UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

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

For the quarterly period ended MarchDecember 31, 2020

or

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

For the transition period from ___________ to ___________

Commission file number 001-34426

 

Astrotech Corporation

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

 

91-1273737

State or Other Jurisdiction of

Incorporation or Organization

 

I.R.S. Employer Identification No.

 

 

 

201 West 5th Street,2028 E. Ben White Blvd., Suite 1275,240-9530, Austin, Texas

 

7870178741

Address of Principal Executive Offices

 

Zip Code

 

(512) 485-9530

Registrant’s Telephone Number, Including Area Code

Not Applicable

Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock, $0.001 par value per share

 

ASTC

 

NASDAQ Stock Market, LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes      No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes     No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 


Large accelerated filer

 

 ☐

  

Accelerated filer

 

 ☐

Non-accelerated filer

 

 ☑

  

Smaller reporting company

 

 ☑

Emerging growth company

 

 ☐

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.     ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes ☐    No 

As of May 13, 2020,February 12, 2021, the number of shares of the registrant’s common stock outstanding was: 7,575,464.19,731,600.

 

 

 



ASTROTECH CORPORATION AND SUBSIDIARIES

QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS

 

 

 

 

 

Page

PART I:

 

FINANCIAL INFORMATION

 

43

 

 

 

 

 

ITEM 1.

 

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

43

ITEM 2.

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

1918

ITEM 3.

 

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

2523

ITEM 4.

 

CONTROLS AND PROCEDURES

 

2523

 

 

 

 

 

PART II:

 

OTHER INFORMATION

 

2624

 

 

 

 

 

ITEM 1.

 

LEGAL PROCEEDINGS

 

2624

ITEM 1A.

 

RISK FACTORS

 

2624

ITEM 2.

 

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

2724

ITEM 3.

 

DEFAULTS UPON SENIOR SECURITIES

 

2724

ITEM 4.

 

MINE SAFETY DISCLOSURES

 

2724

ITEM 5.

 

OTHER INFORMATION

 

2724

ITEM 6.

 

EXHIBITS

 

2825

 

 



 

PART I: FINANCIAL INFORMATION

ITEM 1.   Condensed Consolidated Financial Statements

ASTROTECH CORPORATION AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(In thousands, except share and per share data)

 

March 31,

2020

 

 

June 30,

2019

 

 

December 31,

2020

 

 

June 30,

2020

 

 

(Unaudited)

 

 

(Note)

 

 

(Unaudited)

 

 

(Note)

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

4,660

 

 

$

1,588

 

 

$

22,121

 

 

$

3,349

 

Restricted cash

 

 

122

 

 

 

 

 

 

542

 

 

 

 

Accounts receivable, net of allowance of $0

 

 

85

 

 

 

3

 

Accounts receivable

 

 

95

 

 

 

101

 

Inventory:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Raw materials

 

 

374

 

 

 

150

 

 

 

173

 

 

 

416

 

Work-in-process

 

 

155

 

 

 

181

 

 

 

221

 

 

 

38

 

Finished goods

 

 

64

 

 

 

 

 

 

194

 

 

 

222

 

Income tax receivable

 

 

429

 

 

 

429

 

 

 

 

 

 

429

 

Prepaid expenses and other current assets

 

 

239

 

 

 

371

 

 

 

76

 

 

 

117

 

Total current assets

 

 

6,128

 

 

 

2,722

 

 

 

23,422

 

 

 

4,672

 

Property and equipment, net

 

 

371

 

 

 

469

 

 

 

85

 

 

 

99

 

Assets held for disposal

 

 

 

 

 

237

 

Operating leases, right-of-use assets, net

 

 

937

 

 

 

 

 

 

72

 

 

 

851

 

Long-term tax receivable

 

 

-

 

 

 

429

 

Other assets

 

 

72

 

 

 

72

 

 

 

 

 

 

71

 

Total assets

 

$

7,508

 

 

$

3,692

 

 

$

23,579

 

 

$

5,930

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

 

188

 

 

 

160

 

 

 

228

 

 

 

239

 

Payroll related accruals

 

 

412

 

 

 

319

 

 

 

434

 

 

 

433

 

Accrued expenses and other liabilities

 

 

718

 

 

 

357

 

 

 

939

 

 

 

627

 

Income tax payable

 

 

2

 

 

 

2

 

 

 

2

 

 

 

2

 

Term note payable - related party

 

 

2,500

 

 

 

 

 

 

2,500

 

 

 

2,500

 

Lease liabilities, current

 

 

326

 

 

 

 

Term note payable

 

 

421

 

 

 

210

 

Lease liabilities

 

 

82

 

 

 

339

 

Total current liabilities

 

 

4,146

 

 

 

838

 

 

 

4,606

 

 

 

4,350

 

Lease liabilities, non-current

 

 

711

 

 

 

 

Other liabilities

 

 

 

 

 

146

 

Term note payable, net of current portion

 

 

121

 

 

 

332

 

Lease liabilities, net of current portion

 

 

42

 

 

 

623

 

Total liabilities

 

 

4,857

 

 

 

984

 

 

 

4,769

 

 

 

5,305

 

Commitments and contingencies (Note 12)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Convertible preferred stock, $0.001 par value, 2,500,000 shares authorized; 280,898 shares of Series C and 280,898 shares of Series D issued and outstanding at March 31, 2020 and June 30, 2019, respectively

 

 

 

 

 

 

Common stock, $0.001 par value, 15,000,000 shares authorized; 7,975,388 and 6,184,698 shares issued at March 31, 2020 and June 30, 2019, respectively; 7,575,742 and 5,775,171 shares outstanding at March 31, 2020 and June 30, 2019, respectively

 

 

190,599

 

 

 

190,571

 

Treasury stock, 399,916 shares at cost at March 31, 2020 and June 30, 2019, respectively

 

 

(4,129

)

 

 

(4,129

)

Convertible preferred stock, $0.001 par value, 2,500,000 shares authorized; 280,898 shares of Series D issued and outstanding at December 31, 2020 and June 30, 2020

 

 

 

 

 

 

Common stock, $0.001 par value, 50,000,000 shares authorized; 18,941,345 and 8,250,286 shares issued at December 31, 2020 and June 30, 2020, respectively; 18,541,429 and 7,850,362 shares outstanding at December 31, 2020 and June 30, 2020, respectively

 

 

190,610

 

 

 

190,599

 

Treasury stock, 399,916 shares at cost at December 31, 2020 and June 30, 2020

 

 

(4,129

)

 

 

(4,129

)

Additional paid-in capital

 

 

13,868

 

 

 

7,964

 

 

 

35,841

 

 

 

13,934

 

Accumulated deficit

 

 

(197,687

)

 

 

(191,698

)

 

 

(203,512

)

 

 

(199,779

)

Total stockholders’ equity

 

 

2,651

 

 

 

2,708

 

 

 

18,810

 

 

 

625

 

Total liabilities and stockholders’ equity

 

$

7,508

 

 

$

3,692

 

 

$

23,579

 

 

$

5,930

 

Note: The balance sheet at June 30, 2020, has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by the United States generally accepted accounting principles for complete financial statements.

.

See accompanying notes to unaudited condensed consolidated financial statements.


ASTROTECH CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Operations and Comprehensive Loss

(In thousands, except per share data)

(Unaudited)

 

 

Three Months Ended

March 31,

 

 

Nine Months Ended

March 31,

 

 

Three Months Ended

December 31,

 

 

Six Months Ended

December 31,

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Revenue

 

$

118

 

 

 

 

 

$

324

 

 

$

40

 

 

$

130

 

 

$

205

 

 

$

270

 

 

$

206

 

Cost of revenue

 

 

111

 

 

 

 

 

 

307

 

 

 

11

 

 

 

128

 

 

 

196

 

 

 

241

 

 

 

196

 

Gross profit

 

 

7

 

 

 

 

 

 

17

 

 

 

29

 

 

 

2

 

 

 

9

 

 

 

29

 

 

 

10

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

 

1,193

 

 

 

1,238

 

 

 

3,505

 

 

 

3,667

 

 

 

803

 

 

 

1,110

 

 

 

1,729

 

 

 

2,312

 

Research and development

 

 

814

 

 

 

1,026

 

 

 

2,608

 

 

 

3,027

 

 

 

758

 

 

 

939

 

 

 

1,367

 

 

 

1,794

 

Disposal of corporate lease

 

 

 

 

 

 

 

 

544

 

 

 

 

Total operating expenses

 

 

2,007

 

 

 

2,264

 

 

 

6,113

 

 

 

6,694

 

 

 

1,561

 

 

 

2,049

 

 

 

3,640

 

 

 

4,106

 

Loss from operations

 

 

(2,000

)

 

 

(2,264

)

 

 

(6,096

)

 

 

(6,665

)

 

 

(1,559

)

 

 

(2,040

)

 

 

(3,611

)

 

 

(4,096

)

Interest and other expense, net

 

 

(68

)

 

 

12

 

 

 

(123

)

 

 

15

 

 

 

(63

)

 

 

(43

)

 

 

(122

)

 

 

(55

)

Loss from operations before income taxes

 

 

(2,068

)

 

 

(2,252

)

 

 

(6,219

)

 

 

(6,650

)

 

 

(1,622

)

 

 

(2,083

)

 

 

(3,733

)

 

 

(4,151

)

Income tax benefit

 

 

 

 

 

858

 

 

 

 

 

 

858

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(2,068

)

 

$

(1,394

)

 

$

(6,219

)

 

$

(5,792

)

 

$

(1,622

)

 

$

(2,083

)

 

$

(3,733

)

 

$

(4,151

)

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

 

6,107

 

 

 

5,467

 

 

 

5,934

 

 

 

4,734

 

 

 

15,864

 

 

 

5,947

 

 

 

11,769

 

 

 

5,769

 

Basic and diluted net loss per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(0.34

)

 

$

(0.25

)

 

$

(1.05

)

 

$

(1.22

)

 

$

(0.10

)

 

$

(0.35

)

 

$

(0.32

)

 

$

(0.72

)

Other comprehensive loss, net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(2,068

)

 

$

(1,394

)

 

$

(6,219

)

 

$

(5,792

)

Available-for-sale securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reclassification adjustment for realized loss

 

 

 

 

 

 

 

 

 

 

 

31

 

Total comprehensive loss

 

$

(2,068

)

 

$

(1,394

)

 

$

(6,219

)

 

$

(5,761

)

 

$

(1,622

)

 

$

(2,083

)

 

$

(3,733

)

 

$

(4,151

)

See accompanying notes to unaudited condensed consolidated financial statements.

 


 

ASTROTECH CORPORATION

Condensed Consolidated Statement of Changes in Stockholders’ Equity

(In thousands)

(Unaudited)

 

 

Preferred Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Class C

 

 

Class D

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of

Shares

Outstanding

 

 

Amount

 

 

Number of

Shares

Outstanding

 

 

Amount

 

 

Number of

Shares

Outstanding

 

 

Amount

 

 

Treasury

Stock

Amount

 

 

Additional

Paid-In

Capital

 

 

Accumulated

Deficit

 

 

Accumulated

Other

Comprehensive

Loss

 

 

Total

Stockholders’

Equity

 

Balance at June 30, 2019

 

 

281

 

 

$

 

 

 

281

 

 

$

 

 

 

5,775

 

 

$

190,571

 

 

$

(4,129

)

 

$

7,964

 

 

$

(191,698

)

 

$

 

 

$

2,708

 

Adjustment to opening retained earnings related to adoption of ASC Topic 842

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

230

 

 

 

 

 

 

230

 

Issuance of shares, net of offering issuance costs of $7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

146

 

 

 

 

 

 

 

 

 

321

 

 

 

 

 

 

 

 

 

321

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

78

 

 

 

 

 

 

 

 

 

78

 

Restricted stock issuance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5

 

 

 

26

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

26

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,068

)

 

 

 

 

 

(2,068

)

Balance at September 30, 2019

 

 

281

 

 

$

 

 

 

281

 

 

$

 

 

 

5,926

 

 

$

190,597

 

 

$

(4,129

)

 

$

8,363

 

 

$

(193,536

)

 

$

 

 

$

1,295

 

Issuance of stock, net of offering issuance costs of $19

 

 

 

 

 

 

 

 

 

 

 

 

 

 

433

 

 

 

1

 

 

 

 

 

 

951

 

 

 

 

 

 

 

 

 

952

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

97

 

 

 

 

 

 

 

 

 

97

 

Cancellation of restricted stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(11

)

 

 

 

 

 

 

 

 

(11

)

 

 

 

 

 

 

 

 

(11

)

Forfeiture of stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3

)

 

 

 

 

 

 

 

 

(3

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,083

)

 

 

 

 

 

(2,083

)

Balance at December 31, 2019

 

 

281

 

 

 

 

 

 

281

 

 

 

 

 

 

6,348

 

 

$

190,598

 

 

$

(4,129

)

 

$

9,397

 

 

$

(195,619

)

 

$

 

 

$

247

 

Issuance of stock, net of offering issuance costs of $667

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,227

 

 

 

1

 

 

 

 

 

 

4,376

 

 

 

 

 

 

 

 

 

4,377

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

95

 

 

 

 

 

 

 

 

 

95

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,068

)

 

 

 

 

 

(2,068

)

Balance at March 31, 2020

 

 

281

 

 

 

 

 

 

281

 

 

 

 

 

 

7,575

 

 

$

190,599

 

 

$

(4,129

)

 

$

13,868

 

 

$

(197,687

)

 

$

 

 

$

2,651

 



 

 

Preferred Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Class C

 

 

Class D

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of

Shares

Outstanding

 

 

Amount

 

 

Number of

Shares

Outstanding

 

 

Amount

 

 

Number of

Shares

Outstanding

 

 

Amount

 

 

Treasury

Stock

Amount

 

 

Additional

Paid-In

Capital

 

 

Accumulated

Deficit

 

 

Accumulated

Other

Comprehensive

Loss

 

 

Total

Stockholders’

Equity

 

Balance at June 30, 2018

 

 

 

 

$

 

 

 

 

 

$

 

 

 

4,097

 

 

$

190,570

 

 

$

(4,128

)

 

$

1,745

 

 

$

(184,164

)

 

$

(31

)

 

$

3,992

 

Net change in available-for-sale debt and marketable equity securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

31

 

 

 

31

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

44

 

 

 

 

 

 

 

 

 

44

 

Cancellation of restricted stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(5

)

 

 

(14

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(14

)

Forfeiture of stock options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3

)

 

 

 

 

 

 

 

 

(3

)

Exercise of stock options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3

 

 

 

 

 

 

 

 

 

7

 

 

 

 

 

 

 

 

 

7

 

Share repurchases

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1

)

 

 

 

 

 

 

 

 

 

 

 

(1

)

Restricted stock issuance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,238

)

 

 

 

 

 

(2,238

)

Balance at September 30, 2018

 

 

 

 

$

 

 

 

 

 

$

 

 

 

4,095

 

 

$

190,565

 

 

$

(4,129

)

 

$

1,793

 

 

$

(186,402

)

 

$

 

 

$

1,827

 

Issuance of stock, net of offering issuance costs of $73

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,277

 

 

 

1

 

 

 

 

 

 

2,920

 

 

 

 

 

 

 

 

 

2,921

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

45

 

 

 

 

 

 

 

 

 

45

 

Forfeiture of stock options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1

)

 

 

 

 

 

 

 

 

(1

)

Restricted stock issuance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

199

 

 

 

18

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

18

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,160

)

 

 

 

 

 

(2,160

)

Balance at December 31, 2018

 

 

 

 

$

 

 

 

 

 

$

 

 

 

5,571

 

 

$

190,584

 

 

$

(4,129

)

 

$

4,757

 

 

$

(188,562

)

 

$

 

 

$

2,650

 

Issuance of stock, net of offering issuance costs of $19

 

 

 

 

 

 

 

 

 

 

 

 

 

 

206

 

 

 

 

 

 

 

 

 

998

 

 

 

 

 

 

 

 

 

998

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

43

 

 

 

 

 

 

 

 

 

43

 

Restricted stock issuance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

64

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

64

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,394

)

 

 

 

 

 

(1,394

)

Balance at March 31, 2019

 

 

 

 

$

 

 

 

 

 

$

 

 

 

5,777

 

 

$

190,648

 

 

$

(4,129

)

 

$

5,798

 

 

$

(189,956

)

 

$

 

 

$

2,361

 

 

 

Preferred Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Series D

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of

Shares

Outstanding

 

 

Amount

 

 

Number of

Shares

Outstanding

 

 

Amount

 

 

Treasury

Stock

Amount

 

 

Additional

Paid-In

Capital

 

 

Accumulated

Deficit

 

 

Total

Stockholders’

Equity

 

Balance at June 30, 2020

 

 

 

281

 

 

$

 

 

 

7,850

 

 

$

190,599

 

 

$

(4,129

)

 

$

13,934

 

 

$

(199,779

)

 

$

625

 

Stock offering costs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2

)

 

 

 

 

 

(2

)

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

49

 

 

 

 

 

 

49

 

Restricted stock cancellation

 

 

 

 

 

 

 

 

 

(6

)

 

 

 

 

 

 

 

 

(5

)

 

 

 

 

 

(5

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,111

)

 

 

(2,111

)

Balance at September 30, 2020

 

 

 

281

 

 

$

 

 

 

7,844

 

 

$

190,599

 

 

$

(4,129

)

 

$

13,976

 

 

$

(201,890

)

 

$

(1,444

)

Issuance of stock, net of offering costs

 

 

 

 

 

 

 

 

 

10,714

 

 

 

11

 

 

 

 

 

 

21,819

 

 

 

 

 

 

21,830

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

47

 

 

 

 

 

 

47

 

Restricted stock cancellation

 

 

 

 

 

 

 

 

 

(17

)

 

 

 

 

 

 

 

 

(1

)

 

 

 

 

 

(1

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

���

 

 

 

 

 

 

 

 

 

(1,622

)

 

 

(1,622

)

Balance at December 31, 2020

 

 

 

281

 

 

$

 

 

 

18,541

 

 

$

190,610

 

 

$

(4,129

)

 

$

35,841

 

 

$

(203,512

)

 

$

18,810

 

 

 

 

Preferred Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Series C

 

 

Series D

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of

Shares

Outstanding

 

 

Amount

 

 

Number of

Shares

Outstanding

 

 

Amount

 

 

Number of

Shares

Outstanding

 

 

Amount

 

 

Treasury

Stock

Amount

 

 

Additional

Paid-In

Capital

 

 

Accumulated

Deficit

 

 

Total

Stockholders’

Equity

 

Balance at June 30, 2019

 

 

281

 

 

$

 

 

 

281

 

 

$

 

 

 

5,775

 

 

$

190,571

 

 

$

(4,129

)

 

$

7,964

 

 

$

(191,698

)

 

$

2,708

 

Adjustment to opening retained earnings related to adoption of ASC Topic 842

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

230

 

 

 

230

 

Issuance of shares, net of offering issuance costs of $7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

146

 

 

 

 

 

 

 

 

 

321

 

 

 

 

 

 

321

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

78

 

 

 

 

 

 

78

 

Restricted stock issuance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5

 

 

 

26

 

 

 

 

 

 

 

 

 

 

 

 

26

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,068

)

 

 

(2,068

)

Balance at September 30, 2019

 

 

281

 

 

$

 

 

 

281

 

 

$

 

 

 

5,926

 

 

$

190,597

 

 

$

(4,129

)

 

$

8,363

 

 

$

(193,536

)

 

$

1,295

 

Issuance of stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

433

 

 

 

1

 

 

 

 

 

 

951

 

 

 

 

 

 

952

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

97

 

 

 

 

 

 

97

 

Restricted stock cancellation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(11

)

 

 

 

 

 

 

 

 

(11

)

 

 

 

 

 

(11

)

Forfeiture of stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3

)

 

 

 

 

 

(3

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,083

)

 

 

(2,083

)

Balance at December 31, 2019

 

 

281

 

 

$

 

 

 

281

 

 

$

 

 

 

6,348

 

 

$

190,598

 

 

$

(4,129

)

 

$

9,397

 

 

$

(195,619

)

 

$

247

 

See accompanying notes to unaudited condensed consolidated financial statements.

 


ASTROTECH CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

Nine Months Ended

March 31,

 

 

Six Months Ended

December 31,

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(6,219

)

 

$

(5,792

)

 

$

(3,733

)

 

$

(4,151

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

282

 

 

 

205

 

Stock-based compensation, net of forfeitures

 

 

90

 

 

 

187

 

Depreciation and amortization

 

 

327

 

 

 

206

 

 

 

141

 

 

 

289

 

Deferred income tax benefit

 

 

 

 

 

(429

)

Net loss on sale of available-for-sale investments

 

 

 

 

 

31

 

Loss on disposal of assets

 

 

173

 

 

 

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(82

)

 

 

(29

)

 

 

6

 

 

 

(210

)

Inventory

 

 

(262

)

 

 

 

 

 

88

 

 

 

57

 

Income tax receivable

 

 

 

 

 

(429

)

 

 

429

 

 

 

215

 

Accounts payable

 

 

28

 

 

 

27

 

 

 

(11

)

 

 

(7

)

Other assets and liabilities

 

 

970

 

 

 

(340

)

 

 

319

 

 

 

264

 

Net cash used in operating activities

 

 

(4,956

)

 

 

(6,550

)

 

 

(2,498

)

 

 

(3,356

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from sale of available-for-sale investments

 

 

 

 

 

3,345

 

Proceeds from maturities of securities

 

 

 

 

 

250

 

Sale of property and equipment

 

 

 

 

 

2

 

Net cash provided by investing activities

 

 

 

 

 

3,597

 

Purchases of property and equipment

 

 

(16

)

 

 

 

Net cash used in investing activities

 

 

(16

)

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Payments for purchase of treasury stock

 

 

 

 

 

(1

)

Proceeds from term note payable - related party

 

 

2,500

 

 

 

 

 

 

 

 

 

1,500

 

Proceeds from exercise of stock options

 

 

 

 

 

7

 

Proceeds from issuance of stock, net of offering issuance costs

 

 

5,650

 

 

 

3,919

 

 

 

21,828

 

 

 

1,272

 

Net cash provided by financing activities

 

 

8,150

 

 

 

3,925

 

 

 

21,828

 

 

 

2,772

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net change in cash and cash equivalents and restricted cash

 

$

3,194

 

 

 

972

 

Cash and cash equivalents and restricted cash at beginning of period

 

 

1,588

 

 

 

552

 

Cash and cash equivalents and restricted cash at end of period

 

$

4,782

 

 

$

1,524

 

Net change in cash and cash equivalents

 

$

19,314

 

 

 

(584

)

Cash and cash equivalents at beginning of period

 

 

3,349

 

 

 

1,588

 

Cash and cash equivalents at end of period

 

$

22,663

 

 

$

1,004

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of cash and cash equivalents and restricted cash at end of period:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

4,660

 

 

$

1,524

 

 

$

22,121

 

 

$

393

 

Restricted cash

 

 

122

 

 

 

 

 

$

542

 

 

$

611

 

Total

 

$

22,663

 

 

$

1,004

 

 

$

4,782

 

 

$

1,524

 

 

 

 

 

 

 

 

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

 

 

$

 

 

$

 

 

$

 

Income taxes paid

 

$

 

 

$

 

 

$

 

 

$

 

Impact to retained earnings from adoption of ASC Topic 842

 

$

230

 

 

$

 

 

$

 

 

$

230

 

Operating right-of-use assets and associated liabilities

 

$

1,608

 

 

$

 

 

$

 

 

$

1,608

 

 

See accompanying notes to unaudited condensed consolidated financial statements.


ASTROTECH CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

(1) General Information

Description of the Company – Astrotech Corporation (Nasdaq: ASTC) (“Astrotech,” “the Company,” “we,” “us,” or “our”), a Delaware corporation organized in 1984, is a science and technology development and commercialization company that launches, manages, and builds scalable companies based on innovative technology in order to maximize shareholder value.

 

Basis of Presentation – The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) for interim financial information and the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the ninesix months ended MarchDecember 31, 2020 are not necessarily indicative of the results that may be expected for the year ending June 30, 2020.2021. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2019.2020.

 

Our Business Units

 

Astrotech Technology,Technologies, Inc.

 

Astrotech Technology,Technologies, Inc. (“ATI”) owns and licenses the Astrotech Mass Spectrometer Technology™ (the “AMS Technology™”Technology”), the platform mass spectrometry technology originally developed by 1st Detect Corporation (“1st Detect”). The intellectual property includes 3732 patents granted patents and fivewith two additional patents in process.process along with extensive trade secrets. With a number of diverse market opportunities for the core technology, ATI licensesis structured to license the intellectual property for different fields of use. ATI currently licenses the intellectual propertyAMS Technology to three wholly-owned subsidiaries of Astrotech, including to 1st Detect for use in the security and detection market, to AgLAB Inc. (“AgLAB”) for use in the agriculture market, and to BreathTech Corporation (“BreathTech”) for use in the healthcare industry.    breath analysis.

 

1st Detect Corporation

 

1st Detect, a licensee of ATI for the security and detection market, has developed the TRACER 1000™, the world’s first mass spectrometer (“MS”) based explosives trace detector (“ETD”) certified by the European Civil Aviation Conference (“ECAC”), designed to replace the explosives trace detectorsETDs used at airports, cargo facilities, secured facilities, and borders worldwide. The Company believes that ETD customers are unsatisfied with the currently deployed ETD technology, which is driven by ion mobility spectrometry (“IMS”). The Company believes that IMS-based ETDs are fraught with false positives, as they often misidentify personal care products and other common household chemicals as explosives, causing unnecessary delays, frustration, and significant wasted security resources. In addition, there are hundreds of different types of explosives, but IMS-based ETDs have a very limited threat detection library reserved only for those several explosives of largest concern. Adding additional compounds to the detection library of an IMS-based ETD fundamentally reduces the instrument’s performance, further increasing the likelihood of false alarms. In contrast, adding additional compounds does not degrade the TRACER 1000’s detection capabilities, as it has a virtually unlimited and expandable threat library.

In order to sell the TRACER 1000 to airport and cargo security customers in the European Union, ECAC certification is required. Certain other countries also accept ECAC certification. After receiving ECAC certification for the TRACER 1000 on February 21, 2019, the Company is now marketing to and taking orders from airports and cargo facilities outside of the U.S. that accept ECAC certification.

On June 26, 2019, the Company announced the official launch of the TRACER 1000, and on November 22, 2019, also announced the first commercial sale of TRACER 1000 units to a global shipping and logistics company. 

In the United States, the Company is working with the Transportation Security Administration (“TSA”) towards Air Cargo certification. On March 27, 2018, the Company announced that the TRACER 1000 was accepted into TSA’s Air Cargo Screening Technology Qualification Test (“ACSQT”) and, on April 4, 2018, the Company announced that the TRACER 1000 was beginning testing with TSA for passenger screening at airports. On November 14, 2019, the Company announced that the TRACER 1000 had been selected by the TSA’s Innovation Task Force (“ITF”) to conduct live checkpoint screening at Miami International Airport. With similar protocols as ECAC testing, the Company has received valuable feedback from all programs. Following ECAC certification and the Company's early traction within the cargo market, testing for cargo security continued with the TSA. With the COVID-19 pandemic, all testing within the TSA was put on hold; however, cargo non-detection testing resumed this summer, and the Company subsequently announced on September 9, 2020 that the TRACER 1000 passed the non-detection testing portion of the TSA’s ACSQT. TSA cargo detection testing resumed this fall and continues to move forward. This is the next and final step to be listed on the Air Cargo Screening Technology List (“ACSTL”) as an “approved” device and,


if approved, thereby approved for cargo sales in the United States. Given the deterioration in air traffic caused by the pandemic, TSA certification testing for passenger checkpoint security has been put on indefinite hold. 

Finally, on October 28, 2020, the Company announced that it had surpassed $1.0 million in purchase orders for the TRACER 1000 and an additional $1.0 million in future service and support commitments, also announcing DHL (Deutsche Post AG) as its largest flagship customer.

 

AgLAB Inc.

 

AgLAB is a licensee of ATI is developingand has developed the AgLAB-1000™ series of mass spectrometers for use in the agriculture market. These systems are being designedindustry for applications inboth process control and the hempdetection of trace amounts of solvents and cannabis markets to maximize processing efficiencies and to detect pesticides. The AgLAB product line is a derivative of the Company’s core AMS Technology.

 

BreathTech Corporation

 

BreathTech a licensee of ATI, is developing the BreathTest-1000, a breath analysis tool to screen for volatile organic compound (“VOC”) metabolites found in a person’s breath that could indicate they may have an infection, including Coronavirus Disease 2019 (“COVID-19”)COVID-19 or pneumonia.

 

Astral Images Corporation

Astral Images Corporation (“Astral”) developed advanced film restoration and enhancement software. Although we believe Astral has developed valuable technology fortified by patents and trade secrets,Development of the potential market has not yet advanced as quickly as anticipated. Due to funding constraints,BreathTest-1000 follows the Company’s primary focus remains onresults in pre-clinical trials for the pursuit of opportunities for its platform mass spectrometry technology. Consequently, efforts are exclusively focused on strategic initiativesBreathDetect-1000™, a rapid self-serve breathalyzer that is designed to facilitatedetect bacterial infections in the realization of Astral’s value.

Accounting Pronouncements – In February 2016, the Financial Standards Accounting Board (“FASB”) issued Accounting Standard Update (“ASU”) 2016-02: Leases (“Topic 842” or “ASU 2016-02”) and ASU 2018-10: Codification Improvements to Topic 842, Leases (“ASU 2018-10”) which provide an additional (and optional) transition method whereby the new lease standard is applied at the adoption date and recognized as an adjustment to retained earnings. This ASU requires lessees to recognize a right-of-use (“ROU”) asset and lease liability on the balance sheet for all leases,respiratory tract, including pneumonia. The pre-clinical trials were conducted in collaboration with the exception of short-term leases. The asset will be based on the liability, subject to adjustment, such as for initial direct costs. For statement of operations


purposes, leases are still required to be classified as either operating or financing. Operating leases will resultUT Health San Antonio in straight-line expense while financing leases will result in a front-loaded expense pattern.2017.

 

On July 1, 2019, the Company adopted Topic 842 using the modified retrospective approach and the impact of the adoption of Topic 842 resulted in the recognition of an ROU asset and lease obligation on the Company’s condensed consolidated balance sheets of approximately $1.6 million and an adjustment to retained earnings of $230 thousand. This application of the modified retrospective method will result in a balance sheet presentation that will not be comparable to the prior period in the first year of adoption. Results for reporting periods after July 1, 2019 are presented under Topic 842, while prior periods have not been adjusted. The Company elected the package of practical expedients permitted under the transition guidance within the new standard which, among other things, allowed the Company to carry forward the historical lease classifications. Subsequent to the end of the second quarter of fiscal yearOctober 20, 2020, the Company amended its leaseannounced a joint development agreement with the Cleveland Clinic Foundation to explore leveraging the BreathTest-1000 to rapidly screen for its 1st Detect facility, resulting in a reductionCOVID-19 or related indicators. The goal of the associated ROU asset and lease obligation of $414 thousand inagreement is to develop a non-invasive device that will use breath samples to identify COVID-19 strains, with the second quarter of fiscal year 2020. See Note 3 Leases for more information.

(2) Going Concern

Financial Condition

The Company’s consolidated financial statements for the three and nine months ended March 31, 2020 have been preparedpotential to provide a low-cost, self-service screening option that could be deployed on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As of March 31, 2020, the Company had cash and cash equivalents of $4.7 million and restricted cash of $0.1 million, and working capital was approximately $2.0 million. Restricted cash consists of two letters of credit relating to purchase orders for the TRACER 1000 product. The Company reported a net loss of $7.5 million for the fiscal year 2019 and a net loss of $6.2 million for the nine months ended March 31, 2020, along with net cash used in operating activities of $8.5 million for the fiscal year 2019 and net cash used in operating activities of $5.0 million for the nine months ended March 31, 2020. This raises substantial doubt about the Company’s ability to continue as a going concern.

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 Company or a portion thereof, licensing some of its technology, raising additional funds through capital markets, debt financing, equity financing, merging, or engaging in a strategic partnership. On February 13, 2020, the Company entered into a private placement transaction with Mr. Thomas B. Pickens III, the Company’s Chairman of the Board and Chief Executive Officer, for the issuance and sale of a secured promissory note to Mr. Pickens with a principal amount of $1.0 million. On March 25, 2020, the Company entered into a securities purchase agreement with certain purchasers named therein, pursuant to which the Company agreed to issue and sell, in a registered direct offering, 354,000 shares of the Company’s common stock, par value $0.001 per share, at an offering price of $5.00 per share, resulting in net proceeds of approximately $1.6 million. On March 27, 2020, the Company entered into a second securities purchase agreement with certain purchasers named therein, pursuant to which the Company agreed to issue and sell, in a registered direct offering, 873,335 shares of the Company’s common stock, par value $0.001 per share, at an offering price of $3.75 per share, resulting in net proceeds of approximately $2.9 million. The Company received net proceeds of approximately $2.3 million through the sale of shares of common stock from November 9, 2018 through March 25, 2020 through an “at the market offering” program (the “ATM Offering”), which was terminated on March 25, 2020. The Company is currently evaluating potential offerings 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 March 31, 2020 do not include any adjustments that might result from the outcome of this uncertainty.

COVID-19

In March 2020, the World Health Organization declared COVID-19 a global pandemic. The Company is subject to risks and uncertainties as a result of the COVID-19 pandemic. The extent of the impact of the COVID-19 pandemic on the Company’s business is highly uncertain and difficult to predict, as the responses that the Company, other businesses and governments are taking continue to evolve. Furthermore, capital markets and economies worldwide have also been negatively impacted by the COVID-19 pandemic, and it is possible that it could cause a local and/or global economic recession. Policymakers around the globe have responded with fiscal policy actions to support the economy as a whole. The magnitude and overall effectiveness of these actions remain uncertain.


It is possible that the continued spread of COVID-19 could cause disruption in the Company’s  supply chain; cause delay, or limit the ability of customers to perform, including in making timely payments to the Company; cause delay in regulatory certification testing of the Company’s instruments; impact investment performance; and cause other unpredictable events. As of the date of issuance of Company’s financial statements, the extent to which the COVID-19 pandemic may in the future materially impact the Company’s financial condition, liquidity, or results of operations is uncertain.large-scale.

(3)

(2) Leases

 

As of July 1, 2019, the Company adopted the Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2016-02 Leases: Topic 842 (“Topic 842”), using the modified retrospective method of adoption. Astrotech elected to use the transition option that allowsallowed the Company to initially apply the new lease standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the year of adoption. Comparable periods continue to be presented under the guidance of the previous standard, Accounting Standards Codification (“ASC”) Topic 840. Topic 842 requires lessees to recognize a lease liability and ROU asset on the balance sheet for operating leases. The adoption of Topic 842 resulted in an adjustment to retained earningsaccumulated deficit of $230 thousand.thousand at the beginning of fiscal year 2020.

 

The Company hashad two existing facility leases and several small equipment leases. Astrotech leasesleased office space consisting of 5,219 square feet in Austin, Texas that houseshoused executive management, finance and accounting, sales, and marketing and communications. The lease began in November 2016 and expiresoriginally expired in December 2023 with2023. On August 3, 2020, the Company decided to terminate the lease. Upon lease termination, the Company recognized a provision to renewdecrease in the related operating right-of-use (“ROU”) asset and extend theoperating lease for the entire premises for one renewal termliability 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.approximately $506 thousand and $540 thousand, respectively.

In May 2013, 1st Detect completed build-out of a 16,540 square foot leased research and development and production facility in Webster, Texas. This 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, 1st 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. On January 21, 2020, the Company entered into its fourth amendment of the original lease, with the amended lease beginning May 1, 2020 and expiring April 30, 2021, with the option to renew and extend the lease for one renewal term of one year. During the second quarter of fiscal year 2021, the Company has decided to allow the Webster lease to expire on its expiration date and declined the option to renew the lease. This amendment resulted in an adjustment toa reduction of the associatedrelated operating ROU asset and operating lease liability of $414$171 thousand during the six months ended December 31, 2019. and $192 thousand, respectively.

 

Operating lease assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. Operating lease assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate in determining the present value of lease payments. Significant judgement is required when determining the Company’s incremental borrowing rate. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

 

Upon the adoption of Topic 842, the Company’s accounting for financing leases, previously referred to as capital leases, remains substantially unchanged from prior guidance.

 


The balance sheet presentation of the Company’s operating and finance leases is as follows:

 

(In thousands)

 

Classification on the Condensed Consolidated Balance Sheet

 

March 31, 2020

 

 

Classification on the Condensed Consolidated Balance Sheet

 

December 31, 2020

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Operating lease assets

 

Operating leases, right-of-use assets, net

 

$

937

 

 

Operating leases, right-of-use assets, net

 

$

72

 

Financing lease assets

 

Property and equipment, net

 

 

52

 

 

Property and equipment, net

 

 

52

 

Total lease assets

 

 

 

$

989

 

 

 

 

$

124

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Current:

 

 

 

 

 

 

 

 

 

 

 

 

Operating lease obligations

 

Lease liabilities, current

 

$

317

 

 

Lease liabilities, current

 

$

72

 

Financing lease obligations

 

Lease liabilities, current

 

 

9

 

 

Lease liabilities, current

 

 

10

 

Non-current:

 

 

 

 

 

 

 

 

 

 

 

 

Operating lease obligations

 

Lease liabilities, non-current

 

 

668

 

 

Lease liabilities, non-current

 

 

8

 

Financing lease obligations

 

Lease liabilities, non-current

 

 

43

 

 

Lease liabilities, non-current

 

 

34

 

Total lease liabilities

 

 

 

$

1,037

 

 

 

 

$

124

 

 



Future minimum lease payments as of March 31, 2020 under non-cancellable leases are as follows:

 

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Year Ended June 30,

 

Operating Leases

 

 

Financing Leases

 

 

Total

 

 

Operating Leases

 

 

Financing Leases

 

 

Total

 

2020

 

$

101

 

 

$

3

 

 

$

104

 

2021

 

 

413

 

 

 

12

 

 

 

425

 

 

$

72

 

 

$

6

 

 

$

78

 

2022

 

 

388

 

 

 

12

 

 

 

400

 

 

 

6

 

 

 

12

 

 

 

18

 

2023

 

 

219

 

 

 

12

 

 

 

231

 

 

 

6

 

 

 

12

 

 

 

18

 

2024

 

 

37

 

 

 

12

 

 

 

49

 

 

 

 

 

 

12

 

 

 

12

 

2025

 

 

 

 

 

8

 

 

 

8

 

Thereafter

 

 

 

 

 

9

 

 

 

9

 

 

 

 

 

 

 

 

 

 

Total lease obligations

 

 

1,158

 

 

 

60

 

 

 

1,218

 

 

 

84

 

 

 

50

 

 

 

134

 

Less: imputed interest

 

 

173

 

 

 

8

 

 

 

181

 

 

 

4

 

 

 

6

 

 

 

10

 

Present value of net minimum lease obligations

 

 

985

 

 

 

52

 

 

 

1,037

 

 

 

80

 

 

 

44

 

 

 

124

 

Less: lease liabilities - current

 

 

317

 

 

 

9

 

 

 

326

 

 

 

72

 

 

 

10

 

 

 

82

 

Lease liabilities - non-current

 

$

668

 

 

$

43

 

 

$

711

 

 

$

8

 

 

$

34

 

 

$

42

 

 

Other information as of MarchDecember 31, 2020 is as follows:

 

Weighted-average remaining lease term (years):

 

 

 

 

Operating leases

 

 

 

 

2.80.3

 

Financing leases

 

 

 

 

4.94.2

 

Weighted-average discount rate:

 

 

 

 

Operating leases

 

 

 

 

11.0

%

Financing leases

 

 

 

 

6.2

%

 

Cash payments for operating leases for the three and nine months ended MarchDecember 31, 2020 and December 31, 2019 totaled $53 thousand and $96 thousand, respectively. Cash payments for operating leases for the six months ended December 31, 2020 and $288December 31, 2019 totaled $123 thousand and $192 thousand, respectively.

Cash payments for financing leases for the three months ended December 31, 2020 and December 31, 2019 totaled $3 thousand and $0, respectively. Cash payments for financing leases for eachthe six months ended December 31, 2020 and December 31, 2019 totaled $6 thousand and $0, respectively.

(3) Property and Equipment

As of December 31, 2020 and June 30, 2020, property and equipment, net consisted of the threefollowing:

(In thousands)

 

December 31, 2020

 

 

June 30, 2020

 

Furniture, fixtures, equipment & leasehold improvements

 

$

1,943

 

 

$

2,522

 

Software

 

 

315

 

 

 

326

 

Capital improvements in progress

 

 

 

 

 

 

Gross property and equipment

 

 

2,258

 

 

 

2,848

 

Accumulated depreciation

 

 

(2,173

)

 

 

(2,512

)

Property held for disposal, net

 

 

 

 

 

(237

)

Property and equipment, net

 

$

85

 

 

$

99

 


Depreciation expense of property and nineequipment for the three months ended MarchDecember 31, 2020 totaled $1and December 31, 2019 were $15 thousand and $58 thousand, respectively. Depreciation expense of property and equipment for the six months ended December 31, 2020 and December 31, 2019 were $37 thousand and $117 thousand, respectively.

On August 3, 2020, the Company terminated its corporate office lease in Austin, Texas and wrote-off the remaining net book value of the related leasehold improvement assets in the amount of $229 thousand.

 

(4) Stockholders’ Equity

Public Offerings of Common Stock

On October 21, 2020, the Company entered into a Securities Purchase Agreement (the “First Purchase Agreement”) with certain purchasers named therein, pursuant to which the Company agreed to issue and sell 7,826,086 shares (the “Public Offering Shares”) of the Company’s common stock, par value $0.001 per share (the “Common Stock”), at an offering price of $2.30 per share (the “Public Offering”).

The Public Offering resulted in gross proceeds of approximately $18.0 million before deducting the placement agent’s fees and related offering expenses.

Pursuant to an engagement agreement dated July 23, 2020, as amended, the Company engaged H.C. Wainwright & Co., LLC (the “Placement Agent”) to act as the Company’s exclusive placement agent in connection with the Public Offering. The Company issued to the Placement Agent, or its designees, warrants (the “Placement Agent’s Warrants No. 1”) to purchase up to 469,565 shares of Common Stock, which represents 6.0% of the Public Offering Shares sold in the Public Offering. The Placement Agent’s Warrants No. 1 have an exercise price of $2.875 per share, which represents 125% of the per share offering price of the Public Offering Shares, and a termination date of October 21, 2025. The Placement Agent’s Warrants No. 1 had a fair value per share of $2.01 as of the date of issuance.

On October 28, 2020, the Company entered into a Securities Purchase Agreement (the “Second Purchase Agreement”) with certain purchasers named therein, pursuant to which the Company agreed to issue and sell, in a registered direct offering (the “Registered Offering”), 2,887,906 shares (the “Registered Offering Shares”) of the Company’s Common Stock, at an offering price of $2.15 per share.

The Registered Offering resulted in gross proceeds of approximately $6.2 million before deducting the placement agent’s fees and related offering expenses.

Pursuant to an engagement agreement dated July 23, 2020, as amended, the Company engaged the Placement Agent to act as the Company’s exclusive placement agent in connection with the Registered Offering. The Company also issued to the Placement Agent, or its designees, warrants (the “Placement Agent’s Warrants No. 2”) to purchase up to 173,274 shares of Common Stock, which represents 6.0% of the Registered Offering Shares sold in the Registered Offering. The Placement Agent’s Warrants No. 2 have an exercise price of $2.6875 per share, which represents 125% of the per share offering price of the Registered Offering Shares, and a termination date of October 28, 2025. The Placement Agent’s Warrants No. 2 had a fair value per share of $1.80 as of the date of issuance.

At-the-Market Agreements

 

From November 9, 2018 through March 25, 2020, the Company sold 793,668 shares of common stockCommon Stock pursuant to an At-the-Market Issuance Sales Agreement (“(the “B. Riley ATM Agreement”) with B. Riley FBR, under which B. Riley FBR acted as the sales agent. In connection with the sale of these shares of common stock,Common Stock, the Company received net proceeds of $2.3 million. The weighted-average sale price per share was $3.04. No additional shares of the Company’s common stockCommon Stock will be sold pursuant to the B. Riley ATM Agreement. The Company did not incur any termination penalties as a result of its termination of the B. Riley ATM Agreement.

 

On March 25,December 18, 2020, the Company entered into a securities purchasean at-the-market offering agreement (the “Wainwright ATM Agreement”) with certain purchasers named therein,H.C. Wainwright & Co., LLC as agent, pursuant to which the Company agreed to issuemay offer and sell, in a registered direct offering (the “Registered Offering No. 1”), 354,000 shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”), at an offering price of $5.00 per share. Registered Offering No. 1 resulted in gross proceeds of approximately $1.77 million before deducting the placement agent’s fees and related offering expenses. The shares from Registered Offering No. 1 were offered by the Company pursuanttime to a prospectus supplement to the Company’s effective shelf registration statement on Form S-3 (Registration No. 333-226060), which was initially filed with the SEC on July 3, 2018, and was declared effective on August 20, 2018. Registered Offering No. 1 closed on March 26, 2020, subject to the satisfaction of customary closing conditions. In connection with Registered Offering No. 1, the Company also issued to the placement agent, or its designees, warrants (the “Warrants No. 1”) to purchase up to 24,780 shares of Common Stock, which represents 7.0% of the shares sold in Registered Offering No. 1. The Warrants No. 1 have an exercise price of $6.25 per share, which represents 125% of the per share offering price of the shares and a termination date of March 25, 2025.

On March 27, 2020, the Company entered into a second securities purchase agreement with certain purchasers named therein, pursuant to which the Company agreed to issue and sell, in a registered direct offering (the “Registered Offering No. 2”), 873,335time through H.C. Wainwright, shares of the Company’s Common Stock, athaving an aggregate offering price of $3.75 per share. Registered Offering No. 2 resultedup to $3,582,614.


Warrants

A summary of the common stock warrant activity for the three months ended December 31, 2020 is presented below:

 

Shares

(In thousands)

 

 

Weighted Average Exercise Price

 

 

Aggregate Fair Market Value at Issuance (In thousands)

 

 

Weighted Average Remaining Contractual Term (Years)

 

Outstanding June 30, 2020

 

86

 

 

$

5.14

 

 

$

194

 

 

 

4.74

 

Warrants issued

 

643

 

 

 

2.82

 

 

 

1,256

 

 

 

4.81

 

Warrants exercised

 

 

 

 

 

 

 

 

 

 

 

Warrants expired

 

 

 

 

 

 

 

 

 

 

 

Outstanding December 31, 2020

 

729

 

 

$

3.10

 

 

$

1,450

 

 

 

4.74

 

The following represents a summary of the warrants outstanding at each of the dates identified:

 

 

 

 

 

 

 

 

 

 

Number of Shares Underlying Warrants

 

Issue Date

 

Classification

 

Exercise Price

 

 

Expiration Date

 

December 31, 2020

 

 

June 30, 2020

 

March 26, 2020

 

Equity

 

$

6.25

 

 

March 25, 2025

 

 

24,780

 

 

 

24,780

 

March 30, 2020

 

Equity

 

$

4.69

 

 

March 27, 2025

 

 

61,133

 

 

 

61,133

 

October 23, 2020

 

Equity

 

$

2.89

 

 

October 21, 2025

 

 

469,565

 

 

 

 

October 28, 2020

 

Equity

 

$

2.69

 

 

October 28, 2025

 

 

173,274

 

 

 

 

Total Outstanding

 

 

 

 

 

 

 

 

 

 

728,752

 

 

 

85,913

 

Nasdaq Compliance

As previously noted in gross proceeds of approximately $3.275 million before deductingour Form 10-K for the placement agent’s fees and related offering expenses. The shares from Registered Offering No. 2 were offered byfiscal year ended June 30, 2020, the Company pursuant towas not in compliance with the minimum stockholders’ equity requirement under Nasdaq Listing Rule 5550(b)(1) for continued listing on The Nasdaq Capital Market because its stockholders’ equity was below the required minimum of $2.5 million at June 30, 2020. On September 11, 2020, the Company received a prospectus supplement tonotice from the Listing Qualifications Department of the Nasdaq Stock Market LLC (“Nasdaq”) stating that it was not in compliance with the required stockholder’s equity of $2.5 million.

The notice had no immediate effect on the Company’s effective shelf registration statementlisting on Form S-3 (Registration No. 333-226060), which was initially filedThe Nasdaq Capital Market. The Company originally had until October 26, 2020 to submit a plan to regain compliance with the SEC on July 3, 2018, and was declared effective on August 20, 2018. Registered Offering No.minimum stockholders’ equity requirement; however, Nasdaq granted an extension of the deadline to submit a plan until November 2, closed on March 30, 2020, subject to2020.

Following the satisfaction of customary closing conditions. In connection with Registered Offering No. 2,offerings mentioned above, the Company also issued to the


placement agent, or its designees, warrants (the “Warrants No. 2” and collectiveis now in compliance with the Warrants No.1, the “Placement Agent Warrants”) to purchase up to 61,133 shares of Common Stock, which represents 7.0% of the Shares sold in Registered Offering No. 2. The Warrants No. 2 have an exercise price of $4.6875 per share, which represents 125% of the per share offering price of the shares and a termination date of March 27, 2025.minimum stockholders’ equity requirement.

 

(5) Net Loss per Share

 

Basic net loss per share is computed on the basis of the weighted average number of shares of common stock outstanding during the period. Diluted net loss per share is computed based on the weighted average number of common shares outstanding plus the effect of potentially dilutive common shares outstanding during the period using the treasury stock method and the if-converted method. Potentially dilutive common shares include outstanding stock options and share-based awards.

 

The following table reconciles the numerators and denominators used in the computations of both basic and diluted net loss per share:

 

 

Three Months Ended

March 31,

 

 

Nine Months Ended

March 31,

 

 

Three Months Ended

December 31,

 

 

Six Months Ended

December 31,

 

(In thousands, except per share data)

 

2020

 

 

2019

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(2,068

)

 

$

(1,394

)

 

$

(6,219

)

 

$

(5,792

)

 

$

(1,622

)

 

$

(2,083

)

 

$

(3,733

)

 

$

(4,151

)

Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Denominator for basic and diluted net loss per share — weighted average common stock outstanding

 

 

6,107

 

 

 

5,467

 

 

 

5,934

 

 

 

4,734

 

 

 

15,864

 

 

 

5,947

 

 

 

11,769

 

 

 

5,769

 

Basic and diluted net loss per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(0.34

)

 

$

(0.25

)

 

$

(1.05

)

 

$

(1.22

)

 

$

(0.10

)

 

$

(0.35

)

 

$

(0.32

)

 

$

(0.72

)

 

All unvested restricted stock awards for the ninesix months ended MarchDecember 31, 2020 are not included in diluted net loss per share, as the impact to net loss per share would be anti-dilutive. Options to purchase 326,153321,225 shares of common stock at exercise prices ranging from $1.85 to $8.35 per share outstanding as of MarchDecember 31, 2020 were not included in diluted net loss per share, as the impact to net loss per share would be anti-dilutive.


(6(6)) Revenue Recognition

 

Astrotech recognizes revenue employing the generally accepted revenue recognition methodologies described under the provisions of ASCAccounting Standards Codification (“ASC”) Topic 606 “Revenue from Contracts with Customers” (“Topic 606”), which was adopted by the Company in fiscal year 2019. The methodology used is based on contract type and how products and services are provided. The guidelines of Topic 606 establish a five-step process to govern the recognition and reporting of revenue from contracts with customers. The five steps are: (i) identify the contract with a customer, (ii) identify the performance obligations within the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations within the contract, and (v) recognize revenue when or as the performance obligations are satisfied.  

 

An additional factor is reasonable assurance of collectability. This necessitates deferral of all or a portion of revenue recognition until collection. During the three and nine months ended MarchDecember 31, 2020, the Company had one revenue source that totaled $130 thousand. During the three and six months ended December 31, 2020, the Company had one material revenue source, totaling $118 thousand and $324 thousand, respectively, and revenuesource. Revenue was recognized at a point in time consistent with the guidelines in Topic 606.

The Company disaggregates revenue by reporting segment to depict the nature of revenue in a manner consistent with its business operations and to be consistent with other communications and public filings. Refer to Note 13 for additional details of revenues by reporting segment.

Contract Assets and Liabilities. The Company enters into contracts to sell products and provide services, and it recognizes contract assets and liabilities that arise from these transactions. The Company recognizes revenue and corresponding accounts receivable according to Topic 606 and, at times, recognize revenue in advance of the time when contracts give us the right to invoice a customer. The Company may also receive consideration, per the terms of a contract, from customers prior to transferring goods to the customer. The Company records customer deposits as deferred revenue. Additionally, the Company may receive payments, most typically for service and warranty contracts, at the onset of the contract and before services have been performed. In such instances, the Company records a deferred revenue liability. The Company recognizes these contract liabilities as sales after all revenue recognition criteria are met.

Practical Expedients. In cases where the Company is responsible for shipping after the customer has obtained control of the goods, the Company has elected to treat the shipping activities as fulfillment activities rather than as a separate performance obligation. Additionally, the Company has elected to capitalize the cost to obtain a contract only if the period of amortization would be longer than one year. The Company only gives consideration to whether a customer agreement has a financing component if the period of time between transfer of goods and services and customer payment is greater than one year.

Product Sales. The Company recognizes revenue from sales of products upon shipment or delivery when control of the product transfers to the customer, depending on the terms of each sale, and when collection is probable. In the circumstance where terms of a product sale include subjective customer acceptance criteria, revenue is deferred until the Company has achieved the acceptance criteria unless the customer acceptance criteria are perfunctory or inconsequential. The Company generally offers customers payment terms of less than one year.

Freight. The Company records shipping and handling fees that it charges to its customers as revenue and related costs as cost of revenue.

Multiple Performance Obligations. Certain agreements with customers include the sale of equipment involving multiple elements in cases where obligations in a contract are distinct and thus require separation into multiple performance obligations, revenue recognition guidance requires that contract consideration be allocated to each distinct performance obligation based on its relative standalone selling price. The value allocated to each performance obligation is then recognized as revenue when the revenue recognition criteria for each distinct promise or bundle of promises has been met.

The standalone selling price for each performance obligation is an amount that depicts the amount of consideration to which the entity expects to be entitled in exchange for transferring the good or service. When there is only one performance obligation associated with a contract, the entire amount of consideration is attributed to that obligation. When a contract contains multiple performance obligations the standalone selling price is first estimated using the observable price, which is generally a list price net of applicable discount or the price used to sell the good or service in similar circumstances. In circumstances when a selling price is not directly observable, the Company will estimate the standalone selling price using information available to it including its market assessment and expected cost plus margin.

The timetable for fulfilment of each of the distinct performance obligations can range from completion in a short amount of time and entirely within a single reporting period to completion over several reporting periods. The timing of revenue recognition for each performance obligation may be dependent upon several milestones, including physical delivery of equipment, completion of site acceptance test, and in the case of after-market consumables and service deliverables, the passage of time.



Impact of COVID-19 Pandemic

The Company has taken what it believes are necessary precautions to safeguard its employees from the COVID-19 pandemic. The Company continues to follow the Centers for Disease Control and Prevention’s (“CDC”) guidance and the recommendations and restrictions provided by state and local authorities. All of the Company’s employees who do not work in a lab setting are currently on a telecommunication work arrangement and have been able to successfully work remotely. The Company’s lab requires in-person staffing and the Company has been able to continue to operate its lab, minimizing infection risk to lab staff through a combination of social distancing and appropriate protective equipment. There can be no assurance, however, that key employees will not become ill or that the Company will be able to continue to operate its labs.

The continuing impact that the COVID-19 pandemic will have on the Company’s operations, including duration, severity, and scope, remains uncertain and cannot be fully predicted at this time. Accordingly, the Company believes that the COVID-19 pandemic could continue to adversely impact its results of operations, cash flows, and financial condition in the future.

As the Company’s business operations continue to be impacted by the pandemic, the Company continues to monitor the situation and the guidance that is being provided by relevant federal, state, and local public health authorities. The Company may take additional actions based upon their recommendations. However, it is possible that the Company may have to make further adjustments to its operating plans in reaction to developments that are beyond its control.

(7) Fair Value Measurement

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 are significant to the fair value of the assets or liabilities.

As of MarchDecember 31, 2020, the fair value of the Company’s cash and cash equivalents and restricted cash approximate their carrying value due to their short-term nature. 

 

(8) Term Note Payable – Related PartyDebt

 

On September 5, 2019, the Company entered into a private placement transaction with Thomas B. Pickens III, the Chief Executive Officer and Chairman of the Board of Directors of the Company for the issuance and sale of a secured promissory note (“Note No. 1”) to Mr. Pickens with a principal amount of $1.5 million. Interest on Note No. 1 shall accrue at 11% per annum. The principal amount and accrued interest on Note No. 1 shall become due and payable on September 5, 2020 (the “Maturity Date”). The Company may prepay the principal amount and all accrued interest on Note No. 1 at any time prior to the Maturity Date. In connection with the issuance of Note No. 1, the Company, along with 1st Detect Corporation and Astrotech Technologies, Inc. (the “Subsidiaries”), entered into a security agreement, dated as of September 5, 2019, with Mr. Pickens (the “Security Agreement No. 1”), pursuant to which the Company and the Subsidiaries granted to Mr. Pickens a security interest in all of the Company’s and the Subsidiaries’ Collateral, as such term is defined in Security Agreement No. 1. In addition, the Subsidiaries jointly and severally agreed to guarantee and act as surety for the Company’s obligation to repay Note No. 1 pursuant to a subsidiary guarantee.

 

On February 13, 2020, the Company entered into a second private placement transaction with Mr. Pickens for the issuance and sale of a secured promissory note (“Note No. 2”) to Mr. Pickens with a principal amount of $1.0 million. Interest on Note No. 2 shall accrue at 11% per annum. The principal amount and accrued interest on Note No. 2 shall become due and payable on the Maturity Date. The Company may prepay the principal amount and all accrued interest on Note No. 2 at any time prior to the Maturity Date. In connection with the issuance of Note No. 2, the Company, along with the Subsidiaries, entered into a second security agreement, dated as of February 13, 2020, with Mr. Pickens (the “Security Agreement No. 2”), pursuant to which the Company and the Subsidiaries granted to Mr. Pickens a security interest in all of the Company’s and the Subsidiaries’ Collateral, as such term is defined in Security Agreement No. 2. In addition, the Subsidiaries jointly and severally agreed to guarantee and act as surety for the Company’s obligation to repay Note No. 2 pursuant to a subsidiary guarantee.

 

On August 24, 2020, the Company and Mr. Pickens agreed to extend the Maturity Date of both the notes and payment of accrued interest to September 5, 2021.


On April 14, 2020, the Company entered into a promissory note under the Paycheck Protection Program “(PPP”) for $542 thousand (the “PPP Promissory Note”) with a commercial bank (the “Bank”) under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The PPP Promissory Note bears interest at a rate of 1.0% per annum. Payments are due monthly beginning November 10, 2020. The remaining principal amount of the PPP Promissory Note along with any unpaid interest is due on April 1, 2022. The principal and interest may be forgiven if the proceeds are used for forgivable purposes as defined by the terms in the PPP Promissory Note, and the Company has used the proceeds from the PPP Promissory Note for forgivable purposes as defined by the terms of the PPP Promissory Note. The Company has applied for forgiveness under the provisions of the CARES Act and escrowed the balance of the note with the lender. Forgiveness is subject to the sole approval of the Small Business Administration (“SBA”) and it may deny our application for forgiveness in whole or in part. Interest expense for the three and six months ended December 31, 2020 was approximately $1 thousand and $2 thousand, respectively.

On October 19, 2020, as required by the SBA prior to executing the First Purchase Agreement on October 21, 2020, the Company and the Bank entered into a Cash Reserve Agreement wherein the Company agreed to deliver to the Bank an amount equal to $542 thousand to be held in a separate restricted cash account in accordance with the terms and conditions of the Cash Reserve Agreement for the purpose of establishing a source of payment for the Company’s obligations to repay and/or obtain forgiveness of the PPP Promissory Note.

(9) Business Risk and Credit Risk Concentration Involving Cash

 

DuringFor the three and ninesix months ended MarchDecember 31, 2020 and 2019, the Company had one customer that substantiallymaterially comprised all of the Company’s revenue. During the three and nine months ended March 31, 2019, the Company recognized revenue from one customer. As of March 31, 2020, the Company’s trade accounts receivable balance was related to sales to a global shipping and logistics company.

The Company maintains funds in bank accounts that may exceed the limit insured by the Federal Deposit Insurance Corporation of $250 thousand per depositor. The risk of loss attributable to these uninsured balances is mitigated by depositing funds in what we believe to be high credit quality financial institutions. The Company has not experienced any losses in such accounts.

 

(10) Common StockStock-Based Compensation

 

Stock Option Activity Summary

 

The Company’s stock option activity for the ninesix months ended MarchDecember 31, 2020 is as follows:

 

 

Shares

(in thousands)

 

 

Weighted Average

Exercise Price

 

 

Shares

(in thousands)

 

 

Weighted Average

Exercise Price

 

Outstanding at June 30, 2019

 

 

324

 

 

$

5.71

 

Outstanding at June 30, 2020

 

 

325

 

 

$

5.68

 

Granted

 

 

10

 

 

 

1.85

 

 

 

 

 

 

 

Exercised

 

 

 

 

 

 

 

 

 

 

 

 

Canceled or expired

 

 

(8

)

 

 

4.07

 

 

 

(4

)

 

 

5.30

 

Outstanding at March 31, 2020

 

 

326

 

 

$

5.68

 

Outstanding at December 31, 2020

 

 

321

 

 

$

5.68

 

 

The aggregate intrinsic value of options exercisable at MarchDecember 31, 2020 was $0, as the fair value of the Company’s common stock is less than the exercise prices of these options. The remaining stock-based compensation expense of $33$2 thousand related to stock options will be recognized over a weighted-average period of 0.571.78 years.


 

The table below details the Company’s stock options outstanding as of MarchDecember 31, 2020:

 

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

 

 

Number

Outstanding

 

 

Options

Outstanding

Weighted-

Average

Remaining

Contractual

Life (years)

 

 

Weighted-

Average

Exercise

Price

 

 

Number

Exercisable

 

 

Options

Exercisable

Weighted-

Average

Exercise

Price

 

$1.85 – 3.55

 

 

76,500

 

 

 

3.03

 

 

$

3.43

 

 

 

66,500

 

 

$

3.43

 

 

 

76,500

 

 

 

2.28

 

 

$

3.43

 

 

 

66,500

 

 

$

3.43

 

$5.30 – 5.85

 

 

119,653

 

 

 

7.11

 

 

 

5.48

 

 

 

76,909

 

 

 

5.49

 

 

 

114,725

 

 

 

6.36

 

 

 

5.49

 

 

 

113,203

 

 

 

5.49

 

$6.00 – 8.35

 

 

130,000

 

 

 

4.65

 

 

 

7.19

 

 

 

86,000

 

 

 

6.59

 

 

 

130,000

 

 

 

3.89

 

 

 

7.19

 

 

 

86,000

 

 

 

6.59

 

$1.85 – 8.35

 

 

326,153

 

 

 

5.17

 

 

$

5.68

 

 

 

229,409

 

 

$

5.31

 

 

 

321,225

 

 

 

4.39

 

 

$

5.68

 

 

 

265,703

 

 

$

5.33

 

 

Compensation costs recognized related to stock option awards were $43$0 and $41 thousand for each of the three months ended MarchDecember 31, 2020, and 2019, respectively and $128$1 thousand and $85 thousand for each of the ninesix months ended MarchDecember 31, 2020 and 2019.2019, respectively.

 


Restricted Stock

 

The Company’s restricted stock activity for the ninesix months ended MarchDecember 31, 2020, is as follows:

 

 

Shares

(in thousands)

 

 

Weighted

Average

Grant-Date

Fair Value

 

 

Shares

(in thousands)

 

 

Weighted

Average

Grant-Date

Fair Value

 

Outstanding at June 30, 2019

 

 

208

 

 

$

4.06

 

Outstanding at June 30, 2020

 

 

133

 

 

$

3.95

 

Granted

 

 

5

 

 

 

2.47

 

 

 

 

 

 

 

Vested

 

 

(63

)

 

 

3.77

 

 

 

(54

)

 

 

1.79

 

Canceled or expired

 

 

(11

)

 

 

3.97

 

 

 

(23

)

 

 

5.40

 

Outstanding at March 31, 2020

 

 

139

 

 

$

3.96

 

Outstanding at December 31, 2020

 

 

56

 

 

$

3.92

 

 

Stock compensation expenses related to restricted stock were $52$46 thousand and $64$42 thousand for the three months ended MarchDecember 31, 2020, and 2019, respectively and $154$90 thousand and $77$102 thousand for the ninesix months ended MarchDecember 31, 2020 and 2019, respectively. The remaining stock-based compensation expense of $359$161 thousand related to restricted stock awards granted will be recognized over a weighted-average period of 1.740.98 years.

 

(11) 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 MarchDecember 31, 2020, the Company established a valuation allowance against all of its net deferred tax assets.

For the three months ended MarchDecember 31, 2020 and 2019, the Company incurred pre-tax losses in the amount of $2.1$1.6 million and $2.3$2.1 million, respectively. For the ninesix months ended MarchDecember 31, 2020 and 2019, the Company incurred pre-tax losses in the amount of $6.2$3.7 million and $6.7$4.2 million, respectively. The total effective tax rate was approximately 0% for the each of the three and ninesix months ended MarchDecember 31, 2020 and 2019.

For each of the ninesix months ended MarchDecember 31, 2020 and 2019, the Company’s effective tax rate differed from the federal statutory rate of 21%, primarily due to the valuation allowance placed against its net deferred tax assets. 

The Coronavirus Aid, Relief, and Economic Security (“CARES”)CARES Act was signed into law on March 27, 2020. The CARES Act provided certain tax relief measures including the acceleration of the alternative minimum tax (“AMT”) credit previously paid. The CARES Act allows for the acceleration of the refundable AMT credit up to 100% of the AMT credit. In connection with its analysis ofresponse to the impact of the CARES Act, and pursuant to filing the Form 1139, the Company has reclassedreceived the refundableremaining AMT credit of $429K from long-term to short-term receivable and recorded no income tax effects on$429 thousand for AMT previously paid during the other tax relief measures of the CARES Act.three months ended September 30, 2020.

FASB ASC 740, “Income Taxes” addresses the accounting for uncertainty in income tax 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 three and ninesix months ended MarchDecember 31, 2020 or 2019.

Loss carryovers are generally subject to modification by tax authorities until three years after they have been utilized; as such, the Company is subject to examination for the fiscal years ended 20002001 through present for federal purposes and fiscal years ended 2006 through present for state purposes. The reason for this extended examination period is due to the utilization of the loss carryovers generated by the sale of our Astrotech Space Operations business unit in fiscal year 2015.

 

(12) Commitments and Contingencies

 

The Company is subject to various lawsuits and other claims in the normal course of business. In addition, from time to time, the Company receives communications from government or regulatory agencies concerning investigations or allegations of noncompliance with laws or regulations in jurisdictions in which the Company operates.

 

The Company establishes reserves for the estimated losses on specific contingent liabilities, for regulatory and legal actions where the Company deems a loss to be probable and the amount of the loss can be reasonably estimated. In other instances, the Company is not able to make a reasonable estimate of liability because of the uncertainties related to the outcome or the amount or range of potential loss.

 

Litigation, Investigations, and Audits – We are not party to, nor are our properties the subject of, any material pending legal proceedings or investigations.proceedings.

 


(13) Segment Information

 

The Company currently has one reportable business unit: 1st Detect Corporation. In prior periods, the Company had two reportable business units: 1st Detect Corporation and Astral Images Corporation. AsAgLAB Inc.

1st Detect Corporation

1st Detect is a manufacturer of March 31, 2020, Astral no longer meetsexplosives and narcotics trace detectors developed for use at airports, secured facilities, and borders worldwide.

AgLAB Inc.

AgLAB is developing a series of mass spectrometers for use in the criteriaagriculture market for segment reporting as both its assetsprocess control and operations are minimal. For more information on keythe detection of trace amounts of solvents and pesticides.

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

Key financial metrics of the Company’s segments in prior reporting periods, refer to the Company’s Annual Report on Form 10-K for the year ended June 30, 2019.are as follows:

 

 

Three Months Ended

December 31, 2020

 

 

Three Months Ended

December 31, 2019

 

 

(In thousands)

 

Revenue

 

 

Depreciation

 

 

Loss before

Income Taxes

 

 

Revenue

 

 

Depreciation

 

 

Loss before

Income Taxes

 

1st Detect

 

$

130

 

 

$

15

 

 

$

(841

)

 

$

205

 

 

$

58

 

 

$

(2,083

)

AgLAB

 

 

 

 

 

 

 

 

(781

)

 

 

 

 

 

 

 

 

 

Total

 

$

130

 

 

$

15

 

 

$

(1,622

)

 

$

205

 

 

$

58

 

 

$

(2,083

)

 

 

Six Months Ended

December 31, 2020

 

 

Six Months Ended

December 31, 2019

 

(In thousands)

 

Revenue

 

 

Depreciation

 

 

Loss before

Income Taxes

 

 

Revenue

 

 

Depreciation

 

 

Loss before

Income Taxes

 

1st Detect

 

$

270

 

 

$

37

 

 

$

(2,251

)

 

$

206

 

 

$

117

 

 

$

(4,151

)

AgLAB

 

 

 

 

 

 

 

 

(1,482

)

 

 

 

 

 

 

 

 

 

Total

 

$

270

 

 

$

37

 

 

$

(3,733

)

 

$

206

 

 

$

117

 

 

$

(4,151

)

 

 

December 31, 2020

 

 

June 30, 2020

 

(In thousands)

 

Fixed Assets,

Net

 

 

Total Capital

Expenditures

(1)

 

 

Total Assets

 

 

Fixed Assets,

Net

 

 

Total Capital

Expenditures

(2)

 

 

Total Assets

 

1st Detect

 

$

85

 

 

$

16

 

 

$

23,579

 

 

$

99

 

 

$

 

 

$

5,930

 

AgLAB

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

$

85

 

 

$

16

 

 

$

23,579

 

 

$

99

 

 

$

 

 

$

5,930

 

(1)

Total capital expenditures are for the six months ended December 31, 2020.

(2)

Total capital expenditures are for the twelve months ended June 30, 2020.

 

(14) Subsequent Events

 

NASDAQ NoticeSubsequent to the end of the second quarter of fiscal year 2021 and as of February 9, 2021, the Company has sold 1,139,323 shares of common stock pursuant to the Wainwright ATM Agreement. In connection with the sales of these shares of common stock, the Company has received net proceeds of approximately $3.5 million. The weighted-average sale price per shares was $3.14.

 

As previously noted byOn February 11, 2021, the Company in its Form 10-Q for the fiscal quarter ended December 31, 2019,entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain purchasers named therein, pursuant to which the Company was notagreed to issue and sell, in compliance with the minimum stockholders’ equity requirement under Nasdaq Listing Rule 5550(b)(1) for continued listing on The Nasdaq Capital Market becausea registered direct offering (the “February Registered Offering”), 2,845,535 shares (the “Shares”) of the Company’s stockholders’ equity was below the required minimumCommon Stock at an offering price of $2.5 million at December 31, 2019. On February 18, 2020, the Company received a notice (the “Notice”) from the Listing Qualifications Department of the Nasdaq Stock Market LLC (“Nasdaq”) stating that the Company was not in compliance with the required stockholder’s equity of $2.5 million.$3.25 per share.

 

The Notice had no immediate effect onFebruary Registered Offering resulted in gross proceeds of approximately $9.25 million before deducting the placement agent’s fees and related offering expenses.

Pursuant to an engagement agreement, dated July 23, 2020, as amended, the Company engaged the Placement Agent to act as the Company’s listing on the Nasdaq Capital Market. On April 14, 2020, the Company submitted a plan to regain complianceexclusive placement agent in connection with the minimum stockholders’ equity requirement. IfFebruary Registered Offering. The Company will also issue to the Company’s planPlacement Agent, or its designees, warrants (the “Placement Agent’s Warrants”) to regain compliance is accepted, Nasdaq may grant an extension ofpurchase up to 180 calendar days from199,187 shares of Common


Stock, which represents 6.0% of the Shares sold in the February Registered Offering. The Placement Agent’s Warrants have an exercise price of $4.06 per share, which represents 125% of the per share offering price of the Shares and a termination date of the Notice to evidence compliance (the “Compliance Period”).

Paycheck Protection Program Loan

On April 14, 2020, the Company received the proceeds from a loan in the amount of $541,500 (the “PPP Loan”) from Pioneer Bank SSB (the “Lender”) pursuant to the Paycheck Protection Program (the “PPP”) of the Coronavirus Aid, Relief, and Economic Security Act administered by the U.S. Small Business Administration. The PPP Loan matures on April 1, 2022 and bears interest at a rate of 1.0% per annum. Commencing November 10, 2020, the Company is required to pay the Lender equal monthly payments of principal and interest as necessary to fully amortize by April 1, 2022 the principal amount outstanding on the PPP Loan as of October 14, 2020. The PPP Loan may be prepaid by the Company at any time prior to maturity with no prepayment penalties. The PPP Loan is evidenced by a promissory note dated April 14, 2020, which contains various certifications and agreements related to the PPP, as well customary default and other provisions.February 11, 2026.

 

 



 

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical fact are forward-looking statements for purposes of federal and state securities laws. Forward-looking statements may include the words “may,” “will,” “plans,” “believes,” “estimates,” “expects,” “intends,” and other similar expressions. Such statements are subject to risks and uncertainties that could cause our actual results to differ materially from those projected in the statements. Such risks and uncertainties include, but are not limited to:

The impact of the COVID-19 outbreak on the global economy, including the possibility of a global recession, and more specifically the impact to our business, suppliers, consumers, customers, and employees;

Our ability to raise sufficient capital to meet our long and short-term liquidity requirements;

Our ability to successfully pursue our business plan and execute our strategy, including our recent collaboration with the Cleveland Clinic;

Our ability to continue as a going concern;

The effect of economic and political conditions in the United States or other nations that could impact our ability to sell our products and services or gain customers;

Product demand and market acceptance risks, including our ability to develop and sell products and services to be used by governmental or commercial customers;

The impact of trade barriers imposed by the U.S. government, such as import/export duties and restrictions, tariffs and quotas, and potential corresponding actions by other countries in which the Company conducts its business;

Our ability to successfully pursue our business plan and execute our strategy;

Technological difficulties and potential legal claims arising from any technological difficulties;

Supply chain delays and challenges;

Uncertainty in government funding and support for key programs, grant opportunities, or procurements;

The impact of competition on our ability to win new contracts; and

Our ability to meet technological development milestones and overcome development challenges.

Although we believe that the assumptions underlying our forward-looking statements are reasonable, any of the assumptions could be inaccurate; therefore, we cannot assure you that the forward-looking statements included in this Quarterly Report on Form 10-Q will prove to be accurate. In light of the significant uncertainties inherent in our forward-looking statements, the inclusion of such information should not be regarded as a representation by us or any other person that our objectives and plans will be achieved. Some of these and other risks and uncertainties that could cause actual results to differ materially from such forward-looking statements are more fully described in our 20192020 Annual Report on Form 10-K, elsewhere in this Quarterly Report on Form 10-Q, or in the documents incorporated by reference herein. Except as may be required by applicable law, we undertake no obligation to publicly update or advise of any change in any forward-looking statement, whether as a result of new information, future events, or otherwise. In making these statements, we disclaim any obligation to address or update each factor in future filings with the Securities and Exchange Commission (“SEC”) or communications regarding our business or results, and we do not undertake to address how any of these factors may have caused changes to discussions or information contained in previous filings or communications. In addition, any of the matters discussed above may have affected our past results and may affect future results, so that our actual results may differ materially from those expressed in this Quarterly Report on Form 10-Q and in prior or subsequent communications.

 


ITEMITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following information should be read in conjunction with the unaudited condensed consolidated financial statements and the accompanying notes included in Part I, Item 1 of this Report.

Business Overview

Astrotech Corporation (Nasdaq: ASTC) (“Astrotech,” the “Company,” “we,” “us,” or “our”), a Delaware corporation organized in 1984, is a science and technology development and commercialization company that launches, manages, and builds scalable companies based on innovative technology in order to maximize shareholder value.

The Company’s efforts are focused on commercializing its platform mass spectrometry technology through its wholly-owned subsidiaries:

Astrotech Technology,Technologies, Inc. (“ATI”) owns and licenses the intellectual property related to the Astrotech Mass Spectrometer Technology™ (the “AMS Technology™”Technology”).

 

1st Detect Corporation (“1st Detect”) is a manufacturer of explosives and narcotics trace detectors developed for use at airports, secured facilities, and borders worldwide. 1st Detect holds an exclusive AMS Technology license from ATI for airport security applications.

AgLAB, Inc. (“AgLAB”) is developing a manufacturerseries of mass spectrometers for use in the agriculture market.market for process control and the detection of trace amounts of solvents and pesticides. AgLAB holds an exclusive AMS Technology license from ATI for agriculture applications.

BreathTech Corporation (“BreathTech”) is developing a breath analysis tool to screen for volatile organic compound (“VOC”) metabolites found in a person’s breath that could indicate they may have an infection, including Coronavirus Disease 2019 (“COVID-19”)COVID-19 or pneumonia. BreathTech holds an exclusive AMS Technology license from ATI for breath analysis applications.

 

Our Business Units

 

Astrotech Technology,Technologies, Inc.

 

ATI owns and licenses the AMS Technology, the platform mass spectrometry technology originally developed by 1st Detect. The intellectual property includes 3732 granted patents and fivetwo additional patents in process.process along with extensive trade secrets. With a number of diverse market opportunities for the core technology, ATI is structured to license the intellectual property for different fields of useuse. ATI currently licenses the AMS Technology to the otherthree wholly-owned subsidiaries of Astrotech, including to 1st Detect for use in the security and detection market, to AgLAB for use in the agriculture market, and to BreathTech for use in the healthcare industry.breath analysis.

 

1st Detect Corporation

 

1st Detect, aan exclusive licensee of ATI for the security and detection market, has developed the TRACER 1000™, the world’s first mass spectrometer (“MS”) based explosives trace detector (“ETD”) certified by the European Civil Aviation Conference (“ECAC”), designed to replace the explosives trace detectorsETDs used at airports, cargo facilities, secured facilities, and borders worldwide. We believe that government and airportETD customers are unsatisfied with the currently deployed ETD technology, which is driven by ion mobility spectrometry (“IMS”). We believe that IMS-based ETDs are fraught with false positives, as they often misidentify personal care products and other common household chemicals as explosives, causing unnecessary passenger delays, frustration, and frustration, significant wasted security resources, and lack of security personnel confidence in ETDs.resources. In addition, there are hundreds of different types of explosives, but IMS-based ETDs have a very limited threat detection library reserved only for those several explosives of largest concern. Adding additional compounds to the detection library of an IMS-based ETD fundamentally reduces the instrument’s performance, further increasing the likelihood of false alarms. In contrast, adding additional compounds does not degrade the TRACER 1000’s detection capabilities, as it has a virtually unlimited and easily expandable threat library. With terrorist threats becoming more numerous, sophisticated, and lethal, security professionals have been looking for better instrumentation, and specifically for mass spectrometry, to address the evolving threats.threats, but mass spectrometry has long been too expensive, too cumbersome, and not practical for security applications until the launch of the TRACER 1000.

 

Either Transportation Security Administration (“TSA”) or ECAC certification is necessaryIn order to sell the TRACER 1000 to airport and cargo security customers in the airport market andEuropean Union, ECAC certification is required. Certain other countries also accept ECAC certification. After receiving ECAC certification for the TRACER 1000 received ECAC certification on February 21, 2019, for both passengerwe are now marketing to and taking orders from airports and cargo screening. After receiving ECAC certification, we can now sell the TRACER 1000 to the majority of airportsfacilities outside of the U.S., including all of Europe. that accept ECAC certification.

On June 26, 2019, the Company announced the official launch of the TRACER 1000. On1000, and on November 22, 2019, we announced our first commercial sale of TRACER 1000 units to a global shipping and logistics company. As the TRACER 1000 is the first MS-based ETD to have ever passed either U.S. or European regulatory testing, there has been considerable interest from prospective customers, which has yielded a number of successful demonstrations and field trials.

 


In the United States, we are working with both TSA and TSAthe Transportation Security Administration (“TSA”) towards Air Cargo towards certification. On March 27, 2018, the Companywe announced that the TRACER 1000 was accepted into TSA’s Air Cargo Screening Technology Qualification Test (“ACSQT”) and, on April 4, 2018, we announced that the TRACER 1000 was beginning testing with TSA for passenger screening at airports. On November 14, 2019, Astrotechwe announced that the TRACER 1000 had been selected by the TSA’s Innovation Task Force (“ITF”) to conduct live checkpoint screening at Miami International Airport. With similar protocols as ECAC testing, we have received valuable feedback from all programs. Following ECAC certification and the Company's early traction within the cargo market, testing for cargo security continued with the TSA. With the current COVID-19 crisis,pandemic, all testing withwithin the TSA was put on hold; however, cargo non-detection testing resumed this summer, and we subsequently announced on September 9, 2020 that the TRACER 1000 passed the non-detection testing portion of the TSA’s ACSQT. TSA cargo detection testing resumed this fall and continues to move forward. This is the next and final step to be listed on the Air Cargo Screening Technology List (“ACSTL”) as an “approved” device and, if approved, thereby approved for cargo sales in the United States. Given the deterioration in air traffic caused by the pandemic, TSA certification testing for passenger checkpoint security has been put on indefinite hold. We expect to resume following

Finally, on October 28, 2020, the pathCompany announced that it had surpassed $1.0 million in purchase orders for ETD certification once TSA employees are allowed to return to work.the TRACER 1000 and an additional $1.0 million in future service and support commitments, also announcing DHL (Deutsche Post AG) as its largest flagship customer.

 

AgLAB Inc.

 

AgLAB, aan exclusive licensee of ATI is developingfor the agriculture market, has developed the AgLAB-1000™ series of mass spectrometers for useprocess control and in the agriculture industry for both chemical detection of trace levels of solvents and process control.pesticides. The AgLAB product line is a derivative of the Company’s core AMS Technology. The AMS Technology provides a significant competitive advantage due to its small size, rugged design, quick analysis, ease of use, and affordability. These attributes are valuable for agriculture applications in both the fieldprocessing facilities and processing facilities.

The AgLAB product line that is currently under development is the AGLAB-1000-D2 and the AGLAB-1000-C2. These systems are being designed for applications in the hemp and cannabis markets to maximize processing efficiencies and to detect pesticides.  

COVID-19 has caused some disruptions in our supply chain and the completion of AgLAB test systems has been delayed.    field.

 

BreathTech Corporation

 

BreathTech, aan exclusive licensee of ATI for breath analysis, is developing the BreathTest-1000, a breath analysis tool to screen for volatile organic compound (“VOC”)VOC metabolites found in a person’s breath that could indicate they may have an infection, including Coronavirus Disease 2019 (“COVID-19”)COVID-19 or pneumonia.

The product is being designed to test healthcare providers, factory floor workers, and the general public in drive-up testing facilities and to provide a result in less than one minute. It is also being designed to be easy to use with minimal training by low skill operators.

 

Development of the BreathTest-1000 follows the Company’s positive results in pre-clinical trials for the BreathDetect-1000™, a rapid bedsideself-serve breathalyzer that detects bacterial infections in the respiratory tract, including pneumonia.  The pre-clinical trials were conducted in collaboration with UT Health San Antonio.Antonio in 2017.

 

Astral Images Corporation

Astral Images (“Astral”) developed advanced film restoration and enhancement software. AlthoughOn October 20, 2020, we believe Astral has developed valuable technology fortified by patents and trade secrets,announced a joint development agreement with the Cleveland Clinic Foundation to explore leveraging the BreathTest-1000 to rapidly screen for COVID-19 or related indicators. The goal of the agreement is to develop a non-invasive device that will use breath samples to identify COVID-19 strains, with the potential market has not advanced as quickly as anticipated. Due to funding constraints, the Company’s primary focus remainsprovide a low-cost, self-service screening option that could be deployed on the pursuit of opportunities for its platform mass spectrometry technology. Consequently, efforts are exclusively focused on strategic initiatives to facilitate the realization of Astral’s value.a large-scale.

 

Trends and Uncertainties - COVID-19

In March 2020, the World Health Organization declared COVID-19 a global pandemic.

We are subject to risks and uncertainties as a result of the COVID-19 pandemic. The extent of the impact of the COVID-19 pandemic on our business is highly uncertain and difficult to predict, as the responses that we, other businesses, and governments are taking continue to evolve. Furthermore, capital markets and economies worldwide have also been negatively impacted by the COVID-19 pandemic, and it is possible that it could cause a local and/orprolonged global economic recession. Policymakers around the globe have responded with fiscal policy actions to support the economy as a whole. The magnitude and overall effectiveness of these actions remain uncertain.

 

To date, the pandemic has caused supply chain issues as noted abovewe have seen delays with respect to AgLABthe TSA certification process and has impactedparts of our revenuesupply chain as noted below.a result of COVID-19. In addition, with a reduction in air travel caused by the pandemic, we are seeing a reduction in near-term demand for ETDs at checkpoints.

 

It is possible that the continued spread of COVID-19 could cause further disruption in our supply chain; cause delay, or limit the ability of customers to perform, including in making timely payments to the Company; cause further delay in regulatory


certification testing of our instruments; impact investment performance; and cause other unpredictable events. The extent to which the COVID-19 pandemic may in the future materially impact on our financial condition, liquidity, or results of operations is uncertain.

 


Critical Accounting Policies

 

The discussion and analysis of our financial condition and results of operations are based upon our condensed 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 disclosures. 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.

 

As of July 1, 2019, the Company adopted ASU 2016-02, Leases (“Topic 842”) using the modified retrospective method of adoption. Astrotech elected to use the transition option that allows the Company to initially apply the new lease standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the year of adoption. Comparable periods continue to be presented under the guidance of the previous standard, Accounting Standards Codification (“ASC”) Topic 840. Topic 842 requires lessees to recognize a lease liability and right-of-use asset on the balance sheet for operating leases. The adoption of Topic 842 resulted in an adjustment to retained earnings of $230 thousand.

Results of Operations

 

Three months ended MarchDecember 31, 2020, compared to three months ended MarchDecember 31, 2019:

 

Selected consolidated financial data for the quarters ended MarchDecember 31, 2020, and 2019 is as follows:

 

 

Three Months Ended March 31,

 

 

Three Months Ended December 31,

 

(In thousands)

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Revenue

 

$

118

 

 

 

 

 

$

130

 

 

$

205

 

Cost of revenue

 

 

111

 

 

 

 

 

 

128

 

 

 

196

 

Gross profit

 

 

7

 

 

 

 

 

 

2

 

 

 

9

 

Gross margin

 

 

6

%

 

 

%

 

 

2

%

 

 

4

%

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

 

1,193

 

 

 

1,238

 

 

 

803

 

 

 

1,110

 

Research and development

 

 

814

 

 

 

1,026

 

 

 

758

 

 

 

939

 

Total operating expenses

 

 

2,007

 

 

 

2,264

 

 

 

1,561

 

 

 

2,049

 

Loss from operations

 

 

(2,000

)

 

 

(2,264

)

 

 

(1,559

)

 

 

(2,040

)

Interest and other expense, net

 

 

(68

)

 

 

12

 

 

 

(63

)

 

 

(43

)

Income tax benefit

 

 

 

 

 

858

 

 

 

 

 

 

 

Net loss

 

$

(2,068

)

 

$

(1,394

)

 

$

(1,622

)

 

$

(2,083

)

 

RevenueTotal revenue increased $118decreased $75 thousand during the third quarter of fiscal 2020, compared to the third quarter of fiscal 2019. Revenue generated in the third quarter of fiscal 2020 was related to the TRACER 1000 product launch. This is a deceleration from the second quarter of fiscal 20202021, compared to the second quarter of fiscal 2020.The decrease was due to delaysthe timing of orders. All of the revenue generated in the acceptancesecond quarters of fiscal 2021 and 2020 was from the sales of our products caused by COVID-19.TRACER 1000.

 

Cost of Revenue Gross profit is comprised of revenue less cost of revenue. In the third quartersecond quarters of fiscal 2021 and 2020, cost of revenue was comprised of labor, materials, overhead,shipping, warranty reserve, and shippingoverhead related to the above sales.sale of TRACER 1000 units. Gross margin was in the single digits as we have low volume production and certain costs related to refining our product for the thirdcargo environment. Gross margin should improve as we increase production and benefit from associated volume discounts, and as we further enhance our technology for the cargo environment. Gross margin remained consistent in the second quarter fiscal 2021, compared to the second quarter of fiscal 2020 was 6%, driven by the first-in-first-out (“FIFO”) inventory methodology where much of the inventory used to build the TRACER 1000 had R&D volume pricing. As we receive more purchase orders for the TRACER 1000, we expect the cost of materials to decline as we recognize the benefits of scale.2020.

 

Operating ExpensesAs a result of management’s ongoing commitment to optimize our resources, operatingOperating expenses decreased $257$488 thousand, or 11%24%, during the thirdsecond quarter of fiscal 2020,2021, compared to the thirdsecond quarter of fiscal 2019. 2020. Significant changes to operating expenses include the following:

Selling, general and administrative decreased $307 thousand, or 28%, due to a decrease in office rent and related expenses remained consistentassociated with the former corporate office. In addition, due to COVID-19, our expenses related to travel and conferences also declined. Finally, we also had a decline in compensation and related expenses due to a reduction in headcount.

Research and development decreased $181 thousand, or 19%, during the thirdsecond quarter of fiscal 2020,2021, compared to the thirdsecond quarter of fiscal 2019. Research and development expenses decreased $212 thousand, or 21%, in the third quarter of fiscal 2020, compared to the third quarter of fiscal 20192020. This decrease is mainly due to decreases in expenses relating to subcontractors, consultants, depreciation,compensation and headcountrelated expenses as well as decreasedless materials expense.purchased for R&D purposes as development of the core AMS Technology is largely complete.

 


Income Taxes Income tax benefit decreased $858 thousanddid not change during the third quarter of fiscal 2020, compared to the third quarter of fiscal 2019 due to the recognition of an Alternative Minimum Tax (“AMT”) credit in the prior period. Half of the AMT credit was received in the second quarter of fiscal 2020 and2021, compared to the remainder is expected to be received during the firstsecond quarter of fiscal 2021.2020. The realization of tax benefits depends on the existence of future taxable income. Pursuant to ASC 740 “Income Taxes” (“ASC 740”), a valuation allowance has been established on all of the Company’s deferred tax assets.

 

Nine



Six months ended MarchDecember 31, 2020, compared to ninesix months ended MarchDecember 31, 2019:

 

Selected consolidated financial data for the ninesix months ended MarchDecember 31, 2020, and 2019 is as follows:

 

 

Nine Months Ended

March 31,

 

 

Six Months Ended

December 31,

 

(In thousands)

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Revenue

 

$

324

 

 

$

40

 

 

$

270

 

 

$

206

 

Cost of revenue

 

 

307

 

 

 

11

 

 

 

241

 

 

 

196

 

Gross profit

 

 

17

 

 

 

29

 

 

 

29

 

 

 

10

 

Gross margin

 

 

5

%

 

 

73

%

 

 

11

%

 

 

5

%

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

 

3,505

 

 

 

3,667

 

 

 

1,729

 

 

 

2,312

 

Research and development

 

 

2,608

 

 

 

3,027

 

 

 

1,367

 

 

 

1,794

 

Disposal of corporate lease

 

 

544

 

 

 

 

Total operating expenses

 

 

6,113

 

 

 

6,694

 

 

 

3,640

 

 

 

4,106

 

Loss from operations

 

 

(6,096

)

 

 

(6,665

)

 

 

(3,611

)

 

 

(4,096

)

Interest and other income, net

 

 

(123

)

 

 

15

 

 

 

(122

)

 

 

(55

)

Income tax benefit

 

 

 

 

 

858

 

 

 

 

 

 

 

Net loss

 

$

(6,219

)

 

$

(5,792

)

 

$

(3,733

)

 

$

(4,151

)

 

Revenue – Total revenue increased $284$64 thousand during the ninesix months ended MarchDecember 31, 2020, compared to the ninesix months ended MarchDecember 31, 2019. During the nine months ended March 31, 2020, substantially all of the revenue generated was related to the TRACER 1000 product launch. All of the material revenue generated during each of the ninesix months ended MarchDecember 31, 2020 and 2019 was associated with Astral’s now-discontinued agreement with ColorTime, a post-production house specializing in media content creation, restoration, and distribution.from the sales of our TRACER 1000 units.

 

Cost of Revenue – Gross profit is comprised of revenue less cost of revenue. During each of the ninesix months ended MarchDecember 31, 2020 and 2019, cost of revenue was comprised of labor, materials, overhead, travel,warranty reserve, and shipping related to the above sales. DuringGross margin increased to 11% during the ninesix months ended MarchDecember 31, 2020, compared to the six months ended December 31, 2019, cost of revenueas the margin in the prior period was comprised of labor related to the agreement with ColorTime. Gross margin for the nine months ended March 31, 2020 was 5%, driven by the FIFO inventory methodology where much of the inventory used to build the TRACER 1000 had R&D volume pricing. As we receive more purchase orders for the TRACER 1000, we expect the cost of materials to decline as we recognize the benefits of scale.

 

Operating ExpensesAs a result of management’s ongoing commitment to optimize our resources, operatingOperating expenses decreased $581$466 thousand, or 9%11%, during the ninesix months ended MarchDecember 31, 2020, compared to the ninesix months ended MarchDecember 31, 2019.Significant changes to operating expenses include the following:

Selling, general and administrative expenses remained consistent. Research and development expenses decreased $419$583 thousand, or 14%25%, during the nine months ended March 31, 2020, compared to nine months ended March 31, 2019, due to decreases in office rent and related expenses relatingassociated with the former corporate office. In addition, due to subcontractors, consultants, depreciation,COVID-19, our expenses related to travel and headcountconferences also declined. Finally, we also had a decrease in compensation and related expenses due to a reduction in headcount.

Research and development decreased $427 thousand, or 24%, mainly due to decreases in compensation and related expenses as well as decreasedless materials expense.purchased for R&D purposes as development of the core AMS Technology is largely complete.

Disposal of long-lived assets increased $544 thousand due to our termination of our corporate office lease and the disposal of the leasehold improvement assets and right-of-use assets and lease liabilities associated with that lease. As a result of this termination, our net cash savings will be approximately $870 thousand over the next three years.

 

Income Taxes – Income tax benefit decreased $858 thousanddid not change during the ninesix months ended MarchDecember 31, 2020, compared to the ninesix months ended MarchDecember 31, 2019 due to the recognition of the AMT credit in the prior period. Half of the AMT credit was received in the second quarter of fiscal 2020 and the remainder is expected to be received during the first quarter of fiscal 2021.The2019. The realization of tax benefits depends on the existence of future taxable income. Pursuant to ASC 740 “Income Taxes”, a valuation allowance has been established on all of the Company’s deferred tax assets.

 


Liquidity and Capital Resources

 

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

 

 

Nine Months Ended

March 31,

 

 

Six Months Ended

December 31,

 

(In thousands)

 

2020

 

 

2019

 

 

Change

 

 

2020

 

 

2019

 

 

Change

 

Change in cash and cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net cash used in operating activities

 

$

(4,956

)

 

$

(6,550

)

 

$

1,594

 

 

$

(2,498

)

 

$

(3,356

)

 

$

858

 

Net cash provided by investing activities

 

 

 

 

 

3,597

 

 

 

(3,597

)

Net cash used in investing activities

 

 

(16

)

 

 

 

 

 

(16

)

Net cash provided by financing activities

 

 

8,150

 

 

 

3,925

 

 

 

4,225

 

 

 

21,828

 

 

 

2,772

 

 

 

19,056

 

Net change in cash and cash equivalents

 

$

3,194

 

 

$

972

 

 

$

2,222

 

 

$

19,314

 

 

$

(584

)

 

$

19,898

 

 

Cash and Cash Equivalents and Restricted Cash

 

As of MarchDecember 31, 2020, we held cash and cash equivalents of $4.7 million and restricted cash of $0.1$22.7 million, and our working capital was approximately $2.0$18.8 million. As of June 30, 2019,2020, we had cash and cash equivalents of $1.6$3.3 million, and our working capital was approximately $1.9$0.3 million. Cash and cash equivalents and restricted cash increased $3.2$19.3 million as of MarchDecember 31, 2020, compared to June 30, 2019,2020, due to salespublic offerings of shares of the Company’s common stock in two registered direct offerings and notes payable from a related party,with net proceeds of approximately $21.8 million, partially offset by funding our normal operating activities and research and development initiatives.

 

Operating Activities

 

Cash used in operating activities decreased $1.6$0.9 million for the ninesix months ended MarchDecember 31, 2020, compared to the ninesix months ended MarchDecember 31, 2019, primarily due to a reduction in our expenses as well as an increasea decrease in deferredaccounts receivable from receiving the remaining alternative minimum tax asset due to the refundable credit of previously paid AMT.(“AMT”) credit.

Investing Activities

 

Cash provided byused in investing activities decreased $3.6 millionincreased $16 thousand for the ninesix months ended MarchDecember 31, 2020, compared to the ninesix months ended MarchDecember 31, 2019, due to liquidating our available-for-sale investments in the first quarterpurchases of fiscal 2019.equipment.

 

Financing Activities

 

Cash provided by financing activities increased $4.2$19.1 million for the ninesix months ended MarchDecember 31, 2020, compared to the ninesix months ended MarchDecember 31, 2019, due to the salesnet proceeds from sale of common stock of $21.8 million in the current period, compared to a note payable from a related party as well as the sale of shares of the Company’s common stock through an “at the market offering” programin two registered direct offerings for net proceeds of approximately $4.5 million.the prior period.

 

Liquidity

 

As of March 31, 2020, we had cash and cash equivalents and restricted cash of $4.8 million, and our working capital was approximately $2.0 million. Restricted cash consists of two letters of credit relating to purchase ordersOur annual report on Form 10-K for the TRACER 1000 product. For the fiscal year 2019, the Company reported a net loss of $7.5 million and net cash used in operating activities of $8.5 million. For the nine months ended March 31,June 30, 2020 the Company reported a net loss of $6.2 million and net cash used in operating activities of $5.0 million. These factors raiseindicated substantial doubt about the Company’sas to our ability to continue as a going concern.

The Company remains resolute in identifying the optimal solution On October 23, 2020, we completed a public offering of our common stock, raising gross proceeds of $18.0 million, and on October 30, 2020, we also completed a registered direct offering of our common stock, raising gross proceeds of $6.2 million. We believe this solves our liquidity issue, and we no longer have substantial doubt about our ability to itscontinue as a going concern. We will continue to evaluate opportunities to further strengthen our liquidity, issue. The Company is currently evaluating several potential sources for additional liquidity. These include, but are not limited to,including selling the Company or a portion thereof, licensing some of our technology, raising additional funds through the capital markets, debt financing, equity financing, merging, or engaging in a strategic partnership. On February 13, 2020, the Company entered into a private placement transaction with Mr. Pickens for the issuance and sale of a secured promissory note to Mr. Pickens with a principal amount of $1.0 million. From November 8, 2019 through March 25, 2020, the Company sold 793,668 shares of common stock pursuant to an At-the-Market Issuance Sales Agreement (“ATM Agreement”) with B. Riley FBR through the ATM Offering under which B. Riley FBR acted as the sales agent. In connection with the sale of these shares of common stock, the Company received net proceeds of $2.3 million. The weighted-average sale price per share was $3.04. On March 25, 2020, the Company entered into a securities purchase agreement with certain purchasers named therein, pursuant to which the Company agreed to issue and sell, in a registered direct offering, 354,000 shares of the Company’s common stock, par value $0.001 per share, at an offering price of $5.00 per share resulting in net proceeds of approximately $1.6 million. On March 27, 2020, the Company entered into


a second securities purchase agreement with certain purchasers named therein, pursuant to which the Company agreed to issue and sell, in a registered direct offering, 873,335 shares of the Company’s common stock, par value $0.001 per share, at an offering price of $3.75 per share resulting in net proceeds of approximately $2.9 million. On April 14, 2020, the Company received the proceeds from a loan in the amount of $541,500 (the “PPP Loan”) from Pioneer Bank SSB (the “Lender”) pursuant to the Paycheck Protection Program (the “PPP”) of the Coronavirus Aid, Relief, and Economic Security Act administered by the U.S. Small Business Administration. The PPP Loan matures on April 1, 2022 and bears interest at a rate of 1.0% per annum.

The Company is currently evaluating potential offerings 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 March 31, 2020 do not include any adjustments that might result from the outcome of this uncertainty.

 

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 MarchDecember 31, 2020, the Company established a valuation allowance against all of its net deferred tax assets.

For the three months ended MarchDecember 31, 2020 and 2019, the Company incurred pre-tax losses in the amount of $2.1$1.6 million and $2.3$2.1 million, respectively. For the ninesix months ended MarchDecember 31, 2020 and 2019, the Company incurred pre-tax losses in the amount of $6.2$3.7 million and $6.7$4.2 million, respectively. The total effective tax rate was approximately 0% for the each of the three and ninesix months ended MarchDecember 31, 2020  and 2019.

For each of the ninesix months ended MarchDecember 31, 2020 and 2019, the Company’s effective tax rate differed from the federal statutory rate of 21%, primarily due to the valuation allowance placed against its net deferred tax assets. 

The Coronavirus Aid, Relief, and Economic Security (“CARES”)CARES Act was signed into law on March 27, 2020. The CARES Act provided certain tax relief measures including the acceleration of the alternative minimumAMT credit previously paid. The CARES Act allows for the acceleration of the refundable AMT credit up to


100% of the AMT credit. In connection with our analysis ofresponse to the impact of the CARES Act, and pursuant to filing the Form 1139, we have reclassedCompany received the refundableremaining AMT credit of $429K from long-term to short-term receivable and recorded no income tax effects on$429 thousand for AMT previously paid during the other tax relief measures of the CARES Act.three months ended September 30, 2020.

FASB ASC 740, “Income Taxes” addresses the accounting for uncertainty in income tax 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 three and ninesix months ended MarchDecember 31, 2020 or 2019.

Loss carryovers are generally subject to modification by tax authorities until three years after they have been utilized; as such, the Company is subject to examination for the fiscal years ended 20002001 through present for federal purposes and fiscal years ended 2006 through present for state purposes. The reason for this extended examination period is due to the utilization of the loss carryovers generated by the sale of our Astrotech Space Operations business unit in fiscal year 2015.

 

Off-Balance Sheet Arrangements

We did not have any off-balance sheet arrangements as of MarchDecember 31, 2020, or June 30, 2019.2020.



 

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable to smaller reporting companies.

ITEM 4.  CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures, as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which 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 SEC’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as of the end of the period covered by this Quarterly Report. Based on the evaluation and criteria of these disclosure controls and procedures, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective.

 

Changes in Internal Control over Financial Reporting

 

There werewas no changeschange in our internal control over financial reporting (as defined in Rule 13a-15(f) underduring the Exchange Act) during the ninesix months ended MarchDecember 31, 2020 that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 



PART II: OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

 

As of MarchDecember 31, 2020, 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. From time to time, 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.

 

ITEM 1A. RISK FACTORS

 

Our stock price has fluctuated in the past, has recently been volatile and may be volatile in the future, and as a result, investors in our common stock could incur substantial losses.

Our stock price has fluctuated in the past, has recently been volatile and may be volatile in the future. By way of example, on February 1, 2021, the price of our common stock closed at $2.11 per share, while on February 10, 2021, our stock price closed at $4.05 per share with no discernable announcements or developments by the Company or third parties.  On January 14, 2021, the intra-day sales price of our common stock fluctuated between a reported low sale price of $2.24 and a reported high sales price of $2.58. We may incur rapid and substantial decreases in our stock price in the foreseeable future that are unrelated to our operating performance or prospects. In addition, the recent outbreak of the novel strain of coronavirus (COVID-19) has caused broad stock market and industry fluctuations. The stock market in general and the market for companies such as ours in particular have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. As a result of this volatility, investors may experience losses on their investment in our common stock. The market price for our common stock may be influenced by many factors, including the following:

investor reaction to our business strategy;

the success of competitive products or technologies;

our continued compliance with the NASDAQ listing standards;

regulatory or legal developments in the United States and other countries, especially changes in laws or regulations applicable to our products;

actions taken by regulatory agencies with respect to our products, manufacturing process or sales and marketing terms;

variations in our financial results or those of companies that are perceived to be similar to us;

the success of our efforts to acquire or in-license additional products or product candidates;

developments concerning our collaborations or partners;

developments or disputes concerning patents or other proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our products;

our ability or inability to raise additional capital and the terms on which we raise it;

declines in the market prices of stocks generally;

trading volume of our common stock;

sales of our common stock by us or our stockholders;

general economic, industry and market conditions; and

other events or factors, including those resulting from such events, or the prospect of such events, including war, terrorism and other international conflicts, public health issues including health epidemics or pandemics, such as the recent outbreak of the novel coronavirus (COVID-19), and natural disasters such as fire, hurricanes, earthquakes, tornados or other adverse weather and climate conditions, whether occurring in the United States or elsewhere, could disrupt our operations, disrupt the operations of our suppliers or result in political or economic instability.

These broad market and industry factors may seriously harm the market price of our common stock, regardless of our operating performance. Further, recent increases are significantly inconsistent with any improvements in actual or expected operating performance, financial condition or other indicators of value, including our loss per share of $1.31 and $0.27 for our fiscal year ended June 30, 2020 and the three months ended September 30, 2020. Since the stock price of our common stock has fluctuated


in the past, has been recently volatile and may be volatile in the future, investors in our common stock could incur substantial losses. In the past, following periods of volatility in the market, securities class-action litigation has often been instituted against companies. Such litigation, if instituted against us, could result in substantial costs and diversion of management’s attention and resources, which could materially and adversely affect our business, financial condition, results of operations and cash flows maygrowth prospects. There can be impacted by a numberno guarantee that our stock price will remain at current levels or that future sales of factors, many of which are beyond our control, includingcommon stock will not be at prices lower than those set forth in our Form 10-K, the occurrence of any one of which could have a material adverse effect on our actual results.sold to investors.

 

ThereAdditionally, securities of certain companies have been no material changesrecently experienced significant and extreme volatility in stock price due short sellers of shares of common stock, known as a “short squeeze.”  These short squeezes have caused extreme volatility in both the stock prices of those companies and in the market, and have led to the Risk Factors previously disclosedprice per share of those companies to trade at a significantly inflated rate that is disconnected from the underlying value of the company. Many investors who have purchased shares in those companies at an inflated rate face the risk of losing a significant portion of their original investment, as in many cases the price per share has declined steadily as interest in those stocks have abated. While we have no reason to believe our Form 10-K, except as noted below.

No assurancesshares would be the target of a short squeeze, there can be givenno assurance that we willwon’t be able to successfully develop the BreathTest-1000™.

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 lossfuture, and you may lose a significant portion or all of anyyour investment we make in developing them, including the development of the BreathTest-1000™.

Furthermore, we are subject to risks including, but not limited to, the following with respect to the development of the BreathTest-1000™:

the governmental approval process could be lengthy, time consuming, andif you purchase our shares at a rate that is inherently unpredictable, and we cannot guarantee that we will ever have a marketable product;

to the extent that there are additional detection methods available for COVID-19, to be commercially successful, customers must be persuaded that usingsignificantly disconnected from our products are effective alternatives to other existing products;underlying value.

if we fail to comply with healthcare regulations, we could face substantial enforcement actions, including civil and criminal penalties and our business, operations, and financial condition could be adversely affected.

We face various risks related to health epidemics, pandemics, and similar outbreaks, which may have material adverse effects on our business, financial position, results of operations, and/or cash flows.

We face various risks related to health epidemics, pandemics, and similar outbreaks, including the global outbreak of COVID-19. In recent weeks, the continued spread of COVID-19 has led to disruption and volatility in the global capital markets, which increases the cost of capital and adversely impacts access to capital. If significant portions of our workforce are unable to work effectively, including because of illness, quarantines, government actions, facility closures, or other restrictions in connection with the COVID-19 pandemic, our operations will likely be impacted. We may be unable to perform fully on our contracts and our costs may increase as a result of the COVID-19 outbreak. These cost increases may not be fully recoverable or adequately covered by insurance.

It is possible that the continued spread of COVID-19 could also further cause disruption in our supply chain; cause delay, or limit the ability of customers to perform, including in making timely payments to us; cause delay in regulatory certification testing of our instruments; impact investment performance; and cause other unpredictable events.

We continue to work with our stakeholders (including customers, employees, suppliers, and local communities) to responsibly address this global pandemic. We continue to monitor the situation, to assess further possible implications to our business, supply chain and customers, and to take actions in an effort to mitigate adverse consequences.

We cannot at this time predict the impact of the COVID-19 pandemic, but it could have a material adverse effect on our business, financial position, results of operations, and/or cash flows.


ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On March 27 and March 30,October 28, 2020, the Company issued the Placement Agent Warrants No. 2 to the Placement Agent. The Placement Agent Warrants and the shares of Common Stock underlying the Placement Agent Warrants have not been registered under the Securities Act and were issued in reliance on an exemption from the registration requirements of the Securities Act afforded by Section 4(a)(2) thereof.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

 

None.

ITEM 4.  MINE SAFETY DISCLOSURE

 

Not applicable.

ITEM 5.  OTHER INFORMATION

 

None.


ITEM 6.  EXHIBITS

 

The following exhibits are filed herewith:

 

Exhibit No.

 

Description

 

Incorporation by Reference

1.1

At the Market Offering Agreement, dated December 18, 2020, by and between Astrotech Corporation and H.C. Wainwright & Co., LLC

Exhibit 1.1 to Form 8-K filed on December 18, 2020.

 

 

 

 

 

4.1

 

Promissory Note due September 5, 2020.Form of Placement Agent’s Warrant

 

Exhibit 4.1 to Form 8-K filed on February 18, 2020October 23, 2020.

 

 

 

 

 

4.2

 

Form of Placement Agent'sAgent’s Warrant issued on March 27, 2020.

 

Exhibit 4.1 to Form 8-K filed on March 26, 2020

4.3

Form of Placement Agent's Warrant, issued on MarchOctober 30, 2020.

Exhibit 4.1 to Form 8-K filed on March 30, 2020

 

 

 

 

 

10.1

 

SecuritySecurities Purchase Agreement dated February 13, 2020, by and among the Company, certain of the Company’s subsidiaries and Thomas B. Pickens III.

 

Exhibit 10.1 to Form 8-K filed on February 18, 2020October 23, 2020.

 

 

 

 

 

10.2

 

Subsidiary Guarantee, dated February 13, 2020, made by certainForm of the Company’s subsidiaries in favor of Thomas B. Pickens III.Securities Purchase Agreement

 

Exhibit 10.210.1 to Form 8-K filed on February 18, 2020October 30, 2020.

 

 

 

 

 

10.399.1

 

Form of Securities PurchaseJoint Development and Option Agreement, dated March 25, 2020.October 20, 2020

 

Exhibit 10.199.1 to Form 8-K filed on March 26, 2020October 20, 2020.

 

 

 

 

 

10.499.2

 

Form of Securities PurchaseCash Reserve Agreement, dated March 27, 2020.October 19, 2020

 

Exhibit 10.199.3 to Form 8-K filed on March 30, 2020October 20, 2020.

 

 

 

 

 

31.1

 

 

Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.

 

Filed herewith.

 

 

 

 

 

31.2

 

Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.

 

Filed herewith.

 

 

 

 

 

32.1

 

Certification pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934.

 

Filed herewith.

 

 

 

 

 

99.1

Press Release, dated March 25, 2020.

Exhibit 99.1 to Form 8-K filed on March 26, 2020

99.2

Press Release, dated March 27, 2020.

Exhibit 99.1 to Form 8-K filed on March 30, 2020

101

 

The following financial information from the Company’s Quarterly Report on Form 10-Q, for the period ended MarchDecember 31, 2020 formatted in eXtensible Business Reporting Language: (i) Unaudited Condensed Consolidated Balance Sheets, (ii) Unaudited Condensed Consolidated Statements of Operations, (iii) Unaudited Condensed Consolidated Statements of Cash Flows, (iv) Notes to Unaudited Condensed Consolidated Financial Statements.

 

Filed herewith.

 

Pursuant to the requirements 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

 

 

 

 

 

 

 

 

Date: May 14, 2020February 16, 2021

 

/s/ Eric Stober

 

 

Eric Stober

 

 

Chief Financial Officer and Principal Accounting Officer

 

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