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What changed in ASTROTECH Corp's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of ASTROTECH Corp's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+383 added−404 removedSource: 10-K (2024-09-20) vs 10-K (2023-09-28)

Top changes in ASTROTECH Corp's 2024 10-K

383 paragraphs added · 404 removed · 235 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

51 edited+48 added−49 removed144 unchanged
Biggest changeAs the market continues to grow, there has been an influx of new companies entering the space, ranging from large corporations to small startups. The competition is fierce, with companies investing heavily in research and development to create innovative products and differentiate themselves from their competitors.
Biggest changeWe also believe this growth is due in part to the passage of the 2018 Farm Bill, which legalized hemp production in the U.S. As the CBD and hemp market continues to grow, there has been an influx of new companies entering the CBD and THC supply chains, ranging from large corporations to small startups.
The Civil Monetary Penalty Act of 1981 imposes penalties against any person or entity that, among other things, is determined to have presented or caused to be presented a claim to a federal healthcare program that the person knows or should know is for an item or service that was not provided as claimed or is false or fraudulent, or offering or transferring remuneration to a federal healthcare beneficiary that a person knows or should know is likely to influence the beneficiary’s decision to order or receive items or services reimbursable by the government from a particular provider or supplier. 19 Table of Contents The Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act (“HITECH”) and including implementing regulations (collectively, “HIPAA”) also created additional federal criminal statutes that prohibit among other actions, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, including private third-party payors, knowingly and willfully embezzling or stealing from a healthcare benefit program, willfully obstructing a criminal investigation of a healthcare offense, and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services.
The Civil Monetary Penalty Act of 1981 imposes penalties against any person or entity that, among other things, is determined to have presented or caused to be presented a claim to a federal healthcare program that the person knows or should know is for an item or service that was not provided as claimed or is false or fraudulent, or offering or transferring remuneration to a federal healthcare beneficiary that a person knows or should know is likely to influence the beneficiary’s decision to order or receive items or services reimbursable by the government from a particular provider or supplier. 21 Table of Contents The Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act (“HITECH”) and including implementing regulations (collectively, “HIPAA”) also created additional federal criminal statutes that prohibit among other actions, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, including private third-party payors, knowingly and willfully embezzling or stealing from a healthcare benefit program, willfully obstructing a criminal investigation of a healthcare offense, and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services.
AgLAB Inc. The currently available technology that we believe to be the only direct competition to our MS-based system is high performance liquid chromatography (“HPLC”). We believe the AgLAB-1000 series of products offers a more customer-friendly interface, quicker results, and, once the AgLAB-1000-D1 is launched, the ability to provide closed loop process control, ensuring maximum yield and product quality.
The currently available technology that we believe to be the only direct competition to our MS-based system is high performance liquid chromatography (“HPLC”). We believe the AgLAB-1000 series of products offers a more customer-friendly interface, quicker results, and, once the AgLAB-1000-D1 is launched, the ability to provide closed loop process control, ensuring maximum yield and product quality.
We are subject to regulations and product registration requirements in many foreign countries in which we may sell our products, including in the areas of: ● design, development, and manufacturing; ● product standards; ● product safety; ● product safety reporting; ● marketing, sales, and distribution; ● packaging and storage requirements; ● labeling requirements; ● content and language of instructions for use; ● clinical trials; 18 Table of Contents ● record keeping procedures; ● advertising and promotion; ● recalls and field corrective actions; ● post-market surveillance, including reporting of deaths or serious injuries and malfunctions that, if they were to recur, could lead to death or serious injury; ● import and export restrictions; ● tariff regulations, duties, and tax requirements; ● registration for reimbursement; and ● necessity of testing performed in country by distributors for licensees.
We are subject to regulations and product registration requirements in many foreign countries in which we may sell our products, including in the areas of: ● design, development, and manufacturing; ● product standards; ● product safety; ● product safety reporting; ● marketing, sales, and distribution; ● packaging and storage requirements; ● labeling requirements; ● content and language of instructions for use; ● clinical trials; 20 Table of Contents ● record keeping procedures; ● advertising and promotion; ● recalls and field corrective actions; ● post-market surveillance, including reporting of deaths or serious injuries and malfunctions that, if they were to recur, could lead to death or serious injury; ● import and export restrictions; ● tariff regulations, duties, and tax requirements; ● registration for reimbursement; and ● necessity of testing performed in country by distributors for licensees.
It also tasks HHS with establishing a methodology whereby harmed individuals who were the victims of breaches of unsecured PHI may receive a percentage of the civil monetary penalty paid by the violator. 20 Table of Contents In addition, California enacted the CCPA, effective January 1, 2020, which, among other things, creates new data privacy obligations for covered companies and provides new privacy rights to California residents, including the right to opt out of certain disclosures of their information.
It also tasks HHS with establishing a methodology whereby harmed individuals who were the victims of breaches of unsecured PHI may receive a percentage of the civil monetary penalty paid by the violator. 22 Table of Contents In addition, California enacted the CCPA, effective January 1, 2020, which, among other things, creates new data privacy obligations for covered companies and provides new privacy rights to California residents, including the right to opt out of certain disclosures of their information.
Once the product has been placed on the market in the EEA, the manufacturer must comply with requirements for reporting incidents and field safety corrective actions associated with the medical device. 17 Table of Contents In order to demonstrate safety and efficacy for their medical devices, manufacturers must conduct clinical investigations in accordance with the requirements of Annex X to the Medical Devices Directive ("MDD"), Annex 7 of the Active Implantable Medical Devices Directive ("AIMDD"), and applicable European and International Organization for Standardization standards, as implemented or adopted in the EEA member states.
Once the product has been placed on the market in the EEA, the manufacturer must comply with requirements for reporting incidents and field safety corrective actions associated with the medical device. 19 Table of Contents In order to demonstrate safety and efficacy for their medical devices, manufacturers must conduct clinical investigations in accordance with the requirements of Annex X to the Medical Devices Directive ("MDD"), Annex 7 of the Active Implantable Medical Devices Directive ("AIMDD"), and applicable European and International Organization for Standardization standards, as implemented or adopted in the EEA member states.
An IDE supplement must be submitted to and approved by the FDA before a sponsor or investigator may make a change to the investigational plan. 15 Table of Contents During a clinical trial, the sponsor is required to comply with the applicable FDA requirements, including, for example, trial monitoring, selecting clinical investigators and providing them with the investigational plan, ensuring IRB review, adverse event reporting, record keeping, and prohibitions on the promotion of investigational devices or on making safety or effectiveness claims for them.
An IDE supplement must be submitted to and approved by the FDA before a sponsor or investigator may make a change to the investigational plan. 17 Table of Contents During a clinical trial, the sponsor is required to comply with the applicable FDA requirements, including, for example, trial monitoring, selecting clinical investigators and providing them with the investigational plan, ensuring IRB review, adverse event reporting, record keeping, and prohibitions on the promotion of investigational devices or on making safety or effectiveness claims for them.
While we do not intend to directly harvest, manufacture, distribute or sell cannabis or cannabis products, we may be detrimentally affected by a change in enforcement by the federal or state governments. 21 Table of Contents In the past, the Obama administration took the position that it was not an efficient use of resources to direct federal law enforcement agencies to prosecute those lawfully abiding by state-designated laws allowing the use and distribution of medical marijuana.
While we do not intend to directly harvest, manufacture, distribute or sell cannabis or cannabis products, we may be detrimentally affected by a change in enforcement by the federal or state governments. 23 Table of Contents In the past, the Obama administration took the position that it was not an efficient use of resources to direct federal law enforcement agencies to prosecute those lawfully abiding by state-designated laws allowing the use and distribution of medical marijuana.
The government may assert that claim includes items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the false claims statute. 16 Table of Contents We may be subject to similar foreign laws that may include applicable post-marketing requirements such as safety surveillance.
The government may assert that claim includes items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the false claims statute. 18 Table of Contents We may be subject to similar foreign laws that may include applicable post-marketing requirements such as safety surveillance.
All applicants for licenses undergo a background investigation, including a criminal record check for all owners and employees. 22 Table of Contents Colorado has also enacted stringent regulations governing the facilities and operations of cannabis businesses that are involved with the plant and its products.
All applicants for licenses undergo a background investigation, including a criminal record check for all owners and employees. 24 Table of Contents Colorado has also enacted stringent regulations governing the facilities and operations of cannabis businesses that are involved with the plant and its products.
In the U.S., for example, the wholesale value of the cannabis crop from just the 11 states permitting adult-use and medical cannabis exceeds $6 billion annually. Growth in the U.S. and in the worldwide market is likely fed in part by the growing acceptance of medicinal cannabis products and anticipated legislative changes in various jurisdictions worldwide.
In the U.S., for example, the wholesale value of the cannabis crop from just the U.S. states permitting adult-use and medical cannabis exceeds $6 billion annually. We believe growth in the U.S. and in the worldwide market is likely fed in part by the growing acceptance of medicinal cannabis products and anticipated legislative changes in various jurisdictions worldwide.
Regulatory Compliance and Risk Management We maintain compliance with regulatory requirements and manage our risks through a program of compliance, awareness, and insurance, which includes maintaining certain insurances and a continued emphasis on safety to mitigate any risks. Employees Update As of June 30, 2023, we employed 22 employees, none of which were covered by any collective bargaining agreements.
Regulatory Compliance and Risk Management We maintain compliance with regulatory requirements and manage our risks through a program of compliance, awareness, and insurance, which includes maintaining certain insurances and a continued emphasis on safety to mitigate any risks. Employees As of June 30, 2024, we employed 30 employees, none of which were covered by any collective bargaining agreements.
In October 2021, FDA enacted regulations implementing the above-referenced FDCA provisions governing the de novo reclassification process. Premarket Approval Process. Class III devices require submission through the PMA process before they can be marketed. The PMA process is more demanding than the 510(k) premarket notification process.
In October 2021, FDA enacted regulations implementing the above-referenced FDCA provisions governing the de novo reclassification process. 16 Table of Contents Premarket Approval Process. Class III devices require submission through the PMA process before they can be marketed. The PMA process is more demanding than the 510(k) premarket notification process.
IMS-ETD 1 st Detect’s TRACER 1000 ● False alarms caused by confusants ● Near-zero false alarm rate ● Lower probability of detection ● Higher probability of detection ● Numerous unscheduled bake-outs and calibrations ● Near 100% up-time ● Limited library of compounds of interest ● Unlimited library of compounds of interest ● Addition of new compounds may require hardware changes ● Library updates that do not require hardware changes ● Causes delays or shutdowns at security facilities/inspection checkpoints ● Improves throughput at security facilities and checkpoints ● Low price chemical detector ● Competitive price to IMS in a throughput sensitive environment These claims have been confirmed in numerous discussions with industry experts and verified in our many field trials.
IMS-ETD 1 st Detect’s TRACER 1000 ● False alarms caused by confusants ● Near-zero false alarm rate ● Lower probability of detection ● Higher probability of detection ● Numerous unscheduled bake-outs and calibrations ● Near 100% up-time ● Limited library of compounds of interest ● Unlimited library of compounds of interest ● Addition of new compounds may require hardware changes ● Library updates that do not require hardware changes ● False alarms cause delays or shutdowns at security facilities/inspection checkpoints ● Improved throughput at security facilities and checkpoints ● Low price chemical detector ● Competitive price to IMS in a throughput sensitive environment These claims have been confirmed in numerous discussions with industry experts and verified in our many field trials. 13 Table of Contents AgLAB Inc.
BreathTech Corporation The BreathTest-1000 product that is currently under development is being designed to screen for VOC metabolites. The VOC metabolites are found in a person’s breath and could indicate they may have a compromised condition including but not limited to a bacterial or viral infection.
BreathTech Corporation The BreathTest-1000 product that is currently under development is being designed to screen for VOC metabolites in a person’s breath and which could indicate the person may have a compromised condition including but not limited to a bacterial or viral infection.
The AgLAB product line is a derivative of the Company’s core AMS Technology. AgLAB has continued to conduct field trials to demonstrate that the AgLAB 1000-D2™ can be used in the distillation process to significantly improve the processing yields of tetrahydrocannabinol (“THC”) and cannabidiol (“CBD”) oil during distillation.
The AgLAB product line is a derivative of the Company’s core AMS Technology. AgLAB continues to conduct field trials demonstrating that the AgLAB 1000-D2™ can be used in the distillation process to significantly improve the yields of tetrahydrocannabinol (“THC”) and cannabidiol (“CBD”) oil during distillation.
We believe there is strong value for this easy to use screener in high density and critical locations, especially with additional COVID-19 variants and other diseases continuing to pose new or reemerging threats. Most currently available tests either take too long or are invasive and painful.
We believe there is strong value for this easy to use screener in high density and critical locations, especially with heightened concern about airborne diseases continuing to pose new or reemerging threats. Most currently available tests either take too long or are invasive and painful.
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 a compromised condition including but not limited to a bacterial or viral infection.
AgLAB holds an exclusive AMS Technology license from ATI for applications in the agriculture industry which require analyzing complex chemical compounds found in organic plant material and extracts. ● 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 a compromised condition including but not limited to a bacterial or viral infection.
Competition 1 st Detect Corporation Competition for the TRACER 1000 comes primarily from IMS-based ETDs. We have several competitors that sell IMS-based ETDs whose Company's are much larger than us, with well-established sales forces and offering a wider range of security products; however, we believe the TRACER 1000 has a number of attributes that are superior to competing products.
We have several competitors that sell IMS-based ETDs whose companies are much larger than us, with well-established sales forces and offering a wider range of security products; however, we believe the TRACER 1000 has a number of attributes that are superior to competing products.
BreathTech R&D activities are being devoted to sample introduction and library development, which is needed to identify the specific compounds present in the breath that are indicative of the presence a compromised condition including infections. We have been in correspondence with the U.S.
BreathTech R&D activities are being devoted to sample introduction and library development, which is needed to identify the specific compounds present in the breath that are indicative of the presence of a compromised condition including infections. 14 Table of Contents During our fiscal year 2023, we were in correspondence with the U.S.
The intellectual property includes 18 patents granted 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.
With a number of diverse market opportunities for the core technology, ATI is structured to license the intellectual property for different fields of use.
The Foreign Corrupt Practices Act establishes rules for U.S. companies doing business internationally. Compliance with these rules is achieved through established and enforced corporate policies, documented internal procedures, and financial controls. Iran Nonproliferation Act of 2000 .
Federal regulations that impact our operations include, but are not limited to, the following: Foreign Corrupt Practices Act . The Foreign Corrupt Practices Act establishes rules for U.S. companies doing business internationally. Compliance with these rules is achieved through established and enforced corporate policies, documented internal procedures, and financial controls. Iran Nonproliferation Act of 2000 .
The AgLAB 1000-D2™ uses the Maximum Value Process solution (“MVP”) to analyze samples in real-time and assist the equipment operator determining the ideal settings required to maximize yields.
The AgLAB 1000-D2™ uses the Maximum Value Process solution (“MVP”) to analyze samples in real-time and assist the equipment operator determining the ideal settings required to maximize yields. Production and processing of hemp and cannabis is a huge, worldwide industry.
If the FDA agrees that the device is substantially equivalent to a predicate device, it will grant 510(k) clearance to market the device. 13 Table of Contents After a device receives 510(k) marketing clearance, any modification that could significantly affect its safety or effectiveness, or that would constitute a major change or modification in its intended use, will require a new 510(k) marketing clearance or, depending on the modification, a de novo request or PMA approval.
After a device receives 510(k) marketing clearance, any modification that could significantly affect its safety or effectiveness, or that would constitute a major change or modification in its intended use, will require a new 510(k) marketing clearance or, depending on the modification, a de novo request or PMA approval.
The FDA’s 510(k) review process usually takes from three to six months but may take longer. The FDA may require additional information, including clinical data, to make a determination regarding substantial equivalence.
The FDA’s 510(k) review process usually takes from three to six months but may take longer. The FDA may require additional information, including clinical data, to make a determination regarding substantial equivalence. If the FDA agrees that the device is substantially equivalent to a predicate device, it will grant 510(k) clearance to market the device.
In such cases, the manufacturer might be required to follow certain patient groups for a number of years and to make periodic reports to FDA on the clinical status of those patients.
In such cases, the manufacturer might be required to follow certain patient groups for a number of years and to make periodic reports to FDA on the clinical status of those patients. Failure to comply with the conditions of approval can result in material adverse enforcement action, including withdrawal of the approval.
Some Class I devices may require premarket notification to the FDA. Class II devices are moderate risk devices and are subject to the FDA’s general controls, and certain special controls as deemed necessary by the FDA to ensure the safety and effectiveness of the device. These special controls can include performance standards, post-market surveillance, patient registries, and FDA guidance documents.
Some Class I devices may require premarket notification to the FDA. 15 Table of Contents Class II devices are moderate risk devices and are subject to the FDA’s general controls, and certain special controls as deemed necessary by the FDA to ensure the safety and effectiveness of the device.
Currently under development is the AgLAB-1000-D1. When completed, this instrument will be an inline process control unit. BreathTech Corporation The BreathTest-1000 is being developed, in conjunction with Cleveland Clinic, to provide an inexpensive, non-invasive screening device for a variety of diseases, including highly contagious diseases like COVID-19 as well as other compromising conditions.
Currently under development is the AgLAB-1000-D1. When completed, this instrument will be an inline process control unit. BreathTech Corporation The BreathTest-1000 is being developed, in conjunction with Cleveland Clinic, to provide an inexpensive, non-invasive screening device for a variety of diseases. The BreathTest-1000 is designed to detect infectious VOC metabolites in a person’s breath. Pro-Control, Inc.
Given that breath samples are quick, inexpensive, and painless, we anticipate that the BreathTest-1000 will help screen for signs of disease. We do not see this as competing with traditional tests but supplementing and improving medical care. 11 Table of Contents Research and Development Astrotech Technologies, Inc. We invest considerable resources into our internal research and development (“R&D”) functions.
Given that breath samples are quick, inexpensive, and painless, we anticipate that the BreathTest-1000 will help screen for signs of disease. We do not see this as competing with traditional tests but supplementing and improving medical care. Pro-Control, Inc.
While most Class I devices are exempt from the 510(k) premarket notification requirement, manufacturers of most Class II devices are required to submit to the FDA a premarket notification under Section 510(k) of the FDCA requesting permission to commercially distribute the device.
These special controls can include performance standards, post-market surveillance, patient registries, and FDA guidance documents. While most Class I devices are exempt from the 510(k) premarket notification requirement, manufacturers of most Class II devices are required to submit to the FDA a premarket notification under Section 510(k) of the FDCA requesting permission to commercially distribute the device.
Failure to comply with the conditions of approval can result in material adverse enforcement action, including withdrawal of the approval. 14 Table of Contents Certain changes to an approved device, such as changes in manufacturing facilities, methods, or quality control procedures, or changes in the design performance specifications, which affect the safety or effectiveness of the device, require submission of a PMA supplement.
Certain changes to an approved device, such as changes in manufacturing facilities, methods, or quality control procedures, or changes in the design performance specifications, which affect the safety or effectiveness of the device, require submission of a PMA supplement.
In June 2022, the Company expanded its existing study that initially focused on COVID-19 with Cleveland Clinic to use the BreathTest-1000 to screen for a variety of diseases spanning the entire body.
The Company believes that new tools to quickly identify the presence of a VOC metabolite could play an important role in detecting and containing airborne diseases. In June 2022, the Company expanded its existing study that initially focused on COVID-19 with Cleveland Clinic to use the BreathTest-1000 to screen for a variety of diseases spanning the entire body.
ATI owns and licenses the AMS Technology, the platform mass spectrometry technology originally developed by 1st Detect. The AMS Technology has been designed to be inexpensive, smaller, and easier to use when compared to traditional mass spectrometers. Unlike other technologies, the AMS Technology works under ultra-high vacuum, which eliminates competing molecules, yielding higher resolution and fewer false alarms.
The AMS Technology has been designed to be inexpensive, smaller, and easier to use when compared to traditional mass spectrometers. 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 17 patents granted along with extensive trade secrets.
AgLAB Inc. The AgLAB-1000 series uses the core AMS Technology and is continuing its development of its product line to include other valuable products specific to the hemp and cannabis industry. BreathTech Corporation The BreathTest-1000 employs the core AMS Technology.
The AgLAB-1000 series uses the core AMS Technology and is continuing its development of its product line to include other valuable products specific to the hemp and cannabis industry. When complete, the AgLAB-1000-D1 will be an inline process control unit meaning it will be integrated directly into the distillation equipment. BreathTech Corporation The BreathTest-1000 employs the core AMS Technology.
Compliance with environmental laws and regulations and technology export requirements has not had and, we believe, will not have in the future, material effects on our capital expenditures, earnings, or competitive position. 12 Table of Contents Federal regulations that impact our operations include, but are not limited to, the following: Foreign Corrupt Practices Act .
In addition, we are subject to federal contracting procedures, audit, and oversight. Compliance with environmental laws and regulations and technology export requirements has not had and, we believe, will not have in the future, material effects on our capital expenditures, earnings, or competitive position.
BreathTech Corporation The BreathTest-1000 product that is currently under development is being designed to provide an inexpensive, non-invasive screening device for compromised conditions including a bacterial or viral infection that can offer results on-site in a very short period of time.
We believe agricultural companies engaged in these supply chain activities will benefit from the increased use of MS: ● Plant material harvesting ● Ingredient processing ● Oil distillation ● Contaminate detection ● Inspection and certification ● Formulation and packaging BreathTech Corporation The BreathTest-1000 product that is currently under development is being designed to provide an inexpensive, non-invasive screening device for compromised conditions including a bacterial or viral infection that can offer results on-site in a very short period of time.
If approved, the TRACER 1000 will be approved for cargo sales in the United States. AgLAB Inc. AgLAB, an exclusive licensee of ATI for the agriculture market, has developed the AgLAB 1000™ series of mass spectrometers for use in the hemp and cannabis markets with initial focus on optimizing yields in the distillation process.
AgLAB, an exclusive licensee of ATI for the use in the agriculture industry to analyze complex chemical compounds found in organic plant material and extracts, has developed the AgLAB 1000™ series of mass spectrometers for use in the hemp and cannabis markets with the initial focus on optimizing yields in the distillation process.
We now have units deployed in 29 locations in 14 countries. While we have had some degree of success with sales, the sales cycles are normally long and much of the pipeline has seen delays caused by the COVID-19 pandemic. AgLAB Inc. Currently, AgLAB uses only direct sales.
We employ both direct sales and channel sales through distributors. We now have units deployed in 30 locations in 14 countries. While we have had some degree of success securing and fulfilling orders, the sales cycles in the regulated and government markets are normally long and much of the pipeline opportunities were delayed by the COVID-19 pandemic. AgLAB Inc.
The Company is currently selling the TRACER 1000 to customers who accept ECAC certification. As of June 30, 2023, the Company has deployed the TRACER 1000 in approximately 29 locations in 14 countries throughout Europe and Asia. In the United States, the Company is working with the U.S. Transportation Security Administration (“TSA”) towards air cargo certification.
The Company is currently selling the TRACER 1000 to customers who accept ECAC certification. As of June 30, 2024, the Company has deployed the TRACER 1000 in approximately 30 locations in 14 countries throughout Europe and Asia. On June 20, 2024, after a long-term engagement with the TSA beginning in 2018, we announced the U.S.
The market need for a quick and painless test is considered significant in the following target markets: ● Hospitals ● Military ● Nursing homes ● Sporting events ● Airlines ● Performing arts venues ● Hotels ● Convention and conference centers ● Cruise lines ● Schools Products and Services 1 st Detect Corporation The TRACER 1000 is the first MS-ETD certified by ECAC.
We expect the market need for a quick and painless test will continue to be significant in the following target markets: ● Hospitals ● Military ● Nursing homes ● Sporting events ● Airlines ● Performing arts venues ● Hotels ● Convention and conference centers ● Cruise lines ● Schools Pro-Control, Inc.
As more research is conducted and regulations are established, we believe it is likely that the market will become more standardized and regulated, leading to increased consumer confidence and demand. However, the industry is also likely to face challenges as it matures, including increased competition and potential regulatory hurdles.
Overall, the CBD and hemp market in the U.S. is a rapidly growing industry with significant potential for continued expansion. As more research is conducted and regulations are established, we believe it is likely that the market will become more standardized and regulated, leading to increased consumer confidence and demand.
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 applications.
ATI currently licenses the AMS Technology to four wholly-owned subsidiaries of Astrotech on an exclusive basis, including to 1st Detect for use in security and detection applications, to AgLAB for use in the agriculture application, to BreathTech for use in breath analysis applications, and to Pro-Control for use in production applications. 1 st Detect Corporation 1st Detect, a licensee of ATI for security and detection applications, has developed the TRACER 1000™, the world’s first MS based ETD certified by the ECAC and approved by TSA for air cargo.
Each market, however, typically requires unique sample introduction technology, library development, and customized adjustments to the user interface. 1 st Detect Corporation While 1 st Detect’s TRACER 1000 is fully commercialized, we continue to invest in cross-platform improvements that benefit all of our products, including those that improve system functionality and reliability, optimize design, reduce cost, and streamline and simplify the software and user experience.
Each market, however, typically requires unique sample introduction technology, library development, and customized adjustments to the user interface. 1 st Detect Corporation While 1 st Detect’s TRACER 1000 is fully commercialized, we continue to invest in library development which resulted in the launch of our narcotics detector. We continue to develop our library to further enhance our offering. AgLAB Inc.
Management believes the AgLAB 1000-D2™ will deliver a compelling combination of cost and time savings while enhancing product quality and quantity for distillation processors of hemp and cannabis. The use of the AgLAB 1000-D2™ should reduce waste from current distillation practices and result in a significantly improved product.
Stakeholders in the industry are likely to face challenges as it matures, including increased competition and potential regulatory hurdles. Management believes the AgLAB 1000-D2™ will deliver a compelling combination of cost and time savings while enhancing product quality and quantity for distillation processors of hemp and cannabis.
We have also expanded into the airport passenger screening market with sales to a distributor who services a major international airport in Asia and another who services airports in Romania. We also continue to garner much interest in the narcotics capabilities of our system and plan to expand sales efforts in this area. AgLAB Inc.
We have also expanded into the airport passenger screening market with sales to a distributor who services a major international airport in Asia and another who services airports in Romania. We are currently accepting orders for the TRACER 1000 NTD and ETD.
While we currently market primarily to distillers within the hemp industry, our AgLAB products also have the potential to serve distillers within the broader cannabis industry in the future, in which case our risk exposure would likely increase and could have a detrimental effect on our business. 8 Table of Contents BreathTech Corporation BreathTech, an exclusive licensee of ATI for use in breath analysis applications, 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 compromised condition including but not limited to a bacterial or viral infection.
On June 13, 2024, AgLAB and SC Laboratories (“SC Labs”) entered into a master lease agreement providing for the joint marketing of the AgLAB 1000-D2™ mass spectrometer and the AgLAB Maximum Value Process™ testing method to SC Labs’ clients. 9 Table of Contents BreathTech Corporation BreathTech, an exclusive licensee of ATI for use in breath analysis applications, 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 compromised condition including but not limited to a bacterial or viral infection.
Due in large part to the Company’s proprietary technology, the Company believes it is the only provider of a mass spectrometry system that gives it a distinct advantage in the industry. Our competition consists of high performance liquid chromatography technology which analyzes THC and CBD derived from hemp. .
The use of the AgLAB 1000-D2™ should reduce waste from current distillation practices and result in a significantly improved product. Due in large part to the Company’s proprietary technology, the Company believes it is the only provider of a mass spectrometry system that gives it a distinct advantage in the industry. Sales efforts for the AgLAB 1000-D2 are currently underway.
We do plan to engage with various channel partners, largely companies with existing distribution channels in the hemp and cannabis market, to help sell our products to target customers. BreathTech Corporation Efforts are currently focused on the development of the BreathTest-1000. We plan to increase marketing activities as the product approaches commercial viability.
AgLAB uses direct and channel sales. The lease program that we initiated this year with SC Labs is an example of a channel sales program. We do plan to engage with additional channel partners, largely companies with existing distribution channels in the hemp and cannabis market, to help sell our products to target customers.
However, the market remains highly fragmented, with many products of varying quality and efficacy, making it challenging for consumers to navigate. Overall, the CBD and hemp market in the US is a rapidly growing industry with significant potential for continued expansion.
These companies comprise AgLAB’s target market. The competition within the supply chain is fierce, with companies investing heavily in research and development to create innovative products and differentiate themselves from their competitors. However, the market remains highly fragmented, with many products of varying quality and efficacy, making it challenging for consumers to navigate.
Pickens has been instrumental in the Company’s process to accurately qualify and quantify chemical compounds using our technology. On May 8, 2023, the Company announced that it has accepted a purchase order from a Romanian based company focused on research and innovation in the security and telecommunications space.
In May 2023, we successfully delivered a purchase order for 14 ETDs from a Romania-based company focused on research and innovation in the security and telecommunications space.
It was developed for use at airports, cargo and other secured facilities, and borders worldwide. 1 st Detect holds an exclusive AMS Technology license from ATI for air passenger and cargo security applications. ● AgLAB, Inc.
(“ATI”) owns and licenses the intellectual property related to the AMS Technology. ● 1 st Detect Corporation (“1 st Detect”) is a manufacturer of explosives trace detectors ("ETDs") and narcotics trace detectors (“NTDs”) developed for use in security and detection at airports, border checkpoints, cargo hubs, infrastructure security, correctional facilities, military bases, and law enforcement centers. 1 st Detect holds an exclusive AMS Technology license from ATI for air passenger and cargo security applications. ● AgLAB, Inc.
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Item 1. Business Our Company Astrotech Corporation (Nasdaq: ASTC) (“Astrotech,” the “Company,” “we,” “us,” or “our”), a Delaware corporation organized in 1984, is a mass spectrometry company that launches, manages, and commercializes scalable companies based on its innovative core technology. Our efforts are focused on commercializing our platform mass spectrometry technology through our wholly-owned subsidiaries: ● Astrotech Technologies, Inc.
Added
Item 1. Business Our Company The terms “Astrotech”, “the Company”, “we”, “us”, or “our” refer to Astrotech Corporation (Nasdaq: ASTC), a Delaware corporation organized in 1984. Our use of “products” and “devices” refer to the TRACER 1000™, BreathTest-1000™, AGLAB 1000™, and Pro-Control 1000™ along with related accessories and consumables.
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(“ATI”) owns and licenses the intellectual property related to the Astrotech Mass Spectrometer Technology™ (the “AMS Technology”). ● 1 st Detect Corporation (“1 st Detect”) is a manufacturer of explosives trace detectors capable of also detecting narcotics.
Added
We are commercializing the Astrotech Mass Spectrometer Technology™ platform (“AMS Technology”) through application specific, wholly owned subsidiaries.
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BreathTech holds an exclusive AMS Technology license from ATI for breath analysis applications. Business and Recent Developments On November 23, 2022, the Company announced a Reverse Stock Split. The Board approved the Reverse Stock Split at a ratio of 1-for-30.
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Our mission is to expand access to mass spectrometry (“MS”) and its use through the deployment of devices designed specifically for the appropriate levels of precision required in high-volume, real-time testing environments such as airports, border checkpoints, cargo hubs, infrastructure security, correctional facilities, military bases, law enforcement centers, and industrial locations.
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Each 30 shares of the Company’s issued and outstanding common stock was automatically combined into one validly issued, fully paid and non-assessable share of common stock. The split brought the Company into compliance with the minimum bid price requirements for maintaining its listing in The Nasdaq Capital Market.
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We achieve our mission through simplifying the user interface, automating the complicated calibration process, ruggedizing the critical components to endure MS field work, and enabling multiple configurations for sample intake options.
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On December 21, 2022, the Company announced the adoption of a Rights Agreement with American Stock Transfer & Trust Company, LLC. The Rights Plan is intended to protect the interests of all stockholders and enable all Company stockholders to realize the long-term value of their investment.
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Since the Tracer 1000 was certified by the European Civil Aviation Conference (“ECAC”) in 2019, our customers have deployed our devices in approximately 30 locations across 14 countries throughout Europe and Asia. Our Business Units Our efforts are focused on commercializing our platform mass spectrometry technology through our wholly-owned subsidiaries: ● Astrotech Technologies, Inc.
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Stockholder interests are protected by reducing the likelihood that any person or group could gain control of the Company through rapid open-market purchases of the Company’s shares without paying an appropriate premium. On February 1, 2023, the Company announced the appointment of Bob McFarland to the Board of Directors. Mr.
Added
BreathTech holds an exclusive AMS Technology license from ATI for breath analysis applications. ● Pro-Control, Inc. (“Pro-Control”) is focused on applying the AMS Technology in industrial process control applications. The mass spectrometer and process are designed to test, measure and increase reaction intermediates, purity and percent yields in industrial processes.
Removed
McFarland brings extensive domestic and international executive management experience, with a focus on information technology. He brings experience working with and for the federal government, as well as leading companies in the industry. On February 6, 2023, the Company announced the appointment of Thomas B. Pickens III as Chief Technology Officer of the Company. Mr.
Added
Pro-Control holds an exclusive AMS Technology license from ATI for the distillation of chemicals outside of the agriculture industry. 7 Table of Contents Astrotech Technologies, Inc. ATI owns and licenses the AMS Technology, the platform MS technology originally developed by 1st Detect.
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Pickens has been a valued team member in the discovery and development of the method to detect the compounds associated with COVID-19 lung infections. Mr. Pickens also leads the team that is developing applications for the AMS Technology in the distillation of essential oils using molecular distillation systems, including the manufacturing of hemp and cannabis oils. Mr.
Added
Transportation Security Administration (“TSA”) approved the TRACER 1000 for the Air Cargo Security Technology List (“ACSTL”). This action advances the TRACER 1000 to Stage II testing and allows us to sell the TRACER 1000 to air cargo companies in the United States. In Stage II testing, the Company will begin field trials with the TSA.
Removed
The Company is required to deliver 17 TRACER 1000 explosive trace detectors over the remainder of the calendar year 2023. As of the date of this filing, the TRACER 1000 is deployed in 29 locations across 14 countries throughout Europe and Asia.
Added
If field trials are successful, the TRACER 1000 will be added to the "qualified" list. The Company has also started the process to pass TSA checkpoint testing. This process involves Developmental Test and Evaluation in which the Transportation Security Laboratory ("TSL") will test the TRACER 1000 and work with 1st Detect to ensure its readiness to enter certification testing.
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On May 9, 2023, the Company confirmed the results from field trials using the AgLAB 1000-D2™ mass spectrometer and the Maximum Value Process™ testing method (“AgLAB MVP”). AgLAB MVP is designed to improve yields and bottom-line profits for hemp (CBD) and cannabis (THC) producers of distilled oils. 6 Table of Contents Our Business Units Astrotech Technologies, Inc.
Added
The certification test is then completed by the Independent Test & Evaluation department of TSL. As of the fiscal year 2023 budget the government had over 6,000 ETD units at checkpoint and baggage screening points for which we believe that the TSA would benefit from utilizing our AMS Technology.
Removed
ATI has contracted with various vendors to assist with the further development of our mass spectrometer products including the manufacturability and reliability of our systems. 1 st Detect Corporation 1st Detect, a licensee of ATI for the security and detection market, has developed the TRACER 1000™, the world’s first mass spectrometry (“MS”) based explosives trace detector (“ETD”) certified by the European Civil Aviation Conference (“ECAC”).
Added
During the second fiscal quarter of 2024, we delivered a purchase order for seven of our TRACER 1000 explosives trace detectors for an airport security checkpoint, which were deployed in an airport in Romania. We are currently accepting orders for the TRACER 1000 ETD and NTD which are listed in the U.S.
Removed
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 entered into testing with the TSA for passenger screening at airports.
Added
General Services Administration ("GSA") IT Schedule 70 under Contract No. GS-35F-250GA with SRI Group LLC, Special Item Number 334290 in April 2024. The TRACER 1000 ETD and NTD are high-performance laboratory instruments capable of rapid detection of trace levels of explosive and narcotic compounds in seconds.
Removed
On November 14, 2019, the Company 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, the Company has received valuable feedback from all programs.
Added
The TRACER 1000 ETD and NTD both provide a ruggedized platform that can be applied across various markets including airports, border security, checkpoint, cargo, and infrastructure security, correctional facilities, military, and law enforcement.
Removed
Following ECAC certification and the Company’s early traction within the cargo market, testing for cargo security continued with the TSA.
Added
IT Schedule 70 is a long-term contract issued by the GSA to commercial technology vendors that allows sales to the U.S. federal government, one of the largest buyers of goods and services in the world. We continue to showcase the TRACER 1000 NTD and ETD at the trade events in the U.S. 8 Table of Contents AgLAB Inc.
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With the COVID-19 pandemic, all testing within the TSA was put on hold; however, cargo testing resumed during 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.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

43 edited+17 added−25 removed208 unchanged
Biggest changeIf the FDA disagrees with our determination and requires us to submit new 510(k) notifications, de novo submissions or PMAs for modifications to our previously cleared or approved products for which we have concluded that new clearances or approvals are unnecessary, we may be required to cease marketing or to recall the modified product until we obtain clearance or approval, and we may be subject to significant regulatory fines or penalties.
Biggest changeIf the FDA disagrees with our determination and requires us to submit new 510(k) notifications, de novo submissions or PMAs for modifications to our previously cleared or approved products for which we have concluded that new clearances or approvals are unnecessary, we may be required to cease marketing or to recall the modified product until we obtain clearance or approval, and we may be subject to significant regulatory fines or penalties. 34 Table of Contents Once our BreathTest-1000 or any other device candidate we may develop in the future, if any, is cleared or approved by FDA for marketing in the United States, if ever, we may be liable if the FDA or other U.S. enforcement agencies determine we have engaged in the off ‑ label promotion of such products or have disseminated false or misleading labeling or promotional materials.
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; ● 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; 36 Table of Contents ● 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, 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.
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; ● 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; 39 Table of Contents ● 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, 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.
The FDA and other federal and state governmental agencies regulate numerous elements of our business, including: ● product design and development; ● pre‑clinical and clinical testing and trials; ● product safety; ● establishment registration and product listing; ● labeling and storage; ● marketing, manufacturing, sales and distribution; ● pre‑market clearance or approval; ● servicing and post‑marketing surveillance, including reporting of deaths or serious injuries and malfunctions that, if they recurred, could lead to death or serious injury; ● advertising and promotion; ● post‑market approval studies; ● product import and export; and ● recalls and field‑safety corrective actions. 29 Table of Contents Before we can market or sell a new medical device, such as the BreathTest-1000, in the United States, we must obtain either clearance under Section 510(k) of the FDCA, grant of a de novo classification request, or approval of a pre‑market approval, or PMA, application from the FDA.
The FDA and other federal and state governmental agencies regulate numerous elements of our business, including: ● product design and development; ● pre‑clinical and clinical testing and trials; ● product safety; ● establishment registration and product listing; ● labeling and storage; ● marketing, manufacturing, sales and distribution; ● pre‑market clearance or approval; ● servicing and post‑marketing surveillance, including reporting of deaths or serious injuries and malfunctions that, if they recurred, could lead to death or serious injury; ● advertising and promotion; ● post‑market approval studies; ● product import and export; and ● recalls and field‑safety corrective actions. 32 Table of Contents Before we can market or sell a new medical device, such as the BreathTest-1000, in the United States, we must obtain either clearance under Section 510(k) of the FDCA, grant of a de novo classification request, or approval of a pre‑market approval, or PMA, application from the FDA.
The COVID-19 pandemic had numerous negative consequences for our business, including a reduction in demand for certain of our security screening products and services caused by a significant reduction in airline passenger traffic. To slow and limit the transmission of COVID-19, governments across the world have imposed air travel restrictions and businesses and individuals canceled air travel plans.
The COVID-19 pandemic had numerous negative consequences for our business, including a reduction in demand for certain of our security screening products and services caused by a significant reduction in airline passenger traffic. To slow and limit the transmission of COVID-19, governments across the world imposed air travel restrictions and businesses and individuals canceled air travel plans.
We maintain insurance for certain risks, and we believe our insurance coverage is consistent with general practices within our industry. However, the amount of our insurance coverage may not cover all claims or liabilities and we may be forced to bear substantial costs. Item 1B. Unresolved Staff Comments None. Item 2.
We maintain insurance for certain risks, and we believe our insurance coverage is consistent with general practices within our industry. However, the amount of our insurance coverage may not cover all claims or liabilities and we may be forced to bear substantial costs. Item 1B. Unresolved Staff Comments None.
Concurrent with the sale of products, we record a provision for estimated warranty expenses with a corresponding increase in the cost of goods sold. We periodically adjust this provision based on historical experience and anticipated expenses. We charge actual expenses of repairs under warranty, including parts and labor, to this provision when incurred.
Concurrent with the sale of products, we record a provision for estimated warranty expenses with a corresponding increase in the cost of goods sold. We periodically adjust this provision based on historical experience and anticipated expenses. We charge actual expenses of repairs under warranty, including shipping, labor and parts, to this provision when incurred.
Our present and future funding requirements will depend on many factors, including: ● our ability to achieve projected revenue growth; ● the cost of expanding our operations, including production capacity; 24 Table of Contents ● our rate of progress in launching and commercializing new products, and the cost of the sales and marketing activities associated with increasing sales of our existing instruments and products; ● our rate of progress in, and cost of research and development activities associated with, products in research and development; ● the effect of competing technological and market developments; ● the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims; ● costs related to domestic and international expansion; and ● the potential cost of and delays in product development as a result of any regulatory oversight that may be applicable to our products.
Our present and future funding requirements will depend on many factors, including: ● our ability to achieve projected revenue growth; ● the cost of expanding our operations, including production capacity; 26 Table of Contents ● our rate of progress in launching and commercializing new products, and the cost of the sales and marketing activities associated with increasing sales of our existing instruments and products; ● our rate of progress in, and cost of research and development activities associated with, products in research and development; ● the effect of competing technological and market developments; ● the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims; ● costs related to domestic and international expansion; and ● the potential cost of and delays in product development as a result of any regulatory oversight that may be applicable to our products.
On January 26, 2023, the FDA reiterated its longstanding position (since the passage of the 2018 Farm Bill), announcing that, despite much speculation to the contrary, it would not seek to regulate CBD as a lawful dietary supplement. 34 Table of Contents If FDA changes its current position in the future or if Congress enacts new legislation under which FDA is expressly authorized and directed to do so, the FDA may issue rules and regulations, including good manufacturing practices related to the growth, cultivation, harvesting, processing, and production of hemp products.
On January 26, 2023, the FDA reiterated its longstanding position (since the passage of the 2018 Farm Bill), announcing that, despite much speculation to the contrary, it would not seek to regulate CBD as a lawful dietary supplement. 37 Table of Contents If FDA changes its current position in the future or if Congress enacts new legislation under which FDA is expressly authorized and directed to do so, the FDA may issue rules and regulations, including good manufacturing practices related to the growth, cultivation, harvesting, processing, and production of hemp products.
In addition, delisting could harm our ability to raise capital through alternative financing sources on terms acceptable to us, or at all, and may result in the potential loss of confidence by investors, suppliers, customers and employees and fewer business development opportunities. 38 Table of Contents If our common stock were delisted from Nasdaq, trading of our common stock would most likely take place on an over-the-counter market established for unlisted securities, such as the OTCQB or the Pink Market maintained by OTC Markets Group Inc.
In addition, delisting could harm our ability to raise capital through alternative financing sources on terms acceptable to us, or at all, and may result in the potential loss of confidence by investors, suppliers, customers and employees and fewer business development opportunities. 41 Table of Contents If our common stock were delisted from Nasdaq, trading of our common stock would most likely take place on an over-the-counter market established for unlisted securities, such as the OTCQB or the Pink Market maintained by OTC Markets Group Inc.
In addition, our Board could authorize the issuance of a series of preferred stock that has greater voting power than the common stock or that is convertible into our common stock, which could decrease the relative voting power of the common stock or result in dilution to our existing shareholders. 37 Table of Contents Our Certificate of Incorporation provides that the Court of Chancery of the State of Delaware will be the sole and exclusive forum for any disputes between us and our stockholders, which could limit stockholders ’ ability to obtain a favorable judicial forum for disputes with us or our directors or officers.
In addition, our Board could authorize the issuance of a series of preferred stock that has greater voting power than the common stock or that is convertible into our common stock, which could decrease the relative voting power of the common stock or result in dilution to our existing shareholders. 40 Table of Contents Our Certificate of Incorporation provides that the Court of Chancery of the State of Delaware will be the sole and exclusive forum for any disputes between us and our stockholders, which could limit stockholders ’ ability to obtain a favorable judicial forum for disputes with us or our directors or officers.
Furthermore, we are subject to risks including, but not limited to, the following with respect to the development of the BreathTest-1000: ● the governmental approval process could be lengthy, time consuming and is inherently unpredictable, and we cannot guarantee that the required approvals for our products, including FDA approvals, will be granted on a timely basis or at all or that we will ever have a marketable product; ● customers must be persuaded that using our products are effective alternatives to other existing detection methods available for COVID-19 and other infections in order for our products to be commercially successful; 25 Table of Contents ● if we fail to comply with applicable FDA regulations, our premarket submissions could be adversely affected, and we could face substantial enforcement actions, including civil and criminal penalties and our business, operations and financial condition could be adversely affected.
Furthermore, we are subject to risks including, but not limited to, the following with respect to the development of the BreathTest-1000: ● the governmental approval process could be lengthy, time consuming and is inherently unpredictable, and we cannot guarantee that the required approvals for our products, including FDA approvals, will be granted on a timely basis or at all or that we will ever have a marketable product; ● customers must be persuaded that using our products are effective alternatives to other existing detection methods available for COVID-19 and other infections in order for our products to be commercially successful; ● if we fail to comply with applicable FDA regulations, our premarket submissions could be adversely affected, and we could face substantial enforcement actions, including civil and criminal penalties and our business, operations and financial condition could be adversely affected.
A failure of a key information technology system, process, or site could have a material adverse impact on our ability to conduct business. We rely extensively on information technology systems to interact with our employees and our customers.
A failure of a key information technology system, process, or site could have a material adverse impact on our ability to conduct business. We rely extensively on information technology systems to interact with our employees, suppliers, and our customers.
The success of our new products and services will depend on several factors, including our ability to: • properly identify customer needs and predict future needs; • innovate and develop new technologies, services, and applications; • successfully commercialize new technologies in a timely manner; • manufacture and deliver our products in sufficient volumes and on time; • differentiate our offering from our competitors’ offerings; • price our products competitively; 26 Table of Contents • anticipate our competitors’ development of new products, services, or technological innovations; and • control product quantity in our manufacturing process.
The success of our new products and services will depend on several factors, including our ability to: • properly identify customer needs and predict future needs; • innovate and develop new technologies, services, and applications; 29 Table of Contents • successfully commercialize new technologies in a timely manner; • manufacture and deliver our products in sufficient volumes and on time; • differentiate our offering from our competitors’ offerings; • price our products competitively; • anticipate our competitors’ development of new products, services, or technological innovations; and • control product quantity in our manufacturing process.
If we are unable to effectively market our products and compete for market share, or if the costs of compliance with government legislation and regulation cannot be absorbed through increased selling prices for our products, our sales and operating results could be materially, adversely affected. 35 Table of Contents We are subject to differing tax rates in several jurisdictions in which we operate, which may adversely affect our business, financial condition, results of operations and prospects.
If we are unable to effectively market our products and compete for market share, or if the costs of compliance with government legislation and regulation cannot be absorbed through increased selling prices for our products, our sales and operating results could be materially, adversely affected. 38 Table of Contents We are subject to differing tax rates in several jurisdictions in which we operate, which may adversely affect our business, financial condition, results of operations and prospects.
These additional regulatory requirements may involve significant costs and expenditures and, if we are not able to comply with any such requirements, our international expansion and business could be significantly harmed. 30 Table of Contents Failure to obtain clearance or authorization for the BreathTest-1000, or other delays in the development of the BreathTest-1000, would adversely affect our ability to grow our business.
These additional regulatory requirements may involve significant costs and expenditures and, if we are not able to comply with any such requirements, our international expansion and business could be significantly harmed. 33 Table of Contents Failure to obtain clearance or authorization for the BreathTest-1000, or other delays in the development of the BreathTest-1000, would adversely affect our ability to grow our business.
The FDA’s refusal of, or any significant delays in receiving 510(k) clearance, de novo authorization, or Emergency use Authorization of the BreathTest-1000, would have an adverse effect on our ability to expand our business. Thus far, we have not performed any clinical testing of the BreathTest-1000, which will likely be required before the device can be marketed.
The FDA’s refusal of, or any significant delays in receiving, 510(k) clearance or de novo authorization of the BreathTest-1000, would have an adverse effect on our ability to expand our business. Thus far, we have not performed any clinical testing of the BreathTest-1000, which will likely be required before the device can be marketed.
Such government‑adopted reform measures may adversely impact the pricing of healthcare products and services in the United States or internationally and the amount of reimbursement available from third‑party payors. 32 Table of Contents Our financial performance may be adversely affected by medical device tax provisions in healthcare reform laws.
Such government‑adopted reform measures may adversely impact the pricing of healthcare products and services in the United States or internationally and the amount of reimbursement available from third‑party payors. 35 Table of Contents Our financial performance may be adversely affected by medical device tax provisions in healthcare reform laws.
Obtaining approval from both TSA and FDA is a complex and lengthy process, and approvals for the TRACER 1000 and BreathTest-1000 may not be granted on a timely basis or at all, which would have a material adverse affect on our results of operations and financial condition.
Obtaining approval from both TSA and FDA is a complex and lengthy process, and approvals for the TRACER 1000 and BreathTest-1000 may not be granted on a timely basis or at all, which would have a material adverse effect on our results of operations and financial condition.
General Risks We face various risks related to health epidemics, pandemics and similar outbreaks, which may have material adverse effects on our business, financial position, results of operations, and/or cash flows. We face various risks related to health epidemics, pandemics, and similar outbreaks, including the global outbreak of COVID-19 and its multiple variants.
General Risk Factors We face various risks related to health epidemics, pandemics and similar outbreaks, which may have material adverse effects on our business, financial position, results of operations, and/or cash flows. We face various risks related to health epidemics, pandemics, and similar outbreaks, including the global outbreak of COVID-19 and its multiple variants.
Evolving federal and state laws and regulations pertaining to the use or cultivation of hemp and cannabis, as well active enforcement by federal or state authorities of the laws and regulations governing the use and cultivation of hemp and cannabis may indirectly affect our business, our revenues and our profits. 33 Table of Contents The public’s perception of hemp and cannabis may significantly impact the cannabis industry’s success.
Evolving federal and state laws and regulations pertaining to the use or cultivation of hemp and cannabis, as well active enforcement by federal or state authorities of the laws and regulations governing the use and cultivation of hemp and cannabis may indirectly affect our business, our revenues and our profits. 36 Table of Contents The public’s perception of hemp and cannabis may significantly impact the cannabis industry’s success.
To the extent these costs are significant, our general and administrative expenses are likely to increase. 40 Table of Contents Our insurance coverage may be inadequate to cover all significant risk exposures. We are exposed to liabilities that are unique to the products and services we provide.
To the extent these costs are significant, our general and administrative expenses are likely to increase. 43 Table of Contents Our insurance coverage may be inadequate to cover all significant risk exposures. We are exposed to liabilities that are unique to the products and services we provide.
The FDA’s review process can take several months or longer, and we may not be able to obtain FDA clearance, de novo authorization, or Emergency use Authorization for the BreathTest-1000 on a timely basis, if at all.
The FDA’s review process can take several months or longer, and we may not be able to obtain FDA clearance or de novo authorization for the BreathTest-1000 on a timely basis, if at all.
In addition, the FDA may determine that future products, as applicable, will require the more costly, lengthy and uncertain PMA process. Although we do not currently intend to develop or market any devices under a PMA, the FDA may demand that we obtain a PMA prior to marketing certain of our future product candidates, if applicable.
In addition, the FDA may determine that future products, as applicable, will require the costlier, lengthy and uncertain PMA process. Although we do not currently intend to develop or market any devices under a PMA, the FDA may demand that we obtain a PMA prior to marketing certain of our future product candidates, if applicable.
Commercialization of the BreathTest-1000 may require an EUA, FDA clearance of a 510(k) premarket notification submission, and/or authorization of a de novo submission. The process for submitting and obtaining FDA clearance of a 510(k), authorization of a de novo submission, or EUA can be expensive and lengthy.
Commercialization of the BreathTest-1000 may require FDA clearance of a 510(k) premarket notification submission and/or authorization of a de novo submission. The process for submitting and obtaining FDA clearance of a 510(k) or authorization of a de novo submission, can be expensive and lengthy.
The Board has also designated Series C and Series D Preferred Stock, of which no shares and 280,898 shares are outstanding, respectively, as of June 30, 2023.
The Board has also designated Series C and Series D Preferred Stock, of which no shares and 280,898 shares are outstanding, respectively, as of June 30, 2024.
The process of obtaining a PMA is much more costly, rigorous, and difficult than the 510(k) clearance process and generally takes from one to three years, or longer, from the time the application is submitted to the FDA until an approval is obtained.
The process of obtaining a PMA is much costlier, rigorous, and difficult than the 510(k) clearance process and generally takes from one to three years, or longer, from the time the application is submitted to the FDA until an approval is obtained.
The following is a summary of some of the principal risks we face: ● Risks Related to Our Business and Industry ● Legal and Regulatory Risks ● Risks Related to Ownership of Our Common Stock ● General Risks 23 Table of Contents Risks Related to Our Business and Industry We have incurred significant losses since inception and anticipate that we will incur continued losses for the foreseeable future.
The following is a summary of some of the principal risks we face: ● Risks Related to Our Business and Industry ● Legal and Regulatory Risks ● Risks Related to Ownership of Our Common Stock ● General Risks 25 Table of Contents RISK FACTORS Risks Related to Our Business and Industry We have incurred significant losses since inception and anticipate that we will incur continued losses for the foreseeable future.
As of June 30, 2023, and 2022, we had accrued a balance of $88 thousand and $50 thousand relating to product warranty provision, representing a surplus of estimated warranty expenses over actual expenses for the fiscal years. Substantial amounts of warranty claims could have a material adverse effect on our business, financial condition and results of operations.
As of June 30, 2024, and 2023, we had accrued a balance of $184 thousand and $88 thousand, respectively relating to product warranty provision, representing a surplus of estimated warranty expenses over actual expenses for the fiscal years. Substantial amounts of warranty claims could have a material adverse effect on our business, financial condition and results of operations.
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 $5.95 for our fiscal year ended June 30, 2023.
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 $7.12 for our fiscal year ended June 30, 2024.
Our Certificate of Incorporation authorizes 250,000,000 shares of common stock, of which 1,681,729 were outstanding as of June 30, 2023, and our Board is authorized to issue additional shares of our common stock.
Our Certificate of Incorporation authorizes 250,000,000 shares of common stock, of which 1,701,729 were outstanding as of June 30, 2024, and our Board is authorized to issue additional shares of our common stock.
Any interruption in the supply of components or materials, or our inability to obtain substitute components or materials from alternate sources at acceptable prices in a timely manner, could result in increased costs and impair our ability to meet the demand of our customers, any of which would have an adverse effect on our business, financial condition, results of operations and prospects.
Any interruption in the supply of components or materials, or our inability to obtain substitute components or materials from alternate sources at acceptable prices in a timely manner, could result in increased costs and impair our ability to meet the demand of our customers, any of which would have an adverse effect on our business, financial condition, results of operations and prospects. 31 Table of Contents Repair or replacement costs due to warranties we provide on our products could have a material adverse effect on our business, financial condition and results of operations.
As of June 30, 2023, we had an accumulated deficit of approximately $225.4 million and reported a net loss of $9.6 million for the fiscal year 2023. We are unable to predict the extent of any future losses or when we will become profitable, if at all.
As of June 30, 2024, we had an accumulated deficit of approximately $237 million and reported a net loss of $11.7 million for the fiscal year 2024. We are unable to predict the extent of any future losses or when we will become profitable, if at all.
The process of obtaining regulatory clearances, approvals, and emergency use authorization to market a medical device can be costly and time‑consuming, and we may not be able to obtain these clearances, approvals, or authorizations on a timely basis, or at all for our proposed products.
The process of obtaining regulatory clearances, approvals, and emergency use authorization to market a medical device can be costly and time‑consuming, and we may not be able to obtain these clearances, approvals, or authorizations on a timely basis, or at all for our proposed products. Our BreathTest-1000 product candidate may undergo FDA premarket review via the 510(k) process.
In certain of these cases, we have not yet qualified alternate suppliers. A supply interruption or an increase in demand beyond our current suppliers’ capabilities could harm our ability to manufacture our products unless and until new sources of supply are identified and qualified.
A supply interruption or an increase in demand beyond our current suppliers’ capabilities could harm our ability to manufacture our products unless and until new sources of supply are identified and qualified.
If our systems are damaged or cease to function properly due to any number of causes, ranging from the failures of third-party service providers, to catastrophic events, to power outages, to security breaches, and our business continuity plans do not effectively compensate on a timely basis, we may suffer interruptions in our ability to manage operations which may adversely impact our results of operations and/or financial condition.
If our systems are damaged or cease to function properly due to any number of causes, ranging from the failures of third-party service providers, to catastrophic events, to power outages, to security breaches, and our business continuity plans do not effectively compensate on a timely basis, we may suffer interruptions in our ability to manage operations which may adversely impact our results of operations and/or financial condition. 30 Table of Contents Our manufacturing operations are dependent upon third party suppliers, including single source suppliers, making us vulnerable to external factors such as supply shortages and price fluctuations, which could harm our business.
If we raise funds through collaborations or licensing arrangements, we might be required to relinquish significant rights to our platform technologies or products or grant licenses on terms that are not favorable to us or commit to future payment streams.
If we raise funds through collaborations or licensing arrangements, we might be required to relinquish significant rights to our platform technologies or products or grant licenses on terms that are not favorable to us or commit to future payment streams. Market volatility or other factors may further adversely impact our ability to raise capital as and when needed.
On August 25, 2022, the intra-day sales price of our common stock fluctuated between a reported low sale price of $13.80 and a reported high sales price of $16.20. Throughout the fiscal year 2023, the closing sales price of our common stock has fluctuated between a reported low sales price of $9.28 and a reported high sales price of $16.20.
On November 9, 2023, the intra-day sales price of our common stock fluctuated between a reported low sale price of $7.86 and a reported high sales price of $9.16. Throughout the fiscal year 2024, the closing sales price of our common stock has fluctuated between a reported low sales price of $7.12 and a reported high sales price of $13.49.
Such competition could adversely affect the prices for any products or the market share of any of our business units and could have a material adverse effect on its results of operations and financial condition. We may not be able to successfully develop the BreathTest-1000 or any other new products or services.
Such competition could adversely affect the prices for any products or the market share of any of our business units and could have a material adverse effect on its results of operations and financial condition.
In addition, loss of any critical component provided by a single source supplier could require us to change the design of our manufacturing process based on the functions, limitations, features and specifications of the replacement components. 27 Table of Contents In addition, several other non-critical components and materials that comprise our products are currently manufactured by a single supplier or a limited number of suppliers.
In addition, loss of any critical component provided by a single source supplier could require us to change the design of our manufacturing process based on the functions, limitations, features and specifications of the replacement components.
Moreover, as the COVID-19 pandemic persists and further information continues to develop, we are learning of increased risks and uncertainties in developing and commercializing new products and services in these unprecedented and evolving circumstances. Our success depends significantly on the establishment and maintenance of successful relationships with our customers.
Moreover, as the COVID-19 pandemic persists and further information continues to develop, we are learning of increased risks and uncertainties in developing and commercializing new products and services in these unprecedented and evolving circumstances. Our sales and operations in international markets expose us to operational, financial and regulatory risks.
We and our suppliers may not meet regulatory quality standards applicable to our device-manufacturing processes, which could have an adverse effect on our business, financial condition, and results of operations.
In addition, any other delays in the development of the BreathTest-1000, for example, unforeseen issues during product validation, would have an adverse effect on our ability to commercialize the BreathTest-1000. We and our suppliers may not meet regulatory quality standards applicable to our device-manufacturing processes, which could have an adverse effect on our business, financial condition, and results of operations.
Our failure, or any product or component supplier’s failure, to comply with applicable regulations could result in a wide range of FDA enforcement actions against us, including warning letters, fines, recalls, injunctions, civil penalties, adverse action against marketing applications, product seizure or detention, operating restrictions, and criminal prosecution, any of which could harm our business. 31 Table of Contents If the BreathTest-1000 or any other device candidates are cleared for commercialization in the United States via the 510(k) process, product modifications may require new 510(k) clearances, de novo submissions, or pre ‑ market approvals, or may require us to cease marketing or recall the modified products until clearances are obtained.
Our failure, or any product or component supplier’s failure, to comply with applicable regulations could result in a wide range of FDA enforcement actions against us, including warning letters, fines, recalls, injunctions, civil penalties, adverse action against marketing applications, product seizure or detention, operating restrictions, and criminal prosecution, any of which could harm our business.
Also, some patients may not be able to comply with clinical trial protocols if quarantines impede patient movement or interrupt healthcare services. Similarly, our ability to recruit and retain patients and principal investigators and site staff who, as healthcare providers, may have heightened exposure to COVID-19 and adversely impact our clinical trial operations.
Also, some patients may not be able to comply with clinical trial protocols if quarantines impede patient movement or interrupt healthcare services.
Removed
Market volatility resulting from the COVID-19 pandemic or other factors may further adversely impact our ability to raise capital as and when needed.
Added
Their parties may claim we are infringing their intellectual property rights, and we could suffer significant litigation or licensing expenses or be prevented from selling products.
Removed
Our manufacturing operations are dependent upon third party suppliers, including single source suppliers, making us vulnerable to external factors such as supply shortages and price fluctuations, which could harm our business.
Added
In addition, we may find it necessary to initiate litigation in order to protect our patent or other intellectual property right, and even if the claims are well-founded and ultimately successful, such litigation is typically costly and time-consuming and may expose us to counterclaims, including claims for intellectual property infringement, antitrust, or other such claims.
Removed
Changes in foreign currency exchange rates may negatively affect our financial condition and results of operations.
Added
In addition, some licenses may be non-exclusive, which could provide our competitors access to the same technologies. Under any of the circumstances, we may incur significant expenses. 27 Table of Contents We may not be able to successfully develop the BreathTest-1000 or any other new products or services.
Removed
As a result of the scope of our foreign sales and foreign operations, including in connection with the sale of the TRACER 1000 to airport and cargo security customers in the European Union and certain other countries, we face significant exposure to movements in exchange rates for foreign currencies, particularly the Euro.
Added
International sales comprise a significant amount of our overall revenue and while growing our international sales is an important part of our growth strategy, these efforts may not be successful.
Removed
Moreover, certain of our products are sold internationally in U.S. dollars; if the U.S. dollar strengthens, the relative cost of these products and services to customers located in foreign countries would increase, which could adversely affect export sales. In addition, most of our financial obligations must be satisfied in U.S. dollars.
Added
International operations are subject to a number of other risks, including: ● import and export laws and the impact of tariffs; ● exchange rate fluctuations; ● political and economic instability, war, international terrorism and anti-American sentiment, particularly in emerging markets and the geographic regions affected by the Russia-Ukraine and Israel-Hamas wars; ● potential for violations of anti-corruption laws and regulations, such as those related to bribery and fraud; ● preference for locally branded products, and laws and business practices favoring local competition; ● increased risk in collecting trade receivables; ● potential for delayed revenue recognition; ● less effective protection and/or lack of enforceability of intellectual property; ● stringent foreign regulation, including but not limited to General Data Protection Regulation in the European Union, that are costly to comply with and may vary from country to country; ● changes in local tax and customs duty laws or changes in the enforcement, application or interpretation of such laws; and ● U.S. government’s restrictions on certain technology transfer to certain countries of concern.
Removed
Our exposure to changes in foreign currency exchange rates may change over time as our business practices evolve and could result in increased costs or reduced revenue and could adversely affect our cash flow. Changes in the relative values of currencies occur regularly and may have a significant impact on our operating results.
Added
The occurrence of any of these risks could negatively affect our international business and consequently our business, operating results, and financial condition. 28 Table of Contents Our business, financial condition and results of operations may be adversely impacted by the effects of inflation.
Removed
We cannot predict with any certainty changes in foreign currency exchange rates or the degree to which we can cost-effectively mitigate this exposure. 28 Table of Contents Repair or replacement costs due to warranties we provide on our products could have a material adverse effect on our business, financial condition and results of operations.
Added
Inflation has the potential to adversely affect our business, financial condition and results of operations by increasing our overall cost structure, particularly if we are unable to achieve commensurate increases in the prices we charge our customers. Other inflationary pressures could affect wages, the cost and availability of components, materials and other inputs and our ability to meet customer demand.
Removed
We expect that our BreathTest-1000 product candidate will undergo FDA premarket review via the 510(k) process.
Added
Inflation may further exacerbate other risk factors, including supply chain disruptions, risks related to international operations and the recruitment and retention of qualified employees. We generate substantial revenue from a limited number of customers and the loss of any such customer may harm our business, results of operations and financial results.
Removed
In addition, any other delays in the development of the BreathTest-1000, for example, unforeseen issues during product validation, would have an adverse effect on our ability to commercialize the BreathTest-1000.
Added
We generate substantial revenue from two customers who are affiliates of each other and neither of which have a long-term contract with us. Given such high concentration of revenue on our consolidated results, our revenue may fluctuate significantly year over year based upon sales to either customer.
Removed
FDA ’ s policy with respect to Emergency Use Authorizations is evolving and may limit the ability for medical products, including the BreathTest-1000, to be eligible for commercialization under an Emergency Use Authorization. We intend to submit an application with the FDA for EUA for the BreathTest-1000.
Added
In the event we are unable to obtain additional customers or increase our revenue from other customers to offset any reduction of these revenues, we could experience a material adverse effect on our business, financial condition and reported revenue and results of operation. Our success depends significantly on the establishment and maintenance of successful relationships with our customers.
Removed
The FDA has the authority to grant an Emergency Use Authorization to allow unapproved medical products to be used in an emergency to diagnose, treat or prevent serious or life-threatening diseases or conditions when there are no adequate, approved and available alternatives.
Added
As we introduce any new and potentially promising product or service or improve existing products or services with new features or components, companies possessing competing technologies, or other companies owning patents or other intellectual property rights, may be motivated to assert infringement claims in order to generate royalty revenues, delay or diminish potential sales, and challenge our right to market such products or services.
Removed
If we are granted an Emergency Use Authorization for the BreathTest-1000 for the diagnosis of COVID-19, we would be able to temporarily commercialize the BreathTest-1000 for the diagnosis of COVID-19 prior to FDA clearance or authorization of a 510(k) or de novo submission, respectively, provided that we do so in accordance with the specific conditions set forth in the EUA.
Added
Even if successful in defending against such claims, patent and other intellectual property related litigation is costly and time consuming.
Removed
However, the FDA does not have review deadlines with respect to such submissions and, therefore, the timing of any approval of an EUA submission is uncertain. We cannot guarantee that the FDA will review our data in a timely manner, or that the FDA will accept the data when reviewed.
Added
Third parties could also obtain patents or other intellectual property rights that may require us to either redesign products or, if possible, negotiate licenses from such third parties.
Removed
The FDA may decide that our data is insufficient for an EUA and require additional pre-clinical, clinical or other studies and refuse to approve our application.
Added
Adverse determinations in any such litigation could result in significant liabilities to third parties or injunctions, or could require us to seek licenses from third parties, and if such licenses are not available on commercially reasonable terms, prevent us from manufacturing, importing, distributing, selling, or using certain products, any one of which could have a material adverse effect on us.
Removed
In addition, the FDA may revoke an Emergency Use Authorization where it is determined that the underlying health emergency no longer exists or warrants such authorization, and we cannot predict how long, if ever, an Emergency Use Authorization would remain in place.
Added
In addition, several other non-critical components and materials that comprise our products are currently manufactured by a single supplier or a limited number of suppliers. In certain of these cases, we have not yet qualified alternate suppliers.
Removed
Further, the FDA’s policy with respect to EUAs related to COVID-19 is continuously evolving and may in the future limit the ability for medical products, including the BreathTest-1000, to be eligible for an EUA.
Added
If the BreathTest-1000 or any other device candidates are cleared for commercialization in the United States via the 510(k) process, product modifications may require new 510(k) clearances, de novo submissions, or pre ‑ market approvals, or may require us to cease marketing or recall the modified products until clearances are obtained.
Removed
If we are unsuccessful in obtaining an EUA for the BreathTest-1000 in a timely manner or at all, or if any granted EUA is revoked after a short period of time, it could have a material adverse effect on our future business, financial condition, operating results and cash flows.
Added
Similarly, our ability to recruit and retain patients and principal investigators and site staff who, as healthcare providers, may have heightened exposure to COVID-19 and adversely impact our clinical trial operations. 42 Table of Contents Increased cybersecurity requirements, vulnerabilities, threats, and more sophisticated and targeted computer crime could pose a risk to our systems, networks, products, services, and data.
Removed
Once our BreathTest-1000 or any other device candidate we may develop in the future, if any, is cleared or approved by FDA for marketing in the United States, if ever, we may be liable if the FDA or other U.S. enforcement agencies determine we have engaged in the off ‑ label promotion of such products or have disseminated false or misleading labeling or promotional materials.
Removed
The ongoing military action between Russia and Ukraine could adversely affect our business, financial condition and results of operations. In February of 2022, Russian military forces invaded Ukraine, resulting in conflict and disruption in the region. The length, impact and outcome of the ongoing military conflict in Ukraine is highly unpredictable.
Removed
This conflict has led and may continue to lead to significant market and other disruptions, including significant volatility in commodity prices and supply of energy resources, instability in financial markets, higher inflation, supply chain interruptions, political and social instability, changes in consumer or purchaser preferences as well as increase in cyberattacks and espionage.

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Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Removed
Item 3. Legal Proceedings 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.
Added
Item 3. Legal Proceedings From time to time, the Company is subject to legal and administrative proceedings, settlements, investigations, claims and actions.
Removed
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.
Added
The Company’s assessment of the likely outcome of litigation matters is based on its judgment of a number of factors including experience with similar matters, past history, precedents, relevant financial and other evidence and facts specific to the matter.
Removed
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.
Added
Notwithstanding the uncertainty as to the final outcome, based upon the information currently available, management does not believe any matters, individually or in aggregate, will have a material adverse effect on the Company’s financial position or results of operations. 45 Table of Contents
Removed
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.
Removed
Thereafter, a settlement in principle was reached with the Plaintiffs in the Stein Action and the parties to the Stein Action presented the settlement to the Court for approval.
Removed
On February 13, 2023, the Court approved the settlement, awarded the Plaintiff’s attorneys’ fees and expenses of $290,000, paid prior to the end of fiscal year 2023 and entered a final order and judgment dismissing the Delaware Action with prejudice.
Removed
The parties to the settlement recognize that entry into the settlement does not constitute an admission of liability, wrongdoing, or any matter of fact or law.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeWe have never paid cash dividends and have no intention of paying dividends in the future. 41 Table of Contents We have 250,000,000 shares of common stock authorized for issuance. As of September 26, 2023, we had 1,682,286 shares of common stock outstanding, which were held by approximately 130 holders of record.
Biggest changeWe have 250,000,000 shares of common stock authorized for issuance. As of September 17, 2024, we had 1,701,729 shares of common stock outstanding, which were held by approximately 28 holders of record. This number does not include beneficial or other owners for whom common stock may be held in “street” name.
Item 5. Market for Registrant ’ s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities Market Information, Holders, and Dividends Our common stock is principally traded on The Nasdaq Capital Market under the symbol ASTC.
Item 5. Market for Registrant ’ s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities Market Information, Holders, and Dividends Our common stock is principally traded on The Nasdaq Capital Market under the symbol ASTC. We have never paid cash dividends and have no intention of paying dividends in the future.
This number does not include beneficial or other owners for whom common stock may be held in “street” name. The last reported sale price of our common stock as reported by The Nasdaq Capital Market on September 26, 2023 was $10.10 per share.
The last reported sale price of our common stock as reported by The Nasdaq Capital Market on September 17, 2024 was $8.28 per share. Sales of Unregistered Securities None.
Removed
Issuer Purchase s of Equity Securities The table below sets forth the information required by Item 703(b) of Regulation S-K with respect to any purchases made by or on behalf of the Company or any “affiliated purchaser,” as defined in § 240 10b-18(a)(3) of the Exchange Act, of shares of our common stock.
Removed
Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased As Part of Publicly Announced Plans or Programs (1) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs February 1 through February 28, 2023 2,035 $ 12.67 2,035 $ 974,214 March 1 through March 31, 2023 3,786 $ 11.43 3,786 $ 930,930 April 1 through April 30, 2023 1,681 $ 10.71 1,681 $ 912,923 May 1 through May 31, 2023 1,993 $ 11.01 1,993 $ 890,979 June 1 through June 30, 2023 821 $ 11.59 821 $ 881,468 Total 10,316 10,316 (1) On November 9, 2022, the Company’s Board of Directors authorized a share repurchase program that allows the Company to repurchase up to $1.0 million of the Company’s common stock beginning November 17, 2022 and continuing through and including November 17, 2023.
Removed
No repurchases were made pursuant to the share repurchase program prior to February 2023. On June 16, 2023, in connection with entry into the ATM Agreement, the Company terminated its existing share repurchase program, effective immediately, in order to comply with Regulation M under the Exchange Act.
Removed
The shares could have been repurchased from time to time in the open market or privately negotiated transactions or by other means in accordance with applicable state and federal securities laws.
Removed
The timing, as well as the number and value of shares repurchased under the program, could have been determined by the Company at its discretion and would have depended on a variety of factors, including management’s assessment of the intrinsic value of the Company’s common stock, the market price of the Company’s common stock, general market and economic conditions, available liquidity, compliance with the Company’s debt and other agreements, applicable legal requirements, and other considerations.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeSeptember 28, 2023 53 Table of Contents ASTROTECH CORPORATION Consolidated Balance Sheets (In thousands, except share and per share data) June 30, 2023 2022 Assets Current assets Cash and cash equivalents $ 14,208 $ 26,453 Short-term investments 27,919 26,173 Accounts receivable 225 56 Contract asset — 2 Inventory, net: Raw materials 1,379 864 Work-in-process 243 136 Finished goods 373 518 Income tax receivable 1 — Prepaid expenses and other current assets 365 748 Total current assets 44,713 54,950 Property and equipment, net 2,670 1,098 Operating lease right-of-use assets, net 262 162 Other assets, net 30 11 Total assets $ 47,675 $ 56,221 Liabilities and stockholders’ equity Current liabilities Accounts payable $ 546 $ 169 Payroll related accruals 633 816 Accrued expenses and other liabilities 1,170 961 Income tax payable — 2 Term note payable - related party — 500 Lease liabilities, current 316 234 Total current liabilities 2,665 2,682 Lease liabilities, net of current portion 291 303 Total liabilities 2,956 2,985 Commitments and contingencies (Note 14) Stockholders’ equity Convertible preferred stock, $ 0.001 par value, 2,500,000 shares authorized; 280,898 shares of Series D issued and outstanding at June 30, 2023 and 2022, respectively — — Common stock, $ 0.001 par value, 250,000,000 shares authorized at June 30, 2023 and 2022 respectively; 1,692,045 and 1,685,595 shares issued at June 30, 2023 and 2022 respectively; 1,681,729 and 1,685,595 outstanding at June 30, 2023 and 2022, respectively 190,643 190,642 Treasury shares, 10,316 shares and no shares at June 30, 2023 and 2022, respectively (119 ) — Additional paid-in capital 81,002 79,505 Accumulated deficit (225,354 ) (215,712 ) Accumulated other comprehensive loss (1,453 ) (1,199 ) Total stockholders’ equity 44,719 53,236 Total liabilities and stockholders’ equity $ 47,675 $ 56,221 See accompanying notes to consolidated financial statements. 54 Table of Contents ASTROTECH CORPORATION Consolidated Statements of Operations and Comprehensive Loss (In thousands, except per share data) June 30, 2023 2022 Revenue $ 750 $ 869 Cost of revenue 444 677 Gross profit 306 192 Operating expenses: Selling, general and administrative 5,775 6,006 Research and development 5,591 2,781 Total operating expenses 11,366 8,787 Loss from operations (11,060 ) (8,595 ) Other income and expense, net 1,418 265 Loss from operations before income taxes (9,642 ) (8,330 ) Income tax benefit — — Net loss $ (9,642 ) $ (8,330 ) Weighted average common shares outstanding: Basic and diluted 1,620 1,590 Basic and diluted net loss per common share: Net loss per common share $ (5.95 ) $ (5.24 ) Other comprehensive loss, net of tax: Net loss $ (9,642 ) $ (8,330 ) Available-for-sale securities: Net unrealized loss (254 ) (1,176 ) Total comprehensive loss $ (9,896 ) $ (9,506 ) See accompanying notes to consolidated financial statements. 55 Table of Contents ASTROTECH CORPORATION Consolidated Statement of Changes in Stockholders’ Equity (In thousands) Preferred Stock Common Stock Class D 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 $ — 1,648 $ 190,641 $ — $ 77,971 $ (207,382 ) $ (23 ) $ 61,207 Net change in available-for-sale marketable securities — — — — — — — (1,176 ) (1,176 ) Stock-based compensation — — 46 1 — 1,534 — — 1,535 Cancellation of restricted stock — — (8 ) — — — — — — Net loss — — — — — — (8,330 ) — (8,330 ) Balance at June 30, 2022 281 $ — 1,686 190,642 — 79,505 (215,712 ) (1,199 ) 53,236 Net change in available-for-sale marketable securities — — — — — — — (254 ) (254 ) Stock-based compensation — — 4 1 — 1,497 — — 1,498 Restricted stock issuance — — 2 — — — — — — Purchase of treasury stock — — (10 ) — (119 ) — — — (119 ) Net loss — — — — — — (9,642 ) — (9,642 ) Balance at June 30, 2023 281 $ — 1,682 $ 190,643 $ (119 ) $ 81,002 $ (225,354 ) $ (1,453 ) $ 44,719 See the accompanying notes to consolidated financial statements. 56 Table of Contents ASTROTECH CORPORATION Consolidated Statements of Cash Flows (In thousands) Years Ended June 30, 2023 2022 Cash flows from operating activities: Net loss $ (9,642 ) $ (8,330 ) Adjustments to reconcile net loss to net cash used in operating activities: Stock-based compensation 1,498 1,535 Depreciation 366 148 Amortization of operating lease right-of-use assets 123 88 Interest on financing leases 15 13 Loss on disposal of asset 25 — Changes in assets and liabilities: Accounts receivable (169 ) (51 ) Contract asset 2 (2 ) Inventory, net (477 ) (18 ) Income tax receivable (1 ) — Accounts payable 377 (227 ) Other assets and liabilities 390 138 Income taxes payable (2 ) — Operating lease liabilities (130 ) (86 ) Net cash used in operating activities (7,625 ) (6,792 ) Cash flows from investing activities: Purchases of property and equipment (1,844 ) (596 ) Purchases of short-term investments (5,140 ) — Proceeds from short-term investments 3,140 — Net cash used in investing activities (3,844 ) (596 ) Cash flows from financing activities: Purchase of treasury shares (119 ) — Repayment of related-party debt (500 ) (2,000 ) Repayments on finance lease liabilities (157 ) (95 ) Net cash used in financing activities $ (776 ) $ (2,095 ) Net change in cash and cash equivalents $ (12,245 ) $ (9,483 ) Cash and cash equivalents at beginning of period 26,453 35,936 Cash and cash equivalents at end of period $ 14,208 $ 26,453 Supplemental disclosures of cash flow information: Cash paid for interest $ 69 $ 515 Acquisition of equipment through financing lease $ 119 $ 394 Operating right-of-use assets and associated liabilities $ 223 $ — Income taxes paid $ 2 $ — See accompanying notes to consolidated financial statements. 57 Table of Contents ASTROTECH CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Years Ended June 30, 2023 and 2022 ( 1 ) Description of the Company and Operating Environment Astrotech Corporation (Nasdaq: ASTC) (“Astrotech,” the “Company,” “we,” “us,” or “our”), a Delaware corporation organized in 1984, is a mass spectrometry company that launches, manages, and commercializes scalable companies based on its innovative core technology.
Biggest changeSeptember 28, 2023 PCAOB ID Number 83 56 Table of Contents ASTROTECH CORPORATION Consolidated Balance Sheets (In thousands, except share and per share data) June 30, 2024 2023 Assets Current assets Cash and cash equivalents $ 10,442 $ 14,208 Short-term investments 21,474 27,919 Accounts receivable 77 225 Inventory, net: Raw materials 2,038 1,379 Work-in-process 66 243 Finished goods 370 373 Income tax receivable — 1 Prepaid expenses and other current assets 261 365 Total current assets 34,728 44,713 Property and equipment, net 2,763 2,670 Operating lease right-of-use assets, net 119 262 Other assets, net 30 30 Total assets $ 37,640 $ 47,675 Liabilities and stockholders’ equity Current liabilities Accounts payable $ 373 $ 546 Payroll related accruals 1,174 633 Accrued expenses and other liabilities 754 1,170 Lease liabilities, current 227 316 Total current liabilities 2,528 2,665 Accrued expenses and other liabilities, net of current portion 232 — Lease liabilities, net of current portion 73 291 Total liabilities 2,833 2,956 Commitments and contingencies (Note 14) Stockholders’ equity Convertible preferred stock, $ 0.001 par value, 2,500,000 shares authorized; 280,898 shares of Series D issued and outstanding at June 30, 2024 and 2023, respectively — — Common stock, $ 0.001 par value, 250,000,000 shares authorized at June 30, 2024 and 2023 respectively; 1,712,045 and 1,692,045 shares issued at June 30, 2024 and 2023 respectively; 1,701,729 and 1,681,729 outstanding at June 30, 2024 and 2023, respectively 190,643 190,643 Treasury shares, 10,316 shares at June 30, 2024 and 2023 (119 ) (119 ) Additional paid-in capital 82,480 81,002 Accumulated deficit (237,020 ) (225,354 ) Accumulated other comprehensive loss (1,177 ) (1,453 ) Total stockholders’ equity 34,807 44,719 Total liabilities and stockholders’ equity $ 37,640 $ 47,675 See accompanying notes to consolidated financial statements. 57 Table of Contents ASTROTECH CORPORATION Consolidated Statements of Operations and Comprehensive Loss (In thousands, except per share data) June 30, 2024 2023 Revenue $ 1,664 $ 750 Cost of revenue 913 444 Gross profit 751 306 Operating expenses: Selling, general and administrative 7,241 5,775 Research and development 6,790 5,591 Total operating expenses 14,031 11,366 Loss from operations (13,280 ) (11,060 ) Other income and expense, net 1,616 1,418 Loss from operations before income taxes (11,664 ) (9,642 ) Income tax expense (2 ) — Net loss $ (11,666 ) $ (9,642 ) Weighted average common shares outstanding: Basic and diluted 1,638 1,620 Basic and diluted net loss per common share: Net loss per common share $ (7.12 ) $ (5.95 ) Other comprehensive loss, net of tax: Net loss $ (11,666 ) $ (9,642 ) Available-for-sale securities: Net unrealized gain (loss) 276 (254 ) Total comprehensive loss $ (11,390 ) $ (9,896 ) See accompanying notes to consolidated financial statements. 58 Table of Contents ASTROTECH CORPORATION Consolidated Statement of Changes in Stockholders’ Equity (In thousands) Preferred Stock Common Stock Class D 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, 2022 281 $ — 1,686 $ 190,642 $ — $ 79,505 $ (215,712 ) $ (1,199 ) $ 53,236 Net change in available-for-sale marketable securities — — — — — — — (254 ) (254 ) Stock-based compensation — — 4 1 — 1,497 — — 1,498 Restricted stock issuance — — 2 — — — — — — Purchase of treasury stock — — (10 ) — (119 ) — — — (119 ) Net loss — — — — — — (9,642 ) — (9,642 ) Balance at June 30, 2023 281 $ — 1,682 190,643 (119 ) 81,002 (225,354 ) (1,453 ) 44,719 Net change in available-for-sale marketable securities — — — — — — — 276 276 Restricted stock issuance — — 20 — — — — — — Stock-based compensation — — — — — 1,478 — — 1,478 Net loss — — — — — — (11,666 ) — (11,666 ) Balance at June 30, 2024 281 $ — 1,702 $ 190,643 $ (119 ) $ 82,480 $ (237,020 ) $ (1,177 ) $ 34,807 See the accompanying notes to consolidated financial statements. 59 Table of Contents ASTROTECH CORPORATION Consolidated Statements of Cash Flows (In thousands) Years Ended June 30, 2024 2023 Cash flows from operating activities: Net loss $ (11,666 ) $ (9,642 ) Adjustments to reconcile net loss to net cash used in operating activities: Stock-based compensation 1,478 1,498 Depreciation 731 366 Amortization of operating lease right-of-use assets 143 123 Interest on financing leases 13 15 Loss on disposal of asset — 25 Changes in assets and liabilities: Accounts receivable 148 (169 ) Contract asset — 2 Inventory, net (479 ) (477 ) Income tax receivable — (1 ) Accounts payable (173 ) 377 Other assets and liabilities 246 390 Income taxes payable 1 (2 ) Repayment of financing liability in connection with internal-use software (14 ) — Operating lease liabilities (153 ) (130 ) Net cash used in operating activities (9,725 ) (7,625 ) Cash flows from investing activities: Purchases of property and equipment (579 ) (1,844 ) Purchases of short-term investments — (5,140 ) Proceeds from short-term investments 6,719 3,140 Net cash provided by (used in) investing activities 6,140 (3,844 ) Cash flows from financing activities: Purchase of treasury shares — (119 ) Repayment of related-party debt — (500 ) Repayments on finance lease liabilities (181 ) (157 ) Net cash used in financing activities (181 ) (776 ) Net change in cash and cash equivalents $ (3,766 ) $ (12,245 ) Cash and cash equivalents at beginning of period 14,208 26,453 Cash and cash equivalents at end of period $ 10,442 $ 14,208 Supplemental disclosures of cash flow information: Cash paid for interest $ 26 $ 69 Acquisition of equipment/ software through financing lease $ 245 $ 119 Operating right-of-use assets and associated liabilities $ — $ 223 Income taxes paid $ 2 $ 2 See accompanying notes to consolidated financial statements. 60 Table of Contents ASTROTECH CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Years Ended June 30, 2024 and 2023 ( 1 ) Description of the Company and Operating Environment Business Overview The terms “Astrotech”, “the Company”, “we”, “us”, or “our” refer to Astrotech Corporation (Nasdaq: ASTC), a Delaware corporation organized in 1984.
The Company recognizes revenue and corresponding accounts receivable according to Topic 606 and, at times, recognizes revenue once all performance obligations have been met, 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 recognizes revenue and corresponding accounts receivable according to Topic 606 and, at times, recognizes revenue once all performance obligations have been met, 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.
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.
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.
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 60 days or less. Freight.
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 60 days or less. Freight.
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.
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.
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 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.
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 to Mr. Pickens with a principal amount of $1.5 million (the “2019 Note”), and on February 13, 2020, the Company entered into a second private placement transaction with Mr.
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 to Mr. Pickens with a principal amount of $1.5 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 the Original Notes accrued at 11% per annum.
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 the Original Notes accrued at 11% per annum.
The principal amount and accrued interest on the 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 “Extended Maturity Date”).
The principal amount and accrued interest on the 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 “Extended Maturity Date”).
(the “Subsidiaries”), entered into two security agreements, dated as of September 5, 2019 and February 13, 2020 ( collectively, the “Original Security Agreements”), with Mr. Pickens, 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 Agreements.
(the “Subsidiaries”), entered into two security agreements, dated as of September 5, 2019 and February 13, 2020 ( collectively, the “Original Security Agreements”), with Mr. Pickens, 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 Agreements.
Pickens, in connection with the Original Notes, and ( 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.
Pickens, in connection with the Original Notes, and ( 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 the Amendments, (a) the principal amount of $1.0 million and accrued interest of $172 thousand on the 2020 Note was paid in full and the 2020 Note was canceled, and (b) $1.0 million of the principal amount and $330 thousand of accrued interest on the 2019 Note was paid and the maturity date on the remaining balance of $500 thousand of the 2019 Note was extended to September 5, 2022 ( the “Amended Maturity Date”).
Pursuant to the Amendments, (a) the principal amount of $1.0 million and accrued interest of $172 thousand on the 2020 Note was paid in full and the 2020 Note was canceled, and (b) $1.0 million of the principal amount and $330 thousand of accrued interest on the 2019 Note was paid and the maturity date on the remaining balance of $500 thousand of the 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 pursuant to subsidiary guarantees, dated September 5, 2019 and February 13, 2020, 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 “Amended Subsidiary Guarantee”).
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 pursuant to subsidiary guarantees, dated September 5, 2019 and February 13, 2020, 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 “Amended Subsidiary Guarantee”).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of June 30, 2023 and 2022, and the results of its operations and cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of June 30, 2023, and the results of its operations and cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
The lease payments used to determine the Company’s operating lease assets may include lease incentives, stated rent increases and escalation clauses linked to rates of inflation, when determinable, and are recognized in determining its ROU assets. The Company’s operating leases are reflected in the operating lease, right-of-use asset; lease liabilities, current; and lease liabilities, non-current in its consolidated balance sheets.
The lease payments used to determine the Company’s operating lease assets may include lease incentives, stated rent increases and escalation clauses linked to rates of inflation, when determinable, and are recognized in determining its ROU assets. The Company’s operating leases are reflected in the operating lease, right-of-use assets; lease liabilities, current; and lease liabilities, non-current in its consolidated balance sheets.
The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.
The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.
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.
In cases where the Company is responsible for shipping after the customer has obtained control of the goods, it has elected to treat the shipping activities as fulfillment activities rather than as a separate performance obligation.
We believe the following accounting policies require us to make significant judgments and estimates in the preparation of our consolidated financial statements: 44 Table of Contents 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.
We believe the following accounting policies require us to make significant judgments and estimates in the preparation of our consolidated financial statements. 47 Table of Contents 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.
We expect that our short- and long-term liquidity requirements will consist of working capital and general corporate expenses associated with the growth of our business, including, without limitation, expenses associated with scaling up our operations and continuing to increase our manufacturing capacity, sales and marketing expense associated with rollout of our AgLAB and BreathTech products to commercial customers, additional research and development expenses associated with expanding our product offerings, and expenses associated with being a public company.
We expect that our short-term and long-term liquidity requirements will consist of working capital and general corporate expenses associated with the growth of our business, including, without limitation, expenses associated with scaling up our operations and continuing to increase our manufacturing capacity, sales and marketing expense associated with rollout of our products to commercial customers, additional research and development expenses associated with expanding our product offerings, and expenses associated with being a public company.
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. 60 Table of Contents Foreign Currency The Company’s international operations are subject to certain opportunities and risks, including from foreign currency fluctuations and governmental actions.
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. 63 Table of Contents Foreign Currency The Company’s international operations are subject to certain opportunities and risks, including from foreign currency fluctuations and governmental actions.
Time deposits with maturities of less than 90 days, if any, from the purchase date are included in “Cash and Cash Equivalents.” Time deposits with maturities from 91 - 360 days, if any, are included in “Short-term investments.” Time deposits with maturities of more than 360 days, if any, are included in “Long-term investments.” As of June 30, 2023 and June 30, 2022, the Company had no long-term investments.
Time deposits with maturities of less than 90 days, if any, from the purchase date are included in “Cash and Cash Equivalents.” Time deposits with maturities from 91 - 360 days, if any, are included in “Short-term investments.” Time deposits with maturities of more than 360 days, if any, are included in “Long-term investments.” As of June 30, 2024 and June 30, 2023 , the Company had no long-term investments.
For the years ended June 30, 2023 and 2022 , the Company did not recognize any interest expense for uncertain tax positions. ( 12 ) Net Loss per Share Basic loss per share is computed on the basis of the weighted average number of shares of common stock outstanding during the period.
For the years ended June 30, 2024 and 2023 , the Company did not recognize any interest expense for uncertain tax positions. ( 12 ) Net Loss per Share Basic loss per share is computed on the basis of the weighted average number of shares of common stock outstanding during the period.
If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. There was no impairment of long lived assets recorded for fiscal years ended June 30, 2023, and 2022.
If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. There was no impairment of long lived assets recorded for fiscal years ended June 30, 2024, and 2023.
Diluted net loss per share is computed on the basis of the weighted average number of shares of common stock plus the effect of dilutive potential common shares outstanding during the period using the treasury stock method and the if-converted method. Dilutive potential common shares include outstanding stock options and stock-based awards.
Diluted net loss per share is computed on the basis of the weighted average number of shares of common stock 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.
Receivable balances deemed uncollectible are written off against the allowance. The Company anticipates collecting all unreserved receivables within one year. As of June 30, 2023 and 2022 , there was no allowance for doubtful accounts deemed necessary.
Receivable balances deemed uncollectible are written off against the allowance. The Company anticipates collecting all unreserved receivables within one year. As of June 30, 2024 and 2023 , there was no allowance for doubtful accounts deemed necessary.
(2) Consists of payments due for our leases of three pieces of equipment that expire between December 2024 and May 2028. Off-Balance Sheet Arrangements We did not have any off-balance sheet arrangements as of June 30, 2023. Item 7A. Quantitative and Qualitative Disclosures about Market Risk Not applicable to smaller reporting companies. 51 Table of Contents Item 8.
(2) Consists of payments due for our leases of three pieces of equipment that expire between December 2024 and May 2028. Off-Balance Sheet Arrangements We did not have any off-balance sheet arrangements as of June 30, 2024. Item 7A. Quantitative and Qualitative Disclosures about Market Risk Not applicable to smaller reporting companies. 54 Table of Contents Item 8.
Cash equivalents are comprised primarily of money market and mutual fund investments. 61 Table of Contents Accounts Receivable The carrying value of the Company’s accounts receivable, net of an allowance for doubtful accounts, if any, represents their estimated net realizable value.
Cash equivalents are comprised primarily of money market and mutual fund investments. 64 Table of Contents Accounts Receivable The carrying value of the Company’s accounts receivable, net of an allowance for doubtful accounts, if any, represents their estimated net realizable value.
Utilization of some of these net operating losses is limited due to the changes in stock ownership of the Company associated with the October 2007 Exchange Offer; as such, the benefit from these losses may not be realized. The Company has federal research and development income tax credit carryovers of $1.1 million as of June 30, 2023.
Utilization of some of these net operating losses is limited due to the changes in stock ownership of the Company associated with the October 2007 Exchange Offer; as such, the benefit from these losses may not be realized. The Company has federal research and development income tax credit carryovers of $1.4 million as of June 30, 2024.
Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.
Accordingly, we express no such opinion. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
Research and development costs are used to improve system functionality, streamline and simplify the user experience, and extend our capabilities into customer-defined, application-specific opportunities. Research and development expenses for the fiscal years ended June 30, 2023 and 2022 were $5.6 million and $2.8 million, respectively.
Research and development costs are used to improve system functionality, streamline and simplify the user experience, and extend our capabilities into customer-defined, application-specific opportunities. Research and development expenses for the fiscal years ended June 30, 2024 and 2023 were $6.8 million and $5.6 million, respectively.
For more information, see Note 12. Cash and Cash Equivalents The Company considers short-term investments with original maturities of three months or less to be cash equivalents.
For more information, see Note 13. Cash and Cash Equivalents The Company considers short-term investments with original maturities of three months or less to be cash equivalents.
The timing, as well as the number and value of shares repurchased under the program, will be determined by the Company at its discretion and will depend on a variety of factors, including management’s assessment of the intrinsic value of the Company’s common stock, the market price of the Company’s common stock, general market and economic conditions, available liquidity, compliance with the Company’s debt and other agreements, applicable legal requirements, and other considerations.
The timing, as well as the number and value of shares repurchased under the program, could have been determined by the Company at its discretion and will depend on a variety of factors, including management’s assessment of the intrinsic value of the Company’s common stock, the market price of the Company’s common stock, general market and economic conditions, available liquidity, compliance with the Company’s debt and other agreements, applicable legal requirements, and other considerations.
The Company had the option to prepay the principal amount and all accrued interest on the Original Notes at any time prior to the Extended Maturity Date. In connection with the issuance of the Original Notes, the Company, along with 1st Detect Corporation and Astrotech Technologies, Inc.
The Company had the option to prepay the principal amount and all accrued interest on the Original Notes at any time prior to the Extended Maturity Date. 53 Table of Contents In connection with the issuance of the Original Notes, the Company, along with 1st Detect Corporation and Astrotech Technologies, Inc.
The Company adopted this guidance as of June 30, 2022 and the adoption had no impact on the Company’s consolidated financial statements. 63 Table of Contents Treasury Stock The Company records treasury stock at the cost to acquire it and includes treasury stock as a component of stockholders’ equity.
The Company adopted this guidance as of June 30, 2022 and the adoption had no impact on the Company’s consolidated financial statements. Treasury Stock The Company records treasury stock at the cost to acquire it and includes treasury stock as a component of stockholders’ equity.
Basis for Opinion These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's consolidated financial statements based on our audits.
Basis for Opinion These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's consolidated financial statements based on our audit.
In addition, the Subsidiaries jointly and severally agreed to guarantee and act as surety for the Company’s obligation to repay the Original Notes pursuant to a subsidiary guarantee. 50 Table of Contents On September 3, 2021, the Company entered into (1) the Omnibus Amendment to the Secured Promissory Notes (the “Amended Notes”) with Mr.
In addition, the Subsidiaries jointly and severally agreed to guarantee and act as surety for the Company’s obligation to repay the Original Notes pursuant to a subsidiary guarantee. On September 3, 2021, the Company entered into ( 1 ) the Omnibus Amendment to the Secured Promissory Notes (the “Amended Notes”) with Mr.
At June 30, 2023, the Company had net operating loss carryforwards of approximately $83.5 million with approximately $37.8 million ($7.9 million, tax effected) for federal income tax purposes that are available to offset future regular taxable income set to expire between the years of 2024 and 2037.
At June 30, 2024, the Company had net operating loss carryforwards of approximately $88.2 million with approximately $37.8 million ($7.9 million, tax effected) for federal income tax purposes that are available to offset future regular taxable income set to expire between the years of 2024 and 2037.
During fiscal years 2023 and 2022 , the Company conducted business in eleven countries. The Company closely monitors its operations in each country in which it does business and seeks to adopt appropriate strategies that are responsive to changing economic and political environments. The Company currently conducts business in the U.S. dollar and the Euro.
During fiscal years 2024 and 2023 , the Company conducted business in multiple foreign countries. The Company closely monitors its operations in each country in which it does business and seeks to adopt appropriate strategies that are responsive to changing economic and political environments. The Company currently conducts business in the U.S. dollar and the Euro.
Financing leases, formerly referred to as capitalized leases, are treated similarly to operating leases except that the asset subject to the lease is included in the appropriate fixed asset category, rather than recorded as a right-of-use asset, and depreciated over its estimated useful life, or lease term, if shorter. For more information, see Note 4.
Financing leases, formerly referred to as capitalized leases, are treated similarly to operating leases except that the asset subject to the lease is included in the appropriate fixed asset category, rather than recorded as a right-of-use asset, and depreciated over its estimated useful life, or lease term, if shorter.
These credits may be used to offset $13 thousand of state tax liability each year and will expire in 2027. 74 Table of Contents Uncertain Tax Positions The Company had unrecognized tax benefits of $486 thousand as of June 30, 2023 , all of which have been accounted for as contra deferred tax assets.
These credits may be used to offset $13 thousand of state tax liability each year and will expire in 2027. 78 Table of Contents Uncertain Tax Positions The Company had unrecognized tax benefits of $604 thousand as of June 30, 2024 , all of which have been accounted for as contra deferred tax assets.
Lease expense for lease payments is recognized on a straight-line basis over the lease term. The amortization expense for financed lease assets for the years ended June 30, 2023 and 2022 totaled $101 thousand and $61 thousand, respectively.
Lease expense for lease payments is recognized on a straight-line basis over the lease term. The amortization expense for financed lease assets for the years ended June 30, 2024 and 2023, totaled $124 thousand and $101 thousand, respectively.
Total depreciation and amortization expense includes finance lease right-of-use asset amortization of $101 thousand and $61 thousand for the years ended June 30, 2023 and 2022, respectively. 66 Table of Contents ( 6 ) Fair Value Measurement ASC 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.
Depreciation and amortization expense includes finance lease right-of-use asset amortization of $124 thousand and $101 thousand for the years ended June 30, 2024 and 2023 , respectively. 70 Table of Contents ( 6 ) Fair Value Measurement ASC 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 following tables present the carrying amounts, estimated fair values, and valuation input levels of certain financial instruments as of June 30, 2023 , and June 30, 2022 : June 30, 2023 Carrying Fair Value Measured Using Fair (In thousands) Amount Level 1 Level 2 Level 3 Value Available-for-Sale Securities Short-Term Investments Mutual Funds - Corporate & Government Debt $ 18,965 $ 18,965 $ — $ — $ 18,965 ETFs - Corporate & Government Debt 6,958 6,958 — — 6,958 Time Deposits: 91-360 days 1,996 — 1,996 1,996 Total Available-for-Sale Investments $ 27,919 $ 25,923 $ 1,996 $ — $ 27,919 June 30, 2022 Carrying Fair Value Measured Using Fair (In thousands) Amount Level 1 Level 2 Level 3 Value Available-for-Sale Securities Short-Term Investments Mutual Funds - Corporate & Government Debt $ 19,191 $ 19,191 $ — $ — $ 19,191 ETFs - Corporate & Government Debt 6,982 6,982 — — 6,982 Total Available-for-Sale Investments $ 26,173 $ 26,173 $ — $ — $ 26,173 The value of available-for-sale investments is based on pricing from third -party pricing vendors, who may use quoted prices in active markets for identical assets (Level 1 inputs). 67 Table of Contents ( 7 ) Related-party Debt On September 5, 2019, the Company entered into a private placement transaction with Thomas B.
The following tables present the carrying amounts, estimated fair values, and valuation input levels of certain financial instruments as of June 30, 2024 , and June 30, 2023 : June 30, 2024 Carrying Fair Value Measured Using Fair (In thousands) Amount Level 1 Level 2 Level 3 Value Available-for-Sale Securities Short-Term Investments Mutual Funds - Corporate & Government Debt $ 14,426 $ 14,426 $ — $ — $ 14,426 ETFs - Corporate & Government Debt 7,048 7,048 — — 7,048 Time Deposits: 91-360 days — — — — Total Available-for-Sale Investments $ 21,474 $ 21,474 $ — $ — $ 21,474 June 30, 2023 Carrying Fair Value Measured Using Fair (In thousands) Amount Level 1 Level 2 Level 3 Value Available-for-Sale Securities Short-Term Investments Mutual Funds - Corporate & Government Debt $ 18,965 $ 18,965 $ — $ — $ 18,965 ETFs - Corporate & Government Debt 6,958 6,958 — — 6,958 Time Deposits 1,996 — 1,996 — 1,996 Total Available-for-Sale Investments $ 27,919 $ 25,923 $ 1,996 $ — $ 27,919 The value of available-for-sale investments is based on pricing from third -party pricing vendors, who may use quoted prices in active markets for identical assets (Level 1 inputs). 71 Table of Contents ( 7 ) Related-party Debt On September 5, 2019, the Company entered into a private placement transaction with Thomas B.
At June 30, 2023, the credit amount is $0.5 million ($0.4 million, tax effected).
At June 30, 2024, the credit amount is $0.5 million ($0.4 million, tax effected).
Treasury yield curve in effect at the time of grant. • For the years ended June 30, 2023 and 2022 , the Company used the simplified method of calculating the expected life of the options. 72 Table of Contents ( 11 ) Income Taxes The Company accounts for income taxes under the asset and liability method.
Treasury yield curve in effect at the time of grant. • For the years ended June 30, 2024 and 2023 , the Company used the simplified method of calculating the expected life of the options. ( 11 ) Income Taxes The Company accounts for income taxes under the asset and liability method.
These credits will expire between the years 2035 and 2043. At June 30, 2023, the Company also has accumulated state net operating loss carryforwards of approximately $7.4 million ($0.4 million, tax effected) that are available to offset future state taxable income. These net operating loss carryforwards expire between the years 2026 and 2036.
At June 30, 2024, the Company also has accumulated state net operating loss carryforwards of approximately $7.4 million ($0.4 million, tax effected) that are available to offset future state taxable income. These net operating loss carryforwards expire between the years 2026 and 2036.
The assumptions used for the years ended June 30, 2023 and 2022 and the resulting estimates of weighted-average fair value per share of options granted or modified are summarized in the following table: Year Ended Year Ended June 30, 2023 June 30, 2022 Expected Dividend Yield — — Expected Volatility 104.67 % 104.97 % Risk-Free Interest Rates 1.59 % 0.65 % Expected Option Life (in years) 3.5 3.5 Weighted-average grant-date fair value of options awarded $ 20.22 $ 25.80 • The expected dividend yield is based on the Company’s current dividend yield and the best estimate of projected dividend yield for future periods within the expected life of the option, which is currently 0%. • The Company estimated volatility using the historical share price performance over the expected life.
The assumptions used for the years ended June 30, 2024 and 2023, and the resulting estimates of weighted-average fair value per share of options granted or modified are summarized in the following table: Year Ended Year Ended June 30, 2024 June 30, 2023 Expected Dividend Yield — — Expected Volatility 99.85 % 104.67 % Risk-Free Interest Rates 4.36 % 1.59 % Expected Option Life (in years) 3.5 3.5 Weighted-average grant-date fair value of options awarded $ 11.63 $ 20.22 • The expected dividend yield is based on the Company’s current dividend yield and the best estimate of projected dividend yield for future periods within the expected life of the option, which is currently 0%. • The Company estimated volatility using the historical share price performance over the expected life.
For more information about the fair value of the Company’s financial instruments, see Note 6. 64 Table of Contents The following table presents the carrying amounts of certain financial instruments as of June 30, 2023 and June 30, 2022: Carrying Value Short-Term Investments Long-Term Investments (In thousands) June 30, 2023 June 30, 2022 June 30, 2023 June 30, 2022 Money Market Funds Mutual Funds - Corporate & Government Debt 18,965 19,191 — — ETFs - Corporate & Government Debt 6,958 6,982 — — Time deposits Maturities from 1-90 days — — — — Maturities from 91-360 days 1,996 — — - Total $ 27,919 $ 26,173 $ — $ — ( 4 ) Leases On April 27, 2021, Astrotech entered into a new lease for a research and development facility of approximately 5,960 square feet in Austin, Texas (the “R&D facility”) that includes a laboratory, a small production shop, and offices for staff.
For more information about the fair value of the Company’s financial instruments, see Note 7. 68 Table of Contents The following table presents the carrying amounts of certain financial instruments as of June 30, 2024 and June 30, 2023 : Carrying Value Short-Term Investments Long-Term Investments (In thousands) June 30, 2024 June 30, 2023 June 30, 2024 June 30, 2023 Money Market Funds Mutual Funds - Corporate & Government Debt $ 14,426 $ 18,965 $ — $ — ETFs - Corporate & Government Debt 7,048 6,958 — — Time deposits Maturities from 1-90 days — — — — Maturities from 91-360 days — 1,996 — — Total $ 21,474 $ 27,919 $ — $ — ( 4 ) Leases On April 27, 2021, Astrotech entered into a lease for a research and development facility of approximately 5,960 square feet in Austin, Texas (the “R&D facility”) that includes a laboratory, a small production shop, and offices for staff.
The Company had unrecognized tax benefit of $486 thousand as of June 30, 2023 , all of which has been accounted for as contra deferred tax assets.
The Company had unrecognized tax benefit of $604 thousand as of June 30, 2024, all of which has been accounted for as contra deferred tax assets.
The Company also had net operating loss carryforwards with indefinite lives of approximately $45.7 million ($9.6 million, tax effected) for federal income tax purposes that are available to offset future regular taxable income.
The Company also had net operating loss carryforwards with indefinite lives of approximately $50.4 million ($10.6 million, tax effected) for federal income tax purposes that are available to offset future regular taxable income.
A rollforward of the beginning and ending amount of unrecognized tax benefits from July 1, 2021 to June 30, 2023 is as follows: Year Ended June 30, (In thousands) 2023 2022 Fiscal year beginning balance $ 400 $ 329 Additions for tax positions of current period 86 71 Additions for tax positions of prior years — — Decreases for tax positions of prior years — — Fiscal year ending balance $ 486 $ 400 The Company recognizes interest and penalties related to income tax matters in income tax expense, as incurred.
A roll forward of the beginning and ending amount of unrecognized tax benefits from July 1, 2022 to June 30, 2024, is as follows: Year Ended June 30, (In thousands) 2024 2023 Fiscal year beginning balance $ 486 $ 400 Additions for tax positions of current period 136 86 Additions for tax positions of prior years — — Decreases for tax positions of prior years (18 ) — Fiscal year ending balance $ 604 $ 486 The Company recognizes interest and penalties related to income tax matters in income tax expense, as incurred.
Cash payments for financing leases for the years ended June 30, 2023 and 2022 totaled $157 thousand and $95 thousand, respectively.
Cash payments for financing leases for the years ended June 30, 2024 and 2023, totaled $181 thousand and $157 thousand, respectively.
All of the fiscal years 2023 and 2022 revenue was comprised of sales related to our TRACER 1000 units, as well as ongoing sales of consumables and recurring maintenance services for the TRACER 1000. The decrease was due to less new units sold compared to the prior year.
Both of the fiscal years 2024 and 2023 revenue was comprised of sales related to our TRACER 1000 units, as well as ongoing sales of consumables and recurring maintenance services for the TRACER 1000. The increase was due to more new units sold compared to the prior year.
For the years ended June 30, 2023 and 2022 , the Company made matching contributions of $59 thousand and $57 thousand, respectively, to the plan. The Company has the right, but not an obligation, to make additional contributions to the plan in future years at the discretion of the Company’s Board of Directors.
The Company has the right, but not an obligation, to make additional contributions to the plan in future years at the discretion of the Company’s Board of Directors. The Company has not made any additional contributions for the years ended June 30, 2024 and 2023 .
Financial Statements and Supplementary Data REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Board of Directors and Stockholders Astrotech Corporation Austin, Texas Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheet of Astrotech Corporation and subsidiaries (the "Company") as of June 30, 2023 and 2022, the related consolidated statements of operations and comprehensive loss, changes in stockholders' equity, and cash flows for the years then ended, and the related notes (collectively referred to as the "consolidated financial statements").
Financial Statements and Supplementary Data REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of Astrotech Corporation Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheet of Astrotech Corporation (the “Company”) as of June 30, 2024, and the related consolidated statements of operations and comprehensive loss, changes in stockholders’ equity, and cash flows for the year ended June 30, 2024, and the related notes (collectively referred to as the “consolidated financial statements”).
During the fiscal year ended June 30, 2023, the Company had four material customers that comprised substantially all of its $750 thousand in revenue. During the fiscal year ended June 30, 2022, the Company recognized revenue from two material customers for total revenue of $869 thousand.
During the fiscal year ended June 30, 2024,, the Company had three material customers that comprised substantially all of its $1.7 million in revenue. During the fiscal year ended June 30, 2023, the Company recognized revenue from four material customers for total revenue of $750 thousand.
The current obligation for warranty provision is included in accrued expenses and other liabilities in the consolidated balance sheets, whose activity for each of the two fiscal years ended June 30, 2023 and 2022 is summarized in the following table: (In thousands) Warranty Provision Balance as of June 30, 2021 $ 16 Warranty claims provided for 112 Settlements made (78 ) Balance as of June 30, 2022 50 Warranty claims provided for 157 Settlements made (119 ) Balance as of June 30, 2023 $ 88 Research and Development Research and development costs are expensed as incurred.
The current obligation for warranty provision is included in accrued expenses and other liabilities in the consolidated balance sheets, whose activity for each of the two fiscal years ended June 30, 2024 and 2023 is summarized in the following table: (In thousands) Warranty Provision Balance as of June 30, 2022 $ 50 Accruals for new warranties issued 157 Settlements made (119 ) Balance as of June 30, 2023 88 Accruals for new warranties issued 172 Settlements made (76 ) Balance as of June 30, 2024 $ 184 Research and Development Research and development costs are expensed as incurred.
This necessitates deferral of all or a portion of revenue recognition until assurance of collection. During the fiscal year ended June 30, 2023 , the Company had four material customers that comprised substantially all of its $750 thousand in revenue.
This necessitates deferral of all or a portion of revenue recognition until assurance of collection. During the fiscal year ended June 30, 2024 , the Company had three material customers that comprised substantially all of its $1.7 million in revenue.
( 3 ) Investments The following tables summarize gains and losses related to the Company’s investments: June 30, 2023 Available-for-Sale Adjusted Unrealized Unrealized Fair (In thousands) Cost Gain Loss Value Mutual Funds - Corporate & Government Debt $ 19,990 $ — $ (1,025 ) $ 18,965 ETFs - Corporate & Government Debt 7,376 — (418 ) 6,958 Time Deposits 2,006 — (10 ) 1,996 Total $ 29,372 $ — $ (1,453 ) $ 27,919 June 30, 2022 Available-for-Sale Adjusted Unrealized Unrealized Fair (In thousands) Cost Gain Loss Value Mutual Funds - Corporate & Government Debt $ 19,997 $ — $ (806 ) $ 19,191 ETFs - Corporate & Government Debt 7,375 — (393 ) 6,982 Total $ 27,372 $ — $ (1,199 ) $ 26,173 We have certain financial instruments on our consolidated balance sheets related to interest-bearing time deposits.
( 3 ) Investments The following tables summarize gains and losses related to the Company’s investments: June 30, 2024 Available-for-Sale Adjusted Unrealized Unrealized Fair (In thousands) Cost Gain Loss Value Mutual Funds - Corporate & Government Debt $ 15,276 $ — $ (850 ) $ 14,426 ETFs - Corporate & Government Debt 7,375 — (327 ) 7,048 Total $ 22,651 $ — $ (1,177 ) $ 21,474 June 30, 2023 Available-for-Sale Adjusted Unrealized Unrealized Fair (In thousands) Cost Gain Loss Value Mutual Funds - Corporate & Government Debt $ 19,990 $ — $ (1,025 ) $ 18,965 ETFs - Corporate & Government Debt 7,376 — (418 ) 6,958 Time Deposits 2,006 — (10 ) 1,996 Total $ 29,372 $ — $ (1,453 ) $ 27,919 We have certain financial instruments on our consolidated balance sheets related to interest-bearing time deposits.
The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.
The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. We determined that there are no critical audit matters.
Other income and expense, net – Other income and expense, net for the year ended June 30, 2023 was $1.4 million compared to other expense, net of $265 thousand for the year ended June 30, 2022.
Other income and expense, net – Other income and expense, net for the year ended June 30, 2024, was $1.6 million of income compared $1.4 million of income for the year ended June 30, 2023.
With the cancelation of the 2019 Note, the Amended Subsidiary Guarantee was terminated and the Subsidiaries' Collateral was released. 68 Table of Contents ( 8 ) Stockholders ’ Equity Common Stock On November 22, 2022, the Company filed a third amendment (the “Amendment”) to the Company’s Certificate of Incorporation (as amended, the “Certificate of Incorporation”) with the Secretary of State of the State of Delaware to effect a 1 -for- 30 reverse stock split of all of the Company’s issued and outstanding shares of Common Stock.
( 8 ) Stockholders ’ Equity Common Stock On November 22, 2022, the Company filed a third amendment (the “Amendment”) to the Company’s Certificate of Incorporation (as amended, the “Certificate of Incorporation”) with the Secretary of State of the State of Delaware to effect a 1 -for-30 stock split of all of the Company’s issued and outstanding shares of Common Stock.
Contractual Obligations and Commitments The following table summarized our commitments to settle contractual obligations as of June 30, 2023: Payments Due by Period (In thousands) Total Less than 1 Year 1 to 3 Years 4 to 5 Years More than 5 Years Operating lease commitments (1) $ 277 $ 139 $ 138 — — Finance lease commitments (2) 330 168 138 24 — Total $ 607 $ 307 $ 276 $ 24 $ — (1) Consists of payments due for our leases of research and development space in Austin, Texas that expires April 2025.
Contractual Obligations and Commitments The following table summarized our commitments to settle contractual obligations as of June 30, 2024 : Payments Due by Period (In thousands) Total Less than 1 Year 1 to 3 Years 4 to 5 Years More than 5 Years Operating lease commitments (1) $ 142 $ 142 $ — — — Finance lease commitments (2) 173 94 79 — — Total $ 315 $ 236 $ 79 $ — $ — (1) Consists of payments due for our leases of research and development space in Austin, Texas that expires April 2025.
Federal statutory rate to the loss before income taxes to the actual amount of income tax benefit recognized follows: Year Ended June 30, (In thousands) 2023 2022 Expected benefit $ 2,025 $ 1,749 State tax expense — — Tax credits 200 166 Change in valuation allowance (1,838 ) (1,511 ) Stock-based compensation (296 ) (306 ) Prior year true-up — (9 ) Expiration of net operating loss carryovers (88 ) (89 ) Other permanent items (3 ) — Total income tax benefit $ — $ — 73 Table of Contents Deferred Tax Assets and Liabilities The Company’s deferred tax assets as of June 30, 2023 and 2022 consist of the following: Year Ended June 30, (In thousands) 2023 2022 Deferred tax assets: Net operating loss carryforwards $ 17,920 $ 17,202 Tax credit carryforwards 1,530 1,330 Lease liability - current and non-current 128 113 Unrealized loss on securities 305 — IRC Section 174 R&D Expense Capitalization 1,061 Accrued expenses and other timing 143 180 Stock-based compensation 111 579 Property and equipment, principally due to differences in depreciation — — Total gross deferred tax assets $ 21,198 $ 19,404 Less — valuation allowance (21,064 ) (19,348 ) Net deferred tax assets $ 134 $ 56 Deferred tax liabilities: Right-of-use assets $ (55 ) $ (34 ) Property and equipment, principally due to differences in depreciation (79 ) (22 ) Total gross deferred tax liabilities (134 ) (56 ) Net deferred tax assets $ — $ — The Company files consolidated returns for federal, California, Florida, and Texas income and franchise taxes.
Federal statutory rate to the loss before income taxes to the actual amount of income tax benefit recognized follows: Year Ended June 30, (In thousands) 2024 2023 Expected benefit $ 2,449 $ 2,025 State tax expense (2 ) — Tax credits 251 200 Change in valuation allowance (2,465 ) (1,838 ) Stock-based compensation (271 ) (296 ) Prior year true-up 43 — Expiration of net operating loss carryovers — (88 ) Other permanent items (7 ) (3 ) Total income tax benefit/ (expense) $ (2 ) $ — 77 Table of Contents Deferred Tax Assets and Liabilities The Company’s deferred tax assets as of June 30, 2024 and 2023, consist of the following: Year Ended June 30, (In thousands) 2024 2023 Deferred tax assets: Net operating loss carryforwards $ 18,900 $ 17,920 Tax credit carryforwards 1,800 1,530 Lease liability - current and non-current 63 128 Unrealized loss on securities 247 305 IRC Section 174 R&D Expense Capitalization 2,107 1,061 Accrued expenses and other timing 310 143 Stock-based compensation 63 111 Property and equipment, principally due to differences in depreciation — — Total gross deferred tax assets $ 23,490 $ 21,198 Less — valuation allowance (23,444 ) (21,064 ) Net deferred tax assets $ 46 $ 134 Deferred tax liabilities: Right-of-use assets $ (25 ) $ (55 ) Property and equipment, principally due to differences in depreciation (21 ) (79 ) Total gross deferred tax liabilities (46 ) (134 ) Net deferred tax assets $ — $ — The Company files consolidated returns for federal, California, Florida, Oregon and Texas.
Warranty Provision Astrotech offers its customers warranties on the products that it sells. These warranties typically provide for repairs and maintenance of the products if problems arise during a specified time period after original shipment. Concurrent with the sale of products, the Company records a provision for estimated warranty expenses with a corresponding increase in cost of goods sold.
These warranties typically provide for repairs and maintenance of the products if problems arise during a specified time period after original shipment. Concurrent with the sale of products, the Company records a provision for estimated warranty expenses with a corresponding increase in cost of goods sold. The Company periodically adjusts this provision based on historical experience and anticipated expenses.
With a number of diverse market opportunities for the core technology, ATI is structured to license the intellectual property for different fields of use.
The intellectual property includes 17 patents granted 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.
Prior to termination, we had not sold any shares of our common stock pursuant to the ATM Agreement. If we raise funds through additional strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies or future revenue streams or to grant licenses on terms that may not be favorable to us.
If we raise funds through additional strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies or future revenue streams or to grant licenses on terms that may not be favorable to us.
Changes in one or more of these factors may significantly affect the estimated fair value of the stock options. The Company recognizes forfeitures as they occur. The fair value of awards that are likely to meet goals, if any, are recorded as an expense over the vesting period. For more information, see Note 10.
The Company recognizes forfeitures as they occur. The fair value of awards that are likely to meet goals, if any, are recorded as an expense over the vesting period. For more information, see Note 10.
The risk of loss attributable to these uninsured balances is mitigated by depositing funds in what the Company believes to be high credit quality financial institutions. The Company has not experienced any losses in such accounts.
The Company maintains funds in bank accounts that may exceed the limit insured by the Federal Deposit Insurance Corporation (the “FDIC”). The risk of loss attributable to these uninsured balances is mitigated by depositing funds in what the Company believes to be high credit quality financial institutions. The Company has not experienced any losses in such accounts.
The Company periodically adjusts this provision based on historical experience and anticipated expenses. The Company charges actual expenses of repairs under warranty, including parts and labor, to this provision when incurred.
The Company charges actual expenses of repairs under warranty, including parts and labor, to this provision when incurred.
( 10 ) Common Stock Incentive, Stock Purchase Plans, and Other Compensation Plans Stock Option Activity Summary The Company’s stock option activity for the years ended June 30, 2023 and 2022 was as follows: Weighted Shares Average Exercise Price Outstanding at June 30, 2021 9,183 $ 157.50 Granted 29,200 19.20 Exercised — — Canceled or expired (4,099 ) 148.80 Outstanding at June 30, 2022 34,284 $ 40.50 Granted 6,962 12.47 Exercised — — Canceled or expired (3,080 ) 139.29 Outstanding at June 30, 2023 38,166 $ 27.34 The aggregate intrinsic value of options exercisable at June 30, 2023 was $0 as the fair value of the Company’s common stock is less than the exercise prices of these options.
( 10 ) Common Stock Incentive, Stock Purchase Plans, and Other Compensation Plans Stock Option Activity Summary The Company’s stock option activity for the years ended June 30, 2024 and 2023, was as follows: Weighted Average Shares Exercise Price Outstanding at June 30, 2022 34,284 $ 40.50 Granted 6,962 12.47 Exercised — — Canceled or expired (3,080 ) 139.29 Outstanding at June 30, 2023 38,166 $ 27.34 Granted 131,840 10.01 Exercised — — Canceled or expired (13,378 ) 10.70 Outstanding at June 30, 2024 156,628 $ 14.18 74 Table of Contents The aggregate intrinsic value of options exercisable at June 30, 2024, was $0 as the fair value of the Company’s common stock is less than the exercise prices of these options.
( 5 ) Property and Equipment, net As of June 30, 2023 and 2022 , property and equipment, net consisted of the following: June 30, (In thousands) 2023 2022 Furniture, fixtures, equipment & leasehold improvements $ 2,805 $ 1,371 Software 217 264 Capital improvements in progress 649 242 Gross property and equipment 3,671 1,877 Accumulated depreciation (1,001 ) (779 ) Property and equipment, net $ 2,670 $ 1,098 Depreciation and amortization expense of property and equipment was $366 thousand for the year ended June 30, 2023 and $148 thousand for the year ended June 30, 2022 .
( 5 ) Property and Equipment, net As of June 30, 2024 and 2023 , property and equipment, net consisted of the following: June 30, (In thousands) 2024 2023 Furniture, fixtures, equipment & leasehold improvements $ 3,613 $ 2,805 Software 881 217 Capital improvements in progress 1 649 Gross property and equipment 4,495 3,671 Accumulated depreciation (1,732 ) (1,001 ) Property and equipment, net $ 2,763 $ 2,670 Total depreciation and amortization expense of property and equipment was $731 thousand for the year ended June 30, 2024 and $366 thousand for the year ended June 30, 2023 .
The aggregate intrinsic value of all options outstanding at June 30, 2023 was $0.
The aggregate intrinsic value of all options outstanding at June 30, 2024, was $3 thousand.
Actual results may vary. 59 Table of Contents 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” ). The methodology used is based on contract type and how products and services are provided.
Management views the Company’s operations and manages its business as one operating segment. 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” ). The methodology used is based on contract type and how products and services are provided.
Operating Expenses – Our operating expenses increased $2.6 million, or 29.3%, during the fiscal year ended June 30, 2023, compared to the fiscal year ended June 30, 2022.
Operating Expenses – Our operating expenses increased $2.7 million, or 23.4%, during the fiscal year ended June 30, 2024, compared to the fiscal year ended June 30, 2023.
Gross profit increased $114 thousand, or 59.4%, and gross margin increased to 41% during the fiscal year ended June 30, 2023, compared to the year ended June 30, 2022, due to a higher proportion of recurring revenue.
Gross profit increased $445 thousand, or 145.4%, and gross margin increased to 45.1% during the fiscal year ended June 30, 2024, compared to 40.8% for the fiscal year ended June 30, 2023, due to a higher proportion of recurring revenue.
The balance sheet presentation of the Company’s operating and finance leases is as follows: (In thousands) Classification on the Consolidated Balance Sheet June 30, 2023 June 30, 2022 Assets: Operating lease assets Operating lease right-of-use assets, net 262 162 Financing lease assets Property and equipment, net 484 466 Total lease assets $ 746 $ 628 Liabilities: Current: Operating lease obligations Lease liabilities, current 148 95 Financing lease obligations Lease liabilities, current 168 139 Non-current: Operating lease obligations Lease liabilities, non-current 130 90 Financing lease obligations Lease liabilities, non-current 161 213 Total lease liabilities $ 607 $ 537 65 Table of Contents Future minimum lease payments as of June 30, 2023 under non-cancelable leases are as follows (in thousands): For the Year Ended June 30, Operating Leases Financing Leases Total 2024 $ 153 $ 181 $ 334 2025 142 94 236 2026 — 27 27 2027 — 27 27 2028 — 24 24 Thereafter — — — Total lease obligations 295 353 648 Imputed interest (17 ) (24 ) (41 ) Present value of net minimum lease obligations 278 329 607 Lease liabilities - current (148 ) (168 ) (316 ) Lease liabilities - non-current $ 130 $ 161 $ 291 Other information as of June 30, 2023 is as follows: Weighted-average remaining lease term (years): Operating leases 1.8 Financing leases 2.2 Weighted-average discount rate: Operating leases 6.3 % Financing leases 5.2 % Cash payments for operating leases for the years ended June 30, 2023 and 2022 totaled $130 thousand and $86 thousand, respectively.
The balance sheet presentation of the Company’s operating and finance leases is as follows: (In thousands) Classification on the Consolidated Balance Sheet June 30, 2024 June 30, 2023 Assets: Operating lease assets Operating lease right-of-use assets, net $ 119 $ 262 Financing lease assets Property and equipment, net 366 484 Total lease assets $ 485 $ 746 Liabilities: Current: Operating lease obligations Lease liabilities, current $ 138 $ 148 Financing lease obligations Lease liabilities, current 89 168 Non-current: Operating lease obligations Lease liabilities, non-current — 130 Financing lease obligations Lease liabilities, non-current 73 161 Total lease liabilities $ 300 $ 607 69 Table of Contents Future minimum lease payments as of June 30, 2024, under non-cancelable leases are as follows (in thousands): For the Year Ended June 30, Operating Leases Financing Leases Total 2025 $ 142 $ 94 $ 236 2026 — 27 27 2027 — 27 27 2028 — 25 25 2029 — — — Thereafter — — — Total lease obligations 142 173 315 Imputed interest (4 ) (11 ) (15 ) Present value of net minimum lease obligations 138 162 300 Lease liabilities - current (138 ) (89 ) (227 ) Lease liabilities - non-current $ — $ 73 $ 73 Other information as of June 30, 2024, is as follows: Weighted-average remaining lease term (years): Operating leases 0.8 Financing leases 2.6 Weighted-average discount rate: Operating leases 6.1 % Financing leases 5.4 % Cash payments for operating leases for the years ended June 30, 2024 and 2023, totaled $166 thousand and $130 thousand, respectively.
ASU 2016 - 13 requires entities to use a forward-looking approach based on current expected credit losses (“CECL”) to estimate credit losses on certain types of financial instruments, including trade receivables.
ASU 2016 - 13 requires entities to use a forward-looking approach based on current expected credit losses (“CECL”) to estimate credit losses on certain types of financial instruments, including trade receivables. The standard will become effective for the Company for financial statements periods beginning after December 15, 2022.

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