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Item 1. Business

2024-09-20 compared with 2023-09-28 · 263 added, 247 removed, 286 unchanged (64% of the section changed)

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.

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.

We are commercializing the Astrotech Mass Spectrometer Technology™ platform (“AMS Technology”) through application specific, wholly owned subsidiaries.

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.

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.

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.

(“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.

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”) 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 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

(“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”) 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 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.

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.

Pro-Control holds an exclusive AMS Technology license from ATI for the distillation of chemicals outside of the agriculture industry.

Astrotech Technologies, Inc.

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.

ATI owns and licenses the AMS Technology, the platform MS 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 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.

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. 

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 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”).

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.

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.

Adding additional compounds to the detection library of an IMS-based ETD fundamentally reduces the instrument’s performance, further increasing the likelihood of false alarms.

In contrast, adding additional compounds to the TRACER 1000’s detection library does not degrade its detection capabilities, as it has a virtually unlimited and easily expandable threat library.

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.

Adding additional compounds to the detection library of an IMS-based ETD fundamentally reduces the instrument’s performance, further increasing the likelihood of false alarms.

In contrast, adding additional compounds to the TRACER 1000’s detection library does not degrade its detection capabilities, as it has a virtually unlimited and easily expandable threat library.

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

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, 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 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 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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

We 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.

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.

Overall, the CBD and hemp market in the US is a rapidly growing industry with significant potential for continued expansion.

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.

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. 

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.

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.

AgLAB announced the presentation of the AgLAB Maximum Value Processing at MJBizCon.

The AgLAB MVP is an innovative process control system proven to increase the potency of ending-weight yields and increase revenue.

The AgLAB MVP process provides real-time data, allowing distillers to adjust parameters to optimize the quality and quantity of each batch of oil.

During our field trials of the AgLAB MVP, we were able to improve ending-weights yields by 20% or more.

We believe these ongoing field trials demonstrate the solution can be a valuable tool for cannabis and hemp oil processors worldwide.

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.

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.

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.

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 of 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 ECAC certified ETD driven by a mass spectrometer.

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.

We currently market the TRACER 1000 to countries that accept ECAC certification.

If we obtain TSA certification and are listed on the ACSTL as an “approved”

device, we plan to also market and sell the TRACER 1000 to those countries that accept TSA certification.

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 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.

The project focused on detecting bloodstream infections and respiratory infections.

While the Joint Development Agreement with Cleveland Clinic remains active, we believe the work to commercialize this application of the AMS Technology will require many years and significant investment due to regulatory requirements and have determined to deploy capital instead to our other business units.

We are also exploring how the advancements and knowledge derived from our research on the BreathTech use case can be applied in our other existing and potential new business units.

Pro-Control, Inc.

On December 12, 2023, we announced the formation of our new wholly-owned subsidiary, Pro-Control, and ATI’s entry into an exclusive license with Pro-Control to utilize our AMS Technology for industrial process control applications involving chemical distillation outside of the agriculture industry.

Pro-Control uses advanced mass spectrometer instrumentation to monitor and control the production and operations of manufacturing processes using real-time, in-process samples.

Pro-Control provides the vital spectral qualitative and quantitative data needed to control the production parameters (temperatures, flow, speed, and pressure) while significantly improving efficiency.

Pro-Control has introduced its proprietary Pro-Control Maximum Value Processing and the Pro-Control 1000-D2™ mass spectrometer, which in combination are designed to test, measure and increase reaction intermediates, purity and percent yields in industrial processes.

1 st Detect Corporation

The TRACER 1000 is the first MS-ETD certified by ECAC and approved by TSA for air cargo.

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.

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 are currently accepting orders for the TRACER 1000 NTD and ETD.

The TRACER 1000 NTD is a high-performance laboratory instrument capable of rapid detection of trace levels of narcotic and explosive compounds in seconds.

The TRACER 1000 provides 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.

We currently market the TRACER 1000 to countries that accept ECAC certification or TSA approval for air cargo.

The markets needing explosives and narcotics trace detection with a broader range of compounds and better accuracy include the following:

Passenger Airports

Cargo Airports

Military Bases

Government Office Buildings

Border Checkpoints

Law Enforcement Agencies

Critical Infrastructure Security Checkpoints

Initial interest for the AgLAB-1000 series has come from the hemp and cannabis industry.

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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 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.

market, but international markets present attractive future growth opportunities as the number of countries with legal recreational or medicinal use continues to expand.

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.

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.

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 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.

The market need for a quick and painless test is considered significant in the following target markets:

We expect the market need for a quick and painless test will continue to be significant in the following target markets:

Nursing homes

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Convention and conference centers

Pro-Control, Inc.

As part of our growth plan, we have leveraged technology and processes developed by AgLAB to launch a new family of “process control” methods and solutions, which are the focus of Pro-Control.

The presence of MS directly on production floors and ultimately integrated directly into manufacturing lines provides the opportunity for manufacturers to increase yields by reducing waste and increasing quality by ensuring consistent purity.

Markets which we believe are likely to adopt Pro-Control’s products and services include:

Petroleum refining

Industrial chemical manufacturing

Food processing

Nutraceutical manufacturing

Pharmaceutical manufacturing

Products and Services

Detect Corporation

The TRACER 1000 is the first MS-ETD certified by ECAC.

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.

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.

Our products are considered mass spectrometry equipment.

Mass spectrometry is an analytical technique used to measure the mass-to-charge ratio of ions.

It is commonly employed to identify the composition of a sample by generating a mass spectrum that provides detailed information about the sample's molecular structure, chemical properties, and purity.

MS is considered a superior method for identifying molecules due to several advantages.

We believe our business units are demonstrating these advantages in multiple use cases in our target markets.

Speed and specificity are two of the most relevant advantages we highlight during customer conversations.

MS can detect and measure minute quantities of a substance making it ideal for trace analysis.

It provides precise mass-to-charge (m/z) ratios, which are characteristic of specific molecules or fragments, allowing for accurate identification and differentiation of compounds with similar structures.

MS offers rapid analysis, which is especially valuable in manufacturing, security, environmental, and forensic applications where timely results are crucial.

MS can analyze a wide range of molecules, from small organic compounds to large biomolecules like proteins and nucleic acids.

Other separation techniques can be coupled with MS, such as gas chromatography (“GC-MS”) or liquid chromatography (“LC-MS”), to enhance the analysis of complex mixtures and provide additional separation before detection.

The innate capabilities of MS and its ability to incorporate multiple sample intake methods allows us to continually expand and adapt the libraries used by our business units for the identification of compounds of interest in new applications of our AMS Technology.

MS is widely used in various industries, including pharmaceuticals, biotechnology, environmental analysis, and materials science, for quality control, research, and development purposes.

Historically, these purposes have required high rates of precision which has increased the size, cost, and complexity of legacy MS equipment.

Our core AMS Technology originated from a device specifically designed and manufactured for installation in the International Space Station (“ISS”) to monitor the quality of the air circulating within the ISS.

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 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.

We have translated the compact, lightweight, and low voltage requirements of the ISS into our current products targeting a much broader array of government agency adoption as well as the variety of industries that can benefit from on-site and in-line MS.

1 st Detect was the first subsidiary successful at licensing, developing, and selling the AMS Technology.

Similar to 1 st Detect, each of our business units is developing and delivering MS devices focused on an industry specific use case of the AMS Technology.

We also provide our customers with consumable products that are necessary to successfully operate our devices.

Routine maintenance and warranty programs are also available to our customers.

1 st Detect Corporation

The TRACER 1000 is the first MS-ETD certified by ECAC and approved by TSA for air cargo.

We are currently accepting orders for the TRACER 1000 ETD and NTD.

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.

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.

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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.

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

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.

Pro-Control has introduced the Pro-Control 1000-D2™ to put mass spectrometry on the factory floor at chemical manufacturers.

The experience gained by AgLAB with hemp and cannabis distillers was the catalyst for the Pro-Control 1000-D2™ and its related Maximum Value Process solution to analyze samples in real-time and to assist the manufacturer by increasing production and/or quality, reducing both cost and time, and helping to address safety and environmental concerns.

Customers, Sales, and Marketing

Detect Corporation

Marketing efforts at 1 st  Detect are currently focused on foreign airports and commercial companies in aviation and cargo security.

1 st Detect Corporation

Marketing efforts at 1 st Detect are currently focused on the variety of markets that are seeking:

Increased uptime in detection equipment

Expanding library of detectable explosive and narcotic compounds and threats

Examples of these markets include foreign airports, commercial companies in aviation and cargo security, law enforcement agencies, and security organizations responsible for the protection of sensitive facilities.

We employ both direct sales and channel sales through distributors.

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.

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.

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 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.

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.

Detect Corporation

We will begin marketing activities if the product achieves commercial viability.

Pro-Control, Inc.

Currently, Pro-Control uses only direct sales with proof of concept and trial engagements being conducted with companies in close proximity to our Austin, Texas headquarters.

We intend to use regional sales teams assigned to geographic territories with a density of manufacturing.

There is a high density of food, petrochemical, chemical, and industrial companies within a few hours driving radius of Austin.

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;

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.

1 st  Detect’s TRACER 1000

1 st Detect’s TRACER 1000

False alarms caused by confusants

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Library updates that do not require hardware changes

Causes delays or shutdowns at security facilities/inspection checkpoints

Improves throughput at security facilities and checkpoints

False alarms cause delays or shutdowns at security facilities/inspection checkpoints

Improved throughput at security facilities and checkpoints

Low price chemical detector

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These claims have been confirmed in numerous discussions with industry experts and verified in our many field trials.

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.

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.

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.

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.

We do not see this as competing with traditional tests but supplementing and improving medical care.

Pro-Control, Inc.

Manufacturers may deploy the legacy, sophisticated MS equipment available from a number of global OEM’s or send samples to laboratories for off-site testing.

In either instance, the time from sample extraction to results will be measured in hours or days.

The AMS Technology used by Pro-Control simplifies MS, thereby enabling more users to take advantage of its capabilities with cycle times measured in minutes.

We intend for this approach to create new markets where MS has not been adopted in the past due to the complexities presented by the offerings from legacy OEM’s.

These OEM’s include ABB, Siemens, Emerson, Thermo Fisher Scientific, Endress and Hauser, Perkin Elmer, Mettler Toledo, PAC LP, Horiba Process Analyzers, and AMETEK.

Customers may have MS adopted but are not using it for process adjustment closer to the manufacturing process, but instead for offline quality control and adjustments to the finished product.

In these instances, the analytical capabilities are located in central analytical labs and our intention is to place this testing capability in the hands of the operations personnel to get as close to real time analysis as possible on the factory floor.

Research and Development

Astrotech Technologies, Inc.

We invest considerable resources into our internal research and development (“R&D”) functions.

Much of our R&D investment is devoted to the cross-platform AMS Technology as the R&D team continually works to develop new derivative products, 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. 

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.

We invest considerable resources into our internal research and development (“R&D”) functions.

Much of our R&D investment is devoted to the cross-platform AMS Technology as the R&D team continually works to develop new derivative products, 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.

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.

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.

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 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.

We have not submitted a request for an EUA but are hopeful that we will be able to obtain authorization under the EUA to get the BreathTest-1000 to market as quickly as possible.

The timeframe for authorization of an EUA is highly variable and depends on, among other things, the complexity of the product, completeness of the submission, and technical requirements of the FDA.

Authorization, if granted, may take as little as one month or as long as several months, and there is no guarantee that an EUA will be granted for the BreathTest-1000.

During our fiscal year 2023, we were 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.

Pro-Control, Inc.

Pro-Control is in the early stages of using the core AMS Technology.

It is refining its product line to include other valuable products and it is developing its library for chemical manufacturers.

Certain Regulatory Matters

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Goods and services provided by us to U.S.

Government agencies are subject to Federal Acquisition Regulations (“FAR”).

These regulations provide rules and procedures for invoicing, documenting, and conducting business under contract with such entities.

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The Truth in Negotiations Act was enacted for the purpose of providing full and fair disclosure by contractors in the conduct of negotiations with the U.S.

The most significant provision included in the Truth in Negotiations Act is the requirement that contractors submit certified cost and pricing data for negotiated procurements above a defined threshold.

The most significant provision included in the Truth in Negotiations Act is the requirement that contractors submit certified cost and pricing data for negotiated procurements above a defined threshold.

Export Administration Act .

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Export Administration Regulations.

 The Export Administration Regulations govern whether a person or company may export goods from the U.S., re-export goods from a foreign country, or transfer goods from one person or company to another in a foreign country.

The Export Administration Regulations govern whether a person or company may export goods from the U.S., re-export goods from a foreign country, or transfer goods from one person or company to another in a foreign country.

Medical Device Regulation

FDA Premarket Clearance and Approval Requirements.

Unless an exemption applies, each medical device, to be lawfully commercially distributed in the U.S., requires either FDA clearance of a 510(k) premarket notification submission, granting of a de novo request, or premarket application (“PMA”) approval.

Under the Federal Food Drug and Cosmetic Act (“FDCA”), administered by the FDA, medical devices are classified into one of three classes, Class I, Class II, or Class III, depending on the degree of risk associated with each medical device and the extent of manufacturer and regulatory controls needed to ensure its safety and effectiveness.

Class I includes devices with the lowest risk to the patient and are those for which safety and effectiveness can be assured by adherence to the FDA’s general controls for medical devices, which include compliance with the applicable portions of the Quality System Regulation (“QSR”), facility registration and product listing, reporting of adverse medical events, and truthful and non-misleading labeling, advertising, and promotional materials.

Under the Federal Food Drug and Cosmetic Act (“FDCA”), administered by the FDA, medical devices are classified into one of three classes, Class I, Class II, or Class III, depending on the degree of risk associated with each medical device and the extent of manufacturer and regulatory controls needed to ensure its safety and effectiveness.

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.

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.

The FDA’s permission to commercially distribute a device subject to a 510(k) premarket notification is generally known as 510(k) clearance.

Under the 510(k) process, the manufacturer must submit to the FDA a premarket notification demonstrating that the device is “substantially equivalent”

to either a device that was legally marketed prior to May 28, 1976, the date upon which the Medical Device Amendments of 1976 were enacted, or another commercially available device that was cleared to through the 510(k) or de novo process.

The FDA’s permission to commercially distribute a device subject to a 510(k) premarket notification is generally known as 510(k) clearance.

Under the 510(k) process, the manufacturer must submit to the FDA a premarket notification demonstrating that the device is “substantially equivalent” to either a device that was legally marketed prior to May 28, 1976, the date upon which the Medical Device Amendments of 1976 were enacted, or another commercially available device that was cleared to through the 510(k) or de novo process.

Devices deemed by the FDA to pose the greatest risks, such as life-sustaining, life-supporting or some implantable devices, or devices that have a new intended use, or use advanced technology that is not substantially equivalent to that of a legally marketed device, are placed in Class III, requiring approval of a PMA.

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510(k) Marketing Clearance.

To obtain 510(k) clearance, a premarket notification submission must be submitted to the FDA demonstrating that the proposed device is “substantially equivalent”

to a predicate device.

To obtain 510(k) clearance, a premarket notification submission must be submitted to the FDA demonstrating that the proposed device is “substantially equivalent” to a predicate device.

A predicate device is a legally marketed device that is not subject to premarket approval, i.e., a device that was legally marketed prior to May 28, 1976 (pre-amendments device) and for which a PMA is not required, a device that has been reclassified from Class III to Class II or I (e.g., via the de novo classification process), or a device that was previously cleared through the 510(k) process.

The FDA’s 510(k) review process usually takes from three to six months but may take longer.

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.

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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 requires each manufacturer to determine whether the proposed change requires submission of a 510(k), de novo or a PMA in the first instance, but the FDA can review that decision and disagree with a manufacturer’s determination.

If the FDA disagrees with a manufacturer’s determination, the FDA may take a wide range of enforcement actions, including, but not limited to, issuing a warning letter, withdrawing existing 510(k) clearance(s), and/or requesting a recall of the modified device.

In addition, the manufacturer must cease marketing of the modified device until FDA has cleared or approved a new 510(k), de novo or PMA for the change, if ever.

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If a previously unclassified new medical device does not qualify for the 510(k) pre-market notification process because no predicate device to which it is substantially equivalent can be identified, the device is automatically classified into Class III.

The Food and Drug Administration Modernization Act of 1997 established a new route to market for low to moderate risk medical devices that are automatically placed into Class III due to the absence of a predicate device, called the “Request for Evaluation of Automatic Class III Designation,”

or the de novo classification procedure.

This procedure allows a manufacturer whose novel device is automatically classified into Class III to request down-classification of its medical device into Class I or Class II on the basis that the device presents low or moderate risk, rather than requiring the submission and approval of a PMA.

Prior to the enactment of the Food and Drug Administration Safety and Innovation Act (“FDASIA”) in July 2012, a medical device could only be eligible for de novo classification if the manufacturer first submitted a 510(k) pre-market notification and received a determination from the FDA that the device was not substantially equivalent.

Prior to the enactment of the Food and Drug Administration Safety and Innovation Act (“FDASIA”) in July 2012, a medical device could only be eligible for de novo classification if the manufacturer first submitted a 510(k) pre-market notification and received a determination from the FDA that the device was not substantially equivalent.

FDASIA streamlined the de novo classification pathway by permitting (under Section 513(f)(2) of the FDCA) manufacturers to request de novo classification directly without first submitting a 510(k) pre-market notification to the FDA and receiving a not substantially equivalent determination.

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Premarket Approval Process.

Class III devices require submission through the PMA process before they can be marketed.

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.

Under the PMA pathway, the manufacturer must demonstrate that the investigational device is safe and effective for the target indication(s) for use, and the PMA must be supported by extensive data, including data from preclinical studies and human clinical trials conducted under a valid investigational device exemption (“IDE”).

The PMA must also contain, among other things, a full description of the device and its components, a full description of the methods, facilities and controls used for manufacturing, and proposed labeling.

Following receipt of a PMA submission, the FDA determines whether the application is sufficiently complete to permit a substantive review.

If the FDA accepts the application for review, it has 180 days under the FDCA to complete its review of a PMA, although in practice, the FDA’s review often takes significantly longer, and can take up to several years.

An advisory panel of experts from outside the FDA may be convened to review and evaluate the application and provide recommendations to the FDA as to the approvability of the device.

The FDA may or may not accept the panel’s recommendation.

In addition, the FDA will generally conduct a preapproval inspection of the applicant or its third-party manufacturers’

or suppliers’

manufacturing facility or facilities to ensure compliance with the QSR.

The FDA may or may not accept the panel’s recommendation.

In addition, the FDA will generally conduct a preapproval inspection of the applicant or its third-party manufacturers’ or suppliers’ manufacturing facility or facilities to ensure compliance with the QSR.

The FDA will approve the new device for commercial distribution if it determines that the data and information in the PMA application constitute valid scientific evidence and that there is reasonable assurance that the device is safe and effective for its intended use(s).

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Certain other changes to an approved device require the submission of a new PMA, such as when the design change causes a different intended use, mode of operation, and technical basis of operation, or when the design change is so significant that a new generation of the device will be developed, and the data that were submitted with the original PMA are not applicable for the change in demonstrating a reasonable assurance of safety and effectiveness.

Emergency Use Authorization .

The Commissioner of the FDA, under delegated authority from HHS may, under certain circumstances, issue an EUA, that would temporarily permit the use of an unapproved medical device or unapproved use of an approved medical device.

Before an EUA may be issued, the HHS Secretary must declare that circumstances exist to justify the authorization (referred to as an “EUA declaration”) based on one of the following grounds:

a determination by the Secretary of the Department of Homeland Security (“DHS”) that there is a domestic emergency, or a significant potential for a domestic emergency, involving a heightened risk of attack with a specified biological, chemical, radiological or nuclear agent or agents;

a determination by the Secretary of Defense that there is a military emergency, or a significant potential for a military emergency, involving a heightened risk to U.S.

military forces of attack with a specified biological, chemical, radiological, or nuclear agent or agents; 

a determination by the Secretary of HHS of a public health emergency that affects or has the significant potential to affect, national security or the health and security of U.S.

citizens living abroad, and that involves a specified biological, chemical, radiological, or nuclear agent or agents, or a specified disease or condition that may be attributable to such agent or agents;

the identification of a material threat, by the DHS Secretary pursuant to section 319F-2 of the Public Health Service (“PHS”) Act, that is sufficient to affect national security or the health and security of U.S.

citizens living abroad.

In order for a medical countermeasure, such as an IVD (among others), to be the subject of an EUA, the FDA Commissioner must conclude that, based on the totality of scientific evidence available, it is reasonable to believe that the product may be effective in diagnosing, treating, or preventing a disease attributable to the agents described above, that the product’s potential benefits outweigh its potential risks and that there is no adequate, approved alternative to the product.

Clinical Trials.

Clinical trials are almost always required to support de novo or a PMA and are sometimes required to support a 510(k) submission.

All clinical investigations of investigational devices to determine safety and effectiveness must be conducted in accordance with the FDA’s IDE regulations which govern investigational device labeling, prohibit promotion of the investigational device, and specify an array of recordkeeping, reporting and monitoring responsibilities of study sponsors and study investigators.

If the device presents a “significant risk”

to human health, as defined by the FDA, the FDA requires the device sponsor to submit an IDE application to the FDA, which must become effective prior to commencing human clinical trials.

All clinical investigations of investigational devices to determine safety and effectiveness must be conducted in accordance with the FDA’s IDE regulations which govern investigational device labeling, prohibit promotion of the investigational device, and specify an array of recordkeeping, reporting and monitoring responsibilities of study sponsors and study investigators.

If the device presents a “significant risk” to human health, as defined by the FDA, the FDA requires the device sponsor to submit an IDE application to the FDA, which must become effective prior to commencing human clinical trials.

A significant risk device is one that presents a potential for serious risk to the health, safety or welfare of a patient and either is implanted, used in supporting or sustaining human life, substantially important in diagnosing, curing, mitigating or treating disease or otherwise preventing impairment of human health, or otherwise presents a potential for serious risk to a subject.

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In addition, clinical studies must be approved by, and conducted under the oversight of, an Institutional Review Board ("IRB") for each clinical site.

The IRB is responsible for the initial and continuing review of the IDE and may pose additional requirements for the conduct of the trial.

The IRB is responsible for the initial and continuing review of the IDE and may pose additional requirements for the conduct of the trial.

If an IDE application is approved by the FDA and one or more IRBs, human clinical trials may begin at a specific number of investigational sites with a specific number of patients, as approved by the FDA.

If the device presents a non-significant risk to the patient, a sponsor may begin the clinical trial after obtaining approval for the trial by one or more IRBs without separate approval from the FDA, but must still follow abbreviated IDE requirements, such as monitoring the investigation, ensuring that the investigators obtain informed consent, and labeling and record-keeping requirements.

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.

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.

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.

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state licensure requirements for the manufacturing and distribution of medical devices;

FDA’s QSR requirements, which require manufacturers, including third-party manufacturers, to follow stringent design, testing, control, documentation, and other quality assurance procedures during all aspects of the design and manufacturing process;

FDA labeling and marketing regulations, which require that promotion is truthful, not misleading, fairly balanced, provide adequate directions for use, and that all claims are substantiated, and also prohibit the promotion of products for unapproved or “off-label” uses and impose other restrictions on labeling; 

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 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;

FDA regulations requiring Unique Device Identifiers on devices and also requiring the submission of certain information about each device to the FDA’s Global Unique Device Identification Database;

the FDA’s recall authority, whereby the agency can order device manufacturers to recall from the market a product that is in violation of governing laws and regulations;

FDA regulations requiring Unique Device Identifiers on devices and also requiring the submission of certain information about each device to the FDA’s Global Unique Device Identification Database;

the FDA’s recall authority, whereby the agency can order device manufacturers to recall from the market a product that is in violation of governing laws and regulations;

FDA post-market surveillance activities and regulations, which apply when deemed by the FDA to be necessary to protect the public health or to provide additional safety and effectiveness data for the device;

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Regulation of Medical Devices in the EEA

Medical devices placed on the market in the European Economic Area ("EEA") must meet the relevant essential requirements laid down in Annex I of Directive 93/42/EEC concerning medical devices ("the Medical Devices Directive").

Medical devices placed on the market in the European Economic Area ("EEA") must meet the relevant essential requirements laid down in Annex I of Directive 93/42/EEC concerning medical devices ("the Medical Devices Directive").

The most fundamental essential requirement is that a medical device must be designed and manufactured in such a way that it will not compromise the clinical condition or safety of patients, or the safety and health of users and others.

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Notified bodies are often separate entities and are authorized or licensed to perform such assessments by government authorities.

The notified body would typically audit and examine a product’s technical dossiers and the manufacturers’

quality system.

The notified body would typically audit and examine a product’s technical dossiers and the manufacturers’ quality system.

If satisfied that the relevant product conforms to the relevant essential requirements, the notified body issues a certificate of conformity, which the manufacturer uses as a basis for its own declaration of conformity.

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strengthen the rules on placing devices on the market and reinforce surveillance once they are available;

establish explicit provisions on manufacturers’ responsibilities for the follow-up of the quality, performance, and safety of devices placed on the market;

establish explicit provisions on manufacturers’ responsibilities for the follow-up of the quality, performance, and safety of devices placed on the market;

improve the traceability of medical devices throughout the supply chain to the end-user or patient through a unique identification number;

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strengthened rules for the assessment of certain high-risk devices, such as implants, which may have to undergo an additional check by experts before they are placed on the market.

In the European Union, member states are responsible for enforcing the EU’s medical device rules and for ensuring that only compliant medical devices are placed on the market or put into service in their jurisdictions.

They have powers to suspend the marketing and use, or demand the recall, of unsafe or non-compliant devices.

They also have the power to bring enforcement action against companies or individuals for breaches of the device rules.

Non-compliance may also result in Notified Bodies revoking any certificate of conformity that they have issued for a device or the manufacturer’s quality system.

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:

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The federal civil False Claims Act prohibits, among other things, any person or entity from knowingly presenting, or causing to be presented, a false or fraudulent claim for payment or approval to the federal government or knowingly making, using or causing to be made or used a false record or statement material to a false or fraudulent claim to the federal government.

A claim includes “any request or demand”

for money or property presented to the U.S.

A claim includes “any request or demand” for money or property presented to the U.S.

The federal civil False Claims Act also applies to false submissions that cause the government to be paid less than the amount to which it is entitled, such as a rebate.

Intent to deceive is not required to establish liability under the federal civil False Claims Act.

In addition, private parties may initiate “qui tam”

whistleblower lawsuits against any person or entity under the federal civil False Claims Act in the name of the government and share in the proceeds of the lawsuit.

In addition, private parties may initiate “qui tam” whistleblower lawsuits against any person or entity under the federal civil False Claims Act in the name of the government and share in the proceeds of the lawsuit.

Penalties for federal civil False Claim Act violations include fines for each false claim, plus up to three times the amount of damages sustained by the federal government and, most critically, may provide the basis for exclusion from the federally funded healthcare program The criminal False Claims Act prohibits the making or presenting of a claim to the government knowing such claim to be false, fictitious or fraudulent and, unlike the federal civil False Claims Act, requires proof of intent to submit a false claim.

When an entity is determined to have violated the federal civil False Claims Act, the government may impose civil fines and penalties ranging from $11,803 to $23,607 for each false claim, plus treble damages, and exclude the entity from participation in Medicare, Medicaid, and other federal healthcare programs.

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.

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.

Similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation.

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In the future, we may also be subject to various federal, state, and foreign laws that protect personal information including certain patient health information, such as the E.U.

General Data Protection Regulation (“GDPR”) and the California Consumer Privacy Act (“CCPA”), and restrict the use and disclosure of patient health information, such as HIPAA, and analogous state laws, many of which apply more broadly than HIPAA, in the U.S.

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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A covered entity must notify any individual whose PHI is breached according to the specifications set forth in the breach notification rule.

The HIPAA privacy and security regulations establish a uniform federal “floor”

and do not supersede state laws that are more stringent or provide individuals with greater rights with respect to the privacy or security of, and access to, their records containing PHI or insofar as such state laws apply to personal information that is broader in scope than PHI as defined under HIPAA.

The HIPAA privacy and security regulations establish a uniform federal “floor” and do not supersede state laws that are more stringent or provide individuals with greater rights with respect to the privacy or security of, and access to, their records containing PHI or insofar as such state laws apply to personal information that is broader in scope than PHI as defined under HIPAA.

HIPAA requires the notification of patients, and other compliance actions, in the event of a breach of unsecured PHI.

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In addition, if the PHI of 500 or more individuals is improperly used or disclosed, we would be required to report the improper use or disclosure to HHS which would post the violation on its website, and to the media.

Failure to comply with the HIPAA privacy and security standards can result in civil monetary penalties up to $63,973 per violation, not to exceed an aggregate of $1.92 million per calendar year, and, in certain circumstances, criminal penalties with fines up to $250,000 per violation and/or imprisonment.

Failure to comply with the HIPAA privacy and security standards can result in civil monetary penalties up to $63,973 per violation, not to exceed an aggregate of $1.92 million per calendar year, and, in certain circumstances, criminal penalties with fines up to $250,000 per violation and/or imprisonment.

HIPAA authorizes state attorneys general to file suit on behalf of their residents for violations.

Courts are able to award damages, costs and attorneys’

fees related to violations of HIPAA in such cases.

Courts are able to award damages, costs and attorneys’ fees related to violations of HIPAA in such cases.

While HIPAA does not create a private right of action allowing individuals to file suit against us in civil court for violations of HIPAA, its standards have been used as the basis for duty of care cases in state civil suits such as those for negligence or recklessness in the misuse or breach of PHI.

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The CCPA also creates a private right of action with statutory damages for certain data breaches, thereby potentially increasing risks associated with a data breach.

Although the law includes limited exceptions, including for “protected health information”

maintained by a covered entity or business associate, it may regulate or impact our processing of personal information depending on the context.

Although the law includes limited exceptions, including for “protected health information” maintained by a covered entity or business associate, it may regulate or impact our processing of personal information depending on the context.

In the EEA, we may become subject to laws which restrict our collection, control, processing, and other use of personal data (i.e., data relating to an identifiable living individual) including the GDPR (and any national laws implementing the GDPR).

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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.

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.

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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.

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.

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:

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

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

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.

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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.

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.

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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.

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

As of June 30, 2024, we employed 30 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