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 December 31, 20202021

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.

 

 

 

2028 E. Ben White Blvd.,2105 Donley Drive, Suite 240-9530,100, Austin, Texas

 

7874178758

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 February 12, 2021,7, 2022, the number of shares of the registrant’s common stock outstanding was: 19,731,600.49,569,113.

 

 

 


ASTROTECH CORPORATION AND SUBSIDIARIES

QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS

 

 

 

 

 

Page

PART I:

 

FINANCIAL INFORMATION

 

3

 

 

 

 

 

ITEM 1.

 

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

3

ITEM 2.

 

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

 

18

ITEM 3.

 

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

23

ITEM 4.

 

CONTROLS AND PROCEDURES

 

23

 

 

 

 

 

PART II:

 

OTHER INFORMATION

 

24

 

 

 

 

 

ITEM 1.

 

LEGAL PROCEEDINGS

 

24

ITEM 1A.

 

RISK FACTORS

 

24

ITEM 2.

 

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

24

ITEM 3.

 

DEFAULTS UPON SENIOR SECURITIES

 

24

ITEM 4.

 

MINE SAFETY DISCLOSURES

 

24

ITEM 5.

 

OTHER INFORMATION

 

24

ITEM 6.

 

EXHIBITS

 

25

 

 


 

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)

 

December 31,

2020

 

 

June 30,

2020

 

 

December 31,

2021

 

 

June 30,

2021

 

 

(Unaudited)

 

 

(Note)

 

 

(Unaudited)

 

 

(Note)

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

22,121

 

 

$

3,349

 

 

$

30,170

 

 

$

35,936

 

Restricted cash

 

 

542

 

 

 

 

Short-term investments

 

 

27,106

 

 

 

27,351

 

Accounts receivable

 

 

95

 

 

 

101

 

 

 

92

 

 

 

5

 

Inventory:

 

 

 

 

 

 

 

 

Inventory, net:

 

 

 

 

 

 

 

 

Raw materials

 

 

173

 

 

 

416

 

 

 

1,135

 

 

 

1,056

 

Work-in-process

 

 

221

 

 

 

38

 

 

 

2

 

 

 

147

 

Finished goods

 

 

194

 

 

 

222

 

 

 

277

 

 

 

297

 

Income tax receivable

 

 

 

 

 

429

 

Prepaid expenses and other current assets

 

 

76

 

 

 

117

 

 

 

516

 

 

 

318

 

Total current assets

 

 

23,422

 

 

 

4,672

 

 

 

59,298

 

 

 

65,110

 

Property and equipment, net

 

 

85

 

 

 

99

 

 

 

870

 

 

 

263

 

Assets held for disposal

 

 

 

 

 

237

 

Operating leases, right-of-use assets, net

 

 

72

 

 

 

851

 

 

 

206

 

 

 

249

 

Other assets

 

 

 

 

 

71

 

 

 

11

 

 

 

11

 

Total assets

 

$

23,579

 

 

$

5,930

 

 

$

60,385

 

 

$

65,633

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

 

228

 

 

 

239

 

 

 

90

 

 

 

396

 

Payroll related accruals

 

 

434

 

 

 

433

 

 

 

741

 

 

 

344

 

Accrued expenses and other liabilities

 

 

939

 

 

 

627

 

 

 

853

 

 

 

888

 

Income tax payable

 

 

2

 

 

 

2

 

 

 

2

 

 

 

2

 

Term note payable - related party

 

 

2,500

 

 

 

2,500

 

 

 

500

 

 

 

2,500

 

Term note payable

 

 

421

 

 

 

210

 

Lease liabilities

 

 

82

 

 

 

339

 

Lease liabilities, current

 

 

227

 

 

 

81

 

Total current liabilities

 

 

4,606

 

 

 

4,350

 

 

 

2,413

 

 

 

4,211

 

Term note payable, net of current portion

 

 

121

 

 

 

332

 

Lease liabilities, net of current portion

 

 

42

 

 

 

623

 

 

 

421

 

 

 

215

 

Total liabilities

 

 

4,769

 

 

 

5,305

 

 

 

2,834

 

 

 

4,426

 

Commitments and contingencies (Note 12)

 

 

 

 

 

 

 

 

Commitments and contingencies (Note 13)

 

 

 

 

 

 

 

 

Stockholders’ equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

)

Convertible preferred stock, $0.001 par value, 2,500,000 shares authorized; 280,898 shares of Series D issued and outstanding at December 31, 2021 and June 30, 2021

 

 

 

 

 

 

Common stock, $0.001 par value, 250,000,000 and 50,000,000 shares authorized at December 31, 2021 and June 30, 2021, respectively; 49,514,467 and 49,450,558 shares issued and outstanding at December 31, 2021 and June 30, 2021, respectively

 

 

190,641

 

 

 

190,641

 

Additional paid-in capital

 

 

35,841

 

 

 

13,934

 

 

 

78,769

 

 

 

77,971

 

Accumulated deficit

 

 

(203,512

)

 

 

(199,779

)

 

 

(211,591

)

 

 

(207,382

)

Accumulated other comprehensive loss

 

 

(268

)

 

 

(23

)

Total stockholders’ equity

 

 

18,810

 

 

 

625

 

 

 

57,551

 

 

 

61,207

 

Total liabilities and stockholders’ equity

 

$

23,579

 

 

$

5,930

 

 

$

60,385

 

 

$

65,633

 

Note: The balance sheet at June 30, 2020,2021, 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

December 31,

 

 

Six Months Ended

December 31,

 

 

Three Months Ended

December 31,

 

 

Six Months Ended

December 31,

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Revenue

 

$

130

 

 

$

205

 

 

$

270

 

 

$

206

 

 

$

561

 

 

$

130

 

 

$

748

 

 

$

270

 

Cost of revenue

 

 

128

 

 

 

196

 

 

 

241

 

 

 

196

 

 

 

441

 

 

 

128

 

 

 

616

 

 

 

241

 

Gross profit

 

 

2

 

 

 

9

 

 

 

29

 

 

 

10

 

 

 

120

 

 

 

2

 

 

 

132

 

 

 

29

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

 

803

 

 

 

1,110

 

 

 

1,729

 

 

 

2,312

 

 

 

1,728

 

 

 

803

 

 

 

3,154

 

 

 

1,729

 

Research and development

 

 

758

 

 

 

939

 

 

 

1,367

 

 

 

1,794

 

 

 

652

 

 

 

758

 

 

 

1,291

 

 

 

1,367

 

Disposal of corporate lease

 

 

 

 

 

 

 

 

544

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

544

 

Total operating expenses

 

 

1,561

 

 

 

2,049

 

 

 

3,640

 

 

 

4,106

 

 

 

2,380

 

 

 

1,561

 

 

 

4,445

 

 

 

3,640

 

Loss from operations

 

 

(1,559

)

 

 

(2,040

)

 

 

(3,611

)

 

 

(4,096

)

 

 

(2,260

)

 

 

(1,559

)

 

 

(4,313

)

 

 

(3,611

)

Interest and other expense, net

 

 

(63

)

 

 

(43

)

 

 

(122

)

 

 

(55

)

Other income and (expense), net

 

 

80

 

 

 

(63

)

 

 

104

 

 

 

(122

)

Loss from operations before income taxes

 

 

(1,622

)

 

 

(2,083

)

 

 

(3,733

)

 

 

(4,151

)

 

 

(2,180

)

 

 

(1,622

)

 

 

(4,209

)

 

 

(3,733

)

Income tax benefit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

Net loss

 

$

(1,622

)

 

$

(2,083

)

 

$

(3,733

)

 

$

(4,151

)

 

$

(2,180

)

 

$

(1,622

)

 

$

(4,209

)

 

$

(3,733

)

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

 

15,864

 

 

 

5,947

 

 

 

11,769

 

 

 

5,769

 

 

 

47,482

 

 

 

15,864

 

 

 

47,455

 

 

 

11,769

 

Basic and diluted net loss per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(0.10

)

 

$

(0.35

)

 

$

(0.32

)

 

$

(0.72

)

 

$

(0.05

)

 

$

(0.10

)

 

$

(0.09

)

 

$

(0.32

)

Other comprehensive loss, net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(2,180

)

 

$

(1,622

)

 

$

(4,209

)

 

$

(3,733

)

Available-for-sale securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net unrealized loss

 

 

(197

)

 

 

 

 

 

(245

)

 

 

 

Total comprehensive loss

 

$

(1,622

)

 

$

(2,083

)

 

$

(3,733

)

 

$

(4,151

)

 

$

(2,377

)

 

$

(1,622

)

 

$

(4,454

)

 

$

(3,733

)

See accompanying notes to unaudited condensed consolidated financial statements.

 

 


 

 

ASTROTECH CORPORATION

Condensed Consolidated Statement of Changes in Stockholders’ Equity

(In thousands)

(Unaudited)

 

 

 

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 D

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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, 2021

 

 

281

 

 

$

 

 

 

49,451

 

 

$

190,641

 

 

$

 

 

$

77,971

 

 

$

(207,382

)

 

$

(23

)

 

$

61,207

 

Net change in available-for-sale marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(48

)

 

 

(48

)

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

359

 

 

 

 

 

 

 

 

 

359

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,029

)

 

 

 

 

 

(2,029

)

Balance at September 30, 2021

 

 

281

 

 

$

 

 

 

49,451

 

 

$

190,641

 

 

$

 

 

$

78,330

 

 

$

(209,411

)

 

$

(71

)

 

$

59,489

 

Net change in available-for-sale marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(197

)

 

 

(197

)

Stock-based compensation

 

 

 

 

 

 

 

 

63

 

 

 

 

 

 

 

 

 

439

 

 

 

 

 

 

 

 

 

439

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,180

)

 

 

 

 

 

(2,180

)

Balance at December 31, 2021

 

 

281

 

 

$

 

 

 

49,514

 

 

$

190,641

 

 

$

 

 

$

78,769

 

 

$

(211,591

)

 

$

(268

)

 

$

57,551

 

 

 

 

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

 

 

 

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

 

 

Accumulated

Other

Comprehensive

Loss

 

 

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

 

See accompanying notes to unaudited condensed consolidated financial statements.

 


 

ASTROTECH CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

Six Months Ended

December 31,

 

 

Six Months Ended

December 31,

 

 

2020

 

 

2019

 

 

2021

 

 

2020

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(3,733

)

 

$

(4,151

)

 

$

(4,209

)

 

$

(3,733

)

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation, net of forfeitures

 

 

90

 

 

 

187

 

 

 

798

 

 

 

90

 

Depreciation and amortization

 

 

141

 

 

 

289

 

 

 

94

 

 

 

141

 

Loss on disposal of assets

 

 

173

 

 

 

 

 

 

0

 

 

 

173

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable

 

 

6

 

 

 

(210

)

 

 

(87

)

 

 

6

 

Inventory

 

 

88

 

 

 

57

 

Inventory, net

 

 

86

 

 

 

88

 

Income tax receivable

 

 

429

 

 

 

215

 

 

 

0

 

 

 

429

 

Accounts payable

 

 

(11

)

 

 

(7

)

 

 

(306

)

 

 

(11

)

Other assets and liabilities

 

 

319

 

 

 

264

 

 

 

140

 

 

 

325

 

Net cash used in operating activities

 

 

(2,498

)

 

 

(3,356

)

 

 

(3,484

)

 

 

(2,492

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(16

)

 

 

 

 

 

(264

)

 

 

(16

)

Net cash used in investing activities

 

 

(16

)

 

 

 

 

 

(264

)

 

 

(16

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from term note payable - related party

 

 

 

 

 

1,500

 

Repayment of related party debt

 

 

(2,000

)

 

 

0

 

Payments on lease financing

 

 

(18

)

 

 

(6

)

Proceeds from issuance of stock, net of offering issuance costs

 

 

21,828

 

 

 

1,272

 

 

 

0

 

 

 

21,828

 

Net cash provided by financing activities

 

 

21,828

 

 

 

2,772

 

 

 

 

 

 

 

 

 

Net cash (used in) provided by financing activities

 

 

(2,018

)

 

 

21,822

 

Net change in cash and cash equivalents

 

$

19,314

 

 

 

(584

)

 

 

(5,766

)

 

 

19,314

 

Cash and cash equivalents at beginning of period

 

 

3,349

 

 

 

1,588

 

 

 

35,936

 

 

 

3,349

 

Cash and cash equivalents at end of period

 

$

22,663

 

 

$

1,004

 

 

$

30,170

 

 

$

22,663

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

22,121

 

 

$

393

 

 

$

30,170

 

 

$

22,121

 

Restricted cash

 

$

542

 

 

$

611

 

 

 

0

 

 

 

542

 

Total

 

$

22,663

 

 

$

1,004

 

 

$

30,170

 

 

$

22,663

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

 

 

$

 

 

$

3

 

 

$

0

 

Income taxes paid

 

$

 

 

$

 

 

$

0

 

 

$

0

 

Impact to retained earnings from adoption of ASC Topic 842

 

$

 

 

$

230

 

Operating right-of-use assets and associated liabilities

 

$

 

 

$

1,608

 

Acquisition of equipment through financing lease

 

$

394

 

 

$

 

 

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,the “Company,” “we,” “us,” or “our”), a Delaware corporation organized in 1984, is a science and technology development and commercializationmass spectrometry company that launches, manages, and buildscommercializes scalable companies based on its innovative technology in order to maximize shareholder value.core technology.

 

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 three and six months ended December 31, 20202021 are not necessarily indicative of the results that may be expected for the year ending June 30, 2021.2022. 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, 2020.2021. Certain prior year amounts have been reclassified to conform to the current year presentation.

Accounting Pronouncements – In November 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2021-10, “Government Assistance (Topic 832)” (“ASU 2021-10”), which enhances disclosure of transactions with governments that are accounted for by applying a grant or contribution model. The new pronouncement requires entities to provide information about the nature of the transaction, terms and conditions associated with the transaction, and financial statement line items affected by the transaction. ASU 2021-10 is effective for fiscal years beginning after December 15, 2021. The Company does not expect the adoption of ASU 2021-10 to have a material impact on its financial statements.

 

Our Business Units

 

Astrotech Technologies, Inc.

 

Astrotech Technologies, Inc. (“ATI”) owns and licenses the Astrotech Mass Spectrometer Technology™ (the “AMS Technology”), the platform mass spectrometry technology originally developed by 1st Detect Corporation (“1st Detect”). The AMS Technology has been designed to be inexpensive, small, and easy to use. Unlike other technologies, the AMS Technology works under ultra-high vacuum, which eliminates competing molecules, yielding higher resolution and fewer false alarms. The intellectual property includes 3224 patents granted with two2 additional patents in 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 use. ATI currently licenses the AMS Technology to three3 wholly-owned subsidiaries of Astrotech on an exclusive basis, 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 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 spectrometerspectrometry (“MS”) based explosives trace detector (“ETD”) certified by the European Civil Aviation Conference (“ECAC”), designed to replace the ETDs used at airports, cargo facilities,and other 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 facility shutdowns, 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 to the TRACER 1000’s detection library does not degrade the TRACER 1000’sits detection capabilities, as it has a virtually unlimited and easily expandable threat library.

 

In order to sell the TRACER 1000 to airport and cargo security customers in the European Union and certain other countries, ECAC certification is required. Certain other countries also accept ECAC certification. After receiving ECAC certification forWe are currently selling 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. thatcustomers who 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 U.S. Transportation Security Administration (“TSA”) towards Air Cargoair 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, the Company resumed cargo non-detection


testing resumed thisduring the summer of 2020, and the Company subsequently announced on September 9, 2020 that the TRACER 1000 passed the non-detection testing portion of the TSA’s ACSQT. Due to continued delays caused by COVID-19, TSA cargo detection testing resumed this fall and continues to move forward. Thisis ongoing but proceeding much more slowly than anticipated. As a result, efforts are primarily focused on the Company’s other opportunities. TSA cargo detection testing is the next and final step to be listed on the Air Cargo Screening Technology List (“ACSTL”) as an “approved” device and,


ifdevice. If approved, therebythe TRACER 1000 will be 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 CompanyOn August 25, 2021, 1st Detect announced that it had surpassed $1.0 million insecured an important landmark purchase ordersorder for the TRACER 1000, andrepresenting the first units to be deployed at an additional $1.0 million in future service and support commitments, also announcing DHL (Deutsche Post AG) as its largest flagship customer.airport security checkpoint. These systems were delivered to the customer during the second quarter of fiscal year 2022.

 

AgLAB Inc.

 

AgLAB, is aan exclusive licensee of ATI andfor the agriculture market, has developed the AgLAB-1000™ series of mass spectrometers for use in the agriculture industry for both process controlhemp and cannabis market with initial focus on optimizing yields in the detection of trace amounts of solventsextraction and pesticides.distillation process. 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, and ease of use.

 

BreathTech Corporation

 

BreathTech, an exclusive licensee of ATI for use in breath analysis, 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 COVID-19 or pneumonia. While vaccines have been deployed to prevent the transmission of COVID-19, only a fraction of the world has been vaccinated and new variants continue to pose a significant and evolving threat. New tools to aid in the battle against COVID-19 remain of the utmost importance to help defeat the disease, and BreathTech, in conjunction with Cleveland Clinic, are developing a quick and easy to use device to help aid in preventing the further spread of the disease.

 

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

 

(2) Investments

The following tables summarize gains and losses related to the Company’s investments as of December 31, 2021 and June 30, 2021:

 

 

December 31, 2021

 

Available-for-Sale

 

Adjusted

 

 

Unrealized

 

 

Unrealized

 

 

Fair

 

(In thousands)

 

Cost

 

 

Gain

 

 

Loss

 

 

Value

 

Mutual Funds - Corporate & Government Debt

 

$

19,998

 

 

$

0

 

 

$

(179

)

 

$

19,819

 

ETFs - Corporate & Government Debt

 

 

7,376

 

 

 

0

 

 

 

(89

)

 

 

7,287

 

Total

 

$

27,374

 

 

$

0

 

 

$

(268

)

 

$

27,106

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2021

 

Available-for-Sale

 

Adjusted

 

 

Unrealized

 

 

Unrealized

 

 

Fair

 

(In thousands)

 

Cost

 

 

Gain

 

 

Loss

 

 

Value

 

Mutual Funds - Corporate & Government Debt

 

$

19,998

 

 

$

0

 

 

$

(13

)

 

$

19,985

 

ETFs - Corporate & Government Debt

 

 

7,376

 

 

 

0

 

 

 

(10

)

 

 

7,366

 

Total

 

$

27,374

 

 

$

0

 

 

$

(23

)

 

$

27,351

 

(3) Leases

On October 20,April 27, 2021, Astrotech entered into a new lease for a research and development facility of approximately 5,960 square feet in Austin, Texas that includes a laboratory, a small production shop, and offices for staff, although many of the Company’s employees continue to work remotely. The lease commenced on June 1, 2021 and has a lease term of 36 months.

On August 3, 2020, the Company 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 to provide a low-cost, self-service screening option that could be deployed on a large-scale.

(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 allowed the Company to initially apply the newterminated its office lease standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the year of adoption. The adoption of Topic 842 resulted in an adjustment to accumulated deficit of $230 thousand at the beginning of fiscal year 2020.

The Company had two existing facility leases and several small equipment leases. Astrotech leased office space consisting of 5,219 square feet in Austin, Texas that housed executive management, finance and accounting, sales, and marketing and communications. The lease began in November 2016 and was originally expiredset to expire in December 2023. On August 3, 2020, the Company decided to terminate the lease.2023. Upon lease termination, the Company recognized a decrease in the related operating right-of-use (“ROU”) asset and operating lease liability of approximately $539 thousand and $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 resulted in a reduction of the related operating ROU asset and operating lease liability of $171 thousand 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

 

December 31, 2020

 

 

Classification on the Condensed Consolidated Balance Sheet

 

December 31, 2021

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Operating lease assets

 

Operating leases, right-of-use assets, net

 

$

72

 

 

Operating leases, right-of-use assets, net

 

$

206

 

Financing lease assets

 

Property and equipment, net

 

 

52

 

 

Property and equipment, net

 

 

516

 

Total lease assets

 

 

 

$

124

 

 

 

 

$

722

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Current:

 

 

 

 

 

 

 

 

 

 

 

 

Operating lease obligations

 

Lease liabilities, current

 

$

72

 

 

Lease liabilities, current

 

$

92

 

Financing lease obligations

 

Lease liabilities, current

 

 

10

 

 

Lease liabilities, current

 

 

135

 

Non-current:

 

 

 

 

 

 

 

 

 

 

 

 

Operating lease obligations

 

Lease liabilities, non-current

 

 

8

 

 

Lease liabilities, non-current

 

 

138

 

Financing lease obligations

 

Lease liabilities, non-current

 

 

34

 

 

Lease liabilities, non-current

 

 

283

 

Total lease liabilities

 

 

 

$

124

 

 

 

 

$

648

 

 

Future minimum lease payments 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

 

2021

 

$

72

 

 

$

6

 

 

$

78

 

2022

 

 

6

 

 

 

12

 

 

 

18

 

 

$

52

 

 

$

77

 

 

$

129

 

2023

 

 

6

 

 

 

12

 

 

 

18

 

 

 

103

 

 

 

154

 

 

 

257

 

2024

 

 

 

 

 

12

 

 

 

12

 

 

 

93

 

 

 

154

 

 

 

247

 

2025

 

 

 

 

 

8

 

 

 

8

 

 

 

 

 

 

67

 

 

 

67

 

2026

 

 

 

 

 

 

 

 

 

Thereafter

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total lease obligations

 

 

84

 

 

 

50

 

 

 

134

 

 

 

248

 

 

 

452

 

 

 

700

 

Less: imputed interest

 

 

4

 

 

 

6

 

 

 

10

 

 

 

18

 

 

 

34

 

 

 

52

 

Present value of net minimum lease obligations

 

 

80

 

 

 

44

 

 

 

124

 

 

 

230

 

 

 

418

 

 

 

648

 

Less: lease liabilities - current

 

 

72

 

 

 

10

 

 

 

82

 

 

 

92

 

 

 

135

 

 

 

227

 

Lease liabilities - non-current

 

$

8

 

 

$

34

 

 

$

42

 

 

$

138

 

 

$

283

 

 

$

421

 

 

Other information as of December 31, 20202021 is as follows:

 

Weighted-average remaining lease term (years):

 

 

 

 

Operating leases

 

 

 

 

0.32.4

 

Financing leases

 

 

 

 

4.23.0

 

Weighted-average discount rate:

 

 

 

 

Operating leases

 

 

 

 

11.06.4

%

Financing leases

 

 

 

 

6.25.3

%

 

Cash payments for operating leases for the three months ended December 31, 2021 and 2020 and December 31, 2019 totaled $53$25 thousand and $96$53 thousand, respectively. Cash payments for operating leases for the six months ended December 31, 2021 and 2020 and December 31, 2019 totaled $123$35 thousand and $192$123 thousand, respectively.

 

Cash payments for financing leases for the three months ended December 31, 2021 and 2020 totaled $15 thousand and December 31, 2019 totaled $3 thousand, and $0, respectively. Cash payments for financing leases for the six months ended December 31, 2021 and 2020 totaled $18 thousand and December 31, 2019 totaled $6 thousand, and $0, respectively.

 

(3)



(4) Property and Equipment

 

As of December 31, 20202021 and June 30, 2020,2021, property and equipment, net consisted of the following:

 

(In thousands)

 

December 31, 2020

 

 

June 30, 2020

 

 

December 31, 2021

 

 

June 30, 2021

 

Furniture, fixtures, equipment & leasehold improvements

 

$

1,943

 

 

$

2,522

 

 

$

1,289

 

 

$

535

 

Software

 

 

315

 

 

 

326

 

 

 

264

 

 

 

315

 

Capital improvements in progress

 

 

 

 

 

 

 

 

 

 

 

187

 

Gross property and equipment

 

 

2,258

 

 

 

2,848

 

 

 

1,553

 

 

 

1,037

 

Accumulated depreciation

 

 

(2,173

)

 

 

(2,512

)

Property held for disposal, net

 

 

 

 

 

(237

)

Accumulated depreciation and amortization

 

 

(683

)

 

 

(774

)

Property and equipment, net

 

$

85

 

 

$

99

 

 

$

870

 

 

$

263

 

 


Depreciation and amortization expense of property and equipment for the three months ended December 31, 2021 and 2020 was $34 thousand and December 31, 2019 were $15 thousand, and $58 thousand, respectively. Depreciation and amortization expense of property and equipment for the six months ended December 31, 2021 and 2020 and December 31, 2019 were $37was $51 thousand and $117$37 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)(5) Stockholders’ Equity

 

Public Offerings of CommonPreferred Stock

 

On October 21, 2020,The Company has issued 280,898 shares of Series D convertible preferred stock (“Series D Preferred Shares”), all of which are issued and outstanding. Series D Preferred Shares are convertible to common stock on a one-to-one basis. Series D Preferred Shares are not callable by the Company. The holder of the preferred stock is entitled to receive, and we shall pay, dividends on shares equal to and in the same form as dividends actually paid on shares of common stock when, and if, such dividends are paid on shares of common stock. NaN other dividends are paid on the preferred shares. Preferred shares have no voting rights. Upon liquidation, dissolution, or winding-up of the Company, entered into a Securities Purchase Agreement (the “First Purchase Agreement”) with certain purchasers named therein, pursuantwhether voluntary or involuntary, the preferred shares have preference over common stock. The holder of Series D Preferred Shares has the option to which the Company agreedconvert said shares 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 holder’s discretion.

 

The Public Offering resultedholder of the preferred stock previously agreed with the Company that they would not convert the preferred stock until such time as the amendment to the Certificate of Incorporation (the “2020 Certificate Amendment”) was accepted for filing with the state of Delaware, which occurred in gross proceeds of approximately $18.0 million before deducting the placement agent’s fees and related offering expenses.October 2021.

 

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 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, 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 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 December 18, 2020, the Company entered into an at-the-market offering agreement (the “Wainwright ATM Agreement”) with H.C. Wainwright & Co., LLC as agent, pursuant to which the Company may offer and sell, from time to time through H.C. Wainwright, shares of the Company’s Common Stock, having an aggregate offering price of up to $3,582,614.


Warrants

 

A summary of the common stock warrant activity for the threesix months ended December 31, 20202021 is presented below:

 

Shares

(In thousands)

 

 

Weighted Average Exercise Price

 

 

Aggregate Fair Market Value at Issuance (In thousands)

 

 

Weighted Average Remaining Contractual Term (Years)

 

Number of Shares Underlying Warrants

(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

 

Outstanding June 30, 2021

 

2,393

 

 

$

2.40

 

 

$

3,747

 

 

 

4.63

 

Warrants issued

 

643

 

 

 

2.82

 

 

 

1,256

 

 

 

4.81

 

 

 

 

 

 

 

 

 

 

 

 

Warrants exercised

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Warrants expired

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding December 31, 2020

 

729

 

 

$

3.10

 

 

$

1,450

 

 

 

4.74

 

Outstanding December 31, 2021

 

2,393

 

 

$

2.40

 

 

$

3,747

 

 

 

4.10

 

 

The Company has made an immaterial error correction to the table above to reflect the correct weighted average exercise price and weighted average remaining contractual term reported as of June 30, 2021. Management evaluated the materiality of the error, both quantitatively and qualitatively, and concluded that it was not material to the financial statements of any period presented.



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

 

 

 

 

 

 

 

 

 

 

Number of Shares Underlying Warrants

 

 

 

 

 

 

 

 

 

 

Number of Shares Underlying Warrants

(In thousands)

 

Issue Date

 

Classification

 

Exercise Price

 

 

Expiration Date

 

December 31, 2020

 

 

June 30, 2020

 

 

Classification

 

Exercise Price

 

 

Expiration Date

 

December 31, 2021

 

 

June 30, 2021

 

March 26, 2020

 

Equity

 

$

6.25

 

 

March 25, 2025

 

 

24,780

 

 

 

24,780

 

 

Equity

 

$

6.25

 

 

March 25, 2025

 

 

25

 

 

 

25

 

March 30, 2020

 

Equity

 

$

4.69

 

 

March 27, 2025

 

 

61,133

 

 

 

61,133

 

 

Equity

 

$

4.69

 

 

March 27, 2025

 

 

61

 

 

 

61

 

October 23, 2020

 

Equity

 

$

2.89

 

 

October 21, 2025

 

 

469,565

 

 

 

 

 

Equity

 

$

2.88

 

 

October 21, 2025

 

 

470

 

 

 

470

 

October 28, 2020

 

Equity

 

$

2.69

 

 

October 28, 2025

 

 

173,274

 

 

 

 

 

Equity

 

$

2.69

 

 

October 28, 2025

 

 

173

 

 

 

173

 

February 16, 2021

 

Equity

 

$

4.06

 

 

February 11, 2026

 

 

171

 

 

 

171

 

April 12, 2021

 

Equity

 

$

1.88

 

 

April 7, 2026

 

 

1,493

 

 

 

1,493

 

Total Outstanding

 

 

 

 

 

 

 

 

 

 

728,752

 

 

 

85,913

 

 

 

 

 

 

 

 

 

 

 

2,393

 

 

 

2,393

 

 

Nasdaq Compliance

 

As previously noted in our Form 10-K for the fiscal year ended June 30, 2020, the Company was 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,December 21, 2021, the Company received a noticedeficiency letter from the Nasdaq Listing Qualifications Department of the Nasdaq Stock Market LLC (“Nasdaq”NASDAQ”) stating that it was not innotifying the Company of its failure to maintain compliance with the $1.00 per share of common stock minimum closing bid price requirement over the preceding 30 consecutive business days as required stockholder’s equityby Marketplace Rule 5550(a)(2). The letter stated that the Company has 180 calendar days, or until June 20, 2022, to regain compliance. If at any time during this 180-day period the closing bid price of $2.5 million.the Company’s common stock is at least $1.00 per share for a minimum of ten consecutive business days, the Company’s compliance will be regained.

In the event the Company does not regain compliance in that period, it may be eligible to apply for an additional 180 calendar days to regain compliance. To qualify, the Company will be required to meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for The NASDAQ Capital Market, with the exception of the bid price requirement. The Company will also need to provide written notice of its intention to cure the deficiency during the second compliance period. However, if it appears to the NASDAQ staff that the Company will neither be able nor otherwise eligible to cure the deficiency, it may be subject to delisting by NASDAQ.

 

The notice had no immediate effect onCompany has not yet determined what action, if any, it will take in response to this letter, although the Company’s listing on The Nasdaq Capital Market. The Company originally had until October 26, 2020intends to submitmonitor the closing bid price of its common stock between now and June 19, 2022, and to consider available options if its common stock does not trade at a planlevel likely to regainresult in the Company regaining compliance with theThe NASDAQ Capital Market minimum stockholders’ equity requirement; however, Nasdaq granted an extension of the deadline to submit a plan until November 2, 2020.

Following the offerings mentioned above, the Company is now in compliance with the minimum stockholders’ equityclosing bid price requirement.

 

(5)(6) 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

December 31,

 

 

Six Months Ended

December 31,

 

 

Three Months Ended

December 31,

 

 

Six Months Ended

December 31,

 

(In thousands, except per share data)

 

2020

 

 

2019

 

 

2020

 

 

2019

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(1,622

)

 

$

(2,083

)

 

$

(3,733

)

 

$

(4,151

)

 

$

(2,180

)

 

$

(1,622

)

 

$

(4,209

)

 

$

(3,733

)

Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

15,864

 

 

 

5,947

 

 

 

11,769

 

 

 

5,769

 

 

 

47,482

 

 

 

15,864

 

 

 

47,455

 

 

 

11,769

 

Basic and diluted net loss per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(0.10

)

 

$

(0.35

)

 

$

(0.32

)

 

$

(0.72

)

 

$

(0.05

)

 

$

(0.10

)

 

$

(0.09

)

 

$

(0.32

)

 

All unvested restricted stock awards for the six months ended December 31, 20202021 are not included in diluted net loss per share, as the impact to net loss per share would be anti-dilutive. Options to purchase 321,225152,532 shares of common stock at exercise prices ranging from $1.85 to $8.35$6.00 per share outstanding as of December 31, 20202021 were not included in diluted net loss per share, as the impact to net loss per share would be anti-dilutive.


(6)(7) Revenue Recognition

 

Astrotech recognizes revenue employing the generally accepted revenue recognition methodologies described under the provisions of Accounting 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 months ended December 31, 2020, the Company had one revenue source that totaled $130 thousand. During the three and six months ended December 31, 2020,2021, the Company had one material2 revenue source.sources that comprised all of its revenue. 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, recognizerecognizes 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.60 days or less.

 

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)(8) Fair Value Measurement

The accounting standard for fair value measurementsASC Topic 820 “Fair Value Measurement” (“Topic 820”) defines fair value, establishes a market-based framework or hierarchy for measuring fair value, and expands disclosures about fair value measurements. The standardTopic 820 is applicable whenever assets and liabilities are measured and included in the financial statements at fair value.

The fair value hierarchy established in the standardTopic 820 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.


AsThe following tables present the carrying amounts, estimated fair values, and valuation input levels of certain financial instruments as of December 31, 2020, the fair2021 and June 30, 2021:

 

 

December 31, 2021

 

Available-for-Sale

 

Carrying

 

 

Fair Value Measured Using

 

 

Fair

 

(In thousands)

 

Amount

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Value

 

Mutual Funds - Corporate & Government Debt

 

$

19,819

 

 

$

19,819

 

 

$

 

 

$

 

 

$

19,819

 

ETFs - Corporate & Government Debt

 

 

7,287

 

 

 

7,287

 

 

 

 

 

 

 

 

 

7,287

 

Total

 

$

27,106

 

 

$

27,106

 

 

$

 

 

$

 

 

$

27,106

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2021

 

Available-for-Sale

 

Carrying

 

 

Fair Value Measured Using

 

 

Fair

 

(In thousands)

 

Amount

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Value

 

Mutual Funds - Corporate & Government Debt

 

$

19,985

 

 

$

19,985

 

 

$

 

 

$

 

 

$

19,985

 

ETFs - Corporate & Government Debt

 

 

7,366

 

 

 

7,366

 

 

 

 

 

 

 

 

 

7,366

 

Total

 

$

27,351

 

 

$

27,351

 

 

$

 

 

$

 

 

$

27,351

 

The value of the Company’s cash and cash equivalents approximate their carrying value due to their short-term nature. available-for-sale investments is based on pricing from third-party pricing vendors, who use quoted prices in active markets for identical assets (Level 1 inputs).

 

(8)(9) Debt

 

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.million (the “2019 Note”), and on February 13, 2020, the Company entered into a second private placement transaction with Mr. Pickens for the issuance and sale of a second secured promissory note to Mr. Pickens with a principal amount of $1.0 million (the “2020 Note” and, collectively with the 2019 Note, the “Original Notes”). Interest on Note No. 1 shall accruethe Original Notes accrued at 11% per annum. The principal amount and accrued interest on Note No. 1 shallthe Original Notes originally were to become due and payable on September 5, 2020; however, on August 24, 2020, the Company and Mr. Pickens agreed to extend the date of maturity of the Original Notes and payment of accrued interest to September 5, 2021 (the “Maturity“Original Maturity Date”). The Company mayhad the option to prepay the principal amount and all accrued interest on Note No. 1the Original Notes at any time prior to the Original Maturity Date.

In connection with the issuance of Note No. 1,the Original Notes, the Company, along with 1st Detect Corporation and Astrotech Technologies, Inc. (the “Subsidiaries”), entered into atwo security agreement,agreements, dated as of September 5, 2019 and February 13, 2020 (collectively, the “Original Security Agreements”), 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 the Original Security Agreement No. 1.Agreements. In addition, the Subsidiaries jointly and severally agreed to guarantee and act as surety for the Company’s obligation to repay Note No. 1the Original Notes pursuant to a subsidiary guarantee.

 

On February 13, 2020,September 3, 2021, the Company entered into a second private placement transaction(1) the Omnibus Amendment to the Secured Promissory Notes (the “Amended Notes”) with Mr. Pickens, forin connection with the issuanceOriginal Notes, and sale of a secured promissory note (“Note No. 2”(2) the Omnibus Amendment to the Security Agreements (the “Amended Security Agreements”, and together with the Amended Notes, the “Amendments”) with the Subsidiaries, in connection with the Original Security Agreements. Pursuant to Mr. Pickens with athe Amendments, (a) the principal amount of $1.0 million. Interest on Note No. 2 shall accrue at 11% per annum. The principal amountmillion and accrued interest on Note No. 2 shall become due and payableof $172 thousand on the Maturity Date. The Company may prepay2020 Note was paid in full and the 2020 Note was cancelled, and (b) $1.0 million of the principal amount and all$330 thousand of accrued interest on the 2019 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 Companywas paid and the Subsidiaries granted to Mr. Pickens a security interest in allmaturity date on the remaining balance of $500 thousand of the Company’s and the Subsidiaries’ Collateral, as such term is defined in Security Agreement No. 2. 2019 Note was extended to September 5, 2022 (the “Amended Maturity Date”).

In addition, the Subsidiaries jointly and severally agreed to guarantee and act as surety for the Company’s obligation to repay the remaining balance on the 2019 Note No. 2 pursuant to a subsidiary guarantee.

Onguarantees, dated September 5, 2019 and February 13, 2020, respectively, as amended by the Omnibus Amendments to Subsidiary Guarantees, dated August 24, 2020 and September 3, 2021, respectively (the Omnibus Amendment to Subsidiary Guarantees dated September 3, 2021, 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”“Amended Subsidiary Guarantee”). The PPP PromissorySubsidiary Guaranty with respect to the 2020 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 definedwas also cancelled 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 subjectAmended Subsidiary Guarantee due to the sole approval of the Small Business Administration (“SBA”) and it may deny our application for forgiveness2020 Note being repaid 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.full.

 

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)(10) Business Risk and Credit Risk Concentration Involving Cash

 

For the each of the three and six months ended December 31, 2020 and 2019,2021, the Company had one customer2 customers that materially comprised all of the Company’s revenue.


 

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)(11) Stock-Based Compensation

 

Stock Option Activity Summary

 

The Company’s stock option activity for the six months ended December 31, 20202021 is as follows:

 

 

Shares

(in thousands)

 

 

Weighted Average

Exercise Price

 

 

Shares

(In thousands)

 

 

Weighted Average

Exercise Price

 

Outstanding at June 30, 2020

 

 

325

 

 

$

5.68

 

Outstanding at June 30, 2021

 

 

275

 

 

$

5.25

 

Granted

 

 

 

 

 

 

 

 

 

 

 

 

Exercised

 

 

 

 

 

 

 

 

 

 

 

 

Canceled or expired

 

 

(4

)

 

 

5.30

 

 

 

(122

)

 

 

4.96

 

Outstanding at December 31, 2020

 

 

321

 

 

$

5.68

 

Outstanding at December 31, 2021

 

 

153

 

 

$

5.41

 

 

The aggregate intrinsic value of options exercisable at December 31, 20202021 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 $2$1 thousand related to stock options will be recognized over a weighted-average period of 1.780.78 years.

 

The table below details the Company’s stock options outstanding as of December 31, 2020:2021:

 

Range of exercise prices

 

Number

Outstanding

 

 

Options

Outstanding

Weighted-

Average

Remaining

Contractual

Life (years)

 

 

Weighted-

Average

Exercise

Price

 

 

Number

Exercisable

 

 

Options

Exercisable

Weighted-

Average

Exercise

Price

 

$1.85 – 3.55

 

 

76,500

 

 

 

2.28

 

 

$

3.43

 

 

 

66,500

 

 

$

3.43

 

$5.30 – 5.85

 

 

114,725

 

 

 

6.36

 

 

 

5.49

 

 

 

113,203

 

 

 

5.49

 

$6.00 – 8.35

 

 

130,000

 

 

 

3.89

 

 

 

7.19

 

 

 

86,000

 

 

 

6.59

 

$1.85 – 8.35

 

 

321,225

 

 

 

4.39

 

 

$

5.68

 

 

 

265,703

 

 

$

5.33

 

Range of exercise prices

 

Number

Outstanding (In thousands)

 

 

Options

Outstanding

Weighted-

Average

Remaining

Contractual

Life (Years)

 

 

Weighted-

Average

Exercise

Price

 

 

Number

Exercisable (In thousands)

 

 

Options

Exercisable

Weighted-

Average

Exercise

Price

 

$1.85 – 2.83

 

 

13

 

 

 

6.74

 

 

$

2.08

 

 

 

10

 

 

$

2.15

 

$5.00 – 5.85

 

 

88

 

 

 

5.36

 

 

 

5.55

 

 

 

88

 

 

 

5.55

 

$6.00 – 6.00

 

 

52

 

 

 

0.64

 

 

 

6.00

 

 

 

52

 

 

 

6.00

 

$1.85 – 6.00

 

 

153

 

 

 

3.87

 

 

$

5.41

 

 

 

150

 

 

$

5.49

 

 

Compensation costs recognized related to stock option awards were $0 and $41 thousand for each of the three months ended December 31, 2020,2021, and 2019, respectively2020 and $1 thousand and $85 thousand for each of the six months ended December 31, 20202021 and 2019, respectively.2020.

 


Restricted Stock

 

The Company’s restricted stock activity for the six months ended December 31, 2020,2021, 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, 2020

 

 

133

 

 

$

3.95

 

Outstanding at June 30, 2021

 

$

2,023

 

 

$

2.05

 

Granted

 

 

 

 

 

 

 

 

 

 

 

 

Vested

 

 

(54

)

 

 

1.79

 

 

 

(28

)

 

 

3.39

 

Canceled or expired

 

 

(23

)

 

 

5.40

 

 

 

 

 

 

 

Outstanding at December 31, 2020

 

 

56

 

 

$

3.92

 

Outstanding at December 31, 2021

 

$

1,995

 

 

$

2.03

 

 

Stock compensation expenses related to restricted stock were $46$439 thousand and $42$46 thousand for the three months ended December 31, 2020,2021, and 2019,2020, respectively, and $90$797 thousand and $102$90 thousand for the six months ended December 31, 20202021 and 2019,2020, respectively. The remaining stock-based compensation expense of $161 thousand$3.0 million related to restricted stock awards granted will be recognized over a weighted-average period of 0.982.23 years.

 

(11)(12) Income Taxes

 

The Company accounts for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the expected tax consequences of temporary differences between the tax bases of assets and liabilities and their reported amounts. Valuation allowances are established, when necessary, to reduce deferred tax assets to amounts that are more likely than not to be realized. As of December 31, 2020,2021, the Company established a valuation allowance against all of its net deferred tax assets.

 


For the three months ended December 31, 20202021 and 2019,2020, the Company incurred pre-tax losses in the amount of $1.6$2.2 million and $2.1$1.6 million, respectively. For the six months ended December 31, 20202021 and 2019,2020, the Company incurred pre-tax losses in the amount of $3.7$4.2 million and $4.2$3.7 million, respectively. The total effective tax rate was approximately 0% for the each of the three and six months ended December 31, 20202021 and 2019.2020.

 

For each of the six months ended December 31, 20202021 and 2019,2020, 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 Act (“CARES ActAct”) 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 response to the impact of the CARES Act, the Company received the remaining AMT credit of $429 thousand for AMT previously paid during the 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 unrecognizedcurrently has approximately $300 thousand of uncertain tax benefit for the three and six months endedpositions as of December 31, 2020 or 2019.2021, all of which are accounted as contra-deferred tax assets. The Company does 0t expect any significant changes to its uncertain tax positions in the coming 12 months.

 

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 2001 through present for federal purposes and fiscal years ended 2006 through present for state purposes.

 

(12)(13) 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.

 


(13)On April 15, 2021, a putative stockholder of the Company commenced a class action and derivative lawsuit in the Delaware Court of Chancery, Stein v. Pickens, et al., C.A. No. 2021-0322-JRS (the “Stein Action”), in which it was alleged, among other things, that the Company improperly included broker non-votes in the tabulation of votes counted in favor to approve an amendment to the Company’s Certificate of Incorporation (the “2020 Certificate Amendment”) and, thus the 2020 Certificate Amendment was defective. The Company investigated those allegations and does not believe that the filing and effectiveness of the 2020 Certificate Amendment was either invalid or ineffective.  Nevertheless, to resolve any uncertainty, on April 30, 2021, the Company filed a validation proceeding in the Delaware Court of Chancery, In re Astrotech Corporation, C.A. No. 2021-0380-JRS, pursuant to Section 205 of the Delaware General Corporation Law.  On October 6, 2021, the Delaware Court of Chancery granted the Company’s request and confirmed and validated the 2020 Certificate Amendment.  Thereafter, a settlement in principle was reached with the Plaintiffs in the Stein Action and the parties to the Stein Action presently anticipate presenting the settlement for approval in the first half of 2022. 

Further information regarding the Stein Action and the Section 205 Action is provided in the Schedule 14A proxy statement amendment and supplement filed by the Company with the SEC on April 29, 2021.

(14) Segment Information

 

The Company currently has two reportable business units: 1st Detect Corporation and AgLAB Inc.determined that it does not meet the criteria of ASC 280 “Segment Reporting” because the Company’s subsidiaries represent Company brands that leverage the same core technology rather than independent operating segments. Furthermore, restatement of prior results is not necessary as they would mirror the consolidated results.

 

1st Detect Corporation(15) Impact of COVID-19 Pandemic

 

1st Detect is a manufacturer of explosivesThe 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 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 agriculture market for process controlPrevention’s (“CDC”) guidance and the detection of trace amounts of solventsrecommendations and pesticides.

restrictions provided by state and local authorities. All intercompany transactions between business units have been eliminated in consolidation.

Key financial metrics of the Company’s segmentsemployees who do not work in a lab setting are as follows: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. 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.

 

 

 

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)To date, the Company has seen delays with respect to the TSA certification process and parts of its supply chain, particularly the impact of the global semiconductor and electronics shortage, which has now resulted in product pricing inflation. In addition, although passenger demand for air travel has rebounded, the overall recovery of the airline industry and ancillary services remains highly uncertain and is dependent upon, among other things, the number of cases declining around the globe, public health impacts of new COVID-19 variants, the continued administration of vaccines to unvaccinated populations, and the duration of immunity granted by vaccines.

The Company continues to manage production, to secure alternative supplies, and to take other proactive actions. The Company believes that it will be able to pass the inflation caused by raw materials shortages and increased shipping costs to its customers by increasing the price of its instruments. If supply chain shortages become more severe or longer term in nature, the Company’s business and results of operations could be adversely impacted; however, the Company does not expect this issue to materially adversely affect its liquidity position. The long-term impact of the COVID-19 pandemic on the Company’s business may not be fully reflected until future periods.

The Company continues to evaluate the current and potential impact of the pandemic on its business, results of operations, and consolidated financial statements. The Company also continues to actively monitor developments and business conditions that may cause it to take further actions that alter business operations as may be required by applicable authorities or that it determines are in the best interests of its employees, customers, suppliers, and stockholders.

CARES Act

On March 27, 2020, the CARES Act was enacted. The CARES Act, among other things, includes provisions relating to refundable payroll taxes, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations, and technical corrections to tax depreciation methods for qualified improvement property. The most significant relief measures which the Company qualified for are a loan pursuant to the Paycheck Protection Program for which the Company has received full forgiveness, alternative minimum tax credit refunds, employee retention credit, and payroll tax deferral. The payroll tax deferral was effective from the enactment date through December 31, 2020, and the deferred amount will be repaid in two installments. 50% of the deferred amount has been paid as of December 31, 2021, and the remainder will be due by December 31, 2022. The deferred payroll taxes are recorded within accrued liabilities on the condensed consolidated balance sheets.

The Company will continue to assess the treatment of the CARES Act to the extent additional guidance and regulations are issued, the further applicability of the CARES Act to the Company, and the potential impacts on the business.

(16) Subsequent Events

 

SubsequentThe Company has analyzed its operations subsequent to December 31, 2021 to the end of the second quarter of fiscal year 2021date these unaudited condensed consolidated financial statements were issued and as of February 9, 2021, the Company has sold 1,139,323 shares of common stock pursuantdetermined that it does not have any material subsequent events to the Wainwright ATM Agreement. In connection with the sales ofdisclose in 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.

On February 11, 2021, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain purchasers named therein, pursuant to which the Company agreed to issue and sell, in a registered direct offering (the “February Registered Offering”), 2,845,535 shares (the “Shares”) of the Company’s Common Stock at an offering price of $3.25 per share.

The February 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 exclusive placement agent in connection with the February Registered Offering. The Company will also issue to the Placement Agent, or its designees, warrants (the “Placement Agent’s Warrants”) to purchase up to 199,187 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 February 11, 2026.

unaudited condensed consolidated financial statements.



 

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;

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 Cleveland Clinic;

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

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;

Our ability to continue as a going concern;

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 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;

The impact of trade barriers imposed by the U.S. government, such as import/export duties and restrictions, tariffs andquotas, and potential corresponding actions by other countries in which we conduct our business;

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

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

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

The risks related to the availability of, and cost inflation in, supply chain inputs, including labor, raw materials, commodities, packaging, and transportation;

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

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

Supply chain delays and challenges;

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

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

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

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

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

Our ability to successfully identify, complete and integrate acquisitions.

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 20202021 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.

 


ITEM 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 commercializationmass spectrometry company that launches, manages, and buildscommercializes scalable companies based on its innovative technology in order to maximize shareholder value.core technology.

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

 

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

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

 

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

AgLAB, Inc. (“AgLAB”) is developing a series of mass spectrometers for use in the agriculture 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.

AgLAB, Inc. (“AgLAB”) is developing a series of mass spectrometers for use in the hemp and cannabis market with initial focus on optimizing yields in the extraction and distillation process. 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 COVID-19 or pneumonia. BreathTech holds an exclusive AMS Technology license from ATI for breath analysis 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 COVID-19 or pneumonia. BreathTech holds an exclusive AMS Technology license from ATI for breath analysis applications.

 

Our Business Units

 

Astrotech Technologies, Inc.

 

ATI owns and licenses the AMS Technology, the platform mass spectrometry technology originally developed by 1st1st Detect. Long recognized as the gold standard in chemical detection, mass spectrometry has historically been too costly, bulky, and cumbersome. In contrast, the AMS Technology has been designed to be inexpensive, small, and easy to use. Unlike other technologies, the AMS Technology works under ultra-high vacuum, which eliminates competing molecules, yielding higher resolution and fewer false alarms. The intellectual property includes 3224 granted patents and two additional patents in 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 use. ATI currently licenses the AMS Technology to three wholly-owned subsidiaries of Astrotech on an exclusive basis, 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 breath analysis.

 

ATI has contracted with Sanmina Corporation (“Sanmina”), a leading contract manufacturer with a worldwide presence. Sanmina has already helped to reduce the cost of the TRACER 1000™, and we have leveraged their expertise to improve manufacturability and reliability of our systems.

1st Detect Corporation

 

1st Detect, an exclusivea licensee of ATI for the security and detection market, has developed the TRACER 1000™,1000, the world’s first mass spectrometerspectrometry (“MS”) based explosives trace detector (“ETD”) certified by the European Civil Aviation Conference (“ECAC”), designed to replace the ETDs used at airports, cargo facilities,and other secured facilities, and borders worldwide. We believe that ETD 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 facility shutdowns, 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 to the TRACER 1000’s detection library does not degrade the TRACER 1000’sits 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, but mass spectrometry has long been too expensive, too cumbersome, and not practical for security applications until the launch of the TRACER 1000.

 

In order to sell the TRACER 1000 to airport and cargo security customers in the European Union and certain other countries, ECAC certification is required. Certain other countries alsoWe are currently selling the TRACER 1000 to customers who accept ECAC certification. After receiving ECAC certificationWe have deployed or received orders for the TRACER 1000 on February 21, 2019, we are now marketing toin approximately twenty locations in thirteen countries throughout Europe 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, we announced our first commercial sale of TRACER 1000 units to a global shipping and logistics company. Asia.

 


In the United States, we are working with the U.S. Transportation Security Administration (“TSA”) towards Air Cargoair cargo certification. On March 27, 2018, we 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, we announced that the TRACER 1000 had been selected by the TSA’s Innovation Task Force 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'sour 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, we resumed cargo non-detection testing resumed thisduring the summer of 2020, and we subsequently announced on September 9, 2020 that the TRACER 1000 passed the non-detection testing portion of the TSA’s ACSQT. Due to continued delays caused by COVID-19, TSA cargo detection testing resumed this fall and continues to move forward. Thisis ongoing but proceeding much more slowly than anticipated. As a result, efforts are primarily focused on our other opportunities. TSA cargo detection testing is the next and final step to be listed on the Air Cargo Screening Technology List (“ACSTL”) as an “approved” device and, ifdevice. If approved, therebythe TRACER 1000 will be 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 CompanyOn August 25, 2021, 1st Detect announced that it had surpassed $1.0 million insecured an important landmark purchase ordersorder for the TRACER 1000, andrepresenting the first units to be deployed at an additional $1.0 million in future service and support commitments, also announcing DHL (Deutsche Post AG) as its largest flagship customer.airport security checkpoint. These systems were delivered to the customer during the second quarter of fiscal year 2022.

 

AgLAB Inc.

 

AgLAB, an exclusive licensee of ATI for the agriculture market, has developed the AgLAB-1000™ series of mass spectrometers for process control anduse in the detection of trace levels of solventshemp and pesticides.cannabis market with initial focus on optimizing yields in the extraction and distillation process. The AgLAB product line is a derivative of the Company’sour core AMS Technology. The AMS Technology provides a significant competitive advantage due to its small size, rugged design, quick analysis, and ease of use,use. We continue to work with the market to refine our library and affordability. These attributes are valuable for agriculture applications in both processing facilities and in the field.instrumentation.

 

BreathTech Corporation

 

BreathTech, an exclusive licensee of ATI for use in breath analysis, is developing the BreathTest-1000, a breath analysis tool to screen for VOC metabolites found in a person’s breath that could indicate they may have an infection, including COVID-19 or pneumonia. While vaccines have been deployed to prevent the transmission of COVID-19, only a fraction of the world has been vaccinated and new variants continue to pose a significant and evolving threat. New tools to aid in the battle against COVID-19 remain of the utmost importance to help defeat the disease, and BreathTech, in conjunction with Cleveland Clinic, are developing a quick and easy to use device to help prevent the further spread of the disease.

 

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

 

On October 20, 2020, weFebruary 1, 2022, BreathTech announced that it has hired Dr. Karim Sirgi, MD, MBA and FCAP as its Chief Science Officer. Dr. Sirgi is a jointpathologist, board certified in Anatomic, Clinical and Cytopathology, and has over 30 years of practice and leadership experience in private and academic pathology practices. We expect Dr. Sirgi will be key in the research and development agreementand regulatory efforts at BreathTech and will help lead our partnership with the Cleveland Clinic Foundation to explore leveragingin the BreathTest-1000 to rapidly screen for COVID-19 or related indicators. The goaldevelopment of the agreement is to develop a non-invasive device that will use breath samples to identify COVID-19 strains, with the potential to provide a low-cost, self-service screening option that could be deployed on a large-scale.BreathTest-1000.

 

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 uncertain and difficult to predict, as the disease and 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 isremains possible that it could cause a prolonged 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 have been somewhat positive, but continuing actions remain uncertain.uncertain and pose some degree of risk.

 

To date, we have seen delays with respect to the TSA certification process and parts of our supply chain, as a resultparticularly the impact of COVID-19.the global semiconductor and electronics shortage, which has now resulted in product pricing inflation. In addition, with a reduction inalthough passenger demand for air travel causedhas rebounded, the overall recovery of the airline industry and ancillary services remains highly uncertain and is dependent upon, among other things, the number of cases declining around the globe, public health impacts of


new COVID-19 variants, the continued administration of vaccines to unvaccinated populations, and the duration of immunity granted by the pandemic, we are seeing a reduction in near-term demand for ETDs at checkpoints.vaccines.

 

It is possibleWe continue to manage production, to secure alternative supplies, and to take other proactive actions. We believe that we will be able to pass the continued spread of COVID-19 could cause further disruption ininflation caused by raw materials shortages and increased shipping costs to our supply chain; cause delay, or limitcustomers by increasing the ability of customers to perform, including in making timely payments to the Company; cause further delay in regulatory certification testingprice of our instruments;instruments. If supply chain shortages become more severe or longer term in nature, our business and results of operations could be adversely impacted; however, we do not expect this issue to materially adversely affect our liquidity position. The long-term impact investment performance; and cause other unpredictable events. The extent to whichof the COVID-19 pandemic on our business may innot be fully reflected until future periods.

We continue to evaluate the future materiallycurrent and potential impact of the pandemic on our financial condition, liquidity, orbusiness, results of operations, is uncertain.and consolidated financial statements. We also continue to actively monitor developments and business conditions that may cause us to take further actions that alter business operations as may be required by applicable authorities or that we determine are in the best interests of our employees, customers, suppliers, and stockholders.

 


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.

 

Results of Operations

 

Three months ended December 31, 2020,2021, compared to three months ended December 31, 20192020:

 

Selected consolidated financial data for the quarters ended December 31, 2020,2021, and 20192020 is as follows:

 

 

Three Months Ended December 31,

 

 

Three Months Ended December 31,

 

(In thousands)

 

2020

 

 

2019

 

 

2021

 

 

2020

 

Revenue

 

$

130

 

 

$

205

 

 

$

561

 

 

$

130

 

Cost of revenue

 

 

128

 

 

 

196

 

 

 

441

 

 

 

128

 

Gross profit

 

 

2

 

 

 

9

 

 

 

120

 

 

 

2

 

Gross margin

 

 

2

%

 

 

4

%

 

 

21

%

 

 

2

%

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

 

803

 

 

 

1,110

 

 

 

1,728

 

 

 

803

 

Research and development

 

 

758

 

 

 

939

 

 

 

652

 

 

 

758

 

Total operating expenses

 

 

1,561

 

 

 

2,049

 

 

 

2,380

 

 

 

1,561

 

Loss from operations

 

 

(1,559

)

 

 

(2,040

)

 

 

(2,260

)

 

 

(1,559

)

Interest and other expense, net

 

 

(63

)

 

 

(43

)

Other income and (expense), net

 

 

80

 

 

 

(63

)

Income tax benefit

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(1,622

)

 

$

(2,083

)

 

$

(2,180

)

 

$

(1,622

)

 

RevenueTotal revenue decreased $75significantly increased by $431 thousand during the second quarter of fiscal 2021,2022, compared to the second quarter of fiscal 2020.The decrease2021. In the second quarter of fiscal 2022, revenue was duecomprised of sales related to the timing of orders.our TRACER 1000 to an airport security checkpoint customer as well as to DHL (Deutsche Post AG). All of the revenue generated in the second quartersquarter of fiscal 2021 and 2020 was from the sales of our related to TRACER 1000 sales to DHL (Deutsche Post AG).

 

Cost of Revenue Gross profit is comprised of revenue less cost of revenue. In the second quarters of fiscal 20212022 and 2020,2021, cost of revenue was comprised of labor, materials, shipping, and warranty reserve and overhead related to the 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 cargo 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 inCost of revenue increased $313 thousand during the second quarter of fiscal 2021,2022, compared to the second quarter of fiscal 2020.2021, due to the increase in revenue described above. Gross margin increased by 19% in the second quarter fiscal 2022, compared to the second quarter of fiscal 2021, as we have increased production and benefited from associated volume discounts. Further, we have benefited from implementing specific enhancements to our technology.

 

Operating Expenses – Operating expenses decreased $488increased $819 thousand, or 24%52%, during the second quarter of fiscal 2021,2022, compared to the second quarter of fiscal 2020.2021. Significant changes to operating expenses include the following:

 


Selling, general and administrative increased $925 thousand, or 115%, during the second quarter of fiscal 2022, compared to the second quarter of fiscal 2021, due to non-cash equity incentive compensation for employees, payroll-related accruals, and legal expenses related to our derivative litigation.

Selling, general and administrative decreased $307 thousand, or 28%, due to a decrease in office rent and related expenses associated 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 second quarter of fiscal 2021, compared to the second quarter of fiscal 2020. This decrease is mainly due to decreases in compensation and related expenses as well as less materials purchased for R&D purposes as development of the core AMS Technology is largely complete.

Research and development decreased $106 thousand, or 14%, during the second quarter of fiscal 2022, compared to the second quarter of fiscal 2021, largely driven by a decrease in purchases of R&D materials and equipment as we continue to shift our focus from R&D toward the commercialization of our products.

 

Income Taxes Income tax benefit did not change during the second quarter of fiscal 2021,2022, compared to the second quarter of fiscal 2021. The realization of tax benefits depends on the existence of future taxable income. Pursuant to Accounting Standards Codification (“ASC”) 740 “Income Taxes”, a valuation allowance has been established on all of our deferred tax assets.

Six months ended December 31, 2021, compared to six months ended December 31, 2020:

Selected consolidated financial data for the six months ended December 31, 2021 and 2020 is as follows:

 

 

Six Months Ended

December 31,

 

(In thousands)

 

2021

 

 

2020

 

Revenue

 

$

748

 

 

$

270

 

Cost of revenue

 

 

616

 

 

 

241

 

Gross profit

 

 

132

 

 

 

29

 

Gross margin

 

 

18

%

 

 

11

%

Operating expenses:

 

 

 

 

 

 

 

 

Selling, general and administrative

 

 

3,154

 

 

 

1,729

 

Research and development

 

 

1,291

 

 

 

1,367

 

Disposal of corporate lease

 

 

 

 

 

544

 

Total operating expenses

 

 

4,445

 

 

 

3,640

 

Loss from operations

 

 

(4,313

)

 

 

(3,611

)

Other income and (expense), net

 

 

104

 

 

 

(122

)

Income tax benefit

 

 

 

 

 

 

Net loss

 

$

(4,209

)

 

$

(3,733

)

RevenueTotal revenue increased $478 thousand during the fiscal year 2022, compared fiscal year 2021. In fiscal year 2022, revenue was comprised of sales related to our TRACER 1000 to an airport security checkpoint customer as well as to DHL (Deutsche Post AG). In fiscal year 2021, all of our revenue was related to the sales of the TRACER 1000 to DHL (Deutsche Post AG).

Cost of Revenue Gross profit is comprised of revenue less cost of revenue. In the six months ended December 31, 2021 and December 31, 2020, cost of revenue was comprised of labor, materials, shipping, warranty reserve, and overhead allocation related to the sale of TRACER 1000 units. Cost of revenue increased $375 thousand during fiscal year 2022, compared to fiscal year 2021, due to the increase in revenue described above. Gross margin increased by 7% in the fiscal year 2022, compared to the fiscal year 2021, as we have increased production and benefited from associated volume discounts. Further, we have benefited from implementing specific enhancements to our technology.

Operating Expenses – Operating expenses increased $805 thousand, or 22% during the six months ended December 31, 2021, compared to six months ended December 31, 2020. Significant changes to operating expenses include the following:

Selling, general and administrative increased $1.4 million, or 82%, due to non-cash equity incentive compensation for employees, payroll-related accruals, and legal expenses related to our derivative litigation.

Research and development decreased $76 thousand, or 6%, during the six months ended December 31, 2021, compared to the six months ended December 31, 2020, largely driven by less materials purchased for R&D purposes as we continue to shift our focus from R&D toward the commercialization of our products.

Disposal of long-lived assets decreased $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 in the prior period.

Income Taxes Income tax benefit did not change during the six months ended December 31, 2021, compared to the six months ended December 31, 2020. 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’sour deferred tax assets.



Six months ended December 31, 2020, compared to six months ended December 31, 2019:

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

 

 

Six Months Ended

December 31,

 

(In thousands)

 

2020

 

 

2019

 

Revenue

 

$

270

 

 

$

206

 

Cost of revenue

 

 

241

 

 

 

196

 

Gross profit

 

 

29

 

 

 

10

 

Gross margin

 

 

11

%

 

 

5

%

Operating expenses:

 

 

 

 

 

 

 

 

Selling, general and administrative

 

 

1,729

 

 

 

2,312

 

Research and development

 

 

1,367

 

 

 

1,794

 

Disposal of corporate lease

 

 

544

 

 

 

 

Total operating expenses

 

 

3,640

 

 

 

4,106

 

Loss from operations

 

 

(3,611

)

 

 

(4,096

)

Interest and other income, net

 

 

(122

)

 

 

(55

)

Income tax benefit

 

 

 

 

 

 

Net loss

 

$

(3,733

)

 

$

(4,151

)

Revenue – Total revenue increased $64 thousand during the six months ended December 31, 2020, compared to the six months ended December 31, 2019. All of the material revenue generated during each of the six months ended December 31, 2020 and 2019 was 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 six months ended December 31, 2020 and 2019, cost of revenue was comprised of labor, materials, overhead, warranty reserve, and shipping related to the above sales. Gross margin increased to 11% during the six months ended December 31, 2020, compared to the six months ended December 31, 2019, as the margin in the prior period was driven by the FIFO inventory methodology where much of the inventory used to build the TRACER 1000 had R&D volume pricing.

Operating Expenses – Operating expenses decreased $466 thousand, or 11%, during the six months ended December 31, 2020, compared to the six months ended December 31, 2019.Significant changes to operating expenses include the following:

Selling, general and administrative decreased $583 thousand, or 25%,due to decreases in office rent and related expenses associated 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 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 less materials 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 did not change during the six months ended December 31, 2020, compared to the six months ended December 31, 2019. 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:

 

 

Six Months Ended

December 31,

 

 

Six Months Ended

December 31,

 

(In thousands)

 

2020

 

 

2019

 

 

Change

 

 

2021

 

 

2020

 

 

Change

 

Change in cash and cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net cash used in operating activities

 

$

(2,498

)

 

$

(3,356

)

 

$

858

 

 

$

(3,484

)

 

$

(2,492

)

 

$

(992

)

Net cash used in investing activities

 

 

(16

)

 

 

 

 

 

(16

)

 

 

(264

)

 

 

(16

)

 

 

(248

)

Net cash provided by financing activities

 

 

21,828

 

 

 

2,772

 

 

 

19,056

 

Net cash (used in) provided by financing activities

 

 

(2,018

)

 

 

21,822

 

 

 

(23,840

)

Net change in cash and cash equivalents

 

$

19,314

 

 

$

(584

)

 

$

19,898

 

 

$

(5,766

)

 

$

19,314

 

 

$

(25,080

)

 

Cash and Cash Equivalents

 

As of December 31, 2020,2021, we held cash and cash equivalents and restricted cash of $22.7$30.2 million, and our working capital was approximately $18.8$56.9 million. As of June 30, 2020,2021, we had cash and cash equivalents of $3.3$35.9 million, and our working capital was approximately $0.3$60.9 million. Cash and cash equivalents increased $19.3decreased $5.8 million as of December 31, 2020,2021, compared to June 30, 2020,2021, due to public offeringsthe partial repayment of common stock with net proceeds of approximately $21.8 million, partially offset by funding our normalthe related party notes including accrued interest as well as continuing operating activities and research and development initiatives.expenses.

 

Operating Activities

 

Cash used in operating activities decreased $0.9increased $1.0 million for the six months ended December 31, 2020,2021, compared to the six months ended December 31, 2019, primarily2020, due to a reductionan increase in our expenses as well asaccounts receivable from sales of the TRACER 1000, receipt of an alternative minimum tax credit in the prior period, and a decrease in accounts receivable from receiving the remaining alternative minimum tax (“AMT”) credit.payable.

Investing Activities

 

Cash used in investing activities increased $16$248 thousand for the six months ended December 31, 2020,2021, compared to the six months ended December 31, 2019,2020, due to purchasesthe addition of equipment.leasehold improvement assets related to our new R&D facility in Austin.

 

Financing Activities

 

Cash provided byused in financing activities increased $19.1was $2.0 million for the six months ended December 31, 2020,2021, compared to cash provided by financing activities of $21.8 million for the six months ended December 31, 2019,2020. This change was due to the partial repayment of the related party notes during the current period, compared to the net 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 common stock through an “at the market offering” program in the prior period.period.

 

Liquidity

 

Our annual report on Form 10-K forHistorically, our primary uses of cash have been to fund research and development, inventory, and selling, general and administrative expenses. During the fiscal year ended June 30, 2020 indicated substantial doubt as to our ability to continue as a going concern. On October 23, 2020,2021, we successfully completed aseveral public offeringofferings of our common stock, raising grossnet 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 $6.2approximately $67.6 million. We believe this solves our liquidity issue, and we no longer have substantial doubt about our ability to continue as a going concern. We will continue to evaluate opportunities to further strengthen our liquidity, 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. However, our ability to successfully effectuate any such transactions depends on operating and economic conditions, some of which are beyond our control. If additional capital is needed, we may not be able to obtain debt or equity financing on terms favorable to us, or at all. Based on current expectations, we believe we have sufficient liquidity to meet our cash flow needs during this fiscal year 2022 and the immediate future.

 

Income Taxes

 

The Company accountsProvision for Income Tax

Our effective tax rate is 0% for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the six months ended December 31, 2021, and we expect that our effective tax rate for the full fiscal year 2022 year will be 0%. Based on the weight of available evidence, including net cumulative losses and 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 amountsfuture losses, we have determined that areit is more likely than not tothat our U.S. federal and state deferred tax assets will not be realized. As of December 31, 2020, the Company establishedrealized and therefore a full valuation allowance against all of itshas been provided on the U.S. federal and state net deferred tax assets.

 

ForIn general, if we experience a greater than 50 percentage point aggregate change in ownership over a three-year period (a Section 382 ownership change), utilization of its pre-change net operating loss (“NOL”) carryforwards are subject to an annual limitation under Section 382 of the three months endedInternal Revenue Code. Generally, U.S. state laws have laws similar to Internal Revenue Code Section 382. The annual limitation generally is determined by multiplying the value of the Company’s stock at the time of such ownership change (subject to certain adjustments) by the applicable long-term tax-exempt rate. Such limitations may result in expiration of a portion of the NOL carryforward before utilization.


We file U.S. federal and state income tax returns. We are not currently subject to any income tax examinations. Dating back to June 2002, we have net operating loss carryovers, which generally allows all tax years to remain open to income tax examinations for all years for which there are loss carryforwards.

Uncertain Tax Positions

We recognize the financial statement effects of a tax position when it becomes more likely than not, based upon the technical merits, that the position will be sustained upon examination. We currently have approximately $300 thousand of uncertain tax positions as of December 31, 2020 and 2019, the2021, all of which are accounted as contra-deferred tax assets. The Company incurred pre-tax lossesdoes not expect any significant changes to its uncertain tax positions in the amount of $1.6 million and $2.1 million, respectively. For the six months ended December 31, 2020 and 2019, the Company incurred pre-tax losses in the amount of $3.7 million and $4.2 million, respectively. The total effective tax rate was approximately 0%coming 12 months.

Income Taxes

There is $0 provision for theincome taxes during each of the three and six months ended December 31, 20202021 and 2019.2020.  

 

For each of the six months ended December 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 CARES Act was signed into law on March 27, 2020. The CARES Act provided certain tax relief measures including the acceleration of the AMT credit previously paid. The CARES Act allows for the acceleration of the refundable AMT credit up to


100% of the AMT credit. In response to the impact of the CARES Act, the Company received the remaining AMT credit of $429 thousand for AMT previously paid during the 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 six months ended December 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 2001 through present for federal purposes and fiscal years ended 2006 through present for state purposes.

Off-Balance Sheet Arrangements

We did not have any off-balance sheet arrangements as of December 31, 2020,2021, or June 30, 2020.2021.

 

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.effective at the reasonable assurance level.

 

Changes in Internal Control over Financial Reporting

 

There was no change in our internal control over financial reporting during the six monthsour last fiscal quarter ended December 31, 20202021 that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 



PART II: OTHER INFORMATION

 

AsOn April 15, 2021, a putative stockholder of December 31, 2020, we are not involved in any pending or threatened legal proceedings that we believe could reasonably be expected to havethe Company commenced a material adverse effect on our financial condition, results of operations, or cash flows. From time to time, we are subject to legal proceedingsclass action 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 changederivative lawsuit in the future, we may be requiredDelaware Court of Chancery, Stein v. Pickens, et al., C.A. No. 2021-0322-JRS (the “Stein Action”), in which it was alleged, among other things, that the Company improperly included broker non-votes in the tabulation of votes counted in favor to recordapprove an amendment to the Company’s Certificate of Incorporation (the “2020 Certificate Amendment”) and, thus the 2020 Certificate Amendment was defective. The Company investigated those allegations and does not believe that the filing and effectiveness of the 2020 Certificate Amendment was either moreinvalid or less litigation expense.ineffective.  Nevertheless, to resolve any uncertainty, on April 30, 2021, the Company filed a validation proceeding in the Delaware Court of Chancery, In re Astrotech Corporation, C.A. No. 2021-0380-JRS, pursuant to Section 205 of the Delaware General Corporation Law.  On October 6, 2021, the Delaware Court of Chancery granted the Company’s request and confirmed and validated the 2020 Certificate Amendment.  Thereafter, a settlement in principle was reached with the Plaintiffs in the Stein Action and the parties to the Stein Action presently anticipate presenting the settlement for approval in the first half of 2022.  

Further information regarding the Stein Action and the Section 205 Action is provided in the Schedule 14A proxy statement amendment and supplement filed by the Company with the Securities and Exchange Commission on April 29, 2021.

 

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 growth prospects. There cancash flows may be no guarantee thatimpacted by a number of factors, many of which are beyond our stock price will remain at current levels or that future salescontrol, including those set forth in our Form 10-K and our Form 10-Qs, the occurrence of any one of which could have a material adverse effect on our common stock will not be at prices lower than those sold to investors.actual results.

 

Additionally, securities of certain companiesThere have recently 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 ledbeen no material changes to the price 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 sharesRisk Factors previously disclosed 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 shares would be the target of a short squeeze, there can be no assurance that we won’t be in the future, and you may lose a significant portion or all of your investment if you purchase our shares at a rate that is significantly disconnected from our underlying value.fiscal year 2021 Form 10-K.

 

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

 

On 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.None.

 

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

 

3.1

 

AtCertificate of Incorporation, as filed with the Market Offering Agreement, dated December 18, 2020, by and between Astrotech Corporation and H.C. Wainwright & Co., LLCSecretary of State of the State of Delaware.

 

Exhibit 1.13.1 to Form 8-K filed on December 18,28, 2017.

3.2

Bylaws of the Registrant (incorporated by reference to Exhibit 3.2 of the Registrant’s Form 8-K filed with the Securities and Exchange Commission on December 28, 2017).

Exhibit 3.2 to Form 8-K filed on December 28, 2017.

3.3

Certificate of Designations of Series A Junior Participating Preferred Stock, as filed with the Secretary of State of the State of Delaware.

Exhibit 3.3 to Form 8-K filed on December 28, 2017.

3.4

Certificate of Designations of Series C Convertible Preferred Stock, as filed with the Delaware Secretary of State on April 17, 2019.

Exhibit 3.1 to Form 8-K filed on April 23, 2019.

3.5

Certificate of Designations of Preferences, Rights and Limitations of Series D Convertible Preferred Stock, as filed with the Delaware Secretary of State on April 17, 2019.

Exhibit 3.2 to Form 8-K filed on April 23, 2019.

3.6

Certificate of Amendment to the Certificate of Incorporation of Astrotech Corporation.

Exhibit 3.1 to Form 8-K filed on July 1, 2020.

 

 

 

 

 

4.13.7

 

FormCertificate of Placement Agent’s WarrantAmendment to the Certificate of Incorporation of Astrotech Corporation.

 

Exhibit 4.13.1 to Form 8-K filed on October 23, 2020.12, 2021.

 

 

 

 

 

4.2

Form of Placement Agent’s Warrant

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

10.1

Securities Purchase Agreement

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

10.2

Form of Securities Purchase Agreement

Exhibit 10.1 to Form 8-K filed on October 30, 2020.

99.1

Joint Development and Option Agreement, dated October 20, 2020

Exhibit 99.1 to Form 8-K filed on October 20, 2020.

99.2

Cash Reserve Agreement, dated October 19, 2020

Exhibit 99.3 to Form 8-K filed on October 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.

 

FiledFurnished herewith.

 

 

 

 

 

101101.INS

 

Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

Filed herewith.

101.SCH

Inline XBRL Taxonomy Extension Schema Document

Filed herewith.

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

Filed herewith.

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

Filed herewith.

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document

Filed herewith.

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

Filed herewith.

104

The following financial informationcover page from the Company’s Quarterly Report on Form 10-Q for the periodquarter ended December 31, 20202021, has been 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.Inline XBRL.

 

Filed herewith.

 



SIGNATURES

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: February 16, 202114, 2022

 

/s/ Eric Stober

 

 

Eric Stober

 

 

Chief Financial Officer and Principal Accounting Officer

 

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