ASTROTECH CORP
10-Ks and 10-Qs
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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
| þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended June 30, 2010
| 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
(Exact name of registrant as specified in its charter)
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Washington
(State or other jurisdiction of incorporation or organization) |
91-1273737
(I.R.S. Employer Identification No.) |
401 Congress Ave. Suite 1650
Austin, Texas 78701
(Address of principal executive offices) (Zip code)
(512) 485-9530
(Registrant’s telephone number, including area code)
Securities Registered pursuant to Section 12(b) of the Act:
Austin, Texas 78701
(Address of principal executive offices) (Zip code)
(512) 485-9530
(Registrant’s telephone number, including area code)
Securities Registered pursuant to Section 12(b) of the Act:
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Title of each class
Common Stock (no par value) |
Name of each exchange
on which registered NASDAQ Capital Market |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of
the Securities Act.
YES
o
NO
þ
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or
Section 15(d) of the Act.
YES
o
NO
þ
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. YES
þ
NO
o
Indicate by check mark whether the registrant has submitted electronically and posted on it
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§229.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files).
YES
o
NO
o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K
(§229.405 of this chapter) is not contained herein, and will not be contained, to the best of
registrant’s knowledge, in definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this Form 10-K.
o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a small reporting company. See definition of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer o | Accelerated filer o | Non-accelerated filer o | Smaller reporting company þ | |||
| (Do not check if a smaller reporting company) |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). YES
o
NO
þ
The aggregate market value of the registrants voting and non-voting common equity held by
non-affiliates of the registrant, based upon the closing price of such stock on the NASDAQ Capital
Market on such date of $1.92 was approximately $31,807,035 as of December 31, 2009.
As of
August 25, 2010, 19,238,988 shares of the registrant’s Common Stock, no par value, were
outstanding, including 1,540,203 shares of restricted stock with
voting rights.
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i
Table of Contents
FORWARD-LOOKING STATEMENTS
This Form 10-K contains “forward-looking statements” within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other
than statements of historical fact are “forward-looking statements” for purposes of federal and
state securities laws. Forward-looking statements may include the words “may,” “will,” “plans,”
“believes,” “estimates,” “expects,” “intends” and other similar expressions. Such statements are
subject to risks and uncertainties that could cause our actual results to differ materially from
those projected in the statements. Such risks and uncertainties include, but are not limited to:
| • |
The effect of economic conditions in the United States or other space faring nations that could impact our ability to access space and support or gain customers;
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Our ability to raise sufficient capital to meet our long and short-term liquidity requirements;
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Our ability to successfully pursue our business plan;
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Whether we will fully realize the economic benefits under our NASA and other customer contracts;
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Continued availability and use of the U.S. Space Shuttle and the International Space Station;
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Technological difficulties and potential legal claims arising from any technological difficulties;
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Product demand and market acceptance risks, including our ability to develop and sell products and services to be used by the manned and unmanned space programs
that replace the Space Shuttle Program;
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Uncertainty in government funding and support for key space programs;
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The impact of competition on our ability to win new contracts;
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Uncertainty in securing reliable and consistent access to space;
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Delays in the timing of performance of other contracts; and
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Risks described in the “Risk Factors” section of this Form 10-K.
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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 Form 10-K 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 Item 1A “Risk Factors”
of this Form 10-K and elsewhere in this Form 10-K, 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 Form 10-K and in prior or subsequent communications.
ii
Table of Contents
Our Company
Astrotech Corporation (Nasdaq: ASTC) (“Astrotech,” “the Company,” “we,” “us” or “our”) is a
commercial aerospace company that provides spacecraft payload processing and related services,
designs and manufactures space hardware, and commercializes space technologies for use on Earth.
The Company serves the U.S. Government and commercial satellite and spacecraft customers with our
pre-launch services from our Astrotech Space Operations (“ASO”) subsidiary and incubates space
technology businesses now focusing on two companies: 1
st
Detect Corporation (“1
st
Detect), which is developing a Miniature Chemical Detector first developed for the International
Space Station; and Astrogenetix, Inc. (“Astrogenetix”), which is utilizing the unique microgravity
environment of space to develop novel therapeutic products.
Astrotech was formed in 1984 to leverage the environment of space for commercial purposes. For the
last 26 years, the Company has remained a crucial player in space commerce activities. We have
supported the launch of 23 shuttle missions and more than 280 spacecraft, built space hardware and
processing facilities, and prepared and processed scientific research for microgravity.
We offer products and services in the following areas:
| • |
Facilities and support services necessary for the preparation of satellites and payloads for launch.
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Commercialization of space-based technologies into real-world applications.
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Expertise in qualifying hardware for spaceflight and the habitability and occupational challenges of space.
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The Company has experience supporting both manned and unmanned missions to space with product and
service support including space hardware design and manufacturing, research and logistics
expertise, engineering and support services, and payload processing and integration. Through new
Spacetech business initiatives such as 1
st
Detect and Astrogenetix, Astrotech is paving the way in
the commercialization of space by translating space-based technology into terrestrial applications.
Our Business Units
Astrotech Space Operations
(“ASO”)
ASO is the leading commercial supplier of satellite launch processing services in the United
States. ASO provides processing support for government and commercial customers for their complex
communication, earth observation and deep space satellites. ASO’s spacecraft processing facilities
are among the elite in the industry, with over 150,000 square feet of
clean rooms that can support the largest five-meter class satellites, encompassing the majority of U.S. based
satellite preparation services. ASO has provided launch processing support for government and
commercial customers for more than a quarter century, successfully processing more than 280
spacecraft.
1
Table of Contents
ASO accounted for 100% of our consolidated revenues for the year ended June 30, 2010 (See Item 7:
Management’s Discussion and Analysis of Financial Condition and Results of Operations.) Revenue for
our ASO business unit is primarily generated from various fixed-priced contracts with launch service
providers in both the commercial and government markets. The services and facilities we provide to
our customers support the final assembly, checkout, and countdown functions associated with
preparing a spacecraft for launch. The revenue and cash flows generated from our ASO operations are
related to the number of spacecraft launches, which reflects the growth in the satellite-based
communications industries and the requirement to replace aging satellites. Other factors that have
impacted, and are expected to continue to impact earnings and cash flows for this business include:
| • |
Our ability to control our capital expenditures, which are primarily limited to modifications to accommodate
payload processing for new launch vehicles, upgrading communications infrastructure and other building
improvements.
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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.
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Our ability to complete customer specified facility modifications within budgeted costs and time commitments.
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Our ability to control and reduce costs in order to maximize profitability of our fixed-priced contracts.
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Spacetech
Our Spacetech business unit is an incubator intended to develop space-industry technologies into
commercial applications to be sold to consumers and industry. Spacetech has developed three
business initiatives to date: 1
st
Detect Corporation, Astrogenetix and AirWard Corporation
(“AirWard”). 1
st
Detect’s business began under a Space Act Agreement with the National
Aeronautics and Space Administration (“NASA”) for a chemical detection unit to be used on the
International Space Station. 1
st
Detect engineers have developed a Miniature Chemical
Detector, based on mass spectrometry, that we believe will fill a niche by being highly accurate,
lightweight, battery-powered, durable and inexpensive. Astrogenetix is a biotechnology company
created to use the unique environment of space to discover and develop novel therapeutic products.
A natural extension of the many years of experience preparing, launching, and operating over 1,500
scientific payloads in space, Astrogenetix is in the process of developing products from
microgravity discoveries. AirWard designed and manufactured shipping containers to transport oxygen
bottles and oxygen generators for commercial aircraft. Further
investment in AirWard was suspended
in February 2010, as the initiative has not yielded the anticipated return for shareholders.
Noncontrolling Interest
In January 2010, restricted shares of Astrotech subsidiaries 1
st
Detect and Astrogenetix were
granted to certain employees, directors and officers, resulting in Astrotech owning less than 100%
of these subsidiaries. The Company applied non-controlling interest accounting for the period ended
June 30, 2010, which requires us to clearly identify the
non-controlling interest in the consolidated balance
sheets and consolidated income statements. We disclose three measures of net income: net income, net income
attributable to noncontrolling interest, and net income attributable to Astrotech Corporation. Our
operating cash flows in our consolidated statements of cash flows reflect net income, while our
basic and diluted earnings per share calculations reflect net income attributable to Astrotech
Corporation.
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Beginning balance at July 1, 2009
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$ | — | ||
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Net loss attributable to noncontrolling interest
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(588 | ) | ||
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Issuance of
restricted stock and warrants
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1,826 | |||
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State of
Texas Funding
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900 | |||
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Stock based
compensation
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116 | |||
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Ending balance at June 30, 2010
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$ | 2,254 | ||
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As of June 30, 2010, the Company’s share of income and losses is 86% for 1
st
Detect and 79% for
Astrogenetix.
Business Strategy
Astrotech Space Operations
As the leading commercial satellite processing provider, ASO is continuously working to secure
additional government and commercial customers that require our services.
Spacetech
1
st
Detect has developed a revolutionary chemical detector based on ion trap mass
spectrometry, which allows for the device’s portability, versatility, sensitivity, durability, high
speed and low cost. Potential markets that 1
st
Detect may serve include Security and Defense,
Industrial, Medical and Healthcare, Critical Infrastructure, and First Responders.
2
Table of Contents
Astrogenetix is currently focused on submitting an Initial New Drug application with the Food and
Drug Administration (“FDA”) for a Salmonella vaccine as part of the ongoing commercialization
strategy. Concurrently, we are using the final two scheduled Space Shuttle flights to complete the
on-orbit processing of our next vaccine biomarker discovery, methicilin-resistant Staphylococcus
aureus (“MRSA”).
Products and Services
Astrotech Space Operations
From our state of the art facilities in Titusville, Florida and Vandenberg Air Force Base (“VAFB”) in California
we have provided support
for pre-launch ground based operations for 26 years for both commercial and government satellites,
and we are the leader in this service sector.
Spacetech
1
st
Detect’s Miniature Chemical Detector is a universal chemical analyzer that provides
rapid analysis time and is capable of detecting residues and vapors from a wide range of chemicals
including explosives, chemical warfare agents, toxic chemicals, and volatile organic compounds.
1
st
Detect’s proprietary technology, leveraging advances in low power electronics and
miniaturization technologies developed for the space program, allows for the device’s portability,
versatility, sensitivity, durability, efficiency and low cost.
Astrogenetix has discovered a Salmonella vaccine candidate, which validates the use of microgravity
in identifying commercially viable biomarkers. Astrogenetix’s capabilities include preparing
microgravity payloads that can be flown on a variety of launch systems, including the Space
Shuttle, the Russian Soyuz, Progress and Photon, the European Automated Transfer Vehicle, the
Japanese H-II Transfer Vehicle, and the SpaceX Dragon (still under development). The Astrogenetix
Microgravity Processing Platform has been developed to grow microbes in space that can result in
significant advantages over traditional earthbound vaccine discovery processes, thus reducing the
development time and cost significantly.
Customers, Sales and Marketing
Astrotech Space Operations
ASO services a variety of domestic and international government and commercial customers sending
satellites to low-earth-orbit or geosynchronous orbit. ASO has long-term contracts in place with
NASA, other U.S. Governmental agencies, United Launch Alliance, and Sea Launch, LLC. During fiscal
year 2010, ASO accounted for 100% of our consolidated revenues.
Spacetech
The broadband nature of the 1
st
Detect technology, as well as the high performance
provided by the ion trap architecture, opens up 1
st
Detect to a variety of applications.
Potential markets that 1
st
Detect may serve include Security and Defense, Industrial,
Medical and Healthcare, Critical Infrastructure, and First Responders.
While there have been no sales to date, likely customers for Astrogenetix will be large
international pharmaceutical companies and smaller biotechnology companies. Astrogenetix is
currently focused on starting the FDA process with the Salmonella vaccine candidate and is
continuing drug development work for other vaccine targets, including MRSA.
Most recently, Astrogenetix testing samples were included in the latest shuttle Discovery launch,
STS-132. The 1
st
Detect Miniature Chemical Detector debuted at the American Society of
Mass Spectrometry Conference in June 2008, during which several companies demonstrated significant
interest in the product. Currently, several operational units have been manufactured including a
boxed unit and a bench-top development unit. In tandem, we
are working on the development of an additional technical capability, which will increase accuracy,
increase auto-tuning capability, and reduce size and cost.
3
Table of Contents
Competition
Astrotech Space Operations
The majority of the Company’s revenue is derived from ASO, which processes satellites for U.S.
launch locations. The only significant competition to ASO’s facilities is from commercial
competitor Spaceport Systems International (“SSI”) and
certain U.S. Government facilities. However,
we believe that the majority of domestic satellites, including many government satellites, are
processed at ASO due to the state-of-the-art, professionally operated, full-service environment.
Commercial
SSI operates and manages a commercial spaceport at VAFB and is a
provider of payload processing and launch services for both commercial and government users. The
SSI facility throughput capability is significantly less than that of ASO in VAFB and it is heavily
influenced by government customers. The ASO VAFB contract award for the five-meter high bay
construction significantly improves ASO’s competitive advantage at VAFB. SSI does not provide
payload processing services in support of the Cape Canaveral Air Force Station (“CCAFS”) / Kennedy
Space Center (“KSC”) launch site, and therefore, does not compete with ASO in Florida.
Governmental
NASA and the United States Air Force own and operate payload processing facilities at both the
CCAFS /KSC and VAFB launch sites. These facilities, however, are used to process select government
spacecraft only. They are not used to process commercial spacecraft. Therefore, ASO’s competition
from the U.S. Government is limited in scope.
Spacetech
There are many incumbent vendors that will compete with 1
st
Detect’s Miniature Chemical
Detector. However, we believe the 1
st
Detect product offers a combination of attributes
that are currently unavailable in the marketplace in a single product.
There are many earthbound developers of vaccines, including most large pharmaceutical companies and
many smaller biotechnology firms. However, there are no known competitors to Astrogenetix
developing vaccines in microgravity. With the construction of the ISS nearing completion, and with
the recent delivery of both the European Space Agency and the Japanese Space Agency nodes on the
ISS, competition from foreign governments, academia and commercial companies is anticipated.
Research and Development
We incurred $2.8 million and $2.3 million in research and development expense during fiscal years
2010 and 2009, respectively. Research and development in fiscal year 2010 has been primarily
directed towards development of 1
st
Detect’s Miniature Chemical Detector and
Astrogenetix’s Microgravity Processing Platform. Astrogenetix continues to work on processing its
FDA application for its Salmonella vaccine candidate while also researching other potential
vaccines, including MRSA.
4
Table of Contents
Backlog
The Company’s 18-month rolling backlog at June 30, 2010, which includes contractual backlog and
scheduled but uncommitted missions, is $24.9 million. The majority of the backlog is for ASO
pre-launch satellite processing services, which include hardware launch preparation, advance
planning, use of unique satellite preparation facilities and spacecraft checkout, encapsulation,
fueling, and transport.
| (In thousands) | 18-Month Rolling | |||
| Contract | Backlog | |||
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ASO Missions
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$ | 20,659 | ||
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Facility Programs
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4,203 | |||
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Total Backlog
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$ | 24,862 | ||
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The 18-month rolling backlog consists of fixed-price satellite missions from various government and
commercial entities requiring pre-launch processing services at our Titusville, Florida and VAFB
locations.
Certain Regulatory Matters
We are subject to federal, state, and local laws and regulations designed to protect the
environment and to regulate the discharge of materials into the environment in order to protect our
domestic technology from unintended foreign exploitation and to regulate certain business
practices. We believe that our policies, practices and procedures are properly designed to prevent
unreasonable risk of environmental damage and consequential financial liability to us. Compliance
with environmental laws and regulations and technology export requirements has not had in the past,
and, we believe, will not have in the future, material effects on our capital expenditures,
earnings, or competitive position. Our operations are also subject to various regulations under
federal laws relative to the international transfer of technology, as well as to various federal
and state laws relative to business operations. In addition, we are subject to federal contracting
procedures, audit, and oversight.
Significant federal regulations impacting our operations include the following:
Federal Regulation of International Business
. We are subject to various federal regulations as it
relates to the export of certain goods, services, and technology. These regulations, which include
the Export Administration Act of 1979 administered by the Commerce Department and the Arms Export
Control Act administered by the State Department, impose substantial restrictions on the sharing or
transfer of technology to foreign entities. Our activities in the development of space technology
and in the processing of commercial satellites deal with the type of technology subject to these
regulations. Our operations are conducted pursuant to a comprehensive export compliance policy that
provides close review and documentation of activities subject to these laws and regulations.
Foreign Corrupt Practices Act
. The Foreign Corrupt Practices Act establishes rules for U.S.
companies doing business internationally. Compliance with these rules is achieved through
established and enforced corporate policies, documented internal procedures, and financial
controls.
Iran Nonproliferation Act of 2000
. This act includes specific prohibitions on commercial activities
with certain specified Russian entities engaged in providing goods or services to the International
Space Station. Our activities with Rocket Space Corporation, Energia of Russia, are not subject to
this act.
Federal Acquisition Regulations
. Goods and services provided by us to NASA and other U.S.
Government agencies are subject to Federal Acquisition Regulations. These regulations provide rules
and procedures for invoicing, documenting, and conducting business under contract with such
entities. The Federal Acquisition Regulations also subject us to audit by federal auditors to
confirm such compliance.
Truth in Negotiations Act
. The Truth in Negotiations Act was enacted for the purpose of providing
full and fair disclosure by contractors in the conduct of negotiations with the U.S. Government.
The most significant provision included in the Truth in Negotiations Act is the requirement that
contractors submit certified cost and pricing data for negotiated procurements above a defined
threshold.
Defense Security Service
. Occasionally, we are requested to process government spacecraft payloads
that must be handled under federal security clearances. To accommodate these requirements, we
maintain facility security clearances within certain subsidiaries of the Company and have persons
engaged by the Company with necessary active security clearances to support these requirements.
Maintenance of an active facility clearance requires dedicated trained personnel, specified
facility standards and recordkeeping.
5
Table of Contents
Regulatory Compliance and Risk Management
We maintain compliance with regulatory requirements and manage our risks through a program of
compliance, awareness, and insurance, which includes the following:
Safety
. We place a continual emphasis on safety throughout our organization. At the corporate
level, safety programs and training are monitored by a corporate safety manager.
Export Control Compliance
. We have a designated senior officer responsible for export control
issues and the procedures detailed in our export control policy. This officer and the designated
export compliance administrator monitor training and compliance with regulations relative to
foreign business activities. Employees are provided comprehensive training in compliance with
regulations relative to export and foreign activities through our interactive training program and
are certified as proficient in such regulations as are relative to their job responsibilities.
Insurance
. Our operations are subject to the hazards associated with operating assets in the severe
environment of space. These hazards include the risk of loss or damage to the assets during
storage, preparation for launch, in transit to the launch site, and during the space mission
itself. We maintain insurance coverage against these hazards with reputable insurance underwriters.
Employees Update
As of June 30, 2010, we employed 71 regular full-time employees, none of which were covered by any
collective bargaining agreements.
In June 2010, General (Ret.) Lance W. Lord resigned from the Board of Directors of Astrotech and as
the Chief Executive Officer of Astrotech Space Operations. The vacancy on the Board of Directors
created by General Lord’s resignation is not expected to be filled until the next annual meeting.
The position of Chief Executive Officer, Astrotech Space Operations, will remain open pending a
review of internal and external candidates.
In July 2010, the Company simultaneously announced the termination of James Royston, President of
Astrotech Corporation, and a realignment of its corporate structure in order to optimize
operational efficiencies. The Company’s action follows an evaluation of each business and a review
of strategic alternatives. The corporate realignment will allow Astrotech to put a greater focus on
the pre-launch satellite service offering of its ASO business unit. The Company has no immediate
plans to fill the vacancy created by Mr. Royston’s termination.
In July 2009, the Board of Directors appointed John Porter as Astrotech’s Chief Financial Officer.
Mr. Porter, a Senior Vice President of the Company, had been serving as interim CFO since the
resignation of Brian K. Harrington on June 4, 2009.
Given the inherent uncertainty and complexity of the businesses that we engage in, our results from
operations and financial condition could be materially adversely impacted as set forth below.
Additional risks and uncertainties not presently known to us, or that we currently deem immaterial,
may also impact our business operations.
Our success depends significantly on the establishment and maintenance of successful relationships
with our customers.
We have relied on governmental customers for a substantial portion of our revenue. Approximately
49% of our revenue in fiscal year 2010 was generated by various NASA and U.S. Government contracts
or subcontracts. The loss of these customers could have a material adverse effect on our business,
financial condition and results of operations. We cannot make any assurances that any customer will
require our services in the future. Therefore, we continue to work on diversifying our customer
base to include other government agencies and commercial industries, while going to great lengths
to satisfy the needs of our current customer base.
6
Table of Contents
Termination of our future orders could negatively impact our revenues.
The Company’s rolling backlog at June 30, 2010, which includes contractual backlog and scheduled
but uncommitted missions, is $24.9 million. The majority is for ASO pre-launch satellite processing
services, which include hardware launch preparation; advance planning; use of unique satellite
preparation facilities; and spacecraft checkout, encapsulation,
fueling and transport. Since some of our
government contracts are contingent upon congressional appropriations and can be terminated “for
convenience,” we cannot assure that our backlog will ultimately result in revenues.
A branch of the U.S. Government or a commercial competitor could construct spacecraft ground
processing facilities, which could significantly reduce the number of missions using Astrotech
facilities.
Astrotech provides services for domestic launch sites. In the event that the U.S. Government
constructs spacecraft ground processing facilities for the launch sites currently serviced by
Astrotech, there could be a reduced need for the use of Astrotech facilities. This would result in
direct competition for our existing customers in connection with servicing domestic launch sites,
which could significantly reduce our revenues. There can be no assurance that we will be able to
compete successfully against any new competitor in this area or that these competitive pressures we
may face will not result in reduced revenues and market share.
Compliance with environmental and other government regulations could be costly and could negatively
affect our financial condition.
Our business, particularly our ASO business unit, is subject to numerous laws and regulations
governing the operation and maintenance of our facilities and the release or discharge of hazardous
or toxic substances, including spacecraft fuels and oxidizers, into the environment. Under these
laws and regulations, we could be liable for personal injury and cleaning costs and other
environmental and property damages, as well as administrative, civil, and criminal penalties. In
the event of a violation of these laws, or a release of hazardous substances at or from our
facilities, our business, financial condition, and results of operations could be materially
adversely affected.
As a U.S. Government contractor, we are subject to a number of rules and regulations, the violation
of which could result in us being barred from future U.S. Government contracts.
We must comply with, and are affected by, laws and regulations relating to the award,
administration, and performance of U.S. Government contracts. These laws and regulations, among
other things:
| • |
Require certification and disclosure of all cost or pricing data in connection with certain contract negotiations.
|
|
| • |
Impose acquisition regulations that define allowable and unallowable costs and otherwise govern our right to reimbursement under certain cost-based U.S. Government contracts.
|
|
| • |
Restrict the use and dissemination of information classified for national security purposes and the exportation of certain products and technical data.
|
A violation of specific laws and regulations could result in the imposition of fines and penalties,
the termination of our contracts, or disbarment from bidding on U.S. Government contracts.
Additionally, U.S. Government contracts generally contain provisions that allow the U.S. Government
to unilaterally suspend us from receiving new contracts pending resolution of alleged violations of
certain federal laws or regulations, reduce the value of existing contracts, issue modifications to
a contract, and control and potentially prohibit the export of our services and associated
materials. Prohibition against bidding on future U.S. Government contracts would have a material
adverse effect on our financial condition and results of operations.
7
Table of Contents
Our failure to comply with U.S. export control laws and regulations could adversely affect our
business.
We are obligated by law and under contract to comply, and to ensure that our subcontractors comply,
with all U.S. export control laws and regulations, including the International Traffic in Arms
Regulations and the Export Administration Regulations. We are responsible for obtaining all
necessary licenses or other approvals, if required, for exports of hardware, technical data, and
software, or for the provision of technical assistance. We are also
required to obtain export
licenses, if required, before utilizing foreign persons in the performance of our contracts if the
foreign person will have access to export-controlled technical data or software. The violation of
any of the applicable export control laws and regulations, whether by us or any of our
subcontractors, could subject us to administrative, civil, and criminal penalties.
Our business could be adversely affected by a negative audit by the U.S. Government.
U.S. Government agencies, including NASA, routinely audit and investigate government contractors.
These agencies review a contractor’s performance under its contracts, cost structure, and
compliance with applicable laws, regulations, and standards. The U.S. Government may also review
the adequacy of, and a contractor’s compliance with, its internal control systems and policies,
including the contractor’s purchasing, property, estimating, compensation, and management
information systems. Any costs found to be improperly allocated to a specific contract will not be
reimbursed, while such costs already reimbursed must be refunded. If an audit uncovers improper or
illegal activities, we may be subject to civil and criminal penalties and administrative sanctions,
including termination of contracts, forfeiture of profits, suspension of payments, fines, and
suspension or prohibition from doing business with the U.S. Government. In addition, we could
suffer serious reputational harm that may affect our non-governmental business if allegations of
impropriety were made against us.
Our Spacetech business unit is in an early development stage. It has earned no revenues and it is
uncertain whether it will earn any revenues in the future or whether it will ultimately be
profitable.
Our Spacetech business unit is in an early development stage with no commercial sales and a limited
operating history. Its future operations are subject to all of the risks inherent in the
establishment of a new business enterprise including, but not limited to, risks related to capital
requirements, failure to establish business relationships and competitive disadvantages as against
larger and more established companies. The Spacetech business unit will require substantial amounts
of funding to develop, test, and commercialize its products. If such funding comes in the form of
equity financing, such equity financing may involve substantial dilution to existing shareholders.
Even with funding, our product development program may not lead to commercial products, either
because our product candidates fail to be effective or are not attractive to the market or because
we lack the necessary financial or other resources or relationships to pursue our programs through
commercialization.
The Spacetech business unit can be expected to experience significant operating losses until it can
generate sufficient revenues to cover its operating costs. The Spacetech business unit currently
has no commercial products and there can be no assurance that the business will be able to develop,
manufacture or market any products in the future, that future revenues will be significant, that
any sales will be profitable or that the business will have sufficient funds available to complete
its marketing and development programs or to market any products which it may develop.
Any products and technologies developed and manufactured by our Spacetech business unit may require
regulatory approval prior to being made, marketed, sold, and used. There can be no assurance that
regulatory approval of any products will be obtained.
The commercial success of the Spacetech business unit is expected to depend, in part, on obtaining
patent and other intellectual property protection for the technologies contained in any products it
develops. In addition, the Spacetech business unit may need to license intellectual property to
commercialize future products or avoid infringement of the intellectual property rights of others.
There can be no assurance that licenses will be available on acceptable terms and conditions, if at
all. The Spacetech business unit may suffer if any licenses terminate, if the licensors fail to
abide by the terms of the license or fail to prevent infringement by third parties, if the licensed
patents or other rights are found to be invalid, or if the Spacetech business unit is unable to
enter into necessary licenses on acceptable terms. If the Spacetech business unit, or any third
party, from whom it licenses intellectual property, fails to obtain adequate patent or other
intellectual property protection for intellectual property covering its products, or if any
protection is reduced or eliminated, others could use the intellectual property covering the
products, resulting in harm to the competitive business position of the Spacetech business unit. In
addition, patent and other intellectual property protection may not provide the Spacetech business
unit with a competitive advantage against competitors
that devise ways of making competitive products without infringing any patents that the Spacetech
business unit owns or has rights to. Such competition could adversely affect the prices for any
products or the market share of the Spacetech business unit and could have a material adverse
effect upon its results of operations and financial condition.
8
Table of Contents
Our facilities located in Florida and California are susceptible to damage caused by hurricanes,
earthquakes, or other natural disasters.
Our ASO spacecraft processing facilities on the east coast of Florida are susceptible to damage
caused by hurricanes or other natural disasters. In addition, our launch processing facilities at
VAFB and the facilities we operate at the Port of Long Beach are subject to damage caused by
earthquakes. Although we insure our properties and maintain business interruption insurance, there
can be no guarantee that the coverage would be sufficient. A natural disaster could result in a
temporary or permanent closure of our business operations, thus impacting our future financial
performance.
Due to our dependence on the timing of spacecraft launches, our results may fluctuate significantly
from quarter to quarter.
The use of our ASO spacecraft processing facilities is highly dependent upon the number of
satellite launches planned and executed each year. Additionally, factors beyond our direct control,
such as a delay or accident at a launch vehicle support facility, could cause a material change in
our financial results. As a result, significant fluctuations should be expected from quarter to
quarter in our operating results.
The loss of key management and other employees could have a material adverse effect on our
business.
We are dependent on the personal efforts and abilities of our senior management, and our success
will also depend on our ability to attract and retain additional qualified employees. Failure to
attract personnel sufficiently qualified to execute our strategy, or to retain existing key
personnel, could have a material adverse effect on our business.
If we are unable to anticipate technological advances and customer requirements in the commercial
and governmental markets, our business and financial condition may be adversely affected.
Our business strategy outlines the use of decades of experience to expand the services and products
we offer to both government agencies and commercial industries. We believe that our growth and
future financial performance depend upon our ability to anticipate technological advances and
customer requirements. There can be no assurance that we will be able to achieve the necessary
technological advances for us to remain competitive. In fiscal year 2010, we continued new business
initiatives for advancing commerce in space. These new business initiatives will require
substantial investments of capital and technical expertise. Our failure to anticipate or respond
adequately to changes in technological and market requirements, or delays in additional product
development or introduction, could have a material adverse effect on our business and financial
performance. Additionally, the cost of capital to fund these businesses will likely require
dilution of shareholders.
Our inability to generate sufficient cash flow to pay off or refinance our indebtedness with
near-term maturities could have a material adverse effect on our financial condition.
We cannot assure that our business will generate cash flows from operations or that future
borrowings will be available to us in an amount sufficient to pay our maturing indebtedness as it
comes due. As a result, we may need to refinance all or a portion of the debt or we may need to
secure new financing before maturity. We cannot be sure that we will be able to obtain financing on
reasonable terms or at all, particularly given the general economic situation and lending
environment we currently face.
Our earnings and margins may vary due to the nature of our fixed-priced contracts.
Our business mix includes cost-reimbursable and fixed-price contracts. Cost-reimbursable contracts
generally have lower profit margins than fixed-price contracts. Our ASO business unit contracts are
mainly fixed-price contracts. If we are unable to control costs we incur in performing under the
contract, our financial condition and operating results could be materially adversely affected.
Additionally, the costs incurred to operate our core ASO business are near-term fixed. As a result,
if we are not able to schedule payload processing in order to optimize our facilities our financial
results could be adversely affected.
We plan to develop new products and services. No assurances can be given that we will be able to
successfully develop these products and services.
Our business strategy outlines the use of the decades of experience we have accumulated to expand
the services and products we offer to both U.S. Government and commercial industries. These
services and products generally involve the commercial exploitation of space, and involve new and
untested technologies and business models. These technologies and business models may not be
successful, which could result in the loss of any investment we make in developing them.
9
Table of Contents
Our financial results could be adversely affected if the estimates that we use in accounting for
contracts are incorrect and need to be changed.
Contract accounting requires judgment relative to assessing risks, estimating contract revenues and
costs, and making assumptions for scheduling and technical issues. We rely on the application of
consistent business processes in order to minimize material error and maximize reporting
transparency. The estimation of total revenues and cost at completion for many of our contracts is
complicated and subject to many unknown variables.
If our performance under a cost reimbursable contract results in an award fee that is lower than we
have estimated, we would be required to refund previously billed fee amounts and would have to
adjust our revenue recognition accordingly. If our performance was determined to be significantly
deficient, we may be required to reimburse our customers for the entire amount of previously billed
awards. Changes in underlying assumptions, circumstances, or estimates may adversely affect future
period financial performance.
Our spacecraft payload processing facilities are specifically designed to process satellites and
other payloads and we would lose a substantial portion of their value if we no longer provide these
services.
Our ASO spacecraft processing facilities were built specifically to process satellites and space
related payloads. If we were required to terminate the processing businesses, the value of these
facilities could be impaired and, as a result, our financial condition and results of operations
would likely be negatively impacted.
Our inability to maintain required government security clearances and the impact of foreign
ownership or control could result in a loss of potential future spacecraft ground processing and
other opportunities.
In order to be a service and product provider for spacecraft ground processing and other related
activities, we are required to maintain certain government security clearances and we must comply
with laws that limit foreign ownership and control. We may be subject to regulatory action and
other sanctions if we fail to comply with applicable laws and regulations relating to required
security clearances and foreign ownership and control. This could harm our reputation, our
prospects for future work, and our operating results.
We incur substantial upfront, non-reimbursable costs in preparing proposals to bid on contracts
that we may not be awarded.
Preparing a proposal to bid on a contract is generally a three to six month process. This process
is labor-intensive and results in the incurrence of substantial costs that are generally not
retrievable. Additionally, although we may be awarded a contract, work performance does not
commence for several months following completion of the bidding process. If funding problems by the
party awarding the contract or other matters further delay our commencement of work, these delays
may lower the value of the contract, or possibly render it unprofitable.
Not applicable.
Astrotech relocated its corporate headquarters to Austin, Texas in June 2009. The leased office
houses executive management, finance and accounting, and marketing and communications. We continue
to maintain leased offices in Houston, Texas which are primarily focused on supporting the
engineering efforts of Spacetech.
ASO’s headquarters, and Florida operations team, are located in a nine-building complex located on
a 62-acre space technology campus in Titusville, Florida. This campus encompasses 140,000 square
feet of facility space supporting non-hazardous and hazardous flight hardware processing, payload
storage, and customer offices.
In September 2009, we
completed construction of a 23,000 square foot payload processing facility at VAFB in
California which enhanced our capability to process five-meter class satellite payloads. Additionally, in December
2009, we completed construction of a 5,600 square foot office building used by customers for administrative and
operational support of teams processing satellites in the new five-meter payload facility. ASO presently leases the
60-acre site located on VAFB in California, where we own four buildings totaling over 50,000 square feet of space.
The present land lease expires in July 2013, with provisions to extend the lease at the request of the lessee and the
concurrence of the lessor. Upon final expiration of the land lease, all improvements on the property revert, at the
lessor’s option, to the lessor at no cost.
We
maintain a separate 58,000 square foot payload processing facility located in Cape Canaveral,
Florida. We negotiated an agreement with the Canaveral Port Authority for the lease of the land for
a forty-three year period, expiring 2040. Upon expiration of the land lease, all improvements on
the property revert at no cost to the lessor. In May 2005, we sold the facility in Cape Canaveral,
Florida for $4.8 million. We now lease back 100% of the facility through December 31, 2010, with an
option period of an additional five years.
10
Table of Contents
We believe that our current facilities and equipment are generally well maintained and in good
condition, and are adequate for our present and foreseeable needs.
The Company is not a party to any significant pending or threatened proceedings, which in
management’s opinion, would have a material adverse effect on our business, financial condition, or
results of operation.
No matters were submitted to a vote of stockholders during the fourth quarter of the year ended
June 30, 2010.
Market Information
The following table sets forth the quarterly high and low intra-day bid prices for the periods
indicated:
| Fiscal 2010 | High | Low | ||||||
|
|
||||||||
|
First Quarter
|
$ | 3.84 | $ | 0.98 | ||||
|
Second Quarter
|
$ | 3.66 | $ | 1.36 | ||||
|
Third Quarter
|
$ | 4.06 | $ | 1.88 | ||||
|
Fourth Quarter
|
$ | 3.58 | $ | 1.24 | ||||
| Fiscal 2009 | High | Low | ||||||
|
|
||||||||
|
First Quarter
|
$ | 0.60 | $ | 0.26 | ||||
|
Second Quarter
|
$ | 0.46 | $ | 0.20 | ||||
|
Third Quarter
|
$ | 0.50 | $ | 0.20 | ||||
|
Fourth Quarter
|
$ | 1.73 | $ | 0.40 | ||||
We have never paid cash dividends. It is our present policy to retain earnings to finance the
growth and development of our business; therefore, we do not anticipate paying cash dividends on
our Common Stock in the foreseeable future.
11
Table of Contents
We have 75,000,000 shares of Common Stock authorized for
issuance. As of August 25, 2010 we had
19,238,988 shares of Common Stock outstanding, including 1,540,203 shares of restricted stock with
voting rights.
Effective May 4, 2009, the Company changed its stock trading symbol to “ASTC” from “SPAB” on the
NASDAQ Capital Markets stock exchange.
Astrotech Equity Available for Issuance
| Number of securities to | Weighted average exercise | |||||||||||
| be issued upon exercise | price of outstanding | Number of securities | ||||||||||
| of outstanding options, | options, warrants, and | remaining available | ||||||||||
| warrants, and rights | rights | for future issuance | ||||||||||
| Plan Category | (a) | (b) | (c) | |||||||||
|
Equity compensation plans approved by security holders
|
806,541 | $ | 1.65 | 379,389 | ||||||||
|
Equity compensation plans not approved by security holders
|
— | — | — | |||||||||
|
|
||||||||||||
|
Total
|
806,541 | $ | 1.65 | 379,389 | ||||||||
|
|
||||||||||||
1
st
Detect Equity Available for Issuance
| Number of securities to | Weighted average exercise | |||||||||||
| be issued upon exercise | price of outstanding | Number of securities | ||||||||||
| of outstanding options, | options, warrants, and | remaining available | ||||||||||
| warrants, and rights | Rights | for future issuance | ||||||||||
| Plan Category | (a) | (b) | (c) | |||||||||
|
Equity compensation plans approved by security holders
|
1,820 | $ | 212.00 | 172,000 | ||||||||
|
Equity compensation plans not approved by security holders
|
— | — | — | |||||||||
|
|
||||||||||||
|
Total
|
1,820 | $ | 212.00 | 172,000 | ||||||||
|
|
||||||||||||
Astrogenetix Equity Available for Issuance
| Number of securities to | Weighted average exercise | |||||||||||
| be issued upon exercise | price of outstanding | Number of securities | ||||||||||
| of outstanding options, | options, warrants, and | remaining available | ||||||||||
| warrants, and rights | rights | for future issuance | ||||||||||
| Plan Category | (a) | (b) | (c) | |||||||||
|
Equity compensation plans approved by security holders
|
2,050 | $ | 167.00 | 190,400 | ||||||||
|
Equity compensation plans not approved by security holders
|
— | — | — | |||||||||
|
|
||||||||||||
|
Total
|
2,050 | $ | 167.00 | 190,400 | ||||||||
|
|
||||||||||||
12
Table of Contents
Stock Performance Graph
The following performance graph and table do not constitute soliciting material and the performance
graph and table should not be deemed filed or incorporated by reference into any other previous or
future filings by us under the Securities Act of 1933, as amended, or the Securities Exchange Act
of 1934, as amended, except to the extent that we specifically incorporate the performance graph
and table by reference therein.
The performance graph and table below compare the five-year cumulative total return of our common
stock with the comparable five-year cumulative total returns of the Standard & Poor’s Aerospace &
Defense Stock Index (“S&P Aerospace & Defense”) and the NASDAQ Composite Stock Index (“NASDAQ
Composite”). The figures assume an initial investment of $100 at the close of business on June 30,
2005 in Astrotech Corporation, S&P, and NASDAQ, and the reinvestment of all dividends.
| 6/05 | 6/06 | 6/07 | 6/08 | 6/09 | 6/10 | |||||||||||||||||||
|
Astrotech Corporation
|
100.00 | 65.92 | 36.31 | 3.19 | 6.42 | 6.93 | ||||||||||||||||||
|
NASDAQ Composite
|
100.00 | 107.08 | 130.99 | 114.02 | 90.79 | 105.54 | ||||||||||||||||||
|
S&P Aerospace & Defense
|
100.00 | 119.11 | 147.92 | 130.62 | 99.41 | 122.37 | ||||||||||||||||||
13
Table of Contents
Issuer Purchases of Equity Securities
In March 2003, our Board of Directors authorized us to repurchase up to $1.0 million of our
outstanding stock at market prices. Additionally, in September 2008, the Board of Directors
authorized the repurchase of the Company’s outstanding Common Stock or Senior Convertible Notes
payable, up to a cumulative amount of $6.0 million. During the year ended June 30, 2009, we
repurchased 300,000 shares at a cost of $0.1 million. To date, a total of 311,660 shares at a cost
of $0.2 million have been repurchased by the Company.
| (d) | ||||||||||||||||
| Maximum number | ||||||||||||||||
| (c) | (or approximate | |||||||||||||||
| Total number of | dollar value) of | |||||||||||||||
| (a) | shares (or units) | shares (or units) that | ||||||||||||||
| Total number of | (b) | purchased as part of | may yet be | |||||||||||||
| shares (or units) | Average price paid | publicly announced | purchased under the | |||||||||||||
| Period | purchased | per share (or unit) | plans or programs | plans or programs | ||||||||||||
|
04/01/10 – 04/30/10
|
— | — | — | — | ||||||||||||
|
05/01/10 – 05/31/10
|
— | — | — | — | ||||||||||||
|
06/01/10 – 06/30/10
|
— | — | — | — | ||||||||||||
|
|
||||||||||||||||
|
Total
|
— | — | — | — | ||||||||||||
|
|
||||||||||||||||
14
Table of Contents
The following table sets forth our selected consolidated financial data as of and for the years
ended June 30, 2006, 2007, 2008, 2009, and 2010. Such data has been derived from our consolidated
financial statements audited by Grant Thornton LLP for the fiscal year ended June 30, 2006, and by
PMB Helin Donovan, LLP for the fiscal years ended June 30, 2007, 2008, 2009 and 2010. The data set
forth below should be read in conjunction with “Management’s Discussion and Analysis of Financial
Condition and Results of Operations,” “Risk Factors” and our Consolidated Financial Statements and
Notes included in this annual report.
| Years Ended June 30, | ||||||||||||||||||||
| 2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
| (In thousands) | ||||||||||||||||||||
|
Statement of Operations Data:
|
||||||||||||||||||||
|
Revenue
|
$ | 27,979 | $ | 31,985 | $ | 25,544 | $ | 52,762 | $ | 50,746 | ||||||||||
|
Costs of revenue
|
12,858 | 15,723 | 19,540 | 51,029 | 46,855 | |||||||||||||||
|
|
||||||||||||||||||||
|
Gross profit
|
15,121 | 16,262 | 6,004 | 1,733 | 3,891 | |||||||||||||||
|
Selling, general and administrative expenses
|
12,170 | 9,760 | 9,361 | 13,762 | 10,672 | |||||||||||||||
|
Research and development expenses
|
2,798 | 2,330 | 1,375 | 801 | 410 | |||||||||||||||
|
|
||||||||||||||||||||
|
Income (loss) from operation
|
153 | 4,172 | (4,732 | ) | (12,830 | ) | (7,191 | ) | ||||||||||||
|
Gain on bond exchange
|
— | 665 | — | — | — | |||||||||||||||
|
Debt conversion expense
|
— | — | (30,194 | ) | — | — | ||||||||||||||
|
Interest and other expense, net
|
(459 | ) | (622 | ) | (427 | ) | (3,531 | ) | (5,174 | ) | ||||||||||
|
Income tax benefit (expense)
|
(22 | ) | 510 | (675 | ) | 69 | (32 | ) | ||||||||||||
|
|
||||||||||||||||||||
|
Net income (loss)
|
(328 | ) | 4,725 | (36,028 | ) | (16,292 | ) | (12,397 | ) | |||||||||||
|
|
||||||||||||||||||||
|
Less: net loss attributable to noncontrolling interest
|
(588 | ) | — | — | — | — | ||||||||||||||
|
|
||||||||||||||||||||
|
Net income (loss) attributable to Astrotech Corporation
|
260 | 4,725 | (36,028 | ) | (16,292 | ) | (12,397 | ) | ||||||||||||
|
|
||||||||||||||||||||
|
Net income (loss) per common share — basic
|
$ | 0.02 | $ | 0.29 | $ | (4.26 | ) | $ | (12.61 | ) | $ | (9.73 | ) | |||||||
|
|
||||||||||||||||||||
|
Shares used in computing net income (loss) per common
share — basic
|
16,567 | 16,365 | 9,254 | 1,292 | 1,274 | |||||||||||||||
|
Net income (loss) per common share — diluted
|
$ | 0.01 | $ | 0.28 | $ | (4.26 | ) | $ | (12.61 | ) | $ | (9.73 | ) | |||||||
|
|
||||||||||||||||||||
|
Shares used in computing net income (loss) per common
share — diluted
|
18,283 | 16,904 | 9,254 | 1,292 | 1,274 | |||||||||||||||
|
|
||||||||||||||||||||
|
Balance Sheet Data (End of Period):
|
||||||||||||||||||||
|
Cash and Cash Equivalents
|
$ | 8,085 | $ | 4,730 | $ | 2,640 | $ | 9,724 | $ | 6,317 | ||||||||||
|
Total assets
|
54,903 | 58,919 | 58,211 | 72,475 | 85,450 | |||||||||||||||
|
Current debt
|
8,467 | 267 | 267 | — | — | |||||||||||||||
|
Long-term debt, excluding current portion
|
— | 8,435 | 10,387 | 52,944 | 63,250 | |||||||||||||||
|
Stockholders’ equity
|
42,212 | 40,548 | 34,936 | (13,131 | ) | 2,809 | ||||||||||||||
|
Working capital (deficit) surplus
|
$ | 2,623 | $ | 8,418 | $ | 522 | $ | (6,105 | ) | $ | 2,753 | |||||||||
|
|
||||||||||||||||||||
|
Other Data:
|
||||||||||||||||||||
|
Net cash provided by operating activities
|
$ | 4,437 | $ | 4,972 | $ | (8,598 | ) | $ | 6,028 | $ | 3,984 | |||||||||
|
Net cash used in investing activities
|
(1,829 | ) | (1,427 | ) | (158 | ) | (1,077 | ) | (1,141 | ) | ||||||||||
|
Net cash used in financing activities
|
747 | (1,455 | ) | 1,672 | (1,544 | ) | (3,853 | ) | ||||||||||||
15
Table of Contents
The following discussion should be read in conjunction with, and is qualified in its entirety by
reference to, our audited consolidated financial statements and notes included elsewhere in this
report.
Overview
Astrotech was formed in 1984 to leverage the environment of space for commercial purposes. For the
last 26 years, the Company has remained a crucial player in space commerce activities. We have
supported the launch of 23 shuttle missions and more than 280 spacecraft, building space hardware
and processing facilities, and preparing and processing scientific research for microgravity.
We offer products and services in the following areas:
| • |
Facilities and support services necessary for the preparation of satellites and payloads for launch.
|
|
| • |
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 provides support for its government and commercial customers to successfully process complex
communication, earth observation and deep space satellites in preparation for their launch on a
variety of launch vehicles. Processing activities include satellite ground transportation;
pre-launch hardware integration and testing; satellite encapsulation, fueling, launch pad delivery;
and communication linked launch control. Our ASO facilities can accommodate five meter class
satellites encompassing the majority of U.S. based satellite preparation services. In addition to
satellite processing, ASO offers engineering services capabilities that encompass the entire life
cycle of a satellite. ASO accounted for 100% of our consolidated revenues for the year ended June
30, 2010. Revenue for our ASO business unit is generated primarily from various fixed-priced contracts with
launch service providers in both the commercial and government markets. The services and facilities
we provide to our customers support the final assembly, checkout, and countdown functions
associated with preparing a spacecraft for launch. The revenue and cash flows generated from our
ASO operations are related to the number of spacecraft launches, which reflects the growth in the
satellite-based communications industries and the requirement to replace aging satellites. Other
factors that have impacted, and are expected to continue to impact earnings and cash flows for this
business include:
| • |
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.
|
Spacetech
Our other business unit is an incubator intended to commercialize space-industry technologies into
commercial applications to be sold to consumers and industry. The 1
st
Detect Miniature
Chemical Detector and the Astrogenetix microgravity processing platform are initiatives developed
under our Spacetech business unit. The 1
st
Detect Miniature Chemical Detector, which is
in development, is a low power, portable chemical detection device intended
to be utilized for a variety of applications. 1
st
Detect has been awarded a
Developmental Testing and Evaluation designation from the U.S. Department of Homeland Security as a
“promising anti-terrorism technology”, and is the recipient of a Phase I award from the U.S. Army’s
Chemical and Biological Defense (“CBD”) Small Business Innovation Research (“SBIR”) Program.
Additionally, 1
st
Detect received a $1.8 million award from the Texas Emerging
Technology Fund. Astrogenetix is performing drug discovery in microgravity and NASA has designated
this work as the National Lab Pathfinder Missions. Astrogenetix has identified a vaccine candidate
for Salmonella and is currently conducting microgravity research on MRSA.
16
Table of Contents
Critical Accounting Policies
Revenue Recognition.
Revenue is derived primarily from contracts to deliver payload processing
support and facilities to the U.S. Government and to commercial customers. Revenues under these
contracts are recognized using the methods described below. Given the changing launch schedules of
our customers, and the changing requirements of the customers in construction contracts, estimating
future costs and revenues is a process requiring a high degree of judgment by our management. (See
Risk Factors—Risks Related to Our Business—Our financial
results could be adversely affected if the estimates
that we use in accounting for contracts are incorrect and need to be changed.) For our satellite
payload processing, we base our estimate on historical experience and on assumptions that are
believed to be reasonable under the circumstances, including the negotiation of equitable
adjustments to our fixed-price contracts due to launch delays. For construction contracts, costs to
complete include, when appropriate, material, labor, subcontracting costs, lease costs,
commissions, insurance, and depreciation. In the event of a change in total estimated contract cost
or profit, the cumulative effect of such change is recorded in the period that the change in
estimate occurs.
A Summary of Revenue Recognition Methods Follows:
| Services/Products Provided | Contract Type | Method of Revenue Recognition | ||
|
Satellite Payload Processing Support & Facilities
|
Firm Fixed Price — Mission Specific | Ratably, over the occupancy period of a satellite within the facility from arrival through launch | ||
|
|
||||
|
|
Firm Fixed Price — Guaranteed Number of Missions |
For multi-year contract
payments recognized ratably over the contract period |
||
|
|
||||
|
Facility Construction contracts
|
Firm Fixed Price |
Percentage-of-completion based
on costs incurred |
||
|
|
||||
|
Engineering Services
|
Cost Reimbursable
Award/Fixed Fee |
Reimbursable costs incurred plus
award/fixed fee |
||
|
|
||||
|
Commercial Products
|
Specific Purchase
Order Based |
At shipment |
Under certain contracts, we make expenditures for specific enhancements and/or additions to our
facilities where the customer agrees to pay a fixed fee to deliver the enhancement or addition. We
account for such agreements as a reduction in the cost of such investments and recognize any excess
of amounts collected above the expenditure as revenue. Revenue for ASO recognized under a building
modification contract with a government agency was accounted for under the percentage-of-completion
method based on costs incurred over the period of the agreement.
Long-Lived Asset.
In assessing the recoverability of long-lived assets, fixed assets, assets under
construction and intangible assets, we evaluate the recoverability of those assets. Recoverability
of assets to be held and used is measured by a comparison of the carrying amount of an asset to
future net cash flows expected to be generated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which the carrying amount of
the asset exceeds the fair value of the asset. Assets to be disposed of are reported at the lower
of the carrying amount or fair value less costs to sell.
Use of Estimates
The preparation of consolidated financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates and assumptions that
directly affect the reported amounts of assets and liabilities, the disclosure of contingent assets
and liabilities at the date of the consolidated financial statements and the reported amounts of
revenue and expenses during the reporting periods. Actual results could differ from these
estimates.
Deferred Revenue
Deferred revenue represents amounts collected from customers for projects, products, or services
expected to be provided at a future date. Deferred revenue is shown on the balance sheet as either
a short-term or long-term liability, depending on when the service or product is expected to be
provided.
Share Based Compensation
The Company accounts for share-based awards to employees based on the fair value of the award on
the grant date. The fair value of the stock options is estimated using expected dividend yields of
the Company’s stock, the expected volatility of the stock, the
expected length of time the options
remain outstanding and risk-free interest rates. Changes in one or more of these factors may
significantly affect the estimated fair value of the stock options. Additionally, the Company
estimates the number of instruments for which the required service is expected to be rendered. The
Company estimates forfeitures using historical forfeiture rates for previous grants of equity
instruments. The fair value of awards that are expected to vest is recorded as an expense over the
vesting period.
Noncontrolling Interest
Noncontrolling interest accounting is applied for any entities where the Company maintains less
than 100% ownership. The Company clearly identifies the noncontrolling interest in the balance
sheets and income statements. We also disclose three measures of net income: net income, net income
attributable to noncontrolling interest, and net income attributable to Astrotech Corporation. Our
operating cash flows in our consolidated statements of cash flows reflect net income, while our
basic and diluted earnings per share calculations reflect net income attributable to Astrotech
Corporation.
17
Table of Contents
State of Texas Funding
The
Company accounts for the State of Texas funding in its majority owned subsidiary 1
st
Detect as a contribution of capital and has reflected the disbursement in the equity section of the
consolidated balance sheet. While the award agreement includes both a common stock purchase right
and a note payable to the State of Texas, the economic substance of the transaction is that the
State of Texas has purchased shares of 1
st
Detect in exchange for granted award.
CONSOLIDATED RESULTS OF OPERATIONS
Results of Operations for the Years Ended June 30, 2010 and 2009
The following table sets forth the significant components in the Consolidated Statements of
Operations for the year ended June 30, 2010, compared with 2009. The financial information and the
discussion below should be read in conjunction with the Consolidated Financial Statements and
Notes.
| Year Ended June 30, | ||||||||||||
| (In thousands) | 2010 | 2009 | Variance | |||||||||
|
Revenue
|
$ | 27,979 | $ | 31,985 | $ | (4,006 | ) | |||||
|
Gross profit
|
15,121 | 16,262 | (1,141 | ) | ||||||||
|
Gross margin
|
54 | % | 51 | % | 3 | % | ||||||
|
Selling, general and administrative
|
12,170 | 9,760 | 2,410 | |||||||||
|
Research and development
|
2,798 | 2,330 | 468 | |||||||||
|
|
||||||||||||
|
Total operating expenses
|
14,968 | 12,090 | 2,878 | |||||||||
|
Income from operations
|
153 | 4,172 | (4,019 | ) | ||||||||
|
Gain on bond exchange
|
— | 665 | (665 | ) | ||||||||
|
Interest and other expense, net
|
(459 | ) | (622 | ) | 163 | |||||||
|
|
||||||||||||
|
Income (loss) before income taxes
|
(306 | ) | 4,215 | (4,521 | ) | |||||||
|
Income tax (expense) benefit
|
(22 | ) | 510 | (532 | ) | |||||||
|
|
||||||||||||
|
Net income (loss)
|
(328 | ) | 4,725 | (5,053 | ) | |||||||
|
Less: net loss attributable to noncontrolling interest
|
(588 | ) | — | (588 | ) | |||||||
|
|
||||||||||||
|
Net income attributable to Astrotech Corporation
|
$ | 260 | $ | 4,725 | $ | (4,465 | ) | |||||
|
|
||||||||||||
The following table sets forth the percentage of total revenue of certain items in the Consolidated
Statements of Operations for the year ended June 30, 2010, compared with 2009:
| Year Ended June 30, | ||||||||
| 2010 | 2009 | |||||||
|
Revenue
|
100 | % | 100 | % | ||||
|
Cost of revenue
|
46 | % | 49 | % | ||||
|
|
||||||||
|
Gross profit
|
54 | % | 51 | % | ||||
|
|
||||||||
|
Operating expenses
|
||||||||
|
Selling, general and administrative
|
44 | % | 31 | % | ||||
|
Research and development
|
10 | % | 7 | % | ||||
|
Total operating expenses
|
54 | % | 38 | % | ||||
|
|
||||||||
|
Income (loss) from operations
|
1 | % | 13 | % | ||||
|
Gain on bond exchange
|
— | % | 2 | % | ||||
|
Interest and other expense, net
|
(2 | )% | (2 | )% | ||||
|
|
||||||||
|
Income (loss) before income taxes
|
(1 | )% | 13 | % | ||||
|
Income tax (expense) benefit
|
* | 2 | % | |||||
|
|
||||||||
|
Net income (loss)
|
(1 | )% | 15 | % | ||||
|
Less: net loss attributable to noncontrolling interest
|
(2 | )% | — | % | ||||
|
Net income attributable to Astrotech Corporation
|
1 | % | 15 | % | ||||
| * |
Represents less than 1% of period revenue
|
18
Table of Contents
Revenue.
Total revenue decreased to $28.0 million for the year ended June 30, 2010, as compared to
$32.0 million at June 30, 2009, due to the completion of construction on the new 5-meter satellite facility and associated building improvement projects at VAFB during
the first quarter of 2010, offset partially by processing
RSC-Energia’s MRM1 in our Cape Canaveral facility.
A breakdown of revenue for the years ended June 30, 2010 and 2009 is as follows:
| Year Ended June 30, | ||||||||
| (In thousands) | 2010 | 2009 | ||||||
|
ASO
|
$ | 27,979 | $ | 31,856 | ||||
|
Spacetech
|
— | 129 | ||||||
|
|
||||||||
|
|
$ | 27,979 | $ | 31,985 | ||||
|
|
||||||||
Gross Profit.
Gross profit decreased to $15.1 million for the year ended June 30, 2010, as compared
to $16.3 million for the year ended June 30, 2009. The decrease in gross profit was attributable to
the decline in revenue, partially offset by a customer contract which was processed at a higher
margin.
Selling, General and Administrative Expense.
Selling, general and administrative expense increased
to $12.2 million for the year ended June 30, 2010, as compared to $9.8 million for the year ended
June 30, 2009. The increase was primarily attributable to additional employee incentive
compensation expense, an increase in business development personnel and an increase in outside
consulting fees. As a percentage of revenue, selling, general and administrative expenses increased
to 44% for the year ended June 30, 2010, on lower revenue, as compared to 31% for the year ended
June 30, 2009.
Research and Development Expense.
Research and development expense increased to $2.8 million for
the year ended June 30, 2010, as compared to $2.3 million for the year ended June 30, 2009. As a
percentage of revenue, research and development increased to 10% for the year ended June 30, 2010,
as compared with 7% for the year ended June 30, 2009. The increase in expense was the result of our
investments in the development of the 1
st
Detect Miniature Chemical Detector and the
Astrogenetix Microgravity Processing Platform.
Gain on bond exchange.
In October 2008, the Company repurchased and retired $1.8 million principal
amount of its outstanding 5.5% Senior Convertible notes, acquired at an established market price on
the day of trade. The Company recognized a gain of $0.7 million on the transaction in the year
ended June 30, 2009.
Interest and Other expense, net.
Interest and other expense, net, decreased to $0.5 million for the
year ended June 30, 2010, as compared to $0.6 million for the year ended June 30, 2009. Interest
expense relates to interest on the Senior Convertible Notes and the term loan, offset by interest
income primarily from our money market accounts due to the larger cash balance available for
investment. Also included in other expense for the years ended June 30, 2010 and 2009 is the
write-off of $0.2 million and $0.1 million, respectively, of aerospace metals.
19
Table of Contents
SEGMENT RESULTS OF OPERATIONS
Selected financial data for the years ended June 30, 2010, and 2009 of our ASO business unit is as
follows:
| Year Ended June 30, | ||||||||||||
| (In thousands) | 2010 | 2009 | Variance | |||||||||
|
Revenue
|
$ | 27,979 | $ | 31,856 | $ | (3,877 | ) | |||||
|
Gross profit
|
15,125 | 16,338 | (1,213 | ) | ||||||||
|
Gross margin percentage
|
54 | % | 51 | % | 3 | % | ||||||
|
Selling, general and administrative
|
8,563 | 8,739 | (176 | ) | ||||||||
|
|
||||||||||||
|
Operating expenses
|
8,563 | 8,739 | (176 | ) | ||||||||
|
|
||||||||||||
|
Interest and other expense, net
|
(230 | ) | (254 | ) | 24 | |||||||
|
Income tax expense
|
— | — | — | |||||||||
|
|
||||||||||||
|
Net income
|
6,332 | 7,345 | (1,013 | ) | ||||||||
|
|
||||||||||||
|
Less: net loss attributable to noncontrolling interest
|
— | — | — | |||||||||
|
|
||||||||||||
|
Net income attributable to ASO
|
$ | 6,332 | $ | 7,345 | $ | (1,013 | ) | |||||
|
|
||||||||||||
Revenue.
Total revenue decreased to $28.0 million for the year ended June 30, 2010, as compared to
$31.9 million at June 30, 2009, due to the completion of construction on the new 5-meter satellite facility and associated building improvement projects at VAFB during
the first quarter of 2010, offset partially by processing
RSC-Energia’s MRM1 in our Cape Canaveral facility.
Gross Profit.
Gross profit decreased to $15.1 million for the year ended June 30, 2010, as compared
to $16.3 million for the year ended June 30, 2009. The decrease in gross profit was attributable to
the decline in revenue, partially offset by a customer contract which was processed at a higher
margin.
Selling, General and Administrative Expense.
Selling, general and administrative expense decreased
to $8.6 million for the year ended June 30, 2010, as compared to $8.7 million for the year ended
June 30, 2009. This decrease is primarily a result of lower
administrative fees.
Interest and other expense, net.
Interest and other expense, net, decreased to $0.2 million in the
year ended June 30, 2010, as compared to $0.3 million in the year ended June 30, 2009. This
relatively consistent expense relates to interest on the term loan, offset by interest earned
primarily from our money market accounts. Also included in other expense for the year ended June
30, 2010 and 2009 is the write-off of $0.2 million and $0.1 million, respectively, of aerospace
metals.
Selected financial data for the years ended June 30, 2010, and 2009 of our Spacetech business unit
is as follows:
| Year Ended June 30, | ||||||||||||
| (In thousands) | 2010 | 2009 | Variance | |||||||||
|
Revenue
|
$ | — | $ | 129 | $ | (129 | ) | |||||
|
Gross loss
|
(4 | ) | (76 | ) | $ | 72 | ||||||
|
Gross margin percentage
|
— | % | (59 | )% | 59 | % | ||||||
|
Selling, general and administrative
|
3,607 | 1,021 | 2,586 | |||||||||
|
Research and development
|
2,798 | 2,330 | 468 | |||||||||
|
|
||||||||||||
|
Operating expenses
|
6,405 | 3,351 | 3,054 | |||||||||
|
Gain on notes repurchased
|
— | 665 | (665 | ) | ||||||||
|
Interest and other expense, net
|
(229 | ) | (368 | ) | 139 | |||||||
|
Income tax expense
|
(22 | ) | 510 | (532 | ) | |||||||
|
|
||||||||||||
|
Net loss
|
(6,660 | ) | (2,620 | ) | (4,040 | ) | ||||||
|
Less: net loss attributable to noncontrolling interest
|
(588 | ) | — | (588 | ) | |||||||
|
|
||||||||||||
|
Net loss attributable to Spacetech
|
$ | (6,072 | ) | $ | (2,620 | ) | $ | (3,452 | ) | |||
|
|
||||||||||||
20
Table of Contents
Revenue.
Total revenue decreased $0.1 million for the year ended June 30, 2010, from the year
ended June 30, 2009. The revenue in fiscal year 2009 was derived from AirWard, which designed and
manufactured shipping containers to transport oxygen bottles and oxygen generators for commercial
aircraft. In February 2010, further investment in AirWard was suspended as the initiative has not
yielded the anticipated return for shareholders.
Gross loss.
The gross loss decreased for AirWard in the year ended June 30, 2010, as the initiative
has not yielded the anticipated return for shareholders.
Selling, General and Administrative Expense.
Selling, general and administrative expense increased
to $3.6 million for the year ended June 30, 2010, as compared to $1.0 million for the year ended
June 30, 2009. The increase was primarily attributable to increased employee incentive compensation
expense and an increase in outside consulting fees.
Research
and Development Expense.
Research and development expense increased to $2.8 million for the year ended
June 30, 2010, as compared to $2.3 million for the year ended June 30, 2009. The increase in
expense was the result of our investments in the development of the 1
st
Detect Miniature Chemical
Detector and the Astrogenetix Microgravity Processing Platform.
Interest and other expense, net.
Interest and other expense, net, decreased to $0.2 million in the
year ended June 30, 2010, as compared to $0.4 million for the year ended June 30, 2009. Interest
expense relates to interest on the Senior Convertible Notes, offset by interest earned from our
money market accounts.
FINANCIAL CONDITION, CAPITAL RESOURCES, AND LIQUIDITY
Total assets for the year ended June 30, 2010, were $54.9 million compared to total assets of
$58.9 million as of the end of fiscal year 2009. The following table sets forth the significant
components of the balance sheet as of June 30, 2010, compared with 2009 (in thousands):
| Year Ended June 30, | ||||||||||||
| 2010 | 2009 | Variance | ||||||||||
|
Assets:
|
||||||||||||
|
Current assets
|
$ | 14,964 | $ | 17,600 | $ | (2,636 | ) | |||||
|
Property and equipment, net
|
39,920 | 40,226 | (306 | ) | ||||||||
|
Other assets, net
|
19 | 1,093 | (1,074 | ) | ||||||||
|
|
||||||||||||
|
Total
|
$ | 54,903 | $ | 58,919 | $ | (4,016 | ) | |||||
|
|
||||||||||||
|
Liabilities and stockholders’ equity:
|
||||||||||||
|
Current debt
|
$ | 8,467 | $ | 267 | $ | 8,200 | ||||||
|
Other current liabilities
|
3,874 | 8,915 | (5,041 | ) | ||||||||
|
Long-term debt
|
— | 8,435 | (8,435 | ) | ||||||||
|
Other long-term liabilities
|
350 | 754 | (404 | ) | ||||||||
|
Stockholders’ equity
|
42,212 | 40,548 | 1,664 | |||||||||
|
|
||||||||||||
|
Total
|
$ | 54,903 | $ | 58,919 | $ | (4,016 | ) | |||||
|
|
||||||||||||
Current assets.
Current assets
decreased $2.6 million for the year ended June 30, 2010, as compared
to June 30, 2009. The overall decrease relates to collection of
accounts receivable, including the
collection of final invoicing on the facility construction at VAFB which were outstanding at June 30,
2009, and the timing of a note receivable which is now classified as due within one year.
21
Table of Contents
Property and equipment, net.
Depreciation and amortization expense of $2.1 million exceeded capital
expenditures of $1.8 million.
Other assets, net.
Other assets, net, decreased $1.1 million for the year ended June 30, 2010, as
compared to June 30, 2009. A note receivable of
$0.7 million is due now within the next fiscal year
and classified as a current asset. The Company also had a partial write off of $0.2 million and a
recorded sale of $0.1 million on remaining aerospace metals.
Current
and long-term debt.
The $5.1 million of Senior Convertible Notes and the $3.4 million term
loan are due within the next fiscal year, and therefore, the classification has changed from
long-term debt to current debt. The Company made principal payments
on the term loan of $0.3
million for the year ended June 30, 2010. Interest is paid bi-annually on the Senior Convertible
Notes.
Other current liabilities.
Other current liabilities decreased by $5.0 million for the year ended
June 30, 2010, as compared to June 30, 2009. The decrease in accounts payable of $2.1 million is
due to payments made to vendors related to the facility construction at VAFB, which were
outstanding at June 30, 2009, as well as timing of other payments. The decrease in short term deferred
revenue of $2.7 million is a result of a timing difference between cash collections on payload
processing customer contracts and amounts earned as revenue.
Other
long-term liabilities.
Other long-term liabilities decreased $0.4 million for the year ended
June 30, 2010, as compared to June 30, 2009.
This was primarily due to a decrease in non-current deferred revenue of $0.3 million.
Liquidity and Capital Resources
As of June 30, 2010, we had cash and cash equivalents of $8.1 million and our working capital was
approximately $2.6 million, including $0.5 million of cash in 1
st
Detect available only
to fund development of the Miniature Chemical Detector (see Note 13). As of June 30, 2009 we had
cash and cash equivalents of $4.7 million and our working capital was approximately $8.4 million.
The following is a summary of the change in our cash and cash equivalents:
| June 30, | ||||||||
| 2010 | 2009 | |||||||
|
Net cash provided by operating activities
|
$ | 4,437 | $ | 4,972 | ||||
|
Net cash used in investing activities
|
(1,829 | ) | (1,427 | ) | ||||
|
Net cash used in financing activities
|
747 | (1,455 | ) | |||||
|
|
||||||||
|
Net increase in cash and cash equivalents
|
$ | 3,355 | $ | 2,090 | ||||
|
|
||||||||
Operating Activities
Cash provided by operations for the year ended June 30, 2010, was $4.4 million as compared with
$5.0 million for the year ended June 30, 2009. Significant items affecting operating cash flows at
June 30, 2010 were our net loss of $0.3 million and depreciation and amortization of $2.1 million.
At June 30, 2009, operating cash flow included net income of $4.7 million and depreciation and
amortization of $2.2 million.
Changes in assets and liabilities affecting our operating cash flows for fiscal year 2010 are as
follows:
Assets.
The decrease in accounts receivable of $6.6 million is primarily attributable to the timing
of payments received by the Company, including the collection of
amounts due from the U.S. Government on the facility
construction at VAFB which were outstanding as of June 30, 2009. The increase in cash and cash
equivalents of $3.4 million is primarily due to the collection of amounts in our accounts
receivable.
Liabilities.
The decrease in accounts payable of $2.1 million is due to
payments made to vendors related to the facility construction at VAFB, which were outstanding at June 30, 2009, as
well as timing of other payments. The decrease in short term deferred revenue of $2.7 million is a
result of a timing difference between cash collections on payload processing customer contracts and
amounts earned as revenue.
22
Table of Contents
Investing Activities
Cash used in investing activities for the year ended June 30, 2010, was $1.8 million as compared
with $1.4 million for the year ended June 30, 2009. In fiscal year 2010, capital expenditures for
payload processing facilities related to ASO were $1.8 million, which included construction of an administrative customer support building at VAFB.
Financing Activities
Cash provided by financing activities for the year ended June 30, 2010, was $0.7 million as
compared with cash used in financing activities of $1.5 million for the year ended June 30, 2009.
In fiscal year 2010, the Company received $0.1 million in proceeds from issuance of
common stock and 1
st
Detect received $0.9 million from the Texas Emerging
Technology Fund (See Note 13). This was offset by the $0.3 million in principal
payments the Company made on the term loan.
In fiscal year 2009, the Company purchased $1.8 million of the principal amount of its outstanding
Senior Convertible Notes offset by a gain of $0.7 million.
Debt
Facilities.
In February 2008, we entered into a financing facility providing a $4.0 million
term loan terminating February 2011 and a $2.0 million revolving credit facility terminating in
February 2009. The term loan requires monthly payments of principal, plus interest at the rate of
prime plus 1.75% and the revolving credit facility incurs interest at the rate of prime plus 1.75%.
Effective February 2010, we renewed the $2.0 million revolving credit facility for an additional
one-year period expiring February 2011. The renewal changed the interest rate to the bank’s prime
rate plus 0.75%. The bank financing facilities are secured by the assets of our ASO Florida
facilities and other bank covenants. The balance of the $4.0 million term loan as of June 30, 2010
was $3.4 million. As of June 30, 2010, there was no balance outstanding on the $2.0 million
revolving credit facility.
As of June 30, 20 Astrotech had $5.1 million of Senior Convertible Notes outstanding which mature
on October 15, 2010, and pay interest on April 15 and October 15 annually. The $5.1 million of
Senior Convertible Notes and the $3.4 million term loan are due within the next fiscal year, and
therefore, the classification has changed from long-term debt to current debt.
Contractual Obligations
Leases
The Company is obligated under non-cancelable operating leases for equipment, office space,
the land for a payload processing facility and certain flight assets. Future minimum
payments under these non-cancelable operating leases are as follows (in thousands):
| Payments due by period | ||||||||||||||||||||
| Less than | More than 5 | |||||||||||||||||||
| Contractual Obligations | Total | 1 year | 1-3 years | 3-5 years | years | |||||||||||||||
|
Long-Term Debt Obligations
|
— | — | — | — | — | |||||||||||||||
|
Capital Lease Obligations
|
— | — | — | — | — | |||||||||||||||
|
Operating Lease Obligations
|
$ | 885 | $ | 616 | $ | 269 | — | — | ||||||||||||
|
Purchase Obligations
|
— | — | — | — | — | |||||||||||||||
|
Other
Long-Term Liabilities Reflected on
the Registrant’s Balance
Sheet under GAAP
|
— | — | — | — | — | |||||||||||||||
|
|
||||||||||||||||||||
|
Total
|
$ | 885 | $ | 616 | $ | 269 | — | — | ||||||||||||
|
|
||||||||||||||||||||
Rent expense for the years ended June 30, 2010, and 2009 was approximately $0.9 million and
$0.9 million, respectively. For fiscal year 2010, the Company received sublease payments of
$0.3 million.
23
Table of Contents
Construction Contract Contingency
In August 2007, we entered into a $14.0 million modification to our existing VAFB construction
contract. The modification required us to complete the construction on the redesigned facility by
September 30, 2009. The modification contained penalties of up to $3.0 million if we did not meet
the contracted completion date. The construction was complete in September 2009 and no penalties
were incurred (See Note 12).
State of Texas Funding
In March 2010, the Texas Emerging Technology Fund awarded 1
st
Detect $1.8 million for the
development and marketing of the Miniature Chemical Detector, a portable mass spectrometer designed
to serve the security, healthcare and industrial markets (See Note
13). As of June 30, 2010, 1
st
Detect has received the first of two $0.9 million disbursements. The disbursed amount of $0.9
million represents a contingency through March 2020, the date of cancellation. If an event of
default should occur, the principal and accrued interest would be reclassified from equity to notes
payable in the consolidated financial statements as amounts due to the State of Texas. Management
considers the likelihood of an event of default to be remote.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of June 30, 2010.
Our primary exposure to market risk relates to interest rates. We do not currently use any interest
rate swaps or derivative financial instruments to manage our exposure to fluctuations in interest
rates. A one percent change in variable interest rates will not have a material impact on our
financial condition.
24
Table of Contents
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
Astrotech Corporation and Subsidiaries:
Astrotech Corporation and Subsidiaries:
We have audited the accompanying consolidated balance sheets of Astrotech Corporation and its
subsidiaries (the “Company”) as of June 30, 2010 and 2009, and the related consolidated statements
of operations, stockholders’ equity and cash flows for the years then ended. These consolidated
financial statements are the responsibility of the Company’s management. Our responsibility is to
express an opinion on these consolidated financial statements based on our audit.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the consolidated financial statements are free of material
misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audits included consideration of internal control
over financial reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
Company’s internal control over financial reporting. Accordingly, we express no such opinion. An
audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated financial statements, assessing the accounting principles used, and significant
estimates made by management, as well as evaluating the overall consolidated financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all
material respects, the consolidated financial position of the Company as of June 30, 2010 and
2009, and the results of their operations and their cash flows for the years then ended in
conformity with accounting principles generally accepted in the United States of America.
/s/ PMB HELIN DONOVAN LLP
Austin, Texas
August 30, 2010
Austin, Texas
August 30, 2010
25
Table of Contents
ASTROTECH CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands, except share data)
| June 30, | ||||||||
| 2010 | 2009 | |||||||
|
Assets
|
||||||||
|
Current assets
|
||||||||
|
Cash and cash equivalents
|
$ | 8,085 | $ | 4,730 | ||||
|
Accounts receivable, net
|
5,676 | 12,279 | ||||||
|
Prepaid expenses and other current assets
|
528 | 591 | ||||||
|
Short term note receivable
|
675 | — | ||||||
|
|
||||||||
|
Total current assets
|
14,964 | 17,600 | ||||||
|
|
||||||||
|
Property and equipment, net
|
39,920 | 40,226 | ||||||
|
Long term note receivable
|
— | 691 | ||||||
|
Other assets, net
|
19 | 402 | ||||||
|
|
||||||||
|
Total assets
|
$ | 54,903 | $ | 58,919 | ||||
|
|
||||||||
|
|
||||||||
|
Liabilities and Stockholders’ Equity
|
||||||||
|
Current liabilities
|
||||||||
|
Accounts payable
|
859 | 2,965 | ||||||
|
Accrued liabilities and other
|
2,083 | 2,356 | ||||||
|
Deferred revenue
|
854 | 3,594 | ||||||
|
Senior convertible subordinated notes payable — 5.5%
|
5,111 | — | ||||||
|
Term note payable
|
3,356 | 267 | ||||||
|
Other
|
78 | — | ||||||
|
|
||||||||
|
Total current liabilities
|
12,341 | 9,182 | ||||||
|
|
||||||||
|
Deferred revenue
|
350 | 649 | ||||||
|
Other liabilities
|
— | 105 | ||||||
|
Senior convertible subordinated notes payable — 5.5%
|
— | 5,111 | ||||||
|
Term note payable, net of current portion
|
— | 3,324 | ||||||
|
|
||||||||
|
Total liabilities
|
12,691 | 18,371 | ||||||
|
|
||||||||
|
|
||||||||
|
Commitments and contingencies (Note 12)
|
— | — | ||||||
|
|
||||||||
|
Stockholders’ equity
|
||||||||
|
Preferred stock, no par value, convertible, 2,500,000 authorized shares, 0 issued and outstanding shares, at June 30, 2010 and 2009
|
— | — | ||||||
|
Common
stock, no par value, 75,000,000 and 75,000,000 shares authorized at June 30, 2010 and 2009 respectively, 17,081,543 and
16,754,378 shares issued at June 30, 2010 and 2009, respectively
|
183,515 | 183,341 | ||||||
|
Treasury stock, 311,660 shares at cost
|
(237 | ) | (237 | ) | ||||
|
Additional paid-in capital
|
639 | 1,663 | ||||||
|
Retained deficit
|
(143,959 | ) | (144,219 | ) | ||||
|
Noncontrolling interest
|
2,254 | — | ||||||
|
|
||||||||
|
Total stockholders’ equity
|
42,212 | 40,548 | ||||||
|
|
||||||||
|
Total liabilities and stockholders’ equity
|
$ | 54,903 | $ | 58,919 | ||||
|
|
||||||||
See accompanying notes to consolidated financial statements.
26
Table of Contents
ASTROTECH CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
(In thousands, except per
share data)
| Year Ended June 30, | ||||||||
| 2010 | 2009 | |||||||
|
|
||||||||
|
Revenue
|
$ | 27,979 | $ | 31,985 | ||||
|
Costs of revenue
|
12,858 | 15,723 | ||||||
|
|
||||||||
|
Gross profit
|
15,121 | 16,262 | ||||||
|
|
||||||||
|
Operating expenses
|
||||||||
|
Selling, general and administrative
|
12,170 | 9,760 | ||||||
|
Research and development
|
2,798 | 2,330 | ||||||
|
|
||||||||
|
Total operating expenses
|
14,968 | 12,090 | ||||||
|
|
||||||||
|
Income from operations
|
153 | 4,172 | ||||||
|
|
||||||||
|
Gain on bond exchange
|
— | 665 | ||||||
|
Interest and other expense, net
|
(459 | ) | (622 | ) | ||||
|
|
||||||||
|
Income (loss) before income taxes
|
(306 | ) | 4,215 | |||||
|
Income tax benefit (expense)
|
(22 | ) | 510 | |||||
|
|
||||||||
|
Net income (loss)
|
(328 | ) | 4,725 | |||||
|
Less: Net loss attributable to noncontrolling interest
|
(588 | ) | — | |||||
|
|
||||||||
|
Net income attributable to Astrotech Corporation
|
$ | 260 | $ | 4,725 | ||||
|
|
||||||||
|
|
||||||||
|
Net income per share, basic
|
$ | 0.02 | $ | 0.29 | ||||
|
Weighted average common shares outstanding, basic
|
16,567 | 16,365 | ||||||
|
|
||||||||
|
Net income per share, diluted
|
$ | 0.01 | $ | 0.28 | ||||
|
Weighted average common shares outstanding, diluted
|
18,283 | 16,904 | ||||||
See accompanying notes to consolidated financial statements.
27
Table of Contents
ASTROTECH CORPORATION AND SUBSIDIARIES
Consolidated Statement of Changes in Stockholders’ Equity
(In thousands)
| Common Stock | Treasury | Additional | Non- | Total | ||||||||||||||||||||||||
| Number of | Stock | Paid- In | Accumulated | Controlling | Stockholders’ | |||||||||||||||||||||||
| Shares | Amount | Amount | Capital | Deficit | Interest | Equity | ||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Balance at June 30, 2008
|
14,954 | $ | 183,306 | $ | (117 | ) | $ | 691 | $ | (148,944 | ) | $ | — | $ | 34,936 | |||||||||||||
|
Stock based compensation
|
— | — | — | 972 | — | — | 972 | |||||||||||||||||||||
|
Treasury stock purchase
|
(312 | ) | — | (120 | ) | — | — | — | (120 | ) | ||||||||||||||||||
|
Exercise of stock options
|
38 | 35 | — | — | — | — | 35 | |||||||||||||||||||||
|
Restricted
stock issuance
|
1,763 | |||||||||||||||||||||||||||
|
Net income (loss)
|
— | — | — | 4,725 | — | 4,725 | ||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Balance at June 30, 2009
|
16,443 | $ | 183,341 | $ | (237 | ) | $ | 1,663 | $ | (144,219 | ) | $ | — | $ | 40,548 | |||||||||||||
|
Stock based compensation
|
— | — | — | 862 | — | 116 | 978 | |||||||||||||||||||||
|
Exercise of stock options
|
283 | 174 | — | (60 | ) | — | — | 114 | ||||||||||||||||||||
|
Restricted
stock issuance
|
44 | — | — | — | — | — | — | |||||||||||||||||||||
|
Issuance of restricted stock and warrants in subsidiaries
|
— | — | — | (1,826 | ) | 1,826 | — | |||||||||||||||||||||
|
State of Texas Funding
|
900 | 900 | ||||||||||||||||||||||||||
|
Net income (loss)
|
— | — | — | — | 260 | (588 | ) | (328 | ) | |||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Balance at June 30, 2010
|
16,770 | $ | 183,515 | $ | (237 | ) | $ | 639 | $ | (143,959 | ) | $ | 2,254 | $ | 42,212 | |||||||||||||
|
|
||||||||||||||||||||||||||||
See the
accompanying notes to consolidated financial statements.
28
Table of Contents
ASTROTECH CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands)
| Year Ended June 30, | ||||||||
| 2010 | 2009 | |||||||
|
Cash flows from operating activities
|
||||||||
|
Net income (loss)
|
$ | (328 | ) | $ | 4,725 | |||
|
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
|
||||||||
|
Stock-based compensation
|
978 | 338 | ||||||
|
Depreciation and amortization
|
2,135 | 2,209 | ||||||
|
Gain on note repurchase
|
— | (665 | ) | |||||
|
Other
|
— | 171 | ||||||
|
Changes in assets and liabilities:
|
||||||||
|
Restricted cash
|
— | 8,386 | ||||||
|
Accounts receivable
|
6,603 | (8,407 | ) | |||||
|
Deferred revenue
|
(3,039 | ) | 2,009 | |||||
|
Accounts payable
|
(2,106 | ) | 365 | |||||
|
Advances for construction contract
|
— | (4,863 | ) | |||||
|
Other assets and liabilities
|
194 | 704 | ||||||
|
|
||||||||
|
Net cash provided by operating activities
|
4,437 | 4,972 | ||||||
|
|
||||||||
|
Cash flows from investing activities
|
||||||||
|
Purchases of property, equipment and leasehold improvements
|
(1,829 | ) | (1,427 | ) | ||||
|
|
||||||||
|
Net cash used in investing activities
|
(1,829 | ) | (1,427 | ) | ||||
|
|
||||||||
|
Cash flows from financing activities
|
||||||||
|
State of Texas Funding
|
900 | — | ||||||
|
Proceeds from issuance of common stock
|
114 | 17 | ||||||
|
Senior convertible note repurchase
|
— | (1,085 | ) | |||||
|
Term loan payment
|
(267 | ) | (267 | ) | ||||
|
Purchase of treasury stock
|
— | (120 | ) | |||||
|
|
||||||||
|
Net cash provided by (used in) financing activities
|
747 | (1,455 | ) | |||||
|
|
||||||||
|
Net change in cash and cash equivalents
|
3,355 | 2,090 | ||||||
|
|
||||||||
|
Cash and cash equivalents at beginning of period
|
4,730 | 2,640 | ||||||
|
Cash and cash equivalents at end of period
|
$ | 8,085 | $ | 4,730 | ||||
|
|
||||||||
|
|
||||||||
|
Supplemental disclosures of cash flow information
|
||||||||
|
Cash paid for interest
|
$ | 469 | $ | 569 | ||||
|
Cash paid for income taxes
|
$ | — | $ | — | ||||
See accompanying notes to consolidated financial statements.
29
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Description of the Company and Operating Environment
Astrotech Corporation (Nasdaq: ASTC) (“Astrotech,” “the Company,” “we,” “us” or “our”) is a
commercial aerospace company that provides spacecraft payload processing and government services,
designs and manufactures space hardware, and develops space technologies for use on Earth.
Astrotech has experience supporting both manned and unmanned missions to space with product and
service support including space hardware design and manufacturing, research and logistics
expertise, engineering and support services, and payload processing and integration. Through new
business initiatives such as 1
st
Detect and Astrogenetix, Astrotech is paving the way in
the commercialization of space by translating space-based technology into terrestrial applications.
Our Business Units
Astrotech Space Operations
(“ASO”) — ASO is the leading commercial supplier of satellite launch
processing services in the United States. ASO provides processing support for government and
commercial customers for their complex communication, earth observation and deep space satellites.
ASO’s spacecraft processing facilities are among the elite in
the industry, with more than 150,000
square feet of clean room space that can support the largest, five-meter class satellites. ASO has provided
launch processing support for government and commercial customers for nearly a quarter century,
successfully processing more than 280 spacecraft.
Spacetech
— Our other business unit is an incubator intended to develop space-industry technologies
into commercial applications to be sold to consumers and industry. Spacetech has developed three
business initiatives to date: 1
st
Detect Corporation (“1
st
Detect”), Astrogenetix, Inc. (“Astrogenetix”) and AirWard Corporation (“Airward”). 1
st
Detect’s business began under a Space Act Agreement with the National Aeronautics and Space
Administration (“NASA”) for a chemical detection unit to be used on the International Space
Station. 1
st
Detect engineers have developed a Miniature Chemical Detector, a device
based on mass spectrometry, that we believe will fill a niche by being highly accurate,
lightweight, battery-powered, durable and inexpensive. Astrogenetix is a biotechnology company
created to use the unique environment of space to develop novel therapeutic products. A natural
extension of the many years of experience preparing, launching, and operating over 1,500 science
payloads in space, Astrogenetix is in the process of developing products from microgravity
discoveries. AirWard designed and manufactured shipping containers to transport oxygen bottles and
oxygen generators for commercial aircraft. Further investment in Airward was suspended in February,
2010, as the initiative has not yielded the anticipated return for shareholders.
The
Company’s significant legal entities include Astrotech
Space Operations, Inc., 1
st
Detect Corporation and
Astrogenetix, Inc. Additional discussion on Astrotech’s business can be found in Items 1-7 and
Exhibit 21 of this Form 10-K.
30
Table of Contents
Liquidity
As of June 30, 2010, we had cash and cash equivalents of $8.1 million and our working capital was
approximately $2.6 million, including $0.5 million of cash in 1
st
Detect available only
to fund development of the Miniature Chemical Detector (see Note 13). As of June 30, 2009, we had
cash and cash equivalents of $4.7 million and our working capital was approximately $8.4 million.
In February 2008 (see Note 5), we consummated a financing facility with a commercial bank. This
facility provides for a three year $4.0 million term loan, payable in monthly installments of
principal and interest and a $2.0 million revolving credit facility. The term loan is secured by
the assets of ASO and the revolving credit facility is secured by ASO’s accounts receivable. As of
June 30, 2010, we have no outstanding balance under the revolving credit facility.
At June 30, 2010, Astrotech had $5.1 million of Senior Convertible Notes outstanding which mature
on October 15, 2010, and pay interest on April 15 and October 15 annually (see Note 5). The $5.1
million of
Senior Convertible Notes and the $3.4 million term loan are due within the next fiscal year and
therefore the classification has changed from long-term debt to current debt. The Company made
principal payments on the term loan of $0.3 million for the year ended June 30, 2010. Interest is
paid bi-annually on the Senior Convertible Notes.
The Company’s debt repayments are due as follows (in thousands):
| Balance | Fiscal Year | Fiscal Year | Fiscal Year | Fiscal Year | Fiscal Year | |||||||||||||||||||
| 6/30/2010 | 2011 | 2012 | 2013 | 2014 | 2015 | |||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Term Note
|
$ | 3,356 | $ | 3,356 | $ | — | $ | — | $ | — | $ | — | ||||||||||||
|
|
||||||||||||||||||||||||
|
Senior Convertible
Notes Payable — 5.5%
|
5,111 | 5,111 | — | — | — | — | ||||||||||||||||||
|
|
||||||||||||||||||||||||
|
|
||||||||||||||||||||||||
|
|
$ | 8,467 | $ | 8,467 | $ | — | $ | — | $ | — | $ | — | ||||||||||||
|
|
||||||||||||||||||||||||
We believe we have sufficient liquidity and backlog to fund ongoing operations for at least
the next fiscal year. We expect to utilize existing cash and proceeds from operations to grow our
core business offering in ASO and to support strategies for new business initiatives.
(2) Summary of Significant Accounting Policies
Principles of Consolidation and Basis of Presentation
The consolidated financial statements include the accounts of Astrotech Corporation and its
majority-owned subsidiaries that are required to be consolidated. All significant intercompany
transactions have been eliminated in consolidation.
Use of Estimates
The preparation of consolidated financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates and assumptions that
directly affect the reported amounts of assets and liabilities, the disclosure of contingent assets
and liabilities at the date of the consolidated financial statements and the reported amounts of
revenue and expenses during the reporting periods. Actual results could differ from these
estimates.
Reclassifications
Certain amounts reported in previous periods have been reclassified to conform to the current year
presentation.
Credit Risk
The Company maintains funds in bank accounts that, at times, may exceed the limit insured by the
Federal Deposit Insurance Corporation, or “FDIC.” In October 2008, the FDIC increased its insurance
to $250,000 per depositor, and to an unlimited amount for non-interest bearing accounts. 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.
31
Table of Contents
Revenue Recognition
Revenue is derived primarily from contracts to deliver payload processing support and facilities to
the U.S. Government and to commercial customers. Revenues under these contracts are recognized
using the methods described below. Given the changing launch schedules of our customers, and the
changing requirements of the customers in construction contracts, estimating future costs and
revenues is a process requiring a high degree of judgment by our management. (See Risk
Factors—Risks Related to Our Business—Our financial results
could be adversely affected if the estimates that
we use in accounting for contracts are incorrect and need to be changed.) For our satellite payload
processing, we base our estimate on
historical experience and on assumptions that are believed to be reasonable under the
circumstances, including the negotiation of equitable adjustments to our fixed-price contracts due
to launch delays. For construction contracts, costs to complete include, when appropriate,
material, labor, subcontracting costs, lease costs, commissions, insurance, and depreciation. In
the event of a change in total estimated contract cost or profit, the cumulative effect of such
change is recorded in the period that the change in estimate occurs.
A Summary of Revenue Recognition Methods Follows:
| Services/Products Provided | Contract Type | Method of Revenue Recognition | ||
|
Satellite Payload Processing
Support & Facilities
|
Firm Fixed Price — Mission Specific | Ratably, over the occupancy period of a satellite within the facility from arrival through launch | ||
|
|
||||
|
|
Firm Fixed Price — Guaranteed Number of Missions | For multi-year contract payments recognized ratably over the contract period | ||
|
|
||||
|
Facility Construction contracts
|
Firm Fixed Price | Percentage-of-completion based on costs incurred | ||
|
|
||||
|
Engineering Services
|
Cost Reimbursable Award/Fixed Fee | Reimbursable costs incurred plus award/fixed fee | ||
|
|
||||
|
Commercial Products
|
Specific Purchase Order Based | At shipment |
Under certain contracts, we make expenditures for specific enhancements and/or additions to our
facilities where the customer agrees to pay a fixed fee to deliver the enhancement or addition. We
account for such agreements as a reduction in the cost of such investments and recognize any excess
of amounts collected above the expenditure as revenue. Revenue for ASO recognized under a building
modification contract with a government agency was accounted for under the percentage-of-completion
method based on costs incurred over the period of the agreement.
Deferred Revenue
Deferred revenue represents amounts collected from customers for projects, products, or services
expected to be provided at a future date. Deferred revenue is shown on the balance sheet as either
a short-term or long-term liability, depending on when the service or product is expected to be
provided.
Research and Development
Research and development costs are expensed as incurred.
Income Taxes
We recognize income taxes under the asset and liability method. Deferred tax assets and liabilities
are recognized for the future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities, and their respective tax bases and
operating loss and tax credit carry forward. Deferred tax assets and liabilities are measured using
tax rates expected to apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change
in tax rates is recognized in income in the period that includes the enactment date. A valuation
allowance is established when it is more likely than not that some portion or all of the deferred
tax assets will not be realized.
32
Table of Contents
Net Income Per Share
Basic net income per share is calculated by dividing net income by the weighted
average number of common shares outstanding during the period. Diluted net income per share
includes all common stock options and other common stock equivalents that potentially may be issued
as a result of
conversion privileges, including the convertible subordinated notes payable and convertible
preferred stock (see Note 10).
Cash and Cash Equivalents
The Company considers short-term investments with original maturities of three months or less to be
cash equivalents. Cash equivalents are comprised primarily of operating cash accounts, money market
investments and certificates of deposits.
Accounts Receivable
The carrying value of the Company’s accounts receivable, net of the allowance for doubtful
accounts, represents their estimated net realizable value. We estimate the allowance for doubtful
accounts based on type of customer, age of outstanding receivable, historical collection trends,
and existing economic conditions. If events or changes in circumstances indicate that a specific
receivable balance may be unrealizable, further consideration is given to the collectability of
those balances, and the allowance is adjusted accordingly. Receivable balances deemed uncollectible
are written off against the allowance.
Property and Equipment
Property and equipment are stated at cost. All furniture, fixtures, and equipment are depreciated
using the straight-line method over the estimated useful lives of the respective assets, which is
generally five years. Our payload processing facilities are depreciated using the straight-line
method over their estimated useful lives ranging from 16 to 40 years.
Leasehold improvements are amortized over the shorter of the useful life of the building or the
term of the lease. Repairs and maintenance are expensed when incurred.
As required by our customers, we purchase equipment or enhance our facilities to meet specific
customer requirements. These enhancements or equipment purchases are compensated through our
contract with the customer. The difference between the amount reimbursed and the cost of the
enhancements is recognized as revenue.
Deferred Financing Costs
Deferred financing costs represent loan origination fees paid to the lender and related
professional fees. These costs are amortized on a straight-line basis over the term of the
respective loan agreements.
Investments in Affiliates
We use the equity method of accounting for our investments in, and earnings of, investees in which
we exert significant influence. In accordance with the equity method of accounting, the carrying
amount of such an investment is initially recorded at cost and is increased to reflect our share of
the investor’s income and is reduced to reflect the Company’s share of the investor’s losses.
Impairment of Long-Lived Assets
We review long-lived assets and certain identifiable intangibles for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
Recoverability of assets to be held and used is measured by a comparison of the carrying amount of
an asset to future net cash flows expected to be generated by the asset. If such assets are
considered to be impaired, the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are
reported at the lower of the carrying amount or fair value less costs to sell.
33
Table of Contents
Fair Value of Financial Instruments
Our financial instruments consist of
cash and cash equivalents, accounts receivable, notes
receivable, accounts payable, notes payable and accrued liabilities. The carrying amounts of these assets and liabilities, in
the opinion of Company’s management, approximate their fair
value, except for the Senior Convertible Notes Payable (See Note 6).
Share Based Compensation
The Company accounts for share-based awards to employees based on the fair value of the award on
the grant date. The fair value of the stock options is estimated using expected dividend yields of
the Company’s stock, the expected volatility of the stock, the expected length of time the options
remain outstanding and risk-free interest rates. Changes in one or more of these factors may
significantly affect the estimated fair value of the stock options.
The
Company estimates forfeitures using historical forfeiture rates for previous grants of equity
instruments. The fair value of awards that are expected to vest is recorded as an expense over the
vesting period.
Noncontrolling Interest
Noncontrolling interest accounting is applied for any entities where the Company maintains less
than 100% ownership. The Company clearly identifies the noncontrolling interest in the balance
sheets and income statements. We also disclose three measures of net income: net income, net income
attributable to noncontrolling interest, and net income attributable to Astrotech Corporation. Our
operating cash flows in our consolidated statements of cash flows reflect net income, while our
basic and diluted earnings per share calculations reflect net income attributable to Astrotech
Corporation.
State of Texas Funding
The Company accounts for the State of Texas funding in its majority owned subsidiary 1
st
Detect as
a contribution of capital and has reflected the disbursement in the equity section of the
consolidated balance sheet. While the award agreement includes both a common stock purchase right
and a note payable to the State of Texas, the economic substance of the transaction is that the
State of Texas has purchased shares of 1
st
Detect in exchange for the granted award.
The common stock purchase right gives the State of Texas the ability to purchase common stock in
1
st
Detect, at par value per share, at the earlier of: (1) the first Qualifying Financing
Event or (2) eighteen months (See Note 13).
There are no cash payments due under the note unless there is an event of default, and the terms
that allow for the note to be cancelled after the passage of a set amount of time. The purpose of
the note is to provide recourse for the State of Texas if 1
st
Detect fails to fulfill the purpose
of the grant, which is primarily to provide for economic development within the State of Texas. If
an event of default should occur, the principal and accrued interest would be reclassified from
equity to notes payable in the consolidated financial statements as amounts due to the State of
Texas. Management considers the likelihood of an event of default to be remote.
34
Table of Contents
(3) Accounts Receivable
As of June 30, 2010, and 2009, accounts receivable consisted of the following (in thousands):
| 2010 | 2009 | |||||||
|
U.S. Government contracts:
|
||||||||
|
Billed
|
$ | 2,123 | $ | 6,274 | ||||
|
Unbilled
|
836 | 4,926 | ||||||
|
|
||||||||
|
Total U.S. Government contracts
|
$ | 2,959 | $ | 11,200 | ||||
|
|
||||||||
|
|
||||||||
|
Commercial contracts:
|
||||||||
|
Billed
|
$ | 1,926 | $ | 254 | ||||
|
Unbilled
|
791 | 825 | ||||||
|
|
||||||||
|
Total commercial contracts
|
$ | 2,717 | $ | 1,079 | ||||
|
|
||||||||
|
|
||||||||
|
Total accounts receivable
|
$ | 5,676 | $ | 12,279 | ||||
|
|
||||||||
The Company anticipates collecting all unreserved receivables within one year. Unbilled
accounts receivable represents revenue earned in excess of contracted billing milestones.
The accuracy and appropriateness of our direct and indirect costs and expenses under government
contracts, and therefore, our accounts receivable recorded pursuant to such contracts, are subject
to extensive regulation and audit by the U.S. Defense Contract Audit Agency (“DCAA”) or by other
appropriate agencies of the U.S. Government. Such agencies have the right to challenge our cost
estimates or allocations with respect to any government contract. Additionally, a substantial
portion of the payments to the Company under government contracts are provisional payments that are
subject to potential adjustment upon audit by such agencies. In the opinion of management, any
adjustments likely to result from inquiries or audits of its contracts would not have a material
adverse impact on our financial condition or results of operations.
(4) Property & Equipment
As of June 30, 2010, and 2009, property and equipment consisted of the following (in thousands):
| June 30, | ||||||||
| 2010 | 2009 | |||||||
|
|
||||||||
|
Flight Assets
|
$ | 49,210 | $ | 49,210 | ||||
|
Payload Processing Facilities
|
44,457 | 42,652 | ||||||
|
Furniture, Fixtures, Equipment & Leasehold Improvements
|
19,611 | 18,810 | ||||||
|
Capital Improvements in Progress
|
108 | 885 | ||||||
|
|
||||||||
|
Gross Property and Equipment
|
113,386 | 111,557 | ||||||
|
|
||||||||
|
Accumulated Depreciation
|
(73,466 | ) | (71,331 | ) | ||||
|
|
||||||||
|
Property and Equipment, net
|
$ | 39,920 | $ | 40,226 | ||||
|
|
||||||||
Depreciation and amortization expense of property and equipment
for the years
ended June 30, 2010 and 2009 was $2.1 million and $2.2 million, respectively.
Revolving Loan Payable
In February 2008, we entered into a financing facility with a bank providing a $4.0 million term
loan terminating February 2011 and a $2.0 million revolving credit facility terminating in
February 2009. The term loan requires monthly payments of principal, plus interest at the rate of
prime plus 1.75%, and the revolving credit facility incurs interest at the rate of prime plus
1.75%. Effective February 2010, we renewed the $2.0 million revolving credit facility for an
additional one-year period which included reducing the interest rate to prime plus 0.75%. The bank
financing facilities are secured by the assets of ASO and require us to comply with designated
covenants. As of June 30, 2010, the balance of the $4.0 million term loan was $3.4 million and
there was no balance outstanding on the $2.0 million revolving credit facility. The Company made
principal payments on the term loan of $0.3 million for the year ended June 30, 2010. Interest is
paid bi-annually on the Senior Convertible Notes.
Convertible Subordinated Notes Payable
As of June 30, 2010 Astrotech had $5.1 million of 5.5% Senior Convertible Notes outstanding which mature
on October 15, 2010, and pay interest on
April 15 and October 15 annually. Senior Convertible Notes
are convertible into 66.67 shares of Astrotech common stock per $1,000 of par.
35
Table of Contents
The $5.1 million of Senior Convertible Notes and the $3.4 million term loan are due within the next
fiscal year, and therefore, the classification has changed from long-term debt to current debt.
(6) Fair Value of Financial Instruments
In general, fair values utilizes quoted prices in active (when available) markets for identical
assets or liabilities. The following table presents the carrying amounts and estimated fair values
of certain of the Company’s financial instruments as of June 30, 2010, and 2009 (in thousands):
| June 30, 2010 | June 30, 2009 | |||||||||||||||
| Carrying | Fair | Carrying | Fair | |||||||||||||
| Amount | Value | Amount | Value | |||||||||||||
|
|
||||||||||||||||
|
Term loan payable
|
$ | 3,356 | $ | 3,356 | $ | 3,591 | $ | 3,591 | ||||||||
|
|
||||||||||||||||
|
Senior Convertible Notes Payable — 5.5%
|
$ | 5,111 | $ | 4,808 | $ | 5,111 | $ | 2,650 | ||||||||
The fair value of our long-term debt is estimated based on the current rates offered for similar
financial instruments. The carrying amounts of cash and cash equivalents, accounts receivable,
notes receivable, and accounts payable approximate their fair market value due to the relatively
short duration of these instruments.
(7) Business Concentration
A substantial portion of our revenue has been generated under contracts with the U.S. Government.
During the years ended June 30, 2010, and 2009, approximately 49% and 65% of our revenues were
generated under U.S. Government contracts, respectively. Of the accounts receivable balance as of
June 30, 2010, totaling $5.7 million, 52% of the balance is
attributed to the U.S. Government.
(8) Common Stock Incentive, Stock Purchase Plans and Other Compensation Plans
As of
June 30, 2010, 379,389 shares of Common Stock were reserved for future grants of stock
incentive grants under the Company’s three stock incentive plans.
The 1994 Plan (“1994 Plan”)
Under the terms of the 1994 Plan, the number and price of the stock incentive awards granted to
employees is determined by the Board of Directors and such grants vest, in most cases,
incrementally over a period of four years and expire no more than ten years after the date of
grant. The total number of shares that are available under this plan is 395,000. As of June 30,
2010 there are no shares available for grant. Based on the Articles
of the 1994 stock incentive plan, no
awards shall be granted more than ten years after the effective date of the plan unless amended.
The Directors’ Stock Option Plan (“Director’s Plan”)
Options under the Director’s Plan vest after one year and expire seven years from the date of
grant. The total number of options that are available under this plan is 50,000. Through June 30,
2010, there are 30,000 options available for grant.
Space Media, Inc. Stock Option Plan
During the year ended June 30, 2000, Space Media, Inc. (“SMI”), a majority-owned subsidiary of the
Company, adopted an option plan under which 1,500,000 shares of our Common Stock have been reserved
for future grants. The operations of SMI have been discontinued. No options were issued or are
outstanding under this plan.
2008 Stock Incentive Plan (“2008 Plan”)
The 2008 Plan was created to promote growth of the Company by aligning the long-term financial
success of the Company with the employees, consultants and directors. In the first and second
quarters of fiscal 2010, the compensation committee of the Board of Directors granted 1,995,559 and
410,000 restricted
shares, respectively, to directors, named executive officers and employees in recognition of the
positive fiscal 2009 financial and operating performance. The shares were issued from the 2008
Stock Incentive Plan, vest 33.33% a year over a three year period and expire upon the employee’s
termination. As of June 30, 2010, 5,622,267 stock options and restricted shares were granted,
471,656 shares have been cancelled and 349,389 shares are available for future grant.
36
Table of Contents
1
st
Detect
On January 19, 2010, an independent committee of the Board of Directors of 1
st
Detect, a subsidiary
of the Company, approved a grant of 1,180 restricted stock shares and 1,820 stock purchase warrants
to certain officers, directors and employees of 1
st
Detect. The awards vest 50% a year over a 2
year period. We recognized compensation expense of $0.1 million for restricted stock
outstanding in 2010. The Company utilized the Black-Scholes methodology in determining the fair
market value of the warrants of $0.3 million, of which $1,600 was recognized in 2010.
Astrogenetix
On January 19, 2010, an independent committee of the Board of Directors of Astrogenetix, a
subsidiary of the Company, approved a grant of 1,550 restricted stock shares and 2,050 stock
purchase warrants to certain officers, directors and employees of Astrogenetix. The awards vest 50%
a year over a 2 year period. We recognized compensation expense
of $0.1 million for restricted stock outstanding in 2010. The Company utilized the Black-Scholes methodology in determining the
fair market value of the warrants of $0.2 million, of which $1,400 was recognized in 2010.
Stock Option Activity Summary
The Company’s stock options activity for the twelve months ended June 30, 2010 was as follows:
| Shares | Weighted Average | |||||||
| (in thousands) | Exercise Price | |||||||
|
Outstanding at June 30, 2009
|
1,125 | $ | 2.27 | |||||
|
|
||||||||
|
Granted
|
— | — | ||||||
|
Exercised
|
(271 | ) | 0.43 | |||||
|
Cancelled or expired
|
(109 | ) | 12.54 | |||||
|
|
||||||||
|
Outstanding at June 30, 2010
|
745 | $ | 1.45 | |||||
|
|
||||||||
The
aggregate intrinsic value of options exercisable at June 30, 2010 was
$0.4 million as the fair value of the Company’s common stock is
more than the exercise prices of these options.
| Options | ||||||||||||||||||||
| outstanding | Options | |||||||||||||||||||
| Weighted- | exercisable | |||||||||||||||||||
| Average | Weighted- | Weighted- | ||||||||||||||||||
| Remaining | Average | Average | ||||||||||||||||||
| Number | Contractual | Exercise | Number | Exercise | ||||||||||||||||
| Range of exercise prices | Outstanding | Life (years) | Price | Exercisable | Price | |||||||||||||||
|
$0.30 – 0.45
|
705,741 | 4.4 | 0.40 | 520,741 | 0.41 | |||||||||||||||
|
$4.40 – 11.50
|
17,600 | 3.4 | 9.07 | 16,400 | 8.89 | |||||||||||||||
|
$14.30 – 26.00
|
14,100 | 2.6 | 21.27 | 14,100 | 21.27 | |||||||||||||||
|
$34.38 – 48.75
|
8,200 | 0.3 | 41.57 | 8,200 | 41.57 | |||||||||||||||
|
|
||||||||||||||||||||
|
$0.30 – 48.75
|
745,641 | 4.3 | $ | 1.45 | 559,441 | $ | 1.79 | |||||||||||||
Compensation costs recognized related to vested stock option awards during the year ended June 30,
2010, and 2009 was $0.1 million and $0.2 million, respectively. At June 30, 2010, there was $0.1
million of total
unrecognized compensation cost related to non-vested stock option awards, which is expected to be
recognized over a weighted-average period of 2.24 years.
37
Table of Contents
Restricted Stock
At
June 30, 2010, and 2009, there was $2.3 million and $0.2 million of unrecognized compensation
costs related to restricted stock, respectively, which is expected to be recognized over a weighted
average period of 2.1 years.
The Company’s restricted stock activity for the twelve months ended June 30, 2010, was as follows:
| Weighted | ||||||||
| Average | ||||||||
| Shares | Grant-Date | |||||||
| (in thousands) | Fair Value | |||||||
|
Non-vested at June 30, 2009
|
243 | $ | 0.52 | |||||
|
|
||||||||
|
Granted
|
2,406 | 1.27 | ||||||
|
Vested
|
(44 | ) | 0.50 | |||||
|
Cancelled or expired
|
(269 | ) | 1.63 | |||||
|
|
||||||||
|
Non-vested at June 30, 2010
|
2,336 | $ | 1.17 | |||||
|
|
||||||||
Restricted Stock 1
st
Detect
At
June 30, 2010, there was $0.5 million of unrecognized compensation costs related to restricted
stock and warrants, which is expected to be recognized over a weighted average period of 1.6 years.
1
st
Detect restricted stock activity for the twelve months ended June 30, 2010, was as
follows:
| Weighted | ||||||||
| Average | ||||||||
| Grant-Date | ||||||||
| Shares | Fair Value | |||||||
|
Non-vested at June 30, 2009
|
— | $ | — | |||||
|
|
||||||||
|
Granted
|
1,180 | 212.00 | ||||||
|
Vested
|
— | — | ||||||
|
Cancelled or expired
|
— | — | ||||||
|
|
||||||||
|
Non-vested at June 30, 2010
|
1,180 | $ | 212.00 | |||||
|
|
||||||||
Restricted Stock Astrogenetix
At
June 30, 2010, there was $0.4 million of unrecognized compensation costs related to restricted
stock and warrants, which is expected to be recognized over a weighted average period of 1.6 years.
Astrogenetix restricted stock activity for the twelve months ended June 30, 2010, was as follows:
Other Stock Based Incentive Awards
| Weighted | ||||||||
| Average | ||||||||
| Grant-Date | ||||||||
| Shares | Fair Value | |||||||
|
Non-vested at June 30, 2009
|
— | $ | — | |||||
|
|
||||||||
|
Granted
|
1,950 | 167.00 | ||||||
|
Vested
|
— | — | ||||||
|
Cancelled or expired
|
(400 | ) | 167.00 | |||||
|
|
||||||||
|
Non-vested at June 30, 2010
|
1,550 | $ | 167.00 | |||||
|
|
||||||||
38
Table of Contents
2007 performance shares — We issued 239,900 performance shares in December 2007 out of the 1994
Plan, which vest in February 2011, subject to certain events or upon designation by the
Compensation Committee. Termination of employment for any cause is an event of forfeiture. We
valued the 2007 performance shares granted at the close of business on the date of grant, and
recognize expense and accrue an incentive compensation liability, pro rata over the vesting period.
Subsequent to issuance 179,000 shares were forfeited. An expense was
incurred in the amount of $0.02 million for
the year ended June 30, 2010.
Fair Value of Stock Based Compensation
The Company calculated the fair value of each option grant on the date of grant using the
Black-Scholes option pricing model with the following weighted-average assumptions:
| Astrotech | Spacetech | |||||||||||||||
| Year ended June 30, | Year ended June 30, | |||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
|
Expected Dividend Yield
|
— | % | 0 | % | 0 | % | — | % | ||||||||
|
Expected Volatility
|
— | 1.15 | 1.43 | — | ||||||||||||
|
Risk-Free Interest Rates
|
— | % | 2.7 | % | 0.9 | % | — | % | ||||||||
|
Expected Option Life (in years)
|
— | 3.55 | 2.00 | — | ||||||||||||
Due to differences in option terms and historical exercise patterns among the plans, we have
segregated option awards into two homogenous groups for the purpose of determining fair values for
its options. Valuation assumptions are determined separately for the two groups, which represent,
respectively, the 1994 Stock Incentive Plan and the Director’s Stock Option Plan. No options have
been issued during the year ended June 30, 2010, under the 2008 Stock Incentive Plan. The assumptions are as
follows:
| • |
We estimated volatility using our historical share price performance over
the last ten years. Management believes the historical estimated volatility
is materially indicative of expectations about expected future volatility.
|
||
| • |
We use the simplified method to estimate expected lives for options granted.
|
||
| • |
The risk-free interest rate is based on the U.S. Treasury yield in
effect at the time of grant for the expected term of the option.
|
||
| • |
The expected dividend yield is based on our current dividend yield and the
best estimate of projected dividend yield for future periods within the
expected life of the option.
|
Cash Based Long Term Incentive Awards
The Compensation Committee of the Board of Directors adopted and implemented a Long-Term Cash
Incentive Plan during the second quarter of fiscal year 2008. The Long-Term Cash Incentive Plan
pays cash awards to employees upon the successful completion of certain events and passage of time
as established by the Compensation Committee. In the year ended June 30, 2008, the Compensation
Committee awarded Long-Term Cash Incentive Units valued at $0.3 million to employees. These units
vest 50% in August 2010 and 50% in February 2011 and are subject to material risk of forfeiture.
For fiscal year 2010, expense recognized for this plan totaled $0.01 million, cash paid to
terminated employees was $0.02 million, and the deferred liability was $0.1 million.
39
Table of Contents
Securities Repurchase Program
In March 2009, the Company repurchased 300,000 shares of Common Stock at a price of $0.40 per
share, pursuant to the securities repurchase program. As of June 30, 2009, we had repurchased
311,660 share of Common Stock at a cost of $0.2 million, which represents an average cost of $0.76
per share, and $1.1 million of Senior Convertible Notes Payable (See Note 5). As a result, the
Company is authorized to repurchase an additional $5.7 million of securities under this program.
Common Stock or Senior Convertible Notes Payable repurchases under the Company’s securities
repurchase program may be made from time-to-time, in the open market, through block trades or
otherwise in accordance with applicable regulations of the Securities and Exchange Commission.
Depending on market conditions and other factors, these purchases may be commenced or suspended at
any time or from time-to-time without prior notice. Additionally, the timing of such transactions
will depend on other corporate strategies and will be at the discretion of the management of the
Company.
(9) Income Taxes
The components of income tax expense (benefit) from continuing operations are as follows (in
thousands):
| Year Ended June 30, | ||||||||
| 2010 | 2009 | |||||||
|
Current
|
||||||||
|
Federal
|
$ | — | $ | (202 | ) | |||
|
State and local
|
22 | (308 | ) | |||||
|
Foreign
|
— | — | ||||||
|
|
||||||||
|
|
$ | 22 | $ | (510 | ) | |||
|
|
||||||||
|
|
||||||||
|
Deferred
|
||||||||
|
Federal
|
— | — | ||||||
|
State and local
|
— | — | ||||||
|
Foreign
|
— | — | ||||||
|
|
||||||||
|
|
$ | 22 | $ | (510 | ) | |||
|
|
||||||||
40
Table of Contents
A
reconciliation of the reported income tax expense to the amount that
would result by applying the U.S. Federal statutory rate to the
income (loss) before income taxes to the actual amount of income tax
expense (benefit) recognized follows (in thousands):
| Year Ended June 30, | ||||||||
| 2010 | 2009 | |||||||
|
Expected expense (benefit)
|
$ | (104 | ) | $ | 1,433 | |||
|
Alternative minimum tax and state tax expense
|
22 | 123 | ||||||
|
Debt exchange
|
— | (210 | ) | |||||
|
Adjustment
from prior year tax filings
|
— | (633 | ) | |||||
|
Change in valuation allowance
|
(186 | ) | (1,482 | ) | ||||
|
Stock compensation
|
207 | 126 | ||||||
|
Other permanent items
|
83 | 133 | ||||||
|
|
||||||||
|
Total
|
$ | 22 | $ | (510 | ) | |||
|
|
||||||||
|
|
||||||||
|
The
Company’s deferred tax assets as of June 30, 2010 and 2009
consist of the following (in thousands):
|
||||||||
|
|
||||||||
|
Deferred tax assets:
|
||||||||
|
Net operating loss carryforwards
|
$ | 12,410 | $ | 12,500 | ||||
|
Alternative minimum tax credit
carryforwards
|
689 | 687 | ||||||
|
Accrued expenses and other timing
|
85 | 113 | ||||||
|
|
||||||||
|
Total gross deferred tax assets
|
$ | 13,184 | $ | 13,300 | ||||
|
Less — valuation allowance
|
(12,789 | ) | (12,975 | ) | ||||
|
|
||||||||
|
Net deferred tax assets
|
$ | 395 | $ | 325 | ||||
|
|
||||||||
|
|
||||||||
|
Deferred tax liabilities:
|
||||||||
|
Property and equipment, principally
due to differences in depreciation
|
(395 | ) | (325 | ) | ||||
|
|
||||||||
|
Total gross deferred tax liabilities
|
$ | (395 | ) | $ | (325 | ) | ||
|
|
||||||||
|
Net deferred tax assets (liabilities)
|
$ | — | $ | — | ||||
|
|
||||||||
The
valuation allowance decreased by approximately $0.2 million for the year ended June 30, 2010.
The valuation allowance decreased by approximately $1.5 million for the year ended June 30, 2009.
At June 30, 2010, the Company had accumulated net operating loss carryforwards of approximately
$36.5 million for Federal income tax purposes ($12.4 million, tax effected) that are available to
offset
future regular taxable income. These net operating loss carryforwards expire between the years 2021
and 2026. Utilization of these net operating losses is limited due to the changes in stock
ownership of the Company associated with the October 2007 Exchange Offer; as such, the benefit from
these losses may not be realized.
The Company has $0.7 million of alternative minimum tax credit carryforwards available to offset
future regular tax liabilities.
In assessing the need for a valuation allowance, management considers whether it is more likely
than not that some portion or all of the net deferred tax assets will be utilized to offset future
tax liabilities. Management considers the scheduled reversal of deferred tax liabilities, projected
future taxable income, and tax planning strategies in making this assessment. As of June 30, 2010,
the Company provided a full valuation allowance of approximately $12.8 million against its net
deferred tax assets.
41
Table of Contents
(10) Net Income Per Share
Basic net income per share is computed on the basis of the weighted average number of shares of
common stock outstanding during the period. Diluted net income per share is computed on the basis
of the weighted average number of shares of common stock plus the effect of dilutive potential
common shares outstanding during the period using the treasury stock method and the if-converted
method. Dilutive potential common shares include outstanding stock options, convertible debt, and
shared-based awards. Reconciliation and the components of basic and diluted net income per share
are as follows (in thousands):
| Year Ended June 30, | ||||||||
| 2010 | 2009 | |||||||
|
|
||||||||
|
Numerator:
|
||||||||
|
Net income basic
|
$ | 260 | $ | 4,725 | ||||
|
Dilutive share based payments
|
— | 21 | ||||||
|
|
||||||||
|
Net income diluted
|
$ | 260 | $ | 4,746 | ||||
|
|
||||||||
|
|
||||||||
|
Denominator:
|
||||||||
|
Denominator for basic net income per
share — weighted average common stock
outstanding
|
16,567 | 16,365 | ||||||
|
Dilutive common stock equivalents —
common stock options and share-based
awards
|
1,716 | 539 | ||||||
|
Denominator for diluted net income
per share weighted average common
stock outstanding and dilutive common
stock equivalents
|
18,283 | 16,904 | ||||||
|
|
||||||||
|
|
||||||||
|
Basic net income per share
|
$ | 0.02 | $ | 0.29 | ||||
|
|
||||||||
|
Diluted net income per share
|
$ | 0.01 | $ | 0.28 | ||||
|
|
||||||||
The Senior Convertible Subordinated Notes Payable outstanding as of June 30, 2010, and June 30,
2009, which are convertible into 341,000 and 458,000 shares of common stock, respectively, at
$15.00 per share, have not been included in the computation of
diluted net income per share
for the twelve months ended June 30, 2010, and June 30,
2009, as the impact to net income per share is anti-dilutive.
Options to purchase 39,900 shares of common stock at exercise prices ranging from $4.40 to $48.75
per share outstanding for the twelve months ended June 30, 2010, were not included in diluted net
income per share, as the impact to net income per share is anti-dilutive. Options to purchase
467,000 shares of common stock at exercise prices ranging from $0.30 to $51.25 per share
outstanding for the twelve months ended
June 30, 2009, respectively, were not included in diluted net income per share, as the impact to
net income per share is anti-dilutive.
(11) Employee Benefit Plans
We have a defined contribution retirement plan, which covers substantially all employees and
officers. For the years ended June 30, 2010 and 2009, we have contributed the required match of
$0.3 million and $0.3 million, respectively, to the plan. We have the right, but not an obligation,
to make additional contributions to the plan in future years at the discretion of the Company’s
Board of Directors. We have not made any additional contributions for the years ended June 30, 2010
and 2009.
42
Table of Contents
(12) Commitments
and Contingencies
Leases
The Company is obligated under noncancelable operating leases for equipment, office space, storage
space, and the land for a payload processing facility, and certain flight assets. Future minimum
payments under these noncancelable operating leases are as follows (in thousands).
| Operating | ||||
| Year ending June 30, | Leases | |||
|
|
||||
|
2011
|
616 | |||
|
2012
|
256 | |||
|
2013
|
13 | |||
|
2014
|
— | |||
|
2015
|
— | |||
|
2016 and thereafter
|
— | |||
|
|
||||
|
Subtotal
|
$ | 885 | ||
|
|
||||
Rent expense for the years ended June 30, 2010 and 2009 was approximately $0.9 million and
$0.9 million, respectively. For fiscal year 2010, the Company received sublease payments of
$0.3 million.
Construction Contract Contingency
In August 2007 we entered into a $14.0 million modification to our existing VAFB construction
contract. The modification required us to complete the construction on the facility by
September 30, 2009. The modification contained penalties of up to $3.0 million if we did not meet
the contracted completion date. The construction was complete in September 2009 and the Company did
not incur a penalty.
State of Texas Funding
In March 2010, the Texas Emerging Technology Fund awarded 1
st
Detect $1.8 million for the
development and marketing of the Miniature Chemical Detector, a portable mass spectrometer designed
to serve the security, healthcare and industrial markets. (See Note
13). As of June 30, 2010, 1
st
Detect has received the first of two $0.9 million disbursements. The disbursed amount of $0.9
million represents a contingency through March 2020, the date of cancellation. If an event of
default should occur, the principal and accrued interest would be reclassified from equity to notes
payable in the consolidated financial statements as amounts due to the State of Texas. Management
considers the likelihood of an event of default to be remote.
Employment
Contracts
The Company has entered into employment contracts with certain of its key executives. Generally,
certain amounts may become payable in the event the Company terminates the executives’ employment
(See Part III, Item 11).
(13) State of Texas Funding
In March 2010, the Texas Emerging Technology Fund awarded 1
st
Detect $1.8 million for the
development and marketing of the Miniature Chemical Detector, a portable mass spectrometer designed
to serve the
security, healthcare and industrial markets. In exchange for the award, 1
st
Detect granted a
common stock purchase right and a note payable to the State of Texas. As of June 30, 2010, 1
st
Detect has received the first of two $0.9 million disbursements. The proceeds from the award can
only be used to fund development of the Miniature Chemical Detector at 1
st
Detect, not for repaying
existing debt or for use in other Company subsidiaries.
The common stock purchase right is exercisable at the first “Qualifying Financing Event”, which is
essentially a change in control or third party equity investment in 1
st
Detect. The number of
shares available to the State of Texas, at the price of par value, is calculated as the total
disbursements (numerator) divided by the stock price established in the Qualifying Financing Event
(denominator). If the first Qualifying Financing Event does not occur within eighteen months of
the agreement effective date, the number of shares available for purchase will equal the total
disbursements (numerator) divided by $100 (denominator).
43
Table of Contents
The
note equals the disbursements to 1
st
Detect to date, accrues interest at 8% per year and cancels
automatically at the earlier of (1) selling substantially all of the assets of 1
st
Detect, (2)
selling more than 50% of common stock of 1
st
Detect or (3) in March 2020. No payments of interest
or principal are due on the note unless there is a default, which would occur if 1
st
Detect moves
its operations or headquarters outside of Texas at any time before March 2020. 1
st
Detect has the
option to pay back the principal plus accrued interest by September 30, 2011, but repayment does
not cancel the State of Texas’ common stock purchase right.
Management considers the likelihood of voluntarily repaying the note or of a default event as
remote. As such, the first $0.9 million installment was accounted for as a contribution to equity
in the period ended June 30, 2010.
(14) Segment Information
Selected
financial data for the year ended June 30, 2010 and 2009 of the
Company’s segments is as follows (in thousands):
Year ended June 30, 2010:
| Income (loss) | Net Fixed | Depreciation & | Total | |||||||||||||||||
| Revenue | before income taxes | Assets | Amortization | Assets | ||||||||||||||||
|
ASO
|
$ | 27,979 | $ | 6,332 | $ | 39,670 | $ | 2,025 | $ | 48,670 | ||||||||||
|
Spacetech
|
— | (6,638 | ) | 250 | 110 | 6,233 | ||||||||||||||
|
|
||||||||||||||||||||
|
Total
|
$ | 27,979 | $ | (306 | ) | $ | 39,920 | $ | 2,135 | $ | 54,903 | |||||||||
|
|
||||||||||||||||||||
Year ended June 30, 2009:
| Income (loss) | Net Fixed | Depreciation & | Total | |||||||||||||||||
| Revenue | before income taxes | Assets | Amortization | Assets | ||||||||||||||||
|
ASO
|
$ | 31,856 | $ | 7,345 | $ | 40,051 | $ | 2,073 | $ | 52,595 | ||||||||||
|
Spacetech
|
129 | (3,130 | ) | 175 | 136 | 6,324 | ||||||||||||||
|
|
||||||||||||||||||||
|
Total
|
$ | 31,985 | $ | 4,215 | $ | 40,226 | $ | 2,209 | $ | 58,919 | ||||||||||
|
|
||||||||||||||||||||
(15) Strategic Financial and Business Alternatives
In September 2009, the Company announced that the Board of Directors had engaged investment banking
firm Lazard Ltd. to advise the Company in exploring strategic financial and business alternatives
to enhance shareholder value. In July 2010, the Company announced that it had concluded its
engagement with Lazard Middle Market following a review of strategic alternatives by its Board of
Directors.
(16) Board of Director Resignation
On June 18, 2010, General (Ret.) Lance W. Lord resigned from the Board of Directors of Astrotech
and as the Chief Executive Officer of Astrotech Space Operations. The vacancy on the Board of
Directors created by General Lord’s resignation is not expected to be filled until the next annual
meeting. The role of Chief Executive Officer, Astrotech Space Operations, will remain open pending
a review of internal and external candidates.
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Table of Contents
On September 30, 2009, R. Scott Nieboer resigned from the Astrotech Board of Directors and the
Audit Committee of the Board of Directors. Mr. Nieboer’s decision to resign is not a result of a
disagreement with the Company related to the Company’s operations, policies or practices. In
October 2009, the Board of Directors appointed current director Sha-Chelle Manning to fill the
vacancy on the Audit Committee.
(17) Related Party Transactions
The Company engaged in certain transactions with directors, executive officers, shareholders, and
certain former officers during fiscal years 2010 and 2009. Following is a description of these
transactions:
Senior Convertible Note Repurchase
In October 2008, the Company purchased $1.8 million principal amount of its outstanding 5.5% Senior
Convertible Notes. At the time, company Director Mr. R. Scott Nieboer was a beneficial owner of the
repurchased securities. The Company paid $1.1 million for these securities and has recognized a
gain of $0.7 million on the transaction in fiscal year 2009.
Directors Compensation
Our independent directors are paid an annual cash retainer fee upon their appointment or annual
re-election to the Board of Directors and are granted annual equity based compensation grants. We
amortize the expense of these annual awards over the period between annual meetings of
shareholders. Meeting fees, expenses, and other costs are expensed as incurred. The director fees
expensed in 2010 and 2009 were $0.2 million and $0.3 million, respectively.
James D. Royston
Effective December 2008, the Company entered into a seven month auto-renewable lease agreement with
Mr. Royston for a house located in Melbourne Florida to be used by employees of the Company while
conducting business on behalf of the Company. The lease provides for monthly rental payments of
$2,900 plus utilities and consumables to be paid by the Company. The lease was terminated by the
Company as of March 2010.
(18) Adverse Event
On January 30, 2007, Sea Launch experienced a launch failure resulting in the loss of a satellite
and damage to the floating launch platform. A full inspection, evaluation, and repair of the damage
occurred and Sea Launch returned to operations in October 2007. We were paid under our contract
with Sea Launch upon launch of each mission; therefore, revenues were delayed until the resumption
of normal operations. As a result of the launch failure, the Company lost revenue on at least three
launch missions either through cancellation or schedule delay. We submitted a claim under our
business interruption insurance for $750,000, the limit of our policy.
After negotiation with our Insurance Company, Affiliated FM, we received a letter in February 2009
denying coverage. In June 2009, Sea Launch filed for Chapter 11 bankruptcy protection. We see no
further method of recourse and now consider the matter closed.
(19) NASDAQ Listing Qualifications
On April 7, 2008, we received a NASDAQ Staff Determination letter indicating that we failed to
comply with NASDAQ Marketplace Rule 4310(c)(4), which requires that we maintain a $1.00 bid price,
and our securities were, therefore, subject to delisting from The NASDAQ Capital Market.
In June 2009, we received a letter from the NASDAQ Listing Qualifications Staff indicating that we
regained compliance with the bid price rule. As of June 30, 2010, we are in compliance with all
continued listing standards.
(20) Subsequent Events
In July 2010, the Company announced that it has concluded its engagement with Lazard Middle Market
following a review of strategic alternatives by its Board of
Directors (See Note 15). As a result,
the Company realigned its corporate structure in order to optimize operational efficiencies.
45
Table of Contents
The Company’s corporate realignment included the termination of James Royston, President of
Astrotech Corporation, allowing for a greater focus on the satellite payload processing of its ASO
business unit. The Company has no immediate plans to fill the vacancy created by Mr. Royston’s
termination.
The Company and ARES have resolved certain issues relative to the early termination of the
subcontract in May 2008, including, but not limited to, a receivable from ARES under this contract
totaling $1.4 million. The Company wrote off $0.1 million of unbilled receivables in connection
with this agreement in the period ended June 30, 2010. In July 2010, the Company received $1.2
million from ARES. The remaining $0.2 million balance is expected to be paid upon completion of
the 2005 through 2008 governmental audits by the DCAA.
(21)
Recent Accounting Pronouncements
In December 2007, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard
Codification (“ASC”) No. 805,
Business Combinations
(“ASC 805”), previously referred to as
Statement of Financial Accounting Standard (“SFAS”) 141 (revised 2007),
Business Combinations.
ASC
805 will significantly change current practices regarding business combinations. Among the more
significant changes, ASC 805 expands the definition of a business and a business combination;
requires the acquirer to recognize the assets acquired, liabilities assumed and noncontrolling
interests (including goodwill), measured at fair value at the acquisition date; requires
acquisition-related expenses and restructuring costs to be recognized separately from the business
combination; and requires in-process research and development to be capitalized at fair value as an
indefinite-lived intangible asset. ASC 805 is effective for financial statements issued for fiscal
years beginning after December 15, 2008. The Company adopted the provisions of ASC 805 in the first
quarter of 2010 and its adoption did not have a material effect on its consolidated financial
statements.
In June 2009, the FASB issued ASC No. 105,
Generally Accepted Accounting Principles
(“GAAP”) (“ASC
105” or “FASB Codification”), previously referred to as SFAS No. 168,
The FASB Accounting
Standards Codification and the Hierarchy of Generally Accepted Accounting Principles — a
replacement of FASB Statement No 162
(“SFAS 168”). The effective date for use of the FASB
Codification is for interim and annual periods ending after September 15, 2009. Companies should
account for the adoption of the guidance on a prospective basis. The Company adopted the FASB
Codification in the first quarter of 2010 and its adoption did not have an effect on its
consolidated financial statements.
In June 2009, the FASB issued ASC No. 810, Consolidation, previously referred to as SFAS 167,
Amendments to FASB Interpretation No. 46(R),
which significantly changes the consolidation model
for variable interest entities. ASC No. 810 requires companies to qualitatively assess the
determination of the primary beneficiary of a variable interest entity (“VIE”) based on whether
the entity (1) has the power to direct matters that most significantly affect the activities of
the VIE, and (2) has the obligation to absorb losses or the right to receive benefits of the VIE
that could potentially be significant to the VIE. The standard shall be effective as of the
beginning of each reporting entity’s first annual reporting period that begins after November 15,
2009, for interim periods within that first annual reporting period, and for interim and annual
reporting periods thereafter. Earlier application is prohibited. The Company does not expect that
the adoption of ASC No. 810 will have a material effect on its consolidated financial position or
results of operations.
In January 2010, the FASB issued ASU No. 2010-06,
Fair Value Measurements and Disclosures
(Topic
820):
Improving Disclosures about Fair Value Measurements
(“ASU 2010-06”). Reporting entities will
have to provide information about movements of assets among Levels 1 and 2; and a reconciliation
of purchases, sales, issuance, and settlements of activity valued with a Level 3 method, of the
three-tier fair value hierarchy established by SFAS No. 157, Fair Value Measurements (ASC 820).
The ASU 2010-06 also clarifies the existing guidance to require fair value measurement disclosures
for each class of assets and liabilities. ASU 2010-06 is effective for interim and annual
reporting periods beginning after December 15, 2009 for Level 1 and 2 disclosure requirements and
after December 15, 2010 for Level 3 disclosure requirements. The
Company adopted ASU No. 2010-06 in
the third quarter of 2010 and it did not have a material effect on its consolidated financial
statements.
None to report for the year ended June 30, 2010.
46
Table of Contents
Under the supervision and with the participation of our management, including our principal
executive officer and principal financial officer, we have evaluated the effectiveness of our
design and operation of our disclosure controls and procedures as of the end of the period covered
by this annual report, and, based on that evaluation, our principal executive officer and principal
financial officer have concluded that these controls and procedures are effective. There have been
no changes in our internal control over financial reporting that occurred during our last fiscal
quarter that have materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.
Disclosure controls and procedures are our controls and other procedures that are designed to
ensure that information required to be disclosed by us in the reports that we file or submit under
the Exchange Act is recorded, processed, summarized, and reported, within the time periods
specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and
procedures include, without limitation, controls and procedures designed to ensure that information
required to be disclosed by us in the reports that we file under the Exchange Act is accumulated
and communicated to our management, including our principal executive officer and principal
financial officer, as appropriate to allow timely decisions regarding required disclosure.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over
financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision
and with the participation of our management, including our principal executive and financial
officers, we conducted an evaluation of the effectiveness of our internal control over financial
reporting as of June 30, 2010, based on the frame work in the Internal Control-Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our
evaluation under the framework in Internal Control-Integrated Framework, our management concluded
that our internal control over financial reporting was effective as of June 30, 2010.
This annual report does not include an attestation report of our registered public accounting firm
regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered
accounting firm pursuant to §989G of the Dodd-Frank Wall Street Reform and
Consumer Protection Act, which exempts the Company from the requirement
that it include an attestation report of the Company’s registered public
accounting firm regarding internal control over our management’s
assessment of internal controls over financial reporting.
None to report for the period ended June 30, 2010.
47
Table of Contents
A Board of six directors was elected at the 2009 Annual Meeting. The Company’s Articles of
Incorporation authorize the Board of Directors (“Board”) to determine the number of its members. A
director who is appointed by the existing Board of Directors, due to a vacant position or the need
for an additional director, will serve until the next Annual Meeting of Shareholders or until a
successor is duly elected and qualified.
The following table shows information as of June 30, 2010, regarding members of the Company’s Board
of Directors:
| Age as of | Director | |||||||||
| Current Directors ** | Principal Occupation | June 30, 2010 | Since | |||||||
|
|
||||||||||
| Thomas B. Pickens, III |
Chairman and Chief Executive
Officer of Astrotech Corporation
|
53 | 2004 | |||||||
|
|
||||||||||
| Mark Adams* |
Founder, President and CEO,
Advocate MD Financial Group, Inc.
|
48 | 2007 | |||||||
|
|
||||||||||
| John A. Oliva* |
Managing Principal, Capital City
Advisors, Inc.
|
54 | 2008 | |||||||
|
|
||||||||||
| William F. Readdy* |
Founder, Discovery Partners,
International LLC
|
58 | 2008 | |||||||
|
|
||||||||||
| Sha-Chelle Devlin Manning* |
Managing Director, Nanoholdings LLC
|
42 | 2009 | |||||||
| * |
Indicates an “independent director”
|
|
| ** |
Lance W. Lord served as a member of the Board of Directors during the time from the 2009 Annual
Meeting through his resignation on June 18, 2010.
|
Current Directors
Thomas B. Pickens, III
Mr. Pickens was named Astrotech’s Chief Executive Officer in January 2007 and Chairman in February
2008. In 1985, Mr. Pickens founded T.B. Pickens & Co., a company that provides consulting services
to corporations, public institutions, and start-up organizations. Additionally, Mr. Pickens is the
Managing Partner and Founder of Tactic Advisors, Inc., a company specializing in corporate
turnarounds on behalf of creditors and investors that have aggregated to over $20 billion in value.
Since 1985, Mr. Pickens has served as President of T.B. Pickens & Co. From 1991 to 2002, Mr.
Pickens was the Founder and Chairman of U.S. Utilities, Inc., a company which operated 114 water
and sewer utilities on behalf of various companies affiliated with Mr. Pickens. From 1995 to 1999,
Mr. Pickens directed over 20 direct investments in various venture capital investments and was
Founder and Chairman of the Code Corporation. From 1988 to 1993, Mr. Pickens was the Chairman of
Catalyst Energy Corporation and was Chairman of United Thermal Corporation (NYSE). Mr. Pickens was
also the President of Golden Bear Corporation, Slate Creek Corporation, Eury Dam Corporation,
Century Power Corporation, and Vidilia Hydroelectric Corporation. From 1982 to 1988, Mr. Pickens
founded Beta Computer Systems, Inc., and Sumpter Partners, and was the General Partner of Grace
Pickens Acquisition L.P.
48
Table of Contents
Mark Adams
Mr. Adams founded Advocate, MD Financial Group, Inc., a leading Texas-based medical liability
insurance holding company, in July 2003. Since July 2003, Mr. Adams has served as its Chairman,
President, and Chief Executive Officer. He is also a founding partner in several other companies
including the Endowment Development Group, a Houston-based life insurance company specializing in
placing large multimillion dollar life insurance policies throughout the U.S. market. Mr. Adams
founded Murphy Adams Restaurant Group in 2007. He owns and operates Mama Fu’s Asian House
restaurants throughout the southeast United States. In 2008, Mr. Adams founded Small Business
United, LLC, a cutting edge health insurance company for small businesses. Mr. Adams founded Sozo
Global, LLC, a rapidly expanding network marketing functional beverage company. Mr. Adams is the
winner of the 2008 Prestigious Ernst and Young Entrepreneur of the Year Award for Central Texas.
After his career with global public companies such as Xerox and Johnson & Johnson (1985-1988),
beginning in 1988, Mr. Adams then spent the next 12 years at Bostik Adhesives where he served in
senior management, sales and strategic business roles for their worldwide markets in North America,
Latin America, Asia, and Europe. In 1997, Mr. Adams then served as Global Sales Director for Bostik
and General Manager of Nitta-Findley Company based in Osaka, Japan and later joined Ward Adhesives,
Inc. as a minority owner, General Manager, and Vice President of Sales and Marketing. Mr. Adams
currently serves as a Director for several public and private companies, as well as a board member
for multiple nonprofit organizations. Mr. Adams is also an advisory board member for the McCoy
College of Business at Texas State University.
John A. Oliva
John A. Oliva has 30 years of
experience in the private equity, investment banking, capital markets, branch management, and
asset management sectors. Since 2002, Mr. Oliva has been the Managing Principal of Southeastern
Capital Partners BD Inc., a FINRA registered broker/dealer and independent investment banking
and advisory firm. Since 2002, Southeast Capital Partners has provided financial advisory services,
including mergers/acquisitions, underwriting and raising expansion capital to select mid-tier
companies. In addition, Mr. Oliva is the Managing Partner of Capital City Advisors Inc.,
which provides private merchant banking services to clients in Europe and Asia.
Mr. Oliva has eight FINRA licenses
including the Managing Principal and Financial Principal licenses. Prior to joining Southeastern
Capital Partners, he worked for Morgan Stanley & Co and served as an advisor to their
Private Wealth Management group, developing, reviewing and implementing solutions for investment
banking clients, he was also a group manager at Morgan Stanley. Mr. Oliva has been nationally
recognized for achievements while at Morgan Stanley & Co. and Shearson/Lehman Brothers in
the asset management and investment banking sector. He performed similar key roles at
Interstate/Johnson Lane and The Robinson Humphrey Company. Mr. Oliva has also worked on
the floor of the New York Stock Exchange.
William F. Readdy
From 1974 to 2005, Mr. Readdy served the United States as a naval aviator, pilot astronaut,
military officer, and civil service executive. In 2005, Mr. Readdy established Discovery Partners,
International LLC, a consulting firm to provide strategic planning, risk management, safety and
emerging technology solutions to aerospace and high-tech industries.
He served as a test pilot and instructor between carrier deployments to the North Atlantic,
Caribbean and Mediterranean in the late 1970s and early 1980s. Mr. Readdy joined the National
Aeronautics and Space Administration (NASA) in 1986 and in 1987 became a member of the astronaut
corps, but continued his military service in the Naval Reserve, attaining the rank of captain
before retiring in 2000.
Mr. Readdy logged more than 672 hours in space on three shuttle missions. He commanded his third
flight, docking space shuttle
Atlantis
at the Russian space station
Mir
in 1996 and oversaw the
first exchange of American astronaut researchers living aboard the Russian outpost.
In 2001, Mr. Readdy was appointed as NASA’s associate administrator for space operations and moved
to Washington D.C. Following the loss of space shuttle
Columbia
in February 2003, Mr. Readdy
chaired NASA’s Space Flight Leadership Council, and oversaw the agency’s recovery from the accident
and the shuttle’s successful return to flight in July 2005.
Mr. Readdy was honored as a Meritorious Rank Executive by President Bush in 2003 and in 2005 was
awarded NASA’s highest honor, the Distinguished Service Medal for the second time. He has also
been the recipient of NASA’s Outstanding Leadership Medal three times and the Exceptional Service
Medal twice. In addition he is the recipient of numerous national and international aviation and
space awards, and has been recognized for his contributions to aerospace safety.
49
Table of Contents
Sha-Chelle Manning
Since September 1, 2008,
Sha-Chelle Manning has been Managing Director of Nanoholdings LLC, a company that
commercializes scientific breakthroughs in nanotechnology that solve energy efficiency challenges with some of the
world’s best scientists and universities. From January 2007 to December 31, 2008,
Ms. Manning was Vice-President at Authentix, a Carlyle company, that is the leader in
authentication solutions for Fortune 500 companies and governments around the world for brand
protection, excise tax recovery, and nano-scaled enabled authentication of security documents and
pharmaceutical drugs. From September 2005 to April 2007, Ms. Manning was a consultant to the
Office of the Governor of Texas, Rick Perry, where she led the development of various
strategic initiatives including the Texas Nanotechnology Initiative. Prior to these
assignments, Ms. Manning was Director of Alliances at Zyvex Corporation from August 2002 to
September 2005, where she was responsible for the commercialization of nanotechnology products
(consumer, energy, and defense) introduced and sold into the marketplace in partnership
with key government agencies and industry. Ms. Manning also served as a Vice President for
Winstar Communications (acquired by IDT) where she commercialized and brought to market
broadband wireless technologies and web-enabled platforms. Several of her projects were
launched by the White House including “the Virtual Wall”
(
www.vvmf.org
), honoring the 58,195 Vietnam Veterans who made the ultimate sacrifice for their country.
Ms. Manning continues and or has
provided strategic consulting for some of the following organizations: Lockheed Martin
(Office of the CTO), Texas A&M University System (Vice-Chancellor for Research); HRL
Laboratories (Office of the CEO); KERA-PBS, Zyvex Labs (atomically precise manufacturing to
enable quantum devices and computing), and Nano-Retina (a nano-enabled artificial retina to
restore vision).
Ms. Manning serves on the advisory
boards of the non-profit organizations; Soul Arts and Music Foundation, and the Clean Technology
and Sustainable Industries. Ms. Manning has served as one of the NSTI (Nanotechnology Society Technical
Industry) Conference Chairs both in 2008 and 2010. Ms. Manning received a MBA in Telecommunications
from the University of Dallas.
Executive Officers and Key Employees of the Company who are Not Directors
Set forth below is a summary of the background and business experience of the executive officers of
the Company who are not nominees of the Board of Directors:
| With | ||||||||||
| Age as of | Company | |||||||||
| Name | Position(s) | June 30, 2010 | Since | |||||||
|
|
||||||||||
| John M. Porter |
Senior Vice President,
Chief Financial Officer, Treasurer
and Secretary
|
38 | 2008 | |||||||
|
|
||||||||||
| Don M. White Jr. |
Senior Vice President, GM
of Astrotech Space
Operations
|
47 | 2005 | |||||||
|
James Royston served as President until his termination from Astrotech Corporation in July 2010.
|
The executive officers and key employees named below will serve in such capacities until the next
annual meeting of the Company’s Board of Directors, or until their respective successors have been
duly elected and have been qualified, or until their earlier death, resignation, disqualification,
or removal from office.
John M. Porter
Mr. Porter joined Astrotech in October 2008 and serves as the Company’s Senior Vice President,
Chief Financial Officer, Treasurer and Secretary. He is responsible for overall strategic planning, corporate
development and finance. His primary areas of focus is utilizing financial management to support
the core spacecraft payload processing business while efficiently advancing the Company’s
biotechnology initiatives in microgravity processing and commercializing advanced technologies that
have been developed in and around the space industry.
Prior to joining the Company, Mr. Porter co-founded Arabella Securities, an investment banking firm
that specialized in providing trading services and equity research on small-cap companies to
institutional investors. He headed the Equity Research department, and published research on small
companies in the Healthcare Technology sector. Arabella Securities subsequently merged with another
broker/dealer in 2006 where Mr. Porter continued to lead the firm’s Healthcare investment banking
practice. Mr. Porter previously served as Director of Business Development for Luminex Corporation
(NASDAQ: LMNX), a leading developer of biological testing technologies for the Diagnostic and life
sciences industries. While at Luminex, Mr. Porter was responsible for the development, negotiation
and management of Luminex’s strategic partnership program. During his tenure at Luminex, over 40
new strategic licensing partnerships were formed with companies around the globe including Hitachi
Software (Japan), Qiagen (Germany), Tepnel (UK), Invitrogen (formerly Biosource, US), Inverness
Medical (US), Millipore Corporation (formerly Upstate Biotech, US), and many other world class
companies. Mr. Porter performed additional duties including strategic planning, product
development, marketing management, and investor relations. Mr. Porter also served in multiple
capacities during the preparation, and execution of Luminex’s initial public offering (IPO) in
March 2000, where the company successfully raised approximately $100M.
50
Table of Contents
Mr. Porter has a Bachelor of Science in Chemistry from Hampden-Sydney College in Virginia. In
addition, Mr. Porter earned a Master of Business Administration from the A.B. Freeman School of
Business at Tulane University and holds a Master of Science in Physical Chemistry & Material
Science from Tulane University in New Orleans.
Don M. White Jr.
Don M. White has been instrumental in leading Astrotech’s satellite processing operations since
2005. As Senior Vice President and General Manager of Astrotech Space Operations, Mr. White
oversees a rigorous satellite payload processing schedule. He is also responsible for expanding
business services, improving profitability, and managing current contracts. Additionally, Mr. White
maintains ongoing negotiations with all customers, pledging that every mission contract process is
streamlined with the utmost efficacy and safety.
Prior to joining the Astrotech team, Mr. White’s 21 years of Aerospace experience included
employment at Lockheed Martin as their Payloads/Ordnance Chief Engineer. He was then promoted to
Mission Support Manager, leading various aspects of the Atlas V Development Program. Mr. White’s
extensive aerospace experience also includes providing leadership to the Titan and Shuttle External
Tank programs while at Martin Marietta Corporation.
Mr. White has a Master of Business Administration from the Florida Institute of Technology and a
Bachelor of Science in Industrial technology from the University of West Florida.
Operations of the Board of Directors
Board Member Attendance at Annual Meeting of Stockholders
The Company strongly encourages each member of the Board of Directors to attend each annual meeting
of stockholders. Accordingly, we expect most, if not all, of the Company’s directors to be in
attendance at the meeting. All of our directors attended the 2009 annual meeting of stockholders.
Meetings and Committees of the Board of Directors
The Board of Directors and its committees meet periodically during the year as deemed appropriate.
During 2010, the Board of Directors met eight times. No director attended fewer than 75% of all
the 2010 meetings of the Board of Directors and its committees on which each such director served.
Director Nomination Process
Astrotech’s Director nominees are approved by the Board after considering the recommendation of the
Corporate Governance and Nominating Committee.
A Board of five Directors is expected to be elected at the Annual Meeting. The Company’s Articles
of Incorporation provide that, with respect to any vacancies or newly created directorships, the
Board will nominate such individuals as may be specified by a majority vote of the then sitting
directors.
Regarding nominations for directors, the Corporate Governance and Nominating Committee identifies
nominees in various ways. The Corporate Governance and Nominating Committee considers the current
directors that have expressed interest in, and that continue to satisfy, the criteria for serving
on the Board. Other nominees may be proposed by current directors, members of management, or by
shareholders. The Corporate Governance and Nominating Committee may engage a
professional firm to identify and evaluate potential director nominees, but has not paid any of
such fees to date. The Corporate Governance and Nominating Committee considers the Board at a
strategic level looking for industry and professional experience that complements the Company’s
goals and direction. The Corporate Governance and Nominating Committee has established certain
criteria it considers as nominating guidelines for the Board of Directors. The criteria include:
| • |
the candidate’s independence;
|
||
| • |
the candidate’s depth of business experience;
|
||
| • |
the candidate’s availability to serve;
|
51
Table of Contents
| • |
the candidate’s integrity and personal and professional ethics;
|
||
| • |
the balance of the business experience on the Board as a whole; and
|
||
| • |
the need for specific expertise on the Board.
|
The criteria are not exhaustive and the Corporate Governance and Nominating Committee and the Board
of Directors may consider other qualifications and attributes which they believe are appropriate in
evaluating the ability of an individual to serve as a member of the Board of Directors. The
Corporate Governance and Nominating Committee’s goal is to assemble a Board of Directors that
brings to the Company a variety of perspectives and skills derived from high quality business and
professional experience. In order to ensure that the Board consists of members with a variety of
perspectives and skills, the Corporate Governance and Nominating Committee has not set any minimum
qualifications and also considers candidates with appropriate non-business backgrounds. Other than
ensuring that at least one member of the Board is a financial expert and a majority of the Board
members meet all applicable independence requirements, the Corporate Governance and Nominating
Committee does not have any specific skills that it believes are necessary for any individual
director to possess. Instead, the Corporate Governance and Nominating Committee evaluates potential
nominees based on the contribution such nominee’s background and skills could have upon the overall
functioning of the Board.
Committees of the Board of Directors
During fiscal year 2010, the Board of Directors had three standing committees: an Audit Committee,
a Compensation Committee and a Corporate Governance and Nominating Committee. Each such committee
currently consists of three persons and each member of the Audit Committee, Compensation Committee and Corporate
Governance and Nominating Committees is required, at the minimum, to meet the “independence”
requirements of the Nasdaq Capital Market’s Marketplace Rules. The Governance and Nominating
Committee, the Audit Committee and the Compensation Committee have adopted a charter that governs
its authority, responsibilities and operation. The Company periodically reviews, both internally
and with the Board, the provisions of the Sarbanes-Oxley Act of 2002, and the rules of the SEC and
NASDAQ regarding corporate governance policies, processes and listing standards. In conformity
with the requirement of such rules and listing standards, we have adopted a written Audit Committee
Charter, a Compensation Committee Charter, and a Corporate Governance and Nominating Committee
Charter, which may be found on the Company’s web site at www.astrotechcorp.com under “For
Investors” or by writing to Astrotech Corporation, 401 Congress Avenue, Suite 1650, Austin, Texas
78701, Attention “Investor Relations” and requesting copies.
The Board of Directors has determined each of the following directors to be an “independent
director” as such term is defined by Rule 5605(a)(2) of the NASDAQ Marketplace Rules: Mark Adams;
John A. Oliva; Sha-Chelle Manning and William F. Readdy.
The Corporate Governance and Nominating Committee
The Corporate Governance and Nominating Committee was created by the Board of Directors in February
2004. The Corporate Governance and Nominating Committee’s charter was adopted by the Committee and
approved by the Board in May 2004. The charter is available in the “For Investors” section of the
Company’s web site at www.astrotechcorp.com. The primary purpose of the Corporate Governance and
Nominating Committee is to provide oversight on the broad range of issues surrounding the
composition and operation of the Board of Directors, including identifying individuals qualified to
become Board members and recommending to the Board director nominees for the next Annual Meeting of
Shareholders. As of the end of fiscal year 2010 the Corporate Governance and Nominating Committee
consisted of Mr. Adams (Chairman), Ms. Manning and Mr. Oliva. During fiscal year 2010, the
Corporate Governance and Nominating Committee met once.
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Table of Contents
The Audit Committee
The Audit Committee is composed solely of independent directors that meet the requirements of
NASDAQ and SEC rules and operates under a written charter adopted by the Audit Committee and
approved by the Board of Directors in May 2004. The charter is available on the Company’s web site which is www.astrotechcorp.com. The Audit Committee is responsible for appointing and compensating
a firm of independent registered public accountants to audit the Company’s financial statements, as
well as oversight of the performance and review of the scope of the audit performed by the
Company’s independent registered public accountants. The Audit Committee also reviews audit plans
and procedures, changes in accounting policies, and the use of the independent registered public
accountants for non-audit services. As of the end of fiscal year 2010, the Audit Committee
consisted of Mr. Oliva (Chairman), Mr. Adams, and Ms. Manning. During fiscal year 2010, the Audit
Committee met five times. The Board of Directors has determined that John A. Oliva met the
qualification guidelines as an “audit committee financial expert” as such term is defined in Item
407(d)(5)(ii) of Regulation S-K promulgated by the SEC.
Mr. Nieboer resigned as Director on September 30, 2009. Subsequently, Ms. Manning was appointed to
the Audit Committee in October 2009.
The Compensation Committee
The Compensation Committee is composed solely of independent directors that meet the requirements
of NASDAQ and SEC rules and operates under a written charter adopted by the Compensation Committee
and approved by the Board of Directors in May 2004, and amended in May 2005. The charter is
available on the Company’s web site at www.astrotechcorp.com. The Compensation Committee is
responsible for determining the compensation and benefits of all executive officers of the Company
and establishing general policies relating to compensation and benefits of employees of the
Company. The Compensation Committee also administers the Company’s 2008 Stock Incentive Plan, the
1994 Stock Incentive Plan, the 1995 Directors’ Stock Option Plan, and the Employee Stock Purchase
Plan in accordance with the terms and conditions set forth in those plans. As of the end of fiscal
year 2010, the Compensation Committee consisted of Mr. Adams (Chairman), Mr. Readdy, and Mr. Oliva.
During fiscal year 2010, the Compensation Committee met three times.
Code of Ethics and Business Conduct
The Company’s Code of Ethics and Business Conduct applies to all directors, officers, and employees
of Astrotech. The key principles of this code include acting legally and ethically, speaking up,
getting advice, and dealing fairly with the Company’s Shareholders. The Code of Ethics and Business
Conduct is available on the Company’s web site at www.astrotechcorp.com and is available to the
Company’s Shareholders upon request. The Code of Ethics and Business Conduct meets the requirements
for a “Code of Conduct” under the SEC rules for financial officers.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the Company’s directors, executive
officers and persons who beneficially own more than 10% of the Company’s Common Stock to file
reports of ownership and changes in ownership with the SEC. Such directors, executive officers, and
greater than 10% Shareholders are required by SEC regulation to furnish to the Company copies of
all Section 16(a) forms they file. Due dates for the reports are specified by those laws, and the
Company is required to disclose in this document any failure in the past fiscal year to file by the
required dates. Based solely on written representations of the Company’s directors, executive
officers and 10% Shareholders and on copies of the reports that they have filed with the SEC, it is
the Company’s belief that all of Astrotech’s directors, executive officers and 10% Shareholders
complied with all filing requirements applicable to them with respect to transactions in the
Company’s equity securities during fiscal year 2010.
Compensation Discussion and Analysis
Overview
Astrotech provides a range of products and services that focus on utilizing space for the needs of
government and commercial applications. Our core business operates spacecraft pre-launch
facilities and provides supporting services at three domestic launch sites. We develop and operate
space flight hardware assets, provide manned and unmanned payload processing services, and develop
commercial product using space-based technology. In anticipation of the planned 2011 space shuttle
retirement, we began developing new products and services within our strategic focus on the
commercial exploitations of space.
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Table of Contents
Achieving our Company’s aspirations requires a highly skilled, motivated team. Thus, our
compensation system is designed to be competitive with those of other companies that compete for
highly skilled technical employees and executives. Our performance-based compensation system is
intended to include incentives for innovation and entrepreneurial spirit.
Guiding Principles
The Compensation Committee strives to achieve our strategic objectives by designing our
compensation program to offer competitive base compensation to attract and retain experienced
qualified executives while offering incentives to foster the innovation and entrepreneurial spirit
necessary for executing our business strategy and rewards for successful achievement of performance
goals. In designing our executive compensation program, we are guided by five principles:
| • |
Establish target compensation levels that are competitive within the industries and the
markets in which we compete for executive talent;
|
| • |
Structure executive compensation so that our executives share in Astrotech’s successes and
failures by correlating compensation with target levels based upon business performance;
|
| • |
Link pay to performance by making a percentage of total executive compensation variable, or
“at risk”, through an annual determination of performance-based incentive compensation;
|
| • |
Align a portion of executive pay with shareholder interests through equity awards; and
|
| • |
Maintain a company-wide entrepreneurial atmosphere by minimizing special “executive only”
benefits or prerequisites.
|
Operation of the Compensation Committee
The Compensation Committee of the Board of Directors administers our executive compensation program
and monitors the Company’s overall compensation strategy to ensure that executive compensation
supports the Company’s business objectives. The Compensation Committee reviews and determines
salary, short-term incentives, long-term incentives and other benefits for the Company’s Chief
Executive Officer (“CEO”) and certain named executive officers (“NEOs”).
For a more complete discussion of the responsibilities of the Compensation Committee, see the
Operations of the Board of Directors — The Compensation Committee, and the charter for the
Compensation Committee, posted on our web site at www.astrotechcorp.com.
The Compensation Program
The key components of our current compensation program for Astrotech executive officers are:
| • |
Base salary;
|
| • |
Short-term cash incentives;
|
| • |
Long-term performance-based and other equity awards; and
|
| • |
Other benefits.
|
To remain competitive, the Compensation Committee periodically benchmarks our executive
compensation program to determine how actual compensation targets and levels compare to our
overall philosophy and target markets. The primary focus of the benchmarking process is on public
companies in the aerospace, defense and government contractor industries of similar or otherwise
comparable size and complexity. This benchmarking considers information from proxy data for the
peer group’s CEO and NEOs and was last presented to the Compensation Committee in July 2010.
Other Considerations in Determining Executive Compensation
We believe that our executive compensation properly incentivizes our senior management to focus on
the overall goals of the Company. Each element of our Executive Compensation Program is structured
towards specific objectives. If a unique situation occurs where incentive goal adjustment or stock
option repricing are considered, the Compensation Committee will perform a review of the individual
facts and circumstances before taking any action.
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Table of Contents
Role of the Compensation Committee and CEO in Determining Executive Compensation
Mr. Pickens is not a member of the Compensation Committee. He did not attend the Compensation
Committee meetings in August 2009 or July 2010, which discussed NEO and all other employee
compensation.
Base Salary
Base salary is designed to compensate our employees in part for their roles and responsibilities,
and also to provide a fixed level of compensation that serves as a retention tool throughout the
executive’s career. Initial base salaries were set considering each executive’s roles and
responsibilities, current skills, future potential and comparable market compensation. Typically,
the Compensation Committee reviews the base salaries of each NEO annually. Adjustments are made
based on individual performance, changes in roles and responsibilities, and external market data
for similar positions.
Short-term Cash Incentives
At the discretion of the Compensation Committee, we provide annual incentive awards under our Key
Employee Incentive Bonus Plan (the “Bonus Plan”). These short-term cash incentives are designed to
reward the achievement of specific, pre-set financial results measured over the fiscal year in
which that compensation is earned. Generally, we compute the Bonus Plan after the end of each
fiscal year and make the cash awards during the first quarter of the next fiscal year. The Bonus
Plan encompasses all employees of the Company based upon maximum award levels stated as a
percentage of base salary (“Payout Percentage”). The maximum award levels are set within our
salary-grade structure for each salary grade ranging from 5% to 50%.
For fiscal year 2010, the Compensation Committee approved a Bonus Plan encompassing three equally
weighted “Bonus Elements,” each based upon specific objectives set by the Compensation Committee at
the beginning of the fiscal year. The sum of the Payout Percentage for each of the Bonus Elements,
then is applied to the award levels for each employee to determine the Bonus Award. For fiscal year
2010, the Compensation Committee had established the following three Bonus Elements:
| • |
Individual Performance
— A Payout Percentage of up to 33% of the individual’s total
bonus is based upon the officer or employee’s performance of his job responsibilities and
achievement of individual goals as determined through the annual performance review process.
|
| • |
Business Unit Performance
— A Payout Percentage of up to 33% of the individual’s
total bonus is to be awarded based upon the financial performance of the officer or employee’s
business unit based upon net income, relative to the approved budget for the fiscal year.
|
| • |
Corporate Performance
— A Payout Percentage of up to 33% of the individual’s total
bonus is to be awarded based upon the financial performance of the Company, as measured by
comparing the approved budget of revenue, net income and backlog to actual results for the
fiscal year.
|
Given the dynamic marketplace and the possibility of unforeseen developments, the Compensation
Committee has discretionary authority to adjust such awards to reflect actual performance in light
of such developments or to make other discretionary adjustments to the overall Payout Percentage or
to individual employee bonuses. Bonus maximum award levels range from 30% to 50% of base salaries
for our NEOs. On average, we target our short term cash incentives to comprise approximately 15% of
the total compensation package of our NEOs.
Long-term Non-cash Incentive Awards
Our long-term incentive awards are used to link Company performance and increases in shareholder
value to the total compensation of our NEOs. These awards are also key components of our ability to
attract and retain our NEOs. The annualized value of the awards to our NEOs is intended to be a
significant component of the overall compensation package. On average, and assuming performance is
on target, these awards are targeted to represent up to 40% of the total compensation package,
consistent with our emphasis on linking executive pay to shareholder value.
Our shareholder-approved incentive plans allow for the granting of stock options based upon
Astrotech’s stock prices in the public markets. Stock options are granted with an exercise price
not less than the market price of our common stock on the grant date. Options generally vest over a
period of four years with 25% becoming exercisable on each anniversary of the grant date as long as
the recipient is still employed by the Company on the date of vesting, and generally expire after
ten years.
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Stock awards, restricted stock grants and stock option awards were made to our NEOs in August 2009
and November 2009, in the amounts set forth in the table labeled Fiscal Year 2010 Grants of
Plan-Based Awards.
Benefits
Our benefit programs are established based upon an assessment of competitive market factors and a
determination of what is needed to attract and retain high caliber
executives and other employees. Astrotech’s primary
benefits for executives include participation in the Company’s broad-based plans: the 401(k) Plan,
the Company’s health, dental and vision plans and term life and disability insurance plans. The
Company also provides certain executives, including some NEOs, with supplemental disability
insurance. This plan offers additional income protection to Senior Vice Presidents and above and is
provided to supplement the monthly benefit amounts that are capped in the general disability
policy. The Company provides 1.5 times of each NEOs annual base salary to a maximum of $300,000 in
term life insurance and pays the premium for such insurance. The fair value of premiums paid in
excess of IRS limitations are included as other income reported for the NEO.
Indemnification Agreements
The Company has entered into indemnification agreements with each of its NEOs. The agreements
provide that the Company shall indemnify and hold harmless each indemnitee from liabilities
incurred as a result of such indemnitee’s status as an officer or employee of the Company, subject
to certain limitations.
Post-Termination Compensation
The Compensation Committee believes that severance benefits and change of control benefits are
necessary in order to attract and retain the caliber and quality of executive that the Company
needs in its most senior
positions. These benefits are particularly important to provide for continuity of senior management
allowing executives to focus on results and long-term strategic initiatives.
As of June 30, 2010, Mr. Pickens, Mr. Royston and Mr. White were the executives with existing
employment contracts. In July 2010, Mr. Royston was terminated from Astrotech. The agreements
provide for severance payments and benefits if termination occurs without “cause” or if the
executive leaves for “good reason.” There is also additional compensation provided in circumstances
following such termination after a “change in control.” Additional information regarding the
severance and change in control payments, including a definition of key terms and a quantification
of benefits that would have been received by our NEOs at termination is found under Potential
Payments upon Termination or Change in Control, which follows.
Stock Ownership Guidelines
The Company has not established stock ownership guidelines.
Tax Deductibility Policy
The Compensation Committee considers the deductibility of compensation for federal income tax
purposes in the design of the Company’s compensation programs. We believe that all of the incentive
compensation paid to our NEOs for fiscal year 2010 qualifies as “performance-based compensation”
and thus, is fully deductible by the Company for federal income tax purposes. While we generally
seek to ensure the deductibility of the incentive compensation paid to our NEOs, the Compensation
Committee intends to retain the flexibility necessary to provide cash and equity compensation in
line with competitive practice, our compensation philosophy, and the best interest of our
Shareholders even if these amounts are not fully tax deductible. The employment agreements between
the Company and its NEOs provide for interpretation, operation and administration consistent with
the intent of Section 409A of the Internal Revenue Code, to the extent applicable.
Compensation Committee Interlocks and Insider Participation
The
Company’s Compensation Committee consists of Mr. Adams
(Chairman), Mr. Readdy and Mr. Oliva. Mr. Adams is Chairman,
President and Chief Executive Officer of Advocate MD. Mr. Pickens
previously served on the Board of Directors of Advocate MD until his resignation in
November 2009.
Compensation Committee Report
Astrotech’s Compensation Committee reviewed and discussed with management the Compensation
Discussion and Analysis required by item 402(b) of Regulation S-K and, based on such review and
discussion, has recommended to the Board of Directors that such Compensation Discussion and
Analysis be included in Form 10-K for fiscal year ended June 30, 2010.
Mark Adams
John A. Oliva
William F. Readdy
August 26, 2010
John A. Oliva
William F. Readdy
August 26, 2010
56
Table of Contents
Executive Compensation
The Summary Compensation Table provides compensation information about
Astrotech’s principal executive officer, principal financial officer and
the other most highly compensated executive officers.
Summary Compensation Table
| Spacetech | ||||||||||||||||||||||||||||||||
| Name and | Stock | Option | Incentive | All Other | ||||||||||||||||||||||||||||
| Principal | Bonus | Awards | Awards | Awards | Compensation | |||||||||||||||||||||||||||
| Position | Year | Salary ($) | ($) (1) | ($) (2) | ($) (3) | ($) (4) | ($) (5) | Total ($) | ||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Thomas B. Pickens, III;
|
2010 | 380,000 | 57,000 | — | — | 361,782 | 24,091 | 822,873 | ||||||||||||||||||||||||
|
Chief Executive Officer
|
2009 | 360,000 | 200,000 | 847,500 | — | — | 11,974 | 1,419,474 | ||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
John M. Porter
(6)
;
|
2010 | 250,000 | 37,500 | — | — | 227,704 | 11,900 | 527,104 | ||||||||||||||||||||||||
|
Chief Finance Officer
|
2009 | 142,500 | 100,000 | 339,000 | 30,040 | — | 7,378 | 618,918 | ||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Don M. White
(7)
;
|
2010 | 200,470 | 91,000 | — | — | — | 10,703 | 302,173 | ||||||||||||||||||||||||
| Sr. VP, GM of Astrotech Space Operations | 2009 | 184,765 | 92,383 | 84,750 | 14,160 | — | 9,879 | 385,937 | ||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
James D. Royston
(8)
;
|
2010 | 210,000 | 150,000 | 185,000 | — | 50,100 | 8,958 | 604,058 | ||||||||||||||||||||||||
|
President
|
2009 | 210,000 | — | — | — | — | 813 | 210,813 | ||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Lance W. Lord
(9)
;
|
2010 | 240,000 | 75,000 | 370,000 | — | — | 24,072 | 709,072 | ||||||||||||||||||||||||
| Former Chief Executive Officer, Astrotech Space Operations | 2009 | 225,000 | — | — | — | — | 703 | 225,703 | ||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Brian K. Harrington;
|
2010 | — | — | — | — | — | — | — | ||||||||||||||||||||||||
|
Former Chief Financial Officer
|
2009 | 207,692 | — | — | — | — | 85,556 | 293,248 | ||||||||||||||||||||||||
| (1) |
See narrative on
Short-term Cash Incentives
: Bonus was awarded in August 2010, for
performance in fiscal year 2010, except for Mr. Royston and Mr. Lord who received payment in November 2009.
|
|
| (2) |
See narrative on
Long-term Incentive Non-cash Awards
: Includes restricted stock granted on
August 19, 2009 of 750,000 shares to Mr. Pickens, 300,000 shares to Mr. Porter and 75,000
shares to Mr. White. On November 13, 2009, Mr. Royston received 100,000 shares of restricted stock and Mr. Lord
received 200,000 shares of restricted stock.
|
|
| (3) |
Option awards are valued using a Black-Scholes option pricing model at the grant date.
|
| (4) |
Consists of grants of restricted stock and warrants for Astrogenetix
and 1
st
Detect. On January 19, 2010, Mr. Pickens received 500 shares of restricted
stock and 1,000 warrants in Astrogenetix, Mr. Porter received 400 shares of restricted stock
and 800 warrants in Astrogenetix and Mr. Royston received 300 shares of restricted stock in
Astrogenetix. On January 19, 2010, Mr. Pickens received 300 shares of restricted stock and
680 warrants in 1
st
Detect and Mr. Porter received 200 shares of restricted stock
and 180 warrants in 1
st
Detect.
|
|
| (5) |
See
Schedule of All Other Compensation
that follows for further detail.
|
|
| (6) |
Mr. Porter began
employment with Astrotech in October 2008. His
annual salary was $195,000 in fiscal 2009.
|
|
| (7) |
In addition to his fiscal
year 2010 performance bonus of $75,000, Mr. White was awarded a bonus of
$16,000 in February 2010 in recognition of his efforts which resulted in the timely
completion of ASO’s new 5-meter processing facility at VAFB.
|
|
| (8) |
Mr. Royston was terminated on July 13, 2010.
|
|
| (9) |
Mr. Lord was appointed Chief Executive Officer of Astrotech Space Operations in June 2008.
Prior to that time, Mr. Lord was a member of the Board of Directors. Mr. Lord resigned from
Astrotech Corporation effective June 18, 2010.
|
|
Schedule of All Other Compensation for Fiscal Year 2010
| 401(K) Plan | ||||||||||||||||
| Company | Supplemental | |||||||||||||||
| Matching | Disability Insurance | |||||||||||||||
| Named Executive | Contributions | Premium | Total | |||||||||||||
| Officer | ($) | ($) | Other Benefits ($) | ($) | ||||||||||||
|
|
||||||||||||||||
|
Thomas B. Pickens, III
(1)
|
9,952 | 1,578 | 12,561 | 24,091 | ||||||||||||
|
|
||||||||||||||||
|
John M. Porter
|
10,894 | 1,006 | — | 11,900 | ||||||||||||
|
|
||||||||||||||||
|
Don M. White
|
9,903 | 800 | — | 10,703 | ||||||||||||
|
|
||||||||||||||||
|
James D.
Royston
(2)
|
8,077 | 881 | — | 8,958 | ||||||||||||
|
|
||||||||||||||||
|
Lance W.
Lord
(3)
|
— | 995 | 23,077 | 24,072 | ||||||||||||
| (1) |
Mr. Pickens employement
contract includes a car allowance of $1,000 per month. Astrotech paid
$561 for a healthclub membership for Mr. Pickens during fiscal 2010.
|
|
| (2) |
Mr. Royston was terminated
on July 13, 2010.
|
|
| (3) |
Mr. Lord resigned as Chief Executive Officer of Astrotech Space Operations in June 2010.
Included in Other Benefits is
accrued vacation paid upon his resignation.
|
57
Table of Contents
Fiscal Year 2010 Grants of Plan-Based Awards
The following table shows additional information regarding: (i) the target and presumed maximum
level of annual cash incentive awards for the Company’s executive officers for performance during
fiscal year 2011, as established by the Compensation Committee under the Company’s Key
Employee Incentive Bonus Plan; and (ii) Spacetech equity awards
granted in January 2010 that were
awarded to help retain the NEOs and focus their attention on building Shareholder value. The actual
amount of the annual cash incentive award received by each NEO for performance during fiscal year
2010 is shown in the Fiscal Year 2010 Summary Compensation Table.
| All Other | ||||||||||||||||||||||||||||
| Estimated Future | Stock | |||||||||||||||||||||||||||
| Payouts Under Non- | Awards: | |||||||||||||||||||||||||||
| Equity Incentive Plan | Number of | Spacetech | Grant Date | Grant | ||||||||||||||||||||||||
| Awards | Shares | Restricted | Spacetech | Fair Value | Date of | |||||||||||||||||||||||
| Target | Maximum | Restricted | Stock | Warrants | of Equity | Equity | ||||||||||||||||||||||
| Name | ($) (1) | ($) (1) | Stock (#) (2) | (#) (3) | (#) (3) | ($) | Awards | |||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Thomas B. Pickens, III
|
119,700 | 199,500 | — | 800 | 1,680 | 361,782 | January 19, 2010 | |||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
John M. Porter
|
82,500 | 137,500 | — | 600 | 980 | 227,704 | January 19, 2010 | |||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Don M. White
|
67,500 | 112,500 | — | — | — | — | — | |||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
James D. Royston
(4)
|
— | — | 100,000 | 300 | — | 235,100 |
November 13, 2009 &
January 19, 2010 |
|||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Lance Lord
(5)
|
— | — | 200,000 | — | — | 370,000 | November 13, 2009 | |||||||||||||||||||||
|
No options were awarded to
NEO’s during fiscal year 2010.
|
||
| (1) |
Estimated bonus for Mr. Pickens, Mr. Porter, and Mr. White are computed at a maximum of
50% of base salary. Estimated target bonus percentage is 30% of base salary.
|
|
| (2) |
Represents restricted stock
granted to Mr. Royston on November
13, 2009.
|
|
| (3) |
Represents Astrogenetix and
1st Detect restricted stock and warrants granted to Mr. Pickens, Mr.
Porter and Mr. Royston on January 19, 2010.
|
|
| (4) |
Mr. Royston was terminated from Astrotech on July 13, 2010.
|
|
| (5) |
Mr. Lord resigned from Astrotech on June 18, 2010.
|
|
Employment Agreements
During
fiscal year 2010, the Company had employments agreements in place with Mr. Pickens, Mr. White,
Mr. Lord and Mr. Royston. Each employment agreement sets forth, among other things, the NEO’s
minimum base salary, bonus opportunities and provisions with respect to certain payments and other
benefits upon termination of employment under certain circumstances such as without “Cause,”
leaving employment for “Good Reason” or a “Change in Control.” Please see Potential Payments Upon
Termination or Change in Control for a description of such provisions.
The minimum base salary set in the employment agreement for Mr. Pickens is $360,000, for Mr. White
is $184,765, for Mr. Lord is $175,000 and for Mr. Royston is $210,000. Mr. Lord was paid his salary
pro rata through the date of his resignation, June 18, 2010. Mr. Royston was paid his salary pro
rata through the date of his termination on July 13, 2010.
The NEOs participate in the Key Employee Incentive Bonus Plan in accordance with the terms of the
plan which includes all employees of the Director level and above. In accordance with that Plan,
all NEO’s maximum bonus is 50%, subject to Compensation Committee discretion.
Awards
On January 19, 2010, an independent committee of the Board of Directors of 1
st
Detect, a subsidiary of the
Company, approved a grant of 1,180 restricted stock shares and 1,820 stock purchase warrants to certain officers,
Directors and employees of 1
st
Detect. Additionally, on the same day, an independent committee of the Board of
Directors of Astrogenetix, a subsidiary of the Company, approved a grant of 1,550 restricted stock shares and 2,050
stock purchase warrants to certain officers, directors and employees of Astrogenetix.
The Compensation Committee also awarded
bonuses to directors, NEOs, and
employees in August 2010, in recognition of the employee performance during fiscal year
2010.
Salary and Bonus in Proportion to Total Compensation
We believe that a substantial portion of each NEO’s compensation should be in the form of
performance based awards, particularly equity based awards which align the interests of management
with that of the Shareholders. In 2010, the total compensation of our NEOs was consistent with
this philosophy. Providing long-term compensation such as equity awards allows the Company to
attract and incentivize qualified executives with less cash outlay, and to retain the executives
over a longer period.
58
Table of Contents
Outstanding Equity Awards at Fiscal Year 2010 End
The following table shows certain information about unexercised options as of June 30, 2010.
Schedule of Outstanding Equity Awards
| Option Awards & Warrants | ||||||||||||||||||||
| Number of | Number of | |||||||||||||||||||
| Securities | Securities | |||||||||||||||||||
| Underlying | Underlying | |||||||||||||||||||
| Unexercised | Unexercised | Option | ||||||||||||||||||
| Options (#) | Options (#) | Exercise | Spacetech | |||||||||||||||||
| Name | Exercisable (1) | Unexercisable (2) | Price ($) | Warrants (#)(3) | Expiration Date | |||||||||||||||
|
|
||||||||||||||||||||
|
Thomas B. Pickens, III
(3)
|
100,000 | — | 0.45 | 07/18/2010 | ||||||||||||||||
|
|
1,000 | — | 20.80 | 12/01/2011 | ||||||||||||||||
|
|
500 | — | 7.70 | 12/01/2012 | ||||||||||||||||
|
|
500 | — | 7.20 | 12/12/2013 | ||||||||||||||||
|
|
1,680 | 01/19/2017 | ||||||||||||||||||
|
|
||||||||||||||||||||
|
John M. Porter
|
100,000 | — | 0.35 | 10/01/2018 | ||||||||||||||||
|
|
980 | 01/19/2017 | ||||||||||||||||||
|
|
||||||||||||||||||||
|
Don M.
White
(4)
|
8,900 | — | 0.45 | 07/18/2010 | ||||||||||||||||
|
|
900 | 300 | 11.50 | 08/09/2016 | ||||||||||||||||
|
|
12,500 | 37,500 | 0.33 | 10/06/2018 | ||||||||||||||||
|
|
||||||||||||||||||||
|
James D.
Royston
(5)
|
75,000 | — | 0.45 | 07/18/2010 | ||||||||||||||||
|
|
300 | — | 7.00 | 09/17/2012 | ||||||||||||||||
|
|
400 | — | 10.20 | 08/07/2013 | ||||||||||||||||
|
|
1,200 | — | 24.10 | 08/16/2014 | ||||||||||||||||
|
|
1,200 | — | 14.30 | 08/03/2015 | ||||||||||||||||
|
|
1,500 | 500 | 11.50 | 08/09/2016 | ||||||||||||||||
| (1) |
All exercisable options will expire 90 days after the date of an employee’s termination.
|
|
| (2) |
Options vest ratable over a four year period, with the exception of the July 18, 2009,
grants, which vested on January 15, 2009 and expired on July 18, 2010.
|
|
| (3) |
Spacetech warrants are unexercisable. Stock price is based on grant date fair value: $212.00 for 1
st
Detect and $167.00 for Astrogenetix.
|
|
| (4) |
All exercisable options with an expiration date of July 18, 2010 were exercised prior to expiration date.
|
|
| (5) |
All exercisable options with an expiration date of July 18, 2010
were exercised prior to expiration date. Mr. Royston was terminated
on July 13, 2010.
|
The following table provides information with respect to the vesting of each NEO’s outstanding
unexercisable options and warrants:
Schedule
of Vesting Astrotech Stock Option Grants
| Name | 08/09/2010 | 10/06/2010 | 10/06/2011 | 10/06/2012 | ||||||||||||
|
Don M. White
|
300 | 12,500 | 12,500 | 12,500 | ||||||||||||
|
|
||||||||||||||||
|
James D. Royston
|
500 | — | — | — | ||||||||||||
|
|
||||||||||||||||
Schedule
of Vesting Spacetech Warrant Grants
| Name | 01/19/2011 | 01/19/2012 | ||||||
|
|
||||||||
|
Thomas B.
Pickens, III
(1)
|
840 | 840 | ||||||
|
|
||||||||
|
John Porter
(1)
|
490 | 490 | ||||||
| (1) |
Warrants granted to Mr.
Pickens and Mr. Porter in January 2010 for 1
st
Detect and Astrogenetix.
|
59
Table of Contents
2010 Option Exercises and Stock Granted
During
fiscal year 2010, there were no stock options exercised by the
Company’s CEO or other NEOs. The
following table sets forth the number and corresponding value realized during fiscal year 2010 and
reflecting the grants made on August 19, 2009 and November 13, 2009, with respect to common stock
or restricted stock grants.
| Restricted | Spacetech Warrant | Spacetech Restricted Stock | ||||||||||||||||||||||||||||||
| Option Awards | Stock Awards | Awards | Awards | |||||||||||||||||||||||||||||
| Number | ||||||||||||||||||||||||||||||||
| of Shares | Value | Number | Number | Value | Number | |||||||||||||||||||||||||||
| Acquired | Realized | of Shares | Value | of Shares | Realized | of Shares | Value | |||||||||||||||||||||||||
| on | on | Acquired | Realized | Acquired | on | Acquired | Realized | |||||||||||||||||||||||||
| Name | Exercise | Exercise | on Grant | on Grant ($) | on Grant | Grant ($) | on Grant | on Grant ($) | ||||||||||||||||||||||||
|
Thomas B.
Pickens III
(1)
|
— | — | 750,000 | 847,500 | 1,680 | 214,682 | 800 | 147,100 | ||||||||||||||||||||||||
|
John M. Porter
(1)
|
— | — | 300,000 | 339,000 | 980 | 118,504 | 600 | 109,200 | ||||||||||||||||||||||||
|
James D.
Royston
(2)
|
— | — | 100,000 | 185,000 | — | — | 300 | 50,100 | ||||||||||||||||||||||||
|
Lance W.
Lord
(3)
|
— | — | 200,000 | 370,000 | — | — | — | — | ||||||||||||||||||||||||
| (1) |
Awards of restricted stock vesting 33.33% on August 19, 2010, 33.33% on August 19, 2011,
and 33.33% on August 19, 2012.
|
|
| (2) |
Awards of restricted stock
vesting 33.33% on November 13, 2010, 33.33% on November 13,
2011, and 33.33% on November 13, 2012. Mr. Royston was
terminated on July 13, 2010.
|
|
| (3) |
Awards of restricted stock vesting 33.33% on November 13, 2010, 33.33% on November 13,
2011, and 33.33% on November 13, 2012. Mr. Lord resigned on
June 18, 2010.
|
The Company granted restricted stock units to the
NEO’s during fiscal 2010. Refer
to the table entitled “Fiscal Year 2010 Grants of Plan-Based Awards” included in Item 11 of this
Form 10-K for further detail.
Pension Benefits
All employees of the Company, including NEOs, are eligible to participate in the Astrotech 401(k)
plan. In accordance with this plan, employees are eligible to contribute up to 25% of their base
salary subject to Internal Revenue Service limitations into the plan with all such contributions
being fully vested upon contribution. The Company will match, dollar for dollar, up to 5% of the
employee’s contributions. Employer contributions into the plan vest pro-rata after 3 years of
vesting service and are fully vested thereafter. The Company has no additional pension benefits for
its NEOs.
The Company does not have a nonqualified deferred compensation plan and the NEOs have not accrued
any benefits or rights to payments other than the Astrotech 401(k) Plan and potential payments upon
termination discussed below.
Potential Payments Upon Termination or Change in Control
As noted under Compensation Discussion and Analysis – Post-Termination Compensation, the Company
has entered into employment agreements with Mr. Pickens and Mr. White that provide for payments and
other benefits in connection with the officer’s termination for a qualifying event or circumstance
and for enhanced payments in connection with such termination after a Change in Control (as defined
in the applicable agreement). A description of the terms with respect to each of these types of
terminations follows.
60
Table of Contents
Termination Other Than After a Change in Control
The employment agreements provide for payments of certain benefits upon the termination of the
employment of the NEO. The NEO’s rights upon termination of his or her employment depend upon the
circumstances of the termination. Central to an understanding of the rights of each NEO under the
employment agreements is an understanding of the definitions of “Cause” and “Good Reason” as those
terms are used in those agreements. For purposes of the employment agreements, the Term of
Employment may be terminated at any time by the Company upon any of the following:
| • |
Death of the NEO;
|
|
| • |
In the event of physical or mental disability where the NEO is unable to perform his/her
duties;
|
|
| • |
For Cause or Material Breach where Cause is defined as conviction of certain crimes and/or
felonies, and Material Breach is defined to include certain specified failures to perform
duties or uphold fiduciary responsibilities; or
|
|
| • |
Otherwise at the discretion of the Company and subject to the termination obligations set
forth in the employment agreement.
|
The NEO may terminate the Term of Employment at any time upon any of the following:
| • |
Upon the death of the NEO;
|
|
| • |
In the event of physical or mental disability where the NEO is unable to perform his/her
duties;
|
|
| • |
Upon the Company’s material reduction in the NEO’s authority, perquisites, position, title
or responsibilities or other actions that would give the NEO the right to resign for “Good
Reason;” or
|
|
| • |
Otherwise at the discretion of the NEO and subject to the termination obligations set forth
in the employment agreement.
|
The benefits to be provided to the NEO in each of these situations are described in the tables
below, which assume that the termination had taken place in fiscal
2011.
Termination after a Change in Control
A termination after a Change in Control is similar to the severance provisions described above,
except that the NEO becomes entitled to benefits under these provisions only if his employment is
terminated within twelve months following a Change in Control. A Change in Control for this purpose
is defined to mean (i) the acquisition by any person or entity of the beneficial ownership of
securities representing 50% or more of the outstanding securities of the Company having the right
under ordinary circumstances to vote at an election of the Board of Directors of the Company; (ii)
the date on which the majority of the members of the Board of Directors of the Company consists of
persons other than directors nominated by a majority of the directors on the Board of Directors at
the time of their election; and (iii) the consummation of certain types of transactions, including
mergers and the sale or other disposition of all, or substantially all, of the Company’s assets.
As with the severance provisions described above, the rights to which the NEO is entitled under the
Change in Control provisions upon a termination of employment are dependent on the circumstances of
the termination. The definitions of Cause and other reasons for termination are the same in this
termination scenario as in a termination other than after a Change in Control.
Payment Obligations Under Employment Agreements Upon Termination of Employment of NEO
The following tables set forth Astrotech’s potential future payment obligations under the
employment agreements under the circumstances specified upon a termination of the employment of our
NEOs. Unless otherwise noted, the descriptions of the payments below are applicable to all of the
tables relating to potential payments upon termination or a Change in Control.
Equity
Acceleration — The Company’s employment agreements include provisions to accelerate the
vesting of outstanding equity awards upon termination, including termination pursuant to a Change
in Control. The Compensation Committee oversees the Executive Stock Option Plan and is charged with
the responsibility of reviewing and granting exceptions to previously issued equity grants on a
case by case basis.
61
Table of Contents
Health
Care Benefits — The employment agreements generally provide that, after resignation for Good
Reason or termination without Cause, the Company will continue providing medical, dental, and
vision coverage to the NEO and the NEO’s dependents at least equal to that which would have been
provided if the NEO’s employment had not terminated, if such coverage continues to be available to
the Company, until the earlier of (a) the date the NEO becomes eligible for any comparable medical
benefits provided by any other employer or (b) the end date of an enumerated period following the
NEO’s date of termination.
As termination benefits would be payable upon an event following June 30, 2010, the tables below
reflect salary changes made by the Compensation Committee for fiscal year 2011.
Thomas
B. Pickens, III
| Resignation | ||||||||||||||||||||
| Resignation | Termination | for Good | ||||||||||||||||||
| for Good | for Other | Reason or | ||||||||||||||||||
| Reason or | Than Good | Termination | ||||||||||||||||||
| Termination | Reason or | Without Cause | ||||||||||||||||||
| Benefits and Payments | Without | Termination | After Change- | |||||||||||||||||
| Upon Termination | Cause ($) (1) | With Cause ($) | in-Control ($) (2) | Disability ($) | Death ($) | |||||||||||||||
|
|
||||||||||||||||||||
|
Compensation:
|
||||||||||||||||||||
|
|
||||||||||||||||||||
|
Base Salary
|
399,000 | — | 598,500 | 399,000 | 399,000 | |||||||||||||||
|
|
||||||||||||||||||||
|
Bonus
(3)
|
99,750 | — | 149,625 | 99,750 | 99,750 | |||||||||||||||
|
|
||||||||||||||||||||
|
Equity
(4)
:
|
||||||||||||||||||||
|
|
||||||||||||||||||||
|
Restricted Stock
|
930,000 | — | 930,000 | 930,000 | 930,000 | |||||||||||||||
|
|
||||||||||||||||||||
|
Spacetech Equity Awards
|
361,782 | — | 361,782 | 361,782 | 361,782 | |||||||||||||||
|
|
||||||||||||||||||||
|
Benefits and Perquisites:
|
||||||||||||||||||||
|
|
||||||||||||||||||||
|
Post-Termination Health Care
|
19,557 | — | 29,336 | 19,557 | 19,557 | |||||||||||||||
|
|
||||||||||||||||||||
|
Accrued Vacation Pay
(5)
|
38,365 | 38,365 | 38,365 | 38,365 | 38,365 | |||||||||||||||
|
|
||||||||||||||||||||
|
|
||||||||||||||||||||
|
Total:
|
1,848,454 | 38,365 | 2,107,608 | 1,848,454 | 1,848,454 | |||||||||||||||
| (1) |
Pursuant to the employment agreement, this estimate assumes twelve months of base salary
and benefits after termination.
|
|
| (2) |
Provision on change in control provides for 18 months salary if terminated.
|
|
| (3) |
Bonus calculated at 50% of estimated maximum bonus.
|
|
| (4) |
Astrotech equity awards assumed exercise price of $1.24, which was the closing ASTC stock price as of
June 30, 2010. Unvested options with a strike price above market value as of June 30, 2010 were not included in
the calculation. Spacetech warrants were valued based on
the Black Scholes Model and Spacetech restricted stock was
based on a third party valuation.
|
|
| (5) |
Assumes 5 weeks of accrued vacation upon termination (maximum contractual allowance).
|
62
Table of Contents
Don M. White
| Resignation | ||||||||||||||||||||
| Resignation | Termination | for Good | ||||||||||||||||||
| for Good | for Other | Reason or | ||||||||||||||||||
| Reason or | Than Good | Termination | ||||||||||||||||||
| Benefits and | Termination | Reason or | Without Cause | |||||||||||||||||
| Payments Upon | Without | Termination | After Change- | |||||||||||||||||
| Termination | Cause ($) (1) | With Cause ($) | in-Control ($) (2) | Disability ($) | Death ($) | |||||||||||||||
|
|
||||||||||||||||||||
|
Compensation
(3)
:
|
||||||||||||||||||||
|
|
||||||||||||||||||||
|
Base Salary
|
112,500 | — | 168,750 | 112,500 | 112,500 | |||||||||||||||
|
|
||||||||||||||||||||
|
Bonus
|
56,250 | 84,375 | 56,250 | 56,250 | ||||||||||||||||
|
|
||||||||||||||||||||
|
Equity:
|
||||||||||||||||||||
|
|
||||||||||||||||||||
|
Restricted Stock
(4)
|
93,000 | — | 93,000 | 93,000 | 93,000 | |||||||||||||||
|
|
||||||||||||||||||||
|
Options
(5)
|
34,125 | — | 34,125 | 34,125 | 34,125 | |||||||||||||||
|
|
||||||||||||||||||||
|
Benefits and Perquisites:
|
||||||||||||||||||||
|
|
||||||||||||||||||||
|
Post-Termination Health Care
|
6,998 | — | 10,497 | 6,998 | 6,998 | |||||||||||||||
|
|
||||||||||||||||||||
|
Life Insurance Premiums
|
— | — | — | — | — | |||||||||||||||
|
|
||||||||||||||||||||
|
Accrued Vacation Pay
(6)
|
21,635 | 21,635 | 21,635 | 21,635 | 21,635 | |||||||||||||||
|
|
||||||||||||||||||||
|
|
||||||||||||||||||||
|
Total:
|
324,508 | 21,635 | 412,382 | 324,508 | 324,508 | |||||||||||||||
| (1) |
Pursuant to the employment agreement, this estimate assumes six months of base salary and
benefits after termination.
|
|
| (2) |
Provision on change in control provides for nine months salary if terminated.
|
|
| (3) |
Bonus estimated at 50% of maximum bonus.
|
|
| (4) |
Equity awards assumed exercise price of $1.24, which was the ASTC closing stock price as of
June 30, 2010.
|
|
| (5) |
Option awards assumed market price of $1.24, which was the ASTC closing stock price as of
June 30, 2010. Unvested options with a strike price above market value as of June 30, 2010, were not included in
the calculation.
|
|
| (6) |
Assumes five weeks of accrued vacation upon termination (maximum contractual allowance).
|
63
Table of Contents
Director Compensation
Overview
Astrotech’s director compensation program consists of cash-based as well as equity-based
compensation. The Board of Directors recognizes that cash compensation is an integral part of the
compensation program and has instituted a fixed and variable fee structure to provide compensation
relative to the required time commitment of each director. The equity component of Astrotech’s
director compensation program is designed to build an ownership stake in the Company while
conveying an incentive to directors relative to the returns recognized by our Shareholders.
Cash-Based Compensation
Company directors, other than the Chairman of the Audit Committee and Chairman of the Compensation
Committee, receive an annual stipend of $30,000 paid upon the annual election of each non-employee
director or upon joining the Board of Directors. The Chairman of the Audit Committee receives an
annual stipend of $40,000 and the Chairman of the Compensation Committee receives an annual stipend
of $35,000, recognizing the additional duties and responsibilities of those roles. In addition,
each non-employee director receives a meeting fee of $3,000 for each meeting of the Board of
Directors attended in person and $1,000 for each such meeting attended by conference call.
Audit Committee members received $750 for attendance to meetings in person or
by conference call, while the Compensation Committee and the Governance and Nominating Committee
members received $500 for attendance to meetings in person or by conference call.
All directors are reimbursed ordinary and reasonable expenses incurred in
exercising their responsibilities in accordance with Travel and Entertainment Expense Reimbursement
policy applicable to all employees of the Company.
Equity-Based Compensation
Under provisions adopted by the Board of Directors, each non-employee director receives 25,000
shares of restricted common stock issued upon his first election to the Board of Directors, subject
to board discretion. Restricted stock and stock options granted under the plan vest 25% annually,
beginning after one year and terminate in 10 years. Already vested shares do not expire upon
termination of the director’s term on the Board of Directors.
Pension and Benefits
The non-employee directors are not eligible to participate in the Company’s benefits plans,
including the 401(k) plan.
Indemnification Agreements
The Company is party to indemnification agreements with each of its directors that require the
Company to indemnify the directors to the fullest extent permitted by Washington state law. The
Company’s certificate of incorporation also requires the Company to indemnify both the directors
and officers of the Company to the fullest extent permitted by Washington state law.
64
Table of Contents
Fiscal Year 2010 Non-Employee Director Compensation Table
| Restricted | ||||||||||||||||||||
| Fees Earned or | Stock | Stock | All other | |||||||||||||||||
| Paid in Cash | Awards | Options | compensation | Total | ||||||||||||||||
| Name | ($) | ($) | ($) | ($) | ($) | |||||||||||||||
|
|
||||||||||||||||||||
|
Mark Adams
|
54,250 | — | — | — | 54,250 | |||||||||||||||
|
|
||||||||||||||||||||
|
John A. Oliva
|
60,500 | — | — | — | 60,500 | |||||||||||||||
|
|
||||||||||||||||||||
|
William
F. Readdy
(1)
|
46,000 | — | — | 12,708 | 58,708 | |||||||||||||||
|
|
||||||||||||||||||||
|
Sha-Chelle Manning
|
47,500 | — | — | — | 47,500 | |||||||||||||||
|
|
||||||||||||||||||||
|
|
||||||||||||||||||||
|
Total Total
|
208,250 | — | — | 12,708 | 220,958 | |||||||||||||||
|
|
||||||||||||||||||||
| (1) |
Mr. Readdy served as a
consultant to Astrogenetix during fiscal year 2010. In November 2009, he received $12,708
in compensation for consulting fees and for the reimbursement of expenses incurred during
his consulting-related international travel.
|
65
Table of Contents
The following table sets forth as of June 30, 2010, certain information regarding the beneficial
ownership of the Company’s outstanding common stock held by (i) each person known by the Company to
be a beneficial owner of more than five percent of any outstanding class of the Company’s capital
stock, (ii) each of the Company’s directors, (iii) the Company’s Chief Executive Officer and four
most highly compensated executive officers at the end of the Company’s last completed fiscal year,
and (iv) all directors and executive officers of the Company as a group. Unless otherwise described
below, each of the persons listed in the table below has sole voting and investment power with
respect to the shares indicated as beneficially owned by each party.
| Amount | ||||||||||||||||
| and Nature | ||||||||||||||||
| of | Shares | Percentage | ||||||||||||||
| Name and Address of Beneficial | Beneficial | Subject to | of | |||||||||||||
| Owners | Ownership# | Options ($) | Total ($) | Class (1) | ||||||||||||
|
|
||||||||||||||||
|
Certain Beneficial Owners
|
||||||||||||||||
|
|
||||||||||||||||
|
SMH Capital Advisors, Inc.
(2)
|
3,228,192 | — | 3,228,192 | 17.0 | % | |||||||||||
|
|
||||||||||||||||
|
Bruce & Co., Inc.
(3)
|
1,120,073 | — | 1,120,073 | 5.9 | % | |||||||||||
|
|
||||||||||||||||
|
Astrium GmbH
(4)
|
1,099,245 | — | 1,099,245 | 5.8 | % | |||||||||||
|
|
||||||||||||||||
|
Non-Employee Directors:
|
||||||||||||||||
|
|
||||||||||||||||
|
Mark Adams
(5)
|
685,000 | 18,500 | 703,500 | 3.7 | % | |||||||||||
|
|
||||||||||||||||
|
John A. Oliva
(6)
|
170,000 | 17,500 | 187,500 | 1.0 | % | |||||||||||
|
|
||||||||||||||||
|
William F. Readdy
(7)
|
150,000 | 17,500 | 167,500 | * | ||||||||||||
|
|
||||||||||||||||
|
Sha-Chelle Manning
(8)
|
135,000 | — | 135,000 | * | ||||||||||||
|
|
||||||||||||||||
|
Named Executive Officers:
|
||||||||||||||||
|
|
||||||||||||||||
|
Thomas B. Pickens, III
(9)
|
1,850,000 | 102,000 | 1,952,000 | 10.3 | % | |||||||||||
|
|
||||||||||||||||
|
John M. Porter
(10)
|
300,000 | 100,000 | 400,000 | 2.1 | % | |||||||||||
|
|
||||||||||||||||
|
Don M. White
(11)
|
77,000 | 22,600 | 99,600 | * | ||||||||||||
|
|
||||||||||||||||
|
James D. Royston
(12)
|
300,000 | 80,100 | 380,100 | 2.0 | % | |||||||||||
|
|
||||||||||||||||
|
All Directors and Named Executive Officers as a Group (8 persons)
|
3,667,000 | 358,200 | 4,025,200 | 21.1 | % | |||||||||||
| * |
Indicates beneficial ownership of less than 1% of the outstanding shares of common stock.
|
|
| # |
Includes unvested restricted stock grants.
|
| (1) |
Calculated pursuant to Rule 13d-3(d) of the Securities Exchange Act of 1934. Under Rule
13d-3(d), shares not outstanding which are subject to options, warrants, rights or conversion
privileges exercisable within 60 days are deemed outstanding for the purpose of calculating
the number and percentage owned by a person, but not deemed outstanding for the purpose of
calculating the number and percentage owned by any other person listed. As of June 30, 2010,
we had 19,040,369 shares of common stock outstanding, including
2,180,205 of restricted stock with voting rights.
|
|
| (2) |
Held by SMH Capital Advisors, Inc. in discretionary accounts for the benefit of its clients.
This holder’s address is 4800 Overton Plaza, Suite 300, Ft. Worth, Texas 76109. Includes
information from Form 13D filed by SMH Capital Advisors, Inc. on February 1, 2010.
|
|
| (3) |
Bruce & Co., Inc., is the investment manager for Bruce Fund, Inc., a Maryland registered
investment company with its principle business conducted at 20 North Wacker Dr., Suite 2414,
Chicago, IL 60606. Includes information from Schedule 13G files by Bruce & Co., Inc. on
December 31, 2009.
|
|
| (4) |
Astrium GmbH’s address is Hünefeldstraße 1-5, Postfach 105909, D-28361 Bremen, Germany.
|
|
| (5) |
Includes 172,500 shares of unvested restricted stock. On August 19, 2010, 53,334 restricted
shares vest.
|
|
| (6) |
Includes 157,500 shares of unvested restricted stock. On August 19, 2010, 48,334
restricted shares vest.
|
|
| (7) |
Includes 122,500 shares of unvested restricted stock. On August 19, 2010, 36,667
restricted shares vest.
|
|
| (8) |
Includes 128,750 shares of unvested restricted stock. On August 19, 2010, 36,667
restricted shares vest.
|
|
| (9) |
Includes 750,000 shares of unvested restricted stock. On August 19, 2010, 250,000
restricted shares vest.
|
|
| (10) |
Includes 300,000 shares of unvested restricted stock. On August 19, 2010, 100,000
restricted shares vest.
|
|
| (11) |
Includes 75,000 shares of unvested restricted stock. On August 19, 2010, 25,000
restricted shares vest.
|
|
| (12) |
Includes 150,000 shares of unvested restricted stock. James Royston, former President, was terminated in July 2010.
|
66
Table of Contents
Securities Authorized for Issuance Under Equity Compensation Plans.
Equity Compensation Plan Information
| (c) | ||||||||||||||||||
| (a) | Number of securities | |||||||||||||||||
| Number of | (b) | remaining available | ||||||||||||||||
| securities to be | Weighted- | at September 30, | ||||||||||||||||
| issued upon | average exercise | 2009 for future | ||||||||||||||||
| exercise of | price of | issuance under | ||||||||||||||||
| outstanding | outstanding | equity compensation | ||||||||||||||||
| options, | options, | plans (excluding | ||||||||||||||||
| Options | warrants and | warrants and | securities reflected in | |||||||||||||||
| Plan Name | Type | Authorized | rights | rights | column (a) | |||||||||||||
|
|
||||||||||||||||||
|
Plans
Previously Approved by Security Holders
|
||||||||||||||||||
|
|
||||||||||||||||||
|
1 The 1994 Plan
(1)
|
Common Stock Options Incentive or Non-Qualified | 395,000 | 24,900 | $ | 24.53 | 0 | ||||||||||||
|
|
||||||||||||||||||
|
2 Directors Stock Option Plan
(2)
|
Non-Qualified Common Stock Options | 50,000 | 15,000 | $ | 12.64 | 30,000 | ||||||||||||
|
|
||||||||||||||||||
|
3 1997 Employee Stock Purchase Plan
(3)
|
Common Stock | 150,000 | 0 | N/A | 1,735 | |||||||||||||
|
|
||||||||||||||||||
|
4 2008 Stock Incentive Plan
4)
|
Common options, restricted stock, stock units and other equity awards | 5,500,000 | 705,741 | $ | 0.40 | 329,389 | ||||||||||||
| (1) |
Under the terms of the 1994 Plan, the number and price of the options granted to employees
is determined by the Board of Directors and such options vest, in most cases, incrementally
over a period of four years and expire no more than ten years after
the date of grant. As of October 2009, additional shares cannot be
granted from the 1994 Plan.
|
|
| (2) |
Options under the Directors’ Plan vest after one year and expire seven years from the date of
grant.
|
|
| (3) |
The Employee Stock Purchase plan allowed eligible employees to purchase shares of Common
Stock of the Company at prices no less than 85% of the current market price. Company
discontinued employee purchases of common stock under the plan in the fourth quarter of fiscal
year 2007.
|
|
| (4) |
The 2008 Stock Incentive Plan authorizes the award of stock grants, restricted stock and
stock options. The number and price of the awards granted to employees is determined by the
Board of Directors and such options vest, in most cases, incrementally over a period of four
years and expire no more than ten years after the date of grant. As of June 30, 2010,
2,180,205 shares of unvested restricted stock were outstanding.
|
67
Table of Contents
Additional information on the Company’s equity compensation plan can be found under Item 11-
Executive Compensation, above.
Director Independence
The Board of Directors has determined each of the following directors to be an “independent
director” as such term is defined by Nasdaq Listing Rule 5605(a)(2):
Mark E. Adams
John A. Oliva
William F. Readdy
Sha-Chelle Manning
The Board of Directors has also determined that each member of the Audit Committee,
Compensation Committee and Corporate Governance and Nominating
Committee during fiscal year 2010 meet the independence requirements applicable to those
Committees prescribed by Nasdaq and SEC rules.
The Company’s Independent Registered Public Accounting Firm
In March 2010, the Astrotech Shareholders ratified the appointment of PMB Helin Donovan LLP as the
independent registered public accounting firm to audit the Company’s financial statements. There
were no discussions between the Company and PMB Helin Donovan LLP regarding the application of
accounting principles to specific completed or contemplated transactions, or the type of audit
opinion that might be rendered on the Company’s financial statements. Furthermore, no written or
oral advice was provided by PMB Helin Donovan LLP that was an important factor considered by the
Company in reaching a decision as to any accounting, auditing or financial reporting issue. The
Company has not consulted with PMB Helin Donovan LLP regarding any matter that was either the
subject of a disagreement (as defined in paragraph (a)(1)(iv) of Item 304 of Regulation S-K and the
related instructions to this item) or a reportable event (as described in paragraph (a)(1)(v) of
Item 304 of Regulation S-K).
68
Table of Contents
The following table presents fees paid or to be paid for professional audit services rendered by
PMB Helin Donovan LLP for the audit of the Company’s annual financial statements during the years
ended June 30, 2010 and 2009. PMB Helin Donovan LLP did not provide tax or other consulting
services during 2010 or 2009.
| Fiscal 2010 | Fiscal 2009 | |||||||
|
|
||||||||
|
Audit Fees
1
|
$ | 191,000 | $ | 161,000 | ||||
|
Tax Fees
|
— | — | ||||||
|
All Other Fees
|
— | — | ||||||
|
|
||||||||
|
Total All Fees
|
$ | 191,000 | $ | 161,000 | ||||
|
|
||||||||
| (1) |
Audit Fees consisted of fees billed for professional services rendered for the audit of the
Company’s annual financial statements and review of the interim financial statements included
in quarterly reports.
|
Audit Committee Pre-Approval Policy
The Audit Committee is responsible for appointing, setting compensation for, and overseeing the
work of PMB Helin Donovan LLP, the Company’s independent registered public accountants. In order to
assure that the provision of such services does not impair the auditors’ independence, the Audit
Committee has established a policy requiring pre-approval of all audit and permissible non-audit
services to be provided by independent registered public accountants. The policy provides for the
general pre-approval of specific types of services and gives detailed guidance to management as to
the specific audit, audit-related, and tax services that are eligible for general pre-approval. The
policy requires specific pre-approval of the annual audit engagement, most statutory or subsidiary
audits, and all permissible non-audit services for which no general pre-approval exists. For both
audit and non-audit pre-approvals, the Audit Committee will consider whether such services are
consistent with applicable law and SEC rules and regulations concerning auditor independence.
The policy delegates to the Chairman the authority to grant certain specific pre-approvals;
provided, however, that the Chairman is required to report the granting of any pre-approvals to the
Audit Committee at its next regularly scheduled meeting. The policy prohibits the Audit Committee
from delegating to management the Committee’s responsibility to pre-approve services performed by
the independent registered public accountants.
69
Table of Contents
(a) The following documents are filed as part of the report:
Financial Statements.
The following consolidated financial statements of Astrotech Corporation and its wholly-owned and
majority-owned subsidiaries and related notes, are set forth herein as indicated below.
| Page | ||||
|
|
||||
| 25 | ||||
|
|
||||
| 26 | ||||
|
|
||||
| 27 | ||||
|
|
||||
| 28 | ||||
|
|
||||
| 29 | ||||
|
|
||||
| 30 | ||||
|
|
||||
| 82 | ||||
70
Table of Contents
| Exhibit No. | Description of Exhibit | |||||
|
|
||||||
| (2 ) |
Articles of Incorporation and Bylaws
|
|||||
|
|
||||||
| 2.1 |
Amended and Restated Articles of Incorporation of the Registrant, as amended (incorporated by reference to Exhibit 4.1 of the Registrant’s Registration Statement (Reg.
No. 333-126772), and all amendments thereto, filed with the Securities and Exchange Commission on July 21, 2005)
|
|||||
|
|
||||||
| 2.2 |
Bylaws of the Registrant (incorporated by reference to the Registrant’s registration statement on Form S-1, File No. 33- 97812, and all amendments thereto, filed with
the Securities and Exchange Commission on October 5, 1995)
|
|||||
|
|
||||||
| (4 ) |
Instruments Defining the Rights of Security Holders, including Indentures
|
|||||
|
|
||||||
| 4.1 |
Designation of Rights, Terms and Preferences of Series B Senior Convertible Preferred Stock of the Registrant (incorporated by reference to Exhibit 4.3 of the
Registrant’s Registration Statement (Reg. No. 333-126772), and all amendments thereto, filed with the Securities and Exchange Commission on July 21, 2005)
|
|||||
|
|
||||||
| 4.2 |
Preferred Stock Purchase Agreement between the Registrant and DaimlerChrysler Aerospace AG dated as of August 2, 1999 (incorporated by reference to Exhibit 4.2 of the
Registrant’s Report on Form 8-K filed with the Securities and Exchange Commission on August 19, 1999)
|
|||||
|
|
||||||
| 4.3 |
Registration Rights Agreement between the Registrant and DaimlerChrysler Aerospace AG dated as of August 5, 1999 (incorporated by reference to Exhibit 4.3 of the
Registrant’s Report on Form 8-K filed with the Securities and Exchange Commission on August 19, 1999)
|
|||||
|
|
||||||
| 4.4 |
Indenture dated as of October 15, 1997 between the Registrant and First Union National Bank, as Trustee, relating to the Registrant’s 8.0% Convertible Subordinated Notes
due 2007 (incorporated by reference to Exhibit 4.1 of the Registrant’s Registration Statement on Form S-3 (Reg. No. 333-43221) filed with the Securities and Exchange Commission on December 24, 1997)
|
|||||
|
|
||||||
| 4.5 |
Designation of Right, Terms and Preferences of Series D Junior Participating Preferred Stock of Astrotech Corporation (incorporated by reference to Exhibit 3.1 of
Registrant’s Form 8-A filed with the Securities and Exchange Commission on July 31, 2009).
|
|||||
|
|
||||||
| 4.6 |
Rights Agreement, dated as of July 29, 2009, between Astrotech Corporation and American Stock Transfer & Trust Company, LLC, as Rights Agent (incorporated by reference to
Exhibit 4.1 of the Registrant’s Form 8-A filed with the Securities and Exchange Commission on July 31, 2009).
|
|||||
|
|
||||||
| 4.7 |
Amendment
One to Rights Agreement, dated as of July 29, 2010, between Astrotech
Corporation and American Stock Transfer & Trust Company, LLC, as
Rights Agent (incorporated by reference to Exhibit 4.1 of the
Registrant’s Form 8-A/A filed with the Securities and Exchange
Commission on July 29, 2009).
|
|||||
71
Table of Contents
| Exhibit No. | Description of Exhibit | |||||
|
|
||||||
| (10 ) |
Material Contracts
|
|||||
|
|
||||||
| 10.1 |
Letter Agreement dated August 15, 1995, by and between the Registrant and Mitsubishi Corporation (incorporated by reference to Exhibit 10.7 of the Registrant’s
Registration Statement on Form S-1 (Reg. No. 33-97812) filed with the Securities and Exchange Commission on October 5, 1995)
|
|||||
|
|
||||||
| 10.2 |
SPACEHAB, Incorporated 1995 Directors’ Stock Option Plan as amended and restated effective October 21, 1997 (incorporated by reference to Exhibit B of the
Registrant’s Definitive Proxy Statement on Schedule 14A filed with the Securities and Exchange Commission on September 12, 1997)
|
|||||
|
|
||||||
| 10.3 |
Office Building Lease Agreement, dated October 6, 1993, between Astrotech and the Secretary of the Air Force (Lease number SPCVAN – 2-94-001) (incorporated by reference to
Exhibit 10.52 of the Registrant’s Annual Report on Form 10-K for the fiscal year ended June 30, 1997 filed with the Securities and Exchange Commission on September 12, 1997)
|
|||||
|
|
||||||
| 10.4 |
SPACEHAB, Incorporated 1994 Stock Incentive Plan as amended and restated effective October 14, 1999 (incorporated by reference to Exhibit 10.90 of the Registrant’s
Annual Report on Form 10-K for the fiscal year ended June 30, 1999 filed with the Securities and Exchange Commission on September 17, 1999)
|
|||||
|
|
||||||
| 10.5 |
Agreement, dated September 30, 2004, between the Registrant and Dr. Shelley A. Harrison (incorporated by reference to Exhibit 10.7 of the Registrant’s
Registration Statement (Reg. No. 333-126772), and all amendments thereto, filed with the Securities and Exchange Commission on July 21, 2005)
|
|||||
|
|
||||||
| 10.6 |
Lease for property at 300 D Street, SW, Suite #814, Washington, DC, dated as of December 16, 1998, by and between the Registrant and The Washington Design Center, LLC
(incorporated by reference to Exhibit 10.8 of the Registrant’s Registration Statement (Reg. No. 333-126772), and all amendments thereto, filed with the Securities and Exchange Commission on July 21, 2005)
|
|||||
|
|
||||||
| 10.7 |
Sublease Agreement, dated as of July, 2002, between the Registrant and The Boeing Company (incorporated by reference to Exhibit 10.9 of the Registrant’s Registration
Statement (Reg. No. 333-126772), and all amendments thereto, filed with the Securities and Exchange Commission on July 21, 2005)
|
|||||
|
|
||||||
| 10.8 |
SPACEHAB, Incorporated 1997 Employee Stock Purchase Plan (incorporated by reference to Exhibit C of the Registrant’s Definitive Proxy Statement on Schedule 14A filed
with the Securities and Exchange Commission on September 12, 1997)
|
|||||
72
Table of Contents
| Exhibit No. | Description of Exhibit | |||||
|
|
||||||
| 10.9 |
Agreement between Astrotech Space Operations, Inc. and McDonnell Douglas Corporation, dated January 7, 2000 (incorporated by reference to Exhibit 10.103 of the
Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2000 filed with the Securities and Exchange Commission on May 12, 2000)
|
|||||
|
|
||||||
| 10.10 |
Agreement between Astrotech Space Operations, Inc. and Lockheed Martin Commercial Launch Services, Inc., dated January 24, 2000 (incorporated by reference to
Exhibit 10.104 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2000 filed with the Securities and Exchange Commission on May 12, 2000)
|
|||||
|
|
||||||
| 10.11 |
Credit agreement dated as of August 30, 2001 by and between Astrotech Florida Holdings, Inc. and SouthTrust Bank (incorporated by reference to Exhibit 10.114 of the
Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2001 filed with the Securities and Exchange Commission on November 8, 2001)
|
|||||
|
|
||||||
| 10.12 |
Employment and Non-Interference Agreement, dated as of April 1, 2003, between the Registrant and Michael E. Kearney (incorporated by reference to Exhibit 10.119 of the
Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2003 filed with the Securities and Exchange Commission on May 14, 2003)
|
|||||
|
|
||||||
| 10.13 |
First amendment to the Credit Agreement dated as of August 30, 2001 by and between Astrotech Florida Holdings, Inc. and SouthTrust Bank (incorporated by reference to
Exhibit 10.122 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2003 filed with the Securities and Exchange Commission on February 13, 2004)
|
|||||
|
|
||||||
| 10.14 |
Employment and Non-Interference Agreement, dated as of January 9, 2004, between the Registrant and Brian K. Harrington (incorporated by reference to Exhibit 10.123 of the
Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2004 filed with the Securities and Exchange Commission on May 12, 2004)
|
|||||
|
|
||||||
| 10.15 |
50 Year Lease, dated as of February 1, 1991, between the Registrant and Canaveral Port Authority (incorporated by reference to Exhibit 10.17 of the Registrant’s
Registration Statement (Reg. No. 333-126772), and all amendments thereto, filed with the Securities and Exchange Commission on July 21, 2005)
|
|||||
|
|
||||||
| 10.16 |
Commercial Contract, dated as of March 3, 2005, between the Registrant and Tamir Silvers, LLC (incorporated by reference to Exhibit 10.18 of the Registrant’s
Registration Statement (Reg. No. 333-126772), and all amendments thereto, filed with the Securities and Exchange Commission on July 21, 2005)
|
|||||
73
Table of Contents
| Exhibit No. | Description of Exhibit | |||||
|
|
||||||
| 10.17 |
Lease Agreement, dated as of February 18, 2005, between the Registrant and R & H Investments, a California partnership (incorporated by reference to Exhibit 10.19 of
the Registrant’s Registration Statement (Reg. No. 333-126772), and all amendments thereto, filed with the Securities and Exchange Commission on July 21, 2005)
|
|||||
|
|
||||||
| 10.18 |
Fixed Price Subcontract 889208 for Wideband Gapfiller Satellite Program Launch Site Payload Processing Facilities and Services, dated as of January 18, 2005, between Boeing
Satellite Systems, Inc. and Astrotech Space Operations, Inc. (incorporated by reference to Exhibit 10.20 of the Registrant’s Registration Statement (Reg. No. 333-126772), and all amendments thereto, filed with the Securities and
Exchange Commission on
July 21, 2005)
|
|||||
|
|
||||||
| 10.19 |
Loan Agreement, dated as of February 11, 2005, between the Registrant and First American Bank, SSB (incorporated by reference to Exhibit 10.125 to the Registrant’s
Quarterly Report on Form 10-Q for the quarter ended December 31, 2004 filed with the Securities and Exchange Commission on February 14, 2005)
|
|||||
|
|
||||||
| 10.20 |
Letter Contract No. GF80726B11, dated as of February 18, 2004, between the Registrant and Lockheed Martin Corporation (incorporated by reference to Exhibit 10.23 of
the Registrant’s Registration Statement (Reg. No. 333-126772), and all amendments thereto, filed with the Securities and Exchange Commission on July 21, 2005)
|
|||||
|
|
||||||
| 10.21 |
ISS Program Integration and Control Contract, between SPACEHAB Government Services, Inc. and ARES Corporation (incorporated by reference to Exhibit 10.24 of the
Registrant’s Registration Statement (Reg. No. 333-126772), and all amendments thereto, filed with the Securities and Exchange Commission on July 21, 2005)
|
|||||
|
|
||||||
| 10.22 |
Asset Purchase Agreement, dated as of December 19, 2000, between the Registrant and Astrium GmbH. (incorporated by reference to Exhibit 10.27 of the Registrant’s
Registration Statement (Reg. No. 333-126772), and all amendments thereto, filed with the Securities and Exchange Commission on July 21, 2005)
|
|||||
|
|
||||||
| 10.23 |
Amendment No. 1 to Asset Purchase Agreement, dated as of December 19, 2000, between the Registrant and Astrium GmbH, dated July 3, 2001 (incorporated by reference to
Exhibit 10.28 of the Registrant’s Registration Statement (Reg. No. 333-126772), and all amendments thereto, filed with the Securities and Exchange Commission on July 21, 2005)
|
|||||
|
|
||||||
| 10.24 |
Lease Agreement, dated as of February 28, 2001, between the Registrant and Astrium GmbH (incorporated by reference to Exhibit 10.29 of the Registrant’s Registration
Statement (Reg. No. 333-126772), and all amendments thereto, filed with the Securities and Exchange Commission on July 21, 2005)
|
|||||
74
Table of Contents
| Exhibit No. | Description of Exhibit | |||||
|
|
||||||
| 10.25 |
Binding Term Sheet, dated as of December 19, 2001, between the Registrant and Astrium GmbH, amending the Lease Agreement, dated as of February 28, 2001, between the
Registrant and Astrium GmbH (incorporated by reference to Exhibit 10.30 of the Registrant’s Registration Statement (Reg. No. 333-126772), and all amendments thereto, filed with the Securities and Exchange Commission on July 21,
2005)
|
|||||
|
|
||||||
| 10.26 |
Lease Agreement, dated as of July 3, 2001, between the Registrant and Astrium GmbH (incorporated by reference to Exhibit 10.31 of the Registrant’s Registration
Statement (Reg. No. 333-126772), and all amendments thereto, filed with the Securities and Exchange Commission on July 21, 2005)
|
|||||
|
|
||||||
| 10.27 |
Agreement No. 48801 for Provision of Payload Processing Facilities and Support in Conjunction with Commercial Atlas Launches, between Astrotech Space Operations, Inc. and
Lockheed Martin Commercial Launch Services, Inc. (incorporated by reference to Exhibit 10.32 of the Registrant’s Registration Statement (Reg. No. 333-126772), and all amendments thereto, filed with the Securities and Exchange
Commission on July 21,
2005)
|
|||||
|
|
||||||
| 10.28 |
Contract No. NNK04LA75C, dated as of July 2, 2004, between Astrotech Space Operations, Inc. and John F. Kennedy Space Center, NASA (incorporated by reference to
Exhibit 10.33 of the Registrant’s Registration Statement (Reg. No. 333-126772), and all amendments thereto, filed with the Securities and Exchange Commission on July 21, 2005)
|
|||||
|
|
||||||
| 10.29 |
Agreement and Statement of Work, dated as of April 25, 1996 and as amended by Amendment No. 3 as of December 6, 2002, between Astrotech Space Operations, Inc. and Sea
Launch Company, L.L.C. (incorporated by reference to Exhibit 10.34 of the Registrant’s Registration Statement (Reg. No. 333-126772), and all amendments thereto, filed with the Securities and Exchange Commission on July 21,
2005)
|
|||||
|
|
||||||
| 10.30 |
Employment and Non-Interference Agreement, dated as of May 12, 2005, between the Registrant and Michael E. Bain (incorporated by reference to Exhibit 10.35 of the
Registrant’s Registration Statement (Reg. No. 333-126772), and all amendments thereto, filed with the Securities and Exchange Commission on July 21, 2005)
|
|||||
|
|
||||||
| 10.31 |
Employment and Non-Interference Agreement, dated as of May 12, 2005, between the Registrant and E. Michael Chewning (incorporated by reference to Exhibit 10.36 of the
Registrant’s Registration Statement (Reg. No. 333-126772), and all amendments thereto, filed with the Securities and Exchange Commission on July 21, 2005)
|
|||||
75
Table of Contents
| Exhibit No. | Description of Exhibit | |||||
|
|
||||||
| 10.32 |
Settlement Agreement
and Mutual Release of All Claims, dated as of May 25, 2005, among the Registrant and
Lloyd’s of London, Goshawk Syndicate No. 102, Euclidian Syndicate No. 1243,
Ascot Underwriting Ltd. Syndicate No. 1414, and R.J. Kiln Syndicate No. 510
(incorporated by reference to Exhibit 10.37 of the Registrant’s Registration Statement
(Reg. No. 333-126772), and all amendments thereto, filed with the Securities and Exchange Commission on July 21, 2005)
|
|||||
|
|
||||||
| 10.33 |
Lease No. SPCVAN-2-94-0001, between the Secretary of the Air Force and Astrotech Space Operations, L.P. (incorporated by reference to Exhibit 10.39 of the
Registrant’s Registration Statement (Reg. No. 333-126772), and all amendments thereto, filed with the Securities and Exchange Commission on July 21, 2005)
|
|||||
|
|
||||||
| 10.34 |
Strategic Collaboration Agreement, dated as of August 5, 1999, between the Registrant and DaimlerChrysler Aerospace AG (incorporated by reference to Exhibit 10.40 of the
Registrant’s Registration Statement (Reg. No. 333-126772), and all amendments thereto, filed with the Securities and Exchange Commission on July 21, 2005)
|
|||||
|
|
||||||
| 10.35 |
Guaranty Agreement, dated as of August 30, 2001, between the Registrant and SouthTrust Bank (incorporated by reference to Exhibit 10.41 of the Registrant’s
Registration Statement (Reg. No. 333-126772), and all amendments thereto, filed with the Securities and Exchange Commission on July 21, 2005)
|
|||||
|
|
||||||
| 10.36 |
Guaranty Agreement, dated as of August 30, 2001, between Astrotech Space Operations, Inc. and SouthTrust Bank (incorporated by reference to Exhibit 10.42 of the
Registrant’s Registration Statement (Reg. No. 333-126772), and all amendments thereto, filed with the Securities and Exchange Commission on July 21, 2005)
|
|||||
|
|
||||||
| 10.37 |
Stock Pledge and Security Agreement, dated as of August 30, 2001, between the Registrant and SouthTrust Bank (incorporated by reference to Exhibit 10.43 of the
Registrant’s Registration Statement (Reg. No. 333-126772), and all amendments thereto, filed with the Securities and Exchange Commission on July 21, 2005)
|
|||||
|
|
||||||
| 10.38 |
Stock Pledge and Security Agreement, dated as of August 30, 2001, between Astrotech Space Operations, Inc. and SouthTrust Bank (incorporated by reference to Exhibit 10.44
of the Registrant’s Registration Statement (Reg. No. 333-126772), and all amendments thereto, filed with the Securities and Exchange Commission on July 21, 2005)
|
|||||
|
|
||||||
| 10.39 |
Assignment of CLIN 1 Rights, dated as of August 30, 2001, between Astrotech Space Operations, Inc. and SouthTrust Bank (incorporated by reference to Exhibit 10.45 of the
Registrant’s Registration Statement (Reg. No. 333-126772), and all amendments thereto, filed with the Securities and Exchange Commission on July 21, 2005)
|
|||||
76
Table of Contents
| Exhibit No. | Description of Exhibit | |||||
|
|
||||||
| 10.40 |
Termination Agreement, dated as of June 1, 2004, between the Registrant and Vladimir J. Fishel (incorporated by reference to Exhibit 10.46 of the Registrant’s
Registration Statement (Reg. No. 333-126772), and all amendments thereto, filed with the Securities and Exchange Commission on July 21, 2005)
|
|||||
|
|
||||||
| 10.41 |
Memorandum of Understanding, dated as of June 8, 2005, between the Registrant and SMH Capital Advisors, Inc. (incorporated by reference to Exhibit 10.47 of the
Registrant’s Registration Statement (Reg. No. 333-126772), and all amendments thereto, filed with the Securities and Exchange Commission on July 21, 2005)
|
|||||
|
|
||||||
| 10.42 |
Space Media, Inc. Stock Option Plan (incorporated by reference to Exhibit 10.48 of the Registrant’s Registration Statement (Reg. No. 333-126772), and all amendments
thereto, filed with the Securities and Exchange Commission on July 21, 2005)
|
|||||
|
|
||||||
| 10.43 |
First Amendment to Loan Agreement (incorporated by reference to Exhibit 10.49 of the Registrant’s Current Report on 8-K filed with the Securities Exchange Commission on
November 10, 2005), effective September 30, 2005 between SPACEHAB, Incorporated (the “Borrower”) and Citibank Texas, N.A., formerly known as First American Bank, SSB (the “Lender”), as executed on November 10,
2005
|
|||||
|
|
||||||
| 10.44 |
Second Amendment to Loan Agreement (incorporated by reference to Exhibit 10.50 of the Registrant’s Current Report on 8-K filed with the Securities Exchange Commission on
March 3, 2006), dated February 11, 2006 between SPACEHAB, Incorporated (the “Borrower”) and Citibank Texas, N.A., formerly known as First American Bank, SSB (the “Lender”), as executed on February 28,
2006
|
|||||
|
|
||||||
| 10.45 |
Separation Agreement and Mutual Release, dated as of December 15, 2006, between the Registrant and Michael E. Kearney (incorporated by reference to Exhibit 10.1 of the
Registrant’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on December 15, 2006)
|
|||||
|
|
||||||
| 10.46 |
Separation Agreement and Mutual Release, dated as of January 19, 2007, between the Registrant and Michael E. Bain (incorporated by reference to Exhibit 10.1 of the
Registrant’s Quarterly Report on 10-Q, filed with the Securities and Exchange Commission on February 14, 2007)
|
|||||
|
|
||||||
| 10.47 |
Separation Agreement and Mutual Release, dated as of January 19, 2007, between the Registrant and E. Michael Chewning (incorporated by reference to Exhibit 10.2 of the
Registrant’s Quarterly Report on 10-Q, filed with the Securities and Exchange Commission on February 14, 2007)
|
|||||
77
Table of Contents
| Exhibit No. | Description of Exhibit | |||||
|
|
||||||
| 10.48 |
Employment and Non-Interference Agreement, dated as of June 4, 2007, between the Registrant and Michael J. Bowker (incorporated by reference to Exhibit 10.1 of the
Registrant’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on June 12, 2007)
|
|||||
|
|
||||||
| 10.50 |
Loan Agreement dated as of February 6, 2008, between Astrotech Space Operations, Inc. (“the Borrower”) and Green Bank, N.A. (the “Lender”) (incorporated by
reference to Exhibit 10.50 of the Registrant’s Annual Report on 10-K filed with the Securities and Exchange Commission on September 29, 2008)
|
|||||
|
|
||||||
| 10.51 |
Employment Agreement, effective October 6, 2008 between SPACEHAB, Incorporated and Thomas B. Pickens, III (incorporated by reference to Exhibit 10.1 of the
Registrant’s Current Report Form 8-K filed with the Securities and Exchange Commission on November 21, 2008).
|
|||||
|
|
||||||
| 10.52 |
Employment Agreement, effective October 6, 2008 between SPACEHAB, Incorporated and James D. Royston (incorporated by reference to Exhibit 10.2 of the Registrant’s
Current Report Form 8-K filed with the Securities and Exchange Commission on November 21, 2008).
|
|||||
|
|
||||||
| 10.53 |
Employment Agreement, effective October 6, 2008 between SPACEHAB, Incorporated and Brian K. Harrington (incorporated by reference to Exhibit 10.3 of the Registrant’s
Current Report Form 8-K filed with the Securities and Exchange Commission on November 21, 2008).
|
|||||
|
|
||||||
| 10.54 |
Employment Agreement, effective October 6, 2008 between SPACEHAB, Incorporated and Lance W. Lord (incorporated by reference to Exhibit 10.1 of the Registrant’s
Current Report Form 8-K filed with the Securities and Exchange Commission on January 13, 2009).
|
|||||
|
|
||||||
| 10.55 |
Separation, Release and Consulting Agreement, dated June 4, 2009, between the Registrant and Brian K. Harrington.
|
|||||
|
|
||||||
| 10.56 |
1
st
Detect Corporation Stock Purchase Warrant Agreement, dated January 19, 2010.
|
|||||
|
|
||||||
| 10.57 |
1
st
Detect Corporation Restricted Stock Agreement, dated January 19, 2010.
|
|||||
|
|
||||||
| 10.58 |
Astrogenetix, Inc. Stock Purchase Warrant Agreement, dated January 19, 2010.
|
|||||
|
|
||||||
| 10.59 |
Astrogenetix, Inc. Restricted Stock Agreement, dated January 19, 2010.
|
|||||
|
|
||||||
| 10.60 |
Texas Emerging
Technology Fund Award and Security Agreement, effective March 30, 2010, between the State of
Texas and 1
st
Detect Corporation.
|
|||||
|
|
||||||
| 10.61 |
1
st
Detect Corporation Investment Unit, effective March 30, 2010, between the State
of Texas and 1
st
Detect Corporation.
|
|||||
|
|
||||||
| 10.62 |
Third Amendment, dated
February 6, 2010, to the original loan agreement between the Registrant and Greebank, N.A.,
signed on February 6, 2008 (incorporated by reference to Exhibit 99.1 of the Registrant’s
Form 8K filed with the Securities and Exchange Commission on April 1, 2010).
|
|||||
|
|
||||||
| 10.63 |
Separation Agreement, dated August 19, 2010, between the Registrant and James D. Royston.
|
|||||
78
Table of Contents
| Exhibit No. | Description of Exhibit | |||||
|
|
||||||
| (16 ) |
Letter Regarding Change in Certifying Accountant
|
|||||
|
|
||||||
| 16.1 |
Letter from Grant Thornton LLP regarding change in certifying accountant, dated January 18, 2007 (incorporated by reference to Exhibit 16 of the Registrant’s Current
Report on Form 8-K filed with the Securities and Exchange Commission on January 19, 2007)
|
|||||
|
|
||||||
| (21 ) |
Astrotech Corporation and Subsidiaries – Subsidiaries of the Registrant
|
|||||
|
|
||||||
| (23 ) |
Consents of Experts and Counsel
|
|||||
|
|
||||||
| 23.1 |
Consent of PMB Helin Donovan LLP
|
|||||
|
|
||||||
| 23.2 |
Consent of Grant Thornton LLP (incorporated by reference to Exhibit 23.2 of the Registrant’s Annual Report on Form 10-K filed with the Securities and Exchange
Commission on September 29, 2008)
|
|||||
|
|
||||||
| (31 ) |
Rule 13a-14(a) Certifications
|
|||||
|
|
||||||
| 31.1 |
Certification of Thomas B. Pickens, III, the Company’s Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002, filed herewith.
|
|||||
|
|
||||||
| 31.2 |
Certification of John M. Porter, the Company’s Senior Vice President and Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.
|
|||||
|
|
||||||
| (32 ) |
Section 1350 Certifications
|
|||||
|
|
||||||
| 32.1 |
Certification of Thomas B. Pickens, III, the Company’s Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, filed herewith.
|
|||||
|
|
||||||
| 32.2 |
Certification of John M. Porter, the Company’s Senior Vice President and Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith.
|
|||||
79
Table of Contents
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
|
Astrotech Corporation
|
||||
| By: | /s/ Thomas B. Pickens, III | |||
| Thomas B. Pickens, III | ||||
| Chief Executive Officer | ||||
Date: August 30, 2010
| By: | /s/ John M. Porter | |||
| John M. Porter | ||||
| Senior Vice President, Chief Financial Officer and Chief Accounting Officer | ||||
Date: August 30, 2010
80
Table of Contents
Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has been
signed below by the following persons on behalf of this registrant in the capacities and on the
dates indicated.
|
/s/ Thomas B. Pickens, III
|
Chairman of the Board and
Chief Executive Officer |
August 30, 2010 | ||
|
|
||||
|
/s/ Mark Adams
|
Director | August 30, 2010 | ||
|
|
||||
|
/s/ Sha-Chelle Manning
|
Director | August 30, 2010 | ||
|
/s/ John A. Oliva
|
Director | August 30, 2010 | ||
|
|
||||
|
/s/ William F. Readdy
|
Director | August 30, 2010 | ||
|
|
||||
|
/s/ John M. Porter
|
Senior Vice President, Chief Financial Officer and Chief Accounting Officer | August 30, 2010 |
81
Table of Contents
EXHIBIT INDEX
| Exhibit | |||||
| Index | Description | ||||
|
|
|||||
| 10.55 |
Separation, Release and Consulting Agreement, dated June 4, 2009, between the Registrant and Brian K. Harrington.
|
||||
|
|
|||||
| 10.56 |
1
st
Detect Corporation Stock Purchase Warrant Agreement, dated January 19, 2010.
|
||||
|
|
|||||
| 10.57 |
1
st
Detect Corporation Restricted Stock Agreement, dated January 19, 2010.
|
||||
|
|
|||||
| 10.58 |
Astrogenetix, Inc. Stock Purchase Warrant Agreement, dated January 19, 2010.
|
||||
|
|
|||||
| 10.59 |
Astrogenetix, Inc. Restricted Stock Agreement, dated January 19, 2010.
|
||||
|
|
|||||
| 10.60 |
Texas Emerging
Technology Fund Award and Security Agreement, effective March 30, 2010, between the State of
Texas and 1
st
Detect Corporation.
|
||||
|
|
|||||
| 10.61 |
1
st
Detect Corporation Investment Unit, effective March 30, 2010, between the State
of Texas and 1
st
Detect Corporation.
|
||||
|
|
|||||
| 10.63 |
Separation Agreement, dated August 19, 2010, between the Registrant and James D. Royston.
|
||||
|
|
|||||
| 23.1 |
Consent of PMB Helin Donovan LLP
|
||||
|
|
|||||
| 31.1 |
Certification of Thomas B. Pickens, III, the Company’s Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002, filed herewith.
|
||||
|
|
|||||
| 31.2 |
Certification of John M. Porter, the Company’s Senior Vice President and Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.
|
||||
|
|
|||||
| 32.1 |
Certification of Thomas B. Pickens, III, the Company’s Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, filed herewith.
|
||||
|
|
|||||
| 32.2 |
Certification of John M. Porter, the Company’s Senior Vice President and Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith.
|
||||
82
TABLE OF CONTENTS
Part IItem 1. BusinessItem 1A. Risk FactorsItem 1B. Unresolved Staff CommentsItem 2. PropertiesItem 3. Legal ProceedingsItem 4. Submission Of Matters To A Vote Of Security HoldersPart IIItem 5. Market For Registrant S Common Equity, Related Stockholder Matters and Issuer Purchases Of Equity SecuritiesItem 6. Selected Financial DataItem 7. Management S Discussion and Analysis Of Financial Condition and Results Of OperationsItem 7A. Quantitative and Qualitative Disclosures About Market RiskItem 8. Financial Statements and Supplementary DataItem 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureItem 9A. Controls and ProceduresItem 9B. Other InformationPart IIIItem 10. Directors, Executive Officers and Corporate GovernanceItem 11. Executive CompensationItem 12. Security Ownership Of Certain Beneficial Owners and Management and Related Stockholder MattersItem 13. Certain Relationships and Related Transactions and Director IndependenceItem 14. Principal Accounting Fees and ServicesPart IVItem 15. Exhibits, Financial Statement Schedules