##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2009
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File Number: 0-27206
 Astrotech Corporation
  Washington
    
    91-1273737(State or other jurisdiction
    
    (I.R.S. Employerof incorporation or organization)
    
    Identification No.)
 401 Congress Avenue, Suite 1650
Austin, Texas 78701
 (512) 485-9530
 þ o
 Yes o No o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ(Do not check if a smaller reporting company)
 o þ




---



##### 



ASTROTECH CORPORATION AND SUBSIDIARIES
SEPTEMBER 30, 2009 QUARTERLY REPORT ON FORM 10-Q
  
 TABLE OF CONTENTS
 PageDEFINITIONS
    
    
    2PART I: FINANCIAL INFORMATION
    
    
    3ITEM 1. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    
    
    3ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
    
    
    14ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    17ITEM 4. CONTROLS AND PROCEDURES
    
    
    18PART II: OTHER INFORMATION
    
    
    18ITEM 1. LEGAL PROCEEDINGS
    
    
    18ITEM 1A. RISK FACTORS
    
    
    18ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
    
    
    18ITEM 3. DEFAULTS UPON SENIOR SECURITIES
    
    
    18ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    
    18ITEM 5. OTHER INFORMATION
    
    
    18ITEM 6. EXHIBITS
    
    
    19Exhibit 31.1Exhibit 31.2Exhibit 32
   1




---



##### Table of Contents



DEFINITIONS
  2008 Plan
    
    2008 Stock Incentive PlanARES
    
    ARES CorporationCommon stock
    
    Astrotech Corporation common stockEPS
    
    Earnings Per ShareISS
    
    International Space StationNASA
    
    National Aeronautics and Space AdministrationSEC
    
    Securities and Exchange CommissionVAFB
    
    Vandenberg Air Force Base
  2




---



##### Table of Contents



PART I: FINANCIAL INFORMATION
 
 ITEM 1.
    
    Unaudited Condensed Consolidated Financial Statements
 ASTROTECH CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
 September 30,
    
    
    June 30,2009
    
    
    2009(unaudited)AssetsCurrent assetsCash and cash equivalents
    
    $
    2,697
    
    
    $
    4,730Accounts receivable, net
    
    
    15,539
    
    
    
    12,279Prepaid expenses and other current assets
    
    
    570
    
    
    
    591Total current assets
    
    
    18,806
    
    
    
    17,600Property & equipment, net
    
    
    40,384
    
    
    
    40,226Other assets, net
    
    
    222
    
    
    
    402Long-term note receivable, net
    
    
    684
    
    
    
    691Total assets
    
    $
    60,096
    
    
    $
    58,919Liabilities and Stockholders EquityCurrent liabilitiesTerm note payable
    
    $
    267
    
    
    $
    267Revolving credit facility note payable
    
    
    1,000
    
    
    
    Accounts payable
    
    
    828
    
    
    
    2,965Accrued liabilities and other
    
    
    1,896
    
    
    
    2,356Advances on Construction
    
    
    2,330
    
    
    
    Deferred revenue
    
    
    3,181
    
    
    
    3,594Total current liabilities
    
    
    9,502
    
    
    
    9,182Deferred revenue
    
    
    598
    
    
    
    649Term note payable, net of current portion
    
    
    3,266
    
    
    
    3,324Senior convertible notes payable  5.5%
    
    
    5,111
    
    
    
    5,111Other
    
    
    95
    
    
    
    105Total liabilities
    
    
    18,572
    
    
    
    18,371Stockholders EquityPreferred stock, no par value, convertible, 2,500,000 authorized shares, 0 issued and outstanding shares, at September 30, 2009 and 2008 (liquidation of $12,000)
    
    
    
    
    
    
    Common stock, no par value,75,000,000 shares authorized at September 30, 2009 and
June 30, 2009, 16,821,878 and 16,754,378 shares issued at September 30, 2009
and June 30, 2009, respectively
    
    
    183,370
    
    
    
    183,341Treasury
stock, 311,660 shares at cost
    
    
    (237
    )
    
    
    (237
    )Additional paid-in capital
    
    
    1,810
    
    
    
    1,663Retained deficit
    
    
    (143,419
    )
    
    
    (144,219
    )Total stockholders equity
    
    
    41,524
    
    
    
    40,548Total liabilities and stockholders equity
    
    $
    60,096
    
    
    $
    58,919
   3




---



##### Table of Contents



ASTROTECH CORPORATION AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Operations
 Three Months EndedSeptember 30,2009
    
    
    2008Revenue
    
    $
    7,762
    
    
    $
    5,974Costs of revenue
    
    
    2,928
    
    
    
    3,518Gross profit
    
    
    4,834
    
    
    
    2,456Operating expenses:Selling, general and administrative
    
    
    3,075
    
    
    
    1,699Research and development
    
    
    674
    
    
    
    573Total operating expenses
    
    
    3,749
    
    
    
    2,272Income from operations
    
    
    1,085
    
    
    
    184Interest and other expense, net
    
    
    (260
    )
    
    
    (129
    )Income before income taxes
    
    
    825
    
    
    
    55Income Tax Expense
    
    
    (25
    )
    
    
    Net income
    
    $
    800
    
    
    $
    55Net income per share-basic
    
    $
    0.05
    
    
    $
    0.00Weighted average common shares outstanding, basic
    
    
    17,303
    
    
    
    16,109Net income per share, diluted
    
    $
    0.04
    
    
    $
    0.00Weighted average common shares outstanding, diluted
    
    
    18,166
    
    
    
    16,581
   4




---



##### Table of Contents



ASTROTECH CORPORATION AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Cash Flows
 Three Months EndedSeptember 30,2009
    
    
    2008Cash flows from operating activitiesNet income
    
    $
    800
    
    
    $
    55Adjustments to reconcile net income to net cash used in operating activities:Stock-based compensation
    
    
    147
    
    
    
    9Depreciation and amortization
    
    
    540
    
    
    
    631Other
    
    
    21
    
    
    
    (33
    )Changes in assets and liabilities:Restricted cash
    
    
    
    
    
    
    (2,191
    )Accounts receivable
    
    
    (3,260
    )
    
    
    (2,760
    )Deferred revenue
    
    
    (465
    )
    
    
    2,059Accounts payable
    
    
    (2,137
    )
    
    
    (510
    )Advances for construction contract
    
    
    2,330
    
    
    
    1,719Other assets and liabilities
    
    
    (282
    )
    
    
    120Net cash used in operating activities
    
    
    (2,306
    )
    
    
    (901
    )Cash flows from investing activitiesPurchases of property, equipment and leasehold improvements
    
    
    (698
    )
    
    
    (147
    )Net cash used in investing activities
    
    
    (698
    )
    
    
    (147
    )Cash flows from financing activitiesNote payable on revolving credit facility
    
    
    1,000
    
    
    
    970Proceeds from issuance of common stock
    
    
    29
    
    
    
    Term loan payment
    
    
    (58
    )
    
    
    (66
    )Net cash provided by financing activities
    
    
    971
    
    
    
    904Net change in cash and cash equivalents
    
    
    (2,033
    )
    
    
    (144
    )Cash and cash equivalents at beginning of period
    
    
    4,730
    
    
    
    2,640Cash and cash equivalents at end of period
    
    $
    2,697
    
    
    $
    2,496Supplemental disclosures of cash flow information:Cash paid for interest
    
    $
    46
    
    
    $
    67Cash paid for income taxes
    
    $
    
    
    
    $
    
   5




---



##### Table of Contents



ASTROTECH CORPORATION AND SUBSIDIARIES
 Notes to Unaudited Condensed Consolidated Financial Statements
 1. Description of the Company and Operating Environment
   Our Business Units
 Astrotech Space Operations, Inc.
 Other
 Liquidity
    6




---



##### Table of Contents



2. Basis of Presentation
    3. Net Income per Share
  Three Months EndedSeptember 30,2009
    
    
    2008Numerator:Net income, basic and diluted
    
    
    800
    
    
    
    55Denominator:Denominator for basic net income per
share  weighted average common stock
outstanding
    
    
    17,303
    
    
    
    16,109Dilutive common stock equivalents 
common stock options and share-based
awards
    
    
    863
    
    
    
    472Denominator for diluted net income
per share  weighted average common
stock outstanding and dilutive common
stock equivalents
    
    
    18,166
    
    
    
    16,581Basic net income per share
    
    $
    0.05
    
    
    $
    0.00Diluted net income per share
    
    $
    0.04
    
    
    $
    0.00
    7




---



##### Table of Contents



4. Revenue Recognition
   A Summary of Revenue Recognition Methods
 Services/Products Provided
    
    Contract Type
    
    Method of Revenue RecognitionPayload Processing Facilities
    
    Firm Fixed Price  Mission Specific
    
    Ratably, over the occupancy period of a satellite within
the facility from arrival through launchFirm Fixed Price 
Guaranteed Number
of Missions
    
    For multi-year contract
payments recognized ratably
over the contract periodCommercial Space Habitat
Modules, Integration &
Operations Support Services
and Construction contracts
    
    Firm Fixed Price
    
    Percentage-of-completion
based on costs incurredConfiguration Management,
Engineering Services
    
    Cost Reimbursable
Award/Fixed Fee
    
    Reimbursable costs incurred
plus award/fixed feeCommercial Products
    
    Specific Purchase Order Based
    
    At shipment
  5. Debt
 Credit Facilities
  Senior convertible notes payable
   8




---



##### Table of Contents



6. Fair Value Measurement
  September 30, 2009
    
    
    June 30, 2009Carrying
    
    
    Fair
    
    
    Carrying
    
    
    FairAmount
    
    
    Value
    
    
    Amount
    
    
    ValueTerm loan payable
    
    $
    3,533
    
    
    $
    3,533
    
    
    $
    3,591
    
    
    $
    3,591Senior convertible notes payable  5.5%
    
    $
    5,111
    
    
    $
    2,658
    
    
    $
    5,111
    
    
    $
    2,650
   7. Business and Credit Risk Concentration
   8. Segment Information
  September 30, 2009
    
    
    September 30, 2008Revenue and Income
    
    
    
    
    
    Income (Loss)
    
    
    
    
    
    
    Income (Loss)(in thousands)
    
    Revenue
    
    
    before income taxes
    
    
    Revenue
    
    
    before income taxesASO
    
    $
    7,762
    
    
    $
    2,391
    
    
    $
    5,974
    
    
    $
    918Other
    
    $
    
    
    
    $
    (1,566
    )
    
    $
    
    
    
    $
    (862
    )$
    7,762
    
    
    $
    825
    
    
    $
    5,974
    
    
    $
    56
  9




---



##### Table of Contents



Assets
    
    September 30, 2009
    
    
    June 30, 2009(in thousands)
    
    Fixed Assets, net
    
    
    Total Assets
    
    
    Fixed Assets, net
    
    
    Total AssetsASO
    
    $
    40,184
    
    
    $
    57,235
    
    
    $
    40,051
    
    
    $
    55,508Other
    
    $
    200
    
    
    $
    2,861
    
    
    $
    175
    
    
    $
    3,411$
    40,384
    
    
    $
    60,096
    
    
    $
    40,226
    
    
    $
    58,919
 9. Equity and Other Long Term Incentive Plans
  Equity Grants
  Stock Based Incentive Awards
  Cash Based Long Term Incentive Awards
  Accounting for Stock Issued to Employees
  Grants made in three months ended September 30, 20082-year options
    
    
    10-year optionsExpected Dividend Yield
    
    
    0
    
    
    
    0Expected Volatility
    
    
    114
    %
    
    
    114
    %Risk Free Interest Rates
    
    
    3.30
    %
    
    
    3.30
    %Expected Option Life (in years)
    
    
    0.58
    
    
    
    6.25
   10




---



##### Table of Contents



Weighted-Weighted-
    
    
    AverageAverage
    
    
    Remaining
    
    
    AggregateShares Under
    
    
    Exercise
    
    
    Contractual
    
    
    IntrinsicFixed Options
    
    
    Price
    
    
    Term
    
    
    ValueOutstanding at June 30, 2009
    
    
    1,156,056
    
    
    $
    2.23
    
    
    
    4.9
    
    
    
    Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercised
    
    
    (67,500
    )
    
    $
    0.43
    
    
    
    
    
    
    
    Forfeited
    
    
    (7,500
    )
    
    $
    0.45
    
    
    
    
    
    
    
    Expired
    
    
    (26,500
    )
    
    $
    43.06
    
    
    
    
    
    
    
    Outstanding at September 30, 2009
    
    
    1,049,556
    
    
    $
    1.34
    
    
    
    4.8
    
    
    $
    2,414,650Exercisable
    
    
    652,106
    
    
    $
    1.91
    
    
    
    2.2
    
    
    $
    1,441,887
   Director Compensation
  Shareholders Rights Plan
  10. Board of Director Resignation
  11. Related Party Transactions
 James D. Royston
   11




---



##### Table of Contents



12. Recent Accounting Pronouncements
  13. Government Facility at VAFB
  14. Early Termination of Cost Plus Award Fee Contract
   15. Purchase of Common Stock and Convertible Notes
   Repurchase of Outstanding Notes
   12




---



##### Table of Contents



16. Strategic Financial and Business Alternatives
  17. Subsequent Events
 Revolving Credit Line Repayment
  Audit Committee Appointment
   13




---



##### Table of Contents



ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  OVERVIEW
   
    
    Facilities and support services necessary for the preparation of satellites and payloads for launch.
    
    End-to-End Mission Assurance: a turn-key approach to the total satellite lifecycle.
    
    Commercialization of space-based technologies into real-world applications.
    
    Expertise in qualifying hardware for spaceflight and the habitability and occupational challenges of space.
 Our Business Units
 Astrotech Space Operations (ASO)
   
    
    Our ability to control our capital expenditures, which primarily are limited to modifications to
accommodate payload processing for new launch vehicles, upgrading communications infrastructure and
other building improvements.
    
    The continuing limited availability of competing facilities at the major domestic launch sites that can
offer comparable services, leading to an increase in government use of our services.
    
    Our ability to complete customer specified facility modifications within budgeted costs and time
commitments.
    
    Our ability to control and reduce costs in order to maximize profitability of our fixed-priced contracts.
  14




---



##### Table of Contents



New Business Initiatives
  Other
 st st st
 CRITICAL ACCOUNTING POLICIES AND ESTIMATES
   RESULTS OF OPERATIONS
 Results of Operations for the Quarter Ended September 30, 2009 and 2008
  Three Months EndedSeptember 30,2009
    
    
    2008Revenue
    
    $
    7,762
    
    
    $
    5,974Gross profit
    
    $
    4,834
    
    
    $
    2,456Gross margin
    
    
    62
    %
    
    
    41
    %Operating expenses
    
    $
    3,749
    
    
    $
    2,272Other
    
    $
    (285
    )
    
    $
    (129
    )Net income
    
    $
    800
    
    
    $
    55
  15




---



##### Table of Contents



Revenue.
 Gross Profit.
 Selling, General and Administrative Expense.
 Research and Development Expense.
 Interest and Other expense, net.
 LIQUIDITY AND CAPITAL RESOURCES
  2009
    
    
    2008Net cash used in operating activities
    
    $
    (2,306
    )
    
    $
    (901
    )Net cash used in investing activities
    
    
    (698
    )
    
    
    (147
    )Net cash provided by financing activities
    
    
    971
    
    
    
    904Net change in cash and cash equivalents
    
    $
    (2,033
    )
    
    $
    (144
    )
  16




---



##### Table of Contents



Operating Activities
   Assets.
 Liabilities.
   Investing Activities
  Financing Activities
  Off-Balance Sheet Arrangements
  
 ITEM 3.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
   17




---



##### Table of Contents



ITEM 4.
    
    CONTROLS AND PROCEDURES
 (a) Evaluation of Disclosure Controls and Procedures
  (b) Changes in Internal Control over Financial Reporting
  
 PART II: OTHER INFORMATION
 
 ITEM 1.
    
    LEGAL PROCEEDINGS
  
 ITEM 1A.
    
    RISK FACTORS
  
 ITEM 2.
    
    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  
 ITEM 3.
    
    DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 4.
    
    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 ITEM 5.
    
    OTHER INFORMATION
   18




---



##### Table of Contents



ITEM 6.
    
    EXHIBITS
  Exhibit No.
    
    Description31.1
    
    
    Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the
Securities Exchange Act of 1934.31.2
    
    
    Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the
Securities Exchange Act of 1934.32
    
    
    Certification Pursuant to Rule 13a-14(b) of the Securities and Exchange Act of 1934.
  19




---



##### Table of Contents



SIGNATURE
  Astrotech CorporationDate:  November 12, 2009
    /s/ Thomas B. Pickens, IIIThomas B. Pickens, IIIChief Executive Officer/s/ John M. PorterJohn M. PorterSenior Vice President and
Chief Financial Officer  20