# ASTROTECH Corp: Form 10-Q for the period ended Sep 30, 2024

- Company: [ASTROTECH Corp](/companies/astc.md) (CIK 1001907)
- Form: 10-Q
- Filed: 2024-11-13
- Accepted by EDGAR: Nov 13, 2024, 13:45 ET
- Period: 2024-09-30
- Accession: 0001437749-24-034674
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1001907/000143774924034674/astc20240930_10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1001907/000143774924034674/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-07-01 to 2024-09-30 | $34.0k | us-gaap:RevenueFromContractWithCustomerIncludingAssessedTax |
| Cost of revenue | 3 months, 2024-07-01 to 2024-09-30 | $25.0k | us-gaap:CostOfRevenue |
| Gross profit | 3 months, 2024-07-01 to 2024-09-30 | $9.0k | us-gaap:GrossProfit |
| Research and development | 3 months, 2024-07-01 to 2024-09-30 | $1.9m | us-gaap:ResearchAndDevelopmentExpense |
| Selling, general and administrative | 3 months, 2024-07-01 to 2024-09-30 | $1.7m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2024-07-01 to 2024-09-30 | −$3.6m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2024-07-01 to 2024-09-30 | $0 | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-07-01 to 2024-09-30 | −$3.3m | us-gaap:NetIncomeLoss |
| Basic EPS | 3 months, 2024-07-01 to 2024-09-30 | −$2.01 | us-gaap:EarningsPerShareBasic |
| Operating cash flow | 3 months, 2024-07-01 to 2024-09-30 | −$3.7m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2024-07-01 to 2024-09-30 | $193.0k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Current assets | at 2024-09-30 | $31.6m | us-gaap:AssetsCurrent |
| Total assets | at 2024-09-30 | $34.4m | us-gaap:Assets |
| Current liabilities | at 2024-09-30 | $2.1m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-09-30 | $2.4m | us-gaap:Liabilities |
| Shareholders' equity | at 2024-09-30 | $32.1m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 21,891 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

The terms “Astrotech”, “the Company”, “we”, “us”, or “our” refer to Astrotech Corporation (Nasdaq: ASTC), a Delaware corporation organized in 1984. Our use of “products” and “devices” refer to the TRACER 1000™, BreathTest-1000™, AGLAB 1000™, and Pro-Control 1000™ along with related accessories and consumables.

Our mission is to expand access to mass spectrometry (“MS”) and its use through the deployment of devices designed specifically for the appropriate levels of precision required in high-volume, real-time testing environments such as airports, border checkpoints, cargo hubs, infrastructure security, correctional facilities, military bases, law enforcement centers, and industrial locations. We achieve our mission through simplifying the user interface, automating the complicated calibration process, ruggedizing the critical components to endure MS field work, and enabling multiple configurations for sample intake options.

Since the Tracer 1000 was certified by the European Civil Aviation Conference (“ECAC”) in 2019, our customers have deployed our devices in approximately 30 locations across 14 countries throughout Europe and Asia. We are commercializing the Astrotech Mass Spectrometer Technology™ platform (“AMS Technology”) through application specific, wholly-owned subsidiaries.

### Astrotech Technologies, Inc.

ATI owns and licenses the AMS Technology, the platform MS technology originally developed by 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 patents granted 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 security and detection applications, to AgLAB for use in the agriculture application, to BreathTech for use in breath analysis applications, and to Pro-Control for use in production applications.

### 1st Detect Corporation

1st Detect, a licensee of ATI for security and detection applications, has developed the TRACER 1000™, the world’s first MS based ETD certified by the ECAC and approved by TSA for air cargo. The TRACER 1000 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 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. The Company is currently selling the TRACER 1000 to customers who accept ECAC certification. As of September 30, 2024, the Company has deployed the TRACER 1000 in approximately 30 locations in 14 countries throughout Europe and Asia.

In June of 2024, the TSA approved 1st Detect’s TRACER 1000 for the Air Cargo Security Technology List, which advanced the TRACER 1000 to Stage II testing and permits air cargo companies in the United States to use our equipment in their operations. During Stage II testing, the Company is conducting field trials with the TSA. 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 for which we believe that the TSA would benefit from utilizing our AMS Technology.

In May 2023, we successfully delivered a purchase order for 14 ETDs from a Romania-based company focused on research and innovation in the security and telecommunications space. During the second fiscal quarter of 2024, we delivered a purchase order for seven of our TRACER 1000 explosives trace detectors for an airport security checkpoint, which were deployed in an airport in Romania.

We are currently accepting orders for the TRACER 1000 ETD and NTD which are 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 in April 2024. The TRACER 1000 ETD and NTD are high-performance laboratory instruments capable of rapid detection of trace levels of explosive and narcotic compounds in seconds. The TRACER 1000 ETD and NTD both provide 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.

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.

We continue to showcase the TRACER 1000 NTD and ETD at the trade events in the U.S.

### AgLAB Inc.

AgLAB, an exclusive licensee of ATI for the use in the agriculture industry to analyze complex chemical compounds found in organic plant material and extracts, has developed the AgLAB 1000™ series of mass spectrometers for use in the hemp and cannabis markets with the initial focus on optimizing yields in the distillation process. The AgLAB product line is a derivative of the Company’s core AMS Technology. AgLAB continues to conduct field trials demonstrating that the AgLAB 1000-D2™ can be used in the distillation process to significantly improve the 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 assist the equipment operator determining the ideal settings required to maximize yields.

Production and processing of hemp and cannabis is a huge, worldwide industry. In the U.S., for example, the wholesale value of the cannabis crop from just the U.S. states permitting adult-use and medical cannabis exceeds $6 billion annually. We believe growth in the U.S. and in the worldwide market is likely 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.

As the CBD and hemp market continues to grow, there has been an influx of new companies entering the CBD and THC supply chains, ranging from large corporations to small startups. These companies comprise AgLAB’s target market. The competition within the supply chain is fierce, with companies investing heavily in research and development to create innovative products and differentiate themselves from their 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 potential regulatory hurdles.

Management believes the AgLAB 1000-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 AgLAB 1000-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, the Company believes it is the only provider of a mass spectrometry system that gives it a distinct advantage in the industry. Sales efforts for the AgLAB 1000-D2 are currently underway.

AgLAB announced the presentation of the AgLAB Maximum Value Processing at MJBizCon. The AgLAB MVP is an innovative process control system proven to increase the potency of ending-weight yields and increase revenue. The AgLAB MVP process provides real-time data, allowing distillers to adjust parameters to optimize the quality and quantity of each batch of oil. During our field trials of the AgLAB MVP, we were able to improve ending-weights yields by 20% or more. We believe these ongoing field trials demonstrate the solution can be a valuable tool for cannabis and hemp oil processors worldwide.

On June 13, 2024, AgLAB and SC Laboratories (“SC Labs”) entered into a master lease agreement providing for the joint marketing of the AgLAB 1000-D2™ mass spectrometer and the AgLAB Maximum Value Process™ testing method to SC Labs’ clients.

### 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 compromised condition including but not limited to a bacterial or viral infection. The Company believes that new tools to quickly identify the presence of a VOC metabolite could play an important role in detecting and containing airborne diseases.

In June 2022, the Company expanded its existing study that initially focused on COVID-19 with Cleveland Clinic to use the BreathTest-1000 to screen for a variety of diseases spanning the entire body. The project focused on detecting bloodstream infections and respiratory infections. While the Joint Development Agreement with Cleveland Clinic remains active, we believe the work to commercialize this application of the AMS Technology will require many years and significant investment due to regulatory requirements and have determined to deploy capital instead to our other business units. We are also exploring how the advancements and knowledge derived from our research on the BreathTech use case can be applied in our other existing and potential new business units.

### Pro-Control, Inc.

On December 12, 2023, we announced the formation of our new wholly-owned subsidiary, Pro-Control, and ATI’s entry into an exclusive license with Pro-Control to utilize our AMS Technology for industrial process control applications involving chemical distillation outside of the agriculture industry. Pro-Control uses advanced mass spectrometer instrumentation to monitor and control the production and operations of manufacturing processes using real-time, in-process samples. Pro-Control provides the vital spectral qualitative and quantitative data needed to control the production parameters (temperatures, flow, speed, and pressure) while significantly improving efficiency.

Pro-Control has introduced its proprietary Pro-Control Maximum Value Processing and the Pro-Control 1000-D2™ mass spectrometer, which in combination are designed to test, measure and increase reaction intermediates, purity and percent yields in industrial processes.

### 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 September 30, 2024, compared to three months ended September 30, 2023:**

Selected consolidated financial data for the quarters ended September 30, 2024, and 2023 is as follows:

*(In thousands)*

|  | Three Months Ended September 30, 2024 | 2023 |
| --- | ---: | ---: |
| Revenue | $34 | $425 |
| Cost of revenue | 25 | 242 |
| **Gross profit** | **9** | **183** |
| **Gross margin** | **26%** | **43%** |
| Operating expenses: |  |  |
| Selling, general and administrative | 1,688 | 1,646 |
| Research and development | 1,949 | 1,872 |
| **Total operating expenses** | **3,637** | **3,518** |
| **Loss from operations** | **(3,628)** | **(3,335)** |
| Other income and expense, net | 350 | 423 |
| Income tax expense | — | — |
| **Net loss** | $(3,278) | $(2,912) |

***Revenue –*** Total revenue decreased by $391 thousand during the first quarter of fiscal year 2025, compared to the first quarter of fiscal year 2024. In the first quarter of fiscal year 2025 revenue was related to ongoing consumable and recurring maintenance services of the TRACER 1000. In the first 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. The decrease in revenue is the result of not selling devices during the first quarter of fiscal year 2025.

***Cost of Revenue –*** Gross profit is comprised of revenue less cost of revenue. Our costs of revenue include labor, materials, overhead, shipping, and warranty expenses. Cost of revenue decreased by $217 thousand during the first quarter of fiscal year 2025, compared to the first quarter of fiscal year 2024, because of the decrease in device sales. Gross margin decreased by 17% in the first quarter of fiscal year 2025, compared to the first quarter of fiscal year 2024. The decrease in device sales resulted in a decrease in gross margin.

***Operating Expenses –*** Operating expenses increased $119 thousand, or 3.4%, during the first quarter of fiscal year 2025, compared to the first quarter of fiscal year 2024. Significant changes to operating expenses include the following:

- Selling, general and administrative expenses increased $42 thousand, or 2.6%, during the first quarter of fiscal year 2025, compared to the first quarter of fiscal year 2024 due to increases in marketing and selling activities which were partially offset by a decrease in legal fees and personnel costs.
- Research and development expenses increased $77 thousand, or 4.1%, during the first quarter of fiscal year 2025, compared to the first quarter of fiscal year 2024, largely driven by increases in personnel count to support the development of our mass spectrometry offering and expenses related to cross-platform improvements to our technology.

***Other Income and Expense, net –*** Other income and expense, net decreased $73 thousand during the first quarter of fiscal year 2025, compared to the first quarter of fiscal year 2024, due to less investments earning interest income.

***Income Taxes –*** Income tax expense had minimal change during the first quarter of fiscal year 2025, compared to the first quarter of fiscal year 2024.

### 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: | Three Months Ended September 30, 2024 | 2023 | Change |
| --- | ---: | ---: | ---: |
| Net cash used in operating activities | $(3,686) | $(3,050) | $(636) |
| Net cash used in investing activities | (193) | 1,977 | (2,170) |
| Net cash used in financing activities | (45) | (45) | — |
| **Net change in cash and cash equivalents** | $(3,924) | $(1,118) | $(2,806) |

### Cash and Cash Equivalents

As of September 30, 2024, we held cash and cash equivalents of $6.5 million, and our working capital was approximately $29.5 million. As of June 30, 2024, we had cash and cash equivalents of $10.4 million, and our working capital was approximately $32.2 million. Cash and cash equivalents decreased $3.9 million as of September 30, 2024, compared to June 30, 2024, due to funding our continuing operating expenses.

### Operating Activities

Cash used in operating activities increased $636 thousand for the three months ended September 30, 2024, compared to the three months ended September 30, 2023, due to operating expenses, and increases in executive officers bonuses and other liabilities.

### Investing Activities

Cash used in investing activities decreased $2.2 million for the three months ended September 30, 2024, compared to the three months ended September 30, 2023, due primarily to not purchasing short-term time deposit investments. The Company also acquired equipment in the three months ended September 30, 2024 of $0.2 million.

### Financing Activities

Cash used in financing activities remained the same for the three months ended September 30, 2024, compared to the three months ended September 30, 2023.

We did not have any material off-balance sheet arrangements as of September 30, 2024.

### 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, 2024.

### Income Taxes

### Provision for Income Tax

The Company’s effective tax rate is 0% for income tax for the three months ended September 30, 2024 and the Company expects that its effective tax rate for the full fiscal year 2025 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 is 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 $593 thousand of uncertain tax positions as of September 30, 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.

## Controls and procedures

As filed, 1,781 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 September 30, 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 September 30, 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, 2024.

Filed Nov 13, 2024.
Source: SEC EDGAR, the filing index for accession 0001437749-24-034674. Last ingested by Listed: Oct 24, 2026, 15:01 ET. No prices; not investment advice.