##### 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 December 31, 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: 001-34426
 Astrotech Corporation
  Washington
(State or other jurisdiction 
of incorporation or organization)
    
    91-1273737
(I.R.S. Employer
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




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##### 



ASTROTECH CORPORATION AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
 PagePART I: FINANCIAL INFORMATION
    
    
    2ITEM 1. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    
    
    2ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
    
    
    13ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    17ITEM 4. CONTROLS AND PROCEDURES
    
    
    17PART 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




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##### Table of Contents



PART I: FINANCIAL INFORMATION
 
 ITEM 1.
    
    Condensed Consolidated Financial Statements
 ASTROTECH CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
 December 31,
    
    
    June 30,2009
    
    
    2009(unaudited)AssetsCurrent assetsCash and cash equivalents
    
    $
    7,046
    
    
    $
    4,730Accounts receivable, net
    
    
    9,408
    
    
    
    12,279Short-term note receivable, net
    
    
    675
    
    
    
    Prepaid expenses and other current assets
    
    
    646
    
    
    
    591Total current assets
    
    
    17,775
    
    
    
    17,600Property & equipment, net
    
    
    40,345
    
    
    
    40,226Other assets, net
    
    
    53
    
    
    
    402Long-term note receivable, net
    
    
    
    
    
    
    691Total assets
    
    $
    58,173
    
    
    $
    58,919Liabilities and Stockholders EquityCurrent liabilitiesAccounts payable
    
    $
    558
    
    
    $
    2,965Accrued liabilities and other
    
    
    1,539
    
    
    
    2,356Advances on construction
    
    
    411
    
    
    
    Deferred revenue
    
    
    3,020
    
    
    
    3,594Term note payable
    
    
    267
    
    
    
    267Senior convertible notes payable- 5.5%
    
    
    5,111
    
    
    
    Total current liabilities
    
    
    10,906
    
    
    
    9,182Deferred revenue
    
    
    598
    
    
    
    649Term note payable, net of current portion
    
    
    3,207
    
    
    
    3,324Senior convertible notes payable- 5.5%, net of current portion
    
    
    
    
    
    
    5,111Other
    
    
    75
    
    
    
    105Total liabilities
    
    
    14,786
    
    
    
    18,371Stockholders EquityPreferred stock, no par value, convertible, 2,500,000
authorized
shares, 0 issued and
outstanding shares, at December 31, 2009 and June 30,
2009 (liquidation of $12,000)
    
    
    
    
    
    
    Common stock, no par value,75,000,000 shares authorized
16,877,824 and 16,754,378 shares issued at December 31,
2009 and June 30, 2009, respectively
    
    
    183,393
    
    
    
    183,341Treasury stock, 311,660 shares at cost
    
    
    (237
    )
    
    
    (237
    )Additional paid-in capital
    
    
    1,971
    
    
    
    1,663Retained deficit
    
    
    (141,740
    )
    
    
    (144,219
    )Total stockholders equity
    
    
    43,387
    
    
    
    40,548Total liabilities and stockholders equity
    
    $
    58,173
    
    
    $
    58,919
   2




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##### Table of Contents



ASTROTECH CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
 Three Months Ended
    
    
    Six Months EndedDecember 31,
    
    
    December 31,2009
    
    
    2008
    
    
    2009
    
    
    2008(unaudited)
    
    
    (unaudited)Revenue
    
    $
    8,080
    
    
    $
    3,786
    
    
    $
    15,842
    
    
    $
    9,760Costs of revenue
    
    
    2,674
    
    
    
    3,250
    
    
    
    5,602
    
    
    
    6,768Gross profit
    
    
    5,406
    
    
    
    536
    
    
    
    10,240
    
    
    
    2,992Operating expenses:Selling, general and administrative
    
    
    3,270
    
    
    
    2,150
    
    
    
    6,345
    
    
    
    3,849Research and development
    
    
    328
    
    
    
    510
    
    
    
    1,002
    
    
    
    1,083Total operating expenses
    
    
    3,598
    
    
    
    2,660
    
    
    
    7,347
    
    
    
    4,932Income (loss) from operations
    
    
    1,808
    
    
    
    (2,124
    )
    
    
    2,893
    
    
    
    (1,940
    )Gain on notes repurchased
    
    
    
    
    
    
    665
    
    
    
    
    
    
    
    665Interest and other expense, net
    
    
    (79
    )
    
    
    (95
    )
    
    
    (339
    )
    
    
    (224
    )Income (loss) before income taxes
    
    
    1,729
    
    
    
    (1,554
    )
    
    
    2,554
    
    
    
    (1,499
    )Income tax expense
    
    
    (50
    )
    
    
    
    
    
    
    (75
    )
    
    
    Net income (loss)
    
    $
    1,679
    
    
    $
    (1,554
    )
    
    $
    2,479
    
    
    $
    (1,499
    )Net income (loss) per share-basic
    
    $
    0.10
    
    
    $
    (0.09
    )
    
    $
    0.15
    
    
    $
    (0.09
    )Weighted average common shares outstanding,
basic
    
    
    16,534
    
    
    
    16,393
    
    
    
    16,504
    
    
    
    16,251Net income (loss) per share, diluted
    
    $
    0.09
    
    
    $
    (0.09
    )
    
    $
    0.14
    
    
    $
    (0.09
    )Weighted average common shares outstanding,
diluted
    
    
    18,590
    
    
    
    16,393
    
    
    
    17,897
    
    
    
    16,251
   3




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ASTROTECH CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
 Six Months EndedDecember 31,2009
    
    
    2008(unaudited)Cash flows from operating activitiesNet income (loss)
    
    $
    2,479
    
    
    $
    (1,499
    )Adjustments to reconcile net income to net cash provided by (used in) operating activities:Stock-based compensation
    
    
    331
    
    
    
    180Depreciation and amortization
    
    
    1,066
    
    
    
    1,129Gain on note repurchase
    
    
    
    
    
    
    (665
    )Other
    
    
    
    
    
    
    63Changes in assets and liabilities:Accounts receivable
    
    
    2,871
    
    
    
    (958
    )Deferred revenue
    
    
    (625
    )
    
    
    1,554Accounts payable
    
    
    (2,407
    )
    
    
    (342
    )Advances for construction contract
    
    
    411
    
    
    
    (1,116
    )Restricted cash
    
    
    
    
    
    
    1,307Other assets and liabilities
    
    
    (537
    )
    
    
    (689
    )Net cash provided by (used in) operating activities
    
    
    3,589
    
    
    
    (1,036
    )Cash flows from investing activitiesPurchases of property, equipment and leasehold improvements
    
    
    (1,185
    )
    
    
    (172
    )Net cash used in investing activities
    
    
    (1,185
    )
    
    
    (172
    )Cash flows from financing activitiesProceeds from issuance of common stock
    
    
    29
    
    
    
    Term loan payment
    
    
    (117
    )
    
    
    (133
    )Repurchase of notes
    
    
    
    
    
    
    (1,085
    )Net cash used in financing activities
    
    
    (88
    )
    
    
    (1,218
    )Net change in cash and cash equivalents
    
    
    2,316
    
    
    
    (2,426
    )Cash and cash equivalents at beginning of period
    
    
    4,730
    
    
    
    2,640Cash and cash equivalents at end of period
    
    $
    7,046
    
    
    $
    214Supplemental disclosures of cash flow information:Cash paid for interest
    
    $
    234
    
    
    $
    335Cash paid for income taxes
    
    
    
    
    
    
    
   4




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##### 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
 2. Basis of Presentation
   5




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##### Table of Contents



3. Net Income (loss) per Share
  Three Months Ended
    
    
    Six Months EndedDecember 31,
    
    
    December 31,2009
    
    
    2008
    
    
    2009
    
    
    2008Numerator:Net income (loss), basic and diluted
    
    $
    1,679
    
    
    $
    (1,554
    )
    
    $
    2,479
    
    
    $
    (1,499
    )Denominator:Denominator for basic net income
(loss) per share  weighted
average common stock outstanding
    
    
    16,534
    
    
    
    16,393
    
    
    
    16,504
    
    
    
    16,251Dilutive common stock equivalents 
common stock options and
share-based awards
    
    
    2,056
    
    
    
    
    
    
    
    1,393
    
    
    
    Denominator for diluted net income
(loss) per share  weighted
average common stock outstanding
and dilutive common stock
equivalents
    
    
    18,590
    
    
    
    16,393
    
    
    
    17,897
    
    
    
    16,251Basic net income (loss) per share
    
    $
    0.10
    
    
    $
    (0.09
    )
    
    $
    0.15
    
    
    $
    (0.09
    )Diluted net income (loss) per share
    
    $
    0.09
    
    
    $
    (0.09
    )
    
    $
    0.14
    
    
    $
    (0.09
    )
   4. Revenue Recognition
    6




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##### Table of Contents



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
   7




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6. Fair Value Measurement
  December 31, 2009
    
    
    June 30, 2009Carrying
    
    
    Fair
    
    
    Carrying
    
    
    FairAmount
    
    
    Value
    
    
    Amount
    
    
    ValueTerm loan payable
    
    $
    3,474
    
    
    $
    3,474
    
    
    $
    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
   Three Months Ended
    
    
    Three Months EndedDecember 31, 2009
    
    
    December 31, 2008Revenue and Income
    
    Income (Loss)
    
    
    Income (Loss)(in thousands)
    
    Revenue
    
    
    before income taxes
    
    
    Revenue
    
    
    before income taxesASO
    
    $
    8,080
    
    
    
    3,288
    
    
    $
    3,786
    
    
    
    (414
    )Other
    
    $
    
    
    
    
    (1,559
    )
    
    $
    
    
    
    
    (1,140
    )$
    8,080
    
    
    
    1,729
    
    
    $
    3,786
    
    
    
    (1,554
    )
  8




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Six Months Ended
    
    
    Six Months EndedDecember 31, 2009
    
    
    December 31, 2008Revenue and Income
    
    Income (Loss)
    
    
    Income (Loss)(in thousands)
    
    Revenue
    
    
    before income taxes
    
    
    Revenue
    
    
    before income taxesASO
    
    $
    15,842
    
    
    
    5,679
    
    
    $
    9,760
    
    
    
    1,019Other
    
    $
    
    
    
    
    (3,125
    )
    
    $
    
    
    
    
    (2,518
    )$
    15,842
    
    
    
    2,554
    
    
    $
    9,760
    
    
    
    (1,499
    )
 Assets
    
    December 31, 2009
    
    
    June 30, 2009(in thousands)
    
    Fixed Assets, net
    
    
    Total Assets
    
    
    Fixed Assets, net
    
    
    Total AssetsASO
    
    $
    40,158
    
    
    $
    52,561
    
    
    $
    39,815
    
    
    $
    52,595Other
    
    $
    187
    
    
    $
    5,612
    
    
    $
    411
    
    
    $
    6,324$
    40,345
    
    
    $
    58,173
    
    
    $
    40,226
    
    
    $
    58,919
 9. Equity and Other Long Term Incentive Plans
  Equity Grants
  Stock Options
   Weighted AverageShares
    
    
    Exercise Price(in thousands)Outstanding at September 30, 2009
    
    
    1,024
    
    
    $
    1.35Granted
    
    
    
    
    
    
    Exercised
    
    
    (43
    )
    
    $
    0.42Cancelled or expired
    
    
    (10
    )
    
    $
    16.35Outstanding at December 31, 2009
    
    
    971
    
    
    $
    1.25
  9




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##### Table of Contents



Weighted AverageShares
    
    
    Exercise Price(in thousands)Outstanding at June 30, 2009
    
    
    1,125
    
    
    $
    2.27Granted
    
    
    
    
    
    
    Exercised
    
    
    (111
    )
    
    $
    0.42Cancelled or expired
    
    
    (43
    )
    
    $
    29.88Outstanding at December 31, 2009
    
    
    971
    
    
    $
    1.25
 Restricted Stock
   Weighted AverageGrant-DateShares
    
    
    Fair Value(in thousands)Non-vested at September 30, 2009
    
    
    2,219
    
    
    $
    1.08Granted
    
    
    410
    
    
    $
    1.85Vested
    
    
    
    
    
    
    Cancelled or expired
    
    
    
    
    
    $
    Non-vested at December 31, 2009
    
    
    2,629
    
    
    $
    1.20
  Weighted AverageGrant-DateShares
    
    
    Fair Value(in thousands)Non-vested at June 30, 2009
    
    
    243
    
    
    $
    0.52Granted
    
    
    2,406
    
    
    $
    1.27Vested
    
    
    
    
    
    
    Cancelled or expired
    
    
    (20
    )
    
    $
    0.70Non-vested at December 31, 2009
    
    
    2,629
    
    
    $
    1.20
  10




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##### Table of Contents



10. Recent Accounting Pronouncements
  11. Facility at Vandenberg Air Force Base (VAFB
  12. Early Termination of Cost Plus Award Fee Contract
   13. Purchase of Common Stock and Convertible Notes
   Repurchase of Outstanding Notes
  14. Strategic Financial and Business Alternatives
   11




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15. Board of Director Resignation
  16. Related Party Transactions
 James D. Royston
  Director Compensation
  17. Subsequent Events
 .
       12




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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.
  13




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New Business Initiatives
  Other
 st st st
 CRITICAL ACCOUNTING POLICIES AND ESTIMATES
   RESULTS OF OPERATIONS
 Three months ended December 31, 2009 compared to three months ended December 31, 2008
  Three Months EndedDecember 31,2009
    
    
    2008Revenue
    
    $
    8,080
    
    
    $
    3,786Gross profit
    
    $
    5,406
    
    
    $
    536Gross margin
    
    
    67
    %
    
    
    14
    %Operating expenses
    
    $
    3,598
    
    
    $
    2,660Gain on notes repurchased
    
    $
    
    
    
    $
    665Interest and other expense, net
    
    $
    (79
    )
    
    $
    (95
    )Net income (loss)
    
    $
    1,679
    
    
    $
    (1,554
    )
 Revenue.
  14




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##### Table of Contents



Gross Profit.
 Selling, General and Administrative Expense.
 Research and Development Expense. st
 Gain
on Notes Repurchased.
 Interest and Other Expense, net.
 Six months ended December 31, 2009 compared to six months ended December 31, 2008
  Six Months EndedDecember 31,2009
    
    
    2008Revenue
    
    $
    15,842
    
    
    $
    9,760Gross profit
    
    $
    10,240
    
    
    $
    2,992Gross margin
    
    
    65
    %
    
    
    31
    %Operating expenses
    
    $
    7,347
    
    
    $
    4,932Gain on notes repurchased
    
    $
    
    
    
    $
    665Interest and other expense, net
    
    $
    (339
    )
    
    $
    (224
    )Net income (loss)
    
    $
    2,479
    
    
    $
    (1,499
    )
 Revenue.
 Gross Profit.
 Selling, General and Administrative Expense.
  15




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Research and Development Expense. st
 Gain
on Notes Repurchased.
 Interest and Other Expense, net.
 LIQUIDITY AND CAPITAL RESOURCES
   Six Months EndedDecember 31,2009
    
    
    2008Net cash provided by (used in) operating activities
    
    $
    3,589
    
    
    $
    (1,036
    )Net cash used in investing activities
    
    
    (1,185
    )
    
    
    (172
    )Net cash used in financing activities
    
    
    (88
    )
    
    
    (1,218
    )Net change in cash and cash equivalents
    
    $
    2,316
    
    
    $
    (2,426
    )
 Operating Activities
   Assets.
 Liabilities.
   16




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Investing Activities
  Financing Activities
  December 31, 2009
    
    
    June 30, 2009Carrying
    
    
    Fair
    
    
    Carrying
    
    
    FairAmount
    
    
    Value
    
    
    Amount
    
    
    ValueTerm loan payable
    
    $
    3,474
    
    
    $
    3,474
    
    
    $
    3,591
    
    
    $
    3,591Senior convertible notes payable  5.5%
    
    $
    5,111
    
    
    $
    2,658
    
    
    $
    5,111
    
    
    $
    2,650
  Off-Balance Sheet Arrangements
  
 ITEM 3.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 ITEM 4.
    
    CONTROLS AND PROCEDURES
 (a) Evaluation of Disclosure Controls and Procedures
  (b) Changes in Internal Control over Financial Reporting
   17




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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




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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




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Astrotech CorporationDate: February 1, 2010
    /s/ Thomas B. Pickens, IIIThomas B. Pickens, IIIChief Executive Officer/s/ John M. PorterJohn M. PorterSenior Vice President and
Chief Financial Officer  20