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.
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 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 (“SEC”). 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 six months ended December 31, 2019 are not necessarily indicative of the results that may be expected for the year ending June 30, 2020. 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, 2019.
Our Business Units
Astrotech Technology, Inc.
Astrotech Technology, Inc. (“ATI”) was formed to own and license the intellectual property of the platform mass spectrometry technology originally developed by 1st Detect Corporation (“1st Detect”). The intellectual property includes 37 granted patents and five additional patents in process. With a number of diverse market opportunities for the core technology, ATI licenses the intellectual property for different fields of use. ATI currently licenses the intellectual property to 1st Detect for use in the security and detection market and to AgLAB Inc. (“AgLAB”), which was previously known as Agriculture Technology Corporation (“AG-TECH”), for use in the agriculture market.
1st Detect Corporation
1st Detect, a licensee of ATI, has developed the TRACER 1000™, the world’s first certified mass spectrometer (“MS”)-based explosives trace detector (“ETD”), designed to replace the explosives trace detectors used at airports, secured facilities, and borders worldwide.
AgLAB Inc.
AgLAB Inc., a licensee of ATI, has developed the AgLAB-1000™ series of mass spectrometers for use in the agriculture market. The technology enables real-time analysis of hemp and cannabis products in an industry that has traditionally relied upon off site independent laboratories for chemical analysis. The AgLAB-1000 enables real-time pesticide detection and potency testing.
Astral Images Corporation
Astral Images Corporation (“Astral”) developed advanced film restoration and enhancement software. Although we believe Astral has developed valuable technology fortified by patents and trade secrets, the potential market has not yet advanced as quickly as anticipated. Due to funding constraints, the Company’s primary focus remains on the pursuit of opportunities for its platform mass spectrometry technology. Consequently, efforts are exclusively focused on strategic initiatives to facilitate the realization of Astral’s value.
Accounting Pronouncements – In February 2016, the Financial Standards Accounting Board (“FASB”) issued Accounting Standard Update (“ASU”) 2016-02: Leases (“Topic 842” or “ASU 2016-02”) and ASU 2018-10: Codification Improvements to Topic 842, Leases (“ASU 2018-10”) which provide an additional (and optional) transition method whereby the new lease standard is applied at the adoption date and recognized as an adjustment to retained earnings. This ASU requires lessees to recognize a right-of-use (“ROU”) asset and lease liability on the balance sheet for all leases, with the exception of short-term leases. The asset will be based on the liability, subject to adjustment, such as for initial direct costs. For statement of operations purposes, leases are still required to be classified as either operating or financing. Operating leases will result in straight-line expense while financing leases will result in a front-loaded expense pattern.
On July 1, 2019, the Company adopted Topic 842 using the modified retrospective approach and the impact of the adoption of Topic 842 resulted in the recognition of an ROU asset and lease obligation on the Company’s condensed consolidated balance
9
sheets of approximately $1.6 million and an adjustment to retained earnings of $230 thousand. This application of the modified retrospective method will result in a balance sheet presentation that will not be comparable to the prior period in the first year of adoption. Results for reporting periods after July 1, 2019 are presented under Topic 842, while prior periods have not been adjusted. The Company elected the package of practical expedients permitted under the transition guidance within the new standard which, among other things, allowed the Company to carry forward the historical lease classifications. Subsequent to the end of the second quarter of fiscal year 2020, the Company amended its lease for its 1st Detect facility, resulting in a reduction of the associated ROU asset and lease obligation of $414 thousand in the second quarter of fiscal year 2020. See Note 3 Leases for more information.
(2) Going Concern
Financial Condition
The Company’s consolidated financial statements for the three and six months ended December 31, 2019 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 December 31, 2019, the Company had cash and cash equivalents of $0.4 million and restricted cash of $0.6 million, and working capital was approximately $(0.7) million. Restricted cash consists of three letters of credit relating to purchase orders for the TRACER 1000 product. The Company reported a net loss of $7.5 million for the fiscal year 2019 and a net loss of $4.2 million for the six months ended December 31, 2019, along with net cash used in operating activities of $8.5 million for the fiscal year 2019 and net cash used in operating activities of $3.4 million for the six months ended December 31, 2019. 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, licensing some of its technology, 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 to the Company’s Chairman of the Board and Chief Executive Officer, Thomas B. Pickens III, and a long-term accredited investor in the Company. On April 17, 2019, the Company raised $2.0 million in a private placement of equity securities to Mr. Pickens, and a long-term accredited investor in the Company. On September 5, 2019, the Company entered into a private placement transaction with Mr. Pickens for the issuance and sale of a secured promissory note to Mr. Pickens with a principal amount of $1.5 million. As of December 31, 2019, the Company has received net proceeds of approximately $2.3 million through the sale of shares of common stock through an “at the market offering” program (the “ATM Offering”). The Company is currently evaluating potential offerings 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 December 31, 2019 do not include any adjustments that might result from the outcome of this uncertainty.
(3) Leases
As of July 1, 2019, the Company adopted Topic 842, using the modified retrospective method of adoption. Astrotech elected to use the transition option that allows the Company to initially apply the new lease standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the year of adoption. Comparable periods continue to be presented under the guidance of the previous standard, Accounting Standards Codification (“ASC”) Topic 840. Topic 842 requires lessees to recognize a lease liability and ROU asset on the balance sheet for operating leases. The adoption of Topic 842 resulted in an adjustment to retained earnings of $230 thousand.
The Company has two existing facility leases and several small equipment leases. Astrotech leases office space consisting of 5,219 square feet in Austin, Texas that houses executive management, finance and accounting, sales, and marketing and communications. The lease began in November 2016 and expires in December 2023 with a provision to renew and extend the lease for the entire premises for one renewal term of five years. Astrotech must, in writing, advise the landlord of its intention to renew the lease at least eight months before the expiration of its current lease in order to renew the lease. In May 2013, 1st Detect completed build-out of a 16,540 square foot leased research and development and production facility in Webster, Texas. This facility is equipped with state-of-the-art laboratories, a clean room, a production shop, and offices for staff. The term of the lease is 62 months and includes options to extend for two additional five-year periods. In February 2015, 1st Detect exercised its right of first refusal on the adjoining space of 9,138 square feet. The original lease began in May 2013 and was to expire in June 2018; these dates were amended in October 2014 with the amended lease beginning February 1, 2015, and
10
expiring April 30, 2020, with provisions to renew and extend the lease for the entire premises, but not less than the entire premises, for two renewal terms of five years each. On June 1, 2018, the Company entered into its third amendment of the original lease removing 8,118 square feet from its leased space, leaving leased premises with a total square footage of 17,560. On January 21, 2020, the Company entered into its fourth amendment of the original lease, with the amended lease beginning May 1, 2020 and expiring April 30, 2021, with the option to renew and extend the lease for one renewal term of one year. This amendment resulted in an adjustment to the associated ROU asset and operating liability of $414 thousand during the six months ended December 31, 2019. The Company has not commenced any financing leases as of December 31, 2019.
Operating lease assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. Operating lease assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate in determining the present value of lease payments. The incremental borrowing rate used at adoption was 11%. Significant judgement is required when determining the Company’s incremental borrowing rate. Lease expense for lease payments is recognized on a straight-line basis over the lease term.
The condensed consolidated balance sheet classification of lease assets and liabilities are as follows:
(In thousands)
|
|
|
|
|
Assets
|
|
December 31, 2019
|
|
Operating lease right-of-use assets, beginning balance
|
|
$
|
1,608
|
|
Current period amortization
|
|
|
(172
|
)
|
Adjustment for lease amendment
|
|
|
(414
|
)
|
Total operating lease right-of-use asset
|
|
$
|
1,022
|
|
(In thousands)
|
|
|
|
|
Liabilities
|
|
December 31, 2019
|
|
Operating lease liabilities, beginning balance
|
|
$
|
1,608
|
|
Current period reduction
|
|
|
(141
|
)
|
Adjustment for lease amendment
|
|
|
(414
|
)
|
Total lease liabilities
|
|
$
|
1,053
|
|
|
|
|
|
|
Future minimum lease payments as of December 31, 2019 under non-cancellable operating leases are as follows:
(In thousands)
|
|
|
|
|
For the Year Ended June 30,
|
|
December 31, 2019
|
|
2020
|
|
$
|
196
|
|
2021
|
|
|
414
|
|
2022
|
|
|
389
|
|
2023
|
|
|
219
|
|
2024
|
|
|
36
|
|
Thereafter
|
|
|
—
|
|
Total lease payments
|
|
|
1,254
|
|
Less: imputed interest
|
|
|
201
|
|
Operating lease liability
|
|
|
1,053
|
|
Less: operating lease liabilities - current
|
|
|
301
|
|
Operating lease liabilities - non-current
|
|
$
|
752
|
|
Cash payments for operating leases for the three and six months ended December 31, 2019 totaled $96 thousand and $191 thousand, respectively. The weighted-average remaining lease term for operating leases is 3.1 years.
(4) Stockholders’ Equity
A prospectus relating to the ATM Offering was filed with the SEC on November 9, 2018. Since its filing, as of December 31, 2019, the Company has sold 793,668 shares of common stock pursuant to an At-the-Market Issuance Sales Agreement with B. Riley FBR, under which B. Riley FBR acts as sales agent. In connection with the sale of these shares of common stock, the Company has received net proceeds of $2.3 million. The weighted-average sale price per share was $3.04.
The Company’s stockholders’ equity as of December 31, 2019 was less than $2.5 million, which is less than the requirement under Nasdaq Listing Rule 5550(b)(1) for continued listing on The Nasdaq Capital Market. As a result, though no assurance
11
can be given, the Company anticipates that Nasdaq will provide notice of this development and require the Company to take steps in order to avoid the delisting of its common stock.
(5) Net Loss per Share
Basic net loss per share is computed on the basis of the weighted average number of shares of common stock outstanding during the period. Diluted net loss per share is computed based on the weighted average number of common shares outstanding plus the effect of potentially dilutive common shares outstanding during the period using the treasury stock method and the if-converted method. Potentially dilutive common shares include outstanding stock options and share-based awards.
The following table reconciles the numerators and denominators used in the computations of both basic and diluted net loss per share:
|
|
Three Months Ended
December 31,
|
|
|
Six Months Ended
December 31,
|
|
(In thousands, except per share data)
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(2,083
|
)
|
|
$
|
(2,160
|
)
|
|
$
|
(4,151
|
)
|
|
$
|
(4,398
|
)
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for basic and diluted net loss per share — weighted average common stock outstanding
|
|
|
5,947
|
|
|
|
4,678
|
|
|
|
5,769
|
|
|
|
4,374
|
|
Basic and diluted net loss per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(0.35
|
)
|
|
$
|
(0.46
|
)
|
|
$
|
(0.72
|
)
|
|
$
|
(1.01
|
)
|
All unvested restricted stock awards for the six months ended December 31, 2019 are not included in diluted net loss per share, as the impact to net loss per share would be anti-dilutive. Options to purchase 332,819 shares of common stock at exercise prices ranging from $1.85 to $8.35 per share outstanding as of December 31, 2019 were not included in diluted net loss per share, as the impact to net loss per share would be anti-dilutive.
(6) Revenue Recognition
Astrotech recognizes revenue employing the generally accepted revenue recognition methodologies described under the provisions of ASC Topic 606 “Revenue from Contracts with Customers” (“Topic 606”), which was adopted by the Company in fiscal year 2019. The methodology used is based on contract type and how products and services are provided. The guidelines of Topic 606 establish a five-step process to govern the recognition and reporting of revenue from contracts with customers. The five steps are: (i) identify the contract with a customer, (ii) identify the performance obligations within the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations within the contract, and (v) recognize revenue when or as the performance obligations are satisfied.
An additional factor is reasonable assurance of collectability. This necessitates deferral of all or a portion of revenue recognition until collection. During the three and six months ended December 31, 2019, the Company had two revenue sources totaling $205 thousand and $206 thousand, respectively, and revenue was recognized at a point in time consistent with the guidelines in Topic 606.
(7) 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.
12
As of December 31, 2019, the fair value of the Company’s cash and cash equivalents and restricted cash approximate their carrying value due to their short-term nature.
(8) Term Note Payable – Related Party
On September 5, 2019, the Company entered into a private placement transaction with Thomas B. Pickens III, the Chief Executive Officer and Chairman of the Board of Directors of the Company for the issuance and sale of a secured promissory note (“the Note”) to Mr. Pickens with a principal amount of $1.5 million. Interest on the Note shall accrue at 11% per annum. The principal amount and accrued interest on the Note shall become due and payable on September 5, 2020 (the “Maturity Date”). The Company may prepay the principal amount and all accrued interest on the Note at any time prior to the Maturity Date. In connection with the issuance of the Note, the Company, along with 1st Detect Corporation and Astrotech Technologies, Inc. (the “Subsidiaries”), entered into a security agreement, dated as of September 5, 2019, with Mr. Pickens (the “Security Agreement”), pursuant to which the Company and the Subsidiaries granted to Mr. Pickens a security interest in all of the Company’s and the Subsidiaries’ Collateral, as such term is defined in the Security Agreement. In addition, the Subsidiaries jointly and severally agreed to guarantee and act as surety for the Company’s obligation to repay the Note pursuant to a subsidiary guarantee.
(9) Business Risk and Credit Risk Concentration Involving Cash
During the three and six months ended December 31, 2019, the Company had one customer that substantially comprised all of the Company’s revenue. During the three and six months ended December 31, 2018, the Company recognized revenue from one customer. As of December 31, 2019, the Company’s trade accounts receivable balance was related to sales to a global shipping and logistics company.
The Company maintains funds in bank accounts that may exceed the limit insured by the Federal Deposit Insurance Corporation 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.
(10) Common Stock Compensation
Stock Option Activity Summary
The Company’s stock option activity for the six months ended December 31, 2019, is as follows:
|
|
Shares
(in thousands)
|
|
|
Weighted Average
Exercise Price
|
|
Outstanding at June 30, 2019
|
|
|
324
|
|
|
$
|
5.71
|
|
Granted
|
|
|
10
|
|
|
|
1.85
|
|
Exercised
|
|
|
—
|
|
|
|
—
|
|
Canceled or expired
|
|
|
(1
|
)
|
|
|
5.30
|
|
Outstanding at December 31, 2019
|
|
|
333
|
|
|
$
|
5.64
|
|
The aggregate intrinsic value of options exercisable at December 31, 2019, was $0, as the fair value of the Company’s common stock is less than the exercise prices of these options. The remaining stock-based compensation expense of $76 thousand related to stock options will be recognized over a weighted-average period of 1.03 years.
The table below details the Company’s stock options outstanding as of December 31, 2019:
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
|
|
$1.85 – 3.55
|
|
|
80,500
|
|
|
|
3.38
|
|
|
$
|
3.39
|
|
|
|
70,500
|
|
|
$
|
3.39
|
|
$5.30 – 5.85
|
|
|
122,319
|
|
|
|
7.36
|
|
|
|
5.48
|
|
|
|
79,575
|
|
|
|
5.48
|
|
$6.00 – 8.35
|
|
|
130,000
|
|
|
|
4.89
|
|
|
|
7.19
|
|
|
|
86,000
|
|
|
|
6.59
|
|
$1.85 – 8.35
|
|
|
332,819
|
|
|
|
5.43
|
|
|
$
|
5.64
|
|
|
|
236,075
|
|
|
$
|
5.26
|
|
13
Compensation costs recognized related to stock option awards were $41 thousand and $43 thousand for the three months ended December 31, 2019 and 2018, respectively, and $85 thousand and $84 thousand for the six months ended December 31, 2019 and 2018, respectively.
Restricted Stock
The Company’s restricted stock activity for the six months ended December 31, 2019, is as follows:
|
|
Shares
(in thousands)
|
|
|
Weighted
Average
Grant-Date
Fair Value
|
|
Outstanding at June 30, 2019
|
|
|
208
|
|
|
$
|
4.06
|
|
Granted
|
|
|
5
|
|
|
|
2.47
|
|
Vested
|
|
|
(62
|
)
|
|
|
3.74
|
|
Canceled or expired
|
|
|
(11
|
)
|
|
|
3.99
|
|
Outstanding at December 31, 2019
|
|
|
140
|
|
|
$
|
3.97
|
|
Stock compensation expenses related to restricted stock were $42 thousand and $19 thousand for the three months ended December 31, 2019 and 2018, respectively, and $102 thousand and $14 thousand for the six months ended December 31, 2019, and 2018, respectively. The remaining stock-based compensation expense of $411 thousand related to restricted stock awards granted will be recognized over a weighted-average period of 1.99 years.
(11) 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 December 31, 2019, the Company established a valuation allowance against all of its net deferred tax assets.
For the three months ended December 31, 2019 and 2018, the Company incurred pre-tax losses in the amount of $2.1 million and $2.2 million, respectively. For the six months ended December 31, 2019 and 2018, the Company incurred pre-tax losses in the amount of $4.2 million and $4.4 million, respectively. The total effective tax rate was approximately 0% for the each of the three and six months ended December 31, 2019 and 2018.
For each of the six months ended December 31, 2019 and 2018, the Company’s effective tax rate differed from the federal statutory rate of 21%, primarily due to the valuation allowance placed against its net deferred tax assets.
The Tax Cuts and Jobs Act was enacted on December 22, 2017 and provides for a refundable credit of any AMT previously paid. The AMT credit still to be received by the Company of $429 thousand for AMT previously paid will be refunded subsequent to the filing of returns for fiscal years ending June 30, 2020, June 30, 2021 and June 30, 2022. Credit amounts calculated for such years are $214 thousand, $107 thousand, and $107 thousand, respectively.
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 taken or expected to be taken on a tax return. The Company had no unrecognized tax benefit for the three and six months ended December 31, 2019 or 2018.
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.
(12) 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.
14
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 or investigations.
(13) Segment Information
The Company currently has one reportable business unit: 1st Detect Corporation. In prior periods, the Company had two reportable business units: 1st Detect Corporation and Astral Images Corporation. As of December 31, 2019, Astral no longer meets the criteria for segment reporting as both its assets and operations are minimal. For more information on key financial metrics of the Company’s segments in prior reporting periods, refer to the Company’s Annual Report on Form 10-K for the year ended June 30, 2019.
(14) Subsequent Events
On January 7, 2020, the funds from one of the three letters of credit relating to purchase orders for the TRACER 1000 currently held by the Company were released, decreasing the balance of restricted cash to $122 thousand.
On January 21, 2020, the Company entered into its fourth amendment of its original lease for its facility in Webster, Texas. The amended lease begins May 1, 2020 and expires April 30, 2021, with the option to renew and extend the lease for one year.
On February 13, 2020, the Company entered into a private placement transaction with Thomas B. Pickens III, the Chief Executive Officer and Chairman of the Board of Directors of the Company for the issuance and sale of a secured promissory note to Mr. Pickens with a principal amount of $1,000,000. Interest on this promissory note shall accrue at 11% per annum. The principal amount and accrued interest on this promissory note shall become due and payable on September 5, 2020 (the “Maturity Date”). The Company may prepay the principal amount and all accrued interest on this promissory note at any time prior to the Maturity Date. In connection with the issuance of this promissory note, the Company, along with 1st Detect Corporation and Astrotech Technologies, Inc. (the “Subsidiaries”), entered into a security agreement, dated as of February 13, 2020, with Mr. Pickens (the “Security Agreement”), pursuant to which the Company and the Subsidiaries granted to Mr. Pickens a security interest in all of the Company’s and the Subsidiaries’ Collateral, as such term is defined in the Security Agreement. In addition, the Subsidiaries jointly and severally agreed to guarantee and act as surety for the Company’s obligation to repay the Note pursuant to a subsidiary guarantee.
15
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:
|
•
|
Our ability to raise sufficient capital to meet our long- and short-term liquidity requirements;
|
|
•
|
Our ability to continue as a going concern;
|
|
•
|
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;
|
|
•
|
Product demand and market acceptance risks, including our ability to develop and sell products and services to be used by governmental or commercial 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 successfully pursue our business plan and execute our strategy;
|
|
•
|
Technological difficulties and potential legal claims arising from any technological difficulties;
|
|
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Uncertainty in government funding and support for key programs, grant opportunities, or procurements;
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The impact of competition on our ability to win new contracts; and
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Our ability to meet technological development milestones and overcome development challenges.
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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 2019 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.
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