As filed with the U.S. Securities and Exchange Commission on July
6, 2020
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
ASTROTECH CORPORATION
(Exact name of Registrant as specified in its charter)
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Delaware
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3826
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91-1273737
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(State or other jurisdiction of
incorporation or organization)
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(Primary Standard Industrial
Classification Code Number)
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(I.R.S. Employer
Identification Number)
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201 West 5th Street, Suite 1275
Austin, Texas 78701
(512) 485-9530
(Address, including zip code, and telephone number, including area
code, of Registrant’s principal executive offices)
Thomas B. Pickens, III
Chief Executive Officer
201 West 5th Street, Suite 1275
Austin, Texas 78701
(512) 485-9530
(Name, address, including zip
code, and telephone number, including area code, of agent for
service)
Copies to:
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John Hempill, Esq.
Stephen Cohen, Esq.
Sheppard, Mullin, Richter & Hampton LLP
30 Rockefeller Plaza
New York, NY 10112
Telephone: (212) 653-8700
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[UNDERWRITER COUNSEL]
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Approximate date of commencement of proposed sale to the
public:
As soon as practicable after the effective date of this
registration statement.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under
the Securities Act of 1933 check the following box: ☐
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please
check the following box and list the Securities Act registration
statement number of the earlier effective registration statement
for the same offering. ☐
If
this Form is a post-effective amendment
filed pursuant to Rule 462(c) under the Securities Act, check the
following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same
offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier
effective registration statement for the same offering.
☐
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer,
smaller reporting company, or an emerging growth company. See the
definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company,” and “emerging growth company” in Rule
12b-2 of the Exchange Act.
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Large accelerated filer
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☐
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Accelerated filer
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☐
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Non-accelerated filer
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☒
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Smaller reporting company
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☒
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Emerging growth company
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☐
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If an emerging growth
company, indicate by check mark if the registrant has elected not
to use the extended transition period for complying with any new or
revised financial accounting standards provided to
Section 7(a)(2)(B) of the Securities
Act. ☐
CALCULATION OF REGISTRATION FEE
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Title of Each Class of Securities to be Registered
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Proposed Maximum Aggregate Offering Price (1)
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Amount of Registration Fee (2)
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Common Stock, par value $0.001 per share
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$
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20,000,000
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$
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2,596
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1.
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Estimated solely for the purpose of computing the amount of the
registration fee pursuant to Rule 457(o) under the Securities
Act of 1933, as amended. Includes shares of common stock that the
underwriters have the option to purchase to cover over-allotments,
if any.
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2.
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Calculated pursuant to Rule 457(o) based on an estimate of the
proposed maximum aggregate offering price.
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The registrant hereby amends this registration statement on such
date or dates as may be necessary to delay its effective date until
the registrant shall file a further amendment which
specifically states that this registration statement shall
thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement
shall become effective on such date as the Securities and Exchange
Commission, acting pursuant to said Section 8(a), may
determine.
The
information in this preliminary prospectus is not complete and may
be changed. We may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is
effective. This preliminary prospectus is not an offer to sell
these securities and it is not soliciting an offer to buy these
securities in any jurisdiction where the offer or sale is not
permitted.
SUBJECT TO COMPLETION, DATED JULY 6, 2020
PRELIMINARY PROSPECTUS
ASTROTECH CORPORATION
[ ] Shares of Common
Stock
We are offering shares of our common stock, par value $0.001 per
share.
Our common stock is listed on the NASDAQ Capital Market under the
symbol “ASTC”. On [ ],2020, the closing price as
reported on the NASDAQ Capital Market was $[ ] per share.
The final public offering price will
be determined through negotiation between us and the lead
underwriters in the offering and the recent market price used
throughout this prospectus may not be indicative of the actual
offering price.
Investing in our common stock involves a high degree of risk. See
“Risk Factors” beginning on page 10 of this prospectus.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal
offense.
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Per Share
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Total
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Public offering price
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Underwriting discount (1)
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Proceeds to us, before expenses (2)
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1.
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See "Underwriting" beginning on page 33 of this prospectus for a
description of compensation payable to the underwriter.
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2.
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We estimate the total expenses of this offering payable by us,
excluding the underwriting discount, will be approximately
$[ ].
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We have granted
a 45-day option to the representative of the underwriters
to purchase up to [ ] additional shares of common
stock solely to cover over-allotments, if any.
We anticipate that delivery of the shares against payment will be
made on or about [ ], 2020.
Sole Book-Running Manager
[UNDERWRITER]
Prospectus dated [ ], 2020
TABLE OF CONTENTS
We and the underwriter have not authorized anyone to provide any
information or to make any representations other than those
contained in or incorporated by reference in this prospectus or in
any free writing prospectuses prepared by or on behalf of us or to
which we have referred you. We take no responsibility for, and can
provide no assurance as to the reliability of, any other
information that others may give you. This prospectus is an offer
to sell only the shares offered hereby, but only under
circumstances and in jurisdictions where it is lawful to do so. The
information contained in or incorporated by reference in this
prospectus is accurate only as of its date regardless of the time
of delivery of this prospectus or of any sale of common
stock.
To the extent there is a conflict between the information contained
in this prospectus, on the one hand, and the information contained
in any document incorporated by reference filed with the U.S.
Securities and Exchange Commission (the “SEC”) before the date of
this prospectus, on the other hand, you should rely on the
information in this prospectus. If any statement in a document
incorporated by reference is inconsistent with a statement in
another document incorporated by reference having a later date, the
statement in the document having the later date modifies or
supersedes the earlier statement.
Neither we nor the underwriter have done anything that would permit
this offering or possession or distribution of this prospectus in
any jurisdiction where action for that purpose is required, other
than in the United States. Persons who come into possession of this
prospectus and any free writing prospectus in jurisdictions outside
the United States are required to inform themselves about and to
observe any restrictions as to this offering and the distribution
of this prospectus and any free writing prospectus applicable to
that jurisdiction.
This
prospectus and the documents incorporated by reference in this
prospectus contain market data and industry statistics
and forecasts that are based on independent industry publications
and other publicly available information. Although we believe that
these sources are reliable, we do not guarantee the accuracy or
completeness of this information and we have not
independently
verified this information. Although we are not aware of any
misstatements regarding the market and industry data presented or
incorporated by reference in this prospectus, these estimates
involve risks and uncertainties and are subject to change
based
on various factors, including those discussed under the heading
“Risk Factors” and any related free writing prospectus.
Accordingly, investors should not place undue reliance on this
information.
PROSPECTUS
SUMMARY
This summary highlights certain information about us, this offering
and selected information contained elsewhere in this prospectus and
in the documents incorporated by reference. This summary is not
complete and does not contain all of the information that you
should consider before deciding whether to invest in our
securities. For a more complete understanding of our company and
this offering, we encourage you to read and consider carefully the
more detailed information contained in or incorporated by reference
in this prospectus, including the information contained under the
heading “Risk Factors” beginning on page 10 of this prospectus, and
the information included in any free writing prospectus that we
have authorized for use in connection with this offering.
Throughout this prospectus, the terms “we,” “us,” “our,” and “our
company” refer to Astrotech Corporation, a Delaware corporation,
and its consolidated subsidiaries unless the context requires
otherwise.
Company Overview
Astrotech Corporation, organized in 1984 as a Washington
corporation, is a science and technology development and
commercialization company that launches, manages, and builds
scalable companies based on innovative technology in order to
maximize shareholder value. In 2017, the Company reincorporated as
a Delaware corporation.
Our Business Units
Astrotech Technology, Inc.
Astrotech Technology, Inc. (“ATI”) owns and licenses the
Astrotech Mass Spectrometer
Technology™ (the “AMS Technology™”), the platform mass
spectrometry technology originally developed by 1st Detect
Corporation (“1st
Detect”). The intellectual property includes 37 granted
patents and five additional patents in process. With a
number of diverse market opportunities for the core technology, ATI
licenses the intellectual property for different fields of use. ATI
currently licenses the intellectual property to 1st Detect
for use in the security and detection market, to AgLAB Inc.
(“AgLAB”) for use in the agriculture market, and to BreathTech
Corporation (“BreathTech”) for use in the healthcare industry.
1st Detect
Corporation
1st
Detect, a licensee of ATI, 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 explosives trace
detectors used at airports, secured facilities, and borders
worldwide.
AgLAB Inc.
AgLAB, a licensee of ATI, is developing the AgLAB-1000™ series of
mass spectrometers for use in the agriculture market. These systems are being designed for applications
in the hemp and cannabis markets to maximize processing
efficiencies and to detect pesticides.
BreathTech Corporation
BreathTech, a licensee of ATI, 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 Coronavirus Lung Disease 2019 (“COVID-19”) or
pneumonia.
Our principal executive offices are located at 201 W. 5th St. Suite
1275, Austin, TX 78701, and our telephone number is
512-485-9530.
Our common stock trades on the NASDAQ Capital Market under the
symbol “ASTC”.
Available Information
Our principal Internet address is
www.astrotechcorp.com. We make available free of charge
on www.astrotechcorp.com our annual, quarterly and current reports,
and amendments to those reports, as soon as reasonably practicable
after we electronically file such material with, or furnish it to,
the SEC. You may also read and copy any materials we file with the
SEC at the SEC’s Public Reference Room at 100 F Street, N.E.,
Washington, D.C. 20549. You may obtain information on the operation
of the Public Reference Room by calling the SEC at 1-800-SEC-0330.
The SEC maintains an Internet site that contains reports, proxy and
information statements, and other information regarding issuers
that file electronically with the SEC at
http://www.sec.gov.
THE
OFFERING
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Common stock outstanding prior to this offering
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7,850,362
shares.
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Common stock offered
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[___] shares.
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Option to purchase additional shares
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The underwriter has a 45-day option to purchase up to an
additional [___] shares of our common stock at the public offering
price, less underwriting discounts and commissions.
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Common stock to be outstanding after this offering
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[___] shares (or [___] shares of common stock if the underwriters
exercise their over-allotment option in full)
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Use of proceeds
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We estimate that our net proceeds from this offering will be
approximately $[___] million, or approximately $[___] million
if the underwriters exercise their over-allotment option in full.
This is based on an assumed public offering price of $[___] per
share, which is the last reported trading price of our common stock
on the Nasdaq Capital Market on [
], 2020, after deducting the estimated underwriting
discounts and commissions and estimated offering expenses payable
by us.
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We intend to use the net proceeds of this offering for continuing
operating expenses and working capital.
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Risk factors
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See “Risk Factors” beginning on page 10 of this prospectus, as well
as other information included in this prospectus, for a discussion
of factors you should read and consider carefully before investing
in our securities.
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NASDAQ Capital Markets symbol
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Our common stock is listed on the NASDAQ Capital Markets under the
symbol “ASTC”.
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The number of shares of our common stock to be outstanding after
this offering as shown above is based on 7,850,362 shares outstanding as
of June 30, 2020 and excludes as of that date:
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265,035 shares of our
common stock issuable upon exercise of outstanding options at a
weighted average exercise price of $5.31 per share;
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85,913 shares of our
common stock issuable upon exercise of outstanding warrants at a
weighted average exercise price of $5.14 per share;
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280,898 shares of common
stock issuable upon the conversion of our Series D Preferred Stock;
and
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2,122,523
shares of our common stock to be reserved for potential future
issuance pursuant to the Astrotech Corporation 2011 Stock Incentive
Plan (the “Plan”).
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Except as otherwise indicated herein, all information in this
prospectus assumes (i) no exercise of the underwriters’ option to
purchase up to an additional [___] shares of common stock
and (ii) no exercise of options issued under our Plan or of
warrants described above.
RISK
FACTORS
An investment in our securities involves a high degree of risk.
This prospectus contains a discussion of the risks applicable to an
investment in our securities. Prior to making a decision about
investing in our securities, you should carefully consider the
specific factors discussed within this prospectus. The risks and
uncertainties we have described are not the only ones we face.
Additional risks and uncertainties not presently known to us or
that we currently deem immaterial may also affect our operations.
The occurrence of any of these known or unknown risks might cause
you to lose all or part of your investment in the offered
securities.
We have incurred significant losses since inception and anticipate
that we will incur continued losses for the foreseeable future.
As of March 31, 2020, we had an accumulated deficit of
approximately $197.7 million. We are unable to predict the extent
of any future losses or when we will become profitable, if at all.
If we are unable to achieve and then maintain profitability, the
market value of our common stock will likely experience significant
decline.
Our business units are in development stage. They have earned
limited revenues and it is uncertain whether they will earn any
revenues in the future or whether any of them will ultimately be
profitable.
Our business units are in an early development stage and have a
limited operating history. Their future operations are subject to
all of the risks inherent in the establishment of a new business
including, but not limited to, risks related to product
development, capital requirements, failure to establish business
relationships, and competitive disadvantages against larger and
more established companies. These business units will require
substantial amounts of funding to continue to develop and
commercialize their products. If such funding comes in the form of
equity financing, such equity financing may involve substantial
dilution to existing shareholders. Even with funding, there can be
no assurance that the development of our potential products will be
successfully completed. In addition, our products may fail to be
effective or attractive to the market or lack the necessary
financial or other resources or relationships to be successful.
These business units can be expected to experience continued
operating losses until they can generate sufficient revenues to
cover their operating costs. Furthermore, there can be no assurance
that the business units will be able to develop, manufacture, or
market additional products in the future, that future revenues will
be significant, that any sales will be profitable, or that the
business units will have sufficient funds available to complete
their commercialization efforts.
Any products and technologies developed and manufactured by our
business units may require regulatory approvals prior to being
made, marketed, sold, and used. There can be no assurance that
regulatory approval of any products will be obtained. In
particular, FDA approval will be required to market the
BreathTest-1000 in the United States. Obtaining FDA approval is a
complex and lengthy process, and there can be no assurance that FDA
approval for the BreathTest-1000 will be granted on a timely basis
or at all.
The commercial success of any of our business units will depend, in
part, on obtaining patent and other intellectual property
protection for the technologies contained in any products
it developed. In addition, our business units may need to
license intellectual property to commercialize future products or
avoid infringement of the intellectual property rights of others.
There can be no assurance that licenses will be available on
acceptable terms and conditions, if at all. Our business units may
suffer if any licenses terminate, if the licensors fail to abide by
the terms of the license or fail to prevent infringement by third
parties, if the licensed patents or other rights are found to be
invalid, or if our respective business unit is unable to enter
into necessary licenses on acceptable terms. If such business unit,
or any third-party, from whom it licenses intellectual property,
fails to obtain adequate patent or other intellectual property
protection for intellectual property covering its products, or if
any protection is reduced or eliminated, others could use the
intellectual property covering the products, resulting in harm to
the competitive business position of this business unit. In
addition, patent and other intellectual property protection may not
provide our business units with a competitive advantage against
competitors that devise ways of making competitive products without
infringing any patents that this business unit owns or has rights
to. Such competition could adversely affect the prices for any
products or the market share of any of our business units and could
have a material adverse effect on its results of operations and
financial condition.
Our
cash and cash equivalents may not be sufficient to fund our
operating expenses,
capital equipment requirements, and other expected liquidity
requirements.
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 that are
not currently contemplated. Factors that could affect our capital
requirements, in addition to those listed above include continued
collections of accounts receivable consistent with our historical
experience and our ability to manage product development
efforts.
No assurances can be given that we will be able to successfully
develop the BreathTest-1000™ or any other new products or
services.
Our business strategy outlines the use of the decades of experience
we have accumulated to expand the services and products we offer to
both U.S. government agencies and commercial industries. These
services and products are in the development stage and involve new
and untested technologies and business models. These technologies
and business models may not be successful, which could result in
the loss of any investment we make in developing them, including
the development of the BreathTest-1000™.
Furthermore, we are subject to risks including, but not limited to,
the following with respect to the development of the
BreathTest-1000™:
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the governmental
approval process could be lengthy, time consuming and is inherently
unpredictable, and we cannot guarantee that the required approvals
for our products, including FDA approvals, will be granted on a
timely basis or at all or that we will ever have a marketable
product;
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customers must be
persuaded that using our products are effective alternatives to
other existing detection methods available for COVID-19 in order
for our products to be commercially successful;
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if we fail to comply
with healthcare regulations, we could face substantial enforcement
actions, including civil and criminal penalties and our business,
operations and financial condition could be adversely
affected.
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Product development involves a high degree of risk and uncertainty,
and there can be no assurance that our potential products will be
successfully developed, achieve their intended benefits, receive
full market authorization, or be commercially successful. Moreover,
as the COVID-19 pandemic persists and further information continues
to develop, we are learning of increased risks and uncertainties in
developing and commercializing new products and services in these
unprecedented and evolving circumstances.
We face various risks related to health epidemics, pandemics and
similar outbreaks, which may have material adverse effects on our
business, financial position, results of operations, and/or cash
flows.
We face various risks related to health epidemics, pandemics and
similar outbreaks, including the global outbreak of COVID-19. In
recent weeks, the continued spread of COVID-19 has led to
disruption and volatility in the global capital markets, which
increases the cost of capital and adversely impacts access to
capital. If significant portions of our workforce are unable to
work effectively, including because of illness, quarantines,
government actions, facility closures or other restrictions in
connection with the COVID-19 pandemic, our operations will likely
be impacted. We may be unable to perform fully on our contracts and
our costs may increase as a result of the COVID-19 outbreak. These
cost increases may not be fully recoverable or adequately covered
by insurance.
It is possible that the continued spread of COVID-19 could also
further cause disruption in our supply chain; cause delay, or limit
the ability of customers to perform, including in making timely
payments to us; cause delay in regulatory certification testing of
our instruments; and cause other unpredictable events.
We
continue to work with our stakeholders (including customers,
employees, suppliers, and local communities) to responsibly address
this global
pandemic. We continue to monitor the situation, to assess further
possible implications to our business, supply chain and customers,
and to take actions in an effort to mitigate adverse
consequences.
We cannot at this time predict the impact of the COVID-19 pandemic,
but it could have a material adverse effect on our business,
financial position, results of operations and/or cash flows.
If we fail to comply with the continued listing requirements
of The Nasdaq Capital Market LLC, our common
stock may be delisted and the price of our common stock and our
ability to access the capital markets could be negatively
impacted.
On February 18, 2020, the Company received a notice (the “Notice”)
from the Listing Qualifications Department of the Nasdaq Stock
Market LLC (“Nasdaq”) stating that the Company was not in
compliance with Nasdaq Listing Rule 5550(b)(1) (the “Rule”) as the
Company’s stockholder’s equity did not meet the required minimum of
$2.5 million for the quarter ended December 31, 2019.
The Notice had no immediate effect on the Company’s listing on the
Nasdaq Capital Market. On April 14, 2020, we submitted a plan to
remain in compliance with the Rule to Nasdaq. On May 21, 2020, the Company received written
notice from the Listing Qualifications Staff of Nasdaq indicating
that the Company has regained compliance with the Rule as of March
31, 2020, as the Company’s 10-Q for the fiscal quarter ending on
that date reported a stockholders’ equity of $2.7
million.
There can be no assurance that we will be able to continue to
comply with the Rule. However, in the event that this offering is
successful and we are able to raise all of the proceeds associated
with this offering, we expect that it will help enable us to remain
in compliance with the Rule. There can be no assurance that this
offering will be successful and that we will be able to raise
adequate proceeds to enable it to remain in compliance with
Nasdaq’s continued listing standards.
We cannot be certain that additional financing will be available on
reasonable terms when needed, or at all, which could seriously harm
our business.
We have incurred net losses and negative cash flow from operations
in recent prior periods, and we may not achieve or maintain
profitability in the future. As a result, we may need additional
financing. Our ability to obtain additional financing, if and when
required, will depend on investor demand, our operating
performance, the condition of the capital markets, and other
factors. Therefore, we may need to raise additional funds and we
cannot assure investors that additional financing will be available
to us on favorable terms when required, or at all. If we raise
additional funds through the issuance of equity, equity-linked, or
debt securities, those securities may have rights, preferences, or
privileges senior to the rights of our common stock, and our
existing stockholders may experience dilution.
There is substantial doubt about our ability to continue as a going
concern, indicating the possibility that we may not be able to
operate in the future. The report of our independent registered
public accounting firm also includes an explanatory paragraph about
our ability to continue as a going concern.
As of March 31, 2020, the Company had cash and cash equivalents of
$4.7 million and restricted cash of $0.1 million, and working
capital was approximately $2.0 million. Restricted cash consists of
two letters of credit relating to purchase orders for the TRACER
1000 product. The Company reported a net loss of $7.5 million for
the fiscal year 2019 and a net loss of $6.2 million for the nine
months ended March 31, 2020, along with net cash used in operating
activities of $8.5 million for the fiscal year 2019 and net cash
used in operating activities of $5.0 million for the nine months
ended March 31, 2020. This raises substantial doubt about the
Company’s ability to continue as a going concern. Our ability to
continue as a going concern is contingent upon, among other
factors, the sale of the shares of our common stock or obtaining
alternate financing.
On April 14,
2020, the Company received the proceeds from a loan in the amount
of $541,500 (the “PPP Loan”) from Pioneer Bank SSB (the “Lender”)
pursuant to the Paycheck Protection Program (the “PPP”) of the
Coronavirus Aid, Relief, and Economic Security Act administered by
the U.S. Small Business Administration. The PPP Loan matures on
April 1, 2022 and bears interest at a rate of 1.0% per annum.
Commencing November 10, 2020, the Company is
required to pay the Lender equal monthly payments of principal
and
interest as necessary to fully amortize by April 1, 2022 the
principal amount outstanding on the PPP Loan as of October 14,
2020. The PPP Loan may be prepaid by the Company at any time prior
to maturity with no prepayment penalties. The PPP Loan is
evidenced
by a promissory note dated April 14, 2020, which contains various
certifications and agreements related to the PPP, as well customary
default and other provisions.
The Company remains resolute in identifying the optimal solution to
its liquidity issue. The Company is currently evaluating several
potential sources of additional liquidity. These include, but are
not limited to, selling the Company or a portion thereof, debt
financing, equity financing, merging, or engaging in a strategic
partnership. The Company is currently evaluating potential
offerings of any combination of common stock, preferred stock,
debt securities, warrants to purchase common stock, preferred stock
or debt securities, or any combination of the foregoing, either
individually or as units comprised of one or more of the other
securities. However, additional funding may not be available when
needed or on terms acceptable to us. If we are unable to
generate funding within a reasonable timeframe, we may have to
delay, reduce or terminate our research and development programs,
limit strategic opportunities, or curtail our business
activities. Astrotech’s consolidated financial statements as
of June 30, 2019 do not include any adjustments that
might result from the outcome of this uncertainty.
Our success depends significantly on the establishment and
maintenance of successful relationships with our customers.
We cannot make any assurances that any customers will require our
services in the future. Therefore, we continue to work on
diversifying our customer base, while going to great lengths to
satisfy the needs of our current customer base.
Third parties may claim we are infringing their intellectual
property rights, and we could suffer significant litigation or
licensing expenses or be prevented from selling products.
As we introduce any new and potentially promising product or
service, or improve existing products or services with new features
or components, companies possessing competing technologies, or
other companies owning patents or other intellectual property
rights, may be motivated to assert infringement claims in order to
generate royalty revenues, delay or diminish potential sales, and
challenge our right to market such products or services. Even if
successful in defending against such claims, patent and other
intellectual property related litigation is costly and time
consuming. In addition, we may find it necessary to initiate
litigation in order to protect our patent or other intellectual
property rights, and even if the claims are well-founded and
ultimately successful, such litigation is typically costly and
time-consuming and may expose us to counterclaims, including claims
for intellectual property infringement, antitrust, or other such
claims. Third parties could also obtain patents or other
intellectual property rights that may require us to either redesign
products or, if possible, negotiate licenses from such third
parties. Adverse determinations in any such litigation could result
in significant liabilities to third parties or injunctions, or
could require us to seek licenses from third parties, and if such
licenses are not available on commercially reasonable terms,
prevent us from manufacturing, importing, distributing, selling, or
using certain products, any one of which could have a material
adverse effect on us. In addition, some licenses may be
non-exclusive, which could provide our competitors access to the
same technologies. Under any of these circumstances, we may incur
significant expenses.
Our ongoing success is dependent upon the continued availability of
certain key employees.
We are dependent in our operations on the continued availability of
the services of our employees, many of whom are individually key to
our current and future success, and the availability of new
employees to implement our growth plans. The market for skilled
employees is highly competitive, especially for employees in
technical fields. While our compensation programs are intended to
attract and retain the employees required for us to be successful,
ultimately, we may not be able to retain the services of all of our
key employees or a sufficient number to execute on our plans. In
addition, we may not be able to continue to attract new employees
as required.
Our operating results may be adversely affected by increased
competition.
We generally
sell our products in industries that have increased competition
through frequent new product and service introductions, rapid
technological changes, and changing industry standards. Without the
timely introduction of new products, services, and enhancements,
our products and services will become technologically obsolete over
time, in
which case our revenue and operating results would suffer. The
success of our new products and services will depend on several
factors, including our ability to:
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properly identify
customer needs and predict future needs;
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innovate and develop new
technologies, services, and applications;
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successfully
commercialize new technologies in a timely manner;
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manufacture and
deliver our products in sufficient volumes and on time;
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differentiate our
offering from our competitors’ offerings;
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price our products
competitively;
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anticipate our
competitors’ development of new products, services, or
technological innovations; and
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control
product quantity in our manufacturing process.
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Our insurance coverage may be inadequate to cover all significant
risk exposures.
We are exposed to liabilities that are unique to the products and
services we provide. We maintain insurance for certain risks, and
we believe our insurance coverage is consistent with general
practices within our industry. However, the amount of our insurance
coverage may not cover all claims or liabilities and we may be
forced to bear substantial costs.
Increased cybersecurity requirements, vulnerabilities, threats, and
more sophisticated and targeted computer crime could pose a risk to
our systems, networks, products, services, and data.
Increased global cybersecurity vulnerabilities, threats, and more
sophisticated and targeted cyber-related attacks pose a risk to the
security of our and our customers’, suppliers’, and third-party
service providers’ products, systems, and networks and the
confidentiality, availability, and integrity of our and our
customers’ data. Although we have implemented policies, procedures,
and controls to protect against, detect, and mitigate these
threats, we remain potentially vulnerable to additional known or
unknown threats. We also have access to sensitive, confidential, or
personal data or information that is subject to privacy and
security laws, regulations, and customer-imposed controls. Despite
our efforts to protect sensitive, confidential, or personal data or
information, we may be vulnerable to material security breaches,
theft, misplaced or lost data, programming errors, employee errors,
and/or malfeasance that could potentially lead to the compromising
of sensitive, confidential, or personal data or information,
improper use of our systems or networks, unauthorized access, use,
disclosure, modification, or destruction of information, defective
products, production downtimes, and operational disruptions. In
addition, a cyber-related attack could result in other negative
consequences, including damage to our reputation or competitiveness
and remediation or increased protection costs, and could subject us
to fines, damages, litigation, and enforcement actions.
Our facilities located in Houston are susceptible to damage caused
by hurricanes or other natural disasters.
Our 1st Detect
facilities in Houston are susceptible to damage caused by
hurricanes or other natural disasters. Although we insure our
properties and maintain business interruption insurance, there can
be no guarantee that the coverage would be sufficient or a claim
will be fulfilled. A natural disaster could result in a temporary
or permanent closure of our business operations, thus impacting our
future financial performance.
If we are unable to anticipate technological advances and customer
requirements in the commercial and governmental markets, our
business and financial condition may be adversely affected.
Our business
strategy employs our personnel’s decades of experience to expand
the services and products we offer to our customers. We believe
that our growth and future financial performance depend upon our
ability to anticipate technological advances and customer
requirements. There can be no assurance that we will be able to
achieve the necessary technological advances for us to remain
competitive. Our failure to anticipate or respond adequately to
changes in technological and market requirements, or delays in
additional product development or introduction, could
have a material adverse effect on our business and financial
performance. Additionally, the cost of capital to fund these
businesses will likely require
dilution of shareholders.
Significant safety concerns could
arise for our BreathTest-1000™ product, which could have a material
adverse effect on our future revenues and financial condition.
If the development of the BreathTest-1000 is successfully
completed, FDA approval will need to be obtained to market the
BreathTest-1000 in the United States. Health care products
typically receive regulatory approval based on data obtained in
controlled clinical trials of limited duration. Following
regulatory approval, these products will be used over longer
periods of time in many patients. Investigators may also conduct
additional, and perhaps more extensive, studies. If new safety
issues are reported, we may be required to amend the conditions of
use. For example, we may be required to provide additional warnings
on the BreathTest-1000 label or narrow its approved intended use,
either of which could reduce the product’s market acceptance. If
serious safety issues arise with the BreathTest-1000 product, sales
of the product could be halted by us or by regulatory authorities.
Safety issues affecting suppliers’ or competitors’ products also
may reduce the market acceptance of our products.
We incur substantial upfront, non-reimbursable costs in preparing
proposals to bid on contracts that we may not be awarded.
Preparing a proposal to bid on a contract is labor-intensive and
results in the incurrence of substantial costs that are generally
not retrievable. Additionally, although we may be awarded a
contract, work performance does not commence for several months
following completion of the bidding process. If funding problems by
the party awarding the contract or other matters further delay our
commencement of work, these delays may lower the value of the
contract, or possibly render it unprofitable.
A failure of a key information technology system, process, or site
could have a material adverse impact on our ability to conduct
business.
We rely extensively on information technology systems to interact
with our employees and our customers. These interactions include,
but are not limited to, ordering and managing materials from
suppliers, converting materials to finished products, shipping
product to customers, processing transactions, summarizing and
reporting results of operations, transmitting data used by our
service personnel and by and among our wide-spread personnel and
facilities, complying with regulatory, legal, and tax requirements,
and other processes necessary to manage our business. If our
systems are damaged or cease to function properly due to any number
of causes, ranging from the failures of third-party service
providers, to catastrophic events, to power outages, to security
breaches, and our business continuity plans do not effectively
compensate on a timely basis, we may suffer interruptions in our
ability to manage operations which may adversely impact our results
of operations and/or financial condition.
A sale of a substantial number of shares of the common stock may
cause the price of our common stock to decline.
If our shareholders sell, or the market perceives that our
shareholders intend to sell for various reasons, substantial
amounts of our common stock in the public market may make it more
difficult for us to sell equity or equity-related securities in the
future at a time and price that we deem reasonable or
appropriate.
We are a smaller reporting company and, as a result of the reduced
disclosure and governance requirements applicable to such
companies, our common stock may be less attractive to
investors.
We are a smaller reporting company, (i.e. a company with less than
$250 million of public float) and we are eligible to take advantage
of certain exemptions from various reporting requirements
applicable to other public companies. We have elected to adopt
these reduced disclosure requirements. We cannot predict if
investors will find our common stock less attractive as a result of
our taking advantage of these exemptions. If some investors find
our common stock less attractive as a result of our choices, there
may be a less active trading market for our common stock and our
stock price may be more volatile.
We are
required to evaluate the effectiveness of our internal control over
financial reporting on an annual basis and publicly disclose any
material weaknesses in our controls. Any adverse results from
such evaluation could
result in a loss of investor confidence in our financial reports
and significant expense to remediate, and ultimately could have an
adverse effect on our stock price.
Section 404 of the Sarbanes-Oxley Act of 2002 requires our
management to assess the effectiveness of our internal control over
financial reporting and to disclose if such controls were unable to
provide assurance that a material error would be prevented or
detected in a timely manner. We have an ongoing program to review
the design of our internal controls framework in keeping with
changes in business needs, implement necessary changes to our
controls design, and test the system and process controls necessary
to comply with these requirements. Because of the inherent
limitations in all control systems, no evaluation of controls can
provide absolute assurance that misstatements due to error or fraud
will not occur or that all control issues and instances of fraud,
if any, within our Company will have been detected.
If we or our independent registered public accounting firm
identifies material weaknesses in our internal controls, the
disclosure of that fact, even if quickly remedied, may cause
investors to lose confidence in our financial statements and our
stock price may decline. Remediation of a material weakness could
require us to incur significant expenses and, if we fail to remedy
any material weakness, our ability to report our financial results
on a timely and accurate basis may be adversely affected, our
access to the capital markets may be restricted, our stock price
may decline, and we may be subject to sanctions or investigation by
regulatory authorities, including the SEC or NASDAQ. We may also be
required to restate our financial statements from prior periods.
Execution of restatements create a significant strain on our
internal resources and could cause delays in our filing of
quarterly or annual financial results, increase our costs, and
cause management distraction. Restatements may also significantly
affect our stock price in an adverse manner.
We can sell additional shares of common stock without consulting
shareholders and without offering shares to existing shareholders,
which would result in dilution of shareholders’ interests in the
Company and could depress our stock price.
Our Certificate of Incorporation authorizes 50,000,000 shares of
common stock, of which 7,850,362 were outstanding as of
June 30, 2020, and our Board is authorized to issue additional
shares of our common stock. In addition, our Certificate of
Incorporation authorizes 2,500,000 shares of “blank check preferred
stock.” Shares of “blank check preferred stock” may be
issued in such series and with such rights, privileges, and
limitations as the Board may, in its sole discretion,
determine. Our Board has designated
300,000 shares as Series A Junior Preferred Stock, none
of which are outstanding. The Board has also designated Series
C and Series D Preferred Stock, of which no shares and 280,898
shares are outstanding, respectively as of June 30, 2020.
Although our Board intends to utilize its reasonable business
judgment to fulfill its fiduciary obligations to our then existing
shareholders in connection with any future issuance of our capital
stock, the future issuance of additional shares of our capital
stock would cause immediate, and potentially substantial, dilution
to our existing shareholders, which could also have a material
effect on the market value of the shares. Furthermore, our Board
may authorize the issuance of a series of preferred stock that
would grant to holders the preferred right to our assets upon
liquidation, the right to receive dividend payments before
dividends are distributed to the holders of common stock, and the
right to the redemption of the shares, together with a premium,
prior to the redemption of the common stock. In addition, our Board
could authorize the issuance of a series of preferred stock that
has greater voting power than the common stock or that is
convertible into our common stock, which could decrease the
relative voting power of the common stock or result in dilution to
our existing shareholders.
Risks
Related to this Offering and our Common Stock
You will experience immediate dilution in the net tangible book
value per share of the common stock you purchase.
The public offering price of our common stock is substantially
higher than our net tangible book value per share of common stock.
Based on the public offering price of $[ ] per share,
investors purchasing shares in this offering will, therefore, incur
immediate dilution of $[ ] in net tangible book value
per share. This dilution figure deducts the estimated discounts and
commissions and estimated offering expenses payable from the public
offering price. See "Dilution" on page 20.
Because we will have broad discretion and flexibility in how the
net proceeds from this offering are used, we may use the net
proceeds in ways in which you disagree.
We intend to use the net proceeds from the sale of shares for
continuing operating expenses and working capital. See "Use of
Proceeds" on page 21. We have not allocated specific amounts
of the net proceeds from this offering for any of the foregoing
purposes. Accordingly, our management will have significant
discretion and flexibility in applying the net proceeds of this
offering. You will be relying on the judgment of our management
with regard to the use of these net proceeds, and you will not have
the opportunity, as part of your investment decision, to assess
whether the net proceeds are being used appropriately. It is
possible that the net proceeds will be invested in a way that does
not yield a favorable, or any, return for us. The failure of our
management to use such funds effectively could have a material
adverse effect on our business, financial condition, operating
results, and cash flow.
The market price of our common stock may be volatile and adversely
affected by several factors.
The market price of our common stock could fluctuate significantly
in response to various factors and events, including:
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the effect of
coronavirus on our business model and on the markets in
general;
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our ability to integrate
operations, technology, products, and services;
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our ability to execute
our business plan;
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our issuance of
additional securities, including debt or equity or a combination
thereof, which will be necessary to fund our operating
expenses;
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announcements of
technological innovations or new products by us or our
competitors;
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loss of any strategic
relationship;
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industry developments,
including, without limitation, changes in healthcare policies or
practices or third-party reimbursement policies;
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economic and other
external factors;
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period-to-period
fluctuations in our financial results; and
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whether an active
trading market in our common stock is maintained and whether we
maintain compliance with Nasdaq Listing Rules.
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In addition, the securities markets have from time to time
experienced significant price and volume fluctuations that are
unrelated to the operating performance of particular companies.
These market fluctuations may also materially and adversely affect
the market price of our common stock.
CAUTIONARY STATEMENT
REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements, which reflect
the views of our management with respect to future events and
financial performance. These forward-looking statements are subject
to a number of uncertainties and other factors that could cause
actual results to differ materially from such statements.
Forward-looking statements are identified by words such as
“anticipates,” “believes,” “estimates,” “expects,” “intends,”
“plans,” “projects,” “targets,” and similar expressions. Such
forward-looking statements may be contained in the sections “Risk
Factors,” and “Business,” among other places in this prospectus.
Readers are cautioned not to place undue reliance on these
forward-looking statements, which are based on the information
available to management at this time and which speak only as of
this date. We undertake no obligation to update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise. For a discussion of some of the factors
that may cause actual results to differ materially from those
suggested by the forward-looking statements, please read carefully
the information under “Risk Factors.”
The identification in this document of factors that may affect
future performance and the accuracy of forward-looking statements
is meant to be illustrative and by no means exhaustive. All
forward-looking statements should be evaluated with the
understanding of their inherent uncertainty. You may rely only on
the information contained in this prospectus.
We have not authorized anyone to provide information different from
that contained in this prospectus. Neither the delivery of this
prospectus nor the sale of our common stock means that information
contained in this prospectus is correct after the date of this
prospectus. This prospectus is not an offer to sell or solicitation
of an offer to buy these securities in any circumstances under
which the offer or solicitation is unlawful.
DILUTION
If you purchase shares of our common stock in this offering, you
will experience dilution to the extent of the difference between
the price per share you pay in this offering and the net tangible
book value per share of our common stock immediately after this
offering. The net tangible book value of our common stock on March
31, 2020 was approximately $2.7 million, or approximately $0.35 per
share. Net tangible book value per share is equal to the amount of
our total tangible assets, less total liabilities, divided by the
aggregate number of shares of our common stock outstanding.
After giving effect to the assumed sale by us of shares of our
common stock in this offering at an assumed public offering price
of $[____] per share of common stock, based on the last reported sale price
of our common stock on the NASDAQ Capital Market on [____],
2020, after deducting the underwriting discount and
estimated offering expenses payable by us, our as adjusted net
tangible book value as of [___], 2020 would have been
approximately $[____], or approximately $[____] per share of
common stock. This represents an immediate increase in net tangible
book value of approximately $[____] per share to existing
stockholders and an immediate dilution of approximately
$[____] per share to new investors purchasing shares of our
common stock in this offering. The following table illustrates this
per share dilution:
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Assumed combined public offering price per share
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Net tangible book value per share as of March 31, 2020
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$
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0.35
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Increase per share attributable to new investors in this
offering
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As adjusted net tangible book value per share as of March 31, 2020
after giving effect to this offering
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Dilution per share to investors participating in this offering
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Each $[____] increase (decrease) in the assumed public
offering price of $[____] per share would increase (decrease)
our as adjusted net tangible book value after this offering by
$[____] million, or $[____] per share, and the dilution per share
to new investors by $[____] per share, assuming that the
number of shares of common stock offered by us, as set forth above,
remains the same and after deducting the underwriting discount and
estimated offering expenses payable by us. We may also increase or
decrease the number of shares of common stock we are offering from
the assumed number of shares of common stock set forth above. An
increase (decrease) of [____] shares of common
stock would increase (decrease) our as adjusted net tangible book
value after this offering by $[____] million, or $[____] per share,
and the dilution per share to new investors by $[____] per
share, assuming that the combined public offering price remains the
same and after deducting the underwriting discount and estimated
offering expenses payable by us. The information discussed above is
illustrative only and will adjust based on the actual public
offering price, the actual number of shares that we offer in this
offering, and other terms of this offering determined at
pricing.
The discussion and table above assumes no exercise of the
underwriter’s option to purchase up to an
additional [___] shares of common stock.
If the underwriter exercises its option to purchase additional
shares of common stock in full, our pro forma as adjusted net
tangible book value per share after this offering would be $[____]
per share. This represents an immediate increase in net tangible
book value of $[____] per share to existing stockholders and
immediate dilution of $[____] per share to investors
purchasing our securities in this offering at a price of $[____]
per common share.
The foregoing discussion and table does not take into account
further dilution to investors in this offering that could occur
upon the exercise of outstanding options and warrants having a per
share exercise price less than the public offering price per share
in this offering.
The number of shares of our common stock to be outstanding after
this offering as shown above is based on 7,850,362 shares outstanding as
of June 30, 2020 and excludes as of that date:
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265,035 shares of our common stock issuable
upon exercise of outstanding options at a weighted average exercise
price of $5.33 per share;
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85,913 shares of our
common stock issuable upon exercise of outstanding warrants at a
weighted average exercise price of $5.14 per share;
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280,898 shares of common
stock issuable upon the conversion of our Series D Preferred Stock;
and
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2,122,523
shares of our common stock to be reserved for potential future
issuance pursuant to the Astrotech Corporation 2011 Stock Incentive
Plan (the “Plan”).
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USE
OF PROCEEDS
We estimate that our net proceeds from this offering will be
approximately $[____] based on an assumed offering price of
$[____], the last reported sale price of our common stock on the
NASDAQ Capital Markets on [__], 2020. If the underwriter
exercises its option to purchase additional shares in full, we
estimate that our net proceeds from this offering will be
approximately $[____].
An $[____] increase (decrease) in the assumed public offering price
of $[____] per share of our common stock would increase (decrease)
the expected net cash proceeds of the offering to us by
approximately $[____]. An increase (decrease)
of [____] in the assumed number of shares sold in this
offering would increase (decrease) the expected net cash proceeds
of the offering to us by approximately $[____], assuming a public
offering price of $[____] per share.
We intend to use the net proceeds of this offering for continuing operating expenses and working
capital.
We may also use a portion of the net proceeds of this offering to
invest in or acquire complementary businesses, products, or
technologies, or to obtain the right to use such complementary
technologies. We have no commitments with respect to any
acquisition or investment and we are not currently involved in any
negotiations with respect to any such transactions.
As of the date of this prospectus, we cannot specify with certainty
all of the particular uses for the net proceeds to be received upon
the completion of this offering. The amounts and timing of our
actual expenditures will depend on numerous factors, including the
status of our product development efforts, sales and marketing
activities, technological advances, amount of cash generated or
used in operations, and competition. Accordingly, our management
will have broad discretion in the application of the net proceeds
and investors will be relying on the judgment of our management
regarding the application of the proceeds of this offering.
BUSINESS
Business Overview
Astrotech Corporation (Nasdaq: ASTC) (“Astrotech,” the “Company,”
“we,” “us,” or “our”), a Delaware corporation organized in 1984, is
a science and technology development and commercialization company
that launches, manages, and builds scalable companies based on
innovative technology in order to maximize shareholder value.
The Company’s efforts are focused on commercializing its platform
mass spectrometry technology through its wholly-owned
subsidiaries:
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Astrotech Technology,
Inc. (“ATI”) owns and licenses the intellectual property related to
the Astrotech Mass
Spectrometer Technology™ (the “AMS Technology”).
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1st Detect
Corporation (“1st
Detect”) is a manufacturer of explosives and narcotics trace
detectors developed for use at airports, secured facilities, and
borders worldwide. 1st Detect
holds an exclusive AMS Technology license from ATI for airport
security applications.
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AgLAB, Inc. (“AgLAB”) is
developing a mass spectrometer for use in the agriculture market
for trace pesticide detection and process control. AgLAB holds an
exclusive AMS Technology license from ATI for agriculture
applications.
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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.
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Our Business Units
Astrotech Technology, Inc.
ATI owns and licenses the AMS Technology, the platform mass
spectrometry technology originally developed by 1st Detect.
The intellectual property includes 37 granted patents and five
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,
including to 1st Detect
for use in the security and detection market, to AgLAB for use in
the agriculture market, and to BreathTech for use in the healthcare
industry.
1st Detect
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
European Civil Aviation Conference (“ECAC”), designed to replace
the ETDs used at airports, cargo facilities, secured facilities,
and borders worldwide. We believe that ETD customers are
unsatisfied with the currently deployed ETD technology, which is
driven by ion mobility spectrometry (“IMS”). We believe that
IMS-based ETDs are fraught with false positives, as they often
misidentify personal care products and other common household
chemicals as explosives, causing 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 easily expandable threat library. With
terrorist threats becoming more numerous, sophisticated, and
lethal, security professionals have been looking for better
instrumentation, and specifically mass spectrometry, to
address the evolving threats,
but mass spectrometry has
long been too expensive, too cumbersome, and not practical for
security applications until the launch of the TRACER
1000.
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. After
receiving ECAC certification for the TRACER 1000 on February 21,
2019, we are now marketing to airports and cargo facilities outside
of the U.S. that accept ECAC certification. In addition, we are
pursuing Transportation Security Administration (“TSA”)
certification, which is necessary to sell the TRACER 1000 to
airport and cargo security customers in the United States as well
as certain additional countries that do not accept ECAC
certification but do accept TSA certification.
On June 26, 2019, the Company announced the official launch of the
TRACER 1000, and on November 22, 2019, we announced our first
commercial sale of TRACER 1000 units to a global shipping and
logistics company.
In the United States, we are working with both TSA and TSA Air
Cargo towards certification. On March 27, 2018, we announced that
the TRACER 1000 was accepted into TSA’s Air Cargo Screening
Technology Qualification Test (“ACSQT”) and, on April 4, 2018, we
announced that the TRACER 1000 was beginning testing with TSA for
passenger screening at airports. On November 14, 2019, we announced
that the TRACER 1000 had been selected by the TSA’s Innovation Task
Force (“ITF”) to conduct live screening at Miami International
Airport. With similar protocols as ECAC testing, we have received
valuable feedback from all programs. With the current COVID-19
crisis, testing with the TSA has been put on indefinite hold. We
expect testing to resume when TSA provides us with the opportunity
to continue their evaluation.
AgLAB Inc.
AgLAB Inc. is a licensee of ATI and has developed the AgLAB-1000™
series of mass spectrometers for use in the agriculture industry
for both pesticide detection and precise process control. 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. These attributes are valuable for agriculture
applications in both the field and processing facilities.
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.
Development of the BreathTest-1000 follows the Company’s positive
results in pre-clinical trials for the BreathDetect-1000™, a rapid
self-serve breathalyzer that detects bacterial infections in the
respiratory tract, including pneumonia. The pre-clinical
trials were conducted in collaboration with UT Health San
Antonio.
Trends and Uncertainties - COVID-19
In March 2020, the World Health Organization declared COVID-19 a
global pandemic.
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 highly uncertain and difficult to
predict, as 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 is 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
remain uncertain.
To
date, we have seen delays with respect to the TSA certification
process and parts of our supply chain as a result of COVID-19. In
addition,
operational fees throughout Europe largely come from airline ticket
fees, and with a reduction in air travel caused by the pandemic, we
are seeing a near-term reduction in demand for ETDs at
checkpoints.
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 on
our financial condition, liquidity, or results of operations is
uncertain.
Business Strategy
1st Detect
There are more than 30,000 IMS instruments deployed in the field
today, with many nearing their end of life. As the current
generation of IMS technology is replaced, we are working to
position the Company as the next-generation solution for the ETD
market with the introduction of the world’s first ETD driven by a
mass spectrometer. With mass spectrometry being the gold standard
of chemical detection, an MS-ETD significantly improves detection
capabilities, dramatically reduces the number of false positives,
and allows for a much more expansive library of compounds of
interest, yielding an instrument that we believe is far superior to
the currently deployed IMS instruments, at a similar price point
and a lower operating cost.
AgLAB Inc.
Initial interest for the AgLAB-1000 has come from the hemp and
cannabis industry. Many derivative hemp and cannabis products are
being manufactured using cannabinoids present in the plant,
primarily tetrahydrocannabinol (“THC”) for cannabis and cannabidiol
(“CBD”) for hemp. Extraction equipment is used to remove the
cannabinoids from the raw plant matter to create an oil. The AgLAB
mass-spec instruments are designed to assist in this process by
maximizing the final product quality and yield.
Many states regulate pesticides for products that are inhaled.
Currently, cannabis producers must send a sample of their products
to a laboratory for testing to ensure that a product does not
contain pesticides above the defined threshold to sell their
products legally. According to industry experts, results from the
laboratory can take several days. Meanwhile, processing equipment
can become contaminated with pesticides from a contaminated batch
and destroy subsequent batches, leading to significant wasted
resources. The AgLAB-1000 is being designed to deliver real-time
pesticide detection, on-site within a few seconds, eliminating the
concern that subsequent batches will be destroyed by a contaminated
batch. Moreover, based on numerous discussions with prospective
customers and industry experts, the market is demanding organically
grown products that do not use any pesticides, driving demand for
testing throughout the supply chain. Current efforts are focused on
the U.S. market, but international markets present attractive
future growth opportunities as the number of countries with legal
recreational or medicinal use continues to expand.
BreathTech Corporation
The BreathTest-1000 product that is currently under development is
being designed to provide an inexpensive and non-invasive screening
device for COVID-19 and associated lung diseases that can offer
results on-site in a very short period of time, which we believe
could be as little as approximately 60 seconds. We believe there is
a strong market need for a quick, frequent or daily, lung disease
test for use in high density and critical locations. Currently
available tests either take too long or are invasive and painful.
The market need for a quick and painless test is considered
significant in the following target markets:
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Convention and
conference centers
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Products and Services
1st Detect
We believe 1st Detect’s
TRACER 1000 significantly outperforms currently deployed
competitive trace detection solutions. The TRACER 1000 was launched
in the summer of 2019 and it has consistently outperformed IMS-ETDs
in a number of side-by-side comparisons during field trials,
specifically related to false alarm rate, probability of detection,
and unit up-time. Initial interest has come from the cargo security
industry, as we announced our first commercial sales to a global
shipping and logistics company in November 2019.
AgLAB Inc.
Leveraging the platform AMS Technology, the AgLAB product line that
is currently under development is being designed for applications
in the hemp and cannabis markets to detect pesticides and to
maximize processing efficiencies. We are nearing the launch of our
first product, which will likely take place summer 2020.
BreathTech Corporation
The BreathTest-1000 product is being developed to provide an
inexpensive and non-invasive screening device for COVID-19 and
associated lung diseases. Leveraging work that was previously
completed using breath samples to analyze lung diseases, we have
determined that the AMS Technology platform can be used to detect
VOC metabolites found in a person’s
breath that could indicate they may have an infection, including
COVID-19 or pneumonia, using a disposable collection tube
and reporting results in a short period of time, which we believe
could potentially be as little as approximately 60
seconds.
Customers, Sales, and Marketing
1st Detect
Marketing efforts at 1st Detect
are currently focused on foreign airports and commercial companies
in aviation and cargo security. The Company is focused on both
direct sales and on channel sales through distributors. While we
have had some degree of success with direct sales, much of the
pipeline generated through distributors has seen delays due to
reduced near-term demand from airports caused by the COVID-19
pandemic.
AgLAB Inc.
The Company has received a number of inquiries from potential
customers in the hemp and cannabis industry regarding our
technology’s ability to detect pesticides. These inquiries led to
the development of our first AgLAB product, which is nearing
completion. We are in discussions with various channel partners,
largely companies with existing distribution channels in the hemp
and cannabis market, that will help sell our products to target
customers. We also plan to hire a sales team to help educate
prospective customers and to expand our reach to sell directly to
customers following the launch of the Ag-LAB-1000.
BreathTech Corporation
Marketing efforts are currently focused on organizations that are
significantly impacted by COVID-19. The goal is to have a qualified
list of prospective customers in greatest need of the Company’s
solution as the Company gets closer to completing the development
of and launching the BreathTest-1000.
Competition
1st Detect
Competition for the TRACER 1000 comes primarily from IMS-based
ETDs. There are several vendors that compete directly with
1st Detect;
however, we believe the TRACER 1000 has a number of attributes that
are superior to competing products.
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IMS-ETD
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1st
Detect’s TRACER 1000
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•High false
alarms
•Lower probability of
detection
•Numerous unscheduled
bake-outs and calibrations
•Limited library of
compounds of interest
•Fixed library requiring
hardware changes to update
•Causes delays at
security/inspection checkpoints
•Low price chemical
detector
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•Near-zero false alarm
rate
•Higher probability of
detection
•Near 100%
up-time
•Unlimited library of
compounds of interest
•Instantaneous library
updates
•Improves throughput at
checkpoints
•Competitive with
IMS
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These claims have been confirmed in numerous discussions with
industry experts and verified in our many field trials.
AgLAB Inc.
We believe the AG-LAB-1000 will be the only solution on the market
that can quickly detect the presence of pesticides in process oils
without a full laboratory analysis, which, according to industry
experts, often takes many days to complete. Additionally, we do not
believe there are other competitors that provide process
optimization solutions to this market. We therefore believe that
our competition is unsophisticated and manual production
methodologies. We further believe that any customer that utilizes
the AG-LAB-1000 will be able to generate higher quality products
with an increased yield, improving their revenue and thus
justifying their investment in the instrument.
BreathTech Corporation
The BreathTest-1000™ product that is currently under development is
being designed to screen for
VOC metabolites found in a person’s breath that could indicate they
may have an infection, including COVID-19 or pneumonia. Given that
breath samples are quick, inexpensive, and painless, we anticipate
that the BreathTest-1000 will be in demand by hospitals, nursing
homes, companies, airlines, hotels, cruise lines, military,
sporting events, performing arts, convention and conference
centers, schools, and likely anywhere that has high concentrations
of people. This product is not expected to compete with the
currently available molecular tests like RT-PCR but is intended to
be only a screening device that, if positive, will suggest a more
precise test. While we know that other researchers are working on a
breath screening solution for COVID-19, to the best of our
knowledge, they are not commercially available.
Research and Development
1st Detect
We invest considerable resources into our internal research and
development functions. Much of our R&D investment is devoted to
the cross-platform AMS Technology as the R&D team continually
works to improve system functionality, optimize design, reduce
cost, and streamline and simplify the software and user experience.
Each market, however, typically requires unique sample introduction
technology, library development, and customized adjustments to the
user interface. While 1st
Detect’s TRACER 1000 is fully commercialized, we do continue to
invest in cross-platform improvements.
AgLAB Inc.
The AgLAB-1000
employs the core AMS Technology. As we near our first product
launch, R&D at AgLAB is primarily devoted to sample
introduction technology, library development, and customized
adjustments to the user interface.
BreathTech
Corporation
The BreathTest-1000 employs the core AMS Technology. BreathTech
R&D activities are being devoted to sample introduction and
library development, which is needed to identify the specific
compounds present in the breath that are indicative of the presence
of lung infections.
We have been in correspondence with the FDA regarding how the FDA
will classify the BreathTest-1000 and the classification has not
yet been determined. The classification will inform the
required FDA premarket submission and review process that will
follow. If premarket notification (510(k) submission) is
required, we will submit a pre-submission request to the
FDA. The pre-submission is a formal mechanism for requesting
feedback from FDA prior to submitting a medical device application.
The timeframe for receiving feedback from a pre-submission request
is approximately 70 calendar days, but may be shorter or
longer.
Simultaneously, we are exploring how to accelerate our time to
market for the BreathTest-1000 by utilizing the Emergency Use
Authorization (“EUA”) that was initially announced on March 24,
2020 related to COVID-19. EUAs allow the FDA to authorize the
use of unapproved and uncleared in vitro (IVD) diagnostic tests
that have not gone through FDA’s review process in anticipation of
a potential emergency or during an actual emergency involving a
chemical, biological, radiological, or nuclear agent (“CBRN”), or
an emerging infectious disease. Several other COVID-19
diagnostic tests have been authorized through the EUA process, and
such authorization remains in effect until the Secretary of the
Department of Health and Human Services (HHS) declares the public
health emergency is terminated. We are hopeful that we will be able
to obtain authorization under the EUA to get our products to market
as quickly as possible, once their development has been completed.
The timeframe for authorization of an EUA is highly variable and
depends on, among other things, the complexity of the product,
completeness of the submission, and technical requirements of the
FDA. Authorization may take as little as one month or as long as a
few months.
Certain Regulatory Matters
We are subject to United States federal, state, and local laws and
regulations designed to protect the environment and to regulate the
discharge of materials into the environment. We are also beholden
to certain regulations designed to protect our domestic technology
from unintended foreign exploitation and regulate certain business
practices. We believe that our policies, practices, and procedures
are properly designed to prevent unreasonable risk of environmental
damage and consequential financial liability. Our operations are
also subject to various regulations under federal laws regarding
the international transfer of technology, as well as to various
federal and state laws related to business operations. In addition,
we are subject to federal contracting procedures, audit, and
oversight. Compliance with environmental laws and regulations and
technology export requirements has not had and, we believe, will
not have in the future, material effects on our capital
expenditures, earnings, or competitive position.
Federal regulations that impact our operations include the
following:
Foreign Corrupt Practices Act. The
Foreign Corrupt Practices Act establishes rules for U.S. companies
doing business internationally. Compliance with these rules is
achieved through established and enforced corporate policies,
documented internal procedures, and financial controls.
Iran Nonproliferation Act of 2000.
This act authorizes the President of the United States to take
punitive action against individuals or organizations known to be
providing material aid to weapons of mass destruction programs in
Iran.
Federal Acquisition Regulations.
Goods and services provided by us to U.S. Government agencies are
subject to Federal Acquisition Regulations (“FAR”). These
regulations provide rules and procedures for invoicing,
documenting, and conducting business under contract with such
entities. The FAR also subjects us to audit by federal auditors to
confirm such compliance.
Truth in Negotiations Act. The
Truth in Negotiations Act was enacted for the purpose of providing
full and fair disclosure by contractors in the conduct of
negotiations with the U.S. Government. The most significant
provision included in the Truth in Negotiations Act is the
requirement that contractors submit certified cost and pricing data
for negotiated procurements above a defined threshold.
Export Administration Act. This
act provides authority to regulate exports, to improve the
efficiency of export regulation, and to minimize interference with
the ability to engage in commerce.
Export Administration Regulations. The Export Administration Regulations (“EAR”)
govern whether a person or company may export goods from the U.S.,
re-export goods from a foreign country, or transfer goods from one
person or company to another in a foreign country.
Medical Device Regulation
FDA Premarket Clearance and Approval
Requirements. Unless an
exemption applies, each medical device commercially distributed in
the U.S. requires either FDA clearance of a 510(k) premarket
notification or PMA approval. Under the FDCA, medical devices are
classified into one of three classes-Class I, Class II, or Class
III-depending on the degree of risk associated with each medical
device and the extent of manufacturer and regulatory control needed
to ensure its safety and effectiveness. Class I includes devices
with the lowest risk to the patient and are those for which safety
and effectiveness can be assured by adherence to the FDA’s General
Controls for medical devices, which include compliance with the
applicable portions of the Quality System Regulation (“QSR”),
facility registration and product listing, reporting of adverse
medical events, and truthful and non-misleading labeling,
advertising, and promotional materials. Some Class I devices may
require premarket notification to FDA.
Class II devices are subject to the FDA’s General Controls, and
special controls as deemed necessary by the FDA to ensure the
safety and effectiveness of the device. These special controls can
include performance standards, post-market surveillance, patient
registries, and FDA guidance documents. While most Class I devices
are exempt from the 510(k) premarket notification requirement,
manufacturers of most Class II devices are required to submit to
the FDA a premarket notification under Section 510(k) of the FDCA
requesting permission to commercially distribute the device. The
FDA’s permission to commercially distribute a device subject to a
510(k) premarket notification is generally known as 510(k)
clearance. Under the 510(k) process, the manufacturer must submit
to the FDA a premarket notification demonstrating that the device
is “substantially equivalent” to either a device that was legally
marketed prior to May 28, 1976, the date upon which the Medical
Device Amendments of 1976 were enacted, or another commercially
available device that was cleared to through the 510(k)
process.
Devices deemed by the FDA to pose the greatest risks, such as
life-sustaining, life-supporting or some implantable devices, or
devices that have a new intended use, or use advanced technology
that is not substantially equivalent to that of a legally marketed
device, are placed in Class III, requiring approval of a premarket
application (“PMA”).
The PMA process is more demanding than the 510(k) premarket
notification process. In a PMA, the manufacturer must demonstrate
that the device is safe and effective, and the PMA must be
supported by extensive data, including data from preclinical
studies and human clinical trials. The PMA must also contain a full
description of the device and its components, a full description of
the methods, facilities and controls used for manufacturing, and
proposed labeling. Following receipt of a PMA, the FDA determines
whether the application is sufficiently complete to permit a
substantive review. If the FDA accepts the application for review,
it has 180 days under the FDCA to complete its review of a PMA,
although in practice, the FDA’s review often takes significantly
longer, and can take up to several years. An advisory panel of
experts from outside the FDA may be convened to review and evaluate
the application and provide recommendations to the FDA as to the
approvability of the device. The FDA may or may not accept the
panel’s recommendation. In addition, the FDA will generally conduct
a preapproval inspection of the applicant or its third-party
manufacturers’ or suppliers’ manufacturing facility or facilities
to ensure compliance with the QSR.
The FDA will approve the new device for commercial distribution if
it determines that the data and information in the PMA constitute
valid scientific evidence and that there is reasonable assurance
that the device is safe and effective for its intended use(s). The
FDA may approve a PMA with post-approval conditions intended to
ensure the safety and effectiveness of the device, including, among
other things, restrictions on labeling, promotion, sale and
distribution, and collection of long-term follow-up data from
patients in the clinical study that supported PMA approval or
requirements to conduct additional clinical studies post-approval.
The FDA may condition PMA approval on some form of post-market
surveillance when deemed necessary to protect the public health or
to provide additional safety and efficacy data for the device in a
larger population or for a longer period of use. Failure to comply
with the conditions of approval can result in material adverse
enforcement action, including withdrawal of the approval.
Certain changes to an approved device, such as changes in
manufacturing facilities, methods, or quality control procedures,
or changes in the design performance specifications, which affect
the safety or effectiveness of the device, require submission of a
PMA supplement. PMA supplements often require submission of the
same type of information as a PMA, except that the supplement is
limited to information needed to support any changes from the
device covered by the original PMA and may not require as extensive
clinical data or the convening of an advisory panel. Certain other
changes to an approved device require the submission of a new PMA,
such as when the design change causes a different intended use,
mode of operation, and technical basis of operation, or when the
design change is so significant that a new generation of the device
will be developed, and the data that were submitted with the
original PMA are not applicable for the change in demonstrating a
reasonable assurance of safety and effectiveness.
Clinical Trials. Clinical trials
are almost always required to support a PMA and are sometimes
required to support a 510(k) submission. All clinical
investigations of investigational devices to determine safety and
effectiveness must be conducted in accordance with the FDA’s
investigational device exemption ("IDE") regulations which govern
investigational device labeling, prohibit promotion of the
investigational device, and specify an array of recordkeeping,
reporting and monitoring responsibilities of study sponsors and
study investigators. If the device presents a “significant risk” to
human health, as defined by the FDA, the FDA requires the device
sponsor to submit an IDE application to the FDA, which must become
effective prior to commencing human clinical trials.
In addition, clinical studies must be approved by, and conducted
under the oversight of, an Institutional Review Board ("IRB") for
each clinical site. The IRB is responsible for the initial and
continuing review of the IDE, and may pose additional requirements
for the conduct of the study. If an IDE application is approved by
the FDA and one or more IRBs, human clinical trials may begin at a
specific number of investigational sites with a specific number of
patients, as approved by the FDA. If the device presents a
non-significant risk to the patient, a sponsor may begin the
clinical trial after obtaining approval for the trial by one or
more IRBs without separate approval from the FDA, but must still
follow abbreviated IDE requirements, such as monitoring the
investigation, ensuring that the investigators obtain informed
consent, and labeling and record-keeping requirements.
During a study, the sponsor is required to comply with the
applicable FDA requirements, including, for example, trial
monitoring, selecting clinical investigators and providing them
with the investigational plan, ensuring IRB review, adverse event
reporting, record keeping, and prohibitions on the promotion of
investigational devices or on making safety or effectiveness claims
for them. The clinical investigators in the clinical study are also
subject to FDA regulations and must obtain patient informed
consent, rigorously follow the investigational plan and study
protocol, control the disposition of the investigational device,
and comply with all reporting and recordkeeping requirements.
Additionally, after a trial begins, we, the FDA or the IRB could
suspend or terminate a clinical trial at any time for various
reasons, including a belief that the risks to study subjects
outweigh the anticipated benefits.
Post-market Regulation. After a
device is cleared or approved for marketing, numerous and pervasive
regulatory requirements continue to apply. These
include:
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establishment
registration and device listing with the FDA;
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QSR requirements, which
require manufacturers, including third-party manufacturers, to
follow stringent design, testing, control, documentation, and other
quality assurance procedures during all aspects of the design and
manufacturing process;
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labeling and marketing
regulations, which require that promotion is truthful, not
misleading, fairly balanced, provide adequate directions for use,
and that all claims are substantiated, and also prohibit the
promotion of products for unapproved or “off-label” uses and impose
other restrictions on labeling; FDA guidance on off-label
dissemination of information and responding to unsolicited requests
for information;
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clearance or approval of
product modifications to 510(k)-cleared devices that could
significantly affect safety or effectiveness or that would
constitute a major change in intended use of one of our cleared
devices, or approval of a supplement for certain modifications to
PMA devices;
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medical device reporting
regulations, which require that a manufacturer report to the FDA if
a device it markets may have caused or contributed to a death or
serious injury, or has malfunctioned and the device or a similar
device that it markets would be likely to cause or contribute to a
death or serious injury, if the malfunction were to
recur;
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correction, removal, and recall
reporting regulations, which require that manufacturers report to
the FDA field corrections and product recalls or removals if undertaken to reduce a
risk to health posed by the device or to remedy a violation of the
FDCA that may present a risk to health;
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complying with the new
federal law and regulations requiring Unique Device Identifiers
(UDI) on devices and also requiring the submission of certain
information about each device to the FDA’s Global Unique Device
Identification Database (GUDID);
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the FDA’s recall
authority, whereby the agency can order device manufacturers to
recall from the market a product that is in violation of governing
laws and regulations; and
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post-market surveillance
activities and regulations, which apply when deemed by the FDA to
be necessary to protect the public health or to provide additional
safety and effectiveness data for the device.
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the federal Physician
Sunshine Act and various state and foreign laws on reporting
remunerative relationships with health care customers;
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the federal
Anti-Kickback Statute (and similar state laws) prohibiting, among
other things, soliciting, receiving, offering or providing
remuneration intended to induce the purchase or recommendation of
an item or service reimbursable under a federal healthcare program,
such as Medicare or Medicaid. A person or entity does not have to
have actual knowledge of this statute or specific intent to violate
it to have committed a violation; and
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the federal False Claims
Act (and similar state laws) prohibiting, among other things,
knowingly presenting, or causing to be presented, claims for
payment or approval to the federal government that are false or
fraudulent, knowingly making a false statement material to an
obligation to pay or transmit money or property to the federal
government or knowingly concealing, or knowingly and improperly
avoiding or decreasing, an obligation to pay or transmit money to
the federal government. The government may assert that claim
includes items or services resulting from a violation of the
federal Anti-Kickback Statute constitutes a false or fraudulent
claim for purposes of the false claims statute.
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We may be subject to similar foreign laws that may include
applicable post-marketing requirements such as safety surveillance.
Our manufacturing processes, or those of any contract manufacturer
that we engage, are required to comply with the applicable portions
of the QSR, which cover the methods and the facilities, controls
for the design, manufacture, testing, production, processes,
controls, quality assurance, labeling, packaging, distribution,
installation, and servicing of finished devices intended for human
use. The QSR also requires, among other things, maintenance of a
device master file, device history file, and complaint files. The
discovery of previously unknown problems with any of our products,
including unanticipated adverse events or adverse events of
increasing severity or frequency, whether resulting from the use of
the device within the scope of its clearance or off-label by a
physician in the practice of medicine, could result in restrictions
on the device, including the removal of the product from the market
or voluntary or mandatory device recalls.
The FDA has broad regulatory compliance and enforcement powers. If
the FDA determines that we failed to comply with applicable
regulatory requirements, it can take a variety of compliance or
enforcement actions, which may result in any of the following
sanctions:
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warning letters,
untitled letters, fines, injunctions, consent decrees, and civil
penalties;
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recalls, withdrawals, or
administrative detention or seizure of our products;
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operating restrictions
or partial suspension or total shutdown of production (due to
violations of the QSR or other applicable regulations) refusing or
delaying requests for 510(k) marketing clearance or PMA approvals
of new products or modified products;
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withdrawing 510(k)
clearances or PMA approvals that have already been
granted;
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refusal to grant export
or import approvals for our products; or
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Regulation of
Medical Devices in the EEA. There is currently no
premarket government review of medical devices in the European
Economic Area (“EEA”) (which is comprised of the 28 Member States
of the European Union ("E.U.") plus Norway, Liechtenstein, and
Iceland). However, all medical devices placed on the market in the
EEA must meet the relevant essential requirements laid down in
Annex I of Directive 93/42/EEC concerning medical devices ("the
Medical Devices Directive"). The most fundamental essential
requirement is that a medical device must be designed and
manufactured in such a way that it will not compromise the clinical
condition or safety of patients,
or the safety
and health of users and others. In addition, the device must
achieve the performances intended by the manufacturer and be
designed, manufactured, and
packaged in a suitable manner. The European Commission has adopted
various standards applicable to medical devices. These include
standards governing common requirements, such as sterilization and
safety of medical electrical equipment and product standards
for certain types of medical devices. There are also harmonized
standards relating to design and manufacture. While not mandatory,
compliance with these standards is viewed as the easiest way to
satisfy the essential requirements as a practical matter.
Compliance with a standard developed to implement an essential
requirement also creates a rebuttable presumption that the device
satisfies that essential requirement.
To demonstrate compliance with the essential requirements laid down
in Annex I to the Medical Devices Directive, medical device
manufacturers must undergo a conformity assessment procedure, which
varies according to the type of medical device and its
classification. Conformity assessment procedures require an
assessment of available clinical evidence, literature data for the
product, and post-market experience in respect of similar products
already marketed. Except for low-risk medical devices (Class I
non-sterile, non-measuring devices), where the manufacturer can
self-declare the conformity of its products with the essential
requirements (except for any parts which relate to sterility or
metrology), a conformity assessment procedure requires the
intervention of a Notified Body. Notified bodies are often separate
entities and are authorized or licensed to perform such assessments
by government authorities. The notified body would typically audit
and examine a product’s technical dossiers and the manufacturers’
quality system. If satisfied that the relevant product conforms to
the relevant essential requirements, the notified body issues a
certificate of conformity, which the manufacturer uses as a basis
for its own declaration of conformity. The manufacturer may then
apply the CE Mark to the device, which allows the device to be
placed on the market throughout the EEA. Once the product has been
placed on the market in the EEA, the manufacturer must comply with
requirements for reporting incidents and field safety corrective
actions associated with the medical device.
In order to demonstrate safety and efficacy for their medical
devices, manufacturers must conduct clinical investigations in
accordance with the requirements of Annex X to the Medical Devices
Directive ("MDD"), Annex 7 of the Active Implantable Medical
Devices Directive ("AIMDD"), and applicable European and
International Organization for Standardization standards, as
implemented or adopted in the EEA member states. Clinical trials
for medical devices usually require the approval of an ethics
review board and approval by or notification to the national
regulatory authorities. Both regulators and ethics committees also
require the submission of serious adverse event reports during a
study and may request a copy of the final study report.
On April 5, 2017, the European Parliament passed the Medical
Devices Regulation (Regulation 2017/745), which repeals and
replaces the E.U. Medical Devices Directive and the Active
Implantable Medical Devices Directive. Unlike directives, which
must be implemented into the national laws of the EEA member
States, the regulations would be directly applicable, i.e., without
the need for adoption of EEA member State laws implementing them,
in all EEA member States and are intended to eliminate current
differences in the regulation of medical devices among EEA member
States. The Medical Devices Regulation, among other things, is
intended to establish a uniform, transparent, predictable, and
sustainable regulatory framework across the EEA for medical devices
and ensure a high level of safety and health while supporting
innovation. The Medical Devices Regulation will only become
applicable in May 2020, however CE certificates issued under the
AIMDD or MDD framework that are in effect at that time will remain
valid for the duration of that certificate provided significant
changes are not made to the devices. Once applicable, the new
regulations will among other things:
|
|
•
|
strengthen the rules on
placing devices on the market and reinforce surveillance once they
are available;
|
|
|
•
|
establish explicit
provisions on manufacturers’ responsibilities for the follow-up of
the quality, performance, and safety of devices placed on the
market;
|
|
|
•
|
improve the traceability
of medical devices throughout the supply chain to the end-user or
patient through a unique identification number;
|
|
|
•
|
set up a central
database to provide patients, healthcare professionals, and the
public with comprehensive information on products available in the
E.U.;
|
|
|
•
|
strengthened rules for
the assessment of certain high-risk devices, such as implants,
which may have to undergo an additional check by experts before
they are placed on the market.
|
We
are subject to regulations and product registration requirements in
many foreign countries in which we may sell our products, including
in the areas of:
|
|
•
|
design, development, and
manufacturing;
|
|
|
•
|
product safety
reporting;
|
|
|
•
|
marketing, sales, and
distribution;
|
|
|
•
|
packaging and storage
requirements;
|
|
|
•
|
content and language of
instructions for use;
|
|
|
•
|
record keeping
procedures;
|
|
|
•
|
advertising and
promotion;
|
|
|
•
|
recalls and field
corrective actions;
|
|
|
•
|
post-market
surveillance, including reporting of deaths or serious injuries and
malfunctions that, if they were to recur, could lead to death or
serious injury;
|
|
|
•
|
import and export
restrictions;
|
|
|
•
|
tariff regulations,
duties, and tax requirements;
|
|
|
•
|
registration for
reimbursement; and
|
|
|
•
|
necessity of testing
performed in country by distributors for licensees.
|
The time required to obtain clearance required by foreign countries
may be longer or shorter than that required for FDA clearance, and
requirements for licensing a product in a foreign country may
differ significantly from FDA requirements.
Federal, State, and Foreign Fraud and Abuse and Physician Payment
Transparency Laws. In addition to
FDA restrictions on marketing and promotion of drugs and devices,
other federal and state laws may restrict our business practices if
our products will be reimbursable under federal healthcare
programs. These laws include, without limitation, foreign, federal,
and state anti-kickback and false claims laws, as well as
transparency laws regarding payments or other items of value
provided to healthcare providers.
The federal Anti-Kickback Statute prohibits, among other things,
knowingly and willfully offering, paying, soliciting or receiving
any remuneration (including any kickback, bribe or rebate),
directly or indirectly, overtly or covertly, in cash or in kind to
induce or in return for purchasing, leasing, ordering or arranging
for or recommending the purchase, lease or order of any good,
facility, item or service reimbursable, in whole or in part, under
Medicare, Medicaid or other federal healthcare programs.
Violations of the federal Anti-Kickback Statute may result in civil
monetary penalties up to $100,000 for each violation, plus up to
three times the remuneration involved. Civil penalties for such
conduct can further be assessed under the federal False Claims Act.
Violations can also result in criminal penalties, including
criminal fines of up to $100,000 and imprisonment of up to 10
years. Similarly, violations can result in exclusion from
participation in government healthcare programs, including Medicare
and Medicaid. Liability under the federal Anti-Kickback Statute may
also arise because of the intentions or actions of the parties with
whom we do business.
The federal civil False Claims Act prohibits, among other things,
any person or entity from knowingly presenting, or causing to be
presented, a false or fraudulent claim for payment or approval to
the federal government or knowingly making, using or causing to be
made or used a false record or statement material to a false or
fraudulent claim to the federal government. A claim includes “any
request or demand” for money or property presented to the U.S.
government. The federal civil False Claims Act also applies to
false submissions that cause the government to be paid less than
the amount to which it is entitled, such as a rebate. Intent to
deceive is not required to establish liability under the civil
federal civil False Claims Act.
In addition,
private parties may initiate “qui tam” whistleblower lawsuits
against any person or entity under the federal civil False Claims
Act in the name of the government and share in the proceeds of the
lawsuit. Penalties for federal
civil False Claim Act violations include fines for each false
claim, plus up to three times the amount of damages sustained by
the federal
government and, most critically, may provide the basis for
exclusion from the federally funded healthcare program The criminal
False Claims Act prohibits the making or presenting of a claim to
the government knowing such claim to be false, fictitious
or
fraudulent and, unlike the federal civil False Claims Act, requires
proof of intent to submit a false claim. When an entity is
determined to have violated the federal civil False Claims Act, the
government may impose civil fines and penalties ranging
from
$11,181 to $22,363 for each false claim, plus treble damages, and
exclude the entity from participation in Medicare, Medicaid, and
other federal healthcare programs.
The Civil Monetary Penalty Act of 1981 imposes penalties against
any person or entity that, among other things, is determined to
have presented or caused to be presented a claim to a federal
healthcare program that the person knows or should know is for an
item or service that was not provided as claimed or is false or
fraudulent, or offering or transferring remuneration to a federal
healthcare beneficiary that a person knows or should know is likely
to influence the beneficiary’s decision to order or receive items
or services reimbursable by the government from a particular
provider or supplier.
The Health Insurance Portability and Accountability Act of 1996
("HIPAA") also created additional federal criminal statutes that
prohibit among other actions, knowingly and willfully executing, or
attempting to execute, a scheme to defraud any healthcare benefit
program, including private third-party payors, knowingly and
willfully embezzling or stealing from a healthcare benefit program,
willfully obstructing a criminal investigation of a healthcare
offense, and knowingly and willfully falsifying, concealing or
covering up a material fact or making any materially false,
fictitious or fraudulent statement in connection with the delivery
of or payment for healthcare benefits, items or services. Similar
to the federal Anti-Kickback Statute, a person or entity does not
need to have actual knowledge of the statute or specific intent to
violate it in order to have committed a violation.
Many foreign countries have similar laws relating to healthcare
fraud and abuse. Foreign laws and regulations may vary greatly from
country to country. For example, the advertising and promotion of
our products is subject to E.U. directives concerning misleading
and comparative advertising and unfair commercial practices, as
well as other EEA Member State legislation governing the
advertising and promotion of medical devices. These laws may limit
or restrict the advertising and promotion of our products to the
general public and may impose limitations on our promotional
activities with healthcare professionals. Also, many U.S. states
have similar fraud and abuse statutes or regulations that may be
broader in scope and may apply regardless of payor, in addition to
items and services reimbursed under Medicaid and other state
programs.
Data Privacy and Security Laws. In
the future, we may also be subject to various federal, state, and
foreign laws that protect personal information including certain
patient health information, such as the E.U. General Data
Protection Regulation (“GDPR”) and the California Consumer Privacy
Act (“CCPA”), and restrict the use and disclosure of patient health
information, such as HIPAA, as amended by HITECH, in the
U.S.
HIPAA established uniform standards governing the conduct of
certain electronic healthcare transactions and requires certain
entities, called covered entities, to comply with standards that
include the privacy and security of protected health information
(“PHI”). HIPAA also requires business associates, such as
independent contractors or agents of covered entities that have
access to PHI in connection with providing a service to or on
behalf of a covered entity, of covered entities to enter into
business associate agreements with the covered entity and to
safeguard the covered entity’s PHI against improper use and
disclosure.
The HIPAA
privacy regulations cover the use and disclosure of PHI by covered
entities as well as business associates, which are defined to
include subcontractors that create, receive, maintain, or transmit
PHI on behalf of a business associate. They also set forth certain
rights that an individual has with respect to his or her PHI
maintained by a covered entity, including the right to access or
amend certain records containing PHI, or to request restrictions on
the use or disclosure of PHI. The security regulations establish
requirements for safeguarding the confidentiality, integrity, and
availability of PHI that is electronically transmitted or
electronically stored. HITECH, among other things, established
certain health information security breach notification
requirements. A covered entity must notify any individual whose PHI
is breached according to the specifications set forth in the breach
notification rule. The HIPAA privacy and security regulations
establish a uniform federal “floor” and do not supersede state laws
that are more stringent or provide individuals with greater rights
with respect to the privacy or security of, and access to, their
records
containing PHI or insofar as such state laws apply to personal
information that is broader in scope than PHI as
defined under HIPAA.
HIPAA requires the notification of patients, and other compliance
actions, in the event of a breach of unsecured PHI. If notification
to patients of a breach is required, such notification must be
provided without unreasonable delay and in no event later than 60
calendar days after discovery of the breach. In addition, if the
PHI of 500 or more individuals is improperly used or disclosed, we
would be required to report the improper use or disclosure to the
U.S. Department of Health and Human Services ("HHS") which would
post the violation on its website, and to the media. Failure to
comply with the HIPAA privacy and security standards can result in
civil monetary penalties up to $58,490 per violation, not to exceed
$1.75 million per calendar year for non-compliance of an identical
provision, and, in certain circumstances, criminal penalties with
fines up to $250,000 per violation and/or imprisonment.
HIPAA authorizes state attorneys general to file suit on behalf of
their residents for violations. Courts are able to award damages,
costs and attorneys’ fees related to violations of HIPAA in such
cases. While HIPAA does not create a private right of action
allowing individuals to file suit against us in civil court for
violations of HIPAA, its standards have been used as the basis for
duty of care cases in state civil suits such as those for
negligence or recklessness in the misuse or breach of PHI. In
addition, HIPAA mandates that the Secretary of HHS conduct periodic
compliance audits of HIPAA covered entities, and their business
associates for compliance with the HIPAA privacy and security
standards. It also tasks HHS with establishing a methodology
whereby harmed individuals who were the victims of breaches of
unsecured PHI may receive a percentage of the civil monetary
penalty paid by the violator.
In addition, California enacted the CCPA, effective January 1,
2020, which, among other things, creates new data privacy
obligations for covered companies and provides new privacy rights
to California residents, including the right to opt out of certain
disclosures of their information. The CCPA also creates a private
right of action with statutory damages for certain data breaches,
thereby potentially increasing risks associated with a data breach.
Although the law includes limited exceptions, including for
“protected health information” maintained by a covered entity or
business associate, it may regulate or impact our processing of
personal information depending on the context.
In the EEA we may become subject to laws which restrict our
collection, control, processing, and other use of personal data
(i.e. data relating to an identifiable living individual) including
the GDPR (and any national laws implementing the GDPR). As part of
our operations, we process personal data belonging to data subjects
in the EEA, including employees, contractors, suppliers,
distributors, service providers, customers, patients, or clinical
trial participants. For patients or clinical trial participants, we
process special categories of personal data like health and medical
information. We need to ensure compliance with the GDPR (and any
applicable national laws implementing the GDPR) in each applicable
EEA jurisdiction.
Healthcare Reform. The U.S. and
some foreign jurisdictions are considering or have enacted a number
of legislative and regulatory proposals to change the healthcare
system in ways that could affect our ability to sell our products
profitably. Among policy makers and payors in the U.S. and
elsewhere, there is significant interest in promoting changes in
healthcare systems with the stated goals of containing healthcare
costs, improving quality or expanding access. Current and future
legislative proposals to further reform healthcare or reduce
healthcare costs may limit coverage of or lower reimbursement for
the procedures associated with the use of our products. The cost
containment measures that payors and providers are instituting and
the effect of any healthcare reform initiative implemented in the
future could impact our revenue from the sale of our
products.
We expect additional state and federal healthcare reform measures
to be adopted in the future, any of which could limit the amounts
that federal and state governments will pay for healthcare products
and services, which could result in reduced demand for our products
or additional pricing pressure.
Regulatory Compliance and Risk Management
We maintain compliance with regulatory requirements and manage our
risks through a program of compliance, awareness, and insurance,
which includes maintaining certain insurances and a continued
emphasis on safety to mitigate any risks.
Employees
As of June 30, 2020, we employed 27 employees, none of which were
covered by any collective bargaining agreements.
EXECUTIVE
COMPENSATION
The following table and footnotes provide information on
compensation for the services of our Named Executive Officers
(“NEOs”) for fiscal year 2020 and, where required, fiscal year
2019.
|
Name and Principal Position
|
|
Fiscal Year
|
|
Salary
($)
|
|
|
Bonus
($)
|
|
Stock Awards
($)(1)
|
|
|
Options
($)(2)
|
|
|
All Other Compensation ($)(3)
|
|
|
Total
($)
|
|
|
Thomas B. Pickens III;
|
|
2020
|
|
|
429,707
|
|
|
—
|
|
|
39,703
|
|
|
|
50,634
|
|
|
|
15,294
|
|
|
|
535,338
|
|
|
Chief Executive Officer
|
|
2019
|
|
|
421,049
|
|
|
—
|
|
|
21,262
|
|
|
|
58,958
|
|
|
|
33,618
|
|
|
|
534,887
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eric N. Stober;
|
|
2020
|
|
|
300,500
|
|
|
—
|
|
|
11,344
|
|
|
|
27,096
|
|
|
|
977
|
|
|
|
339,917
|
|
|
Chief Financial Officer
|
|
2019
|
|
|
294,716
|
|
|
—
|
|
|
6,075
|
|
|
|
31,550
|
|
|
|
14,891
|
|
|
|
347,232
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rajesh Mellacheruvu;
|
|
2020
|
|
|
278,009
|
|
|
—
|
|
|
39,703
|
|
|
|
34,779
|
|
|
|
2,395
|
|
|
|
354,887
|
|
|
Chief Operating Officer
|
|
2019
|
|
|
272,663
|
|
|
—
|
|
|
21,262
|
|
|
|
40,497
|
|
|
|
8,058
|
|
|
|
342,480
|
|
|
|
1.
|
The amounts in this column include restricted stock granted to the
NEOs. On December 17, 2018, Mr. Pickens was granted 35,000 shares
of restricted stock, Mr. Stober was granted 10,000 shares of
restricted stock, and Mr. Mellacheruvu was granted 35,000 shares of
restricted stock. These grants vest over a three-year period and
represented in this column is the amount that vested during that
fiscal year.
|
|
|
2.
|
The amounts in this column include stock options awards for the
NEOs. On May 9, 2017, Mr. Pickens was awarded 40,000 options, Mr.
Stober was awarded 20,000 options, and Mr. Mellacheruvu was awarded
25,671 options. These options vest over a three-year period and
represented in this column is the amount that vested during that
fiscal year.
|
|
|
3.
|
The amounts in this column include the following: supplemental
disability insurance premiums, cellular telephone service
allowances, matching contributions under our 401(k) savings plan,
and payments associated with a car allowance for Mr. Pickens.
|
Employment Agreements
The Company entered into an employment agreement with Mr. Pickens
on October 6, 2008, which sets forth, among other things, Mr.
Pickens’ minimum base salary, bonus opportunities, provisions with
respect to certain payments, and other benefits upon termination of
employment under certain circumstances such as without “Cause,”
“Good Reason,” or in event of a “Change in Control” of the Company.
Please see Potential Payments Upon Termination or Change in Control
for a description of such provisions. Pursuant to the employment
agreement between the Company and Mr. Pickens, his required minimum
annual base salary is $360,000. He is eligible for short-term cash
incentives, as are all employees of the Company. None of the other
NEOs are party to an employment agreement.
Cash Bonus Awards
During fiscal years 2020 and 2019, no cash bonus awards were given
to the NEOs.
Long-Term Equity Compensation Awards
The Compensation Committee has the authority to grant equity
compensation awards under our 2011 Stock Incentive Plan (the “2011
Stock Incentive Plan”).
Summary of the 2011 Stock Incentive Plan
The 2011 Stock Incentive Plan permits the discretionary award of
incentive stock options, nonqualified stock options, stock
appreciation rights, restricted stock, restricted stock units,
other stock-based awards and incentive awards.
Any
employee or consultant of the Company (or its
subsidiaries)
or a director of the Company who, in the opinion of the
Compensation Committee, is in a position to contribute to the
growth, development, or financial success of the Company, is
eligible to participate in the 2011 Stock Incentive Plan. In any
calendar
year, no covered employee described in Section 162(m) of
the Internal Revenue Code may be granted (in the case of stock
options and stock appreciation rights), or have vest (in the case
of restricted stock or other stock-based awards), awards relating
to
more than 160,000 shares of Common Stock, and the maximum aggregate
cash payout with respect to incentive awards paid in cash to such
covered employees may not exceed $5,000,000.
The maximum number of shares of the Company’s common stock that may
be delivered pursuant to awards granted under the 2011 Stock
Incentive Plan is 3,012,197 shares of common stock. Any shares
subject to an award under the 2011 Stock Incentive Plan that are
forfeited or terminated, expire unexercised, lapse or are otherwise
canceled in a manner such that the shares of common stock covered
by such award are not issued may again be used for awards under the
2011 Stock Incentive Plan. A maximum of 3,012,197 shares of common
stock may be issued upon exercise of incentive stock options. The
maximum number of shares deliverable pursuant to awards granted
under the 2011 Stock Incentive Plan is subject to adjustment by the
Compensation Committee in the event of certain dilutive changes in
the number of outstanding shares. Under the 2011 Stock Incentive
Plan, the Company may issue authorized but unissued shares,
treasury shares, or shares purchased by the Company on the open
market or otherwise. In addition, the number of shares of common
stock available for future awards is reduced by the net number of
shares issued pursuant to an award.
On June 29, 2020, the Board of Directors approved an amendment to
the 2011 Stock Incentive Plan to increase the aggregate number of
shares of our common stock available under the 2011 Stock Incentive
Plan by an additional 1,500,000 shares of common stock. This
increased the number of shares of the Company’s common stock that
may be delivered pursuant to awards granted under the 2011 Stock
Incentive Plan from 1,512,197 to 3,012,197 shares. Our stockholders
approved the amendment at the 2019 annual shareholders’
meeting.
Outstanding
Equity Awards at the End of Fiscal Year 2020
The following table shows certain information about equity awards
as of June 30, 2020:
|
|
|
Option Awards (1)
|
|
Stock Awards
|
|
|
Name
|
|
Number of Securities Underlying Unexercised Options Exercisable
(#)(2)
|
|
|
Number of Securities Underlying Unexercised & Unearned Options
(#)(3)
|
|
Option Exercise Price ($)
|
|
|
Expiration Date
|
|
Number of Shares Not Yet Vested (#)
|
|
|
Market Value of Shares Not Yet Vested at Grant Date ($)
|
|
|
Thomas B. Pickens III
|
|
|
22,500
|
|
|
—
|
|
|
3.55
|
|
|
09/13/21
|
|
—
|
|
|
—
|
|
|
|
|
|
20,000
|
|
|
—
|
|
|
6.00
|
|
|
08/21/22
|
|
—
|
|
|
—
|
|
|
|
|
|
40,000
|
|
|
—
|
|
|
5.85
|
|
|
05/09/27
|
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
23,333
|
|
|
|
79,332
|
|
|
Eric N. Stober
|
|
|
2,800
|
|
|
—
|
|
|
3.55
|
|
|
09/13/21
|
|
—
|
|
|
—
|
|
|
|
|
|
2,000
|
|
|
—
|
|
|
6.00
|
|
|
08/21/22
|
|
—
|
|
|
—
|
|
|
|
|
|
20,000
|
|
|
—
|
|
|
5.30
|
|
|
05/09/27
|
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
6,667
|
|
|
|
22,668
|
|
|
Rajesh Mellacheruvu
|
|
|
8,000
|
|
|
—
|
|
|
2.83
|
|
|
04/07/25
|
|
—
|
|
|
—
|
|
|
|
|
|
34,000
|
|
|
—
|
|
|
7.50
|
|
|
02/17/26
|
|
—
|
|
|
—
|
|
|
|
|
|
25,671
|
|
|
—
|
|
|
5.30
|
|
|
05/09/27
|
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
23,333
|
|
|
|
79,332
|
|
|
|
1.
|
All exercisable options
will expire 90 days after the date of employee’s
termination.
|
|
|
2.
|
Options granted on
September 13, 2011 and August 21, 2012 vested upon the
Company’s common stock achieving a closing price of $1.50 on
October 21, 2013. These options expire 10 years from the grant
date.
|
|
|
3.
|
Options
granted vest in equal annual installments over a three-year period
subject to the NEO’s continuous employment with the
Company.
|
The following table provides information with respect to the
vesting of each NEO’s outstanding exercisable options:
|
Schedule of Vested Astrotech Stock Option Grants
|
|
Amount Vested (#)
|
|
|
Thomas B. Pickens III
|
|
|
82,500
|
|
|
Eric N. Stober
|
|
|
24,800
|
|
|
Rajesh Mellacheruvu
|
|
|
67,671
|
|
401(k) Savings Plan
We maintain a tax-qualified retirement plan that provides eligible
employees, including NEOs, with an opportunity to save for
retirement on a tax advantaged basis. All participants’ interests
in their deferrals are 100% vested when contributed. Contributions
are allocated to each participant’s individual account and are then
invested in selected investment alternatives according to the
participant’s directions. The 401(k) plan is intended to qualify
under Sections 401(a) and 501(a) of the Internal Revenue Code. As a
tax-qualified retirement plan, contributions to the 401(k) plan and
earnings on those contributions are not taxable to the employees
until distributed from the 401(k) plan, and all contributions, if
any, are deductible by the Company when made. The 401(k) plan does
not promise any guaranteed minimum returns or above-market returns;
the investment returns are dependent upon actual investment
results. Accordingly, when determining annual compensation for
executive officers, the Company does not consider the individuals’
retirement plan balances and payout projections.
Potential
Payments Upon Termination or Change in Control
As noted above, the Company has entered into an employment
agreement with Mr. Pickens that provides for payments and
other benefits in connection with termination of his employment for
a qualifying event or circumstance and for enhanced payments in
connection with such termination after a Change in Control (as
defined below). A description of the terms with respect to each of
these types of terminations follows.
Termination other than after a Change in Control
The employment agreement provides for payments of certain benefits
upon the termination of the employment of the NEO. The NEO’s rights
upon termination of his employment depends upon the circumstances
of the termination. For purposes of the employment agreement, Mr.
Pickens’ employment may be terminated at any time by the Company
upon any of the following:
|
|
•
|
In the event of physical or mental disability where the NEO is
unable to perform his duties;
|
|
|
•
|
For Cause or Material Breach where Cause is defined as conviction
of certain crimes and/or felonies, and Material Breach is defined
to include certain specified failures of the NEO to perform duties
or uphold fiduciary responsibilities; or
|
|
|
•
|
Otherwise at the discretion of the Company and subject to the
termination obligations set forth in the employment agreement.
|
The NEO may terminate his employment at any time upon any of the
following:
|
|
•
|
In the event of physical or mental disability where the NEO is
unable to perform his duties;
|
|
|
•
|
The Company’s material reduction in the NEO’s authority,
perquisites, position, title or responsibilities or other actions
that would give the NEO the right to resign for “Good Reason;”
or
|
|
|
•
|
Otherwise at the discretion of the NEO and subject to the
termination obligations set forth in the employment agreement.
|
Termination after a Change in Control
A termination after a Change in Control is similar to the severance
provisions described above, except that Mr. Pickens becomes
entitled to benefits under these provisions only if his employment
is terminated within twelve months following a Change in Control. A
Change in Control for this purpose is defined to mean (i) the
acquisition by any person or entity of the beneficial ownership of
securities representing 50% or more of the outstanding securities
of the Company having the right under ordinary circumstances to
vote at an election of the Board of Directors of the Company;
(ii) the date on which the majority of the members of the
Board of Directors of the Company consists of persons other than
directors nominated by a majority of the directors on the Board of
Directors at the time of their election; and (iii) the
consummation of certain types of transactions, including mergers
and the sale or other disposition of all, or substantially all, of
the Company’s assets.
As with the severance provisions described above, the rights to
which the NEO is entitled under the Change in Control provisions
upon a termination of employment are dependent on the circumstances
of the termination. The definitions of Cause and other reasons for
termination are the same in this termination scenario as in a
termination other than after a Change in Control.
DIRECTOR
COMPENSATION
Overview
Astrotech’s director compensation program consists of cash-based as
well as equity-based compensation. The Board of Directors
recognizes that cash compensation is an integral part of the
compensation program and has instituted a fixed and variable fee
structure to provide compensation relative to the required time
commitment of each director. The equity component of Astrotech’s
director compensation program is designed to build an ownership
stake in the Company while conveying an incentive to directors
relative to the returns recognized by our shareholders.
Cash-Based Compensation
The Company’s directors, other than
the Chairman of each the Audit, Compensation, and Corporate
Governance and Nominating Committees, earn an annual stipend of
$40,000. The Chairman of the Audit Committee earns an annual
stipend of $55,000, the Chairman of the Compensation Committee
earns an annual stipend of $47,500, and the Chairman of the
Corporate Governance and Nominating Committee earns an annual
stipend of $45,000, recognizing the additional duties and
responsibilities of each of those roles. These stipends are
normally paid on a biannual basis. During fiscal year 2020, the
Board of Directors agreed to defer their annual stipend for the
entire fiscal year along with meeting fees beginning in the fourth
quarter of the fiscal year.
In addition, each non-employee director earns a meeting fee of
$4,000 for each meeting of the Board of Directors attended by such
director in person and $1,500 by conference call.
The Chairman of the Audit Committee earns $1,250 for attendance at
Audit Committee meetings in person or by conference call; all other
members of the Audit Committee earn $1,000 for attendance at
meetings in person or by conference call. The Chairman of the
Compensation Committee earns $1,000 for attendance at Compensation
Committee meetings in person or by conference call; all other
members of the Compensation Committee earn $750 for attendance at
meetings in person or by conference call. The Chairman of the
Corporate Governance and Nominating Committee earns $1,000 for
attendance at Corporate Governance and Nominating Committee
meetings in person or by conference call; all other members of the
Corporate Governance and Nominating Committee earn $750 for
attendance at meetings in person or by conference call. All
directors are reimbursed ordinary and reasonable expenses incurred
in exercising their responsibilities in accordance with the
Business Expense Reimbursement policy applicable to all employees
of the Company.
Equity-Based Compensation
Under provisions adopted by the Board of Directors, each
non-employee director receives 5,000 shares of restricted Common
Stock issued upon his first election to the Board of Directors,
subject to board discretion. Other stock awards are given to the
directors at the discretion of the Compensation Committee.
Restricted stock and stock options granted typically terminate in
10 years. Already vested shares do not expire upon termination of
the director’s term on the Board of Directors.
Pension and Benefits
The non-employee directors are not eligible to participate in the
Company’s benefits plans, including the 401(k) plan.
Indemnification Agreements
The Company is party to indemnification agreements with each of its
directors and executive officers that require the Company to
indemnify the directors and executive officers to the fullest
extent permitted by Delaware state law. The Company’s Certificate
of Incorporation also requires the Company to indemnify both the
directors and executive officers of the Company to the fullest
extent permitted by Delaware state law.
Fiscal Year 2020 Non-Employee Director Compensation Table
|
Name
|
|
Fees Earned or Paid in Cash ($) (1)
|
|
|
Stock Awards
($)
|
|
|
Total
($)
|
|
|
Mark Adams
|
|
|
1,500
|
|
|
|
12,446
|
|
|
|
13,946
|
|
|
Daniel T. Russler, Jr.
|
|
|
6,000
|
|
|
|
12,446
|
|
|
|
18,446
|
|
|
Ronald W. Cantwell
|
|
|
6,750
|
|
|
|
25,346
|
|
|
|
32,096
|
|
|
Tom Wilkinson
|
|
|
6,000
|
|
|
|
17,016
|
|
|
|
23,016
|
|
|
Total
|
|
|
20,250
|
|
|
|
67,253
|
|
|
|
87,503
|
|
|
|
1.
|
During fiscal year 2020, the Board of Directors agreed to defer
their annual stipends along with meeting fees beginning in the
fourth quarter.
|
The table below provides the number of outstanding stock options
and unvested restricted stock held by each non-employee director as
of June 30, 2020.
|
Name
|
|
Aggregate Number of Options Outstanding (#)
|
|
|
Aggregate Number of Unvested Restricted Stock Shares Outstanding
(#)
|
|
|
Mark Adams
|
|
|
17,000
|
|
|
|
3,333
|
|
|
Daniel T. Russler, Jr.
|
|
|
17,000
|
|
|
|
3,333
|
|
|
Ronald W. Cantwell
|
|
|
8,000
|
|
|
|
6,667
|
|
|
Tom Wilkinson
|
|
—
|
|
|
|
10,000
|
|
|
Total
|
|
|
42,000
|
|
|
|
23,333
|
|
CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS AND DIRECTOR INDEPENDENCE
Certain Relationships and Related Transactions
For fiscal year 2019, there were no transactions or series of
similar transactions to which we were a party, and there is
currently no proposed transactions or series of similar
transactions to which we will be a party, in which the amount
involved exceeded or will exceed the lesser of (i) $120,000 or (ii)
one percent of the average of our total assets at year-end for the
last two completed fiscal years and in which any related person had
or will have a direct or indirect material interest.
Director Independence
The Board of Directors has determined each of the following
directors and director nominees to be an “independent director” as
such term is defined by Rule 5605(a)(2) of the NASDAQ Listing
Rules:
Mark Adams
Daniel T. Russler, Jr.
Ronald W. Cantwell
Tom Wilkinson
The Board of Directors has also determined that each member of the
Audit Committee, Compensation Committee, and Corporate Governance
and Nominating Committee during the past fiscal year and the
proposed nominees for the upcoming fiscal year meets the
independence requirements applicable to those Committees prescribed
by NASDAQ and SEC rules.
SECURITY
OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
The following table sets forth as of June 30, 2020 certain
information regarding the beneficial ownership of outstanding
Common Stock held by (i) each person known by the Company to
be a beneficial owner of more than 5% of any outstanding class of
the Company’s capital stock, (ii) each of the Company’s
directors and director nominees, (iii) the Company’s Chief
Executive Officer and two most highly compensated executive
officers at the end of the Company’s last completed fiscal year,
and (iv) all directors and executive officers of the Company
as a group. Unless otherwise described below, each of the persons
listed in the table below has sole voting and investment power with
respect to the shares indicated as beneficially owned by each
party.
|
Name and Address of Beneficial Owners
|
|
Shares of Common Stock (#)
|
|
|
Unvested Restricted Stock Grants (#)
|
|
|
Shares Subject to Options Exercisable Within 60 Days of May
19, 2020
|
|
|
Preferred Shares with an Option to Convert on a 1:1 Basis
|
|
|
Total Number of Shares Beneficially Owned
|
|
|
Percentage of Class (1)
|
|
|
Certain Beneficial Owners
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Huckleberry Investments LLP (2)
|
|
|
488,050
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
488,050
|
|
|
|
6.2
|
%
|
|
Winn Interests, Ltd. (4)
|
|
|
662,723
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
662,723
|
|
|
|
8.3
|
%
|
|
Non-Employee Directors: (3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark Adams
|
|
|
109,670
|
|
|
|
3,333
|
|
|
|
17,000
|
|
|
—
|
|
|
|
130,003
|
|
|
|
1.6
|
%
|
|
Daniel T. Russler
|
|
|
17,467
|
|
|
|
3,333
|
|
|
|
17,000
|
|
|
—
|
|
|
|
37,800
|
|
|
*
|
|
|
Ronald W. Cantwell
|
|
|
13,332
|
|
|
|
6,667
|
|
|
|
8,000
|
|
|
—
|
|
|
|
27,999
|
|
|
*
|
|
|
Tom Wilkinson
|
|
|
10,952
|
|
|
|
10,000
|
|
|
—
|
|
|
—
|
|
|
|
20,952
|
|
|
*
|
|
|
Named Executive Officers: (3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas B. Pickens III
|
|
|
1,575,018
|
|
|
|
23,333
|
|
|
|
82,500
|
|
|
|
280,898
|
|
|
|
1,961,749
|
|
|
|
23.9
|
%
|
|
Eric Stober
|
|
|
96,628
|
|
|
|
6,667
|
|
|
|
24,800
|
|
|
—
|
|
|
|
128,095
|
|
|
|
1.6
|
%
|
|
Rajesh Mellacheruvu
|
|
|
49,866
|
|
|
|
23,333
|
|
|
|
67,671
|
|
|
—
|
|
|
|
140,870
|
|
|
|
1.8
|
%
|
|
All Directors and Executive Officers as a Group (7 persons)
|
|
|
1,872,933
|
|
|
|
76,666
|
|
|
|
216,971
|
|
|
|
280,898
|
|
|
|
2,447,468
|
|
|
|
29.3
|
%
|
*Indicates beneficial ownership of less than 1% of the outstanding
shares of common stock.
|
|
1.
|
Calculated pursuant to Rule
13d-3(d) of the Securities Exchange Act of 1934. Under Rule
13d-3(d), shares not outstanding that are subject to options,
warrants, rights or conversion privileges exercisable within 60
days are deemed outstanding for the purpose of calculating the
number and percentage owned by a person, but not deemed outstanding
for the purpose of calculating the number and percentage owned by
any other person listed. As of June 30, 2020, we had 7,850,362
shares of common stock outstanding.
|
|
|
2.
|
Information based on Form
13G/A filed with the SEC by Huckleberry Investments LLP on February
10, 2020. Huckleberry Investments LLP, is a fund manager based in
the United Kingdom with its principal business conducted
at 28 Devereux Lane, London, SW13 8DA, UK.
|
|
|
3.
|
The applicable address for
all non-employee directors and named executive officers is c/o
Astrotech Corporation, 201 W. 5th Street, Suite 1275, Austin, Texas
78701.
|
|
|
Information based on
shares
owned
as of our
fiscal year 2019 proxy
record date of May 8, 2020 and
includes
an additional
280,898
shares due to the conversion
of Series C preferred shares on May 12, 2020.
|
|
DESCRIPTION
OF OUR COMMON
AND PREFERRED
STOCK
As of the date of this prospectus, our authorized capital stock
consisted of 50,000,000 shares of common stock, $0.001 par value
per share, and 2,500,000 shares of preferred stock, $0.001 par
value per share. Our Board may establish the rights and preferences
of the preferred stock from time to time. As of June 30, 2020,
there were 7,850,362 shares of our common stock outstanding and
280,898 shares of preferred stock outstanding.
Common Stock
Holders of our common stock are entitled to one vote per share. Our
Certificate of Incorporation does not provide for cumulative
voting. Holders of our common stock are entitled to receive ratably
such dividends, if any, as may be declared by our Board out of
legally available funds. However, the current policy of our Board
is to retain earnings, if any, for the operation and expansion of
our Company. Upon liquidation, dissolution or winding-up, the
holders of our common stock are entitled to share ratably in all of
our assets which are legally available for distribution, after
payment of or provision for all liabilities. The holders of our
common stock have no preemptive, subscription, redemption or
conversion rights.
Preferred Stock
The Company has available to be issued Series A Junior, Series B,
Series C convertible, and Series D convertible preferred stock.
Both Series C and Series D Preferred Shares are convertible to
common stock on a one-to-one basis. The Preferred C and Preferred D
are not callable by the Company. The holders of the preferred stock
are entitled to receive, and the Company 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.
Securities Exchange Listing
Our common stock is listed on the Nasdaq Capital Market under the
symbol “ASTC.”
Transfer Agent and Registrar
The transfer agent and registrar for our common stock
is American Stock Transfer &
Trust Company, LLC.
UNDERWRITING
We have entered into an underwriting agreement, dated [
], 2020, with , acting as the representative of the underwriter
named below, with respect to the shares of common stock subject to
this offering. Subject to certain conditions, we have agreed to
sell to the underwriter, and the underwriter have severally agreed
to purchase, the number of shares of common stock provided
below.
|
Underwriter
|
|
Number of shares of Common Stock
|
|
Total
|
|
|
The underwriter has agreed to purchase all the securities offered
by us, if it purchases any such securities, and the underwriter’s
obligations are several, which means that the underwriters are
required to purchase a specific number of shares of Common Stock
but are not responsible for the commitment of any other underwriter
to purchase any securities. The obligations of the underwriter may
be terminated upon the occurrence of certain events specified in
the underwriting agreement. Furthermore, pursuant to the
underwriting agreement, the underwriter’s obligations are subject
to customary conditions and representations and warranties
contained in the underwriting agreement, such as receipt by the
underwriter of officers’ certificates and legal opinions.
Discount, Commissions and Expenses
The underwriter has advised us that they propose to offer the
shares of common stock to the public at the public offering price
set forth on the cover page of this prospectus and to certain
dealers at that price less a concession not in excess of $ per
share of common stock. The underwriter may allow, and certain
dealers may reallow, a discount from the concession not in excess
of $ per share to certain brokers and dealers. After this offering,
the public offering price, concession, and reallowance to dealers
may be changed by the representative. No such change shall change
the amount of proceeds to be received by us as set forth on the
cover page of this prospectus. The shares of common stock are
offered by the underwriter as stated herein, subject to receipt and
acceptance by them and subject to their right to reject any order
in whole or in part. The underwriter has informed us that they do
not intend to confirm sales to any accounts over which they
exercise discretionary authority.
The following table shows the underwriting discount payable to the
underwriter by us in connection with this offering.
|
|
|
Per Share
|
|
Total (1)
|
|
Public offering price
|
|
|
|
|
|
Underwriting discount
|
|
|
|
|
|
Proceeds to us, before expenses
|
|
|
|
|
We have agreed to reimburse the underwriter for certain accountable
legal expenses not to exceed [___], as well as certain
non-accountable expenses not to exceed [___]. We estimate that
expenses payable by us in connection with this offering, including
reimbursement of the underwriter’s out-of-pocket expenses, but
excluding the underwriting discount referred to above, will be
approximately [___].
Indemnification
We have agreed to indemnify the underwriter against certain
liabilities, including liabilities under the Securities Act and
liabilities arising from breaches of representations and warranties
contained in the underwriting agreement, or to contribute to
payments that the underwriters may be required to make in respect
of those liabilities.
Lock-up
Agreements
We, our officers and directors, and certain stockholders have
agreed, subject to limited exceptions, for a period of
[ ] days after the date of the underwriting agreement,
not to offer, sell, contract to sell, pledge, grant any option to
purchase, make any short sale or otherwise dispose of, directly or
indirectly any shares of common stock or any securities convertible
into or exchangeable for our common stock either owned as of the
date of the underwriting agreement or thereafter acquired without
the prior written consent of the representative. The representative
may, in its sole discretion and at any time or from time to time
before the termination of the lock-up period, without notice,
release all or any portion of the securities subject to lock-up
agreements.
Price Stabilization, Short Positions and Penalty Bids
In connection with this offering the underwriter may engage in
stabilizing transactions, over-allotment transactions, syndicate
covering transactions, and penalty bids in accordance with
Regulation M under the Exchange Act:
|
|
●
|
Stabilizing transactions permit bids to purchase the underlying
security so long as the stabilizing bids do not exceed a specified
maximum.
|
|
|
●
|
Over-allotment involves sales by the underwriters of shares in
excess of the number of shares the underwriters are obligated to
purchase, which creates a syndicate short position. The short
position may be either a covered short position or a naked short
position. In a covered short position, the number of shares
over-allotted by the underwriters is not greater than the number of
shares that they may purchase in the over-allotment option. In a
naked short position, the number of shares involved is greater than
the number of shares in the over-allotment option. The underwriters
may close out any covered short position by either exercising their
over-allotment option and/or purchasing shares in the open
market.
|
|
|
●
|
Syndicate covering transactions involve purchases of the common
stock in the open market after the distribution has been completed
in order to cover syndicate short positions. In determining the
source of shares to close out the short position, the underwriters
will consider, among other things, the price of shares available
for purchase in the open market as compared to the price at which
they may purchase shares through the over-allotment option. A naked
short position occurs if the underwriters sell more shares than
could be covered by the over-allotment option. This position can
only be closed out by buying shares in the open market. A naked
short position is more likely to be created if the underwriters are
concerned that there could be downward pressure on the price of the
shares in the open market after pricing that could adversely affect
investors who purchase in this offering.
|
|
|
|
|
|
|
●
|
Penalty bids permit the underwriters to reclaim a selling
concession from a syndicate member when the common stock originally
sold by the syndicate member is purchased in a stabilizing or
syndicate covering transaction to cover syndicate short
positions.
|
These stabilizing transactions, syndicate covering transactions and
penalty bids may have the effect of raising or maintaining the
market price of our common stock or preventing or retarding a
decline in the market price of the common stock. As a result, the
price of our common stock may be higher than the price that might
otherwise exist in the open market. These transactions may be
discontinued at any time.
Neither we nor the underwriter make any representation or
prediction as to the direction or magnitude of any effect that the
transactions described above may have on the price of our shares of
common stock. In addition, neither we nor the underwriter make any
representation that the underwriter will engage in these
transactions or that any transaction, if commenced, will not be
discontinued without notice.
Passive Market Making
In
connection with this offering, the underwriter and any selling
group members may engage in passive market making transactions in
our common
stock on the NASDAQ Stock Market in accordance with Rule 103 of
Regulation M under the Securities Exchange Act of 1934, as amended,
during a period before the commencement of offers or sales of
common stock and extending through the completion of the
distribution.
A passive market maker must display its bid at a price not in
excess of the highest independent bid of that security. However, if
all independent bids are lowered below the passive market maker’s
bid, that bid must then be lowered when specified
purchase limits are exceeded.
Electronic Distribution
This prospectus in electronic format may be made available on
websites or through other online services maintained by one or more
of the underwriters, or by their affiliates. Other than this
prospectus in electronic format, the information on any
underwriter’s website and any information contained in any other
website maintained by an underwriter is not part of this prospectus
or the registration statement of which this prospectus forms a
part, has not been approved and/or endorsed by us or any
underwriter in its capacity as underwriter, and should not be
relied upon by investors.
Other
From time to time, the underwriter and/or their affiliates have
provided, and may in the future provide, various investment banking
and other financial services for us for which services they have
received and, may in the future receive, customary fees. In the
course of their businesses, the underwriter and their affiliates
may actively trade our securities or loans for their own account or
for the accounts of customers, and, accordingly, the underwriter
and their affiliates may at any time hold long or short positions
in such securities or loans. Except for services provided in
connection with this offering, no underwriter has provided any
investment banking or other financial services to us during the
180-day period preceding the date of this prospectus and we do not
expect to retain any underwriter to perform any investment banking
or other financial services for at least 90 days after the date of
this prospectus.
LEGAL
MATTERS
Sheppard, Mullin, Richter & Hampton LLP, New York, New York,
will pass upon the validity of the shares of our common stock
offered hereby. Certain legal matters in connection with this offer
will be passed upon for the underwriters by
[ ].
EXPERTS
Armanino LLP, an independent registered public accounting firm, has
audited our consolidated financial statements included in our
Annual Report on Form 10-K for the year ended June 30, 2019, as set
forth in their report, which includes an explanatory paragraph as
to the Company’s ability to continue as a going concern, dated
September 30, 2019, which is incorporated by reference in this
prospectus supplement and elsewhere in the registration statement.
Our consolidated financial statements are incorporated by reference
in reliance on Armanino LLP’s report, given on the authority of
such firm as experts in accounting and auditing.
WHERE YOU CAN
FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form S-1
under the Securities Act with respect to the securities offered by
this prospectus. This prospectus, which constitutes a part of the
registration statement, does not contain all of the information set
forth in the registration statement, some of which is contained in
exhibits to the registration statement as permitted by the rules
and regulations of the SEC. For further information with respect to
us and our securities, we refer you to the registration statement,
including the exhibits filed as a part of the registration
statement. Statements contained in this prospectus concerning the
contents of any contract or any other document is not necessarily
complete. If a contract or document has been filed as an exhibit to
the registration statement, please see the copy of the contract or
document that has been filed. Each statement is this prospectus
relating to a contract or document filed as an exhibit is qualified
in all respects by the filed exhibit. We are subject to the
informational requirements of the Exchange Act and in accordance
therewith file annual, quarterly and current reports, proxy
statements and other information with the SEC. The SEC maintains an
Internet website that contains reports, proxy statements and other
information about issuers, like us, that file electronically with
the SEC. The address of that website
is www.sec.gov. The
registration statement and the documents referred to below under
“Incorporation of Documents By Reference” are also available on our
website, www.spherix.com. We have not incorporated by
reference into this prospectus the information on our website, and
you should not consider it to be a part of this prospectus.
INCORPORATION
OF DOCUMENTS BY REFERENCE
This prospectus is part of the registration statement but the
registration statement includes and incorporates by reference
additional information and exhibits. The SEC permits us to
“incorporate by reference” the information contained in documents
we file with the SEC, which means that we can disclose important
information to you by referring you to those documents rather than
by including them in this prospectus. Information that is
incorporated by reference is considered to be part of this
prospectus and you should read it with the same care that you read
this prospectus. Information that we file later with the SEC will
automatically update and supersede the information that is either
contained, or incorporated by reference, in this prospectus, and
will be considered to be a part of this prospectus from the date
those documents are filed. We have filed with the SEC, and
incorporate by reference in this prospectus:
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Current
Reports on Form 8-K,
filed with the SEC on November
13, 2019, February
13, 2020, February
18, 2020, February
24, 2020, March
26, 2020, March
30, 2020,
April
20, 2020,
May
13, 2020,
May
22, 2020 and
June
29, 2020;
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Definitive Proxy
Statement on Schedule 14A, filed on
May 12,
2020;
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the description of our
common stock and our Series A Junior Participating Preferred Stock
contained in our Registration Statement on Form 8-A12B/A filed
with the Commission on August
6, 2018,
and any amendments or reports filed updating such
description.
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In addition, all documents subsequently filed by us pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act
of 1934, as amended, prior to the termination of the offering
(excluding any information furnished rather than filed) shall be
deemed to be incorporated by reference into this prospectus.
Notwithstanding the statements in the preceding paragraphs, no
document, report or exhibit (or portion of any of the foregoing) or
any other information that we have “furnished” to the SEC pursuant
to the Securities Exchange Act of 1934, as amended shall be
incorporated by reference into this prospectus.
We will furnish without charge to you, on written or oral request,
a copy of any or all of the documents incorporated by reference in
this prospectus, including exhibits to these documents. You should
direct any requests for documents to:
Astrotech Corporation
201 W. 5th Street, Suite 1275
Austin, Texas 78701
Phone: (512) 485-9530
You also may access these filings on our website at
http://www.astrotechcorp.com. We do not incorporate the information
on our website into this prospectus or any supplement to this
prospectus and you should not consider any information on, or that
can be accessed through, our website as part of this prospectus
supplement or any supplement to this prospectus (other than those
filings with the SEC that we specifically incorporate by reference
into this prospectus or any supplement to this prospectus).
Any statement
contained in a document incorporated or deemed to be incorporated
by reference in this prospectus will be deemed modified, superseded
or replaced for purposes of this prospectus to the extent that a
statement contained in this prospectus modifies, supersedes or
replaces such statement. Any statement contained herein or in any
document incorporated or deemed to be incorporated by reference
shall be deemed to be modified or superseded for purposes of the
registration statement of which this prospectus forms a part to the
extent that a statement contained in any other subsequently filed
document which also is or is deemed to be incorporated by reference
modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed to
constitute a part of the registration statement of which this
prospectus
forms a part, except as so modified or
superseded.