Annual Report for Fiscal Year Ending 06-30, 2025 (Form 10-K)

Management's Discussion and Analysis of Financial Condition and Results of Operations

The following information should be read in conjunction with the Consolidated Financial Statements and the accompanying Notes included below in Item 8 of this Annual Report on Form 10-K. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements.

Overview

Our mission encompasses the advancement of both mass spectrometry and gas chromatography, two powerful analytical techniques that together enable precise detection and identification of chemical compounds across a wide range of high-demand environments.  We aim to expand access to mass spectrometry by simplifying the complexity of operating these devices within real-time testing environments such as airports, border checkpoints, cargo hubs, infrastructure security, correctional facilities, military bases, law enforcement centers, and industrial locations. We are introducing our new line of products that are ultra-portable, on-site, rugged environmental testing instruments, featuring our proprietary ATi Mass Spectrometer Technology ("MS") and ATi Gas Chromatography Column ("GC") to achieve our mission through simplifying the user interface, ruggedizing the critical components to endure MS/GC field work, and enabling multiple configurations for sample intake options. The Astrotech Mass Spectrometer Technology™ and ATi Gas Chromatograph Column (GC) platforms achieve our mission through simplifying the user interface, automating the complicated calibration process, ruggedizing the critical components to endure MS/GC field work, and enabling multiple configurations for sample intake options. 

Additional details about our business are provided in Part I, Item 1. "Business" of this Form 10-K.

Fiscal Year 2025 Business Highlights

As of June 30, 2025, we have deployed the TRACER 1000 in approximately 34 locations in 16 countries across the United States, Europe and Asia.

On January 8, 2025, we announced that 1st Detect Corporation had been awarded a research and development contract with the U.S. Department of Homeland Security ("DHS") to research the TRACER 1000 for DHS next generation explosives trace detection.

On January 14, 2025, our wholly owned subsidiary, 1st Detect Corporation, announced that it has been awarded research and development contract 70RSAT24CB0000015 with the U.S. Department of Homeland Security ("DHS") to research, develop and mature the TRACER 1000 for DHS next generation explosives trace detection.

Astrotech received a $429,000 purchase order for TRACER 1000™ explosive trace detectors ("ETDs") from Intuitive Research and Technology, a TSA approved contractor. On January 24, 2025, we fulfilled the purchase order and sold six TRACER 1000 explosive trace detectors to Intuitive Research and Technology Corporation. This is the first TSA-approved sale of our TRACER 1000 ETD, which utilizes mass spectrometry technology, known for its accuracy and low false alarm rate.

On February 28, 2025, Astrotech Corporation (the "Company") issued a press release announcing that it has created a new wholly owned subsidiary, EN-SCAN, Inc., to manufacture and sell a new line of instruments built for environmental testing applications using its proprietary ATi Gas Chromatograph and Astrotech Mass Spectrometer Technology™.

On March 10, 2025, Astrotech Corporation announced the launch of its enhanced TRACER 1000 Narcotic Trace Detector from its 1st Detect subsidiary. This innovative mobilized mass spectrometer is specifically configured to screen for the full range of synthetic opiates and novel psychoactive substances, delivering accuracy and speed to counter the global drug crisis.

On June 12, 2025, our wholly owned subsidiary, 1st Detect Corporation sold the first sale and deployment of its TRACER 1000 Narcotic Trace Detector in Vietnam, by way of its subsidiary 1st Detect. This milestone marks a significant step in expanding the 1st Detect footprint across Southeast Asia and reinforces its commitment to enhancing narcotics trace detection inspection capabilities.

We have 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.

Each of these fiscal year 2025 announcements reflect the progress made by our business units in developing and demonstrating relevant solutions to problems faced by companies and agencies operating in our target markets. The additional applications of the AMS Technology and our growing channel partner relationships create opportunities for us to generate revenue growth in subsequent fiscal years.

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 our 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 the following accounting policies require us to make significant judgments and estimates in the preparation of our consolidated financial statements.

Revenue Recognition

Astrotech recognizes revenue employing the generally accepted revenue recognition methodologies described under the provisions of Accounting Standards Codification ("ASC") Topic 606 "Revenue from Contracts with Customers" ("Topic 606"), which was adopted by us 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.

Astrotech has multiple revenue sources such as product and related consumable sales, grant revenue, recurring maintenance & extended warranty services, repairs and training.

An additional factor is reasonable assurance of collectability. This necessitates deferral of all or a portion of revenue recognition until collection. For the year ended June 30, 2025, we generated approximately $1.0 million in revenue from nine customers that represented a significant portion of total revenue for fiscal year end 2025.

Contract Assets and Liabilities. We enter into contracts to sell products and provide services, and it recognizes contract assets and liabilities that arise from these transactions. We recognize revenue and corresponding accounts receivable according to Topic 606 and, at times, recognizes revenue once all performance obligations have been met, in advance of the time when contracts give us the right to invoice a customer. We may also receive consideration, per the terms of a contract, from customers prior to transferring goods to the customer. We record customer deposits as deferred revenue. Additionally, we may receive payments, most typically for service and warranty contracts, at the onset of the contract and before services have been performed. In such instances, we record a deferred revenue liability. We recognize these contract liabilities as sales after all revenue recognition criteria are met.

Practical Expedients. Under its contracts with customers, we stand ready to deliver product upon receipt of a purchase order. Accordingly, we have no performance obligations under its contracts until its customers submit a purchase order. We do not enter into commitments to provide goods or services that have terms greater than one year. In limited cases, we do require payment in advance of shipping product. Typically, product is shipped within a few days after prepayment is received. These prepayments are recorded as contract liabilities on the consolidated balance sheet and are included in accounts payable and accrued liabilities. As the performance obligation is part of a contract that has an original expected duration of less than one year, we have applied the practical expedient to omit disclosures regarding remaining performance obligations. In cases where we are responsible for shipping after the customer has obtained control of the goods, it has elected to treat the shipping activities as fulfillment activities rather than as a separate performance obligation. We also apply a practical expedient to expense direct costs of obtaining a contract when incurred because the amortization period would have been one year or less.

Product Sales. We recognize revenue from sales of products upon shipment or delivery when control of the product transfers to the customer, depending on the terms of each sale, and when collection is probable. In the circumstance where terms of a product sale include subjective customer acceptance criteria, revenue is deferred until we have achieved the acceptance criteria unless the customer acceptance criteria are perfunctory or inconsequential. We generally offer customers payment terms of 60 days or less.

Freight. We record shipping and handling fees that it charges to its customers as revenue and related costs as cost of revenue.

Multiple Performance Obligations. Certain agreements with customers include the sale of equipment involving multiple elements in cases where obligations in a contract are distinct and thus require separation into multiple performance obligations, revenue recognition guidance requires that contract consideration be allocated to each distinct performance obligation based on its relative standalone selling price. The value allocated to each performance obligation is then recognized as revenue when the revenue recognition criteria for each distinct promise or bundle of promises has been met. Government contracts have specific individual performance obligations known as milestones. Each milestone has a standalone selling price and is allocated directly to that performance obligation. Revenue under long-term government contracts is recorded under the percentage of completion method.

The standalone selling price for each performance obligation is an amount that depicts the amount of consideration to which the entity expects to be entitled in exchange for transferring the good or service. When there is only one performance obligation associated with a contract, the entire amount of consideration is attributed to that obligation. When a contract contains multiple performance obligations, the standalone selling price is first estimated using the observable price, which is generally a list price net of applicable discount or the price used to sell the good or service in similar circumstances. In circumstances when a selling price is not directly observable, we will estimate the standalone selling price using information available to it including its market assessment and expected cost, plus margin.

The timetable for fulfillment of each of the distinct performance obligations can range from completion in a short amount of time and entirely within a single reporting period to completion over several reporting periods. The timing of revenue recognition for each performance obligation may be dependent upon several milestones, including physical delivery of equipment, completion of site acceptance test, and in the case of after-market consumables and service deliverables, the passage of time. The total revenue was approximately $920 thousand in point in time and $130 thousand over time for 2025 and $1.56 million at point in time and $88 thousand over time for 2024. All revenue was substantially related to one product category for both 2025 and 2024.

Valuation of Inventory

Inventories are stated at the lower of cost or net realizable value. Cost is computed using standard cost, which approximates actual cost on a first-in, first-out basis. We reserve or write down inventory for estimated obsolescence, inventory in excess of reasonably expected sales, or unmarketable inventory, in an amount equal to the difference between the cost of inventory and the estimated market value, based upon assumption about future demand and market conditions. If actual market conditions are less favorable than those projected, additional inventory adjustments may be required. Inventory impairment charges establish a new cost basis for inventory and charges are not reversed subsequently to income, even if circumstances later suggest that increased carrying amounts are recoverable.

Warranty Provision

We offer our customers warranties on the products that we sell. These warranties typically provide for repairs and maintenance of the products if problems arise during a specified time period after original shipment. Concurrent with the sale of products, we record a provision for estimated warranty expenses with a corresponding increase in cost of goods sold. We periodically adjust this provision based on historical experience and anticipated expenses, which could impact our cost of revenue and gross margin. We charge actual expenses of repairs under warranty, including parts and labor, to this provision when incurred. The current obligation for warranty provision is included in accrued expenses and other liabilities in the consolidated balance sheets. 

Results of Operations for the Years Ended June 30, 2025 and 2024

Selected financial data for the fiscal years ended June 30, 2025 and 2024 of our operations are as follows:

		Years Ended June 30,
(In thousands)		2025				2024				Variance
Revenue		$	1,049			$	1,664			$	(615	)
Cost of revenue			574				913				339
Gross profit			475				751				(276	)
Gross margin			45.3	%			45.1	%			0.2	%
Operating expenses
Selling, general and administrative			7,067				7,241				174
Research and development			8,142				6,790				(1,352	)
Total operating expenses			15,209				14,031				(1,178	)
Loss from operations			(14,734	)			(13,280	)			(1,454	)
Other income and expense, net			886				1,616				(730	)
Income tax expense			(2)				(2)				-
Net loss		$	(13,850	)		$	(11,666	)		$	(2,184	)
Net unrealized gain			313				276				37
Total comprehensive loss			(13,537)			$	(11,390	)		$	(2,147	)

Revenue - Total revenue decreased by $615 thousand, or 37.0%, to $1.0 million for the fiscal year ended June 30, 2025, compared to $1.7 million for the fiscal year ended June 30, 2024. In both fiscal years 2025 and 2024, revenue was primarily derived from sales of TRACER 1000 units, a government grant, as well as ongoing sales of consumables and recurring maintenance services for the TRACER 1000. The decrease was due to TRACER 1000 units sold compared to the prior year.

Cost of Revenue and Gross Profit - Gross profit is comprised of revenue less cost of revenue. Our cost of revenue include materials, overhead, warranty expenses, shipping, and labor. Cost of revenue decreased $339 thousand, or 37.1%, for the fiscal year ended June 30, 2025, compared to the year ended June 30, 2024, primarily due to the decrease in TRACER 1000 units sold. Gross profit decreased $276 thousand, and gross margin increased slightly by 0.2% to 45.3% during the fiscal year ended June 30, 2025, compared to 45.1% for the fiscal year ended June 30, 2024. The device sales in fiscal year 2025 had a higher margin compared to the device sales in fiscal year 2024 which resulted in an increase in gross margin.

Operating Expenses - Our operating expenses increased $1.2 million, or 8.4%, during the fiscal year ended June 30, 2025, compared to the fiscal year ended June 30, 2024. Significant changes to operating expenses include the following:

•

Selling, General and Administrative Expenses - Our selling, general and administrative expenses decreased by $174 thousand, or 2.4%, for the year ended June 30, 2025, compared to the year ended June 30, 2024, primarily due to a decrease in personnel cost and consulting fees.

•

Research and Development Expenses - Research and development expenses increased $1.4 million, or 19.9%. This increase was largely driven by increased spending on contractors and employees to support the development of our mass spectrometry and gas chromatography offerings and expenses related to cross-platform improvements to our technology.

Other income and expense, net - Other income and expense decreased by approximately decreased by approximately $730 thousand, or 45.2%, compared to the prior period, due to less investments earning interest income.

Income Taxes - For the fiscal year ended June 30, 2025, income taxes were consistent with prior year.

LIQUIDITY AND CAPITAL RESOURCES

Sources of Liquidity

Cash and cash equivalents at June 30, 2025 were $3.1 million as compared to cash and cash equivalents of $10.4 million at June 30, 2024. Historically, the Company has financed its operations through the successful completions of several public offerings of our common stock, raising net proceeds of approximately $67.6 million. We expect that our short-term and long-term liquidity requirements will consist of working capital and general corporate expenses associated with the growth of our business, including, without limitation, expenses associated with scaling up our operations and continuing to increase our manufacturing capacity, sales and marketing expense associated with rollout of our products to commercial customers, additional research and development expenses associated with expanding our product offerings, and expenses associated with being a public company. Our short-term capital expenditure needs relate primarily to the expansion of our research and development capabilities and optimization of existing business processes. We believe that our cash and cash equivalents and investments will enable us to fund our operating expenses and capital expenditure requirements for at least twelve months following the date these consolidated financial statements are issued. Our short-term investments have been utilized as a source of liquidity to fund our operating expenses.

Funding Requirements

We expect our expenses to increase in connection with our ongoing activities, particularly as we continue our research and development efforts and expand our business efforts. Furthermore, we have incurred and will continue to incur additional costs as a result of being a public company. Accordingly, we will need to obtain additional funding in connection with our continuing operations. If we are unable to raise capital when needed or on attractive terms, we would be forced to delay, reduce or eliminate our research and development programs, or future commercialization efforts.

Because of the numerous risks and uncertainties associated with our research and development efforts, we are unable to estimate the exact amount of our operating capital requirements. Our future capital requirements will depend on many factors, including:

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future research and development efforts;

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our ability to enter into and terms and timing of any collaborations, licensing agreements, or other arrangements;

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the costs of sales, marketing, distribution and manufacturing efforts;

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our headcount growth and associated costs as we expand our business;

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the costs of preparing, filing and prosecuting patent applications, maintaining and protecting our intellectual property rights and defending against intellectual property related claims; and

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the costs of operating as a public company.

Until such time, if ever, as we can generate positive cash flows from operations, we expect to finance our additional cash needs through a combination of equity offerings, debt financing, equity financing, merging, or engaging in a strategic partnership. To the extent that we raise additional capital through the sale of equity, our existing stockholders will be diluted, and the terms of those securities may include liquidation or other preferences that adversely affect the rights of holders of common stock. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.

If we raise funds through additional strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies or future revenue streams or to grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity offerings, debt financing, equity financing or engaging in a strategic partnership, we may be required to delay, limit, or reduce our expansion efforts.

Trends and Uncertainties

Inflation and changing prices have not had a material impact on our historical results of operations. We do not currently anticipate that inflation and changing prices will have a material impact on our future results of operations.

Consolidated Balance Sheet

Total assets for the year ended June 30, 2025, were $27 million compared to total assets of $38 million as of the end of fiscal year 2024, a decrease of $10.7 million. The following table sets forth the significant components of the consolidated balance sheet as of June 30, 2025, compared with June 30, 2024:

		Years Ended June 30,
(In thousands)		2025				2024				Variance
Assets:
Current assets		$	21,975			$	34,728			$	(12,753	)
Property and equipment, net			2,443				2,763				(320	)
Operating lease right-of-use assets, net			2,225				119				2,106
Other assets, net			346				30				316
Total		$	26,989			$	37,640			$	(10,651	)
Liabilities and stockholders' equity:
Current liabilities		$	2,451			$	2,528			$	(77	)
Lease liabilities, net			2,274				73				2,201
Other liabilities, net			164				232				(68	)
Stockholders' equity			22,100				34,807				(12,707	)
Total		$	26,989			$	37,640			$	(10,651	)

Current assets - Current assets decreased $12.8 million as of June 30, 2025, compared to June 30, 2024, as a result of cash used for continuing operating expenses and personnel costs.

Property and equipment, net - Property and equipment, net of depreciation, decreased $320 thousand as of June 30, 2025, compared to June 30, 2024, primarily due to depreciation and an asset impairment.

Operating lease right-of-use assets, net -Operating lease right-of-use assets increased $2.1 million as of June 30, 2025, compared to June 30, 2024, due to entering into the Metric facility lease.

Other assets, net - Other assets increased by $316 thousand during the fiscal year due to the lease deposit paid for the Metric facility.

Current liabilities - Current liabilities were consistent with the prior year.

Lease liabilities, net- Lease liabilities increased $2.2 million as of June 30, 2025, compared to June 30, 2024, due to entering into the Metric facility lease.

Other liabilities, net - Other liabilities were consistent with the prior year.

Cash Flows

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

		Years Ended June 30,
(In thousands)		2025				2024				Variance
Change in cash and cash equivalents:
Net cash used in operating activities		$	(12,952	)		$	(9,725	)			(3,227	)
Net cash provided by (used in) investing activities			5,795				6,140				(345	)
Net cash used in financing activities			(185	)			(181	)			(4)
Net change in cash and cash equivalents		$	(7,342	)			(3,766	)		$	(3,576	)

Cash and Cash Equivalents

At June 30, 2025, we held cash and cash equivalents of $3.1 million, and our net working capital was approximately $19.5 million. At June 30, 2024, we held cash and cash equivalents of $10.4 million, and our net working capital was approximately $32.2 million. Cash and cash equivalents decreased by approximately $13.7 million during the year ended June 30, 2025, due to funding our continuing operating expenses. The Company has $15.1 million in short term investments to fund operations.

Operating Activities

Net cash used in operating activities was $13.0 million for the year ended June 30, 2025, compared to cash used in operating activities of $9.7 million for the year ended June 30, 2024. The increase in cash was due by increases in recurring operating expenses and accounts payable.

Investing Activities

Net cash used in investing activities for the year ended June 30, 2025 was $5.8 million, compared to $6.1 million in the year ended June 30, 2024. The decrease in cash provided by investing activities due to purchasing of property, plant, and equipment, offset by the proceeds of short-term investments.

Financing Activities

Cash used in financing activities was $185 thousand for the year ended June 30, 2025, and $181 thousand for the year ended June 30, 2024. The decrease was due to repayment of finance leases.

We did not have any material off-balance sheet arrangements as of June 30, 2025.

Contractual Obligations and Commitments

The following table summarized our commitments to settle contractual obligations as of June 30, 2025:

		Payments Due by Period
(In thousands)		Total				Less than 1 Year				1 to 3 Years				4 to 5 Years				More than 5 Years
Operating lease commitments (1)		$	3,113			$	381			$	807				868				1,057
Finance lease commitments (2)			79				27				52				-
Total		$	3,192			$	408			$	859			$	868			$	1,057

(1) Consists of payments due for our lease of the manufacturing property in Austin, Texas that expire November 2032.

(2) Consists of payments due for an equipment lease that expire May 2028.

Off-Balance Sheet Arrangements

We did not have any off-balance sheet arrangements as of June 30, 2025.