See accompanying notes to unaudited condensed consolidated financial statements.
See accompanying notes to unaudited condensed consolidated financial statements.
See accompanying notes to unaudited condensed consolidated financial statements.
See accompanying notes to unaudited condensed consolidated financial statements.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(1) General Information
Description of the Company – 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.
Basis of Presentation – The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) for interim financial information and the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the nine months ended March 31, 2020 are not necessarily indicative of the results that may be expected for the year ending June 30, 2020. These financial statements should be read in conjunction with the financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2019.
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 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 Disease 2019 (“COVID-19”) or pneumonia.
Astral Images Corporation
Astral Images Corporation (“Astral”) developed advanced film restoration and enhancement software. Although we believe Astral has developed valuable technology fortified by patents and trade secrets, the potential market has not yet advanced as quickly as anticipated. Due to funding constraints, the Company’s primary focus remains on the pursuit of opportunities for its platform mass spectrometry technology. Consequently, efforts are exclusively focused on strategic initiatives to facilitate the realization of Astral’s value.
Accounting Pronouncements – In February 2016, the Financial Standards Accounting Board (“FASB”) issued Accounting Standard Update (“ASU”) 2016-02: Leases (“Topic 842” or “ASU 2016-02”) and ASU 2018-10: Codification Improvements to Topic 842, Leases (“ASU 2018-10”) which provide an additional (and optional) transition method whereby the new lease standard is applied at the adoption date and recognized as an adjustment to retained earnings. This ASU requires lessees to recognize a right-of-use (“ROU”) asset and lease liability on the balance sheet for all leases, with the exception of short-term leases. The asset will be based on the liability, subject to adjustment, such as for initial direct costs. For statement of operations
9
purposes, leases are still required to be classified as either operating or financing. Operating leases will result in straight-line expense while financing leases will result in a front-loaded expense pattern.
On July 1, 2019, the Company adopted Topic 842 using the modified retrospective approach and the impact of the adoption of Topic 842 resulted in the recognition of an ROU asset and lease obligation on the Company’s condensed consolidated balance sheets of approximately $1.6 million and an adjustment to retained earnings of $230 thousand. This application of the modified retrospective method will result in a balance sheet presentation that will not be comparable to the prior period in the first year of adoption. Results for reporting periods after July 1, 2019 are presented under Topic 842, while prior periods have not been adjusted. The Company elected the package of practical expedients permitted under the transition guidance within the new standard which, among other things, allowed the Company to carry forward the historical lease classifications. Subsequent to the end of the second quarter of fiscal year 2020, the Company amended its lease for its 1st Detect facility, resulting in a reduction of the associated ROU asset and lease obligation of $414 thousand in the second quarter of fiscal year 2020. See Note 3 Leases for more information.
(2) Going Concern
Financial Condition
The Company’s consolidated financial statements for the three and nine months ended March 31, 2020 have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. 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.
Management’s Plans to Continue as a Going Concern
The Company remains resolute in identifying the optimal solution to its liquidity issue. The Company is currently evaluating several potential sources for additional liquidity. These include, but are not limited to, selling the Company or a portion thereof, licensing some of its technology, raising additional funds through capital markets, debt financing, equity financing, merging, or engaging in a strategic partnership. On February 13, 2020, the Company entered into a private placement transaction with Mr. Thomas B. Pickens III, the Company’s Chairman of the Board and Chief Executive Officer, for the issuance and sale of a secured promissory note to Mr. Pickens with a principal amount of $1.0 million. On March 25, 2020, the Company entered into a securities purchase agreement with certain purchasers named therein, pursuant to which the Company agreed to issue and sell, in a registered direct offering, 354,000 shares of the Company’s common stock, par value $0.001 per share, at an offering price of $5.00 per share, resulting in net proceeds of approximately $1.6 million. On March 27, 2020, the Company entered into a second securities purchase agreement with certain purchasers named therein, pursuant to which the Company agreed to issue and sell, in a registered direct offering, 873,335 shares of the Company’s common stock, par value $0.001 per share, at an offering price of $3.75 per share, resulting in net proceeds of approximately $2.9 million. The Company received net proceeds of approximately $2.3 million through the sale of shares of common stock from November 9, 2018 through March 25, 2020 through an “at the market offering” program (the “ATM Offering”), which was terminated on March 25, 2020. 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 March 31, 2020 do not include any adjustments that might result from the outcome of this uncertainty.
COVID-19
In March 2020, the World Health Organization declared COVID-19 a global pandemic. The Company is subject to risks and uncertainties as a result of the COVID-19 pandemic. The extent of the impact of the COVID-19 pandemic on the Company’s business is highly uncertain and difficult to predict, as the responses that the Company, 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 local and/or 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.
10
It is possible that the continued spread of COVID-19 could cause disruption in the Company’s supply chain; cause delay, or limit the ability of customers to perform, including in making timely payments to the Company; cause delay in regulatory certification testing of the Company’s instruments; impact investment performance; and cause other unpredictable events. As of the date of issuance of Company’s financial statements, the extent to which the COVID-19 pandemic may in the future materially impact the Company’s financial condition, liquidity, or results of operations is uncertain.
(3) Leases
As of July 1, 2019, the Company adopted Topic 842, using the modified retrospective method of adoption. Astrotech elected to use the transition option that allows the Company to initially apply the new lease standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the year of adoption. Comparable periods continue to be presented under the guidance of the previous standard, Accounting Standards Codification (“ASC”) Topic 840. Topic 842 requires lessees to recognize a lease liability and ROU asset on the balance sheet for operating leases. The adoption of Topic 842 resulted in an adjustment to retained earnings of $230 thousand.
The Company has two existing facility leases and several small equipment leases. Astrotech leases office space consisting of 5,219 square feet in Austin, Texas that houses executive management, finance and accounting, sales, and marketing and communications. The lease began in November 2016 and expires in December 2023 with a provision to renew and extend the lease for the entire premises for one renewal term of five years. Astrotech must, in writing, advise the landlord of its intention to renew the lease at least eight months before the expiration of its current lease in order to renew the lease. In May 2013, 1st Detect completed build-out of a 16,540 square foot leased research and development and production facility in Webster, Texas. This facility is equipped with state-of-the-art laboratories, a clean room, a production shop, and offices for staff. The term of the lease is 62 months and includes options to extend for two additional five-year periods. In February 2015, 1st Detect exercised its right of first refusal on the adjoining space of 9,138 square feet. The original lease began in May 2013 and was to expire in June 2018; these dates were amended in October 2014 with the amended lease beginning February 1, 2015, and expiring April 30, 2020, with provisions to renew and extend the lease for the entire premises, but not less than the entire premises, for two renewal terms of five years each. On June 1, 2018, the Company entered into its third amendment of the original lease removing 8,118 square feet from its leased space, leaving leased premises with a total square footage of 17,560. On January 21, 2020, the Company entered into its fourth amendment of the original lease, with the amended lease beginning May 1, 2020 and expiring April 30, 2021, with the option to renew and extend the lease for one renewal term of one year. This amendment resulted in an adjustment to the associated ROU asset and operating liability of $414 thousand during the six months ended December 31, 2019.
Operating lease assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. Operating lease assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate in determining the present value of lease payments. Significant judgement is required when determining the Company’s incremental borrowing rate. Lease expense for lease payments is recognized on a straight-line basis over the lease term.
Upon the adoption of Topic 842, the Company’s accounting for financing leases, previously referred to as capital leases, remains substantially unchanged from prior guidance.
The balance sheet presentation of the Company’s operating and finance leases is as follows:
(In thousands)
|
|
Classification on the Condensed Consolidated Balance Sheet
|
|
March 31, 2020
|
|
Assets:
|
|
|
|
|
|
|
Operating lease assets
|
|
Operating leases, right-of-use assets, net
|
|
$
|
937
|
|
Financing lease assets
|
|
Property and equipment, net
|
|
|
52
|
|
Total lease assets
|
|
|
|
$
|
989
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
Current:
|
|
|
|
|
|
|
Operating lease obligations
|
|
Lease liabilities, current
|
|
$
|
317
|
|
Financing lease obligations
|
|
Lease liabilities, current
|
|
|
9
|
|
Non-current:
|
|
|
|
|
|
|
Operating lease obligations
|
|
Lease liabilities, non-current
|
|
|
668
|
|
Financing lease obligations
|
|
Lease liabilities, non-current
|
|
|
43
|
|
Total lease liabilities
|
|
|
|
$
|
1,037
|
|
11
12
Future minimum lease payments as of March 31, 2020 under non-cancellable leases are as follows:
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended June 30,
|
|
Operating Leases
|
|
|
Financing Leases
|
|
|
Total
|
|
2020
|
|
$
|
101
|
|
|
$
|
3
|
|
|
$
|
104
|
|
2021
|
|
|
413
|
|
|
|
12
|
|
|
|
425
|
|
2022
|
|
|
388
|
|
|
|
12
|
|
|
|
400
|
|
2023
|
|
|
219
|
|
|
|
12
|
|
|
|
231
|
|
2024
|
|
|
37
|
|
|
|
12
|
|
|
|
49
|
|
Thereafter
|
|
|
—
|
|
|
|
9
|
|
|
|
9
|
|
Total lease obligations
|
|
|
1,158
|
|
|
|
60
|
|
|
|
1,218
|
|
Less: imputed interest
|
|
|
173
|
|
|
|
8
|
|
|
|
181
|
|
Present value of net minimum lease obligations
|
|
|
985
|
|
|
|
52
|
|
|
|
1,037
|
|
Less: lease liabilities - current
|
|
|
317
|
|
|
|
9
|
|
|
|
326
|
|
Lease liabilities - non-current
|
|
$
|
668
|
|
|
$
|
43
|
|
|
$
|
711
|
|
Other information as of March 31, 2020 is as follows:
Weighted-average remaining lease term (years):
|
|
|
|
|
Operating leases
|
|
|
|
|
2.8
|
|
Financing leases
|
|
|
|
|
4.9
|
|
Weighted-average discount rate:
|
|
|
|
|
Operating leases
|
|
|
|
|
11.0
|
%
|
Financing leases
|
|
|
|
|
6.2
|
%
|
Cash payments for operating leases for the three and nine months ended March 31, 2020 totaled $96 thousand and $288 thousand, respectively. Cash payments for financing leases for each of the three and nine months ended March 31, 2020 totaled $1 thousand.
(4) Stockholders’ Equity
From November 9, 2018 through March 25, 2020, the Company sold 793,668 shares of common stock pursuant to an At-the-Market Issuance Sales Agreement (“ATM Agreement”) with B. Riley FBR, under which B. Riley FBR acted as the sales agent. In connection with the sale of these shares of common stock, the Company received net proceeds of $2.3 million. The weighted-average sale price per share was $3.04. No additional shares of the Company’s common stock will be sold pursuant to the ATM Agreement. The Company did not incur any termination penalties as a result of its termination of the ATM Agreement.
On March 25, 2020, the Company entered into a securities purchase agreement with certain purchasers named therein, pursuant to which the Company agreed to issue and sell, in a registered direct offering (the “Registered Offering No. 1”), 354,000 shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”), at an offering price of $5.00 per share. Registered Offering No. 1 resulted in gross proceeds of approximately $1.77 million before deducting the placement agent’s fees and related offering expenses. The shares from Registered Offering No. 1 were offered by the Company pursuant to a prospectus supplement to the Company’s effective shelf registration statement on Form S-3 (Registration No. 333-226060), which was initially filed with the SEC on July 3, 2018, and was declared effective on August 20, 2018. Registered Offering No. 1 closed on March 26, 2020, subject to the satisfaction of customary closing conditions. In connection with Registered Offering No. 1, the Company also issued to the placement agent, or its designees, warrants (the “Warrants No. 1”) to purchase up to 24,780 shares of Common Stock, which represents 7.0% of the shares sold in Registered Offering No. 1. The Warrants No. 1 have an exercise price of $6.25 per share, which represents 125% of the per share offering price of the shares and a termination date of March 25, 2025.
On March 27, 2020, the Company entered into a second securities purchase agreement with certain purchasers named therein, pursuant to which the Company agreed to issue and sell, in a registered direct offering (the “Registered Offering No. 2”), 873,335 shares of the Company’s Common Stock, at an offering price of $3.75 per share. Registered Offering No. 2 resulted in gross proceeds of approximately $3.275 million before deducting the placement agent’s fees and related offering expenses. The shares from Registered Offering No. 2 were offered by the Company pursuant to a prospectus supplement to the Company’s effective shelf registration statement on Form S-3 (Registration No. 333-226060), which was initially filed with the SEC on July 3, 2018, and was declared effective on August 20, 2018. Registered Offering No. 2 closed on March 30, 2020, subject to the satisfaction of customary closing conditions. In connection with Registered Offering No. 2, the Company also issued to the
13
placement agent, or its designees, warrants (the “Warrants No. 2” and collective with the Warrants No.1, the “Placement Agent Warrants”) to purchase up to 61,133 shares of Common Stock, which represents 7.0% of the Shares sold in Registered Offering No. 2. The Warrants No. 2 have an exercise price of $4.6875 per share, which represents 125% of the per share offering price of the shares and a termination date of March 27, 2025.
(5) Net Loss per Share
Basic net loss per share is computed on the basis of the weighted average number of shares of common stock outstanding during the period. Diluted net loss per share is computed based on the weighted average number of common shares outstanding plus the effect of potentially dilutive common shares outstanding during the period using the treasury stock method and the if-converted method. Potentially dilutive common shares include outstanding stock options and share-based awards.
The following table reconciles the numerators and denominators used in the computations of both basic and diluted net loss per share:
|
|
Three Months Ended
March 31,
|
|
|
Nine Months Ended
March 31,
|
|
(In thousands, except per share data)
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(2,068
|
)
|
|
$
|
(1,394
|
)
|
|
$
|
(6,219
|
)
|
|
$
|
(5,792
|
)
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for basic and diluted net loss per share — weighted average common stock outstanding
|
|
|
6,107
|
|
|
|
5,467
|
|
|
|
5,934
|
|
|
|
4,734
|
|
Basic and diluted net loss per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(0.34
|
)
|
|
$
|
(0.25
|
)
|
|
$
|
(1.05
|
)
|
|
$
|
(1.22
|
)
|
All unvested restricted stock awards for the nine months ended March 31, 2020 are not included in diluted net loss per share, as the impact to net loss per share would be anti-dilutive. Options to purchase 326,153 shares of common stock at exercise prices ranging from $1.85 to $8.35 per share outstanding as of March 31, 2020 were not included in diluted net loss per share, as the impact to net loss per share would be anti-dilutive.
(6) Revenue Recognition
Astrotech recognizes revenue employing the generally accepted revenue recognition methodologies described under the provisions of ASC Topic 606 “Revenue from Contracts with Customers” (“Topic 606”), which was adopted by the Company in fiscal year 2019. The methodology used is based on contract type and how products and services are provided. The guidelines of Topic 606 establish a five-step process to govern the recognition and reporting of revenue from contracts with customers. The five steps are: (i) identify the contract with a customer, (ii) identify the performance obligations within the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations within the contract, and (v) recognize revenue when or as the performance obligations are satisfied.
An additional factor is reasonable assurance of collectability. This necessitates deferral of all or a portion of revenue recognition until collection. During the three and nine months ended March 31, 2020, the Company had one material revenue source, totaling $118 thousand and $324 thousand, respectively, and revenue was recognized at a point in time consistent with the guidelines in Topic 606.
(7) Fair Value Measurement
The accounting standard for fair value measurements defines fair value, establishes a market-based framework or hierarchy for measuring fair value, and expands disclosures about fair value measurements. The standard is applicable whenever assets and liabilities are measured and included in the financial statements at fair value.
The fair value hierarchy established in the standard prioritizes the inputs used in valuation techniques into three levels as follows:
Level 1 - Quoted prices in active markets for identical assets or liabilities.
Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
14
Level 3 - Unobservable inputs that are supported by little or no market activity and are significant to the fair value of the assets or liabilities.
As of March 31, 2020, the fair value of the Company’s cash and cash equivalents and restricted cash approximate their carrying value due to their short-term nature.
(8) Term Note Payable – Related Party
On September 5, 2019, the Company entered into a private placement transaction with Thomas B. Pickens III, the Chief Executive Officer and Chairman of the Board of Directors of the Company for the issuance and sale of a secured promissory note (“Note No. 1”) to Mr. Pickens with a principal amount of $1.5 million. Interest on Note No. 1 shall accrue at 11% per annum. The principal amount and accrued interest on Note No. 1 shall become due and payable on September 5, 2020 (the “Maturity Date”). The Company may prepay the principal amount and all accrued interest on Note No. 1 at any time prior to the Maturity Date. In connection with the issuance of Note No. 1, the Company, along with 1st Detect Corporation and Astrotech Technologies, Inc. (the “Subsidiaries”), entered into a security agreement, dated as of September 5, 2019, with Mr. Pickens (the “Security Agreement No. 1”), pursuant to which the Company and the Subsidiaries granted to Mr. Pickens a security interest in all of the Company’s and the Subsidiaries’ Collateral, as such term is defined in Security Agreement No. 1. In addition, the Subsidiaries jointly and severally agreed to guarantee and act as surety for the Company’s obligation to repay Note No. 1 pursuant to a subsidiary guarantee.
On February 13, 2020, the Company entered into a second private placement transaction with Mr. Pickens for the issuance and sale of a secured promissory note (“Note No. 2”) to Mr. Pickens with a principal amount of $1.0 million. Interest on Note No. 2 shall accrue at 11% per annum. The principal amount and accrued interest on Note No. 2 shall become due and payable on the Maturity Date. The Company may prepay the principal amount and all accrued interest on Note No. 2 at any time prior to the Maturity Date. In connection with the issuance of Note No. 2, the Company, along with the Subsidiaries, entered into a second security agreement, dated as of February 13, 2020, with Mr. Pickens (the “Security Agreement No. 2”), pursuant to which the Company and the Subsidiaries granted to Mr. Pickens a security interest in all of the Company’s and the Subsidiaries’ Collateral, as such term is defined in Security Agreement No. 2. In addition, the Subsidiaries jointly and severally agreed to guarantee and act as surety for the Company’s obligation to repay Note No. 2 pursuant to a subsidiary guarantee.
(9) Business Risk and Credit Risk Concentration Involving Cash
During the three and nine months ended March 31, 2020, the Company had one customer that substantially comprised all of the Company’s revenue. During the three and nine months ended March 31, 2019, the Company recognized revenue from one customer. As of March 31, 2020, the Company’s trade accounts receivable balance was related to sales to a global shipping and logistics company.
The Company maintains funds in bank accounts that may exceed the limit insured by the Federal Deposit Insurance Corporation of $250 thousand per depositor. The risk of loss attributable to these uninsured balances is mitigated by depositing funds in what we believe to be high credit quality financial institutions. The Company has not experienced any losses in such accounts.
(10) Common Stock Compensation
Stock Option Activity Summary
The Company’s stock option activity for the nine months ended March 31, 2020, is as follows:
|
|
Shares
(in thousands)
|
|
|
Weighted Average
Exercise Price
|
|
Outstanding at June 30, 2019
|
|
|
324
|
|
|
$
|
5.71
|
|
Granted
|
|
|
10
|
|
|
|
1.85
|
|
Exercised
|
|
|
—
|
|
|
|
—
|
|
Canceled or expired
|
|
|
(8
|
)
|
|
|
4.07
|
|
Outstanding at March 31, 2020
|
|
|
326
|
|
|
$
|
5.68
|
|
The aggregate intrinsic value of options exercisable at March 31, 2020 was $0, as the fair value of the Company’s common stock is less than the exercise prices of these options. The remaining stock-based compensation expense of $33 thousand related to stock options will be recognized over a weighted-average period of 0.57 years.
15
The table below details the Company’s stock options outstanding as of March 31, 2020:
Range of exercise prices
|
|
Number
Outstanding
|
|
|
Options
Outstanding
Weighted-
Average
Remaining
Contractual
Life (years)
|
|
|
Weighted-
Average
Exercise
Price
|
|
|
Number
Exercisable
|
|
|
Options
Exercisable
Weighted-
Average
Exercise
Price
|
|
$1.85 – 3.55
|
|
|
76,500
|
|
|
|
3.03
|
|
|
$
|
3.43
|
|
|
|
66,500
|
|
|
$
|
3.43
|
|
$5.30 – 5.85
|
|
|
119,653
|
|
|
|
7.11
|
|
|
|
5.48
|
|
|
|
76,909
|
|
|
|
5.49
|
|
$6.00 – 8.35
|
|
|
130,000
|
|
|
|
4.65
|
|
|
|
7.19
|
|
|
|
86,000
|
|
|
|
6.59
|
|
$1.85 – 8.35
|
|
|
326,153
|
|
|
|
5.17
|
|
|
$
|
5.68
|
|
|
|
229,409
|
|
|
$
|
5.31
|
|
Compensation costs recognized related to stock option awards were $43 thousand for each of the three months ended March 31, 2020 and 2019, and $128 thousand for each of the nine months ended March 31, 2020 and 2019.
Restricted Stock
The Company’s restricted stock activity for the nine months ended March 31, 2020, is as follows:
|
|
Shares
(in thousands)
|
|
|
Weighted
Average
Grant-Date
Fair Value
|
|
Outstanding at June 30, 2019
|
|
|
208
|
|
|
$
|
4.06
|
|
Granted
|
|
|
5
|
|
|
|
2.47
|
|
Vested
|
|
|
(63
|
)
|
|
|
3.77
|
|
Canceled or expired
|
|
|
(11
|
)
|
|
|
3.97
|
|
Outstanding at March 31, 2020
|
|
|
139
|
|
|
$
|
3.96
|
|
Stock compensation expenses related to restricted stock were $52 thousand and $64 thousand for the three months ended March 31, 2020 and 2019, respectively, and $154 thousand and $77 thousand for the nine months ended March 31, 2020, and 2019, respectively. The remaining stock-based compensation expense of $359 thousand related to restricted stock awards granted will be recognized over a weighted-average period of 1.74 years.
(11) Income Taxes
The Company accounts for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the expected tax consequences of temporary differences between the tax bases of assets and liabilities and their reported amounts. Valuation allowances are established, when necessary, to reduce deferred tax assets to amounts that are more likely than not to be realized. As of March 31, 2020, the Company established a valuation allowance against all of its net deferred tax assets.
For the three months ended March 31, 2020 and 2019, the Company incurred pre-tax losses in the amount of $2.1 million and $2.3 million, respectively. For the nine months ended March 31, 2020 and 2019, the Company incurred pre-tax losses in the amount of $6.2 million and $6.7 million, respectively. The total effective tax rate was approximately 0% for the each of the three and nine months ended March 31, 2020 and 2019.
For each of the nine months ended March 31, 2020 and 2019, the Company’s effective tax rate differed from the federal statutory rate of 21%, primarily due to the valuation allowance placed against its net deferred tax assets.
The Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, was signed into law on March 27, 2020. The CARES Act provided certain tax relief measures including the acceleration of the alternative minimum credit previously paid. The CARES Act allows for the acceleration of the refundable AMT credit up to 100% of the AMT credit. In connection with its analysis of the impact of the CARES Act and pursuant to filing the Form 1139, the Company has reclassed the refundable AMT credit of $429K from long-term to short-term receivable and recorded no income tax effects on the other tax relief measures of the CARES Act.
FASB ASC 740, “Income Taxes” addresses the accounting for uncertainty in income tax recognized in an entity’s financial statements and prescribes a recognition threshold and measurement attribute for financial statement disclosure of tax positions
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taken or expected to be taken on a tax return. The Company had no unrecognized tax benefit for the three and nine months ended March 31, 2020 or 2019.
Loss carryovers are generally subject to modification by tax authorities until three years after they have been utilized; as such, the Company is subject to examination for the fiscal years ended 2000 through present for federal purposes and fiscal years ended 2006 through present for state purposes. The reason for this extended examination period is due to the utilization of the loss carryovers generated by the sale of our Astrotech Space Operations business unit in fiscal year 2015.
(12) Commitments and Contingencies
The Company is subject to various lawsuits and other claims in the normal course of business. In addition, from time to time, the Company receives communications from government or regulatory agencies concerning investigations or allegations of noncompliance with laws or regulations in jurisdictions in which the Company operates.
The Company establishes reserves for the estimated losses on specific contingent liabilities, for regulatory and legal actions where the Company deems a loss to be probable and the amount of the loss can be reasonably estimated. In other instances, the Company is not able to make a reasonable estimate of liability because of the uncertainties related to the outcome or the amount or range of potential loss.
Litigation, Investigations, and Audits – We are not party to, nor are our properties the subject of, any material pending legal proceedings or investigations.
(13) Segment Information
The Company currently has one reportable business unit: 1st Detect Corporation. In prior periods, the Company had two reportable business units: 1st Detect Corporation and Astral Images Corporation. As of March 31, 2020, Astral no longer meets the criteria for segment reporting as both its assets and operations are minimal. For more information on key financial metrics of the Company’s segments in prior reporting periods, refer to the Company’s Annual Report on Form 10-K for the year ended June 30, 2019.
(14) Subsequent Events
NASDAQ Notice
As previously noted by the Company in its Form 10-Q for the fiscal quarter ended December 31, 2019, the Company was not in compliance with the minimum stockholders’ equity requirement under Nasdaq Listing Rule 5550(b)(1) for continued listing on The Nasdaq Capital Market because the Company’s stockholders’ equity was below the required minimum of $2.5 million at December 31, 2019. 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 the required stockholder’s equity of $2.5 million.
The Notice had no immediate effect on the Company’s listing on the Nasdaq Capital Market. On April 14, 2020, the Company submitted a plan to regain compliance with the minimum stockholders’ equity requirement. If the Company’s plan to regain compliance is accepted, Nasdaq may grant an extension of up to 180 calendar days from the date of the Notice to evidence compliance (the “Compliance Period”).
Paycheck Protection Program Loan
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.
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FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical fact are forward-looking statements for purposes of federal and state securities laws. Forward-looking statements may include the words “may,” “will,” “plans,” “believes,” “estimates,” “expects,” “intends,” and other similar expressions. Such statements are subject to risks and uncertainties that could cause our actual results to differ materially from those projected in the statements. Such risks and uncertainties include, but are not limited to:
|
•
|
The impact of the COVID-19 outbreak on the global economy, including the possibility of a global recession, and more specifically the impact to our business, suppliers, consumers, customers, and employees;
|
|
•
|
Our ability to raise sufficient capital to meet our long and short-term liquidity requirements;
|
|
•
|
Our ability to continue as a going concern;
|
|
•
|
The effect of economic and political conditions in the United States or other nations that could impact our ability to sell our products and services or gain customers;
|
|
•
|
Product demand and market acceptance risks, including our ability to develop and sell products and services to be used by governmental or commercial customers;
|
|
•
|
The impact of trade barriers imposed by the U.S. government, such as import/export duties and restrictions, tariffs and quotas, and potential corresponding actions by other countries in which the Company conducts its business;
|
|
•
|
Our ability to successfully pursue our business plan and execute our strategy;
|
|
•
|
Technological difficulties and potential legal claims arising from any technological difficulties;
|
|
•
|
Uncertainty in government funding and support for key programs, grant opportunities, or procurements;
|
|
•
|
The impact of competition on our ability to win new contracts; and
|
|
•
|
Our ability to meet technological development milestones and overcome development challenges.
|
Although we believe that the assumptions underlying our forward-looking statements are reasonable, any of the assumptions could be inaccurate; therefore, we cannot assure you that the forward-looking statements included in this Quarterly Report on Form 10-Q will prove to be accurate. In light of the significant uncertainties inherent in our forward-looking statements, the inclusion of such information should not be regarded as a representation by us or any other person that our objectives and plans will be achieved. Some of these and other risks and uncertainties that could cause actual results to differ materially from such forward-looking statements are more fully described in our 2019 Annual Report on Form 10-K, elsewhere in this Quarterly Report on Form 10-Q, or in the documents incorporated by reference herein. Except as may be required by applicable law, we undertake no obligation to publicly update or advise of any change in any forward-looking statement, whether as a result of new information, future events, or otherwise. In making these statements, we disclaim any obligation to address or update each factor in future filings with the Securities and Exchange Commission (“SEC”) or communications regarding our business or results, and we do not undertake to address how any of these factors may have caused changes to discussions or information contained in previous filings or communications. In addition, any of the matters discussed above may have affected our past results and may affect future results, so that our actual results may differ materially from those expressed in this Quarterly Report on Form 10-Q and in prior or subsequent communications.
18