# ASTROTECH Corp: Form 10-Q for the period ended Mar 31, 2024

- Company: [ASTROTECH Corp](/companies/astc.md) (CIK 1001907)
- Form: 10-Q
- Filed: 2024-05-14
- Accepted by EDGAR: May 14, 2024, 12:45 ET
- Period: 2024-03-31
- Accession: 0001437749-24-016375
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1001907/000143774924016375/astc20240331_10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1001907/000143774924016375/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-01-01 to 2024-03-31 | $50.0k | us-gaap:RevenueFromContractWithCustomerIncludingAssessedTax |
| Revenue | 9 months, 2023-07-01 to 2024-03-31 | $1.6m | us-gaap:RevenueFromContractWithCustomerIncludingAssessedTax |
| Cost of revenue | 3 months, 2024-01-01 to 2024-03-31 | $42.0k | us-gaap:CostOfRevenue |
| Cost of revenue | 9 months, 2023-07-01 to 2024-03-31 | $867.0k | us-gaap:CostOfRevenue |
| Gross profit | 3 months, 2024-01-01 to 2024-03-31 | $8.0k | us-gaap:GrossProfit |
| Gross profit | 9 months, 2023-07-01 to 2024-03-31 | $723.0k | us-gaap:GrossProfit |
| Research and development | 3 months, 2024-01-01 to 2024-03-31 | $1.7m | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 9 months, 2023-07-01 to 2024-03-31 | $5.2m | us-gaap:ResearchAndDevelopmentExpense |
| Selling, general and administrative | 3 months, 2024-01-01 to 2024-03-31 | $1.8m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 9 months, 2023-07-01 to 2024-03-31 | $5.5m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2024-01-01 to 2024-03-31 | −$3.5m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2023-07-01 to 2024-03-31 | −$9.9m | us-gaap:OperatingIncomeLoss |
| Net income | 3 months, 2024-01-01 to 2024-03-31 | −$3.2m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2023-07-01 to 2024-03-31 | −$8.7m | us-gaap:NetIncomeLoss |
| Basic EPS | 3 months, 2024-01-01 to 2024-03-31 | −$1.93 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2023-07-01 to 2024-03-31 | −$5.34 | us-gaap:EarningsPerShareBasic |
| Operating cash flow | 9 months, 2023-07-01 to 2024-03-31 | −$7.2m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2023-07-01 to 2024-03-31 | $353.0k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Share repurchases | 9 months, 2023-07-01 to 2024-03-31 | $0 | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Current assets | at 2024-03-31 | $37.5m | us-gaap:AssetsCurrent |
| Total assets | at 2024-03-31 | $40.2m | us-gaap:Assets |
| Current liabilities | at 2024-03-31 | $2.4m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-03-31 | $2.6m | us-gaap:Liabilities |
| Shareholders' equity | at 2024-03-31 | $37.6m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 29,325 characters.

*The following information should be read in conjunction with the unaudited condensed consolidated financial statements and the accompanying notes included in Part I, Item 1 of this Report.*

### Business Overview

Astrotech Corporation (Nasdaq: ASTC) (“Astrotech,” the “Company,” “we,” “us,” or “our”), a Delaware corporation organized in 1984, is a mass spectrometry company that launches, manages, and commercializes scalable companies based on its innovative core technology.

Our efforts are focused on commercializing our platform mass spectrometry technology through our wholly-owned subsidiaries:

- Astrotech Technologies, Inc. (“ATI”) owns and licenses intellectual property related to the Astrotech Mass Spectrometer Technology™ (the “AMS Technology”).
- 1st Detect Corporation (“1st Detect”) is a manufacturer of explosives trace detectors that is capable of also detecting narcotics. It was developed for use at airports, cargo and other secured facilities, and borders worldwide. 1st Detect holds an exclusive AMS Technology license from ATI for air passenger and cargo security applications.
- AgLAB, Inc. (“AgLAB”) is developing a series of mass spectrometers for use in the hemp and cannabis market with initial focus on optimizing yields in the distillation processes. AgLAB holds an exclusive AMS Technology license from ATI for agriculture applications.
- BreathTech Corporation (“BreathTech”) is developing a breath analysis tool to screen for volatile organic compound (“VOC”) metabolites found in a person’s breath that could indicate they may have a bacterial or viral infection. BreathTech holds an exclusive AMS Technology license from ATI for breath analysis applications.
- Pro-Control, Inc. ("Pro-Control") is focused on applying the AMS Technology in chemical manufacturing process control applications. The mass spectrometer and process is designed to test, measure and increase potency, purity and weight yields in the chemical manufacturing processes.

### Our Business Units

### Astrotech Technologies, Inc.

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 1st 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.

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.

### 1st Detect Corporation

1st Detect, a licensee of ATI for the security and detection market, has developed the TRACER 1000™, the world’s first mass spectrometer ("MS") based explosives trace detector (“ETD”) certified by the European Civil Aviation Conference (“ECAC”), designed to replace the ETDs used at airports, cargo and other secured facilities, and borders worldwide. We believe that ETD customers are unsatisfied with the currently deployed ETD technology, which is driven by ion mobility spectrometry (“IMS”). We further believe that IMS-based ETDs are fraught with false positives, as they often misidentify personal care products and other common household chemicals as explosives, causing 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 TRACER 1000’s detection library does not degrade its detection capabilities, as it has a virtually unlimited and easily expandable threat library.

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.

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.

On May 8, 2023, the Company announced that it has accepted a purchase order from a Romania-based company focused on research and innovation in the security and telecommunications space. The Company has successfully delivered the 14 ETD's that were ordered. On November 12, 2023, the Company announced that 1st Detect had accepted a significant purchase order for seven of its TRACER 1000 explosives trace detector, for an airport security checkpoint, which systems will be deployed in an airport in Romania. These systems were successfully delivered during the second fiscal quarter of 2024.

On March 25, 2024, the Company announced that it is currently accepting orders for the TRACER 1000 Narcotics Trace Detector (NTD). The TRACER 1000 NTD is a high-performance laboratory instrument capable of rapid detection of trace levels of narcotic compounds in seconds. The TRACER 1000 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 9 through April 12, 2024, 1st Detect showcased its TRACER 1000 NTD and ETD at the International Security Conference and Exposition, also known as ISC West, in Las Vegas, Nevada. We believe ISC West is one 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 that 1st Detect’s TRACER 1000 is now listed in the U.S. General Services Administration ("GSA") IT Schedule 70 under Contract No. GS-35F-250GA with SRI Group LLC, Special Item Number 334290. IT Schedule 70 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.

### AgLAB Inc.

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.

Production and processing of hemp and cannabis is a vast, worldwide industry. In the U.S., for example, the wholesale value of aggregate cannabis crop from just the 11 U.S. states permitting lawful adult-use and medical cannabis exceeds $6 billion annually. We believe growth in the U.S. and in the worldwide market is fed in part by the growing acceptance of medicinal cannabis products and anticipated legislative changes in various jurisdictions worldwide. We also believe this growth is due in part to the passage of the 2018 Farm Bill, which legalized hemp production in the U.S. According to a report by BDS Analytics and Arcview Market Research, the U.S. CBD market is estimated to reach $20 billion by 2024, which would be a compound annual growth rate of 49% from 2019 to 2024. The market is segmented into various categories of products including oils, tinctures, foods, skincare products, vitamins, dietary supplements, and pet products, among various others. According to a 2019 Consumer Brands Association report, the largest category of CBD products at such time was oils and tinctures, which were purchased by 55% of American CBD consumers, followed by foods (45%), skincare products (44%) and vitamins or dietary supplements (39%).

As the CBD and hemp market continues to grow, there has been an influx of new companies entering the space, ranging from large corporations to small startups. The competition is fierce, with companies investing heavily in research and development to create innovative products and differentiate themselves from competitors. However, the market remains highly fragmented, with many products of varying quality and efficacy, making it challenging for consumers to navigate. Overall, the CBD and hemp market in the U.S. is a rapidly growing industry with significant potential for continued expansion. As more research is conducted and regulations are established, we believe it is likely that the market will become more standardized and regulated, leading to increased consumer confidence and demand. Stakeholders in the industry are likely to face challenges as it matures, including increased competition and regulatory hurdles.

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%.

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.

### 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 may have a compromised condition including but not 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.

### Pro-Control, Inc.

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.

### Critical Accounting Estimates

The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with United States Generally Accepted Accounting Principles (“U.S. GAAP”). The preparation of these financial statements requires us to make estimates and judgments that directly affect the reported amounts of assets, liabilities, revenues, expenses, and related disclosure of contingent assets and liabilities in the Company’s consolidated financial statements and accompanying notes. A critical accounting estimate is one that involves a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our financial condition or results of operations. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Management continuously evaluates its critical accounting policies and estimates, including those used in evaluating the recoverability of long-lived assets, recognition of revenue, valuation of inventory, and the recognition and measurement of loss contingencies, if any. Actual results may differ from these estimates under different assumptions or conditions. We believe that the following accounting policies require us to make significant judgments and estimates in the preparation of our consolidated financial statements.

### Results of Operations

**Three months ended March 31, 2024, compared to three months ended March 31, 2023:**

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

*(In thousands)*

|  | Three Months Ended March 31, 2024 | 2023 |
| --- | ---: | ---: |
| Revenue | $50 | $35 |
| Cost of revenue | 42 | 24 |
| **Gross profit** | **8** | **11** |
| **Gross margin** | **16%** | **31%** |
| Operating expenses: |  |  |
| Selling, general and administrative | 1,833 | 1,406 |
| Research and development | 1,708 | 1,355 |
| **Total operating expenses** | **3,541** | **2,761** |
| **Loss from operations** | **(3,533)** | **(2,750)** |
| Other income and expense, net | 379 | 375 |
| Income tax benefit | — | — |
| **Net loss** | $(3,154) | $(2,375) |

25

***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.

***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.

***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:

- Selling, general and administrative expenses increased $427 thousand, or 30.4%, during the third quarter of fiscal year 2024, compared to the third quarter of fiscal year 2023 due to an increase in legal and consultant expenses related to sales efforts. In addition, there was an increase in directors' fees and employee equity incentives from the third quarter of fiscal year 2023.
- Research and development expenses increased $353 thousand, or 26.1%, during the third quarter of fiscal year 2024, compared to the third quarter of fiscal year 2023, largely driven by increases in headcount to support the development of our mass spectrometry offering, expenses related to cross-platform improvements to our technology, and continuing expenses that support additional AgLAB, BreathTech, and 1st Detect method developments.

***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.

***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.

**Nine months ended March 31, 2024, compared to nine months ended March 31, 2023:**

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

*(In thousands)*

|  | Nine Months Ended March 31, 2024 | 2023 |
| --- | ---: | ---: |
| Revenue | $1,590 | $336 |
| Cost of revenue | 867 | 211 |
| **Gross profit** | **723** | **125** |
| **Gross margin** | **45%** | **37%** |
| Operating expenses: |  |  |
| Selling, general and administrative | 5,501 | 4,606 |
| Research and development | 5,158 | 3,847 |
| **Total operating expenses** | **10,659** | **8,453** |
| **Loss from operations** | **(9,936)** | **(8,328)** |
| Other income and expense, net | 1,229 | 1,006 |
| Income tax benefit | — | — |
| **Net loss** | $(8,707) | $(7,322) |

***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.

***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.

***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:

- Selling, general and administrative expenses increased $895 thousand, or 19.4%, during the nine months ended March 31, 2024, compared to the nine months ended March 31, 2023 due to an increase in legal and consultant expenses related to sales efforts. In addition, there was an increase in directors' fees and employee equity incentives from the prior third quarter year-to-date.
- Research and development expenses increased $1.3 million, or 34.1%, during the nine months ended March 31, 2024, compared to the nine months ended March 31, 2023, largely driven by increases in headcount to support the development of our mass spectrometry offering, material and depreciation expenses related to supporting cross-platform improvements to our technology, and continuing expenses that support additional AgLAB, BreathTech, and 1st Detect method developments.

***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.

***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.

### Liquidity and Capital Resources

### Cash Flows

The following is a summary of the change in our cash and cash equivalents:

*(In thousands)*

| Change in cash and cash equivalents: | Nine Months Ended March 31, 2024 | 2023 | Change |
| --- | ---: | ---: | ---: |
| Net cash used in operating activities | $(7,237) | $(6,340) | $(897) |
| Net cash used in investing activities | 1,652 | (4,994) | 6,646 |
| Net cash used in financing activities | (136) | (684) | 548 |
| Net change in cash and cash equivalents | $(5,721) | $(12,018) | $6,297 |

### Cash and Cash Equivalents

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.

### Operating Activities

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.

### Investing Activities

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.

### Financing Activities

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.

We did not have any material off-balance sheet arrangements as of March 31, 2024.

### 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.

### Liquidity

There have been no material updates to our expectations for our short- and long-term liquidity and operating capital requirements since our Annual Report on Form 10-K for the year ended June 30, 2023.

### Income Taxes

### Provision for Income Tax

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.

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.

The Company files U.S. federal and state income tax returns. The Company is not currently subject to any income tax examinations. The Company has net operating loss carryovers dating back to the June 2002 year, which generally allows all tax years to remain open to income tax examinations for all years for which there are loss carryforwards.

### Uncertain Tax Positions

The Company recognizes the financial statement effects of a tax position when it becomes more likely than not, based upon the technical merits, that the position will be sustained upon examination. 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 does not expect any significant changes to its uncertain tax positions in the coming 12 months.

### Income Taxes

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.

## Controls and procedures

As filed, 1,773 characters.

### Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed by us in the reports we file or submit under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management was required to apply its judgment in evaluating and implementing possible controls and procedures. Management, including our principal executive officer and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our principal executive officer and principal financial officer have concluded that the Company’s disclosure controls and procedures were effective as of March 31, 2024 at the reasonable assurance level.

### Changes in Internal Controls over Financial Reporting

There have been no changes in our internal controls over financial reporting that occurred during our last fiscal quarter ended March 31, 2024 that materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

## Risk factors

As filed, 515 characters.

Our business, financial condition, results of operations, and cash flows may be impacted by a number of factors, many of which are beyond our control, including those set forth in our Form 10-K and our Form 10-Qs, the occurrence of any one of which could have a material adverse effect on our actual results.

There have been no material changes to the risk factors and other cautionary statements described under the heading “Item 1A Risk Factors” included in our Form 10-K for the fiscal year ended June 30, 2023.

Filed May 14, 2024.
Source: SEC EDGAR, the filing index for accession 0001437749-24-016375. Last ingested by Listed: Oct 24, 2026, 15:01 ET. No prices; not investment advice.