ASTROTECH Corp 10-K

Item 8. Financial Statements and Supplementary Data REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Board of Directors and Stockholders Astrotech Corporation Austin, Texas Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheet of Astrotech Corporation and subsidiaries (the "Company") as of June 30, 2021 and 2020, the related consolidated statements of operations and comprehensive loss, changes in stockholders' equity, and cash flows for the years then ended, and the related notes (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2021 and 2020, and the results of their operations and their cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provides a reasonable basis for our opinion. 47 Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates. Stockholders’ equity — Refer to Note 8 to the Financial Statements Critical Audit Matter Description The Company entered into three securities purchase agreements and an underwritten, firm-commitment public offering during the year. During the year ended June 30, 2021, the Company issued and sold a total of 39,584,698 shares (par value $0.001 per share). The Company issued warrants to their placement agent to purchase a total of 2,306,721 shares. As of June 30, 2021, there were 50,000,000 shares authorized at $0.001 par value, with 49,450,558 issued and outstanding. Significant judgment is exercised by the Company to determine the number of shares to issue and in what manner, specifically the filing of S-1, S-3, and ATM offerings. Given these factors and assumptions are forward-looking and could be affected by future economic and market conditions, the related audit effort to evaluate stockholders’ equity was extensive and required a high degree of auditor judgment. How the Critical Audit Matter Was Addressed in the Audit Our principal audit procedures related to the Company’s stockholders’ equity included the following: • We obtained the year to date equity rollforward and performed the following procedures: o Examined the amendment to the Articles of Incorporation to validate new authorized stock. o Confirmed all outstanding stock with the transfer agent. o Vouched cash proceeds for financing completed during the current year. o Vouched all equity activity (stock issuances, option and restricted stock awards, etc.) to approval by the Board of Directors in the minutes. Armanino LLP San Francisco, California We have served as the Company's auditor since 2019. September 21, 2021 48 ASTROTECH CORPORATION Consolidated Balance Sheets (In thousands, except share and per share data) June 30, 2021 2020 Assets Current assets Cash and cash equivalents $ 35,936 $ 3,349 Short-term investments 27,351 — Accounts receivable 5 101 Inventory, net: Raw materials 1,056 416 Work-in-process 147 38 Finished goods 297 222 Income tax receivable — 429 Prepaid expenses and other current assets 318 117 Total current assets 65,110 4,672 Property and equipment, net 263 99 Assets held for disposal, net — 237 Operating leases, right-of-use asset, net 249 851 Other assets, net 11 71 Total assets $ 65,633 $ 5,930 Liabilities and stockholders’ equity Current liabilities Accounts payable $ 396 $ 239 Payroll related accruals 344 433 Accrued expenses and other liabilities 888 627 Income tax payable 2 2 Term note payable - related party 2,500 2,500 Term note payable — 210 Lease liabilities, current 81 339 Total current liabilities 4,211 4,350 Term note payable, net of current portion — 332 Lease liabilities, non-current 215 623 Total liabilities 4,426 5,305 Commitments and contingencies (Note 14) Stockholders’ equity Convertible preferred stock, $0.001 par value, 2,500,000 shares authorized; 280,898 shares of Series D issued and outstanding at June 30, 2021 and 2020, respectively — — Common stock, $0.001 par value, 50,000,000 shares authorized at June 30, 2021 and 2020; 49,450,558 and 8,250,286 shares issued at June 30, 2021 and 2020, respectively; 49,450,558 and 7,850,362 shares outstanding at June 30, 2021 and 2020, respectively 190,641 190,599 Treasury stock, no shares and 399,916 shares at cost at June 30, 2021 and 2020, respectively — (4,129 ) Additional paid-in capital 77,971 13,934 Accumulated deficit (207,382 ) (199,779 ) Accumulated other comprehensive loss (23 ) — Total stockholders’ equity 61,207 625 Total liabilities and stockholders’ equity $ 65,633 $ 5,930 See accompanying notes to consolidated financial statements. 49 ASTROTECH CORPORATION Consolidated Statements of Operations and Comprehensive Loss (In thousands, except per share data) June 30, 2021 2020 Revenue $ 334 $ 488 Cost of revenue 298 449 Gross profit 36 39 Operating expenses: Selling, general and administrative 4,741 4,716 Research and development 2,692 3,437 Disposal of corporate lease 513 — Total operating expenses 7,946 8,153 Loss from operations (7,910 ) (8,114 ) Interest and other (expense), net (235 ) (197 ) Gain on extinguishment of debt - PPP loan 542 — Loss from operations before income taxes (7,603 ) (8,311 ) Income tax benefit — — Net loss $ (7,603 ) $ (8,311 ) Weighted average common shares outstanding: Basic and diluted 21,984 6,346 Basic and diluted net loss per common share: $ (0.35 ) $ (1.31 ) Other comprehensive loss, net of tax: Net loss $ (7,603 ) $ (8,311 ) Available-for-sale securities Net unrealized losses, net of zero tax expense (23 ) — Total comprehensive loss $ (7,626 ) $ (8,311 ) See accompanying notes to consolidated financial statements. 50 ASTROTECH CORPORATION Consolidated Statement of Changes in Stockholders’ Equity (In thousands) Preferred Stock Common Stock Class C Class D Number of Shares Outstanding Amount Number of Shares Outstanding Amount Number of Shares Outstanding Amount Treasury Stock Amount Additional Paid-In Capital Accumulated Deficit Accumulated Other Comprehensive Loss Total Stockholders’ Equity Balance at June 30, 2019 281 $ — 281 $ — 5,775 $ 190,571 $ (4,129 ) $ 7,964 $ (191,698 ) $ — $ 2,708 Adjustment to opening retained earnings related to adoption ASC Topic 842 — — — — — — — — 230 — 230 Conversion of preferred shares (281 ) — — — 281 — — — — — — Issuance of shares, net of offering issuance costs of $92 — — — — 1,806 2 — 5,648 — — 5,650 Stock-based compensation — — — — 5 26 — 340 — — 366 Cancellation of restricted stock — — — — (17 ) — — (15 ) — — (15 ) Forfeiture of stock-based compensation — — — — — — — (3 ) — — (3 ) Net loss — — — — — — — — (8,311 ) — (8,311 ) Balance at June 30, 2020 — $ — 281 $ — 7,850 190,599 (4,129 ) 13,934 (199,779 ) — 625 Net change in available-for-sale marketable securities — — — — — — — — — (23 ) (23 ) Issuance of shares, net of offering issuance costs of $5,685 — — — — 39,585 40 4,129 63,413 — — 67,582 Stock-based compensation — — — — 2,087 2 — 630 — — 632 Cancellation of restricted stock — — — — (71 ) — — (6 ) — — (6 ) Net loss — — — — — — — — (7,603 ) — (7,603 ) Balance at June 30, 2021 — $ — 281 $ — 49,451 $ 190,641 $ — $ 77,971 $ (207,382 ) $ (23 ) $ 61,207 See the accompanying notes to consolidated financial statement s. 51 ASTROTECH CORPORATION Consolidated Statements of Cash Flows (In thousands) Years Ended June 30, 2021 2020 Cash flows from operating activities: Net loss $ (7,603 ) $ (8,311 ) Adjustments to reconcile net loss from operations to net cash used in operating activities: Stock-based compensation 626 348 Depreciation and amortization 203 533 Gain from extinguishment of debt - PPP loan (542 ) — Loss on impairment of long-lived assets 173 — Changes in assets and liabilities: Accounts receivable 96 (98 ) Inventory, net (824 ) (345 ) Income tax receivable 429 — Accounts payable 157 79 Other assets and liabilities (125 ) 863 Net cash used in operating activities (7,410 ) (6,931 ) Cash flows from investing activities: Purchases of security investments (27,374 ) — Purchases of property and equipment (211 ) — Net cash used in investing activities (27,585 ) — Cash flows from financing activities: Proceeds from related party — 2,500 Proceeds from term note payable — 542 Proceeds from issuance of stock, net of offering issuance costs 67,582 5,650 Net cash provided by financing activities 67,582 8,692 Net change in cash and cash equivalents $ 32,587 $ 1,761 Cash and cash equivalents at beginning of period 3,349 1,588 Cash and cash equivalents at end of period $ 35,936 $ 3,349 Supplemental disclosures of cash flow information: Cash paid for interest $ — $ — Income taxes paid $ — $ — Impact to retained earnings from adoption of ASC Topic 842 $ — $ 230 Operating right-of-use assets and associated liabilities $ 246 $ 1,608 See accompanying notes to consolidated financial statements. 52 ASTROTECH CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Years Ended June 30, 2021 and 2020 (1 ) Description of the Company and Operating Environment Astrotech Corporation (Nasdaq: ASTC) (“Astrotech,” the “Company,” “we,” “us,” or “our”), a Delaware corporation organized in 1984, is a mass spectrometry company that launches, manages, and commercializes scalable companies based on its innovative core technology. Business Overview Segment Information – The Company currently operates three reportable business units, Astrotech Technologies, Inc. (“ATI”) 1 st Detect Corporation (“1 st Detect”) and AgLAB Inc. (“AgLAB”). Since the Company operates in three reportable units, all financial segment information required by Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 280, Segment Reporting (“FASB ASC 280”) can be found in Note 15, Segment Information. Astrotech Technologies, Inc. ATI owns and licenses the Astrotech Mass Spectrometer Technology™ (the “AMS Technology”) , the platform mass spectrometry technology originally developed by 1 st Detect. In contrast, the AMS Technology has been designed to be inexpensive, small, and easy to use. Unlike other technologies, the AMS Technology works under ultra-high vacuum, which eliminates competing molecules, yielding higher resolution and fewer false alarms. The intellectual property includes 28 granted patents and two additional patents in process along with extensive trade secrets. With a number of diverse market opportunities for the core technology, ATI is structured to license the intellectual property for different fields of use. ATI currently licenses the AMS Technology to three wholly-owned subsidiaries of Astrotech on an exclusive basis, including to 1 st Detect for use in the security and detection market, to AgLAB for use in the agriculture market, and to BreathTech Corporation (“BreathTech”) for use in breath analysis. 1 st Detect Corporation 1 st Detect, a licensee of ATI for the security and detection market, has developed the TRACER 1000™, the world’s first mass spectrometer (“MS”) based explosives trace detector (“ETD”) certified by the European Civil Aviation Conference (“ECAC”), designed to replace the ETDs used at airports, cargo and other secured facilities, and borders worldwide. The Company believes that ETD customers are unsatisfied with the currently deployed ETD technology, which is driven by ion mobility spectrometry (“IMS”). The Company believes that IMS-based ETDs are fraught with false positives, as they often misidentify personal care products and other common household chemicals as explosives, causing facility shutdowns, unnecessary delays, frustration, and significant wasted security resources. In addition, there are hundreds of different types of explosives, but IMS-based ETDs have a very limited threat detection library reserved only for those several explosives of largest concern. Adding additional compounds to the detection library of an IMS-based ETD fundamentally reduces the instrument’s performance, further increasing the likelihood of false alarms. In contrast, adding additional compounds does not degrade the TRACER 1000’s detection capabilities, as it has a virtually unlimited and expandable threat library. In order to sell the TRACER 1000 to airport and cargo security customers in the European Union, ECAC certification is required. Certain other countries also accept ECAC certification. The Company received ECAC certification for the TRACER 1000 on February 21, 2019. It is now taking orders from airports and cargo facilities outside of the U.S. that accept ECAC certification. 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’s (“ACSQT”) and, on April 4, 2018, the Company announced that the TRACER 1000 was beginning testing with TSA for passenger screening at airports. On November 14, 2019, the Company announced that the TRACER 1000 had been selected by the TSA’s Innovation Task Force 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. TSA cargo detection testing is ongoing and is the next and final step 53 to be listed on the Air Cargo Screening Technology List (“ACSTL”) as an “approved” device . I f approved, the TRACER 1000 will be approved for cargo sales in the United States . Finally, on October 28, 2020, the Company announced that it had surpassed $1.0 million in purchase orders for the TRACER 1000 and an additional $1.0 million in future service and support commitments, also announcing DHL (Deutsche Post AG) as its largest flagship customer. AgLAB Inc. AgLAB, an exclusive licensee of ATI for the agriculture market, has developed the AgLAB-1000™ series of mass spectrometers for use in the hemp and cannabis market with initial focus on optimizing yields in the extraction and distillation process. The AgLAB product line is a derivative of the Company’s core AMS Technology. The AMS Technology provides a significant competitive advantage due to its small size, rugged design, quick analysis, ease of use, and affordability. BreathTech Corporation BreathTech is developing the BreathTest-1000 ™ , a breath analysis tool to screen for volatile organic compound (“ VOC”) metabolites found in a person’s breath that could indicate they may have an infection, including COVID-19 or pneumonia. While vaccines have been deployed to prevent the transmission of COVID-19, only a small fraction of the world has been vaccinated and new variants continue to pose a significant and evolving threat. New tools to aid in the battle against COVID-19 remain of the utmost importance to help defeat the disease, and BreathTech, in conjunction with the Cleveland Clinic, are at the forefront of developing a quick and easy device to help aid in the further spread of the disease. Development of the BreathTest-1000 follows the Company’s results in pre-clinical trials for the BreathDetect-1000™, a rapid self-serve breathalyzer that was designed to detect bacterial infections in the respiratory tract, including pneumonia. The pre-clinical trials were conducted in collaboration with UT Health San Antonio in 2017. (2 ) Summary of Significant Accounting Policies Principles of Consolidation and Basis of Presentation The consolidated financial statements include the accounts of Astrotech Corporation and its wholly-owned subsidiaries that are required to be consolidated. All intercompany transactions have been eliminated in consolidation. Use of Estimates The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that directly affect the amounts reported in the Company’s consolidated financial statements and accompanying notes. Management continuously evaluates its critical accounting policies and estimates, including those used in evaluating the recoverability of long-lived assets, recognition of revenue, valuation of inventory, and the recognition and measurement of loss contingencies, if any. Actual results may vary. Revenue Recognition Astrotech recognizes revenue employing the generally accepted revenue recognition methodologies described under the provisions of ASC Topic 606 “Revenue from Contracts with Customers” (“Topic 606”), which was adopted by the Company in fiscal year 2019. The methodology used is based on contract type and how products and services are provided. The guidelines of Topic 606 establish a five-step process to govern the recognition and reporting of revenue from contracts with customers. The five steps are: (i) identify the contract with a customer, (ii) identify the performance obligations within the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations within the contract, and (v) recognize revenue when or as the performance obligations are satisfied. An additional factor is reasonable assurance of collectability. This necessitates deferral of all or a portion of revenue recognition until collection. During the fiscal year ended June 30, 2021 , the Company had two material revenue sources that comprised substantially all of its $334 thousand in revenue. During the fiscal year ended June 30, 2020 , the Company recognized revenue from one material customer for a total of $488 thousand. 54 The Company disaggregates revenue by reporting segment to depict the nature of revenue in a manner consistent with its business operations and to be consistent with other communications and public filings. Refer to Note 15 for additional details of revenues by reporting segment. Contract Assets and Liabilities. The Company enters into contracts to sell products and provide services, and it recognizes contract assets and liabilities that arise from these transactions. The Company recognizes revenue and corresponding accounts receivable according to Topic 606 and, at times, recognizes revenue in advance of the time when contracts give it the right to invoice a customer. The Company may also receive consideration, per the terms of a contract, from customers prior to transferring goods to the customer. The Company records customer deposits as deferred revenue. Additionally, the Company may receive payments, most typically for service and warranty contracts, at the onset of the contract and before services have been performed. In such instances, the Company records a deferred revenue liability. The Company recognizes these contract liabilities as sales after all revenue recognition criteria are met. Practical Expedients. In cases where the Company is responsible for shipping after the customer has obtained control of the goods, it has elected to treat the shipping activities as fulfillment activities rather than as a separate performance obligation. Additionally, the Company has elected to capitalize the cost to obtain a contract only if the period of amortization would be longer than one year. The Company only gives consideration to whether a customer agreement has a financing component if the period of time between transfer of goods and services and customer payment is greater than one year. Product Sales. The Company recognizes revenue from sales of products upon shipment or delivery when control of the product transfers to the customer, depending on the terms of each sale, and when collection is probable. In the circumstance where terms of a product sale include subjective customer acceptance criteria, revenue is deferred until the Company has achieved the acceptance criteria unless the customer acceptance criteria are perfunctory or inconsequential. The Company generally offers customers payment terms of less than one year. Freight. The Company records shipping and handling fees that it charges to its customers as revenue and related costs as cost of goods sold. Multiple Performance Obligations. Certain agreements with customers include the sale of equipment involving multiple elements in cases where obligations in a contract are distinct and thus require separation into multiple performance obligations, revenue recognition guidance requires that contract consideration be allocated to each distinct performance obligation based on its relative standalone selling price. The value allocated to each performance obligation is then recognized as revenue when the revenue recognition criteria for each distinct promise or bundle of promises has been met. The standalone selling price for each performance obligation is an amount that depicts the amount of consideration to which the entity expects to be entitled in exchange for transferring the good or service. When there is only one performance obligation associated with a contract, the entire amount of consideration is attributed to that obligation. When a contract contains multiple performance obligations the standalone selling price is first estimated using the observable price, which is generally a list price net of applicable discount or the price used to sell the good or service in similar circumstances. In circumstances when a selling price is not directly observable, the Company will estimate the standalone selling price using information available to it including our market assessment and expected cost plus margin. The timetable for fulfilment of each of the distinct performance obligations can range from completion in a short amount of time and entirely within a single reporting period to completion over several reporting periods. The timing of revenue recognition for each performance obligation may be dependent upon several milestones, including physical delivery of equipment, completion of site acceptance test, and in the case of after-market consumables and service deliverables, the passage of time. Foreign Currency The Company’s international operations are subject to certain opportunities and risks, including from foreign currency fluctuations and governmental actions. During fiscal years 2021 and 2020, the Company conducted business in ten and seven countries, respectively. The Company closely monitors its operations in each country in which it does business and seeks to adopt appropriate strategies that are responsive to changing economic and political environments. The Company currently conducts business in the U.S. dollar and the Euro. Weaknesses in one currency in which the Company does business are often offset by strengths in the other currency. Revenues, costs, and expenses are translated at the applicable rate on the date of the transaction. Translation gains and losses, if any, are calculated on accounts receivable or accounts payable outstanding at the rate applicable the end of the period. The Company includes gains and losses resulting from foreign currency transactions in income, while it excludes those resulting from translation of financial statements from income and includes them as a 55 component of accumulated other comprehensive loss when applicable. Transaction gains and losses, which were included in the Company’s consolidated statement of operations, amounted to a gain of approximately $ 3 thousand for the fiscal year ended June 30, 2021 and a loss of approximately $ 10 thousand for the fiscal year June 30, 2020 . Warranty Provision Astrotech offers its customers warranties on the products that it sells. These warranties typically provide for repairs and maintenance of the products if problems arise during a specified time period after original shipment. Concurrent with the sale of products, the Company records a provision for estimated warranty expenses with a corresponding increase in cost of goods sold. The Company periodically adjusts this provision based on historical experience and anticipated expenses. The Company charges actual expenses of repairs under warranty, including parts and labor, to this provision when incurred. The current obligation for warranty provision is included in accrued expenses and other liabilities in the consolidated balance sheets, whose activity for each of the two fiscal years ended June 30, 2021 and 2020 is summarized in the following table: (In thousands) Warranty Provision Balance as of June 30, 2019 $ 3 Warranty claims provided for 22 Settlements made (7 ) Balance as of June 30, 2020 18 Warranty claims provided for 49 Settlements made (51 ) Balance as of June 30, 2021 $ 16 Research and Development Research and development costs are expensed as incurred. Research and development costs are used to improve system functionality, streamline and simplify the user experience, and extend our capabilities into customer-defined, application-specific opportunities. Research and development expenses for the fiscal years ended June 30, 2021 and 2020 were $2.7 million and $3.4 million, respectively. This decrease was primarily attributable to a reduction in compensation and related expenses. Net Loss per Common Share Basic net loss per common share is calculated by dividing net loss by the weighted average number of common shares outstanding during the period. Diluted net loss per common share is the same as basic net loss per common share as the potential dilutive shares are considered to be anti-dilutive. For more information, see Note 12. Cash and Cash Equivalents The Company considers short-term investments with original maturities of three months or less to be cash equivalents. Cash equivalents are comprised primarily of operating cash accounts, money market investments, and certificates of deposits. Accounts Receivable The carrying value of the Company’s accounts receivable, net of an allowance for doubtful accounts, represents their estimated net realizable value. Astrotech estimates an allowance for doubtful accounts based on type of customer, age of outstanding receivable, historical collection trends, and existing economic conditions. If events or changes in circumstances indicate that a specific receivable balance may be unrealizable, further consideration is given to the collectability of those balances, and the allowance is adjusted accordingly. Receivable balances deemed uncollectible are written off against the allowance. The Company anticipates collecting all unreserved receivables within one year. As of June 30, 2021 and 2020, there was no allowance for doubtful accounts deemed necessary. Inventory The Company computes inventory cost on a first-in, first-out basis, and inventory is valued at the lower-of-cost or net realizable value. The valuation of inventory also requires the Company to estimate obsolete and excess inventory as well as inventory that is not of saleable quality. 56 Property and Equipment. net Property and equipment are stated at cost, less accumulated depreciation. All furniture, fixtures, and equipment are depreciated using the straight-line method over the estimated useful lives of the respective assets, which is generally five years. Purchased software is typically depreciated over three years. Leasehold improvements are amortized over the shorter of the useful life of the improvement or the term of the lease. Repairs and maintenance are expensed when incurred. Impairment of Long-Lived Assets The Company continuously evaluates its long-lived assets for impairment to assess whether the carrying amount of an asset may not be recoverable. Our evaluation is based on an assessment of potential indicators of impairment, such as an adverse change in the business climate that could affect the value of an asset, current or forecasted operating or cash flow losses that demonstrate continuing losses associated with the use of an asset, and a current expectation that, more likely than not, an asset will be disposed of before the end of its previously estimated useful life. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. Recoverability of long-lived assets is dependent on a number of conditions, including uncertainty about future events and demand for our services. Due to the termination of its corporate office lease in August 2021, the Company recorded an impairment of long-lived assets of $173 thousand for the fiscal year ended June 30, 2021 which is included in disposal of corporate lease in the accompanying consolidated statements of operations and comprehensive loss. There was no impairment of long-lived assets recognized during the fiscal year ended June 30, 2020. Fair Value of Financial Instruments Astrotech’s financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable, and accrued liabilities. Management believes the carrying amounts of these assets and liabilities approximates their fair value due to their liquidity. For more information about the Company’s accounting policies surrounding fair value investments, see Note 6. Available-for-Sale Investments Investments that are designated as available-for-sale are reported at fair value, with unrealized gains and losses recorded in accumulated other comprehensive loss. The Company determines the cost of investments sold based on a first-in, first-out cost basis at the individual security level. The Company also considers specific adverse conditions related to the financial health of, and the business outlook for, the investee which may include industry and sector performance, changes in technology, operational and financing cash flow factors, and changes in the investee’s credit rating. The Company records other than temporary impairments on marketable equity securities and marketable equity method investments in gains (losses) on equity investments, net of previously recorded gains (losses). For more information on investments, see Note 3. Operating Leases The Company adopted Accounting Standards Update No. 2016-02, “Leases (Topic 842)” (ASU 2016-02) effective July 1, 2019. ASU 2016-02 requires that the Company determines, at the inception of an arrangement, whether the arrangement is or contains a lease, based on the unique facts and circumstances present. Operating lease assets represent the Company’s right to use an underlying asset for the lease term and operating lease liabilities represent its obligation to make lease payments arising from the lease. Right-of-use (“ROU”) assets and operating lease liabilities are recognized at the commencement date of the lease based upon the present value of lease payments over the lease term. When determining the lease term, the Company includes options to extend or terminate the lease when it is reasonably certain, at inception, that the Company will exercise that option. The interest rate implicit in lease contracts is typically not readily determinable; accordingly, the Company uses its incremental borrowing rate, which is the rate that would be incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment, based upon the information available at the commencement date. The lease payments used to determine the Company’s operating lease assets may include lease incentives, stated rent increases and escalation clauses linked to rates of inflation, when determinable, and are recognized in determining its ROU assets. The Company’s operating leases are reflected in the operating lease, right-of-use asset; lease liabilities, current; and lease liabilities, non-current in its consolidated balance sheets. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. As a result of the Company’s adoption of ASU 2016-02, it no longer recognizes deferred rent on the consolidated balance sheet. Short-term leases, defined as leases that have a lease term of 12 months or less at the commencement date, are excluded from this treatment 57 and are recognized on a straight-line basis over the term of the lease. Variable lease payments are amounts owed by the Company to a lessor that are not fixed, such as reimbursement for common area maintenance costs for our facility lease , and are expensed when incurred. Financing leases, formerly referred to as capitalized leases, are treated similarly to operating leases except that the asset subject to the lease is included in the appropriate fixed asset category, rather than recorded as a right-of-use asset, and depreciated over its estimated useful life, or lease term, if shorter. For more information, see Note 4. Stock-Based Compensation The Company accounts for stock-based awards to employees based on the fair value of the award on the grant date. The fair value of stock options is estimated using the expected dividend yields of the Company’s stock, the expected volatility of the stock, the expected length of time the options remain outstanding, and the risk-free interest rates. Changes in one or more of these factors may significantly affect the estimated fair value of the stock options. The Company recognizes forfeitures as they occur. The fair value of awards that are likely to meet goals, if any, are recorded as an expense over the vesting period. For more information, see Note 10. Income Taxes The Company accounts for income taxes under the liability method, whereby deferred tax asset or liability account balances are determined based on the difference between the financial statement and the tax bases of assets and liabilities using current tax laws and rates in effect for the year in which the differences are expected to affect taxable income. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that includes the enactment date. A valuation allowance is established when it is more likely than not that some portion or all of the deferred tax assets will not be realized. Treasury Stock The Company records treasury stock at the cost to acquire it and includes treasury stock as a component of stockholders’ equity. Accounting Pronouncements In December 2019, the FASB issued ASU 2019-12, “Simplifying the Accounting for Income Taxes” (“ASU 2019-12”), which removes certain exceptions related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences. ASU 2019-12 also amends other aspects of the guidance to help simplify and promote consistent application of GAAP. ASU No. 2019-12 is effective for fiscal years beginning after December 15, 2020 (for the Company, the fiscal year ending June 30, 2022), and interim periods within those fiscal years. ASU 2019-12 is not expected to have a material impact on the Company's financial statements. In May 2021, the FASB issued ASU 2021-04, "Earnings Per Share (Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock Compensation (Topic 718), and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40)" (“ASU 2021-04”), which provides authoritative guidance for the accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange. ASU 2021-04 provides that for an entity that presents earnings per share in accordance with Topic 260, the effects of a modification or an exchange of a freestanding equity-classified written call option that is recognized as a dividend should be an adjustment to net income (or net loss) in the basic earnings per share calculation. The amended guidance becomes mandatorily effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years, and should be applied prospectively to modifications or exchanges occurring on or after the effective date. While the Company does not expect the adoption of ASU 2021-04 to materially impact the Company's consolidated financial statements and related disclosures because it does not currently anticipate modifications to its outstanding equity-classified written call options, the impact on the Company's consolidated financial statements and disclosures will depend on the facts and circumstances of any specific future transactions. 58 (3) Investments The following tables summarize gains and losses related to the Company’s investments: June 30, 2021 Available-for-Sale Adjusted Unrealized Unrealized Fair (In thousands) Cost Gain Loss Value Mutual Funds - Corporate & Government Debt $ 19,998 $ — $ (13 ) $ 19,985 ETFs - Corporate & Government Debt 7,376 — (10 ) 7,366 Total $ 27,374 $ — $ (23 ) $ 27,351 The Company did not hold any investments during the fiscal year ended June 30, 2020. (4) Leases As of July 1, 2019, the Company adopted Topic 842, using the modified retrospective method of adoption. Astrotech elected to use the transition option that allows the Company to initially apply the new lease standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the year of adoption. Comparable periods continue to be presented under the guidance of the previous standard, ASC Topic 840. Topic 842 requires lessees to recognize a lease liability and ROU asset on the balance sheet for operating leases. The adoption of Topic 842 resulted in an adjustment to accumulated deficit of $230 thousand. At the beginning of fiscal year 2021, the Company had two existing facility leases and several small equipment leases. Astrotech leased office space consisting of 5,219 square feet in Austin, Texas that housed executive management, finance and accounting, sales, and marketing and communications. The lease began in November 2016 and originally expired in December 2023. On August 3, 2020, the Company decided to terminate the lease. Upon lease termination, the Company recognized a decrease in the related operating ROU asset and operating lease liability of approximately $539 thousand and $506 thousand, respectively. In May 2013, 1 st Detect completed build-out of a 16,540 square foot leased research and development and production facility in Webster, Texas. This facility was equipped with state-of-the-art laboratories, a clean room, a production shop, and offices for staff. The term of the lease was 62 months and included options to extend for two additional five-year periods. In February 2015, 1 st Detect exercised its right of first refusal on the adjoining space of 9,138 square feet. The original lease began in May 2013 and was set to expire in June 2018; these dates were amended in October 2014 with the amended lease beginning February 1, 2015, and expiring April 30, 2020. On June 1, 2018, the Company entered into its third amendment of the original lease removing 8,118 square feet from its leased space, leaving leased premises with a total square footage of 17,560. On January 21, 2020, the Company entered into its fourth amendment of the original lease, with the amended lease beginning May 1, 2020 and expiring April 30, 2021, with the option to renew and extend the lease for one renewal term of one year. During the second quarter of fiscal year 2021, the Company decided to allow the Webster lease to expire on its expiration date of April 30, 2021 and to consolidate the Company’s entire operations in Austin, Texas. This resulted in a reduction of the related operating ROU asset and operating lease liability of $171 thousand and $192 thousand, respectively. On April 27, 2021, Astrotech entered into a new lease for a research and development facility of approximately 5,960 square feet in Austin, Texas that includes a laboratory, a small production shop, and offices for staff, although many of the Company’s employees continue to work remotely. The lease commenced on June 1, 2021 and has a lease term of 36 months. Operating lease assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. Operating lease assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate in determining the present value of lease payments. Significant judgement is required when determining the Company’s incremental borrowing rate. Lease expense for lease payments is recognized on a straight-line basis over the lease term. Upon the adoption of Topic 842, the Company’s accounting for financing leases, previously referred to as capital leases, remains substantially unchanged from prior guidance. 59 The balance sheet presentation of the Company’s operating and finance leases is as follows: (In thousands) Classification on the Condensed Consolidated Balance Sheet June 30, 2021 Assets: Operating lease assets Operating leases, right-of-use assets, net $ 249 Financing lease assets Property and equipment, net 40 Total lease assets $ 289 Liabilities: Current: Operating lease obligations Lease liabilities, current $ 71 Financing lease obligations Lease liabilities, current 10 Non-current: Operating lease obligations Lease liabilities, non-current 185 Financing lease obligations Lease liabilities, non-current 30 Total lease liabilities $ 296 Future minimum lease payments as of June 30, 2021 under non-cancellable leases are as follows (in thousands): For the Year Ended June 30, Operating Leases Financing Leases Total 2022 $ 86 $ 12 $ 98 2023 103 12 115 2024 93 12 105 2025 — 9 9 2026 — — — Thereafter — — — Total lease obligations 282 45 327 Less: imputed interest 26 5 31 Present value of net minimum lease obligations 256 40 296 Less: lease liabilities - current 71 10 81 Lease liabilities - non-current $ 185 $ 30 $ 215 Other information as of June 30, 2021 is as follows: Weighted-average remaining lease term (years): Operating leases 2.7 Financing leases 3.7 Weighted-average discount rate: Operating leases 6.4 % Financing leases 6.2 % Cash payments for operating leases for the years ended June 30, 2021 and 2020 totaled $195 thousand and $387 thousand, respectively. Cash payments for financing leases for the years ended June 30, 2021 and 2020 totaled $12 thousand and $4 thousand, respectively. 60 (5) Property and Equipment, net As of June 30, 2021 and 2020, property and equipment, net consisted of the following: June 30, (In thousands) 2021 2020 Furniture, fixtures, equipment & leasehold improvements $ 535 $ 2,522 Software 315 326 Capital improvements in progress 187 — Gross property and equipment 1,037 2,848 Accumulated depreciation (774 ) (2,512 ) Property held for disposal, net — (237 ) Property and equipment, net $ 263 $ 99 Depreciation expense of property and equipment was $55 thousand for the year ended June 30, 2021 and $189 thousand for the year ended June 30, 2020. On August 3, 2020, the Company terminated its corporate office lease in Austin, Texas and wrote-off the remaining net book value of the related leasehold improvement assets in the amount of $229 thousand. This write-off was recorded at the ATI business segment. (6) Fair Value Measurement The accounting standard for fair value measurements defines fair value, establishes a market-based framework or hierarchy for measuring fair value, and expands disclosures about fair value measurements. The standard is applicable whenever assets and liabilities are measured and included in the financial statements at fair value. The fair value hierarchy established in the standard prioritizes the inputs used in valuation techniques into three levels as follows: Level 1 - Quoted prices in active markets for identical assets or liabilities. Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 - Unobservable inputs that are supported by little or no market activity and are significant to the fair value of the assets or liabilities. The following tables present the carrying amounts, estimated fair values, and valuation input levels of certain financial instruments as of June 30, 2021 and June 30, 2020: June 30, 2021 Carrying Fair Value Measured Using Fair (In thousands) Amount Level 1 Level 2 Level 3 Value Available-for-Sale Securities Mutual Funds - Corporate & Government Debt $ 19,985 $ 19,985 $ — $ — $ 19,985 ETFs - Corporate & Government Debt 7,366 7,366 — — 7,366 Total $ 27,351 $ 27,351 $ — $ — $ 27,351 June 30, 2020 Carrying Fair Value Measured Using Fair (In thousands) Amount Level 1 Level 2 Level 3 Value Available-for-Sale Securities Mutual Funds - Corporate & Government Debt $ — $ — $ — $ — $ — ETFs - Corporate & Government Debt — — — — — Total $ — $ — $ — $ — $ — 61 The value of available-for-sale investments is based on pricing from third-party pricing vendors, who may use quoted prices in active markets for identical assets (Level 1 inputs). (7) Debt On September 5, 2019, the Company entered into a private placement transaction with Thomas B. Pickens III, the Chief Executive Officer and Chairman of the Board of Directors of the Company for the issuance and sale of a secured promissory note to Mr. Pickens with a principal amount of $1.5 million (the “2019 Note”), and on February 13, 2020, the Company entered into a second private placement transaction with Mr. Pickens for the issuance and sale of a second secured promissory note to Mr. Pickens with a principal amount of $1.0 million (the “2020 Note” and, collectively with the 2019 Note, the “Original Notes”). Interest on the Original Notes shall accrue at 11% per annum. The principal amount and accrued interest on the Original Notes originally were to become due and payable on September 5, 2020; however, on August 24, 2020, the Company and Mr. Pickens agreed to extend the date of maturity of the Notes and payment of accrued interest to September 5, 2021 (the “Original Maturity Date”). The Company may prepay the principal amount and all accrued interest on the Notes at any time prior to the Original Maturity Date. In connection with the issuance of each note, the Company, along with 1 st Detect Corporation and Astrotech Technologies, Inc. (the “Subsidiaries”), entered into two security agreements, dated as of September 5, 2019 and February 13, 2020 (collectively, the “Original Security Agreements”), with Mr. Pickens, pursuant to which the Company and the Subsidiaries granted to Mr. Pickens a security interest in all of the Company’s and the Subsidiaries’ Collateral, as such term is defined in the Original Security Agreements. In addition, the Subsidiaries jointly and severally agreed to guarantee and act as surety for the Company’s obligation to repay the Original Notes pursuant to a subsidiary guarantee. On September 3, 2021, the Company entered into (1) the Omnibus Amendment to the Secured Promissory Notes (the “Amended Notes”) with Mr. Pickens, in connection with the Original Notes, and (2) the Omnibus Amendment to the Security Agreements (the “Amended Security Agreements”, and together with the Amended Notes, the “Amendments”) with the Subsidiaries, in connection with the Original Security Agreements. Pursuant to the Amendments, (a) the principal amount and accrued interest on the 2020 Note was paid in full and the 2020 Note was cancelled, and (b) $1.0 million of the principal amount and all accrued interest on the 2019 Note was paid and the maturity date on the remaining balance of the 2019 Note was extended to September 5, 2022 (the “Amended Maturity Date”). For more information, see Note 17. Interest expense related to the Notes for the years ended June 30, 2021 and 2020 totaled $275 thousand and $177 thousand, respectively. On April 14, 2020, the Company entered into a $542 thousand Paycheck Protection Program Promissory Note and Agreement (the “PPP Promissory Note”) with a commercial bank (the “Bank”) under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The PPP Promissory Note bears interest at a rate of 1.0% per annum. Payments are due monthly beginning November 10, 2020. The principal amount of the PPP Promissory Note along with any unpaid interest is due on April 1, 2022. The principal and interest may be forgiven if the proceeds are used for forgivable purposes as defined by the terms in the PPP Promissory Note, and the Company has used the proceeds from the PPP Promissory Note for forgivable purposes as defined by the terms of the PPP Promissory Note. On October 19, 2020, as required by the Small Business Administration (the “SBA”) prior to executing a securities purchase agreement on October 21, 2020, the Company and the Bank entered into a Cash Reserve Agreement wherein the Company agreed to deliver to the Bank an amount equal to $542 thousand to be held in a separate restricted cash account in accordance with the terms and conditions of the Cash Reserve Agreement for the purpose of establishing a source of payment for the Company’s obligations to repay and/or obtain forgiveness of the PPP Promissory Note. In connection therewith, t he Company applied for forgiveness under the provisions of the CARES Act. On April 19, 2021, the Company received notification from the Bank that the SBA has granted full forgiveness of the Company’s PPP Promissory Note. In addition, the restriction on the cash in the Cash Reserve Agreement was released. (8) Stockholders’ Equity Offerings of Common Stock On October 21, 2020, the Company entered into a securities purchase agreement with certain purchasers named therein, pursuant to which the Company agreed to issue and sell 7,826,086 shares (the “Public Offering Shares”) of the Company’s common stock, par value $0.001 per share (the “Common Stock”), at an offering price of $2.30 per share (the “Public Offering”). 62 The Public Offering resulted in gross proceeds of approximately $18.0 million before deducting the placement agent’s fees and related offering expenses. Pursuant to an engagement agreement dated July 23, 2020, as amended, the Company engaged H.C. Wainwright & Co., LLC (the “Placement Agent”) to act as the Company’s exclusive placement agent in connection with the Public Offering. The Company issued to the Placement Agent, or its designees, warrants (the “Placement Agent’s Warrants No. 1”) to purchase up to 469,565 shares of Common Stock, which represents 6.0% of the Public Offering Shares sold in the Public Offering. The Placement Agent’s Warrants No. 1 have an exercise price of $2.875 per share, which represents 125% of the per share offering price of the Public Offering Shares, and a termination date of October 21, 2025. The Placement Agent’s Warrants No. 1 had a fair value per share of $2.01 as of the date of issuance. On October 28, 2020, the Company entered into a securities purchase agreement with certain purchasers named therein, pursuant to which the Company agreed to issue and sell, in a registered direct offering (the “October Registered Offering”), 2,887,906 shares (the “October Registered Offering Shares”) of the Company’s Common Stock, at an offering price of $2 .15 per share. The October Registered Offering resulted in gross proceeds of approximately $6.2 million before deducting the placement agent’s fees and related offering expenses. Pursuant to an engagement agreement dated July 23, 2020, as amended, the Company engaged the Placement Agent to act as the Company’s exclusive placement agent in connection with the October Registered Offering. The Company also issued to the Placement Agent, or its designees, warrants (the “Placement Agent’s Warrants No. 2”) to purchase up to 173,274 shares of Common Stock, which represents 6.0% of the October Registered Offering Shares sold in the October Registered Offering. The Placement Agent’s Warrants No. 2 have an exercise price of $2.6875 per share, which represents 125% of the per share offering price of the October Registered Offering Shares, and a termination date of October 28, 2025. The Placement Agent’s Warrants No. 2 had a fair value per share of $1.80 as of the date of issuance. On February 11, 2021, the Company entered into a securities purchase agreement with certain purchasers named therein, pursuant to which the Company agreed to issue and sell, in a registered direct offering (the “February Registered Offering”), 2,845,535 shares (the “February Registered Offering Shares”) of the Company’s Common Stock, par value $0.001 per share, at an offering price of $3.25 per share. The February Registered Offering resulted in gross proceeds of approximately $9.25 million before deducting the placement agent’s fees and related offering expenses. Pursuant to an engagement agreement, dated July 23, 2020, as amended, the Company engaged the Placement Agent to act as the Company’s exclusive placement agent in connection with the February Registered Offering. The Company has issued to the Placement Agent, or its designees, warrants (the “Placement Agent’s Warrants No. 3”) to purchase up to 170,732 shares of Common Stock, which represents 6.0% of the February Registered Offering Shares sold in the February Registered Offering. The Placement Agent’s Warrants No. 3 have an exercise price of $4.0625 per share, which represents 125% of the per share offering price of the February Registered Offering Shares and a termination date of February 11, 2026. The Placement Agent’s Warrants had a fair value per share of $2.94 as of the date of issuance. On April 7, 2021, the Company entered into an amended and restated underwriting agreement (the “Underwriting Agreement”) with H.C. Wainwright & Co., LLC (“Wainwright”) to issue and sell, in an underwritten, firm-commitment public offering (the “Offering”), 21,639,851 shares of the Company’s Common Stock. The offering price to the public in the Offering was $1.50 per share of Common Stock and Wainwright agreed to purchase the shares from the Company pursuant to the Underwriting Agreement at a price of $1.395 per share, representing an underwriting discount of seven percent (7.0%). Pursuant to the Underwriting Agreement, the Company also granted Wainwright an option to purchase, for a period of 30 days from the date of the Underwriting Agreement, up to an additional 3,245,977 shares of Common Stock. On April 12, 2021, Wainwright exercised the option in full. The Offering resulted in aggregate gross proceeds, including the option exercise, of approximately $37.3 million, before deducting underwriting discounts and commissions and estimated offering expenses. Pursuant to the Underwriting Agreement, the Company issued warrants (the “Underwriter Warrants”) to Wainwright (in its capacity as the underwriter of the Offering) or its designees to purchase shares of Common Stock in an amount equal to 6.0% of the aggregate number of shares sold in the Offering, or 1,493,150 shares of Common Stock in the aggregate, at an exercise 63 price of $ 1.875 per share. The Underwriter Warrants will be exercisable immediately on or after the date the Company receives shareholder approval to increase its number of authorized shares and upon filing its amendment of certificate of incorporation with the Secretary of State of Delaware and will expire five years after the commencement of the sales of this offering. At-the-Market Agreements On December 18, 2020, the Company entered into an at-the-market offering agreement (the “Wainwright ATM Agreement”) with H.C. Wainwright & Co., LLC as agent, pursuant to which the Company may offer and sell, from time to time through H.C. Wainwright, shares of the Company’s Common Stock, having an aggregate offering price of up to $3,582,614. During the second quarter of fiscal 2021, the Company sold 1,139,323 shares of Common Stock pursuant to the Wainwright ATM Agreement. In connection with the sales of these shares of Common Stock, the Company received gross proceeds of approximately $3.6 million. The weighted-average sale price per shares was $3.14. Warrants A summary of the common stock warrant activity for the year ended June 30, 2021 is presented below: Shares (In thousands) Weighted Average Exercise Price Aggregate Fair Market Value at Issuance (In thousands) Weighted Average Remaining Contractual Life (in years) Outstanding at June 30, 2019 — $ — $ — — Issued 86 5.14 194 4.74 Exercised — — — — Canceled or expired — — — — Outstanding at June 30, 2020 86 $ 5.14 $ 194 4.74 Issued 2,307 2.40 3,553 4.47 Exercised — — — — Canceled or expired — — — — Outstanding at June 30, 2021 2,393 $ 2.32 $ 3,747 4.44 The following represents a summary of the warrants outstanding at each of the dates identified: Number of Shares Underlying Warrants (In thousands) For the period ended June 30, Issue Date Classification Exercise Price Expiration Date 2021 2020 March 26, 2020 Equity $ 6.25 March 25, 2025 25 25 March 30, 2020 Equity $ 4.6875 March 27, 2025 61 61 October 23, 2020 Equity $ 2.88 October 21, 2025 470 — October 28, 2020 Equity $ 2.6875 October 28, 2025 173 — February 16, 2021 Equity $ 4.06 February 11, 2026 171 — April 12, 2021 Equity $ 1.875 April 7, 2026 1,493 — Total Outstanding 2,393 86 Nasdaq Compliance As previously noted in our Form 10-K for the fiscal year ended June 30, 2020, the Company was not in compliance with the minimum stockholders’ equity requirement under Nasdaq Listing Rule 5550(b)(1) for continued listing on The Nasdaq Capital Market because its stockholders’ equity was below the required minimum of $2.5 million at June 30, 2020. On September 11, 2020, the Company received a notice from the Listing Qualifications Department of the Nasdaq Stock Market LLC (“Nasdaq”) stating that it was not in compliance with the required stockholder’s equity of $2.5 million. 64 The Notice had no immediate effect on the Company’s listing on The Nasdaq Capital Market. The Company originally had until October 26, 2020 to submit a plan to regain compliance with the minimum stockholders’ equity requirement; however, Nasdaq granted an extension of the deadline to submit a plan until November 2, 2020. Following the successful offerings of the Company’s Common Stock during fiscal year 2021, the Company is now in compliance with the minimum stockholders’ equity requirement. (9) Business Risk and Credit Risk Concentration Involving Cash For the fiscal year ended June 30, 2021, the Company had two customers that substantially comprised all of the Company’s revenue; these two customers were located in Europe. All of the Company’s revenue for the fiscal year ended June 30, 2020 came from one customer. The Company maintains funds in bank accounts that may exceed the limit insured by the Federal Deposit Insurance Corporation (the “FDIC”). The risk of loss attributable to these uninsured balances is mitigated by depositing funds in what the Company believes to be high credit quality financial institutions. The Company has not experienced any losses in such accounts. (10 ) Common Stock Incentive, Stock Purchase Plans, and Other Compensation Plans 2021 Omnibus Equity Plan (“2021 Plan”) On May 26, 2021 (the “Effective Date”), at the 2020 Annual Meeting of Shareholders, the shareholders of the Company voted to adopt the 2021 Plan. We currently maintain the 2011 Stock Incentive Plan (the “Prior Plan”). However, following the Effective Date, no further awards may be issued under the Prior Plan, but all awards under the Prior Plan that are outstanding as of the Effective Date will continue to be governed by the terms, conditions, and procedures set forth in the Prior Plan and any applicable award agreement. Under the 2021 Plan, 1,500,000 shares of Company common stock are initially available for grant. The number of shares available for grant under the 2021 Plan is designed to enable the Company to properly incentivize its employees and management teams over a number of years on a going-forward basis. The 2021 Plan, administered by the Compensation Committee of the Board of Directors, provided for granting of incentive awards in the form of stock, stock options, stock appreciation rights, and restricted stock to employees, directors, and consultants of the Company. 2011 Stock Incentive Plan (“2011 Plan”) The 2011 Plan was designed to increase shareholder value by compensating employees over the long term. The plan was used to promote long-term financial success and execution of the Company’s business strategy. At the time of approval, 350,000 shares of Astrotech’s common stock were reserved for issuance under this plan. On June 26, 2014, an additional 400,000 shares of Astrotech’s common stock were approved for issuance under this plan. On December 7, 2017, an additional 225,000 shares of Astrotech’s common stock were approved for issuance under this plan. On December 7, 2018, an additional 537,197 shares of Astrotech’s common stock were approved for issuance under this plan. On June 29, 2020, an additional 1,500,000 shares of Astrotech’s common stock were approved for issuance under this plan. Stock Option Activity Summary The Company’s stock option activity for the years ended June 30, 2021 and 2020 was as follows: Shares (In thousands) Weighted Average Exercise Price Outstanding at June 30, 2019 324 $ 5.71 Granted 10 1.85 Exercised — — Canceled or expired (9 ) 4.18 Outstanding at June 30, 2020 325 $ 5.68 Granted 50 5.00 Exercised — — Canceled or expired (100 ) 6.49 Outstanding at June 30, 2021 275 $ 5.25 65 The aggregate intrinsic value of options exercisable at June 30, 2021 was $0 as the fair value of the Company’s common stock is less than the exercise prices of these options. The aggregate intrinsic value of all options outstanding at June 30, 2021 was $0. Range of exercise prices Number Outstanding (In thousands) Options Outstanding Weighted- Average Remaining Contractual Life (years) Weighted- Average Exercise Price Number Exercisable (In thousands) Options Exercisable Weighted- Average Exercise Price $1.85 – $3.55 76 1.8 $ 3.35 70 $ 3.35 $5.30 – $5.85 113 5.9 5.49 113 5.49 $6.00 – $7.50 86 2.5 6.59 86 6.59 $1.85 – $7.50 275 3.7 $ 5.25 269 $ 5.29 Compensation costs recognized related to vested stock option awards during the years ended June 30, 2021 and 2020 were $1 thousand and $147 thousand, respectively. At June 30, 2021, there was $1 thousand of total unrecognized compensation cost related to non-vested stock option awards, which is expected to be recognized over a weighted average period of 1.3 years. Restricted Stock The Company’s restricted stock activity for the years ended June 30, 2021 and 2020, was as follows: Shares (In thousands) Weighted Average Grant-Date Fair Value Outstanding at June 30, 2019 208 $ 4.06 Granted 5 2.47 Exercised (63 ) 3.77 Canceled or expired (17 ) 4.06 Outstanding at June 30, 2020 133 $ 3.95 Granted 2,019 2.02 Exercised (58 ) 1.84 Canceled or expired (71 ) 3.57 Outstanding at June 30, 2021 2,023 $ 2.05 Compensation costs recognized related to vested restricted stock awards during the years ended June 30, 2021 and 2020 were $625 thousand and $202 thousand, respectively. At June 30, 2021, there was $3.7 million of unrecognized compensation cost related to restricted stock, which is expected to be recognized over a weighted average period of 2.7 years. Fair Value of Stock-Based Compensation Stock-based compensation costs are generally based on the fair value calculated from the Black-Scholes model on the date of grant of stock options. The fair values of stock options are amortized as compensation expense on a straight-line basis over the vesting period of the grants. The Company recognizes forfeitures as they occur. The assumptions used for the years ended June 30, 2021 and 2020 and the resulting estimates of weighted-average fair value per share of options granted or modified are summarized in the following table: Year Ended June 30, 2021 Year Ended June 30, 2020 Expected Dividend Yield — — Expected Volatility 106.29 % 103.14 % Risk-Free Interest Rates 1.45 % 0.66 % Expected Option Life (in years) 3.5 3.5 Weighted-average grant-date fair value of options awarded $ 2.40 $ 2.42 66 • The expected dividend yield is based on the Company’s current dividend yield and the best estimate of projected dividend yield for future periods within the expected life of the option, which is currently 0%. • The Company estimated volatility using the historical share price performance over the expected life. Management believes the historical estimated volatility is materially indicative of expectations about future volatility. • The estimate of the risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant. • For the years ended June 30, 2021 and June 30, 2020, the Company used the simplified method of calculating the expected life of the options. (11) Income Taxes The Company accounts for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the expected tax consequences of temporary differences between the tax bases of assets and liabilities and their reported amounts. Valuation allowances are established, when necessary, to reduce deferred tax assets to amounts that are more likely than not to be realized. As of June 30, 2021 and 2020, the Company had established a full valuation allowance against all of its net deferred tax assets. For the fiscal year ended June 30, 2021, the Company incurred losses from operations in the amount of $7.6 million. There is no effective tax rate for the fiscal year 2021. There is no current state tax expense. FASB ASC 740, Income Taxes addresses the accounting for uncertainty in income taxes recognized in an entity’s financial statements and prescribes a recognition threshold and measurement attribute for financial statement disclosure of tax positions taken or expected to be taken on a tax return. The Company had unrecognized tax benefit of $329 thousand as of June 30, 2021, all of which have been accounted for as contra deferred tax assets. For the years ended June 30, 2021 and 2020, the Company’s effective tax rate differed from the federal statutory rate of 21%, primarily due to prior year deferred true ups and the valuation allowance against its net deferred tax assets. Loss carryovers are generally subject to modification by tax authorities until three years after they have been utilized. Income Tax Expense and Effective Tax Rate The components of income tax benefit from operations are as follows: Year Ended June 30, (In thousands) 2021 2020 Current Federal $ — $ — State and local — — Total current tax benefit $ — $ — Deferred Federal — — State and local — — Total deferred tax benefit $ — $ — Total tax benefit $ — $ — 67 A reconciliation of the reported income tax benefit to the amount that would result by applying the U.S. Federal statutory rate to the loss before income taxes to the actual amount of income tax benefit recognized follows: Year Ended June 30, (In thousands) 2021 2020 Expected benefit $ 1,596 $ 1,746 State tax expense — — Tax credits 187 — Change in valuation allowance (1,352 ) 2,961 Prior year true-up 26 (4,650 ) Expiration of net operating loss carryovers (533 ) — Other permanent items 76 (57 ) Total income tax benefit $ — $ — Deferred Tax Assets and Liabilities The Company’s deferred tax assets as of June 30, 2021 and 2020 consist of the following: Year Ended June 30, (In thousands) 2021 2020 Deferred tax assets: Net operating loss carryforwards $ 15,882 $ 14,786 Tax credit carryforwards 1,165 — Lease liability - current and non-current 62 202 Accrued expenses and other timing 741 1,047 Property and equipment, principally due to differences in depreciation 77 85 Total gross deferred tax assets $ 17,927 $ 16,120 Less — valuation allowance (17,875 ) (15,941 ) Net deferred tax assets $ 52 $ 179 Deferred tax liabilities: Right-of-use assets $ (52 ) $ (179 ) Total gross deferred tax liabilities (52 ) (179 ) Net deferred tax assets $ — $ — The Company files consolidated returns for federal, Florida, and Texas income and franchise taxes. In assessing the need for a valuation allowance, management considers whether it is more likely than not that some portion or all of the net deferred tax assets will be utilized to offset future tax liabilities. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. As of June 30, 2021, the Company provided a full valuation allowance of approximately $17.9 million against its net deferred tax assets. The valuation allowance increased by approximately $2.0 million for the year ended June 30, 2021. Since the Company reflects a full valuation allowance against its deferred tax assets, there has been no income tax impact from these changes. The Tax Cuts and Jobs Act enacted on December 22, 2017 repealed the alternative minimum tax and any available alternative minimum tax credit will be refunded according to the guidelines of the Tax Cuts and Jobs Act. The alternative minimum tax credit is limited to 50% of the available balance each year for tax years 2018 to 2020 and any remaining balance is fully refundable for tax year 2021. The CARES Act enacted on March 27, 2020 included the acceleration of the alternative minimum tax credit and allows for the acceleration of the refundable AMT credit up to 100% of the AMT credit. As a result, the Company received a $429 thousand alternative minimum tax credit refund in the June 2021 tax year. The Company has no further alternative minimum tax refund receivable as of June 30, 2021. At June 30, 2021, the Company had net operating loss carryforwards of approximately $74.0 million with approximately $38.6 million ($8.1 million, tax effected) for federal income tax purposes that are available to offset future regular taxable income set to expire between the years of 2020 and 2037. The Company also had net operating loss carryforwards with indefinite lives of approximately $35.4 million ($7.4 million, tax effected) for federal income tax purposes that are available to offset future regular taxable income. For net operating losses with indefinite carryforward lives, generated beginning after December 31, 2017, the Tax Cuts and Jobs Act limits the amount of net operating losses to be utilized and deducted by the taxpayer to 80% of the taxpayer’s taxable income. Utilization of some of these net operating losses is limited due to the changes in stock 68 ownership of the Company associated with the October 2007 Exchange Offer; as such, the benefit from these losses may not be realized . The Company has federal research and development income tax credit carryovers of $0.8 million as of June 30, 2021. These credits will expire between the years 2035 and 2041. At June 30, 2021, the Company also has accumulated state net operating loss carryforwards of approximately $7.4 million ($0.3 million, tax effected) that are available to offset future state taxable income. These net operating loss carryforwards expire between the years 2026 and 2038. These losses may also be subject to utilization limitations; as such, the benefit from these losses may not be realized. The Company has a temporary credit for business loss carryovers that may be utilized to offset its Texas margin tax. At June 30, 2021, the credit amount is $0.5 million ($0.4 million, tax effected). These credits may be used to offset $13 thousand of state tax liability each year and will expire in 2027. Uncertain Tax Positions The Company had unrecognized tax benefits of $329 thousand as of June 30, 2021, all of which have been accounted for as contra deferred tax assets. A rollforward of the beginning and ending amount of unrecognized tax benefits from July 1, 2020 to June 30, 2021 is as follows: . Year Ended June 30, (In thousands) 2021 2020 Balance at July 1, 2020 $ — $ — Additions for tax positions of current period 80 — Additions for tax positions of prior years 249 — Decreases for tax positions of prior years — — Balance at June 30, 2021 $ 329 $ — The Company recognizes interest and penalties related to income tax matters in income tax expense, as incurred. For the years ended June 30, 2021 and 2020, the Company did not recognize any interest expense for uncertain tax positions. (12 ) Net Loss per Share Basic loss per share is computed on the basis of the weighted average number of shares of common stock outstanding during the period. Diluted net loss per share is computed on the basis of the weighted average number of shares of common stock plus the effect of dilutive potential common shares outstanding during the period using the treasury stock method and the if-converted method. Dilutive potential common shares include outstanding stock options and stock-based awards. Reconciliation and the components of basic and diluted net loss per share are as follows (in thousands, except per share data): Year Ended June 30, 2021 2020 Numerator: Net loss $ (7,603 ) $ (8,311 ) Denominator: Denominator for basic and diluted net loss per share — weighted average common stock outstanding 21,984 6,346 Basic and diluted net loss per common share: Net loss $ (0.35 ) $ (1.31 ) All unvested restricted stock awards for the years ended June 30, 2021 and 2020 are not included in diluted net loss per share, as the impact to net loss per share is anti-dilutive. Options to purchase 275,503 shares of common stock at exercise prices ranging from $1.85 to $7.50 per share outstanding for the year ended June 30, 2021 and options to purchase 325,313 shares of common stock at exercise prices ranging from $1.85 to $8.35 per share outstanding for the year ended June 30, 2020 were not included in diluted net loss per share, as the impact to net loss per share is anti-dilutive. 69 (13 ) Employee Benefit Plans Astrotech has a defined contribution retirement plan, which covers substantially all employees and officers. Effective July 1, 2019, the Company elected to no longer match employees’ contributions to the plan; however, beginning in the third quarter of fiscal year 2021, the Company reinstated the match to employees’ contributions to the retirement plan. For the year ended June 30, 2021, the Company contributed the required match of $31 thousand to the plan. The Company has the right, but not an obligation, to make additional contributions to the plan in future years at the discretion of the Company’s Board of Directors. The Company has not made any additional contributions for the years ended June 30, 2021 and 2020. (14 ) Commitments and Contingencies The Company is subject to various lawsuits and other claims in the normal course of business. In addition, from time to time, the Company receives communications from government or regulatory agencies concerning investigations or allegations of noncompliance with laws or regulations in jurisdictions in which the Company operates. The Company establishes reserves for the estimated losses on specific contingent liabilities, for regulatory and legal actions where the Company deems a loss to be probable and the amount of the loss can be reasonably estimated. In other instances, the Company is not able to make a reasonable estimate of liability because of the uncertainties related to the outcome or the amount or range of potential loss. Employment Contracts The Company has entered into an employment contract with a key executive. Generally, certain amounts may become payable in the event the Company terminates the executive’s employment. Legal Proceedings On April 15, 2021, a putative stockholder of the Company commenced a class action and derivative lawsuit in the Delaware Court of Chancery, Stein v. Pickens, et al., C.A. No. 2021-0322-JRS (the “Stein Action”), in which it is alleged, among other things, that the Company improperly included broker non-votes in the tabulation of votes counted in favor to approve an amendment to the Company’s Certificate of Incorporation (the “2020 Certificate Amendment”) and, thus the 2020 Certificate Amendment was defective. The Company investigated these allegations and disputes them. Discovery in this matter is ongoing. On April 30, 2021, the Company filed a validation proceeding in the Delaware Court of Chancery, In re Astrotech Corporation, C.A. No. 2021-0380-JRS, pursuant to Section 205 of the Delaware General Corporation Law (the “Section 205 Action”). The Company does not believe that the filing and effectiveness of the 2020 Certificate Amendment is either invalid or ineffective. However, to resolve any uncertainty, the Company is pursuing corrective actions to ratify the 2020 Certificate Amendment through the filing of the Section 205 Action. The Company presently anticipates presenting its request for validation to the Court in September 2021. Further information regarding the Stein Action and the Section 205 Action is provided in the Schedule 14A proxy statement amendment and supplement filed by the Company with the Securities and Exchange Commission on April 29, 2021. (15) Segment Information The Company currently has three reportable business units: Astrotech Technologies, Inc, 1 st Detect Corporation and AgLAB Inc. T he results for the BreathTech business unit are included within ATI, as BreathTech does not meet the threshold for segment reporting. Astrotech Technologies, Inc. ATI owns and licenses the intellectual property related to the AMS Technology, the platform mass spectrometry technology originally developed by 1 st Detect. 1 st Detect Corporation 1 st Detect is a manufacturer of explosives and narcotics trace detectors developed for use at airports, cargo and other secured facilities, and borders worldwide. 70 AgLAB Inc. AgLAB is developing a series of mass spectrometers for use in the hemp and cannabis market with initial focus on optimizing yields in the extraction and distillation process. All intercompany transactions between business units have been eliminated in consolidation. Key financial metrics of the Company’s segments for the years ended June 30, 2021 and 2020 are as follows: Year Ended June 30, 2021 (In thousands) Revenue Depreciation Loss Before Income Taxes ATI $ — $ 16 $ (3,048 ) 1st Detect 334 3 (1,223 ) AgLAB — 36 (3,332 ) Total $ 334 $ 55 $ (7,603 ) Year Ended June 30, 2020 (In thousands) Revenue Depreciation Loss Before Income Taxes 1st Detect $ 488 $ 189 $ (6,858 ) AgLAB — — (1,453 ) Total $ 488 $ 189 $ (8,311 ) June 30, 2021 (In thousands) Fixed Assets, Net Total Capital Expenditures Total Assets ATI $ 166 $ (166 ) $ 63,402 1st Detect 60 (8 ) 2,086 AgLAB 37 (37 ) 145 Total $ 263 $ (211 ) $ 65,633 June 30, 2020 (In thousands) Fixed Assets, Net Total Capital Expenditures Total Assets 1st Detect $ 99 $ — $ 5,930 AgLAB — — — Total $ 99 $ — $ 5,930 (16) Impact of COVID-19 Pandemic The Company has taken what it believes are necessary precautions to safeguard its employees from the COVID-19 pandemic. The Company continues to follow the Centers for Disease Control and Prevention’s (“CDC”) guidance and the recommendations and restrictions provided by state and local authorities. All of the Company’s employees who do not work in a lab setting are currently on a telecommunication work arrangement and have been able to successfully work remotely. The Company’s lab requires in-person staffing and the Company has been able to continue to operate its lab, minimizing infection risk to lab staff through a combination of social distancing and appropriate protective equipment. There can be no assurance, however, that key employees will not become ill or that the Company will be able to continue to operate its labs. The continuing impact that the COVID-19 pandemic will have on the Company’s operations, including duration, severity, and scope, remains uncertain and cannot be fully predicted at this time. Accordingly, the Company believes that the COVID-19 pandemic could continue to adversely impact its results of operations, cash flows, and financial condition in the future. As the Company’s business operations continue to be impacted by the pandemic, the Company continues to monitor the situation and the guidance that is being provided by relevant federal, state, and local public health authorities. The Company may take additional actions based upon their recommendations. However, it is possible that the Company may have to make further adjustments to its operating plans in reaction to developments that are beyond its control. 71 CARES Act On March 27, 2020, the CARES Act was enacted. The CARES Act, among other things, includes provisions relating to refundable payroll taxes, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations, and technical corrections to tax depreciation methods for qualified improvement property. The most significant relief measures which the Company qualified for are the PPP Promissory Note, alternative minimum tax credit refunds, employee retention credit, and payroll tax deferral. The Company will continue to assess the treatment of the CARES Act to the extent additional guidance and regulations are issued, the further applicability of the CARES Act to the Company, and the potential impacts on the business. (17) Subsequent Events On September 3, 2021, the Company entered into (1) the Amended Notes with Mr. Pickens, in connection with the Original Notes, and (2) the Amended Security Agreements with the Subsidiaries, in connection with the Original Security Agreements, collectively the Amendments. Pursuant to the Amendments, (a) the principal amount and accrued interest on the 2020 Note was paid in full and the 2020 Note was cancelled, and (b) $1.0 million of the principal amount and all accrued interest on the 2019 Note was paid and the maturity date on the remaining balance of the 2019 Note was extended to September 5, 2022. In addition, the Subsidiaries jointly and severally agreed to guarantee and act as surety for the Company’s obligation to repay the remaining balance on the 2019 Note pursuant to subsidiary guarantees, dated September 5, 2019 and February 13, 2020, respectively, as amended by the Omnibus Amendments to Subsidiary Guarantees, dated August 24, 2020 and September 3, 2021, respectively (the Omnibus Amendment to Subsidiary Guarantees dated September 3, 2021, the “Amended Subsidiary Guarantee”). The Subsidiary Guaranty with respect to the 2020 Note was also cancelled by the Amended Subsidiary Guarantee due to the 2020 Note being repaid in full. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.