ITEM 1. Condensed Consolidated Financial Statements
Notes to Unaudited Condensed Consolidated Financial Statements
(1) Description of the Company and Liquidity
Astrotech Corporation (Nasdaq: ASTC) (Astrotech, the Company, we, us or our), a Washington corporation, is a commercial aerospace company that was formed in 1984 to leverage the environment of space for commercial purposes. For nearly 30 years, the Company has remained a crucial player in space commerce activities. We have supported the launch of 23 shuttle missions and more than 300 spacecraft; built space hardware and processing facilities; constructed and operated world-class processing facilities; and prepared and processed scientific research for microgravity.
Our Business Units
Astrotech Space Operations
(ASO)
ASO provides support to its government and commercial customers as they successfully process complex communication, earth observation and deep space satellites in preparation for their launch on a variety of launch vehicles. Processing activities include satellite ground transportation; pre-launch hardware integration and testing; satellite encapsulation, fueling, launch pad delivery; and communication linked launch control. Our ASO facilities can process five meter class satellites accommodating the majority of U.S. based satellites. ASOs service capabilities include designing and building spacecraft processing equipment and facilities. In addition, ASO provides propellant services including designing, building and testing propellant service equipment for fueling spacecraft. ASO accounted for 99% of our consolidated revenues for the period ended March 31, 2013. Revenue for our ASO business unit is generated primarily from various fixed-priced contracts with launch service providers in both government and commercial markets and the design, fabrication and use of critical space launch equipment. The services and facilities we provide to our customers support the final assembly, checkout, and countdown functions required to launch a spacecraft. The revenue and cash flows generated from our ASO operations are primarily related to the number of spacecraft launches and the fabrication of the Ground Support Equipment (GSE) for the U.S. Government.
Spacetech
Our other business unit is a technology incubator designed to commercialize space-industry technologies. This business unit is currently pursuing two distinct opportunities:
1
st
Detect
1
st
Detect designs, manufactures and sells miniature mass spectrometer equipment. 1st Detect launched the MMS-1000
TM
during March 2012. The MMS-1000
TM
is a low power, miniature mass spectrometer device designed initially for the laboratory testing market. The unique design of this unit is the result of the Companys work with the National Aeronautics and Space Administration (NASA) on the International Space Station. 1
st
Detect has been awarded a Developmental Testing and Evaluation designation from the U.S. Department of Homeland Security as a promising anti-terrorism technology, and is the recipient of a Phase I and Phase II award from the U.S. Armys Chemical and Biological Defense (CBD) Small Business Innovation Research (SBIR) Program. Following the successful execution of the Phase I SBIR, 1
st
Detect was awarded a $0.8 million Phase II SBIR contract from the Joint Science and Technology Office for Chemical and Biological Defense. Additionally, 1
st
Detect received a $1.8 million award from the Texas Emerging Technology Fund in March 2010.
1
st
Detect has entered into customer agreements resulting in over $0.8 million research and development funding and is developing relationships with a number of significant analytical instrument manufacturers and distributors. The target markets for 1
st
Detects MMS-1000 and OEM-1000 products are large and growing and present an opportunity to compete with established vendors. The unique characteristics of 1
st
Detects products allow us to develop and market into emerging markets and opportunities.
6
Astrogenetix
Astrogenetix is a biotechnology company formed to commercialize products developed in the unique environment of microgravity. Astrogenetix pursued an aggressive space access strategy to take advantage of the Space Shuttle program prior to its retirement in 2011. This strategy gave Astrogenetix unprecedented access to research in microgravity, as the Company flew experiments twelve times over a three-year period. Astrogenetix is currently researching a Salmonella vaccine as part of its ongoing commercialization strategy. Concurrently, Astrogenetix is evaluating a vaccine target for MRSA based on discoveries made in microgravity. In December 2011, the Company negotiated a Space Act Agreement with NASA for a minimum of twenty-eight future space flights.
Liquidity and Capital Resources
Our future capital requirements will depend on a number of factors, including our success in developing and expanding markets for our products, payments under possible future strategic arrangements, continued progress of our research and development of potential products, the need to acquire licenses to new technology, costs associated with increasing our manufacturing and development facilities, costs associated with strategic acquisitions including integration costs and assumed liabilities, litigation expense, the status of competitive products and potential cost associated with both protecting and defending our intellectual property. Additionally, actions taken as a result of the ongoing internal evaluation of our business could result in expenditures not currently contemplated in our estimates for 2013. We believe, however, that our existing cash and cash equivalents are sufficient to fund our operating expenses, capital equipment requirements and other expected liquidity requirements for the coming twelve months. Factors that could affect our capital requirements, in addition to those listed above include continued collections of accounts receivable consistent with our historical experience, uncertainty surrounding mission launch schedules, and our ability to manage product development efforts.
(2) Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared by Astrotech Corporation in accordance with United States generally accepted accounting principles (GAAP) for interim financial information and the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring entries) considered necessary for a fair presentation have been included. Operating results for the nine months ended March 31, 2013 are not necessarily indicative of the results that may be expected for the year ending June 30, 2013. These financial statements should be read in conjunction with the financial statements and notes included in the Companys Annual Report on Form 10-K for the year ended June 30, 2012.
(3) Noncontrolling Interest
In January 2010, restricted shares of Astrotech subsidiaries, 1
st
Detect and Astrogenetix, were granted to certain employees, directors and officers, resulting in Astrotech owning less than 100% of the subsidiaries. The Company applied noncontrolling interest accounting for the period ended March 31, 2013, which requires us to clearly identify the noncontrolling interest in the balance sheets and income statements. We disclose three measures of net income (loss): net loss, net loss attributable to noncontrolling interest, and net loss attributable to Astrotech Corporation. Our operating cash flows in our consolidated statements of cash flows reflect net loss; while our basic and diluted net loss per share calculations reflect net loss attributable to Astrotech Corporation.
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(In thousands)
|
Beginning balance at June 30, 2012
|
$
|
2,730
|
Net loss attributable to noncontrolling interest
|
|
(382)
|
Capital contribution
|
|
390
|
Stock based compensation
|
|
1
|
Ending balance at March 31, 2013
|
$
|
2,739
|
As of March 31, 2013, the Companys share of income and losses is 86% for 1
st
Detect and 84% for Astrogenetix.
7
(4) Net Income (Loss) per Share
Basic net income (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 shared-based awards. Reconciliation and the components of basic and diluted net loss per share are as follows (in thousands, except per share data):
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Three Months Ended
March 31,
|
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Nine Months Ended
March 31,
|
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2013
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2012
|
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2013
|
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2012
|
Numerator:
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|
|
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Net income (loss) attributable to Astrotech Corporation, basic and diluted
|
$
|
(113)
|
|
$
|
1,014
|
|
$
|
(2,340)
|
|
$
|
(1,438)
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|
|
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Denominator:
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Denominator for basic net loss per share attributable to Astrotech Corporation weighted average common stock outstanding
|
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19,463
|
|
|
18,764
|
|
|
19,279
|
|
|
18,448
|
|
|
|
|
|
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|
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Dilutive common stock equivalents common stock options and share-based awards
|
|
|
|
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388
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|
|
|
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|
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|
|
|
|
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|
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|
Denominator for diluted net loss per share attributable to Astrotech Corporation weighted average common stock outstanding and dilutive common stock equivalents
|
|
19,463
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|
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19,152
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19,279
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18,448
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|
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Basic net loss per share attributable to Astrotech Corporation
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$
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(0.01)
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$
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0.05
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$
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(0.12)
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|
$
|
(0.08)
|
Diluted net loss per share attributable to Astrotech Corporation
|
$
|
(0.01)
|
|
$
|
0.05
|
|
$
|
(0.12)
|
|
$
|
(0.08)
|
Options to purchase 1,147,850 shares of common stock at exercise prices ranging from $0.30 to $24.10 per share outstanding for the three and nine months ended March 31, 2013 were not included in diluted net loss per share, as the impact to net loss per share is anti-dilutive. Options to purchase 794,100 shares of common stock at exercise prices ranging from $0.71 to $24.10 per share outstanding, for the three months ended March 31, 2012, were not included in diluted net income (loss) per share, as the impact to net income (loss) per share is anti-dilutive. Options to purchase 1,147,850 shares of common stock at exercise prices ranging from $0.30 to $24.10 per share outstanding, for the nine months ended March 31, 2012, were not included in diluted net income (loss) per share, as the impact to net income (loss) per share is anti-dilutive.
(5) Revenue Recognition
Astrotech recognizes revenue employing several generally accepted revenue recognition methodologies across its business units. The methodology used is based on contract type and the manner in which products and services are provided.
Revenue generated by Astrotechs payload processing facilities is recognized ratably over the occupancy period of the satellite while in the Astrotech facilities. The percentage-of-completion method is used for all contracts where incurred costs can be reasonably estimated and successful completion can be reasonably assured at inception. Changes in estimated costs to complete and provisions for contract losses are recognized in the period they become known. Revenue for the sale of commercial products is recognized at shipment.
8
A Summary of Revenue Recognition Methods
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Services/Products Provided
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Contract Type
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Method of Revenue Recognition
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Payload Processing Facilities
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Firm Fixed Price Mission Specific
|
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Ratably, over the occupancy period of a satellite
within the facility from arrival through launch
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Construction Contracts
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Firm Fixed Price
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Percentage-of-completion based on costs incurred
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Engineering Services
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Cost Reimbursable
Award/Fixed Fee
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Reimbursable costs incurred plus award/fixed fee
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Commercial Products
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Specific Purchase
Order Based
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At shipment
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Grant
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Cost Reimbursable
Award
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As costs are incurred for related research and
development expenses
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Under certain contracts, we make expenditures for specific enhancements and/or additions to our facilities where the customer agrees to pay a fixed fee to deliver the enhancement or addition. We account for such agreements as a reduction in the cost of such investments and recognize any excess of amounts collected above the expenditure as revenue.
(6) Debt
Credit Facilities
In October 2010, we entered into a financing facility with a commercial bank providing a $7.0 million term loan note and a $3.0 million revolving credit facility. The $7.0 million term loan terminates in October 2015, and the $3.0 million revolving credit facility expired in October 2012. The Company had no outstanding balance on the revolving credit facility. The term loan requires monthly payments of principal plus interest at the rate of prime plus 0.25%, but not less than 4.0%. The revolving credit facility allowed multiple advances not to exceed $3.0 million, based on eligible accounts receivable, and incurred interest at the rate of prime plus 0.25%, but not less than 4.0%. The bank financing facilities are secured by the assets of ASO, including accounts receivable, and require us to comply with designated covenants. The balance of the $7.0 million term loan at March 31, 2013 was $6.1 million.
The bank financing facilities contain certain affirmative and negative covenants with which we must comply, including the maintenance by us of a debt service coverage ratio of 1.00 to 1.00. As of March 31, 2013, we were not in compliance with the debt service coverage ratio; however, we have received a waiver from the bank.
(7) 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 1Quoted prices in active markets for identical assets or liabilities.
Level 2Inputs 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 3Unobservable inputs that are supported by little or no market activity and are significant to the fair value of the assets or liabilities.
9
The following table presents the carrying amounts, estimated fair values and valuation input levels of certain of the Companys financial instruments as of March 31, 2013 and June 30, 2012 (in thousands):
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March 31, 2013
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June 30, 2012
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Carrying
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Fair
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Carrying
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Fair
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Valuation
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Amount
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Value
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Amount
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Value
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Inputs
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Debt
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$
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6,135
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$
|
6,135
|
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$
|
6,414
|
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$
|
6,414
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Level 2
|
The carrying value of the Companys debt at March 31, 2013 approximates fair value based on rates available for similar debt available to comparable companies in the marketplace. The carrying amounts of cash and cash equivalents, accounts receivable, notes receivable and accounts payable approximate their fair market value due to the relatively short duration of these instruments.
(8) Business and Credit Risk Concentration
A substantial portion of our revenue has been generated under contracts with the U.S. Government. During the nine months ended March 31, 2013 and 2012, approximately 64% and 65%, respectively, of our revenues were generated under U.S. Government contracts. Accounts receivable totaled $0.7 million at March 31, 2013, of which 27% was attributable to the U.S. Government.
The Company maintains funds in bank accounts that may exceed the limit insured by the Federal Deposit Insurance Corporation, or FDIC. In October 2008, the FDIC increased its insurance to $250,000 per depositor, and to an unlimited amount for non-interest bearing accounts. The risk of loss attributable to these uninsured balances is mitigated by depositing funds in what we believe to be high credit quality financial institutions. The Company has not experienced any losses in such accounts.
(9) Segment Information
Managements primary financial and operating reviews focus on ASO, the core business unit. All intercompany transactions between business units have been eliminated in consolidation.
Key financial metrics for the three months ended March 31, 2013 and 2012 are as follows (in thousands):
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Three Months Ended
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Three Months Ended
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March 31, 2013
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March 31, 2012
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Income (loss)
before
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Income (loss
before
|
Revenue and Income
|
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Revenue
|
|
income taxes
|
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Revenue
|
|
income taxes
|
ASO
|
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$
|
4,565
|
|
$
|
655
|
|
$
|
9,933
|
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$
|
1,840
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Spacetech
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|
$
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|
|
$
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(893)
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|
$
|
80
|
|
$
|
(955)
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|
|
$
|
4,565
|
|
$
|
(238)
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|
$
|
10,013
|
|
$
|
(885)
|
Key financial metrics for the nine months ended March 31, 2013 and 2012 are as follows (in thousands):
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| |
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Nine Months Ended
|
|
Nine Months Ended
|
|
|
March 31, 2013
|
|
March 31, 2012
|
|
|
|
|
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Income (loss)
before
|
|
|
|
|
Income (loss)
before
|
Revenue and Income
|
|
Revenue
|
|
income taxes
|
|
Revenue
|
|
income taxes
|
ASO
|
|
$
|
14,682
|
|
$
|
14
|
|
$
|
18,351
|
|
$
|
1,490
|
Spacetech
|
|
$
|
133
|
|
$
|
(2,736)
|
|
$
|
178
|
|
$
|
(3,397)
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|
|
$
|
14,815
|
|
$
|
(2,722)
|
|
$
|
18,529
|
|
$
|
(1,907)
|
Key financial metrics for the balance sheet are as follows (in thousands):
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March 31, 2013
|
|
June 30, 2012
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Assets
|
|
Fixed
Assets, net
|
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Total Assets
|
|
Fixed
Assets, net
|
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Total Assets
|
ASO
|
|
$
|
36,056
|
|
$
|
44,879
|
|
$
|
36,997
|
|
$
|
48,867
|
Spacetech
|
|
$
|
625
|
|
$
|
1,600
|
|
$
|
273
|
|
$
|
1,182
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|
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$
|
36,681
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|
$
|
46,479
|
|
$
|
37,270
|
|
$
|
50,049
|
10
(10) State of Texas Funding
In March 2010, the Texas Emerging Technology Fund awarded 1
st
Detect $1.8 million for the development and marketing of the Miniature Chemical Detector, a portable mass spectrometer designed to serve the security, healthcare and industrial markets. In exchange for the award, 1
st
Detect granted a common stock purchase right and a note payable to the State of Texas. As of March 31, 2013, 1
st
Detect has received $1.8 million in disbursements. The proceeds from the award can only be used to fund development of the Miniature Chemical Detector at 1
st
Detect, not for repaying existing debt or for use in other Company subsidiaries.
The common stock purchase right is exercisable at the first Qualifying Financing Event (QFE), which is essentially a change in control or third party equity investment in 1
st
Detect. The number of shares available to the State of Texas, at the price of par value, is calculated as the total disbursements (numerator) divided by the stock price established in the QFE (denominator). If the first QFE does not occur within 18 months of the agreements effective date, which has been extended to March 31, 2013 as a result of recent extensions granted by the State of Texas, the number of shares available for purchase will equal the total disbursements (numerator) divided by $100 (denominator). As of March 31, 2013 no QFE has occurred.
The note equals the disbursements to 1
st
Detect to date, accrues interest at 8% per year and cancels automatically at the earlier of (1) selling substantially all of the assets of 1
st
Detect, (2) selling more than 50% of common stock of 1
st
Detect or (3) March 2020. No payments of interest or principal are due on the note unless there is a default, which would occur if 1
st
Detect moves its operations or headquarters outside of Texas at any time before March 2020. 1
st
Detect has the option to pay back the principal plus accrued interest by March 31, 2013, but repayment does not cancel the State of Texas common stock purchase right.
Management considers the likelihood of voluntarily repaying the note or of a default event as remote due to the fact that the covenants that would necessitate repayment are within the control of the Company. As such, the $1.8 million, which was received in two installments of $0.9 million and $0.9 million prior to the period ended March 31, 2013, was accounted for as a contribution to equity. As of March 31, 2013, no default events have occurred.
(11) Equity and Other Long Term Incentive Plans
The 1994 Plan (1994 Plan)
Under the terms of the 1994 Plan, the number and price of the stock incentive awards granted to employees is determined by the Board of Directors and such grants vest, in most cases, incrementally over a period of four years and expire no more than ten years after the date of grant. At the time of approval, 395,000 shares of our common stock were reserved for issuance under this plan. As of March 31, 2013, there are no shares available for grant. Based on the Articles of the 1994 stock incentive plan, no awards shall be granted more than ten years after the effective date of the plan unless amended.
The Directors Stock Option Plan (Directors Plan)
Options under the Directors Plan vest after one year and expire seven years from the date of grant. At the time of approval, 50,000 shares of our common stock were reserved for issuance under this plan. As of March 31, 2013, there are 41,500 shares available for future grant.
2008 Stock Incentive Plan (2008 Plan)
The 2008 Plan was created to promote growth of the Company by aligning the long-term financial success of the Company with the employees, consultants and directors. At the time of approval, 5,500,000 shares of our common stock were reserved for issuance under this plan. The 2008 Plan, administered by the Compensation Committee of the Board of Directors, provides for granting of incentive awards in the form of stock options, stock appreciation rights (SARs) and restricted stock to employees, directors and consultants of the Company. Stock options awarded will vest upon the Companys stock achieving a closing price of $1.50 and expire ten years from grant date or upon employee or director termination. Restricted shares awarded will vest 33.33% a year over a three year period and expire upon employee or director termination. There have been no SARs granted from the 2008 Plan. As of March 31, 2013, there are 342,501 shares available for grant under the 2008 Plan.
11
2011 Stock Incentive Plan (2011 Plan)
The 2011 Plan was designed to increase shareholder value by compensating employees over the long term. The plan is to be used to promote long-term financial success and execution of our business strategy. At the time of approval, 1,750,000 shares of our common stock were reserved for issuance under this plan. The 2011 Plan, administered by the Compensation Committee of the Board of Directors, provides for granting of incentive awards in the form of stock options, stock appreciation rights (SARs) and restricted stock to employees, directors and consultants of the Company. Stock options awarded will vest upon the Companys stock achieving a closing price of $1.50 and expire ten years from the grant date or upon employee or director termination. Additionally, a single 200,000 stock option grant was awarded to a third party consultant intended to provide incentive which is aligned with management and the shareholders. Vesting for these option shares will occur once certain performance conditions have been fulfilled. There have been no SARs or restricted stock granted from the 2011 Plan. As of March 31, 2013, there are 1,056,000 shares available for grant under the 2011 Plan.
At March 31, 2013, 1,440,001 shares of Common Stock were reserved for future grants of stock incentive grants under the Companys four stock incentive plans.
1
st
Detect
On January 19, 2010, an independent committee of the Board of Directors of 1
st
Detect, a subsidiary of the Company, approved a grant of 1,180 restricted stock shares and 1,820 stock purchase warrants to certain officers, directors and employees of 1
st
Detect, of which 75 and 45, respectively, have subsequently been cancelled. The awards vested 50% a year over a two-year period. The restricted stock awards are equal to the fair market value of 1
st
Detects common stock on the date of grant as determined by an independent valuation firm. The Company utilized the Black-Scholes methodology in determining the fair market value of the warrants.
1
st
Detect 2011 Stock Incentive Plan
The 2011 Plan was designed to increase shareholder value by compensating employees over the long term. The plan is to be used to promote long-term financial success and execution of our business strategy. At the time of approval, 2,500 shares of 1
st
Detect stock were reserved for issuance under this plan. The 2011 Plan, administered by the Board of Directors of 1
st
Detect, provides for granting of incentive awards in the form of stock options to certain directors, officers and employees of 1
st
Detect. The awards vest upon certain performance conditions being met and expire ten years from the grant date. The stock options have an exercise price equal to the fair market value of 1
st
Detects common stock on the date of grant as determined by an independent valuation firm. As of March 31, 2013, there are 1,775 shares available for grant under the 2011 Plan.
Astrogenetix
On January 19, 2010, an independent committee of the Board of Directors of Astrogenetix, a subsidiary of the Company, approved a grant of 1,550 restricted stock shares and 2,050 stock purchase warrants to certain officers, directors and employees of Astrogenetix, of which 375 and 50 have subsequently been cancelled. The awards vested 50% a year over a two-year period. The restricted stock awards are equal to the fair market value of Astrogentixs common stock on the date of grant as determined by an independent valuation firm. The Company utilized the Black-Scholes methodology in determining the fair market value of the warrants.
(12) 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 March 31, 2013, the Company has established a full valuation allowance against all of its net deferred tax assets.
FASB ASC 740,
Income Taxes
(FASB ASC 740) addresses the accounting for uncertainty in income taxes recognized in an entitys 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. As of March 31, 2013, the Company has a liability of $64,000 ($42,000 net of federal benefit) for unrecognized tax benefits.
For the three and nine months ended March 31, 2013 and 2012, the Companys effective tax rate differed from the federal statutory rate of 35%, primarily due to recording changes to the valuation allowance placed against its net deferred tax assets.
12
The Company files consolidated returns for federal, California, Florida, and Texas income and franchise taxes.
The Company is currently under examination by the Internal Revenue Service for the fiscal years ended June 30, 2008 through 2010. Loss carryovers are generally subject to modification by tax authorities until 3 years after they have been utilized; as such, the Company is subject to examination for the fiscal years ended 2000 through present for federal purposes and fiscal years ended 2006 through present for state purposes.
(13) Purchase of Common Stock
Common stock repurchases under the Companys securities repurchase program may be made from time to time, in the open market, through block trades or otherwise in accordance with applicable regulations of the Securities and Exchange Commission. Depending on market conditions and other factors, these purchases may be commenced or suspended at any time or from time to time without prior notice. Additionally, the timing of such transactions will depend on other corporate strategies and will be at the discretion of the management of the Company.
As of March 31, 2013, we had repurchased 311,660 shares of common stock at a cost of $0.2 million, which represents an average cost of $0.76 per share, and $1.1 million of Senior Convertible Notes payable. All of these repurchases were made prior to the period ended March 31, 2013. As a result, the Company is authorized to repurchase an additional $5.7 million of securities under this program. Additionally, on November 1, 2012, Thomas B. Pickens III and Winn Interests, Ltd. purchased 1,783,746 and 594,581 shares of common stock of the Company, respectively, at an average price of $0.90 per share.
(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.
On January 10, 2013, a lawsuit was filed in a district court in Travis County against Astrotech Corporation by John Porter, the former Senior Vice President, Chief Financial Officer, Treasurer and Secretary of the Company. In the lawsuit, Mr. Porter alleges various breaches of contract claims in connection with his termination from the Company on August 3, 2012. Mr. Porter seeks monetary damages of at least $639,808. While the Company intends to vigorously defend any such actions by Mr. Porter, the Company recorded a liability at March 31, 2013 for its estimate of the probable loss in this matter.
On February 20, 2013, a shareholder derivative lawsuit was filed in the District Court of Travis County, Texas against the current directors and chief executive officer of Astrotech Corporation and against the Company, as nominal defendant. The complaint alleges, among other things, that the directors and chief executive officer breached fiduciary duties to the Company in connection with certain corporate transactions, including loans to subsidiaries and purchases of outstanding shares of the Companys common stock. The Company intends to vigorously defend the lawsuit.
(15) NASDAQ Listing Qualifications
On November 13, 2012, we received written notification from NASDAQ indicating that the minimum bid price of our common stock had fallen below $1.00 for 30 consecutive trading days and that we were therefore not in compliance with NASDAQ Listing Rule 5550(a)(2). On May 14, 2013, we received a second compliance notice from NASDAQ regarding the Company's failure to maintain the minimum bid price for continued listing. However, the NASDAQ staff has determined that the Company is eligible for an additional 180 day grace period, or until November 11, 2013, to regain compliance. NASDAQ's determination was based on the Company meeting the continued listing requirement for market value of publicly held shares and all other applicable requirements for initial listing on the NASDAQ Capital Market, with the exception of the bid price requirement, and the Company's written notice to NASDAQ of its intention to cure the deficiency during the second compliance period by effecting a reverse stock split, if necessary.
(16) Subsequent Events
The Company and ARES have resolved certain issues relative to the early termination of the subcontract in May 2008, including, but not limited to, the completion of the 2005 through 2008 governmental audits by the DCAA. In April 2013 the Company received the remaining outstanding balance of $0.1 million.
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FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical fact are forward-looking statements for purposes of federal and state securities laws. Forward-looking statements may include the words may, will, plans, believes, estimates, expects, intends and other similar expressions. Such statements are subject to risks and uncertainties that could cause our actual results to differ materially from those projected in the statements. Such risks and uncertainties include, but are not limited to:
The effect of economic conditions in the United States or other space faring nations that could impact our ability to access space and support or gain customers;
Our ability to raise sufficient capital to meet our long and short-term liquidity requirements;
Our ability to successfully pursue our business plan and execute our strategy;
Whether we will fully realize the economic benefits under our NASA and other customer contracts;
Technological difficulties and potential legal claims arising from any technological difficulties;
Product demand and market acceptance risks, including our ability to develop and sell products and services to be used by governmental or commercial customers;
Uncertainty in government funding and support for key space programs;
The impact of competition on our ability to win new contracts;
Uncertainty in securing reliable and consistent access to space, including the International Space Station;
Delays in the timing of performance of our contracts;
Our ability to meet technological development milestones and overcome development challenges; and
Risks described in the Risk Factors section of this Quarterly Report on Form 10-Q and our 2012 Annual Report on Form 10-K.
Although we believe that the assumptions underlying our forward-looking statements are reasonable, any of the assumptions could be inaccurate, and, therefore, we cannot assure you that the forward-looking statements included in this Quarterly Report on Form 10-Q will prove to be accurate. In light of the significant uncertainties inherent in our forward-looking statements, the inclusion of such information should not be regarded as a representation by us or any other person that our objectives and plans will be achieved. Some of these and other risks and uncertainties that could cause actual results to differ materially from such forward-looking statements are more fully described in the Risk Factors included in Part II Item 1A of this Report and Part I, Item 1A of our 2012 Annual Report on 10-K and elsewhere in this Quarterly Report on Form 10-Q or in the documents incorporated by reference herein. Except as may be required by applicable law, we undertake no obligation to publicly update or advise of any change in any forward-looking statement, whether as a result of new information, future events or otherwise. In making these statements, we disclaim any obligation to address or update each factor in future filings with the Securities and Exchange Commission (SEC) or communications regarding our business or results, and we do not undertake to address how any of these factors may have caused changes to discussions or information contained in previous filings or communications. In addition, any of the matters discussed above may have affected our past results and may affect future results, so that our actual results may differ materially from those expressed in this Quarterly Report on Form 10-Q and in prior or subsequent communications.
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