ASTROTECH Corp

ITEM 1.** Condensed Consolidated Financial Statements

Condensed Consolidated Balance Sheets

(In thousands, except share and per share data)

Note: The condensed consolidated balance sheet at June 30, 2023, has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by the United States generally accepted accounting principles for complete financial statements.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(In thousands, except per share data)

ASTROTECH CORPORATION

Condensed Consolidated Statement of Changes in Stockholders’** Equity**

(In thousands)

** ASTROTECH CORPORATION AND SUBSIDIARIES**

Condensed Consolidated Statements of Cash Flows

(In thousands)

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 in1984, is a mass spectrometry company that launches, manages, and commercializes scalable companies based on its innovative core technology.

Basis of Presentation – The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) for interim financial information and the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they donot include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for thethree andnine months ended* March 31, 2024* arenot necessarily indicative of the results that* maybe expected for the year ending June 30,2024. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Company’s Annual Report on Form10-K for the year ended June 30, 2023*. Certain prior period amounts have been reclassified to conform to the current year presentation or adjusted due to rounding and have hadno impact on net income or stockholders' equity.

Reverse Stock Split – On* December 5, 2022,the Company effectuated a reverse stock split of its shares of common stock, par value $0.001 per share (the “Common Stock”), whereby every thirty (30) pre-split shares of Common Stock were exchanged forone* (1) post-split share of the Company's Common Stock (the “Reverse Stock Split”). No fractional shares were issued in connection with the Reverse Stock Split. Stockholders who would otherwise have held a fractional share of the Common Stock received a cash payment in lieu thereof. Numbers presented in these condensed consolidated financial statements have been adjusted to reflect the Reverse Stock Split.

Accounting Pronouncements –In* June 2016,the FASB issued ASU2016*-13, Measurement of Credit Losses on Financial Instruments. ASU2016-13 requires entities to use a forward-looking approach based on current expected credit losses (“CECL”) to estimate credit losses on certain types of financial instruments, including trade receivables. The standard became effective for the Company for financial statements periods beginning after* December 15, 2022.The adoption of ASU2016*-13 didnot have a material impact on the Company’s consolidated financial statements.

In* July 2023,the FASB issued ASUNo* 2023-03, “Presentation of Financial Statements (Topic205), Income Statement—Reporting Comprehensive Income (Topic220), Distinguishing Liabilities from Equity (Topic480), Equity (Topic505), and Compensation— Stock Compensation (Topic718)” pursuant to SEC Staff Accounting BulletinNo. 120, which adds interpretive guidance for public companies to consider when entering into share-based payment transactions while in possession of material non-public information. The issued guidance doesnot have a material impact on the Company's consolidated financial statements as a result of ASUNo 2023-03.

In* November 2023,the FASB issued Accounting Standards Update2023*-07—Segment Reporting (Topic280): Improvements to Reportable Segment Disclosures. The Company has determined that it doesnot meet the criteria of ASC280 “Segment Reporting” because the Company’s subsidiaries represent Company brands that leverage the same core technology rather than independent operating segments.

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Recently Issued Accounting StandardsNot Yet Adopted -

In* December 2023,the FASB issued ASUNo* 2023-09, “Income Taxes (Topic740): Improvements to Income Tax Disclosures” (“ASU2023-09”). ASU2023-09 expands disclosures in the rate reconciliation and requires disclosure of income taxes paid by jurisdiction. ASU2023-09 is effective for fiscal years beginning after* December 15, 2024.Early adoption is permitted. ASU2023*-09 should be applied prospectively; however, retrospective application is permitted. The Company doesnot expect ASU2023-09 to have a material effect on the Company’s current financial position, results of operations or financial statement disclosures.

Our Business Units

Astrotech Technologies, Inc.

Astrotech Technologies, Inc. (“ATI”) owns and licenses the Astrotech Mass Spectrometer Technology™ (the “AMS Technology”), the platform mass spectrometry technology originally developed by1st Detect Corporation (“1st Detect”). 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 tofour wholly-owned subsidiaries of Astrotech on an exclusive basis, including to1st 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 breath analysis applications.

The Company has announced the formation of a wholly owned subsidiary Pro-Control, Inc. ("Pro-Control"), and has entered into an exclusive license with Pro-Control 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 which is designed to test, measure and increase potency, purity and weight yields in the chemical manufacturing processes.

ATI has contracted with various vendors to assist with the further development of our mass spectrometer products including the manufacturability and reliability of our systems.

1st*** Detect Corporation***

1st Detect, a licensee of ATI for the security and detection market, has developed the TRACER1000™, the world’sfirst mass spectrometry (“MS”) based explosives trace detector (“ETD”) certified by the European Civil Aviation Conference (“ECAC”). The TRACER1000 was designed to outperform the ETDs currently used at airports, cargo and other secured facilities, and borders worldwide. The Company believes that ETD customers are unsatisfied with the currently deployed ETD technology, which is driven by ion mobility spectrometry (“IMS”). The Company further believes that some IMS-based ETDs have issues with false positives, as they often misidentify personal care products and other common household chemicals as explosives, causing facility shutdowns, 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 few 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 to the TRACER1000’s detection library doesnot degrade its detection capabilities, as it has a virtually unlimited and easily expandable threat library.

In order to sell the TRACER1000 to airport and cargo security customers in the European Union and certain other countries, we obtained ECAC certification. The Company is currently selling the TRACER1000 to customers who accept ECAC certification. As of* March**31,* 2024, the Company has deployed the TRACER1000 in approximately 30 locations in14 countries throughout Europe and Asia.

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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 TRACER1000* was accepted into TSA’s Air Cargo Screening Technology Qualification Test (“ACSQT”) and, on* April 4, 2018,the Company announced that the TRACER1000* entered into testing with the TSA for passenger screening at airports. On* November 14, 2019,the Company announced that the TRACER1000* 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 of2020 and on* September 9, 2020the Company announced that the TRACER1000* 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 thethird quarter of the fiscal year2024. 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 TRACER1000 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 TRACER1000 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 TRACER1000 and work with1st 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 year2023 budget, the government had over6,000 ETD units at checkpoint and baggage screening points and we believe that the TSA would benefit from our AMS Technology.

On* March 25, 2024,the Company announced that it is currently accepting orders for the TRACER1000* Narcotics Trace Detector ("NTD"). The TRACER1000 NTD is a high-performance laboratory instrument capable of rapid detection of trace levels of narcotic compounds in seconds. The TRACER1000 NTD provides a ruggedized platform that can be applied across various markets including airports, border security, checkpoint, cargo, and infrastructure security, correctional facilities, military, and law enforcement.

From* April 9through April 12, 2024,*1st Detect showcased its TRACER1000 NTD and ETD at the International Security Conference and Exposition, also known as ISC West, in Las Vegas, Nevada. We believe ISC West isone of the leading comprehensive security trade events in the U.S. and has some of the country’s leading security and public safety professionals in attendance.

On* April 8, 2024,the Company announced that1st Detect’s TRACER1000* is now listed in the U.S. General Services Administration ("GSA") IT Schedule70 under ContractNo. GS-35F-250GA with SRI Group LLC, Special Item Number334290. IT Schedule70 is a long-term contract issued by the GSA to commercial technology vendors that allows sales to the U.S. federal government,one of the largest buyers of goods and services in the world.

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AgLAB Inc.

AgLAB, an exclusive licensee of ATI for the agriculture market, has developed the AgLAB1000™ 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 the Company’s core AMS Technology. AgLAB has continued to conduct field trials to demonstrate that the AgLAB1000-D2™ can be used in the distillation process to significantly improve the processing yields of tetrahydrocannabinol (“THC”) and cannabidiol (“CBD”) oil during distillation. The AgLAB1000-D2 uses the Maximum Value Processing solution (“MVP”) to analyze samples in real-time and assist the equipment operator in determining 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.

Management believes the AgLAB1000-D2 will deliver a compelling combination of cost and time savings while enhancing product quality and quantity for distillation processors of hemp and cannabis. The use of the AgLAB1000-D2 should reduce waste from current distillation practices and result in a significantly improved product. Due in large part to the Company’s proprietary technology, we believe our status as the only provider of a mass spectrometry system gives us a distinct advantage in the industry.

Our competition consists of high-performance liquid chromatography technology which analyzes THC and CBD derived from hemp. While we believe our technology has competitive advantages over the incumbent technology, there areno assurances of successfully competing in this market segment.

The hemp extraction market is a broad market and encompasses many startup companies and well-established companies. There isno assurance this industry will remain profitable, given the evolving regulatory landscape and applicable state and federal restrictions.

Sales efforts for the AgLAB1000-D2 are currently underway. On* May 9, 2023,AgLAB announced the confirmed results from field trials using the AgLAB1000*-D2 mass spectrometer and the MVP testing method (“AgLAB MVP”). AgLAB MVP is designed to improve yields and bottom-line profits for hemp (CBD) and cannabis (THC) producers of distilled oils. While we currently market primarily to distillers within the hemp industry, our AgLAB products also have the potential to serve distillers within the broader cannabis industry in the future, in which case our risk exposure would likely increase and could have a detrimental effect on our business.

BreathTech Corporation

BreathTech, an exclusive licensee of ATI for use in breath analysis applications, is developing the BreathTest-1000™, a breath analysis tool to screen for VOC metabolites found in a person’s breath that could indicate they* mayhave a compromised condition including butnot* limited to a bacterial or viral infection. The Company believes that new tools to more quickly identify an infection* may*be present remain of the utmost importance in the battle against COVID-19 and other diseases.

In* June 2022,*the Company expanded its existing study with Cleveland Clinic, initially focused on COVID-19 to use the BreathTest-1000 to screen for a variety of diseases spanning the entire body. The study focuses on detecting bloodstream infections, respiratory infections such as influenza types A and B and respiratory syncytial virus (“RSV”), carriage of Staphylococcus aureus, and Clostridioides difficile (“C. diff”) infections.

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In* November 2022,*BreathTech announced that, based on analysis of data from testing of breath samples procured during library development, the BreathTest-1000 lung disease screening instrument can clearly distinguish between infected and healthy breath samples. This analysis and conclusion marks a significant milestone in the development of the BreathTest-1000 lung disease screening instrument.

Pro-Control, Inc.

Pro-Control 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.

(2) Investments

The following tables summarize gains and losses related to the Company’s investments as of* March 31, 2024* and* June 30, 2023*, respectively:

We have certain financial instruments on our condensed consolidated balance sheets related to interest-bearing time deposits. Time deposits with maturities of less than90 days, if any, from the purchase date are included in “Cash and Cash Equivalents.” Time deposits with maturities from91-360 days, if any, are included in “Short-term investments.” Time deposits with maturities of more than360 days, if any, are included in “Long-term investments.” As of* March 31, 2024* and* June 30, 2023,the Company hadno* long-term investments. For more information about the fair value of the Company’s financial instruments, see footnote8.

The following table presents the carrying amounts of certain financial instruments as of* March 31, 2024* and* June 30, 2023*, respectively:

(3) Leases

On* April 27, 2021,Astrotech entered into a new lease for a research and development facility of approximately 5,960 square feet in Austin, Texas (the “R&D facility”) that includes a laboratory, a small production shop, and offices for staff, although many of the Company’s employees continue to work remotely. The lease commenced on June 1, 2021and had a lease term of 36 months. On November 11, 2022,the Company signed a lease extension agreement for the R&D facility, extending the term of the lease through April 30, 2025.The Company’s total contractual base rent obligation for theeleven*-month extension is approximately $95 thousand.

On* November 22, 2022,Astrotech entered into a sublease agreement for an additional facility directly adjacent to the R&D facility (the “Subleased Facility”). The Subleased Facility consists of approximately 3,900 square feet and will provide the space needed as the Company launches its AgLAB products and continues its R&D efforts at ATI & BreathTech. The sublease commenced on December 1, 2022,*and has a lease term of 29 months. The Company’s total contractual base rent obligation for the Subleased Facility is approximately $156 thousand.

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 donot 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. The amortization expense for financed lease assets for the years ended* March 31, 2024and2023* totaled $94 thousand and $76 thousand, respectively.

The balance sheet presentation of the Company’s operating and finance leases is as follows:

Future minimum lease payments as of* March 31, 2024*under non-cancellable leases are as follows (in thousands):

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Other information as of* March 31, 2024*, is as follows:

Cash payments for operating leases for thethree months ended* March 31, 2024*, and2023 totaled $41 thousand and $42 thousand, respectively. Cash payments for financing leases for thethree months ended* March 31, 2024*, and2023 totaled $45 thousand and $38 thousand, respectively.

Cash payments for operating leases for thenine months ended* March 31, 2024*, and2023 totaled $124 thousand and $99 thousand, respectively. Cash payments for financing leases for thenine months ended* March 31, 2024*, and2023 totaled $136 thousand and $115 thousand, respectively.

(4) Property and Equipment, net

As of* March 31, 2024* and* June 30, 2023*, property and equipment, net consisted of the following, respectively:

Depreciation and amortization expense of property and equipment was $206 thousand and $88 thousand for thethree months ended* March 31, 2024and2023,* respectively. Depreciation and amortization expense of property and equipment was $507 thousand and $221 thousand for thenine months ended* March 31, 2024* and2023, respectively. Total depreciation and amortization expense includes finance lease right-of-use asset amortization of $94 thousand and $76 thousand for thenine months ended* March 31, 2024* and2023, respectively.

(5) Stockholders’** Equity**

Common Stock

On* November 22, 2022,the Company filed athird* amendment (the “Amendment”) to the Company’s Certificate of Incorporation (as amended, the “Certificate of Incorporation”) with the Secretary of State of the State of Delaware to effect a1-for-30 reverse stock split of all of the Company’s issued and outstanding shares of Common Stock. The Amendment provided that, at the effective time of the Reverse Stock Split, every30 shares of the Company’s issued and outstanding Common Stock were automatically combined intoone validly issued, fully paid and non-assessable share of Common Stock, without effecting a change to the par value per share. The Reverse Stock Split affected all shares of the Company’s Common Stock outstanding immediately prior to the effective time of the Reverse Stock Split, as well as the number of shares of Common Stock available for issuance under the Company’s equity incentive plans. In addition, the Reverse Stock Split effected a reduction in the number of shares of Common Stock issuable upon the exercise of stock options and warrants outstanding immediately prior to the effectiveness of the Reverse Stock Split with a corresponding increase in exercise price per share. The Reverse Stock Split also triggered a proportionate adjustment to the number of shares of Common Stock issuable upon the conversion of our Series D convertible preferred stock, par value of $0.001 per share (“Series D Preferred Shares”). All historical per share data, number of shares outstanding, and other common stock equivalents for the periods presented in the accompanying condensed consolidated financial statements and notes thereto have been adjusted retroactively, where applicable, to reflect the Reverse Stock Split.

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Preferred Stock

The Company has issued 280,898 shares of Series D Preferred shares, all of which are issued and outstanding. Series D Preferred Shares are convertible to common stock on aone-to-thirty basis. Series D Preferred Shares arenot callable by the Company. The holder of the preferred stock is entitled to receive, and we shall pay, dividends on shares equal to and in the same form as dividends actually paid on shares of 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 haveno voting rights. Upon liquidation, dissolution, or winding-up of the Company, whether voluntary or involuntary, the preferred shares have preference over common stock. The holder of the Series D preferred shares has the option to convert at a ratio of30 shares toone of common stock at the holder's discretion.

Share Repurchase Program

On* November 9, 2022,the Company’s Board of Directors authorized a share repurchase program that allowed the Company to repurchase up to $1.0 million of the Company’s common stock beginning November 17, 2022,and continuing through and including November 17, 2023.As previously disclosed, on June 16, 2023,*the Company terminated the share repurchase program, effective immediately, in order to comply with Regulation M under the Exchange Act. The shares could have been repurchased from time to time in the open market or privately negotiated transactions or by other means in accordance with applicable state and federal securities laws. The timing, as well as the number and value of shares repurchased under the program, could have been determined by the Company at its discretion and would have depended on a variety of factors, including management’s assessment of the intrinsic value of the Company’s common stock, the market price of the Company’s common stock, general market and economic conditions, available liquidity, compliance with the Company’s debt and other agreements, applicable legal requirements, and other considerations.

Rights Plan

On* December 21, 2022,the Company’s Board of Directors adopted a limited duration stockholder rights plan (the “Rights Plan”) initially expiring December 20, 2023and declared a dividend ofone preferred share purchase right for each outstanding share of common stock to stockholders of record on January 5, 2023to purchase from the Companyone one*-thousandth of a share of Series A Junior Participating Preferred Stock, par value $0.001 per share, of the Company for an exercise price of $58.00 once the rights become exercisable, subject to the terms of and adjustment as provided in the related rights agreement.

On* December 18, 2023,the Company entered into AmendmentNo.* 1 to Rights Agreement between the Company and Equiniti Trust Company, as Rights Agent (the "Amendment"), which extends the Final Expiration Date (as defined in the Rights Plan) to* December 20, 2024,*unless the Final Expiration Date is further extended by the Company or the rights subject to the Rights Plan are earlier redeemed or exchanged by the Company in accordance with the terms of the Rights Plan. All other terms and conditions of the Rights Plan remain unchanged.

Warrants

A summary of the common stock warrant activity for thenine months ended* March 31, 2024*, is presented below:

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The following represents a summary of the warrants outstanding at each of the dates identified:

(6) 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:

All unvested restricted stock awards and convertible Series D preferred share for thenine months ended* March 31, 2024* arenot included in diluted net loss per share, as the impact to net loss per share would be anti-dilutive. Options to purchase 148,166 shares of common stock at exercise prices ranging from $7.47 to $175.50 per share outstanding as of* March 31, 2024* werenot included in diluted net loss per share, as the impact to net loss per share would be anti-dilutive.

(7) Revenue Recognition

Astrotech recognizes revenue employing the generally accepted revenue recognition methodologies described under the provisions of Accounting Standards Codification (“ASC”) Topic606 “Revenue from Contracts with Customers” (“Topic606”), which was adopted by the Company in fiscal year2019. The methodology used is based on contract type and how products and services are provided. The guidelines of Topic606 establish afive-step process to govern the recognition and reporting of revenue from contracts with customers. Thefive 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 thethree months ended* March 31, 2024,the Company hadone* revenue source that comprised materially all of its revenue. During thenine months ended* March 31, 2024*, the Company hadthree revenue sources that comprised materially all of its revenue. Revenue was recognized at a point in time consistent with the guidelines in Topic606.

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Contract Assets and Liabilities. The Company enters into contracts to sell products and provide services, and it recognizes contract assets and liabilities that arise from these transactions. The Company recognizes revenue and corresponding accounts receivable according to Topic606 and, at times, recognizes revenue in advance of the time when contracts give us the right to invoice a customer. The Company* mayalso receive consideration, per the terms of a contract, from customers prior to transferring goods to the customer. The Company records customer deposits as deferred revenue. Additionally, the Company may*receive payments, most typically for service and warranty contracts, at the onset of the contract and before services have been performed. In such instances, the Company records a deferred revenue liability. The Company recognizes these contract liabilities as sales after all revenue recognition criteria are met.

Practical Expedients. In cases where the Company is responsible for shipping after the customer has obtained control of the goods, the Company has elected to treat the shipping activities as fulfillment activities rather than as a separate performance obligation. Additionally, the Company has elected to capitalize the cost to obtain a contract only if the period of amortization would be longer thanone year. The Company only gives consideration to whether a customer agreement has a financing component if the period of time between transfer of goods and services and customer payment is greater thanone year.

Product Sales. The Company recognizes revenue from sales of products upon shipment or delivery when control of the product transfers to the customer, depending on the terms of each sale, and when collection is probable. In the circumstance where terms of a product sale include subjective customer acceptance criteria, revenue is deferred until the Company has achieved the acceptance criteria unless the customer acceptance criteria are perfunctory or inconsequential. The Company generally offers customers payment terms of60 days or less.

Freight. The Company records shipping and handling fees that it charges to its customers as revenue and related costs as cost of revenue.

Multiple Performance Obligations. Certain agreements with customers include the sale of equipment involving multiple elements in cases where obligations in a contract are distinct and thus require separation into multiple performance obligations, revenue recognition guidance requires that contract consideration be allocated to each distinct performance obligation based on its relative standalone selling price. The value allocated to each performance obligation is then recognized as revenue when the revenue recognition criteria for each distinct promise or bundle of promises has been met.

The standalone selling price for each performance obligation is an amount that depicts the amount of consideration to which the entity expects to be entitled in exchange for transferring the good or service. When there is onlyone performance obligation associated with a contract, the entire amount of consideration is attributed to that obligation. When a contract contains multiple performance obligations, the standalone selling price isfirst estimated using the observable price, which is generally a list price net of applicable discount or the price used to sell the good or service in similar circumstances. In circumstances when a selling price isnot directly observable, the Company will estimate the standalone selling price using information available to it including its market assessment and expected cost, plus margin.

The timetable for fulfilment of each of the distinct performance obligations can range from completion in a short amount of time and entirely within a single reporting period to completion over several reporting periods. The timing of revenue recognition for each performance obligation* may*be dependent upon several milestones, including physical delivery of equipment, completion of site acceptance test, and in the case of after-market consumables and service deliverables, the passage of time.

(8) Fair Value Measurement

ASC Topic820 “Fair Value Measurement” (“Topic820”) defines fair value, establishes a market-based framework or hierarchy for measuring fair value, and expands disclosures about fair value measurements. Topic820 is applicable whenever assets and liabilities are measured and included in the financial statements at fair value. The fair value hierarchy established in Topic820 prioritizes the inputs used in valuation techniques intothree levels as follows:

Level1 - Quoted prices in active markets for identical assets or liabilities.

Level2 - Inputs other than Level1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that arenot 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.

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Level3 - Unobservable inputs that are supported by little orno market activity and are significant to the fair value of the assets or liabilities.

The following tables present the carrying amounts, estimated fair values, and valuation input levels of certain financial instruments as of* March 31, 2024* and* June 30, 2023*:

The value of available-for-sale securities with Level1 inputs is based on pricing fromthird-party pricing vendors, who use quoted prices in active markets for identical assets. The fair value measurements used for time deposits are considered Level2 and use pricing fromthird-party pricing vendors who use quoted prices for identical or similar securities in both active and inactive markets.

(9) Related-party Debt

On* September 5, 2022,the secured promissory issued by the Company on September 5, 2019 (the“2019* Note”) to Thomas B. Pickens III, the Chief Executive Officer and Chairman of the Board of Directors of the Company, matured. On the maturity date, the remaining outstanding principal amount of $500 thousand and accrued interest of $55 thousand on the2019 Note was paid in full and the2019 Note was canceled. With the cancelation of the2019 Note, the Amended Subsidiary Guarantee was terminated and the Subsidiaries’ Collateral was released. Refer to Note7 of our Annual Report on Form10-K for2023 for more detailed information on the2019 Note.

(10) Business Risk and Credit Risk Concentration Involving Cash

The Company hadone customer that materially comprised all of the Company's revenue for thethree months ended* March 31, 2024*. The Company hadtwo customers that comprised of all of the Company’s revenue for thethree months ended* March 31, 2023*. For thenine months ended* March 31, 2024and2023,* the Company hadthree customers that materially comprised all of the Company's revenue. Additionally, the material amount of the company's receivables was comprised ofone company in both fiscal years.

The Company maintains funds in bank accounts that* mayexceed the limit insured by the Federal Deposit Insurance Corporation (the "FDIC"). The risk of loss attributable to these uninsured balances is mitigated by depositing funds in what the Company believes to be high credit quality financial institutions. The Company hasnot* experienced any losses in such accounts.

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(11) Stock-Based Compensation

Stock Option Activity Summary

The Company’s stock option activity for thenine months ended* March 31, 2024* is as follows:

The aggregate intrinsic value of options exercisable at* March 31, 2024* 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 $1.0 million related to stock options will be recognized over a weighted-average period of 2.21 years. The aggregate intrinsic value of options exercisable at* March 31, 2024* was $0 as the fair value of the Company’s common stock is less than the exercise prices of these options. The aggregate intrinsic value of all options outstanding at* March 31, 2024* was $1 thousand.

The table below details the Company’s stock options outstanding as of* March 31, 2024*:

Compensation costs recognized related to stock option awards were $134 thousand and $47 thousand for each of thethree months ended* March 31, 2024* and2023, respectively. Compensation costs recognized related to stock option awards were $338 thousand and $142 thousand for each of thenine months ended* March 31, 2024* and2023, respectively.

Restricted Stock

The Company’s restricted stock activity for thenine months ended* March 31, 2024*, is as follows:

Stock compensation expenses related to restricted stock were $304 thousand and $309 thousand for thethree months ended* March 31, 2024* and2023, respectively. Stock compensation expenses related to restricted stock were $937 thousand and $1.0 million for thenine months ended* March 31, 2024* and2023, respectively. The remaining stock-based compensation expense of $611 thousand related to restricted stock awards granted will be recognized over a weighted-average period of 2.73 years.

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(12) Income Taxes

The Company accounts for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the expected tax consequences of temporary differences between the tax bases of assets and liabilities and their reported amounts. Valuation allowances are established, when necessary, to reduce deferred tax assets to amounts that are more likely thannot to be realized. As of* March 31, 2024,*the Company has a valuation allowance against all of its net deferred tax assets.

For thenine months ended* March 31, 2024and2023,* the Company incurred pre-tax losses in the amount of $8.7 million and $7.3 million, respectively. The total effective tax rate was approximately 0% for thenine months ended* March 31, 2024and2023.*

For each of thenine months ended* March 31, 2024and2023,* 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 Inflation Reduction Act and the Chips and Science Act were enacted in* August 2022.There isno* material impact to the Company from these new tax laws.

FASB ASC740, “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 taken or expected to be taken on a tax return. The Company currently has approximately $486 thousand of uncertain tax positions as of* March 31, 2024,all of which are accounted as contra-deferred tax assets. The Company doesnot* expect any significant changes to its uncertain tax positions in the coming12 months.

Loss carryovers are generally subject to modification by tax authorities untilthree years after they have been utilized; as such, the Company is subject to examination for the fiscal years ended2001 through present for federal purposes and fiscal years ended2006 through present for state purposes.

(13) 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 isnot able to make a reasonable estimate of liability because of the uncertainties related to the outcome or the amount or range of potential loss.

However, we cannot predict the outcome or effect of any of the potential litigation, claims or disputes.

The Company isnot subject to any litigation at the present time.

(14) Segment Information

The Company has determined that it doesnot meet the criteria of ASC280 “Segment Reporting” because the Company’s subsidiaries represent Company brands that leverage the same core technology rather than independent operating segments.

(15) Impact of COVID-19 Pandemic

The Company has taken what it believes are necessary precautions to safeguard its employees from the COVID-19 pandemic. The Company continues to follow the Centers for Disease Control and Prevention’s (“CDC”) guidance and the recommendations and restrictions provided by state and local authorities. Some of the Company’s employees who donot work in a lab setting are currently on a telecommunication work arrangement and have been able to successfully work remotely. The Company’s lab requires in-person staffing, and the Company has been able to continue to operate its lab. There can beno assurance, however, that key employees willnot become ill or that the Company will be able to continue to operate its labs.

19

To date, the Company has seen delays with respect to the TSA certification process and parts of its supply chain, particularly the impact of the global semiconductor and electronics shortage, which has now resulted in product pricing inflation. In addition, although passenger demand for air travel has rebounded, the overall recovery of the airline industry and ancillary services remains highly uncertain and is dependent upon, among other things, the number of cases declining around the globe, public health impacts of new COVID-19 variants, the continued administration of vaccines to unvaccinated populations, and the duration of immunity granted by vaccines.

The Company continues to manage production, to secure alternative supplies, and to take other proactive actions. The Company believes that it will be able to pass the inflation caused by raw materials shortages and increased shipping costs to its customers by increasing the price of its instruments. If supply chain shortages become more severe or longer term in nature, the Company’s business and results of operations could be adversely impacted; however, the Company doesnot expect this issue to materially adversely affect its liquidity position. The long-term impact of the COVID-19 pandemic on the Company’s business* may**not* be fully reflected until future periods.

CARES Act

On* March 27, 2020,the CARES Act was enacted. The CARES Act, among other things, includes provisions relating to refundable payroll taxes, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations, and technical corrections to tax depreciation methods for qualified improvement property. The most significant relief measures which the Company qualified for were a loan pursuant to the Paycheck Protection Program for which the Company has received full forgiveness, alternative minimum tax credit refunds, employee retention credit, and payroll tax deferral. The payroll tax deferral was effective from the enactment date through December 31, 2020,and 100% of the deferred amount has been paid as of December 31, 2022.50% of the deferred amount has been paid as of December 31, 2021,and the remainder was paid before December 31, 2022.*The deferred payroll taxes were recorded within accrued liabilities on the condensed consolidated balance sheets.

The Company will continue to assess the treatment of the CARES Act to the extent additional guidance and regulations are issued, the further applicability of the CARES Act to the Company, and the potential impacts on the business.

(16) Subsequent Events

The Company has evaluated subsequent events through the filing of this Quarterly Report on Form10-Q, and determined that there have beenno events that have occurred that would require adjustments to our disclosures in the financial statements.

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:

While we do not intend to directly harvest, manufacture, distribute or sell cannabis or cannabis products, we may be detrimentally affected by a change in enforcement by federal or state governments and we may be subject to additional risks in connection with the evolving regulatory area and associated uncertainties. Any such effects may give rise to risks and uncertainties that are currently unknown or amplify others identified herein.

These forward-looking statements are based on management’s current expectations. These statements are neither promises nor guarantees, but involve known and unknown risks, uncertainties, and other important factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements.

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 2023 Annual Report on Form 10-K, elsewhere in this Quarterly Report on Form 10-Q, or those discussed in other documents we filed with the SEC. 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 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.