ASTROTECH CO. The following information should be read in conjunction with the Consolidated Financial Statements and the accompanying Notes included below in Item 8 of this Annual Report on Form 10-K. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements.
Business Overview
•Astrotech Technologies, Inc. ("ATI") owns and licenses the intellectual property related to the Astrotech Mass Spectrometer Technology™ (the "AMS Technology"). • 1stDetect Corporation ("1st Detect") is a manufacturer of explosives and narcotics trace detectors developed for use at airports, cargo and other secured facilities, and borders worldwide. 1st Detect holds an exclusive AMS Technology license from ATI for air passenger and cargo security applications. 35
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•AgLAB, Inc. ("AgLAB") is developing a series of mass spectrometers for use in the hemp and cannabis market with initial focus on optimizing yields in the extraction and distillation process. AgLAB holds an exclusive AMS Technology license from ATI for agriculture applications. •BreathTech Corporation ("BreathTech") is developing a breath analysis tool to screen for volatile organic compound ("VOC") metabolites found in a person's breath that could indicate they may have an infection, including COVID-19 or pneumonia. BreathTech holds an exclusive AMS Technology license from ATI for breath analysis applications. Our Business Units
ATI owns and licenses the AMS Technology, the platform mass spectrometry
technology originally developed by 1st 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
1stDetect Corporation
1st 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
In order to sell the TRACER 1000 to airport and cargo security customers in the
In
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to be listed on the Air Cargo Screening Technology List ("ACSTL") as an
"approved" device. If approved, the TRACER 1000 will be approved for cargo sales
in
Finally, on
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 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
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.
COVID-19
In
We are subject to risks and uncertainties as a result of the COVID-19 pandemic. The extent of the impact of the COVID-19 pandemic on our business is uncertain and difficult to predict, as the disease and the responses that we, other businesses, and governments are taking continue to evolve. Furthermore, capital markets and economies worldwide have also been negatively impacted by the COVID-19 pandemic, and it remains possible that it could cause a prolonged global economic recession. Policymakers around the globe have responded with fiscal policy actions to support the economy as a whole. The magnitude and overall effectiveness of these actions have been somewhat positive, but continuing actions remain uncertain and pose some degree of risk.
To date, we have seen delays with respect to the
It is possible that the continued spread of COVID-19 could cause further disruption in our supply chain; cause delay, or limit the ability of customers to perform, including in making timely payments to the Company; cause further delay in regulatory certification testing of our instruments; impact investment performance; and cause other unpredictable events. The extent to which the COVID-19 pandemic may in the future materially impact our financial condition, liquidity, or results of operations is uncertain.
Coronavirus Aid, Relief and Economic Security Act (the "CARES Act")
On
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pandemic, some of the more significant provisions which impacted the Company's financial statements included removal of certain limitations on utilization of net operating losses and increasing the ability to deduct interest expense, as well as amending certain provisions of the previously enacted Tax Cuts and Jobs Act. The Company also qualified for certain relief measures such as the Paycheck Protection Program Promissory Note and Agreement (the "PPP Promissory Note"), alternative minimum tax credit refunds, employee retention credit, and payroll tax deferral.
Critical Accounting Policies
The discussion and analysis of our financial condition and results of operations
are based upon our consolidated financial statements, which have been prepared
in accordance with United States Generally Accepted Accounting Principles ("
Use of Estimates
The preparation of consolidated financial statements in conformity with
Revenue Recognition
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
We disaggregate revenue by reporting segment to depict the nature of revenue in a manner consistent with our business operations and to be consistent with other communications and public filings. Refer to Note 15 to the consolidated financial statements for additional details of revenues by reporting segment.
Contract Assets and Liabilities. We enter into contracts to sell products and provide services, and we recognize contract assets and liabilities that arise from these transactions. We recognize revenue and corresponding accounts receivable according to Topic 606 and, at times, recognize revenue in advance of the time when contracts give us the right to invoice a customer. We may also receive consideration, per the terms of a contract, from customers prior to transferring goods to the customer. We record customer deposits as deferred revenue. Additionally, we 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, we record a deferred revenue liability. We recognize these contract liabilities as sales after all revenue recognition criteria are met.
Practical Expedients. In cases where we are responsible for shipping after the customer has obtained control of the goods, we have elected to treat the shipping activities as fulfillment activities rather than as a separate performance obligation. Additionally, we have elected to capitalize the cost to obtain a contract only if the period of amortization would be longer than
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one year. We only give 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. We recognize 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 we have achieved the acceptance criteria unless the customer acceptance criteria are perfunctory or inconsequential. We generally offer customers payment terms of less than one year.
Freight. We record shipping and handling fees that we charge to our customers as revenue and related costs as cost of revenue.
Multiple Performance Obligations. Certain agreements with customers include the sale of equipment involving multiple elements in cases where obligations in a contract are distinct and thus require separation into multiple performance obligations, revenue recognition guidance requires that contract consideration be allocated to each distinct performance obligation based on its relative standalone selling price. The value allocated to each performance obligation is then recognized as revenue when the revenue recognition criteria for each distinct promise or bundle of promises has been met.
The standalone selling price for each performance obligation is an amount that depicts the amount of consideration to which the entity expects to be entitled in exchange for transferring the good or service. When there is only one performance obligation associated with a contract, the entire amount of consideration is attributed to that obligation. When a contract contains multiple performance obligations the standalone selling price is first estimated using the observable price, which is generally a list price net of applicable discount or the price used to sell the good or service in similar circumstances. In circumstances when a selling price is not directly observable, we will estimate the standalone selling price using information available to us, 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
Our international operations are subject to certain opportunities and risks,
including from foreign currency fluctuations and governmental actions. During
fiscal year 2021, we conducted business in ten countries. We closely monitor our
operations in each country in which we do business and seek to adopt appropriate
strategies that are responsive to changing economic and political environments.
We currently conduct business in the
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Warranty Provision
(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
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 (see Note 12 to the consolidated financial statements).
Cash and Cash Equivalents
We consider 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 deposit.
Accounts Receivable
The carrying value of our accounts receivable, net of an allowance for doubtful
accounts, represents their estimated net realizable value.
Inventory
We compute 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 us to estimate obsolete and excess inventory as well as inventory that is not of saleable quality.
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Property and Equipment, net
Property and equipment are stated at cost, net of depreciation and amortization. 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
We continuously evaluate our 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 our corporate office lease in
Fair Value of Financial Instruments
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. We determine the cost of investments sold based on a first-in, first-out cost basis at the individual security level. We also consider 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. We record 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 to the consolidated financial statements.
Operating Leases
We adopted Accounting Standards Update No. 2016-02, "Leases (Topic 842)" (ASU
2016-02) effective
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Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. As a result of our adoption of ASU 2016-02, we no longer recognize 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 and are recognized on a straight-line basis over the term of the lease. Variable lease payments are amounts owed by us 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 on Leases, see Note 4 to the consolidated financial statements.
Stock-Based Compensation
We account 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 our 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. We recognize 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 on share-based compensation, see Note 9 to the consolidated financial statements.
Income Taxes
We account 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.
Preferred Stock
We have issued Series D convertible preferred stock. Series D Preferred Shares are convertible to common stock on a one-to-one basis. The Preferred D are not callable by the Company. The holders of the preferred stock are entitled to receive, and we shall pay, dividends on shares equal to and in the same form as dividends actually paid on shares of the common stock when, and if, such dividends are paid on shares of common stock. No other dividends are paid on the preferred shares. Preferred shares have no voting rights. Upon liquidation, dissolution, or winding-up of the Company, whether voluntary or involuntary, the preferred shares have preference over common stock. The holder of Series D Preferred Shares has the option to convert said shares to common stock at the holder's discretion.
The holders of the preferred stock have agreed with the Company that they will
not convert the preferred stock until such time as the 2021 Certificate
Amendment is accepted for filing with the state of
Treasury Stock
The Company records treasury stock at the cost to acquire it and includes treasury stock as a component of stockholders' equity. During fiscal year 2021, we sold all treasury stock held by the Company.
Accounting Pronouncements
In
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In
Results of Operations for the Years Ended
Selected financial data for the fiscal years endedJune 30, 2021 and 2020 of our operations are as follows: Years Ended June 30, (In thousands) 2021 2020 Variance Revenue$ 334 $ 488 $ (154 ) Cost of revenue 298 449 151 Gross profit 36 39 (3 ) Gross margin percentage 11 % 8 % 3 % Operating expenses Selling, general and administrative 4,741 4,716 (25 ) Research and development 2,692 3,437 745 Disposal of corporate lease 513 - (513 ) Total operating expenses 7,946 8,153 207 Interest and other (expense), net (235 ) (197 ) (38 ) Gain from extinguishment of debt - PPP loan 542 - 542 Income tax benefit - - - Net loss (7,603 ) (8,311 ) 708 Net unrealized losses, net of zero tax expense (23 ) - (23 ) Total comprehensive loss$ (7,626 ) $ (8,311 ) $ 685
Revenue - Total revenue decreased by
Cost of Revenue and Gross Profit - Cost of revenue is comprised of labor,
materials, shipping, warranty reserve, and overhead allocation. Gross profit is
comprised of revenue less cost of revenue. Cost of revenue decreased
Operating Expenses - Our operating expenses decreased
• Selling, General and Administrative Expenses - Our selling, general and
administrative expenses were consistent for the year ended June 30, 2021 ,
compared to the year ended June 30, 2020 . The increase in legal expenses
related to our ongoing derivative litigation was partially offset by a
decrease in office rent and related expenses associated with the former
corporate office. In addition, due to COVID-19, our expenses related to
travel and conferences also declined.
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• Research and Development Expenses - Research and development expenses
decreased $745 thousand , or 22%, for the year ended June 30, 2021 , compared
to the year ended June 30, 2020 . This decrease is mainly due to a decrease
in headcount as we continue to shift our focus from research and development
and toward commercialization of our products.
• Disposal of long-lived assets increased $513 thousand due to the termination
of our corporate office lease and the disposal of the leasehold improvement
assets and right-of-use assets and lease liabilities associated with that
lease. As a result of this termination, our net cash savings over the
remainder of the lease was estimated to be approximately $870 thousand .
Interest and other (expense), net - Interest expense for the year ended
Gain from extinguishment of PPP loan - Gain from extinguishment of PPP loan was
Income Taxes - Our income tax benefit did not change for the year ended
FINANCIAL CONDITION, CAPITAL RESOURCES AND LIQUIDITY
Consolidated Balance Sheet
Total assets for the year ended
Years Ended June 30,
(In thousands) 2021 2020 Variance
Assets:
Current assets $ 65,110 $ 4,672 $ 60,438
Property and equipment, net 263 99 164
Assets held for disposal, net - 237 (237 )
Operating leases, right-of-use asset, net 249 851 (602 )
Other assets, net 11 71 $ (60 )
Total $ 65,633 $ 5,930 $ 59,703
Liabilities and stockholders' equity:
Current liabilities $ 4,211 $ 4,350 $ (139 )
Lease liabilities, non-current 215 623 (408 )
Term note payable, net of current portion - 332 (332 )
Stockholders' equity 61,207 625 60,582
Total $ 65,633 $ 5,930 $ 59,703 Current assets - Current assets increased
Property and equipment, net - Property and equipment increased
Assets held for disposal, net - Assets held for disposal decreased
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Operating leases, right-of-use asset - Operating leases, right-of-use asset
decreased
Current liabilities - Current liabilities decreased
Other long-term liabilities - Other long-term liabilities decreased
Liquidity and Capital Resources
The following is a summary of the change in our cash and cash equivalents:
Years Ended June 30,
(In thousands) 2021 2020 Variance
Change in cash and cash equivalents:
Net cash used in operating activities $ (7,410 ) $ (6,931 ) $ (479 )
Net cash used in investing activities (27,585 ) - (27,585 )
Net cash provided by financing activities 67,582 8,692 58,890
Net change in cash and cash equivalents $ 32,587 $ 1,761 $ 30,826
Cash and Cash Equivalents
At
Operating Activities
Net cash used in operating activities was
Investing Activities
Net cash used in investing activities for the year ended
Financing Activities
Cash provided by financing activities was
Debt
As of
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Liquidity
Our annual report on Form 10-K for the fiscal year ended
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of
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