ASTROTECH Corp

Previous wording

ATI owns and licenses the AMS Technology, the platform mass spectrometry technology originally developed by 1st Detect. Long recognized as the gold standard in chemical detection, mass spectrometry has historically been too costly, bulky, and cumbersome. In contrast, the AMS Technology has been designed to be inexpensive, smaller, and easier to use when compared to traditional mass spectrometers. Unlike other technologies, the AMS Technology works under ultra-high vacuum, which eliminates competing molecules, yielding higher resolution and fewer false alarms. The intellectual property includes 18 granted patents 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 four wholly-owned subsidiaries of Astrotech on an exclusive basis, including to 1 st Detect for use in the security and detection market, to AgLAB for use in the agriculture market, and to BreathTech for use in breath analysis applications.

Current wording

ATI owns and licenses the AMS Technology™, the platform mass spectrometry technology originally developed by 1st Detect. Long recognized as the gold standard in chemical detection, mass spectrometry has historically been too costly, bulky, and cumbersome. In contrast, the AMS Technology has been designed to be inexpensive, smaller, and easier to use when compared to traditional mass spectrometers. Unlike other technologies, the AMS Technology works under ultra-high vacuum, which eliminates competing molecules, yielding higher resolution and fewer false alarms. The intellectual property includes 17 granted patents 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 four wholly-owned subsidiaries of Astrotech on an exclusive basis, including to 1 st Detect for use in the security and detection market, to AgLAB for use in the agriculture market, and to BreathTech for use in breath analysis applications.

Previous wording

The Company has announced the formation of Pro-Control and has entered into an exclusive license to use the ATi Mass Spectrometer Technology for chemical manufacturing process control applications. Pro-Control has announced the introduction of its proprietary Pro-Control Maximum Value Process™ and the Pro-Control-1000™ mass spectrometer designed to test, measure and increase potency, purity and weight yields in the chemical manufacturing processes.

Current wording

The Company has announced the formation of Pro-Control and has entered into an exclusive license to use the ATI Mass Spectrometer Technology for chemical manufacturing process control applications. Pro-Control has announced the introduction of its proprietary Pro-Control Maximum Value Processing and the Pro-Control-1000™ mass spectrometer designed to test, measure and increase potency, purity and weight yields in the chemical manufacturing processes.

Previous wording

In order to sell the TRACER 1000 to airport and cargo security customers in the European Union and certain other countries, we obtained ECAC certification. We are currently selling the TRACER 1000 to customers who accept ECAC certification. As of December 31, 2023, we have deployed the TRACER 1000 in approximately 29 locations in 14 countries throughout Europe and Asia.

Current wording

In order to sell the TRACER 1000 to airport and cargo security customers in the European Union and certain other countries, we obtained ECAC certification. We are currently selling the TRACER 1000 to customers who accept ECAC certification. As of March 31, 2024, we have deployed the TRACER 1000 in approximately 30 locations in 14 countries throughout Europe and Asia.

Previous wording

In the United States, the Company is working with the U.S. Transportation Security Administration (“TSA”) towards air cargo certification. On March 27, 2018, the Company announced that the TRACER 1000 was accepted into TSA’s Air Cargo Screening Technology Qualification Test (“ACSQT”) and, on April 4, 2018, the Company announced that the TRACER 1000 entered into testing with the TSA for passenger screening at airports. On November 14, 2019, the Company announced that the TRACER 1000 had been selected by the TSA’s Innovation Task Force to conduct live checkpoint screening at Miami International Airport. With similar protocols as ECAC testing, the Company has received valuable feedback from all programs. Following ECAC certification and the Company's early traction within the cargo market, testing for cargo security continued with the TSA. Due to the COVID-19 pandemic, all testing within the TSA was put on hold; however, cargo testing resumed during the summer of 2020 and on September 9, 2020 the Company announced that the TRACER 1000 passed the non-detection testing portion of the TSA’s ACSQT. The Company resumed detection and non-detection testing for cargo security with TSA subsequent to the end of the second quarter of fiscal year 2024. TSA cargo detection testing is the final step to be listed on the Air Cargo Screening Technology List ("ACSTL") as an “approved” device. If approved, we believe the TRACER 1000 will be approved for cargo security screening sales in the United States and field trials with the TSA will begin. If field trials are successful, the Tracer 1000 will be added to the "qualified" list. As a result of the delay in progress with the TSA, efforts are primarily focused on other opportunities.

Current wording

In the United States, the Company is working with the U.S. Transportation Security Administration (“TSA”) towards air cargo certification. On March 27, 2018, the Company announced that the TRACER 1000 was accepted into TSA’s Air Cargo Screening Technology Qualification Test (“ACSQT”) and, on April 4, 2018, the Company announced that the TRACER 1000 entered into testing with the TSA for passenger screening at airports. On November 14, 2019, the Company announced that the TRACER 1000 had been selected by the TSA’s Innovation Task Force to conduct live checkpoint screening at Miami International Airport. With similar protocols as ECAC testing, the Company has received valuable feedback from all programs. Following ECAC certification and the Company’s early traction within the cargo market, testing for cargo security continued with the TSA. Due to the COVID-19 pandemic, all testing within the TSA was put on hold; however, cargo testing resumed during the summer of 2020 and on September 9, 2020 the Company announced that the TRACER 1000 passed the non-detection testing portion of the TSA’s ACSQT. The Company resumed detection and non-detection testing for cargo security with TSA during the third quarter of the fiscal year 2024. TSA cargo detection testing is the final step to be listed on the Air Cargo Screening Technology List ("ACSTL") as an “approved” device. If approved, we believe the TRACER 1000 will be approved for cargo security screening sales in the United States and field trials with the TSA will begin. If field trials are successful, the TRACER 1000 will be added to the "qualified" list. The Company has also started the process to pass TSA checkpoint testing. This process involves Developmental Test and Evaluation in which the Transportation Security Laboratory ("TSL") will test the TRACER 1000 and work with 1st Detect to ensure its readiness to enter certification testing. The certification test is then completed by the Independent Test & Evaluation department of TSL. As of the fiscal year 2023 budget the government had over 6,000 ETD units at checkpoint and baggage screening points and we believe that the TSA would benefit from our AMS Technology.

Previous wording

AgLAB, an exclusive licensee of ATI for the agriculture market, has developed the AgLAB 1000™ series of mass spectrometers for use in the hemp and cannabis markets with initial focus on optimizing yields in the distillation process. The AgLAB product line is a derivative of our core AMS Technology. We believe the AMS Technology provides a significant competitive advantage due to its small size, rugged design, quick analysis, and ease of use. AgLAB has continued to conduct field trials to demonstrate that the AgLAB 1000-D2™ can be used in the distillation process to significantly improve the processing yields of tetrahydrocannabinol (“THC”) and cannabidiol (“CBD”) oil during distillation. The AgLAB 1000-D2 uses the Maximum Value Process solution (“MVP”) to analyze samples in real-time and help the equipment operator to determine the ideal settings required to maximize yields. As part of our growth plan, we have leveraged this technology and launched a family of “process control” methods and solutions, which are the focus of Pro-Control.

Current wording

AgLAB, an exclusive licensee of ATI for the agriculture market, has developed the AgLAB 1000™ series of mass spectrometers for use in the hemp and cannabis markets with initial focus on optimizing yields in the distillation process. The AgLAB product line is a derivative of our core AMS Technology. We believe the AMS Technology provides a significant competitive advantage due to its small size, rugged design, quick analysis, and ease of use. AgLAB has continued to conduct field trials to demonstrate that the AgLAB 1000-D2™ can be used in the distillation process to significantly improve the processing yields of tetrahydrocannabinol (“THC”) and cannabidiol (“CBD”) oil during distillation. The AgLAB 1000-D2 uses the Maximum Value Processing solution (“MVP”) to analyze samples in real-time and help the equipment operator to determine the ideal settings required to maximize yields. As part of our growth plan, we have leveraged this technology by launching a family of “process control” methods and solutions, which are the focus of Pro-Control.

Previous wording

During the first quarter of fiscal year 2023, we began our first production run of the AgLAB 1000-D2 and sales efforts are currently underway. On May 9, 2023, we announced the results from ongoing field trials of the AgLAB MVP solution, which we believe demonstrate that it can be a valuable tool for cannabis and hemp oil processors worldwide. During our field trials, we were able to improve ending-weights yields by an average of 30%.

Current wording

Sales efforts for the AgLAB 1000-D2 are currently underway. On May 9, 2023, we announced the results from ongoing field trials of the AgLAB MVP solution, which we believe demonstrate that it can be a valuable tool for cannabis and hemp oil processors worldwide. During our field trials, we were able to improve ending-weights yields by an average of 30%.

Previous wording

On November 27, 2023, AgLAB announced the presentation of the AgLAB Maximum Value Process™ at MJBizCon. This process is an innovative process control system proven to increase the potency of ending-weight yields and increase revenue by an average of 32%. This process provides real-time data, allowing distillers to adjust parameters to optimize the quality and quantity of each batch of oil.

Current wording

On November 27, 2023, AgLAB announced the presentation of the AgLAB Maximum Value Processing at MJBizCon. This process is an innovative process control system proven to increase the potency of ending-weight yields and increase revenue by an average of 32%. This process provides real-time data, allowing distillers to adjust parameters to optimize the quality and quantity of each batch of oil.

Previous wording

Pro-Control was launched December 12, 2023 and is focused on applying the AMS Technology in chemical manufacturing process control applications developed by AgLAB. The Pro-Control Maximum Value Process™ and the Pro-Control-1000™ mass spectrometer are designed to test, measure and increase potency, purity and weight yields in the chemical manufacturing processes.

Current wording

Pro-Control was launched December 12, 2023 and is focused on applying the AMS Technology in chemical manufacturing process control applications. The Pro-Control Maximum Value Processing and the Pro-Control-1000™ mass spectrometer are designed to test, measure and increase potency, purity and weight yields in the chemical manufacturing processes. The Company is actively marketing the product to large distillers and chemical manufacturers.

Previous wording

Revenue – Total revenue increased by $852 thousand during the second quarter of fiscal year 2024, compared to the second quarter of fiscal year 2023. In the second quarter of fiscal year 2024, revenue was related to the sales of our TRACER 1000 along with ongoing consumable and recurring maintenance services of the TRACER 1000. In the second quarter of fiscal year 2023, revenue was related to ongoing sales of consumables and recurring maintenance services. The increase in revenue is primarily the result of fulfilling the previously announced TRACER 1000 units purchase orders.

Current wording

Revenue – Total revenue increased by $15 thousand, or 42.9%, during the third quarter of fiscal year 2024, compared to the third quarter of fiscal year 2023. In the third quarter of fiscal year 2024 and 2023, revenue was related to ongoing consumables and recurring maintenance services of the TRACER 1000. The increase in revenue is primarily the result of increased maintenance and consumable revenue from more deployed units quarter over quarter.

Previous wording

Cost of Revenue– Gross profit is comprised of revenue less cost of revenue. In the second quarter of fiscal year 2024 and 2023, cost of revenue was comprised of labor, materials, shipping, and warranty reserve related to the sale of TRACER 1000 units. Cost of revenue increased by $428 thousand during the second quarter of fiscal year 2024, compared to the second quarter of fiscal year 2023 due to the increase in revenue as described above. Gross margin increased by 7% in the second quarter of fiscal year 2024, compared to the second quarter of fiscal year 2023 due to sales mix.

Current wording

Cost of Revenue– Gross profit is comprised of revenue less cost of revenue. In the third quarter of fiscal year 2024 and 2023, cost of revenue was comprised of labor, materials, shipping, and warranty reserve related to the sale of TRACER 1000 units. Cost of revenue increased by $18 thousand during the third quarter of fiscal year 2024, compared to the third quarter of fiscal year 2023, due to the increase in revenue as described above. Gross margin decreased by 15% in the third quarter of fiscal year 2024, compared to the third quarter of fiscal year 2023 due to inflationary pressure on shipping charges.

Previous wording

Operating Expenses – Operating expenses increased $678 thousand, or 23.2%, during the second quarter of fiscal year 2024, compared to the second quarter of fiscal year 2023. Significant changes to operating expenses include the following:

Current wording

Operating Expenses – Operating expenses increased $780 thousand, or 28.3%, during the third quarter of fiscal year 2024, compared to the third quarter of fiscal year 2023. Significant changes to operating expenses include the following:

Previous wording

Other income and expense, net– Other income and expense, net increased by $31 thousand during the second quarter of fiscal year 2024, compared to the second quarter of fiscal year 2023, due to more income earned on short-term, capital-preservation, investments as interest rates have increased.

Current wording

Other income and expense, net– Other income and expense, net remained consistent during the third quarter of fiscal year 2024, compared to the third quarter of fiscal year 2023.

Previous wording

Income Taxes–*** ***Income tax benefit did not change during the second quarter of fiscal year 2024, compared to the second quarter of fiscal year 2023. The realization of tax benefits depends on the existence of future taxable income. Pursuant to ASC 740 “Income Taxes”, a valuation allowance has been established on all of our deferred tax assets.

Current wording

Income Taxes–*** ***Income tax benefit did not change during the third quarter of fiscal year 2024, compared to the third quarter of fiscal year 2023. The realization of tax benefits depends on the existence of future taxable income. Pursuant to ASC 740 “Income Taxes”, a valuation allowance has been established on all of our deferred tax assets.

Previous wording

Selected consolidated financial data for the six months ended December 31, 2023, and 2022 is as follows:

Current wording

Selected consolidated financial data for the nine months ended March 31, 2024, and 2023 is as follows:

Previous wording

Revenue – Total revenue increased by $1.239 million during the six months ended December 31, 2023, compared to the six months ended December 31, 2022. The revenue in both quarters was related to the sales of our TRACER 1000 along with ongoing consumable and recurring maintenance services of the TRACER 1000.The increase in revenue is primarily due to new unit sales of TRACER 1000 fulfilling both the previously announced purchase orders we had received.

Current wording

Revenue – Total revenue increased by $1.3 million, or 3.7%, during the nine months ended March 31, 2024, compared to the nine months ended March 31, 2023. The revenue in both periods was related to the sales of our TRACER 1000 along with ongoing consumable and recurring maintenance services of the TRACER 1000. The increase in revenue is primarily due to new unit sales of TRACER 1000, fulfilling both the previously announced purchase orders we had received.

Previous wording

Cost of Revenue– Gross profit is comprised of revenue less cost of revenue. In the six months ended December 31, 2023 and 2022, cost of revenue was comprised of labor, materials, shipping, and warranty reserve related to the sale of TRACER 1000 units. Cost of revenue increased by $638 thousand during the six months ended December 31, 2023, compared to the six months ended December 31, 2022 due to the increase in revenue as described above. Gross margin increased by 8% in the six months ended December 31, 2023, compared to the six months ended December 31, 2022 due to design improvements resulting in less warranty expense and a comparative increase in sales price.

Current wording

Cost of Revenue– Gross profit is comprised of revenue less cost of revenue. In the nine months ended March 31, 2024 and 2023, cost of revenue was comprised of labor, materials, shipping, and warranty reserve related to the sale of TRACER 1000 units. Cost of revenue increased by $656 thousand during the nine months ended March 31, 2024, compared to the nine months ended March 31, 2023 due to the increase in revenue as described above. Gross margin increased by 8% in the nine months ended March 31, 2024, compared to the nine months ended March 31, 2023 due to design improvements resulting in less warranty expense and a comparative increase in sales price.

Previous wording

Operating Expenses – Operating expenses increased $1.426 million, or 25%, during the six months ended December 31, 2023, compared to the six months ended December 31, 2022. Significant changes to operating expenses include the following:

Current wording

Operating Expenses – Operating expenses increased $2.2 million, or 26.1%, during the nine months ended March 31, 2024, compared to the nine months ended March 31, 2023. Significant changes to operating expenses include the following:

Previous wording

Other income and expense, net– Other income and expense, net increased by $219 thousand during the six months ended December 31, 2023, compared to the six months ended December 31, 2022, due to more income earned on short-term, capital-preservation, investments as interest rates have increased.

Current wording

Other income and expense, net– Other income and expense, net increased by $223 thousand during the nine months ended March 31, 2024, compared to the nine months ended March 31, 2023, due to more income earned on short-term, capital-preservation, investments as interest rates have increased.

Previous wording

Income Taxes–*** ***Income tax benefit did not change during the six months ended December 31, 2023, compared to the six months ended December 31, 2022. The realization of tax benefits depends on the existence of future taxable income. Pursuant to ASC 740 “Income Taxes”, a valuation allowance has been established on all of our deferred tax assets.

Current wording

Income Taxes–*** ***Income tax benefit did not change during the nine months ended March 31, 2024, compared to the nine months ended March 31, 2023. The realization of tax benefits depends on the existence of future taxable income. Pursuant to ASC 740 “Income Taxes”, a valuation allowance has been established on all of our deferred tax assets.

Previous wording

As of December 31, 2023, we held cash and cash equivalents of $11.1 million, and our working capital was approximately $37.8 million. As of June 30, 2023, we had cash and cash equivalents of $14.2 million, and our working capital was approximately $42.1 million. Cash and cash equivalents decreased $3.1 million as of December 31, 2023, compared to June 30, 2023, due to funding our continuing operating expenses, partially offset by the proceeds of short-term investments.

Current wording

As of March 31, 2024, we held cash and cash equivalents of $8.5 million, and our working capital was approximately $35.1 million. As of June 30, 2023, we had cash and cash equivalents of $14.2 million, and our working capital was approximately $42.1 million. Cash and cash equivalents decreased $6.3 million as of March 31, 2024, compared to June 30, 2023, due to funding our continuing operating expenses, partially offset by the proceeds of short-term investments.

Previous wording

Cash used in operating activities increased $595 thousand for the six months ended December 31, 2023, compared to the** **six months ended December 31, 2022, due to operating expenses, an increase in inventory and receivables.

Current wording

Cash used in operating activities increased $897 thousand for the nine months ended March 31, 2024, compared to the** **nine months ended March 31, 2023, due to operating expenses, and an increase in inventory and receivables.

Previous wording

Cash used in investing activities decreased $7.6 million for the six months ended December 31, 2023, compared to the** **six months ended December 31, 2022, due to not purchasing and the maturing of the short-term time deposit investments.

Current wording

Cash used in investing activities decreased $6.7 million for the nine months ended March 31, 2024, compared to the** **nine months ended March 31, 2023, due to not purchasing and the maturing of the short-term time deposit investments.

Previous wording

Cash used in financing activities decreased $487 thousand for the six months ended December 31, 2023, compared to the six months ended December 31, 2022, due to a repayment of related-party debt in the prior year.

Current wording

Cash used in financing activities decreased $548 thousand for the nine months ended March 31, 2024, compared to the nine months ended March 31, 2023, due to a repayment of related-party debt in the prior year.

Previous wording

The Company's effective tax rate is 0% for income tax for the three months ended December 31, 2023, and the Company expects that our effective tax rate for the full fiscal year 2024 year will be 0%. Based on the weight of available evidence, including net cumulative losses and expected future losses, the Company has determined that it is more likely than not that our U.S. federal and state deferred tax assets will not be realized and therefore a full valuation allowance has been provided on the U.S. federal and state net deferred tax assets.

Current wording

The Company’s effective tax rate is 0% for income tax for the nine months ended March 31, 2024 and the Company expects that its effective tax rate for the full fiscal year 2024 year will be 0%. Based on the weight of available evidence, including net cumulative losses and expected future losses, the Company has determined that it is more likely than not that its U.S. federal and state deferred tax assets will not be realized and therefore a full valuation allowance has been provided on the U.S. federal and state net deferred tax assets.

Previous wording

In general, if we experience a greater than 50 percentage point aggregate change in ownership over a three-year period (a Section 382 ownership change), utilization of its pre-change net operating loss (“NOL”) carryforwards are subject to an annual limitation under Section 382 of the Internal Revenue Code. Generally, U.S. state laws have laws similar to Internal Revenue Code Section 382. The annual limitation generally is determined by multiplying the value of the Company’s stock at the time of such ownership change (subject to certain adjustments) by the applicable long-term tax-exempt rate. Such limitations may result in expiration of a portion of the NOL carryforward before utilization.

Current wording

In general, if the Company experiences a greater than 50 percentage point aggregate change in ownership over a three-year period (a Section 382 ownership change), utilization of its pre-change net operating loss (NOL) carryforwards are subject to an annual limitation under Section 382 of the Internal Revenue Code. Generally, U.S. state laws have laws similar to Internal Revenue Code Section 382. The annual limitation generally is determined by multiplying the value of the Company’s stock at the time of such ownership change (subject to certain adjustments) by the applicable long-term tax-exempt rate. Such limitations may result in expiration of a portion of the NOL carryforward before utilization.

Previous wording

There is a $2 thousand provision for income taxes during the three and six months ended December 31, 2023. There was $0 provision for income taxes during the three and six months ended December 31, 2022.

Current wording

For each of the three months ended March 2024 and March 2023, the Company reported $0 tax expense. There is a $2 thousand provision for income taxes during the nine months ended March 31, 2024. There was $0 provision for income taxes during the nine months ended March 31, 2023.