What changed in this filing

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Item 1. Business

2023-09-28 compared with 2022-09-15 · 171 added, 91 removed, 362 unchanged (42% of the section changed)

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1 st  Detect holds an exclusive AMS Technology license from ATI for air passenger and cargo security applications.

(“AgLAB”) is developing a series of mass spectrometers for use in the hemp and cannabis market with initial focus on optimizing yields in the extraction and distillation processes.

(“AgLAB”) is developing a series of mass spectrometers for use in the hemp and cannabis market with initial focus on optimizing yields in the distillation processes.

AgLAB holds an exclusive AMS Technology license from ATI for agriculture applications.

BreathTech Corporation (“BreathTech”) is developing a breath analysis tool to screen for volatile organic compound (“VOC”) metabolites found in a person’s breath that could indicate they may have a bacterial or viral infection. BreathTech holds an exclusive AMS Technology license from ATI for breath analysis applications.

Business Developments

On August 3, 2021, AgLAB announced that it has hired Joe Levinthal, a hemp and cannabis industry veteran and an expert in mass spectrometry, as its Chief Science Officer, to help lead AgLAB’s product development team.

Levinthal brings an extensive background in applying highly complex scientific instrumentation to develop products derived from hemp and cannabis, and he has worked with some of the leading companies in the industry.

On August 25, 2021, 1 st Detect announced that it secured an important landmark purchase order for the TRACER 1000™, representing the first units to be deployed at an airport security checkpoint.

On November 17, 2021, we announced that we are actively pursuing strategic and accretive acquisition opportunities for Astrotech Corporation and its subsidiaries. Tom Wilkinson, as Lead Independent Director, is focusing on identifying acquisitions that will complement or improve our core technology, accelerate revenue growth, and/or reduce time to market, while being accretive to earnings and therefore shareholder value.

On February 2, 2022, BreathTech announced that it has hired Dr.

Karim Sirgi, MD, MBA and FCAP as its Chief Science Officer.

Sirgi is a pathologist, board certified in Anatomic, Clinical and Cytopathology, and has over 30 years of practice and leadership experience in private and academic pathology practices.

We expect Dr.

Sirgi will be key in the research and development and regulatory efforts at BreathTech and will help lead our partnership with Cleveland Clinic in the development of the BreathTest-1000™.

On June 23, 2022, BreathTech announced that it has amended its Joint Development and Option Agreement with Cleveland Clinic to include additional areas of focus.

Under the amended agreement, ongoing work towards development of a rapid breath test for COVID-19 will be expanded to utilize BreathTech’s core mass spectrometry technology to screen for a variety of diseases spanning the entire body.

The project will focus on detecting bloodstream infections, respiratory infections such as influenza types A and B and respiratory syncytial virus (“RSV”), carriage of Staphylococcus aureus, and Clostridioides difficile (“C.

diff”) infections.

As of the date of this filing, the TRACER 1000 is deployed in 20 locations across 11 countries throughout Europe and Asia.

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. 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. 

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. 

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. 

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. 

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.

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.

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.

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. 

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.

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.

Our Business Units

Astrotech Technologies, Inc.

ATI owns and licenses the AMS Technology, the platform mass spectrometry technology originally developed by 1 st  Detect.

Long recognized as the gold standard in chemical detection, mass spectrometry has historically been considered to be too costly, bulky, and cumbersome. In contrast, the AMS Technology has been designed to be comparatively inexpensive, small, and easy to use. Unlike other technologies, the AMS Technology works under ultra-high vacuum, which eliminates competing molecules, yielding higher resolution and fewer false alarms.

The intellectual property includes 23 granted patents and one additional patent in process along with extensive trade secrets.

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 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.

ATI currently licenses the AMS Technology to three wholly-owned subsidiaries of Astrotech on an exclusive basis, including to 1 st 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 has contracted with Sanmina Corporation (“Sanmina”), a leading contract manufacturer with a worldwide presence, to manufacture our mass spectrometer products.

Leveraging their expertise, Sanmina has helped to improve the manufacturability and reliability of our systems.

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 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

1 st  Detect, a licensee of ATI for the security and detection market, has developed the TRACER 1000, the world’s first mass spectrometer (“MS”) based explosives trace detector (“ETD”) certified by the European Civil Aviation Conference (“ECAC”), designed to replace the ETDs used at airports, cargo and other secured facilities, and borders worldwide. We believe that ETD customers are unsatisfied with the currently deployed ETD technology, which is driven by ion mobility spectrometry (“IMS”).

We further believe that IMS-based ETDs are fraught with false positives, as they often misidentify personal care products and other common household chemicals as explosives, causing facility shutdowns, unnecessary delays, frustration, and significant wasted security resources.

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”).

The TRACER 1000 was designed to outperform the ETDs currently used at airports, cargo and other secured facilities, and borders worldwide.

The Company believes that ETD customers are unsatisfied with the currently deployed ETD technology, which is driven by ion mobility spectrometry (“IMS”).

The Company further believes that some IMS-based ETDs have issues with false positives, as they often misidentify personal care products and other common household chemicals as explosives, causing facility shutdowns, unnecessary delays, frustration, and significant wasted security resources.

In addition, there are hundreds of different types of explosives, but IMS-based ETDs have a very limited threat detection library reserved only for those few explosives of largest concern.

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In order to sell the TRACER 1000 to airport and cargo security customers in the European Union and certain other countries, we obtained ECAC certification.

We are currently selling the TRACER 1000 to customers who accept ECAC certification.

We have deployed the TRACER 1000 in approximately 20 locations in 11 countries throughout Europe and Asia.

On August 25, 2021, 1 st Detect announced that it secured an important landmark purchase order from a distributor for the TRACER 1000, representing the first units to be deployed at an airport security checkpoint for passenger screening.

These systems were sold to the customer during the second quarter of fiscal year 2022.

In the United States, we are working with the U.S.

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.

On March 27, 2018, we announced that the TRACER 1000 was accepted into TSA’s Air Cargo Screening Technology Qualification Test (“ACSQT”) and, on April 4, 2018, we announced that the TRACER 1000 was beginning testing with TSA for passenger screening at airports.

On November 14, 2019, we announced that the TRACER 1000 had been selected by the TSA’s Innovation Task Force to conduct live checkpoint screening at Miami International Airport.

With similar protocols as ECAC testing, we have received valuable feedback from all programs.

Following ECAC certification and our early traction within the cargo market, testing for cargo security continued with the TSA.

With the onset of the COVID-19 pandemic, all testing within the TSA was put on hold;

however, we resumed cargo testing during the summer of 2020, and we subsequently announced on September 9, 2020, that the TRACER 1000 passed the non-detection testing portion of the TSA’s ACSQT.

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.

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.

Following ECAC certification and the Company’s early traction within the cargo market, testing for cargo security continued with the TSA. With the COVID-19 pandemic, all testing within the TSA was put on hold; however, cargo 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.

Due to delays caused by COVID-19, TSA cargo detection testing is ongoing, but has proceeded much more slowly than originally anticipated.

As a result, efforts are primarily focused on our other opportunities.

TSA cargo detection testing is the final step to be listed on the Air Cargo Screening Technology List (“ACSTL”) as an “approved”

If approved, the TRACER 1000 will be approved for cargo sales in the United States.

TSA cargo detection testing is the final step to be listed on the Air Cargo Screening Technology List as an “approved”

If approved, the TRACER 1000 will be approved for cargo sales in the United States. 

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 market with initial focus on optimizing yields in the extraction and distillation processes.

The AgLAB product line is a derivative of our core AMS Technology.

The AMS Technology provides a significant competitive advantage due to its small size, rugged design, quick analysis, and ease of use. AgLAB recently completed several successful field trials to demonstrate that the AgLAB-1000-D2™

can be used in the distillation process to significantly boost the potency and weight yields of tetrahydrocannabinol (“THC”) and cannabidiol (“CBD”) oil manufacturing. We plan to launch a family of “process control”

instruments, methods, and solutions that we believe could be valuable additions to many nutraceutical extraction and distillation laboratories.

series of mass spectrometers for use in the hemp and cannabis markets with initial focus on optimizing yields in the distillation process.

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 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.  As part of our growth plan, we also plan to launch a family of “process control”

methods and solutions that we believe could be valuable additions to many nutraceutical and pharmaceutical distillation processing plants.

Production and processing of hemp and cannabis is a huge, worldwide industry.

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.

This growth is also due in part to the passage of the 2018 Farm Bill, which legalized hemp production in the United States.

According to a report by BDS Analytics and Arcview Market Research, the U.S.

CBD market is estimated to reach $20 billion by 2024, with a CAGR of 49% from 2019 to 2024.

The market is segmented into various categories of products, including oils, tinctures, capsules, topicals, edibles, and pet products.

The largest category is oils and tinctures, accounting for 44% of the market share in 2020, followed by topicals (26%) and edibles (19%).

CBD-infused pet products are also growing in popularity, with sales estimated to reach $1.7 billion by 2025, despite the FDA’s current position that such products may not be lawfully sold under the federal Food, Drug & Cosmetic Act (FD&C Act).

One factor driving the growth of the market is the increasing consumer interest in natural and alternative health remedies.

According to a survey conducted by the National Center for Complementary and Integrative Health, nearly one-third of Americans use natural products, including CBD, for their health and wellness needs.

Another survey by Consumer Reports found that 64% of Americans who have tried CBD reported benefits in connection with various health conditions, including pain, anxiety, and sleep disorders.

Despite the regulatory uncertainty surrounding the use of CBD in food and dietary supplements, as the FDA has consistently held that such products are unlawful under the FD&C Act, the market has continued to expand.

A survey conducted by the Grocery Manufacturers Association found that 71% of US consumers are open to using CBD-infused food and beverage products, and the market for CBD-infused beverages is projected to reach $1.4 billion by 2023.

As 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.

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.

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.

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.

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.

While we believe our technology has competitive advantages over the incumbent technology, there are no assurances competing in this market segment.

The hemp extraction market is a broad market and encompasses many startup companies and well-established companies. 

There is no assurance this industry will remain profitable, given the evolving regulatory landscape and applicable state and federal restrictions.

During the first quarter of fiscal year 2023, AgLab began the first production run of the AgLAB 1000-D2 and sales efforts are currently underway. On May 9, 2023, AgLab announced the confirmed results from field trials using the AgLAB 1000-D2TM mass spectrometer and the Maximum Value ProcessTM 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.

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. 

BreathTech Corporation

BreathTech, an exclusive licensee of ATI for use in breath analysis, is developing the BreathTest-1000, a breath analysis tool to screen for VOC metabolites found in a person’s breath that could indicate they may have a bacterial or viral infection.

While vaccines have been deployed to mitigate the most serious effects of COVID-19, many people remain unvaccinated and new variants continue to pose a significant and evolving threat.

New tools to aid in the battle against COVID-19 and other diseases remain of the utmost importance to help more quickly identify that an infection may be present, and BreathTech, in conjunction with Cleveland Clinic, is developing a quick and easy to use device to help determine the presence of infections.

In June 2022, we expanded our 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 project will focus on detecting bloodstream infections, respiratory infections such as influenza types A and B and RSV, carriage of Staphylococcus aureus, and C.

diff infections.

Development of the BreathTest-1000 follows our results in pre-clinical trials for the BreathDetect-1000™, a rapid self-serve breathalyzer that was designed to detect bacterial infections in the respiratory tract, including pneumonia.

The pre-clinical trials were conducted in collaboration with UT Health San Antonio in 2017.

Trends and Uncertainties - COVID-19

We are subject to risks and uncertainties as a result of the COVID-19 pandemic. To date, we have seen delays with respect to the TSA certification process and parts of our supply chain, particularly the impact of the global semiconductor and electronics shortage, which has now resulted in product pricing inflation.

In addition, although passenger demand for air travel has rebounded, the overall recovery of the airline industry and ancillary services remains highly uncertain and is dependent upon, among other things, the number of cases declining around the globe, public health impacts of new COVID-19 variants, the continued administration of vaccines to unvaccinated populations, and the duration of immunity granted by vaccines.

We continue to manage production, to secure alternative supplies where available, and to take other proactive actions.

We believe that we will be able to pass the inflation caused by raw materials shortages and increased shipping costs to our customers by increasing the price of our instruments.

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.

The Company believes that new tools to aid in the battle against COVID-19 and other diseases remain of the utmost importance to help more quickly identify that an infection may be present.

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 project will focus on detecting bloodstream infections, respiratory infections such as influenza types A and B and respiratory syncytial virus (“RSV”), carriage of Staphylococcus aureus, and Clostridioides difficile (“C.

diff”) infections.

In November 2022, BreathTech announced that, based on analysis of data from testing of breath samples procured during library development, the BreathTest-1000™

lung disease screening instrument can clearly distinguish between infected and healthy breath samples.

This analysis and conclusion marks a significant milestone in the development of the BreathTest-1000™

lung disease screening instrument.

Trends and Uncertainties

To date, we have seen delays with respect to the TSA certification process and parts of our supply chain, particularly the impact of the global semiconductor and electronics shortage, which has now resulted in product pricing inflation.

In addition, although passenger demand for air travel has rebounded, the overall recovery of the airline industry and ancillary services remains uncertain.

We continue to manage production, to secure alternative supplies, and to take other proactive actions.

We believe that we will be able to pass the inflation caused by raw materials shortages and increased shipping costs to our customers by increasing the price of our instruments.

If supply chain shortages become more severe or longer term in nature, our business and results of operations could be adversely impacted;

however, we do not expect this issue to materially adversely affect our liquidity position.

The long-term impact of the COVID-19 pandemic on our business may not be fully reflected until future periods.

We continue to evaluate the current and potential impact of the pandemic on our business, results of operations, and consolidated financial statements.

We also continue to actively monitor developments and business conditions, including those that may be related to additional COVID-19 variants and other diseases, that may cause us to take further actions that alter business operations as may be required by applicable authorities or that we determine are in the best interests of our employees, customers, suppliers, and stockholders.

however, we do not expect this issue to materially adversely affect our liquidity position.

In addition, the long-term impact of the COVID-19 pandemic on our business may not be fully reflected until future periods.

Business Strategy

Detect Corporation

There are tens of thousands IMS instruments deployed in the field today, with many nearing their end of life.

As the current generation of IMS technology is replaced, we are working to position the Company as the next-generation solution for the ETD market with the introduction of the world’s first ETD driven by a mass spectrometer.

There are tens of thousands of IMS instruments deployed in the field today, with many nearing their end of life.

With mass spectrometry being the gold standard of chemical detection, an MS-ETD significantly improves detection capabilities, dramatically reduces the number of false positives, decreases delays and the associated costs, and allows for a much more expansive library of compounds of interest, yielding an instrument that we believe is far superior to the currently deployed IMS instruments, at a similar price point and a lower operating cost.

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Extraction and distillation equipment is used to remove the cannabinoids from the raw plant matter to create an oil that is used in many manufactured products.

AgLAB has launched the first of several planned products that have been designed to assist in the oil extraction and distillation processes by maximizing the final product quality and yield.

AgLAB has launched the first of several planned products that have been designed to assist in the distillation processes by maximizing the final product quality and yield.

Current efforts are focused on the U.S.

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BreathTech Corporation

The BreathTest-1000 product that is currently under development is being designed to provide an inexpensive, non-invasive screening device for a variety of diseases, including COVID-19, that can offer results on-site in a very short period of time.

We believe there remains a strong market need for a quick, frequent or daily screening test for use in high density and critical locations, especially with additional COVID-19 variants and other diseases continuing to pose new or reemerging threats.

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 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.

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Convention and conference centers

BreathTech is also working to expand the capabilities of the BreathTest-1000 to detect certain bloodstream and bacterial infections. 

Products and Services

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We believe the TRACER 1000 significantly outperforms currently deployed competitive trace detection solutions based on IMS technology, specifically related to false alarm rate, probability of detection, and unit up-time.

The majority of our sales to-date have come from the cargo security industry where false alarms can cause expensive delays and facility shutdowns as the false alarms are cleared, preventing the mission critical continuous flow of time sensitive packages.

We have also recently expanded into the airport passenger screening market with sales to a distributor who services a major international airport in Asia in the second quarter of fiscal year 2022.

Leveraging the platform AMS Technology, AgLAB is currently designing its product line to serve applications in the hemp and cannabis markets.

AgLAB has launched the AgLAB-1000-D2 which is designed to optimize yield during the distillation process.

Many of our sales to-date have come from the cargo security industry where false alarms can cause expensive delays and facility shutdowns as the false alarms are cleared, preventing the mission critical continuous flow of time sensitive packages.

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.

Leveraging the platform AMS Technology, AgLAB has designed its product line to serve distillers in the hemp and cannabis industry.

AgLAB has launched the AgLAB-1000-D2 which is designed to be used to determine the optimal settings to increase yield and potency during the distillation process.

With the AgLAB-1000-D2, a sample is manually introduced into the system for analysis.

Currently under development is the AgLAB-1000-D1.

When completed, this instrument will be an inline process control unit that will increase yields with additional possibilities in solvent and pesticide detection.

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 COVID-19 and its variants as well as associated lung diseases.

The BreathTest-1000 is being designed to detect VOC metabolites in a person’s breath that could indicate they may have an infection using a disposable collection tube.

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.

The BreathTest-1000 is being designed to detect infectious VOC metabolites in a person’s breath.

Customers, Sales, and Marketing

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We employ both direct sales and channel sales through distributors.

We now have units deployed in 20 locations in 11 countries.

While we have had some degree of success with sales, much of the pipeline has seen delays caused by the COVID-19 pandemic.

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.

Currently, AgLAB uses only direct sales.

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Competition for the TRACER 1000 comes primarily from IMS-based ETDs.

We have several competitors that sell IMS-based ETDs that are much larger than us, with well-established sales forces and offering a wider range of security products;

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.

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BreathTech Corporation

The BreathTest-1000 product that is currently under development is being designed to screen for VOC metabolites found in a person’s breath that could indicate they may have a bacterial or viral infection.

Given that breath samples are quick, inexpensive, and painless, we anticipate that the BreathTest-1000 will be in demand by hospitals, nursing homes, airlines, hotels, cruise lines, military, sporting events, performing arts venues, convention and conference centers, schools, and likely anywhere that has high concentrations of people.

This product is not expected to compete with the currently available molecular tests like RT-PCR, but is intended to be a screening device that, upon a positive test, will suggest a more thorough evaluation.

Other researchers are working on a breath screening solution for COVID-19, and to the best of our knowledge, only one company in the U.S.

has gained Emergency Use Authorization (“EUA”) from the U.S.

Food and Drug Administration (“FDA”) for a breath analysis device; however, it remains unclear if this product is commercially available at this time.

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.

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.

Research and Development

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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.

The AgLAB-1000 series uses the core AMS Technology and is continuing its development of its cannabinoid library.

In addition, AgLAB continues to invest in and expand its product line to include other valuable products specific to the hemp and cannabis industry.

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.

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 infections.

We have been in correspondence with the FDA regarding how the FDA will classify the BreathTest-1000 and the classification has not yet been determined. The classification will inform the required FDA premarket submission and review process that will follow. If premarket notification (510(k) submission) is required, we intend to submit a pre-submission request to the FDA. The pre-submission is a formal mechanism for requesting feedback from the FDA prior to submitting a medical device application.

We have been in correspondence with the U.S.

Food and Drug Administration ("FDA") regarding how the FDA will classify the BreathTest-1000 and the classification has not yet been determined. The classification will inform the required FDA premarket submission and review process that will follow. If premarket notification (510(k) submission) is required, we intend to submit a pre-submission request to the FDA. The pre-submission is a formal mechanism for requesting feedback from the FDA prior to submitting a medical device application.

The timeframe for receiving feedback from a pre-submission request is approximately 70 calendar days but may be shorter or longer.

Simultaneously, we are exploring how to potentially accelerate our time to market for the BreathTest-1000 via the EUA process, pursuant to the EUA declaration for in vitro diagnostic tests (“IVDs”) that became effective on February 4, 2020, in connection with the public health emergency related to COVID-19. In relevant part, an EUA declaration allows the FDA to temporarily authorize the use of unapproved and uncleared medical countermeasures, such as, IVD tests that have not gone through the FDA’s review process in anticipation of a potential emergency or during an actual emergency involving a chemical, biological, radiological, or nuclear agent, or an emerging infectious disease where the U.S.

Simultaneously, we are exploring how to potentially accelerate our time to market for the BreathTest-1000 via the Emergency Use Authorization ("EUA") process, pursuant to the EUA declaration for in vitro diagnostic tests (“IVDs”) that became effective on February 4, 2020, in connection with the public health emergency related to COVID-19. In relevant part, an EUA declaration allows the FDA to temporarily authorize the use of unapproved and uncleared medical countermeasures, such as, IVD tests that have not gone through the FDA’s review process in anticipation of a potential emergency or during an actual emergency involving a chemical, biological, radiological, or nuclear agent, or an emerging infectious disease where the U.S.

Secretary of Health and Human Services (“HHS”) determines that circumstances exist to justify such authorization. Several COVID-19 diagnostic tests have been authorized through the EUA process, and such authorizations generally remain in effect until HHS declares the public health emergency is terminated or the conditions of the given EUA are not fulfilled.

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Compliance with environmental laws and regulations and technology export requirements has not had and, we believe, will not have in the future, material effects on our capital expenditures, earnings, or competitive position.

Federal regulations that impact our operations include the following:

Federal regulations that impact our operations include, but are not limited to, the following:

Foreign Corrupt Practices Act .

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FDA regulations and guidance pertaining to clearance or approval of product modifications to 510(k)-cleared devices that could significantly affect safety or effectiveness or that would constitute a major change in intended use of one of our cleared devices, or approval of a supplement for certain modifications to PMA devices;

FDA’s medical device reporting ( “MDR”) regulations, which require that a manufacturer report to the FDA if a device it markets may have caused or contributed to a death or serious injury, or has malfunctioned and the device or a similar device that it markets would be likely to cause or contribute to a death or serious injury, if the malfunction were to recur;

FDA’s medical device reporting (“MDR”) regulations, which require that a manufacturer report to the FDA if a device it markets may have caused or contributed to a death or serious injury, or has malfunctioned and the device or a similar device that it markets would be likely to cause or contribute to a death or serious injury, if the malfunction were to recur;

FDA’s correction, removal, and recall reporting regulations, which require that manufacturers report to the FDA field corrections and product recalls or removals if undertaken to reduce a risk to health posed by the device or to remedy a violation of the FDCA that may present a risk to health;

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HIPAA established uniform standards governing the conduct of certain electronic healthcare transactions and requires certain entities, called covered entities (as defined under HIPAA), to comply with standards that include the privacy and security of Protected Health Information (“PHI”).

HIPAA also requires business associates (as defined under HIPAA), that may include 

independent contractors or agents of covered entities that access, use or disclose PHI in connection with providing a service to or on behalf of a covered entity to enter into business associate agreements with the covered entity and to safeguard the covered entity’s PHI against improper use and disclosure.

HIPAA also requires business associates (as defined under HIPAA), that may include independent contractors or agents of covered entities that access, use or disclose PHI in connection with providing a service to or on behalf of a covered entity to enter into business associate agreements with the covered entity and to safeguard the covered entity’s PHI against improper use and disclosure.

The HIPAA privacy regulations cover the use and disclosure of PHI by covered entities as well as business associates, which are defined to include subcontractors that create, receive, maintain, or transmit PHI on behalf of a business associate.

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We expect additional state and federal healthcare reform measures to be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and services, which could result in reduced demand for our products or additional pricing pressure.

US Government Regulation of the Cannabis Industry

While we do not generate any revenue from the direct sale of cannabis products, we offer our services and solutions to cultivators operating within the cannabis industry.

Marijuana is a Schedule I controlled substance and is illegal under federal law.

Even in those states in which specific uses of marijuana have been legalized, such as medical marijuana or for adult recreational purposes, its use remains a violation of federal laws, subject to the narrow exception carved out by the 2018 Farm Bill.

A Schedule I controlled substance is defined as a substance that has no currently accepted medical use in the United States, a lack of safety for use under medical supervision and a high potential for abuse.

The Department of Justice defines Schedule I controlled substances as “the most dangerous drugs of all the drug schedules with potentially severe psychological or physical dependence.”

If the federal government decides to enforce the Controlled Substances Act with respect to marijuana, persons that are charged with distributing, possessing with intent to distribute, or growing cannabis in violation of federal law could be subject to fines and terms of imprisonment, the maximum being life imprisonment and a $50 million fine.

Any unfavorable change in the federal government’s enforcement of current federal laws could cause significant financial damage to the industry.

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.

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 Trump administration revised this policy but made no major changes in enforcement.

Although President Biden stood for decriminalization and descheduling during his campaign, his administration has not formulated an explicit policy on cannabis.

The Biden administration has implemented pardons for past federal cannabis possession convictions and encouraged governors to do the same.

Also, in May 2021 the Drug Enforcement Administration approved licensed facilities to grow cannabis for the purpose of medical research, and on December 2, 2022, President Biden signed the Medical Marijuana and Cannabidiol Research Expansion Act.

This act is “the first standalone marijuana-related bill approved by both chambers of the United States Congress”

and allows medical marijuana research.

The act requires the Drug Enforcement Administration to register researchers and suppliers of cannabis for medical research in a timely manner, who will then be able to legally manufacture, distribute, dispense and possess the substance.

It also creates a mechanism for FDA approval of drugs derived from the cannabis plant and “protects doctors who may now discuss the harms and benefits of using cannabis and cannabis derivatives.”

It also requires the Department of Health and Human Services to investigate the medical utility of cannabis and barriers that exist to conducting research, and requires the U.S.

Attorney General to conduct an annual review to ensure that cannabis is being adequately produced for research purposes.

In January 2023, the FDA stated that given the growing cannabidiol (CBD) products market, it had convened a high-level internal working group to explore potential regulatory pathways for CBD products and is prepared to find a new regulatory pathway for CBD to balance individuals’

desire for access to CBD products with the regulatory oversight needed to manage risks.

Notwithstanding the actions of the Biden administration, it should be expected that the Department of Justice will continue to enforce the Controlled Substances Act with respect to cannabis under established principles in setting their law enforcement priorities to prevent:

the distribution of cannabis products, such as marijuana, to minors;

criminal enterprises, gangs and cartels receiving revenue from the sale of cannabis;

the diversion of cannabis products from states where it is legal under state law to states where it is not legal under state law;

the use of state-authorized cannabis activity as a cover or pretext for the trafficking of other illegal drugs or other illegal activity;

violence and the use of firearms in the cultivation and distribution of cannabis products;

driving while impaired and the exacerbation of other adverse public health and safety consequences associated with cannabis product usage;

the growing of cannabis on public lands;

cannabis possession or use on federal property.

Since the use of marijuana is illegal under federal law, most federally chartered banks will not accept deposit funds from businesses involved with marijuana.

Consequently, businesses involved in the marijuana industry generally bank with state-chartered banks and credit unions to provide banking to the industry.

In 2014, Congress passed a spending bill containing a provision (the Rohrabacher-Farr amendment and sometimes referred to as the Rohrabacher-Blumenauer Amendment) blocking federal funds and resources allocated under the federal appropriations bills from being used to “prevent such States from implementing their own State medical marijuana laws.”

The Rohrabacher-Blumenauer Amendment, however, did not codify any federal protections for medical marijuana patients and producers operating within state law.

The Justice Department maintains that it can still prosecute violations of the federal cannabis laws and continue cases already in the courts.

The Rohrabacher-Blumenauer Amendment must be re-enacted every year, and it is continued through September 30, 2023.

However, state laws do not supersede the prohibitions set forth in the federal drug laws.

In order to participate in either the medical or the adult use aspects of the cannabis industry, all businesses and employees must obtain licenses from the state and, for businesses, local jurisdictions as well.

As an example, Colorado issues four types of business licenses including cultivation, manufacturing, dispensing, and testing.

In addition, all owners and employees must obtain an occupational license to be permitted to own or work in a facility.

All applicants for licenses undergo a background investigation, including a criminal record check for all owners and employees.

Colorado has also enacted stringent regulations governing the facilities and operations of cannabis businesses that are involved with the plant and its products.

All facilities are required to be licensed by the state and local authorities and are subject to comprehensive security and surveillance requirements.

In addition, each facility is subject to extensive regulations that govern its businesses practices, which includes mandatory seed-to-sale tracking and reporting, health and sanitary standards, packaging and labeling requirements, and product testing for potency and contaminants.

Laws and regulations affecting the medical marijuana industry are constantly changing, which could detrimentally affect our proposed operations.

Local, state and federal medical marijuana and hemp laws and regulations are broad in scope and subject to evolving interpretations, which could require us to incur substantial costs associated with compliance or alter our business plan. It is also possible that regulations may be enacted in the future that will be directly applicable to our business.

We cannot predict the nature of any future laws, regulations, interpretations or applications, nor can we determine what effect additional governmental regulations or administrative policies and procedures, when and if promulgated, could have on our business.

Regulatory Compliance and Risk Management

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As of June 30, 2023, we employed 22 employees, none of which were covered by any collective bargaining agreements.

For more information on the Company’s business operations, please visit our company website at www.astrotechcorp.com.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business