See accompanying notes to unaudited condensed consolidated financial statements.
See accompanying notes to unaudited condensed consolidated financial statements.
See accompanying notes to unaudited condensed consolidated financial statements.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(1) General Information
Description of the Company
– Astrotech Corporation (Nasdaq: ASTC) (“Astrotech,” “the Company,” “we,” “us” or “our”), a Delaware corporation organized in 1984, is a science and technology development and commercialization company that launches, manages, and builds scalable companies based on innovative technology in order to maximize shareholder value.
Basis of Presentation
– The accompanying unaudited condensed consolidated financial statements have been prepared by Astrotech Corporation in accordance with United States Generally Accepted Accounting Principles (“GAAP”) for interim financial information and the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the three months ended September 30, 2018 are not necessarily indicative of the results that may be expected for the year ending June 30, 2019. These financial statements should be read in conjunction with the financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2018.
Accounting Pronouncements
– In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). The new standard establishes a right-of-use (“ROU”) model that requires a lessee to record an ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is assessing the impact the adoption of ASU 2016-02 will have on its financial statements and plans to adopt this ASU in fiscal year 2020.
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”). ASU 2016-13 amends guidance on reporting credit losses for assets held at amortized cost basis and available-for-sale debt securities. For assets held at amortized cost basis, ASU 2016-13 eliminates the probable initial recognition threshold in current generally accepted accounting standards, and, instead, requires an entity to reflect its current estimate of all expected credit losses. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial assets to present the net amount expected to be collected. For available-for-sale debt securities, credit losses should be measured in a manner similar to current generally accepted accounting standards; however, ASU 2016-13 will require that credit losses be presented as an allowance rather than as a write-down. ASU 2016-13 affects entities holding financial assets and net investment in leases that are not accounted for at fair value through net income. This amendment affects loans, debt securities, trade receivables, net investments in leases, off balance sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company is currently evaluating the impact the adoption of this standard will have on its financial statements.
Our Business Units
1
st
Detect Corporation
1
st
Detect is a manufacturer of advanced chemical detection technology that detects and identifies trace amounts of explosives and narcotics. In April 2018, the Company announced that the TRACER 1000 entered the Developmental Testing and Evaluation (“DT&E”) process at the Department of Homeland Security’s (“DHS”) Transportation Security Laboratory (“TSL”). Successful completion and passing of the DT&E phase would lead to TSL Certification. Certification is a step towards being listed on the Transportation Security Administration’s (“TSA”) Qualified Products List (“QPL”), and subsequently having the TRACER1000 potentially deployed in airports throughout the U.S. In addition, the Company also recently announced that the TRACER 1000 has been accepted into the TSA’s Air Cargo Screening Technology Qualification Test (“ACSQT”) program, representing a step toward inclusion on TSA’s exclusive Air Cargo Screening Technology List (“ACSTL”) and having the TRACER 1000 potentially deployed at airports and cargo facilities worldwide to screen air cargo. The instrument was designed to enable air carriers, freight forwarders, shippers, and independent cargo facilities to stay ahead of evolving threats while optimizing cargo throughput. Finally, the Company also announced that the TRACER 1000 was accepted into European Civil Aviation Conference’s (“ECAC”) evaluation process for both passenger and cargo security. ECAC is the European regulatory authority that oversees airport security. The ECAC Certification would be a significant milestone that would allow us to begin selling to international airports. With TSA and ECAC having two of the most rigorous technology review programs for explosives trace detector (“ETD”) instrumentation in the world, Certification or Qualification
6
under any of the three programs above would be a significant endorsement that other customers would consider when procuring ETDs.
There is no assurance that any of the further steps detailed in the milestones mentioned above will be achieved or that our technology will be approved by any of the programs listed.
Astral Images Corporation
Astral Images is a developer of advanced film restoration and enhancement software. Astral’s artificial intelligence (“AI”)-driven algorithms remove dust, scratches, and defects from film while converting the content to a digital format with significantly enhanced resolution. In addition, the intelligent software automatically restores the film’s original color, optimizing the content to be viewed in 4K.
(2) Going Concern
Financial Condition
The Company’s consolidated financial statements for the three months ended September 30, 2018 have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As of September 30, 2018, the Company has working capital of $1.3 million. The Company reported a net loss of $13.3 million for the fiscal year 2018 and a net loss of $2.2 million for the three months ended September 30, 2018, along with net cash used in operating activities of $10.8 million for the fiscal year 2018 and net cash used in operating activities of $2.2 million for the three months ended September 30, 2018. This raises substantial doubt about the Company’s ability to continue as a going concern.
Management’s Plans to Continue as a Going Concern
The Company remains resolute in identifying the optimal solution to its liquidity issue. The Company is currently evaluating several potential sources for additional liquidity. These include, but are not limited to, selling the Company or a portion thereof, debt financing, equity financing, merging, or engaging in a strategic partnership. On July 3, 2018, management filed Form S-3 to raise funds through the capital markets. On October 9, 2018, the Company raised $3.0 million in a private placement of equity securities. The Company is currently evaluating a potential offering of
any combination of common stock, preferred stock, debt securities, warrants to purchase common stock, preferred stock or debt securities, or any combination of the foregoing, either individually or as units comprised of one or more of the other securities. However, additional funding may not be available when needed or on terms acceptable to us. If we are unable to generate funding within a reasonable timeframe, we may have to delay, reduce or terminate our research and development programs, limit strategic opportunities, or curtail our business activities.
Astrotech’s consolidated financial statements as of September 30, 2018 do not include any adjustments that might result from the outcome of this uncertainty.
(3) Investments
As of September 30, 2018, the Company did not hold any investments. The following table summarizes unrealized gains and losses related to our investments as of June 30, 2018:
|
|
June 30, 2018
|
|
|
|
Adjusted
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Fair
|
|
|
|
Cost
|
|
|
Gain
|
|
|
Loss
|
|
|
Value
|
|
Mutual Funds - Corporate & Government Debt
|
|
$
|
1,751
|
|
|
$
|
—
|
|
|
$
|
(23
|
)
|
|
$
|
1,728
|
|
Fixed Income Bonds
|
|
|
1,333
|
|
|
|
—
|
|
|
|
(5
|
)
|
|
|
1,328
|
|
Time Deposits
|
|
|
548
|
|
|
|
—
|
|
|
|
(3
|
)
|
|
|
545
|
|
Total
|
|
$
|
3,632
|
|
|
$
|
—
|
|
|
$
|
(31
|
)
|
|
$
|
3,601
|
|
For information on the unrealized holding losses on available-for-sale investments reclassified out of accumulated other comprehensive loss into the consolidated statements of income, see “Note 9: Other Comprehensive Loss.”
As of June 30, 2018, the Company had certain financial instruments on our condensed consolidated balance sheet related to interest-bearing time deposits and fixed income bonds. These time deposits are included in “Short-term Investments” if the maturities at the end of the reporting period were 360 days or less or “Long-term Investments” if the maturities at the end of the reporting period were over 360 days. Fixed income investments, maturing over one to three years, comprised a set of highly diversified bonds issued by various corporations and entities that in aggregate represented an above average investment-grade fixed income portfolio.
7
The following table presents the carrying amounts of cer
tain financial instruments as of
September 30, 2018
, and
June 30, 2018
:
|
|
Carrying Value
|
|
|
|
Short-Term Investments
|
|
|
Long-Term Investments
|
|
(In thousands)
|
|
September 30, 2018
|
|
|
June 30, 2018
|
|
|
September 30, 2018
|
|
|
June 30, 2018
|
|
Mutual Funds - Corporate & Government Debt
|
|
$
|
—
|
|
|
$
|
1,728
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Time deposits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maturities from 91-360 days
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Maturities over 360 days
|
|
|
—
|
|
|
|
495
|
|
|
|
—
|
|
|
|
50
|
|
Fixed Income Bonds
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maturities less than 1 year
|
|
|
—
|
|
|
|
1,328
|
|
|
|
—
|
|
|
|
—
|
|
Maturities from 1-3 years
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total
|
|
$
|
—
|
|
|
$
|
3,551
|
|
|
$
|
—
|
|
|
$
|
50
|
|
(4) Inventory
As the Company focuses on development of the TRACER 1000, inventory associated with prior iterations of our technology was written-off during the second quarter of fiscal 2018. In addition, materials purchases are currently being expensed until inventory accounting is warranted by future product sales.
The following table summarizes the components of our inventory balances, net of allowance of $393 thousand and $560 thousand at September 30, 2018, and June 30, 2018, respectively:
(In thousands)
|
|
September 30, 2018
|
|
|
June 30, 2018
|
|
Raw materials
|
|
$
|
—
|
|
|
$
|
7
|
|
Work in process
|
|
|
—
|
|
|
|
—
|
|
Total inventory
|
|
$
|
—
|
|
|
$
|
7
|
|
(5) Stockholders’ Equity
The following table breaks down the changes in Stockholders’ Equity for the three months ended September 30, 2018:
(In thousands)
|
|
Total Stockholders' Equity
|
|
Balance at June 30, 2018
|
|
$
|
3,992
|
|
Stock based compensation
|
|
|
36
|
|
Share repurchases
|
|
|
(1
|
)
|
Exercise of stock options
|
|
|
7
|
|
Net change on available-for-sale investments
|
|
|
31
|
|
Net loss
|
|
|
(2,238
|
)
|
Balance at September 30, 2018
|
|
$
|
1,827
|
|
(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.
8
The following table reconciles the numerators and denominators used in the
computations of both basic and diluted net loss per share:
|
|
Three Months Ended
September 30,
|
|
(In thousands, except per share data)
|
|
2018
|
|
|
2017
|
|
Numerator:
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
$
|
(2,238
|
)
|
|
$
|
(3,006
|
)
|
Income tax benefit
|
|
|
—
|
|
|
|
—
|
|
Net loss
|
|
$
|
(2,238
|
)
|
|
$
|
(3,006
|
)
|
Denominator:
|
|
|
|
|
|
|
|
|
Denominator for basic and diluted net loss per share — weighted average common stock outstanding
|
|
|
4,073
|
|
|
|
4,057
|
|
Basic and diluted net loss per common share:
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(0.55
|
)
|
|
$
|
(0.74
|
)
|
All unvested restricted stock awards for the three months ended September 30, 2018 are not included in diluted net loss per share, as the impact to net loss per share would be anti-dilutive. Options to purchase 335,206 shares of common stock at exercise prices ranging from $1.60 to $8.35 per share outstanding as of September 30, 2018 were not included in diluted net loss per share, as the impact to net loss per share would be anti-dilutive.
(7) Revenue Recognition
Astrotech’s revenue recognition methodology is based on contract type and the manner in which products and services are provided. The Company currently employs one generally accepted revenue recognition methodology.
Software Licensing Agreements
When recognizing revenue for licensing software for use, the Company will recognize it when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when a firm sales contract or invoice is in place, delivery has occurred or services have been provided, and collectability is reasonably assured.
(8) Fair Value Measurement
The accounting standard for fair value measurements defines fair value, establishes a market-based framework or hierarchy for measuring fair value, and expands disclosures about fair value measurements. The standard is applicable whenever assets and liabilities are measured and included in the financial statements at fair value.
The fair value hierarchy established in the standard prioritizes the inputs used in valuation techniques into three levels as follows:
Level 1 - Quoted prices in active markets for identical assets or liabilities.
Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 - Unobservable inputs that are supported by little or no market activity and are significant to the fair value of the assets or liabilities.
As of September 30, 2018, the Company did not hold any investments. The following table presents the carrying amounts, estimated fair values, and valuation input levels of certain financial instruments as of June 30, 2018:
|
|
June 30, 2018
|
|
|
|
Carrying
|
|
|
Fair Value Measured Using
|
|
|
Fair
|
|
(In thousands)
|
|
Amount
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Value
|
|
Available-for-Sale Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mutual Funds - Corporate & Government Debt
|
|
$
|
1,728
|
|
|
$
|
1,728
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,728
|
|
Bonds: 0-1 year
|
|
|
1,328
|
|
|
|
—
|
|
|
|
1,328
|
|
|
|
—
|
|
|
|
1,328
|
|
Time deposits: 91-360 days
|
|
|
495
|
|
|
|
—
|
|
|
|
495
|
|
|
|
—
|
|
|
|
495
|
|
Time deposits: over 360 days
|
|
|
50
|
|
|
|
—
|
|
|
|
50
|
|
|
|
—
|
|
|
|
50
|
|
Total
|
|
$
|
3,601
|
|
|
$
|
1,728
|
|
|
$
|
1,873
|
|
|
$
|
—
|
|
|
$
|
3,601
|
|
9
The value of available-for-sale investments is based on pricing from third-party pricing vendors, who may use quoted prices in active markets for identical assets (Level 1 inputs). The fair value of our bonds and time deposits with maturities less than 90 days is considered the amortized value; the fair value measurements used for bonds and time deposits with maturities greater than 90 days is considered Level 2 and uses pricing from third-party pricing vendors who use quoted prices for identical or similar securities in both active and inactive markets.
(9) Other Comprehensive Loss
Changes in the balances of each component included in accumulated other comprehensive loss for the three months ended September 30, 2018, are presented below.
(In thousands)
|
|
Accumulated Other Comprehensive Loss
|
|
Unrealized Loss in Investments
|
|
|
|
|
Balance at June 30, 2018
|
|
$
|
(31
|
)
|
Reclassification to net loss for realized losses
|
|
|
31
|
|
Balance at September 30, 2018
|
|
$
|
—
|
|
(10) Business Risk a
nd Credit Risk Concentration Involving Cash
During the three months ended September 30, 2018, the Company recognized revenue from one customer, a post-production film company, compared to the three months ended September 30, 2017, during which the Company did not recognize any revenue.
The Company maintains funds in bank accounts that may exceed the limit insured by the Federal Deposit Insurance Corporation (“FDIC”) of $250 thousand per depositor. The risk of loss attributable to these uninsured balances is mitigated by depositing funds in what we believe to be high credit quality financial institutions. The Company has not experienced any losses in such accounts.
(
11) Common Stock Compensation
Stock Option Activity Summary
The Company’s stock option activity for the three months ended September 30, 2018, is as follows:
|
|
Shares
(in thousands)
|
|
|
Weighted Average
Exercise Price
|
|
Outstanding at June 30, 2018
|
|
|
361
|
|
|
$
|
5.48
|
|
Granted
|
|
|
—
|
|
|
|
—
|
|
Exercised
|
|
|
(3
|
)
|
|
|
2.25
|
|
Canceled or expired
|
|
|
(23
|
)
|
|
|
4.00
|
|
Outstanding at September 30, 2018
|
|
|
335
|
|
|
$
|
5.61
|
|
The aggregate intrinsic value of options exercisable at September 30, 2018, was $9 thousand as the fair value of the Company’s common stock is more than the exercise prices of these options. The remaining share-based compensation expense of $283 thousand related to stock options will be recognized over a weighted-average period of 1.61 years.
10
The table below details the Company’s stock options outstanding as of
September 30, 2018
:
Range of exercise prices
|
|
Number
Outstanding
|
|
|
Options
Outstanding
Weighted-
Average
Remaining
Contractual
Life (years)
|
|
|
Weighted-
Average
Exercise
Price
|
|
|
Number
Exercisable
|
|
|
Options
Exercisable
Weighted-
Average
Exercise
Price
|
|
$1.60 – 3.55
|
|
|
78,900
|
|
|
|
3.40
|
|
|
$
|
3.21
|
|
|
|
78,900
|
|
|
$
|
3.21
|
|
$5.30 – 5.85
|
|
|
126,306
|
|
|
|
8.61
|
|
|
|
5.47
|
|
|
|
42,616
|
|
|
|
5.47
|
|
$6.00 – 8.35
|
|
|
130,000
|
|
|
|
6.15
|
|
|
|
7.19
|
|
|
|
86,000
|
|
|
|
6.59
|
|
$1.60 – 8.35
|
|
|
335,206
|
|
|
|
6.43
|
|
|
$
|
5.61
|
|
|
|
207,516
|
|
|
$
|
5.07
|
|
Compensation costs recognized related to stock option awards were $41 thousand and $67 thousand for the three months ended September 30, 2018, and 2017, respectively.
Restricted Stock
The Company’s restricted stock activity for the three months ended September 30, 2018, is as follows:
|
|
Shares
(in thousands)
|
|
|
Weighted
Average
Grant-Date
Fair Value
|
|
Outstanding at June 30, 2018
|
|
|
28
|
|
|
$
|
10.16
|
|
Granted
|
|
|
—
|
|
|
|
—
|
|
Vested
|
|
|
(4
|
)
|
|
|
8.86
|
|
Canceled or expired
|
|
|
(4
|
)
|
|
|
9.58
|
|
Outstanding at September 30, 2018
|
|
|
20
|
|
|
$
|
10.53
|
|
Stock compensation expenses related to restricted stock were $(5) thousand and $55 thousand for the three months ended September 30, 2018, and 2017, respectively. The remaining share-based compensation expense of $31 thousand related to restricted stock awards granted will be recognized over a weighted-average period of 0.90 years.
(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 than not to be realized. As of September 30, 2018 and June 30, 2018, the Company established a full valuation allowance against all of its net deferred tax assets.
For the three months ended September 30, 2018 and 2017, the Company incurred pre-tax losses in the amount of $2.2 million and $3.0 million, respectively. The total effective tax rate was approximately 0% for each of the three months ended September 30, 2018 and 2017.
For each of the three months ended September 30, 2018 and 2017, the Company’s effective tax rate differed from the federal statutory rate of 21% and 28% respectively, primarily due to the valuation allowance placed against its net deferred tax assets.
The Tax Cuts and Jobs Act was enacted on December 22, 2017. The Act reduces the U.S. federal corporate tax rate from 35% to 21%, requires companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred, and creates new taxes on certain foreign sourced earnings. In the second quarter of fiscal 2018, the Company revised its estimated annual effective rate to reflect a change in its federal statutory rate from 35% to 21%. The rate change is effective on January 1, 2018; therefore, the Company’s blended statutory tax rate for the fiscal year ended June 30, 2018 is 28%. At September 30, 2018, the Company has not completed its accounting for all of the tax effects of enactment of the Act; however, a reasonable estimate has been made. Note that the Company currently has net operating loss carryovers. A valuation allowance has been recorded to fully reserve for net operating loss carryovers, other carryovers, and book/tax differences on the balance sheet.
FASB ASC 740, “Income Taxes” addresses the accounting for uncertainty in income tax recognized in an entity’s financial statements and prescribes a recognition threshold and measurement attribute for financial statement disclosure of tax positions
11
taken or expected to be taken on a tax return. The Company had an unrecognized tax benefit of $0 for each of the
three months ende
d September 30, 2018
and
2017
.
Loss carryovers are generally subject to modification by tax authorities until three years after they have been utilized; as such, the Company is subject to examination for the fiscal years ended 2000 through present for federal purposes and fiscal years ended 2006 through present for state purposes. The reason for this extended examination period is due to the utilization of the loss carryovers generated by the sale of our Astrotech Space Operations business unit in fiscal year 2015.
(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 is not able to make a reasonable estimate of liability because of the uncertainties related to the outcome or the amount or range of potential loss.
Litigation, Investigations, and Audits
– We are not party to, nor are our properties the subject of, any material pending legal proceedings.
(14) Segment Information
The Company currently has two reportable business units: 1
st
Detect Corporation and Astral Images Corporation.
1
st
Detect Corporation
1
st
Detect is a manufacturer of advanced chemical detection technology that detects and identifies trace amounts of explosives and narcotics.
Astral Images Corporation
Astral Images is a developer of advanced film restoration and enhancement software.
All intercompany transactions between business units have been eliminated in consolidation.
Key financial metrics of the Company’s segments are as follows:
|
|
Three Months Ended
September 30, 2018
|
|
|
Three Months Ended
September 30, 2017
|
|
Revenue, Depreciation, and Income
(In thousands)
|
|
Revenue
|
|
|
Depreciation
|
|
|
Loss before
Income Taxes
|
|
|
Revenue
|
|
|
Depreciation
|
|
|
Loss before
Income Taxes
|
|
1st Detect
|
|
$
|
—
|
|
|
$
|
60
|
|
|
$
|
(1,981
|
)
|
|
$
|
—
|
|
|
$
|
104
|
|
|
$
|
(2,424
|
)
|
Astral Images
|
|
|
33
|
|
|
|
9
|
|
|
|
(257
|
)
|
|
|
—
|
|
|
|
82
|
|
|
|
(582
|
)
|
Total
|
|
$
|
33
|
|
|
$
|
69
|
|
|
$
|
(2,238
|
)
|
|
$
|
—
|
|
|
$
|
186
|
|
|
$
|
(3,006
|
)
|
|
|
September 30, 2018
|
|
|
June 30, 2018
|
|
Assets
(In thousands)
|
|
Fixed Assets,
Net
|
|
|
Total Capital
Expenditures
(1)
|
|
|
Total Assets
|
|
|
Fixed Assets,
Net
|
|
|
Total Capital
Expenditures
(2)
|
|
|
Total Assets
|
|
1st Detect
|
|
$
|
635
|
|
|
$
|
—
|
|
|
$
|
2,860
|
|
|
$
|
699
|
|
|
$
|
8
|
|
|
$
|
5,075
|
|
Astral Images
|
|
|
29
|
|
|
|
—
|
|
|
|
90
|
|
|
|
34
|
|
|
|
11
|
|
|
|
65
|
|
Total
|
|
$
|
664
|
|
|
$
|
—
|
|
|
$
|
2,950
|
|
|
$
|
733
|
|
|
$
|
19
|
|
|
$
|
5,140
|
|
(1)
|
Total capital expenditures are for the three months ended September 30, 2018.
|
(2)
|
Total capital expenditures are for the twelve months ended June 30, 2018.
|
12
(15) Subsequent Events
On October 9, 2018, the Company entered into a Securities Purchase Agreement (the “Agreement”) with Thomas B. Pickens III, the Chief Executive Officer and Chairman of the Board of Directors of the Company and an accredited investor (each individually, an “Investor” and, collectively, the “Investors”).
Pursuant to the Agreement, the Company agreed to sell an aggregate of 866,950 shares of its series B convertible preferred stock, par value $0.001 per share (the “Preferred Shares”) and 409,645 of its shares of common stock, par value $0.001 per share (the “Common Shares”) for aggregate gross proceeds of approximately $3.0 million (the “Offering”). Pursuant to the Agreement, the Company agreed to sell to Mr. Pickens an aggregate of 866,950 Preferred Shares and sell to the other Investor an aggregate of 409,645 Common Shares, each at a purchase price equal to $2.35 per share which was equal to the closing price on The NASDAQ Capital Market on October 8, 2018. The Preferred Shares are convertible into an aggregate of 866,950 Common Shares. As a condition to conversion, the Preferred Shares will automatically convert into the Common Shares upon receipt of shareholder approval in accordance with NASDAQ Listing Rule 5635(b).
13
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical fact are forward-looking statements for purposes of federal and state securities laws. Forward-looking statements may include the words “may,” “will,” “plans,” “believes,” “estimates,” “expects,” “intends,” and other similar expressions. Such statements are subject to risks and uncertainties that could cause our actual results to differ materially from those projected in the statements. Such risks and uncertainties include, but are not limited to:
|
•
|
The effect of economic and political conditions in the United States or other nations that could impact our ability to sell our products and services or gain customers;
|
|
•
|
The impact of trade barriers imposed by the U.S. government, such as import/export duties and restrictions, tariffs and
quotas, and potential corresponding actions by other countries in which the Company conducts its business;
|
|
•
|
Our ability to continue as a going concern;
|
|
•
|
Our ability to raise sufficient capital to meet our long- and short-term liquidity requirements;
|
|
•
|
Our ability to successfully pursue our business plan and execute our strategy;
|
|
•
|
Technological difficulties and potential legal claims arising from any technological difficulties;
|
|
•
|
Product demand and market acceptance risks, including our ability to develop and sell products and services to be used by governmental or commercial customers;
|
|
•
|
Uncertainty in government funding and support for key programs, grant opportunities, or procurements;
|
|
•
|
The impact of competition on our ability to win new contracts; and
|
|
•
|
Our ability to meet technological development milestones and overcome development challenges.
|
Although we believe that the assumptions underlying our forward-looking statements are reasonable, any of the assumptions could be inaccurate; therefore, we cannot assure you that the forward-looking statements included in this Quarterly Report on Form 10-Q will prove to be accurate. In light of the significant uncertainties inherent in our forward-looking statements, the inclusion of such information should not be regarded as a representation by us or any other person that our objectives and plans will be achieved. Some of these and other risks and uncertainties that could cause actual results to differ materially from such forward-looking statements are more fully described in our 2018 Annual Report on Form 10-K, elsewhere in this Quarterly Report on Form 10-Q, or in the documents incorporated by reference herein. Except as may be required by applicable law, we undertake no obligation to publicly update or advise of any change in any forward-looking statement, whether as a result of new information, future events, or otherwise. In making these statements, we disclaim any obligation to address or update each factor in future filings with the Securities and Exchange Commission (“SEC”) or communications regarding our business or results, and we do not undertake to address how any of these factors may have caused changes to discussions or information contained in previous filings or communications. In addition, any of the matters discussed above may have affected our past results and may affect future results, so that our actual results may differ materially from those expressed in this Quarterly Report on Form 10-Q and in prior or subsequent communications.
14