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<p style="margin: 0pt"></p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b>(1) Description of the Company and Operating Environment</b></font></p>
<p style="margin: 0"> </p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">Astrotech Corporation (Nasdaq: ASTC) (“Astrotech,”
“the Company,” “we,” “us” or “our”), a Washington corporation, is a commercial aerospace
company that was formed in 1984 to leverage the environment of space for commercial purposes. For nearly 30 years, the Company
has remained a crucial player in space commerce activities. We have supported the launch of 23 shuttle missions and more than
300 spacecraft; built space hardware and processing facilities; constructed and operated world-class processing facilities; and
prepared and processed scientific research for microgravity.</font></p>
<p style="margin: 0"> </p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b>O<i>ur Business Units</i></b></font></p>
<p style="margin: 0"> </p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b><i>Astrotech Space Operations </i>(“ASO”)</b></font></p>
<p style="margin: 0"> </p>
<p style="margin: 0"><a name="i8"></a><font style="font: 10pt Times New Roman, Times, Serif">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 process five meter class satellites accommodating the
majority of U.S. based satellite preparation programs. ASO’s service capabilities include designing and building
spacecraft processing equipment and facilities. In addition, ASO provides propellant services including designing, building
and testing propellant service equipment for fueling spacecraft. ASO accounted for 98% of our consolidated revenues for the
period ended September 30, 2012. Revenue for our ASO business unit is generated primarily from various fixed-priced contracts
with launch service providers in both the government and commercial markets and the design, fabrication and use of critical
space launch equipment. The services and facilities we provide to our customers support the final assembly, checkout, and
countdown functions required to launch a spacecraft. The revenue and cash flows generated from our ASO operations are
primarily related to the number of spacecraft launches and the fabrication of the Ground Support Equipment (“GSE”) for the U.S.
Government.</font></p>
<p style="margin: 0"> </p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b><i>Spacetech</i></b></font></p>
<p style="margin: 0"> </p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">Our other business unit is a technology incubator
designed to commercialize space-industry technologies. This business unit it currently pursuing two distinct opportunities:</font></p>
<p style="margin: 0"> </p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b>1<sup>st</sup> Detect</b></font></p>
<p style="margin: 0"> </p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">1st Detect designs, manufactures and sells miniature
mass spectrometer equipment. 1st Detect launched th</font>e<font style="font: 10pt Times New Roman, Times, Serif"> MMS-1000TM
during March 2012. The MMS-1000TM is a low power, miniature mass spectrometer device designed initially for the laboratory testing
market. The unique design of this unit is the result of the Company’s work with National Aeronautics and Space Administration
(“NASA”) on the International Space Station. 1st 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 and Phase II award from the U.S. Army’s Chemical and Biological Defense (“CBD”) Small Business Innovation
Research (“SBIR”) Program. Following the successful execution of the Phase I SBIR, 1st Detect was awarded a $0.8 million
Phase II SBIR contract from the Joint Science and Technology Office for Chemical and Biological Defense. Additionally, 1st Detect
received a $1.8 million award from the Texas Emerging Technology Fund in March 2010.</font></p>
<p style="margin: 0"> </p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b>Astrogenetix</b></font></p>
<p style="margin: 0"> </p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">Astrogenetix is a biotechnology company formed to
commercialize products processed in the unique environment of microgravity. Astrogenetix pursued an aggressive space access strategy
to take advantage of the Space Shuttle program prior to its retirement in 2011. This strategy gave Astrogenetix unprecedented
access to research in microgravity, as the Company flew experiments twelve times over a three year period. Astrogenetix is currently
researching a Salmonella vaccine as part of its ongoing commercialization strategy. Concurrently, Astrogenetix is evaluating a
vaccine target for MRSA based on discoveries made in microgravity. In December 2011, the Company negotiated a Space Act Agreement
with NASA for a minimum of twenty eight additional space flights.</font></p>
<p style="margin: 0pt"></p>
More than 300 projects
23 projects
<p style="margin: 0pt"></p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b>(2) Basis of Presentation</b></font></p>
<p style="margin: 0"> </p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">The accompanying unaudited condensed consolidated
financial statements have been prepared by Astrotech Corporation in accordance with United States generally accepted accounting
principles for interim financial information and the rules and regulations of the Securities and Exchange Commission. Accordingly,
they do not include all of the information and footnotes required by United States generally accepted accounting principles for
complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring entries) considered
necessary for a fair presentation have been included. Operating results for the three months ended September 30, 2012 are not
necessarily indicative of the results that may be expected for the year ending June 30, 2013. These financial statements should
be read in conjunction with the financial statements and notes included in the Company’s Annual Report on Form 10-K for the
year ended June 30, 2012.</font></p>
<p style="margin: 0pt"></p>
<p style="margin: 0"></p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><br /></font></p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b>Basis of Presentation </b></font></p>
<p style="margin: 0"> </p>
<p style="margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">The accompanying unaudited condensed consolidated
financial statements have been prepared by Astrotech Corporation in accordance with United States generally accepted accounting
principles for interim financial information and the rules and regulations of the Securities and Exchange Commission. Accordingly,
they do not include all of the information and footnotes required by United States generally accepted accounting principles for
complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring entries) considered
necessary for a fair presentation have been included. Operating results for the three months ended September 30, 2012 are not
necessarily indicative of the results that may be expected for the year ending June 30, 2013. These financial statements should
be read in conjunction with the financial statements and notes included in the Company’s Annual Report on Form 10-K for the
year ended June 30, 2012.</font></p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b>Net Loss per Share</b></font></p>
<p style="margin: 0"> </p>
<p style="margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">Basic net loss per share is computed on the basis
of the weighted average number of shares of common stock outstanding during the period. Diluted net loss per share is computed
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.</font></p>
<p style="margin: 0"></p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b> Revenue Recognition</b></font></p>
<p style="margin: 0"> </p>
<p style="margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">Astrotech recognizes revenue employing several generally
accepted revenue recognition methodologies across its business units. The methodology used is based on contract type and the manner
in which products and services are provided.</font></p>
<p style="margin: 0"> </p>
<p style="margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">Revenue generated by Astrotech’s payload processing
facilities is recognized ratably over the occupancy period of the satellite while in the Astrotech facilities. The percentage-of-completion
method is used for all contracts where incurred costs can be reasonably estimated and successful completion can be reasonably
assured at inception. Changes in estimated costs to complete and provisions for contract losses are recognized in the period they
become known. Revenue for the sale of commercial products is recognized at shipment.</font></p>
<p style="margin: 0"> </p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b>A Summary of Revenue Recognition Methods</b></font></p>
<p style="margin: 0"></p>
<table cellspacing="0" cellpadding="0" style="margin-top: 0px; font-size: 9.5pt; width: 100%">
<tr>
<td style="width: 25%"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 4%"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 25%"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 4%"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 42%"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr>
<td style="border-bottom: #000000 1px solid; vertical-align: top; font-size: 8.5pt; font-weight: bold"><font style="font: 8pt Times New Roman, Times, Serif"><b>Services/Products
Provided</b></font></td>
<td style="vertical-align: top; font-size: 8.5pt"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td style="border-bottom: #000000 1px solid; vertical-align: top; font-size: 8.5pt; font-weight: bold; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Contract
Type</b></font></td>
<td style="vertical-align: top; font-size: 8.5pt"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td style="border-bottom: #000000 1px solid; vertical-align: top; font-size: 8.5pt; font-weight: bold; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Method
of Revenue Recognition</b></font></td></tr>
<tr style="vertical-align: top">
<td><font style="font: 9pt Times New Roman, Times, Serif">Payload Processing Facilities</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif">Firm Fixed Price — Mission Specific</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td><p style="font-size: 9.5pt; margin: 0"><font style="font: 9pt Times New Roman, Times, Serif">Ratably, over the occupancy
period of a satellite</font></p>
<p style="font-size: 9.5pt; margin: 0"><font style="font: 9pt Times New Roman, Times, Serif">within the facility from
arrival through launch</font></p></td></tr>
<tr style="vertical-align: top">
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: top">
<td><font style="font: 9pt Times New Roman, Times, Serif">Construction Contracts</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif">Firm Fixed Price</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif">Percentage-of-completion based on costs incurred</font></td></tr>
<tr style="vertical-align: top">
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: top">
<td><font style="font: 9pt Times New Roman, Times, Serif">Engineering Services</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td><p style="font-size: 9.5pt; margin: 0"><font style="font: 9pt Times New Roman, Times, Serif">Cost Reimbursable</font></p>
<p style="font-size: 9.5pt; margin: 0"><font style="font: 9pt Times New Roman, Times, Serif">Award/Fixed Fee</font></p></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif">Reimbursable costs incurred plus award/fixed fee</font></td></tr>
<tr style="vertical-align: top">
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: top">
<td><font style="font: 9pt Times New Roman, Times, Serif">Commercial Products</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td><p style="font-size: 9.5pt; margin: 0"><font style="font: 9pt Times New Roman, Times, Serif">Specific Purchase</font></p>
<p style="font-size: 9.5pt; margin: 0"><font style="font: 9pt Times New Roman, Times, Serif">Order Based</font></p></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif">At shipment</font></td></tr>
<tr style="vertical-align: top">
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: top">
<td><font style="font: 9pt Times New Roman, Times, Serif">Grant</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td><p style="font-size: 9.5pt; margin: 0"><font style="font: 9pt Times New Roman, Times, Serif">Cost Reimbursable</font></p>
<p style="font-size: 9.5pt; margin: 0"><font style="font: 9pt Times New Roman, Times, Serif">Award</font></p></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td><p style="font-size: 9.5pt; margin: 0"><font style="font: 9pt Times New Roman, Times, Serif">As costs are incurred for
related research and</font></p>
<p style="font-size: 9.5pt; margin: 0"><font style="font: 9pt Times New Roman, Times, Serif">development expenses</font></p></td></tr>
</table>
<p style="margin: 0"> </p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">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.</font></p>
<p style="margin: 0"></p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b>Fair Value Measurement </b></font></p>
<p style="margin: 0"> </p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">The accounting standard for fair value measurements
defines fair value, establishes a market-based framework or hierarchy for measuring fair value, and expands disclosures about
fair value measurements. The standard is applicable whenever assets and liabilities are measured and included in the financial
statements at fair value.</font></p>
<p style="margin: 0"> </p>
<p style="margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">The fair value hierarchy established in the standard
prioritizes the inputs used in valuation techniques into three levels as follows:</font></p>
<p style="margin: 0"> </p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">Level 1—Quoted prices in active markets for identical
assets or liabilities.</font></p>
<p style="margin: 0"> </p>
<p style="margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">Level 2—Inputs other than Level 1 that are observable,
either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not
active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of
the assets or liabilities.</font></p>
<p style="margin: 0"> </p>
<p style="margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">Level 3—Unobservable inputs that are supported
by little or no market activity and that are significant to the fair value of the assets or liabilities.</font></p>
<p style="margin: 0"> </p>
<p style="margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">The following table presents the carrying amounts,
estimated fair values and valuation input levels of certain of the Company’s financial instruments as of September 30, 2012
and June 30, 2012 (in thousands):</font></p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><br /></font></p>
<table cellspacing="0" cellpadding="0" style="margin-top: 0px; font-size: 8.5pt; width: 100%">
<tr>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 7px"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 59px"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 6px"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 7px"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 59px"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 6px"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 7px"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 59px"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 6px"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 7px"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 59px"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 6px"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 72px"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr>
<td style="vertical-align: bottom"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td colspan="5" style="border-bottom: #000000 1px solid; vertical-align: bottom; font-weight: bold; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>September
30, 2012</b></font></td>
<td style="vertical-align: bottom"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td colspan="5" style="border-bottom: #000000 1px solid; vertical-align: bottom; font-weight: bold; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>June
30, 2012</b></font></td>
<td style="vertical-align: bottom"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td style="vertical-align: bottom"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td colspan="2" style="font-weight: bold; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Carrying</b></font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td colspan="2" style="font-weight: bold; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Fair</b></font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td colspan="2" style="font-weight: bold; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Carrying</b></font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td colspan="2" style="font-weight: bold; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Fair</b></font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td style="font-weight: bold; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Valuation</b></font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td colspan="2" style="border-bottom: #000000 1px solid; font-weight: bold; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Amount</b></font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td colspan="2" style="border-bottom: #000000 1px solid; font-weight: bold; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Value</b></font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td colspan="2" style="border-bottom: #000000 1px solid; font-weight: bold; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Amount</b></font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td colspan="2" style="border-bottom: #000000 1px solid; font-weight: bold; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Value</b></font></td>
<td style="border-bottom: #000000 1px solid"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td style="border-bottom: #000000 1px solid; font-weight: bold; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Inputs</b></font></td></tr>
<tr style="vertical-align: bottom; background-color: #f3f3f3">
<td style="font-size: 9pt"><font style="font: 9pt Times New Roman, Times, Serif">Debt</font></td>
<td style="border-bottom: #000000 1px solid; font-size: 9pt"><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 1px solid; font-size: 9pt; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">6,322</font></td>
<td style="font-size: 9pt"><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid; font-size: 9pt"><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 1px solid; font-size: 9pt; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">6,322</font></td>
<td style="font-size: 9pt"><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid; font-size: 9pt"><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 1px solid; font-size: 9pt; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">6,414</font></td>
<td style="font-size: 9pt"><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid; font-size: 9pt"><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 1px solid; font-size: 9pt; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">6,414</font></td>
<td style="font-size: 9pt"><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 9pt; text-align: center"><font style="font: 9pt Times New Roman, Times, Serif">Level 2</font></td></tr>
</table>
<p style="margin: 0"> </p>
<p style="margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">The carrying value of the Company’s debt at September
30, 2012 approximates fair value based on rates available for similar debt available to comparable companies in the marketplace.
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.</font></p>
<p style="margin: 0pt"></p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b>(3) Noncontrolling Interest</b></font></p>
<p style="margin: 0"> </p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">In January 2010, restricted shares of Astrotech subsidiaries,
1<sup>st </sup>Detect and Astrogenetix, were granted to certain employees, directors and officers, resulting in Astrotech owning
less than 100% of the subsidiaries. The Company applied noncontrolling interest accounting for the periods ended September 30,
2012 and 2011, which requires us to clearly identify the noncontrolling interest in the balance sheets and income statements.
We disclose three measures of net income (loss): net loss, net loss attributable to noncontrolling interest, and net loss attributable
to Astrotech Corporation. Our operating cash flows in our consolidated statements of cash flows reflect net loss, while our basic
and diluted net loss per share calculations reflect net loss attributable to Astrotech Corporation.</font></p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><br /></font></p>
<table cellspacing="0" cellpadding="0" style="margin-top: 0px; font-size: 9pt; width: 100%">
<tr>
<td style="width: 86%"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 13%"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr>
<td style="vertical-align: bottom"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td colspan="2" style="border-bottom: #000000 1px solid; vertical-align: bottom; font-size: 8.5pt; font-weight: bold; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>(In
thousands)</b></font></td></tr>
<tr style="vertical-align: bottom; background-color: #f3f3f3">
<td style="font-weight: bold"><font style="font: 9pt Times New Roman, Times, Serif">Beginning balance at June 30, 2012</font></td>
<td style="font-weight: bold"><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="font-weight: bold; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">2,730 </font></td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 12px"><font style="font: 9pt Times New Roman, Times, Serif">Net loss attributable to noncontrolling
interest</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">(141)</font></td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 12px"><font style="font: 9pt Times New Roman, Times, Serif">Capital contribution</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">101 </font></td></tr>
<tr style="vertical-align: bottom; background-color: #f3f3f3">
<td style="text-indent: 12px"><font style="font: 9pt Times New Roman, Times, Serif">Stocked based compensation</font></td>
<td style="border-bottom: #000000 1px solid"><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">1 </font></td></tr>
<tr style="vertical-align: bottom">
<td style="font-weight: bold"><font style="font: 9pt Times New Roman, Times, Serif">Ending balance at September 30, 2012</font></td>
<td style="border-bottom: #000000 3px double; font-weight: bold"><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 3px double; font-weight: bold; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">2,691 </font></td></tr>
</table>
<p style="margin: 0"> </p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">As of September 30, 2012, the Company’s share
of income and losses is 86% for 1<sup>st </sup>Detect and 84% for Astrogenetix.</font></p>
<p style="margin: 0pt"></p>
101000
1000
<table cellspacing="0" cellpadding="0" style="margin-top: 0px; font-size: 9pt; width: 100%">
<tr>
<td style="width: 86%"> </td>
<td style="width: 1%"> </td>
<td style="width: 13%"> </td></tr>
<tr>
<td style="vertical-align: bottom"><font style="font-size: 8pt"><b> </b></font></td>
<td colspan="2" style="border-bottom: #000000 1px solid; vertical-align: bottom; font-size: 8.5pt; font-weight: bold; text-align: center"><font style="font-size: 8pt"><b>(In
thousands)</b></font></td></tr>
<tr style="vertical-align: bottom; background-color: #f3f3f3">
<td style="font-weight: bold"><font style="font: 9pt Times New Roman, Times, Serif">Beginning balance at June 30, 2012</font></td>
<td style="font-weight: bold"><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="font-weight: bold; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">2,730 </font></td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 12px"><font style="font: 9pt Times New Roman, Times, Serif">Net loss attributable to noncontrolling
interest</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">(141)</font></td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 12px"><font style="font: 9pt Times New Roman, Times, Serif">Capital contribution</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">101 </font></td></tr>
<tr style="vertical-align: bottom; background-color: #f3f3f3">
<td style="text-indent: 12px"><font style="font: 9pt Times New Roman, Times, Serif">Stocked based compensation</font></td>
<td style="border-bottom: #000000 1px solid"><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">1 </font></td></tr>
<tr style="vertical-align: bottom">
<td style="font-weight: bold"><font style="font: 9pt Times New Roman, Times, Serif">Ending balance at September 30, 2012</font></td>
<td style="border-bottom: #000000 3px double; font-weight: bold"><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 3px double; font-weight: bold; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">2,691 </font></td></tr>
</table>
<table cellspacing="0" cellpadding="0" style="margin-top: 0px; font-size: 9pt; width: 100%">
<tr>
<td> </td>
<td style="width: 7px"> </td>
<td style="width: 46px"> </td>
<td style="width: 6px"> </td>
<td style="width: 6px"> </td>
<td style="width: 46px"> </td></tr>
<tr>
<td style="vertical-align: bottom"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td colspan="5" style="border-bottom: #000000 1px solid; vertical-align: bottom"><p style="font-size: 8.5pt; text-align: center; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"><b>Three
Months Ended</b></font></p>
<p style="font-size: 8.5pt; text-align: center; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"><b>September
30,</b></font></p></td></tr>
<tr style="vertical-align: bottom">
<td style="font-size: 8.5pt"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td colspan="2" style="border-bottom: #000000 1px solid; font-size: 8.5pt; font-weight: bold; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>2012</b></font></td>
<td style="font-size: 8.5pt"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td colspan="2" style="border-bottom: #000000 1px solid; font-size: 8.5pt; font-weight: bold; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>2011</b></font></td></tr>
<tr style="vertical-align: bottom; background-color: #f3f3f3">
<td style="font-weight: bold"><font style="font: 9pt Times New Roman, Times, Serif"><b>Numerator:</b></font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"><b> </b></font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"><b> </b></font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"><b> </b></font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"><b> </b></font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"><b> </b></font></td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 7px"><font style="font: 9pt Times New Roman, Times, Serif">Net loss attributable to Astrotech Corporation,
basic and diluted</font></td>
<td style="border-bottom: #000000 1px solid"><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">(1,417)</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid"><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">(666)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #f3f3f3">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td style="font-weight: bold"><font style="font: 9pt Times New Roman, Times, Serif"><b>Denominator:</b></font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"><b> </b></font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"><b> </b></font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"><b> </b></font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"><b> </b></font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"><b> </b></font></td></tr>
<tr style="vertical-align: bottom; background-color: #f3f3f3">
<td style="text-indent: 0px"><font style="font: 9pt Times New Roman, Times, Serif">Denominator for basic net loss per share
attributable to Astrotech Corporation weighted average common stock outstanding</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">18,951 </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">18,120 </font></td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 0px"><font style="font: 9pt Times New Roman, Times, Serif">Dilutive common stock equivalents —
common stock options and share-based awards</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">-</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">-</font></td></tr>
<tr style="vertical-align: bottom; background-color: #f3f3f3">
<td style="text-indent: 0px"><font style="font: 9pt Times New Roman, Times, Serif">Denominator for diluted net loss per share
attributable to Astrotech Corporation weighted average common stock outstanding and dilutive common stock equivalents</font></td>
<td style="border-bottom: #000000 1px solid"><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">18,951 </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid"><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">18,120 </font></td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 0px"><font style="font: 9pt Times New Roman, Times, Serif">Basic net loss per share attributable to
Astrotech Corporation</font></td>
<td style="border-bottom: #000000 1px solid"><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">(0.07)</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid"><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">(0.04)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #f3f3f3">
<td style="text-indent: 0px"><font style="font: 9pt Times New Roman, Times, Serif">Diluted net loss per share attributable
to Astrotech Corporation</font></td>
<td style="border-bottom: #000000 1px solid"><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">(0.07)</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid"><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">(0.04)</font></td></tr>
</table>
-1417
-666
-0.07
-0.04
0
0
24.1
24.1
0.3
0.3
1205900
1153350
<p style="margin: 0pt"></p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b>(5) Revenue Recognition</b></font></p>
<p style="margin: 0"> </p>
<p style="margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">Astrotech recognizes revenue employing several generally
accepted revenue recognition methodologies across its business units. The methodology used is based on contract type and the manner
in which products and services are provided.</font></p>
<p style="margin: 0"> </p>
<p style="margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">Revenue generated by Astrotech’s payload processing
facilities is recognized ratably over the occupancy period of the satellite while in the Astrotech facilities. The percentage-of-completion
method is used for all contracts where incurred costs can be reasonably estimated and successful completion can be reasonably
assured at inception. Changes in estimated costs to complete and provisions for contract losses are recognized in the period they
become known. Revenue for the sale of commercial products is recognized at shipment.</font></p>
<p style="margin: 0"> </p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b>A Summary of Revenue Recognition Methods</b></font></p>
<p style="margin: 0"></p>
<table cellspacing="0" cellpadding="0" style="margin-top: 0px; font-size: 9.5pt; width: 100%">
<tr>
<td style="width: 25%"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 4%"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 25%"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 4%"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 42%"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr>
<td style="border-bottom: #000000 1px solid; vertical-align: top; font-size: 8.5pt; font-weight: bold"><font style="font: 10pt Times New Roman, Times, Serif">Services/Products
Provided</font></td>
<td style="vertical-align: top; font-size: 8.5pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid; vertical-align: top; font-size: 8.5pt; font-weight: bold; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif">Contract
Type</font></td>
<td style="vertical-align: top; font-size: 8.5pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid; vertical-align: top; font-size: 8.5pt; font-weight: bold; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif">Method
of Revenue Recognition</font></td></tr>
<tr style="vertical-align: top">
<td><font style="font: 10pt Times New Roman, Times, Serif">Payload Processing Facilities</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">Firm Fixed Price — Mission Specific</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><p style="font-size: 9.5pt; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">Ratably, over the occupancy
period of a satellite</font></p>
<p style="font-size: 9.5pt; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">within the facility from
arrival through launch</font></p></td></tr>
<tr style="vertical-align: top">
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: top">
<td><font style="font: 10pt Times New Roman, Times, Serif">Construction Contracts</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">Firm Fixed Price</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">Percentage-of-completion based on costs incurred</font></td></tr>
<tr style="vertical-align: top">
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: top">
<td><font style="font: 10pt Times New Roman, Times, Serif">Engineering Services</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><p style="font-size: 9.5pt; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">Cost Reimbursable</font></p>
<p style="font-size: 9.5pt; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">Award/Fixed Fee</font></p></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">Reimbursable costs incurred plus award/fixed fee</font></td></tr>
<tr style="vertical-align: top">
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: top">
<td><font style="font: 10pt Times New Roman, Times, Serif">Commercial Products</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><p style="font-size: 9.5pt; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">Specific Purchase</font></p>
<p style="font-size: 9.5pt; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">Order Based</font></p></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">At shipment</font></td></tr>
<tr style="vertical-align: top">
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: top">
<td><font style="font: 10pt Times New Roman, Times, Serif">Grant</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><p style="font-size: 9.5pt; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">Cost Reimbursable</font></p>
<p style="font-size: 9.5pt; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">Award</font></p></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><p style="font-size: 9.5pt; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">As costs are incurred for
related research and</font></p>
<p style="font-size: 9.5pt; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">development expenses</font></p></td></tr>
</table>
<p style="margin: 0"> </p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">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.</font></p>
<p style="margin: 0pt"></p>
<p style="margin: 0pt"></p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b>(6) Debt</b></font></p>
<p style="margin: 0"> </p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b><i>Credit Facilities</i></b></font></p>
<p style="margin: 0"> </p>
<p style="margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">In October 2010, we entered
into a financing facility with a commercial bank providing a $7.0 million term loan note and a $3.0 million revolving credit
facility. The $7.0 million term loan terminates in October 2015, and the $3.0 million revolving credit facility expired in
October 2012. The term loan requires monthly payments of principal plus interest at the rate of prime plus 0.25%, but not
less than 4.0%. The revolving credit facility allowed multiple advances not to exceed $3.0 million, based on eligible
accounts receivable, and incurred interest at the rate of prime plus 0.25%, but not less than 4.0%. The bank financing
facilities are secured by the assets of ASO, including accounts receivable, and require us to comply with designated
covenants. The balance of the $7.0 million term loan at September 30, 2012 was $6.3 million and there was no outstanding
balance on the revolving credit facility at September 30, 2012.</font></p>
<p style="margin: 0"> </p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">The Company was in compliance with all covenants as
of September 30, 2012.</font></p>
<p style="margin: 0"> </p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">In October 2012 the Company’s $3.0 million revolving
credit facility expired. The Company had no outstanding balance on the revolving credit facility.</font></p>
<p style="margin: 0pt"></p>
In October 2010, we entered into a financing facility with a commercial bank providing a $7.0 million term loan note and a $3.0 million revolving credit facility. The $7.0 million term loan terminates in October 2015, and the $3.0 million revolving credit facility expires in October 2012. The term loan requires monthly payments of principal plus interest at the rate of prime plus 0.25%, but not less than 4.0%. The revolving credit facility allowed multiple advances not to exceed $3.0 million, based on eligible accounts receivable, and incurred interest at the rate of prime plus 0.25%, but not less than 4.0%. The bank financing facilities are secured by the assets of ASO, including accounts receivable, and require us to comply with designated covenants.
6300000
Prime plus 0.25% but not less than 4.0%
2012-10-31
2015-10-31
<p style="margin: 0pt"></p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b>(7) Fair Value Measurement</b></font></p>
<p style="margin: 0"> </p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">The accounting standard for fair value measurements
defines fair value, establishes a market-based framework or hierarchy for measuring fair value, and expands disclosures about
fair value measurements. The standard is applicable whenever assets and liabilities are measured and included in the financial
statements at fair value.</font></p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><br /></font></p>
<p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">The fair value hierarchy established
in the standard prioritizes the inputs used in valuation techniques into three levels as follows:</font></p>
<p style="margin: 0"> </p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">Level 1—Quoted prices in active markets for identical
assets or liabilities.</font></p>
<p style="margin: 0"> </p>
<p style="margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">Level 2—Inputs other than Level 1 that are observable,
either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not
active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of
the assets or liabilities.</font></p>
<p style="margin: 0"> </p>
<p style="margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">Level 3—Unobservable inputs that are supported
by little or no market activity and that are significant to the fair value of the assets or liabilities.</font></p>
<p style="margin: 0"> </p>
<p style="margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">The following table presents the carrying amounts,
estimated fair values and valuation input levels of certain of the Company’s financial instruments as of September 30, 2012
and June 30, 2012 (in thousands):</font></p>
<p style="text-align: justify; margin: 0"></p>
<table cellspacing="0" cellpadding="0" style="margin-top: 0px; font-size: 8.5pt; width: 100%">
<tr>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 7px"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 59px"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 6px"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 7px"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 59px"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 6px"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 7px"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 59px"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 6px"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 7px"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 59px"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 6px"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 72px"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr>
<td style="vertical-align: bottom"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td colspan="5" style="border-bottom: #000000 1px solid; vertical-align: bottom; font-weight: bold; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>September
30, 2012</b></font></td>
<td style="vertical-align: bottom"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td colspan="5" style="border-bottom: #000000 1px solid; vertical-align: bottom; font-weight: bold; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>June
30, 2012</b></font></td>
<td style="vertical-align: bottom"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td style="vertical-align: bottom"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td colspan="2" style="font-weight: bold; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Carrying</b></font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td colspan="2" style="font-weight: bold; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Fair</b></font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td colspan="2" style="font-weight: bold; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Carrying</b></font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td colspan="2" style="font-weight: bold; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Fair</b></font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td style="font-weight: bold; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Valuation</b></font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td colspan="2" style="border-bottom: #000000 1px solid; font-weight: bold; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Amount</b></font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td colspan="2" style="border-bottom: #000000 1px solid; font-weight: bold; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Value</b></font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td colspan="2" style="border-bottom: #000000 1px solid; font-weight: bold; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Amount</b></font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td colspan="2" style="border-bottom: #000000 1px solid; font-weight: bold; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Value</b></font></td>
<td style="border-bottom: #000000 1px solid"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td style="border-bottom: #000000 1px solid; font-weight: bold; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Inputs</b></font></td></tr>
<tr style="vertical-align: bottom; background-color: #f3f3f3">
<td style="font-size: 9pt"><font style="font: 9pt Times New Roman, Times, Serif">Debt</font></td>
<td style="border-bottom: #000000 1px solid; font-size: 9pt"><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 1px solid; font-size: 9pt; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">6,322</font></td>
<td style="font-size: 9pt"><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid; font-size: 9pt"><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 1px solid; font-size: 9pt; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">6,322</font></td>
<td style="font-size: 9pt"><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid; font-size: 9pt"><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 1px solid; font-size: 9pt; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">6,414</font></td>
<td style="font-size: 9pt"><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid; font-size: 9pt"><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 1px solid; font-size: 9pt; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">6,414</font></td>
<td style="font-size: 9pt"><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 9pt; text-align: center"><font style="font: 9pt Times New Roman, Times, Serif">Level 2</font></td></tr>
</table>
<p style="margin: 0"> </p>
<p style="margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">The carrying value of the Company’s debt at September
30, 2012 approximates fair value based on rates available for similar debt available to comparable companies in the marketplace.
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.</font></p>
<p style="margin: 0pt"></p>
<table cellspacing="0" cellpadding="0" style="margin-top: 0px; font-size: 8.5pt; width: 100%">
<tr>
<td> </td>
<td style="width: 7px"> </td>
<td style="width: 59px"> </td>
<td style="width: 6px"> </td>
<td style="width: 7px"> </td>
<td style="width: 59px"> </td>
<td style="width: 6px"> </td>
<td style="width: 7px"> </td>
<td style="width: 59px"> </td>
<td style="width: 6px"> </td>
<td style="width: 7px"> </td>
<td style="width: 59px"> </td>
<td style="width: 6px"> </td>
<td style="width: 72px"> </td></tr>
<tr>
<td style="vertical-align: bottom"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td colspan="5" style="border-bottom: #000000 1px solid; vertical-align: bottom; font-weight: bold; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>September
30, 2012</b></font></td>
<td style="vertical-align: bottom"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td colspan="5" style="border-bottom: #000000 1px solid; vertical-align: bottom; font-weight: bold; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>June
30, 2012</b></font></td>
<td style="vertical-align: bottom"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td style="vertical-align: bottom"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td colspan="2" style="font-weight: bold; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Carrying</b></font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td colspan="2" style="font-weight: bold; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Fair</b></font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td colspan="2" style="font-weight: bold; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Carrying</b></font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td colspan="2" style="font-weight: bold; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Fair</b></font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td style="font-weight: bold; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Valuation</b></font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td colspan="2" style="border-bottom: #000000 1px solid; font-weight: bold; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Amount</b></font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td colspan="2" style="border-bottom: #000000 1px solid; font-weight: bold; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Value</b></font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td colspan="2" style="border-bottom: #000000 1px solid; font-weight: bold; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Amount</b></font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td colspan="2" style="border-bottom: #000000 1px solid; font-weight: bold; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Value</b></font></td>
<td style="border-bottom: #000000 1px solid"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td style="border-bottom: #000000 1px solid; font-weight: bold; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Inputs</b></font></td></tr>
<tr style="vertical-align: bottom; background-color: #f3f3f3">
<td style="font-size: 9pt"><font style="font: 9pt Times New Roman, Times, Serif">Debt</font></td>
<td style="border-bottom: #000000 1px solid; font-size: 9pt"><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 1px solid; font-size: 9pt; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">6,322</font></td>
<td style="font-size: 9pt"><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid; font-size: 9pt"><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 1px solid; font-size: 9pt; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">6,322</font></td>
<td style="font-size: 9pt"><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid; font-size: 9pt"><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 1px solid; font-size: 9pt; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">6,414</font></td>
<td style="font-size: 9pt"><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid; font-size: 9pt"><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 1px solid; font-size: 9pt; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">6,414</font></td>
<td style="font-size: 9pt"><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 9pt; text-align: center"><font style="font: 9pt Times New Roman, Times, Serif">Level 2</font></td></tr>
</table>
<p style="margin: 0pt"></p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b>(4) Net Loss per Share</b></font></p>
<p style="margin: 0"> </p>
<p style="margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">Basic net loss per share is computed on the basis
of the weighted average number of shares of common stock outstanding during the period. Diluted net loss per share is computed
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 loss per
share are as follows (in thousands, except per share data):</font></p>
<p style="text-align: justify; margin: 0"></p>
<table cellspacing="0" cellpadding="0" style="margin-top: 0px; font-size: 9pt; width: 100%">
<tr>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 7px"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 46px"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 6px"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 6px"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 46px"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr>
<td style="vertical-align: bottom"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td colspan="5" style="border-bottom: #000000 1px solid; vertical-align: bottom"><p style="font-size: 8.5pt; text-align: center; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"><b>Three
Months Ended</b></font></p>
<p style="font-size: 8.5pt; text-align: center; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"><b>September
30,</b></font></p></td></tr>
<tr style="vertical-align: bottom">
<td style="font-size: 8.5pt"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td colspan="2" style="border-bottom: #000000 1px solid; font-size: 8.5pt; font-weight: bold; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>2012</b></font></td>
<td style="font-size: 8.5pt"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td colspan="2" style="border-bottom: #000000 1px solid; font-size: 8.5pt; font-weight: bold; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>2011</b></font></td></tr>
<tr style="vertical-align: bottom; background-color: #f3f3f3">
<td style="font-weight: bold"><font style="font: 8pt Times New Roman, Times, Serif"><b>Numerator:</b></font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 7px"><font style="font: 9pt Times New Roman, Times, Serif">Net loss attributable to Astrotech Corporation,
basic and diluted</font></td>
<td style="border-bottom: #000000 1px solid"><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">(1,417)</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid"><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">(666)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #f3f3f3">
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="font-weight: bold"><font style="font: 9pt Times New Roman, Times, Serif"><b>Denominator:</b></font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"><b> </b></font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"><b> </b></font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"><b> </b></font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"><b> </b></font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"><b> </b></font></td></tr>
<tr style="vertical-align: bottom; background-color: #f3f3f3">
<td style="text-indent: 0px"><font style="font: 9pt Times New Roman, Times, Serif">Denominator for basic net loss per share
attributable to Astrotech Corporation weighted average common stock outstanding</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">18,951 </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">18,120 </font></td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 0px"><font style="font: 9pt Times New Roman, Times, Serif">Dilutive common stock equivalents —
common stock options and share-based awards</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">-</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">-</font></td></tr>
<tr style="vertical-align: bottom; background-color: #f3f3f3">
<td style="text-indent: 0px"><font style="font: 9pt Times New Roman, Times, Serif">Denominator for diluted net loss per share
attributable to Astrotech Corporation weighted average common stock outstanding and dilutive common stock equivalents</font></td>
<td style="border-bottom: #000000 1px solid"><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">18,951 </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid"><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">18,120 </font></td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 0px"><font style="font: 9pt Times New Roman, Times, Serif">Basic net loss per share attributable to
Astrotech Corporation</font></td>
<td style="border-bottom: #000000 1px solid"><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">(0.07)</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid"><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">(0.04)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #f3f3f3">
<td style="text-indent: 0px"><font style="font: 9pt Times New Roman, Times, Serif">Diluted net loss per share attributable
to Astrotech Corporation</font></td>
<td style="border-bottom: #000000 1px solid"><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">(0.07)</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid"><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">(0.04)</font></td></tr>
</table>
<p style="margin: 0"> </p>
<p style="margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">Options to
purchase 1,205,900 shares of common stock at exercise prices ranging from $0.30 to $24.10 per share outstanding for the three
months ended September 30, 2012, were not included in diluted net loss per share, as the impact to net loss per share
is anti-dilutive. Options to purchase 1,153,350 shares of common stock at exercise prices ranging from $0.30 to $24.10 per
share outstanding, for the three months ended September 30, 2011, were not included in diluted net loss per share, as the
impact to net loss per share is anti-dilutive.</font></p>
<p style="margin: 0pt"></p>
<p style="margin: 0pt"></p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b>(8) Business and Credit Risk Concentration</b></font></p>
<p style="margin: 0"> </p>
<p style="margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">A substantial portion of our revenue has been generated
under contracts with the U.S. Government. During the three months ended September 30, 2012 and 2011, approximately 60% and 68%,
respectively, of our revenues were generated under U.S. Government contracts. Accounts receivable totaled $4.7 million at September
30, 2012, of which 31% was attributable to the U.S. Government.</font></p>
<p style="margin: 0"> </p>
<p style="margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">The Company maintains funds in bank accounts that
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.</font></p>
<p style="margin: 0pt"></p>
0.31
0.6
0.68
<p style="margin: 0pt"></p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b>(9) Segment Information</b></font></p>
<p style="margin: 0"> </p>
<p style="margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">Management’s primary financial and operating
reviews focus on ASO, the core business unit. All intercompany transactions between business units have been eliminated in consolidation.</font></p>
<p style="margin: 0"> </p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">Key financial metrics for the three months ended September
30, 2012 are as follows (in thousands):</font></p>
<p style="margin: 0"></p>
<table cellspacing="0" cellpadding="0" style="margin-top: 0px; font-size: 9pt; width: 100%">
<tr>
<td style="width: 38%"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 2%"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 11%"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 16%"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 11%"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 15%"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr>
<td style="vertical-align: bottom"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td style="vertical-align: bottom"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td colspan="5" style="vertical-align: bottom; font-size: 8.5pt; font-weight: bold; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Three
Months Ended</b></font></td>
<td style="vertical-align: bottom; font-size: 8.5pt"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td colspan="5" style="vertical-align: bottom; font-size: 8.5pt; font-weight: bold; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Three
Months Ended</b></font></td></tr>
<tr style="vertical-align: bottom">
<td style="font-size: 8.5pt"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td style="font-size: 8.5pt"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td colspan="5" style="border-bottom: #000000 1px solid; font-size: 8.5pt; font-weight: bold; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>September
30, 2012</b></font></td>
<td style="font-size: 8.5pt"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td colspan="5" style="border-bottom: #000000 1px solid; font-size: 8.5pt; font-weight: bold; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>September
30, 2011</b></font></td></tr>
<tr style="vertical-align: bottom">
<td style="font-size: 8.5pt"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td style="font-size: 8.5pt"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td style="font-size: 8.5pt"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td style="font-size: 8.5pt"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td style="font-size: 8.5pt"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td colspan="2" style="font-size: 8.5pt; font-weight: bold; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Loss</b></font></td>
<td style="font-size: 8.5pt"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td style="font-size: 8.5pt"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td style="font-size: 8.5pt"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td style="font-size: 8.5pt"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td colspan="2" style="font-size: 8.5pt; font-weight: bold; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Income
(loss)</b></font></td></tr>
<tr style="vertical-align: bottom">
<td style="border-bottom: #000000 1px solid; font-size: 8.5pt; font-weight: bold"><font style="font: 8pt Times New Roman, Times, Serif"><b>Revenue
and Income</b></font></td>
<td style="font-size: 8.5pt"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td colspan="2" style="border-bottom: #000000 1px solid; font-size: 8.5pt; font-weight: bold; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Revenue</b></font></td>
<td style="font-size: 8.5pt"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td colspan="2" style="border-bottom: #000000 1px solid; font-size: 8.5pt; font-weight: bold; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>before
income taxes</b></font></td>
<td style="font-size: 8.5pt"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td colspan="2" style="border-bottom: #000000 1px solid; font-size: 8.5pt; font-weight: bold; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Revenue</b></font></td>
<td style="font-size: 8.5pt"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td colspan="2" style="border-bottom: #000000 1px solid; font-size: 8.5pt; font-weight: bold; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>before
income taxes</b></font></td></tr>
<tr style="vertical-align: bottom; background-color: #f3f3f3">
<td style="font-weight: bold"><font style="font: 9pt Times New Roman, Times, Serif">ASO</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">5,996</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">(538)</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">4,781</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">410 </font></td></tr>
<tr style="vertical-align: bottom">
<td style="font-weight: bold"><font style="font: 9pt Times New Roman, Times, Serif">Spacetech</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid"><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">132</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid"><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">(1,020)</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid"><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">59</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid"><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">(1,257)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #f3f3f3">
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 3px double; font-weight: bold"><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 3px double; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">6,128</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 3px double; font-weight: bold"><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 3px double; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">(1,558)</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 3px double"><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 3px double; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">4,840</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 3px double"><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 3px double; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">(847)</font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="font-size: 8.5pt"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td style="font-size: 8.5pt"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td colspan="5" style="border-bottom: #000000 1px solid; font-size: 8.5pt; font-weight: bold; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>September
30, 2012</b></font></td>
<td style="font-size: 8.5pt"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td colspan="5" style="border-bottom: #000000 1px solid; font-size: 8.5pt; font-weight: bold; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>June
30, 2012</b></font></td></tr>
<tr style="vertical-align: bottom">
<td style="border-bottom: #000000 1px solid; font-size: 8.5pt; font-weight: bold"><font style="font: 8pt Times New Roman, Times, Serif"><b>Assets</b></font></td>
<td style="font-size: 8.5pt"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td colspan="2" style="border-bottom: #000000 1px solid"><p style="font-size: 8.5pt; text-align: center; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"><b>Fixed</b></font></p>
<p style="font-size: 8.5pt; text-align: center; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"><b>Assets,
net</b></font></p></td>
<td style="font-size: 8.5pt"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td colspan="2" style="border-bottom: #000000 1px solid; font-size: 8.5pt; font-weight: bold; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Total
Assets</b></font></td>
<td style="font-size: 8.5pt"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td colspan="2" style="border-bottom: #000000 1px solid"><p style="font-size: 8.5pt; text-align: center; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"><b>Fixed</b></font></p>
<p style="font-size: 8.5pt; text-align: center; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"><b>Assets,
net</b></font></p></td>
<td style="font-size: 8.5pt"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td colspan="2" style="border-bottom: #000000 1px solid; font-size: 8.5pt; font-weight: bold; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Total
Assets</b></font></td></tr>
<tr style="vertical-align: bottom; background-color: #f3f3f3">
<td style="font-weight: bold"><font style="font: 9pt Times New Roman, Times, Serif">ASO</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">36,693</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">46,588 </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">36,997</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">48,867 </font></td></tr>
<tr style="vertical-align: bottom">
<td style="font-weight: bold"><font style="font: 9pt Times New Roman, Times, Serif">Spacetech</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid"><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">293</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid"><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">1,130 </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid"><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">273</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid"><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">1,182 </font></td></tr>
<tr style="vertical-align: bottom; background-color: #f3f3f3">
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 3px double"><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 3px double; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">36,986</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 3px double"><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 3px double; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">47,718 </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 3px double"><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 3px double; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">37,270</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 3px double"><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 3px double; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">50,049 </font></td></tr>
</table>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><br /></font></p>
<p style="margin: 0pt"></p>
<table cellspacing="0" cellpadding="0" style="margin-top: 0px; font-size: 9pt; width: 100%">
<tr>
<td style="width: 38%"> </td>
<td style="width: 2%"> </td>
<td style="width: 1%"> </td>
<td style="width: 11%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 16%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 11%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 15%"> </td></tr>
<tr>
<td style="vertical-align: bottom"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td style="vertical-align: bottom"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td colspan="5" style="vertical-align: bottom; font-size: 8.5pt; font-weight: bold; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Three
Months Ended</b></font></td>
<td style="vertical-align: bottom; font-size: 8.5pt"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td colspan="5" style="vertical-align: bottom; font-size: 8.5pt; font-weight: bold; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Three
Months Ended</b></font></td></tr>
<tr style="vertical-align: bottom">
<td style="font-size: 8.5pt"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td style="font-size: 8.5pt"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td colspan="5" style="border-bottom: #000000 1px solid; font-size: 8.5pt; font-weight: bold; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>September
30, 2012</b></font></td>
<td style="font-size: 8.5pt"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td colspan="5" style="border-bottom: #000000 1px solid; font-size: 8.5pt; font-weight: bold; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>September
30, 2011</b></font></td></tr>
<tr style="vertical-align: bottom">
<td style="font-size: 8.5pt"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td style="font-size: 8.5pt"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td style="font-size: 8.5pt"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td style="font-size: 8.5pt"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td style="font-size: 8.5pt"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td colspan="2" style="font-size: 8.5pt; font-weight: bold; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Loss</b></font></td>
<td style="font-size: 8.5pt"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td style="font-size: 8.5pt"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td style="font-size: 8.5pt"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td style="font-size: 8.5pt"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td colspan="2" style="font-size: 8.5pt; font-weight: bold; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Income
(loss)</b></font></td></tr>
<tr style="vertical-align: bottom">
<td style="border-bottom: #000000 1px solid; font-size: 8.5pt; font-weight: bold"><font style="font: 8pt Times New Roman, Times, Serif"><b>Revenue
and Income</b></font></td>
<td style="font-size: 8.5pt"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td colspan="2" style="border-bottom: #000000 1px solid; font-size: 8.5pt; font-weight: bold; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Revenue</b></font></td>
<td style="font-size: 8.5pt"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td colspan="2" style="border-bottom: #000000 1px solid; font-size: 8.5pt; font-weight: bold; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>before
income taxes</b></font></td>
<td style="font-size: 8.5pt"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td colspan="2" style="border-bottom: #000000 1px solid; font-size: 8.5pt; font-weight: bold; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Revenue</b></font></td>
<td style="font-size: 8.5pt"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td colspan="2" style="border-bottom: #000000 1px solid; font-size: 8.5pt; font-weight: bold; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>before
income taxes</b></font></td></tr>
<tr style="vertical-align: bottom; background-color: #f3f3f3">
<td style="font-weight: bold"><font style="font: 9pt Times New Roman, Times, Serif">ASO</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">5,996</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">(538)</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">4,781</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">410 </font></td></tr>
<tr style="vertical-align: bottom">
<td style="font-weight: bold"><font style="font: 9pt Times New Roman, Times, Serif">Spacetech</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid"><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">132</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid"><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">(1,020)</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid"><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">59</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid"><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">(1,257)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #f3f3f3">
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 3px double; font-weight: bold"><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 3px double; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">6,128</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 3px double; font-weight: bold"><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 3px double; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">(1,558)</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 3px double"><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 3px double; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">4,840</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 3px double"><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 3px double; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">(847)</font></td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td style="font-size: 8.5pt"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td style="font-size: 8.5pt"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td colspan="5" style="border-bottom: #000000 1px solid; font-size: 8.5pt; font-weight: bold; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>September
30, 2012</b></font></td>
<td style="font-size: 8.5pt"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td colspan="5" style="border-bottom: #000000 1px solid; font-size: 8.5pt; font-weight: bold; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>June
30, 2012</b></font></td></tr>
<tr style="vertical-align: bottom">
<td style="border-bottom: #000000 1px solid; font-size: 8.5pt; font-weight: bold"><font style="font: 8pt Times New Roman, Times, Serif"><b>Assets</b></font></td>
<td style="font-size: 8.5pt"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td colspan="2" style="border-bottom: #000000 1px solid"><p style="font-size: 8.5pt; text-align: center; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"><b>Fixed</b></font></p>
<p style="font-size: 8.5pt; text-align: center; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"><b>Assets,
net</b></font></p></td>
<td style="font-size: 8.5pt"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td colspan="2" style="border-bottom: #000000 1px solid; font-size: 8.5pt; font-weight: bold; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Total
Assets</b></font></td>
<td style="font-size: 8.5pt"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td colspan="2" style="border-bottom: #000000 1px solid"><p style="font-size: 8.5pt; text-align: center; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"><b>Fixed</b></font></p>
<p style="font-size: 8.5pt; text-align: center; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"><b>Assets,
net</b></font></p></td>
<td style="font-size: 8.5pt"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td colspan="2" style="border-bottom: #000000 1px solid; font-size: 8.5pt; font-weight: bold; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Total
Assets</b></font></td></tr>
<tr style="vertical-align: bottom; background-color: #f3f3f3">
<td style="font-weight: bold"><font style="font: 9pt Times New Roman, Times, Serif">ASO</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">36,693</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">46,588 </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">36,997</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">48,867 </font></td></tr>
<tr style="vertical-align: bottom">
<td style="font-weight: bold"><font style="font: 9pt Times New Roman, Times, Serif">Spacetech</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid"><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">293</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid"><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">1,130 </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid"><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">273</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid"><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">1,182 </font></td></tr>
<tr style="vertical-align: bottom; background-color: #f3f3f3">
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 3px double"><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 3px double; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">36,986</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 3px double"><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 3px double; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">47,718 </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 3px double"><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 3px double; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">37,270</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 3px double"><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 3px double; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">50,049 </font></td></tr>
</table>
<p style="margin: 0pt"></p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b>(10) State of Texas Funding</b></font></p>
<p style="margin: 0"> </p>
<p style="margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">In March 2010, the Texas Emerging Technology Fund
awarded 1<sup>st </sup>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<sup>st </sup>Detect
granted a common stock purchase right and a note payable to the State of Texas. As of September 30, 2012, 1<sup>st </sup>Detect
has received $1.8 million in disbursements. The proceeds from the award can only be used to fund development of the Miniature
Chemical Detector at 1<sup>st</sup> Detect, not for repaying existing debt or for use in other Company subsidiaries.</font></p>
<p style="margin: 0"> </p>
<p style="margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">The common stock purchase right is exercisable at
the first Qualifying Financing Event (“QFE”), which is essentially a change in control or third party equity investment
in 1<sup>st</sup> 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 QFE (denominator). If the first QFE does not occur
within 18 months of the agreement’s effective date, which has been extended to March 31, 2013 as a result of recent extensions
granted by the State of Texas, the number of shares available for purchase will equal the total disbursements (numerator) divided
by $100 (denominator). As of September 30, 2012 no QFE has occurred.</font></p>
<p style="margin: 0"> </p>
<p style="margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">The note equals the disbursements to 1<sup>st</sup>
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<sup>st</sup> Detect, (2) selling more than 50% of common stock of 1<sup>st</sup> Detect or (3) March 2020. No payments
of interest or principal are due on the note unless there is a default, which would occur if 1<sup>st</sup> Detect moves its operations
or headquarters outside of Texas at any time before March 2020. 1<sup>st</sup> Detect has the option to pay back the principal
plus accrued interest by March 31, 2013, but repayment does not cancel the State of Texas’ common stock purchase right.</font></p>
<p style="margin: 0"> </p>
<p style="margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">Management considers the likelihood of voluntarily
repaying the note or of a default event as remote due to the fact that the covenants that would necessitate repayment are within
the control of the Company. As such, the $1.8 million, which was received in two installments of $0.9 million and $0.9 million,
was accounted for as a contribution to equity in the period ended September 30, 2012. As of September 30, 2012, no default events
have occurred.</font></p>
<p style="margin: 0pt"></p>
1800000
<p style="margin: 0pt"></p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b>(11) Equity and Other Long Term Incentive Plans</b></font></p>
<p style="margin: 0"> </p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b><i>Equity Grants</i></b></font></p>
<p style="margin: 0"> </p>
<p style="margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">In the first and second quarters of the fiscal year
ended June 30, 2010, the Compensation Committee of the Board of Directors granted directors, named executive officers and employees
1,995,559 and 410,000, respectively, of restricted shares. The shares were issued from the 2008 Stock Incentive Plan, vest 33.33%
a year over a three-year period and expire upon employee termination.</font></p>
<p style="margin: 0"> </p>
<p style="margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">In the first quarter of fiscal year ended June 30,
2012, the Compensation Committee of the Board of Directors granted directors, named executive officers and employees 579,000 stock
options designed to increase shareholder value by compensating employees over the long term. The options were issued from the
2008 and 2011 Stock Incentive Plans, vest upon the Company’s stock achieving a closing price of $1.50 and expire 10 years
from grant date.</font></p>
<p style="margin: 0"> </p>
<p style="margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">In July 2011, the Compensation Committee of the Board
of Directors granted a third party consultant 200,000 stock options intended to align his incentives with management
and the shareholders. The options were issued out of the 2011 Stock Incentive Plan, vest upon certain performance conditions and
expire 7 years from grant date. Management considers the likelihood of the performance conditions being met as remote, and therefore
no expense was recorded for the three months ended September 30, 2011.</font></p>
<p style="margin: 0"> </p>
<p style="margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">In the first quarter of fiscal year 2013, the Compensation
Committee of the Board of Directors granted directors, named executive officers and employees 330,000 stock options designed to
increase shareholder value by compensating employees over the long term. The options were issued from the 2011 Stock Incentive
Plans, vest upon the Company’s stock achieving a closing price of $1.50 and expire 10 years from grant date.</font></p>
<p style="margin: 0"> </p>
<p style="margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">As of September 30, 2012, 333,501 shares of common
stock were reserved for future grants under the 2008 Stock Incentive Plan and 1,056,000 shares of common stock reserved for future
grant under the 2011 Stock Incentive Plan. In the three months ended September 30, 2012 and 2011, we recognized compensation expense
of $(0.1) million and $0.3 million, respectively, for restricted stock and stock options outstanding.</font></p>
<p style="margin: 0"> </p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b><i>Related Party Transactions</i></b></font></p>
<p style="margin: 0"> </p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b><i>Director Compensation</i></b></font></p>
<p style="margin: 0"> </p>
<p style="margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">In August 2009, the Board of Directors granted 525,000
total restricted shares valued at $0.6 million to directors from the 2008 Stock Incentive Plan. The restricted shares vest 33.33%
a year for three years and expire upon termination. Compensation expense of $0.1 million was recorded in the three months ended
September 30, 2012 for these awards.</font></p>
<p style="margin: 0"> </p>
<p style="margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">In September 2011, the Board of Directors granted
150,000 total stock options valued at $0.1 million to directors from the 2011 Stock Incentive Plan. The stock options vest upon
the Company’s stock achieving a closing price of $1.50 and expire 10 years from grant date. Compensation expense of $0.1
million was recorded in the three months ended September 30, 2012.</font></p>
<p style="margin: 0"> </p>
<p style="margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">In August 2012, the Board of Directors granted 150,000
total stock options valued at $0.1 million to directors from the 2011 Stock Incentive Plan. The stock options vest upon the Company’s
stock achieving a closing price of $1.50 and expire 10 years from grant date. Compensation expense of $0.1 million was recorded
in the three months ended September 30, 2012.</font></p>
<p style="margin: 0"> </p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b><i>Executive Compensation</i></b></font></p>
<p style="margin: 0"> </p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b><i>1<sup>st </sup>Detect</i></b></font></p>
<p style="margin: 0"> </p>
<p style="margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">In January 2010, an independent committee of the Board
of Directors of 1<sup>st</sup> Detect approved a grant of 1,180 restricted stock shares, of which 75 have been subsequently cancelled,
and 1,820 stock purchase warrants, of which 45 have been cancelled, to certain officers, directors and employees of 1<sup>st</sup>
Detect.<b> </b>The awards vest 50% a year over a 2 year period. The restricted stock awards are equal to the fair market value
of 1<sup>st</sup> Detect’s common stock on the date of grant as determined by an independent valuation firm.</font></p>
<p style="text-align: justify; margin: 0"> </p>
<p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">The number of shares and warrants
underlying each award to a named executive officer is as follows: Thomas B. Pickens III: 300 shares, 680 warrants. There was no
compensation expense for the three months ended September 30, 2012 and in the three months ended September 30, 2011, we recognized
compensation expense of $0.1 million, for restricted stock and warrants outstanding.</font></p>
<p style="text-align: justify; margin: 0"> </p>
<p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">In September 2012, the Board
of Directors of 1<sup>st</sup> Detect approved a grant of 965 stock options, of which 230 have been subsequently cancelled, to
certain officers, directors and employees of 1<sup>st</sup> Detect. The awards vest upon certain performance conditions being
met and expire 10 years from grant date. The stock options have an exercise price equal to the fair market value of 1<sup>st</sup>
Detect’s common stock on the date of grant as determined by an independent valuation firm.</font></p>
<p style="text-align: justify; margin: 0"> </p>
<p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">The number of options underlying
each award to a named executive officer is as follows: Thomas B. Pickens III: 200 stock options. In the three months ended September
30, 2012 and 2011, the Company recognized compensation expense of $0.1 million and $0.1 million, respectively.</font></p>
<p style="text-align: justify; margin: 0"> </p>
<p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">Assuming a business event occurred
which resulted in the vesting of all restricted stock, stock purchase warrants and stock options, then Thomas B. Pickens III would
hold 11 % and the Company would hold 66% of the outstanding shares of 1<sup>st</sup> Detect.</font></p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><br /></font></p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">The restricted stock issuances resulted in noncontrolling
interest, as described in Note 3.</font></p>
<p style="margin: 0"> </p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b><i>Astrogenetix</i></b></font></p>
<p style="margin: 0"> </p>
<p style="margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">In January 2010, an independent committee of the Board
of Directors of Astrogenetix approved a grant of 1,550 restricted stock shares, of which 375 have been cancelled. There were 2,050
stock purchase warrants, of which 50 have been subsequently cancelled, that were also granted to certain officers, directors and
employees of Astrogenetix. The awards vest 50% a year over a 2 year period. The restricted stock awards are equal to the fair
market value of Astrogentix’s common stock on the date of grant as determined by an independent valuation firm.</font></p>
<p style="text-align: justify; margin: 0"> </p>
<p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">The number of shares and warrants
underlying each award to a named executive officer is as follows: Thomas B. Pickens III: 500 shares, 1,000 warrants. There was
no compensation expense for the three months ended September 30, 2012 and in the three months ended September 30, 2011, we recognized
compensation expense of $0.1 million, for restricted stock and warrants outstanding.</font></p>
<p style="text-align: justify; margin: 0"> </p>
<p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">Assuming a business event occurred
which resulted in the vesting of all restricted stock and stock purchase warrants, then Thomas B. Pickens III would hold 16% and
the Company would hold 65% of the outstanding shares of Astrogenetix.</font></p>
<p style="margin: 0"> </p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">The restricted stock issuances resulted in noncontrolling
interest, as described in Note 3.</font></p>
<p style="margin: 0"> </p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b><i>Stock Options</i></b></font></p>
<p style="margin: 0"> </p>
<p style="margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">In September 2012, 330,000
stock options were granted to employees and directors. At September 30, 2012 and 2011, there were $0.5 million and $0.3
million, respectively, of total unrecognized compensation costs related to non-vested stock options, which is expected to
be recognized over a weighted average period of 9.5 years.</font></p>
<p style="margin: 0"> </p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">The Company’s stock options activity for the
three months ended September 30, 2012 was as follows:</font></p>
<p style="margin: 0"></p>
<table cellspacing="0" cellpadding="0" style="margin-top: 0px; font-size: 9pt; width: 100%">
<tr>
<td style="width: 71%"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 12%"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 14%"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr>
<td style="vertical-align: bottom"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td style="vertical-align: bottom"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td style="vertical-align: bottom; font-size: 8.5pt; font-weight: bold; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Shares</b></font></td>
<td style="vertical-align: bottom; font-size: 8.5pt"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td colspan="2" style="vertical-align: bottom; font-size: 8.5pt; font-weight: bold; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Weighted
Average</b></font></td></tr>
<tr style="vertical-align: bottom">
<td style="font-size: 8.5pt"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td style="font-size: 8.5pt"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td style="border-bottom: #000000 1px solid; font-size: 8.5pt; font-weight: bold; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>(in
thousands)</b></font></td>
<td style="font-size: 8.5pt"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td colspan="2" style="border-bottom: #000000 1px solid; font-size: 8.5pt; font-weight: bold; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Exercise
Price</b></font></td></tr>
<tr style="vertical-align: bottom; background-color: #f3f3f3">
<td><font style="font: 9pt Times New Roman, Times, Serif">Outstanding at June 30, 2012</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">1,141 </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid"><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">0.79</font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font: 9pt Times New Roman, Times, Serif">Granted</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">330 </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">1.20</font></td></tr>
<tr style="vertical-align: bottom; background-color: #f3f3f3">
<td><font style="font: 9pt Times New Roman, Times, Serif">Exercised</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">(100)</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">0.35</font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font: 9pt Times New Roman, Times, Serif">Cancelled or expired</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">(165)</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid"><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">0.74</font></td></tr>
<tr style="vertical-align: bottom; background-color: #f3f3f3">
<td><font style="font: 9pt Times New Roman, Times, Serif">Outstanding at September 30, 2012</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 3px double; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">1,206 </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 3px double"><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 3px double; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">0.95</font></td></tr>
</table>
<p style="margin: 0"> </p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b><i>Restricted Stock</i></b></font></p>
<p style="margin: 0"> </p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">At September 30, 2012 and 2011, there were $0.1 million
and $0.7 million respectively, of unrecognized compensation costs related to restricted stock, which is expected to be recognized
over a weighted average period of 1.5 years.</font></p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><br /></font></p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">The Company’s restricted stock activity for the
three months ended September 30, 2012 was as follows:</font></p>
<p style="margin: 0"></p>
<table cellspacing="0" cellpadding="0" style="margin-top: 0px; font-size: 9pt; width: 100%">
<tr>
<td style="width: 74%"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 13%"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 11%"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr>
<td style="vertical-align: bottom"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td style="border-bottom: #000000 1px solid; vertical-align: bottom"><p style="font-size: 8.5pt; text-align: center; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"><b>Shares</b></font></p>
<p style="font-size: 8.5pt; text-align: center; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"><b>(in
thousands)</b></font></p></td>
<td style="vertical-align: bottom; font-size: 8.5pt"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td colspan="2" style="border-bottom: #000000 1px solid; vertical-align: bottom"><p style="font-size: 8.5pt; text-align: center; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"><b>Weighted</b></font></p>
<p style="font-size: 8.5pt; text-align: center; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"><b>Average</b></font></p>
<p style="font-size: 8.5pt; text-align: center; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"><b>Grant-Date</b></font></p>
<p style="font-size: 8.5pt; text-align: center; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"><b>Fair
Value</b></font></p></td></tr>
<tr style="vertical-align: bottom; background-color: #f3f3f3">
<td><font style="font: 9pt Times New Roman, Times, Serif">Non-vested at June 30, 2012</font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">678 </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid"><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">1.14</font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font: 9pt Times New Roman, Times, Serif">Granted</font></td>
<td style="text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">—</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">—</font></td></tr>
<tr style="vertical-align: bottom; background-color: #f3f3f3">
<td><font style="font: 9pt Times New Roman, Times, Serif">Vested</font></td>
<td style="text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">(209)</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">1.22</font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font: 9pt Times New Roman, Times, Serif">Cancelled or expired</font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">(133)</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid"><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">1.15</font></td></tr>
<tr style="vertical-align: bottom; background-color: #f3f3f3">
<td><font style="font: 9pt Times New Roman, Times, Serif">Non-vested at September 30, 2012</font></td>
<td style="border-bottom: #000000 3px double; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">336 </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 3px double"><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 3px double; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">1.16</font></td></tr>
</table>
<p style="margin: 0"> </p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b><i>Stock Options and Warrants for 1<sup>st </sup>Detect</i></b></font></p>
<p style="margin: 0"> </p>
<p style="margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">At September 30, 2012 and 2011, there was $0.1 million
and $0.1 million respectively, of unrecognized compensation costs related to warrants and options, which is expected to be recognized
over a weighted average period of 9.0 years.</font></p>
<p style="margin: 0"> </p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">1<sup>st</sup> Detect stock options and warrants activity
for the three months ended September 30, 2012 was as follows:</font></p>
<p style="margin: 0"></p>
<table cellspacing="0" cellpadding="0" style="margin-top: 0px; font-size: 9pt; width: 100%">
<tr>
<td style="width: 74%"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 13%"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 11%"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr>
<td style="vertical-align: bottom"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid; vertical-align: bottom; font-size: 8.5pt; font-weight: bold; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif">Shares</font></td>
<td style="vertical-align: bottom; font-size: 8.5pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="border-bottom: #000000 1px solid; vertical-align: bottom"><p style="font-size: 8.5pt; text-align: center; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">Weighted</font></p>
<p style="font-size: 8.5pt; text-align: center; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">Average</font></p>
<p style="font-size: 8.5pt; text-align: center; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">Grant-Date</font></p>
<p style="font-size: 8.5pt; text-align: center; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif">Fair
Value</font></p></td></tr>
<tr style="vertical-align: bottom; background-color: #f3f3f3">
<td><font style="font: 9pt Times New Roman, Times, Serif">Non-vested at June 30, 2012</font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">2,730 </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid"><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">212.00</font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font: 9pt Times New Roman, Times, Serif">Granted</font></td>
<td style="text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">—</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">—</font></td></tr>
<tr style="vertical-align: bottom; background-color: #f3f3f3">
<td><font style="font: 9pt Times New Roman, Times, Serif">Exercised</font></td>
<td style="text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">—</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">—</font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font: 9pt Times New Roman, Times, Serif">Cancelled or expired</font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">(220)</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid"><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">212.00</font></td></tr>
<tr style="vertical-align: bottom; background-color: #f3f3f3">
<td><font style="font: 9pt Times New Roman, Times, Serif">Outstanding at September 30, 2012</font></td>
<td style="border-bottom: #000000 3px double; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">2,510 </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 3px double"><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 3px double; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">212.00</font></td></tr>
</table>
<p style="margin: 0"> </p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b><i>Restricted Stock for 1<sup>st</sup> Detect</i></b></font></p>
<p style="margin: 0"> </p>
<p style="margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">At September 30, 2012, the awards were fully vested
and there is no additional compensation expense to be recognized related to restricted stock. At September 30, 2011 there was
$0.1 million of unrecognized compensation costs related to restricted stock.</font></p>
<p style="margin: 0"> </p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b><i>Warrants for Astrogenetix</i></b></font></p>
<p style="margin: 0"> </p>
<p style="margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">At September 30, 2012 the warrants were fully vested
and there is no additional compensation expense to be recognized related to warrants. At September 30, 2011 there was $0.1 million
of unrecognized compensation costs related to warrants.</font></p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><br /></font></p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">Astrogenetix warrant activity for the three months
ended September 30, 2012 was as follows:</font></p>
<p style="margin: 0"></p>
<table cellspacing="0" cellpadding="0" style="margin-top: 0px; font-size: 9pt; width: 100%">
<tr>
<td style="width: 74%"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 13%"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 11%"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr>
<td style="vertical-align: bottom"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td style="border-bottom: #000000 1px solid; vertical-align: bottom; font-size: 8.5pt; font-weight: bold; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Shares</b></font></td>
<td style="vertical-align: bottom; font-size: 8.5pt"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td colspan="2" style="border-bottom: #000000 1px solid; vertical-align: bottom"><p style="font-size: 8.5pt; text-align: center; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"><b>Weighted</b></font></p>
<p style="font-size: 8.5pt; text-align: center; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"><b>Average</b></font></p>
<p style="font-size: 8.5pt; text-align: center; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"><b>Grant-Date</b></font></p>
<p style="font-size: 8.5pt; text-align: center; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"><b>Fair
Value</b></font></p></td></tr>
<tr style="vertical-align: bottom; background-color: #f3f3f3">
<td><font style="font: 9pt Times New Roman, Times, Serif">Outstanding at June 30, 2012</font></td>
<td style="text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">2,000</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">167.00</font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font: 9pt Times New Roman, Times, Serif">Granted</font></td>
<td style="text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">—</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">—</font></td></tr>
<tr style="vertical-align: bottom; background-color: #f3f3f3">
<td><font style="font: 9pt Times New Roman, Times, Serif">Exercised</font></td>
<td style="text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">—</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">—</font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font: 9pt Times New Roman, Times, Serif">Cancelled or expired</font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">—</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid"><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">—</font></td></tr>
<tr style="vertical-align: bottom; background-color: #f3f3f3">
<td><font style="font: 9pt Times New Roman, Times, Serif">Outstanding at September 30, 2012</font></td>
<td style="border-bottom: #000000 3px double; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">2,000</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 3px double"><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 3px double; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">167.00</font></td></tr>
</table>
<p style="margin: 0"> </p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b><i>Restricted Stock for Astrogenetix</i></b></font></p>
<p style="margin: 0"> </p>
<p style="margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">At September 30, 2012, the awards were fully vested
and there is no additional compensation expense to be recognized related to restricted stock. At September 30, 2011 there was
$0.1 million of unrecognized compensation costs related to restricted stock.</font></p>
<p style="margin: 0pt"></p>
<table cellspacing="0" cellpadding="0" style="margin-top: 0px; font-size: 9pt; width: 100%">
<tr>
<td style="width: 74%"> </td>
<td style="width: 13%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 11%"> </td></tr>
<tr>
<td style="vertical-align: bottom"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td style="border-bottom: #000000 1px solid; vertical-align: bottom"><p style="font-size: 8.5pt; text-align: center; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"><b>Shares</b></font></p>
<p style="font-size: 8.5pt; text-align: center; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"><b>(in
thousands)</b></font></p></td>
<td style="vertical-align: bottom; font-size: 8.5pt"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td colspan="2" style="border-bottom: #000000 1px solid; vertical-align: bottom"><p style="font-size: 8.5pt; text-align: center; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"><b>Weighted</b></font></p>
<p style="font-size: 8.5pt; text-align: center; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"><b>Average</b></font></p>
<p style="font-size: 8.5pt; text-align: center; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"><b>Grant-Date</b></font></p>
<p style="font-size: 8.5pt; text-align: center; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"><b>Fair
Value</b></font></p></td></tr>
<tr style="vertical-align: bottom; background-color: #f3f3f3">
<td><font style="font: 9pt Times New Roman, Times, Serif">Non-vested at June 30, 2012</font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">678 </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid"><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">1.14</font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font: 9pt Times New Roman, Times, Serif">Granted</font></td>
<td style="text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">—</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">—</font></td></tr>
<tr style="vertical-align: bottom; background-color: #f3f3f3">
<td><font style="font: 9pt Times New Roman, Times, Serif">Vested</font></td>
<td style="text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">(209)</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">1.22</font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font: 9pt Times New Roman, Times, Serif">Cancelled or expired</font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">(133)</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid"><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">1.15</font></td></tr>
<tr style="vertical-align: bottom; background-color: #f3f3f3">
<td><font style="font: 9pt Times New Roman, Times, Serif">Non-vested at September 30, 2012</font></td>
<td style="border-bottom: #000000 3px double; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">336 </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 3px double"><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 3px double; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">1.16</font></td></tr>
</table>
<p style="margin: 0"></p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><br /></font></p>
<table cellspacing="0" cellpadding="0" style="margin-top: 0px; font-size: 9pt; width: 100%">
<tr>
<td style="width: 71%"><font style="font: 10pt Times New Roman, Times, Serif"><b> Stock Option Activity for Astrotech</b></font></td>
<td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif"><b> </b></font></td>
<td style="width: 12%"><font style="font: 10pt Times New Roman, Times, Serif"><b> </b></font></td>
<td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif"><b> </b></font></td>
<td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif"><b> </b></font></td>
<td style="width: 14%"><font style="font: 10pt Times New Roman, Times, Serif"><b> </b></font></td></tr>
<tr>
<td style="vertical-align: bottom"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="vertical-align: bottom"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="vertical-align: bottom; font-size: 8.5pt; font-weight: bold; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif">Shares</font></td>
<td style="vertical-align: bottom; font-size: 8.5pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="vertical-align: bottom; font-size: 8.5pt; font-weight: bold; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif">Weighted
Average</font></td></tr>
<tr style="vertical-align: bottom">
<td style="font-size: 8.5pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 8.5pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid; font-size: 8.5pt; font-weight: bold; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif">(in
thousands)</font></td>
<td style="font-size: 8.5pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="border-bottom: #000000 1px solid; font-size: 8.5pt; font-weight: bold; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif">Exercise
Price</font></td></tr>
<tr style="vertical-align: bottom; background-color: #f3f3f3">
<td><font style="font: 9pt Times New Roman, Times, Serif">Outstanding at June 30, 2012</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">1,141 </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid"><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">0.79</font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font: 9pt Times New Roman, Times, Serif">Granted</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">330 </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">1.20</font></td></tr>
<tr style="vertical-align: bottom; background-color: #f3f3f3">
<td><font style="font: 9pt Times New Roman, Times, Serif">Exercised</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">(100)</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">0.35</font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font: 9pt Times New Roman, Times, Serif">Cancelled or expired</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">(165)</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid"><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">0.74</font></td></tr>
<tr style="vertical-align: bottom; background-color: #f3f3f3">
<td><font style="font: 9pt Times New Roman, Times, Serif">Outstanding at September 30, 2012</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 3px double; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">1,206 </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 3px double"><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 3px double; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">0.95</font></td></tr>
</table>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><br /></font></p>
<table cellspacing="0" cellpadding="0" style="margin-top: 0px; font-size: 9pt; width: 100%">
<tr>
<td style="width: 74%"><font style="font: 10pt Times New Roman, Times, Serif"><b>Stock Options and Warrants for 1<sup>st </sup>Detect</b></font></td>
<td style="width: 13%"><font style="font: 10pt Times New Roman, Times, Serif"><b> </b></font></td>
<td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif"><b> </b></font></td>
<td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif"><b> </b></font></td>
<td style="width: 11%"><font style="font: 10pt Times New Roman, Times, Serif"><b> </b></font></td></tr>
<tr>
<td style="vertical-align: bottom"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td style="border-bottom: #000000 1px solid; vertical-align: bottom; font-size: 8.5pt; font-weight: bold; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Shares</b></font></td>
<td style="vertical-align: bottom; font-size: 8.5pt"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td colspan="2" style="border-bottom: #000000 1px solid; vertical-align: bottom"><p style="font-size: 8.5pt; text-align: center; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"><b>Weighted</b></font></p>
<p style="font-size: 8.5pt; text-align: center; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"><b>Average</b></font></p>
<p style="font-size: 8.5pt; text-align: center; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"><b>Grant-Date</b></font></p>
<p style="font-size: 8.5pt; text-align: center; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"><b>Fair
Value</b></font></p></td></tr>
<tr style="vertical-align: bottom; background-color: #f3f3f3">
<td><font style="font: 9pt Times New Roman, Times, Serif">Non-vested at June 30, 2012</font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">2,730 </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid"><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">212.00</font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font: 9pt Times New Roman, Times, Serif">Granted</font></td>
<td style="text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">—</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">—</font></td></tr>
<tr style="vertical-align: bottom; background-color: #f3f3f3">
<td><font style="font: 9pt Times New Roman, Times, Serif">Exercised</font></td>
<td style="text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">—</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">—</font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font: 9pt Times New Roman, Times, Serif">Cancelled or expired</font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">(220)</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid"><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">212.00</font></td></tr>
<tr style="vertical-align: bottom; background-color: #f3f3f3">
<td><font style="font: 9pt Times New Roman, Times, Serif">Outstanding at September 30, 2012</font></td>
<td style="border-bottom: #000000 3px double; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">2,510 </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 3px double"><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 3px double; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">212.00</font></td></tr>
</table>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><br /> </font></p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"></font></p>
<p style="margin: 0"></p>
<p style="margin: 0"></p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><br /></font></p>
<table cellspacing="0" cellpadding="0" style="margin-top: 0px; font-size: 9pt; width: 100%">
<tr>
<td style="width: 74%"><font style="font: 10pt Times New Roman, Times, Serif"><b> </b></font><b>Warrants for Astrogenetix</b></td>
<td style="width: 13%"><font style="font: 10pt Times New Roman, Times, Serif"><b> </b></font></td>
<td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif"><b> </b></font></td>
<td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif"><b> </b></font></td>
<td style="width: 11%"><font style="font: 10pt Times New Roman, Times, Serif"><b> </b></font></td></tr>
<tr>
<td style="vertical-align: bottom"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td style="border-bottom: #000000 1px solid; vertical-align: bottom; font-size: 8.5pt; font-weight: bold; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Shares</b></font></td>
<td style="vertical-align: bottom; font-size: 8.5pt"><font style="font: 8pt Times New Roman, Times, Serif"><b> </b></font></td>
<td colspan="2" style="border-bottom: #000000 1px solid; vertical-align: bottom"><p style="font-size: 8.5pt; text-align: center; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"><b>Weighted</b></font></p>
<p style="font-size: 8.5pt; text-align: center; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"><b>Average</b></font></p>
<p style="font-size: 8.5pt; text-align: center; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"><b>Grant-Date</b></font></p>
<p style="font-size: 8.5pt; text-align: center; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"><b>Fair
Value</b></font></p></td></tr>
<tr style="vertical-align: bottom; background-color: #f3f3f3">
<td><font style="font: 9pt Times New Roman, Times, Serif">Outstanding at June 30, 2012</font></td>
<td style="text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">2,000</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">167.00</font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font: 9pt Times New Roman, Times, Serif">Granted</font></td>
<td style="text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">—</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">—</font></td></tr>
<tr style="vertical-align: bottom; background-color: #f3f3f3">
<td><font style="font: 9pt Times New Roman, Times, Serif">Exercised</font></td>
<td style="text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">—</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">—</font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font: 9pt Times New Roman, Times, Serif">Cancelled or expired</font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">—</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid"><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">—</font></td></tr>
<tr style="vertical-align: bottom; background-color: #f3f3f3">
<td><font style="font: 9pt Times New Roman, Times, Serif">Outstanding at September 30, 2012</font></td>
<td style="border-bottom: #000000 3px double; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">2,000</font></td>
<td><font style="font: 9pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 3px double"><font style="font: 9pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 3px double; text-align: right"><font style="font: 9pt Times New Roman, Times, Serif">167.00</font></td></tr>
</table>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><br /></font></p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b><i> </i></b></font></p>
0.95
.79
212
212
167
167
0.74
212
0
0.35
0
0
1.2
0
0
1206000
1141000
2510000
2730000
2000000
2000000
-165000
-220000
0
-100000
0
0
330000
0
0
1.16
1.14
1.15
1.22
0
336000
678000
-133000
-209000
0
<p style="margin: 0pt"></p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b>(12) Income Taxes</b></font></p>
<p style="margin: 0"> </p>
<p style="margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">The Company accounts for income taxes under the asset
and liability method. Deferred tax assets and liabilities are recognized for the expected tax consequences of temporary differences
between the tax bases of assets and liabilities and their reported amounts. Valuation allowances are established, when necessary,
to reduce deferred tax assets to amounts that are more likely than not to be realized. As of September 30, 2012, the Company has
established a full valuation allowance against all of its net deferred tax assets.</font></p>
<p style="margin: 0"> </p>
<p style="margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">FASB ASC 740, <i>Income Taxes </i>(FASB ASC 740) addresses
the accounting for uncertainty in income taxes recognized in an entity’s financial statements and prescribes a recognition
threshold and measurement attribute for financial statement disclosure of tax positions taken or expected to be taken on a tax
return. As of September 30, 2012, the Company has a liability of $64,000 ($42,000 net of federal benefit) for unrecognized tax benefits.</font></p>
<p style="margin: 0"> </p>
<p style="margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">For the three months ended September 30, 2012 and
2011, the Company’s effective tax rate differed from the federal statutory rate of 35%, primarily due to recording changes
to the valuation allowance placed against its net deferred tax assets.</font></p>
<p style="margin: 0"> </p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">The Company files consolidated returns for federal,
California, Florida, and Texas income and franchise taxes.</font></p>
<p style="margin: 0"> </p>
<p style="margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">The Company is currently under examination by the
Internal Revenue Service for the fiscal years ended June 30, 2008 through 2010. Loss carryovers are generally subject to modification
by tax authorities until 3 years after they have been utilized; as such, the Company is subject to examination for the fiscal
years ended 2000 through present for federal purposes and fiscal years ended 2006 through present for state purposes.</font></p>
<p style="margin: 0pt"></p>
The Company is currently under examination by the Internal Revenue Service for
the fiscal years ended June 30, 2008 through 2010. Loss carryovers are generally
subject to modification by tax authorities until 3 years after they have been
utilized; as such, the Company is subject to examination for the fiscal years
ended 2000 through present for federal purposes and fiscal years ended 2006
through present for state purposes.
64000
<p style="margin: 0pt"></p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b>(13) Purchase of Common Stock</b></font></p>
<p style="margin: 0"> </p>
<p style="margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">Common stock 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.</font></p>
<p style="margin: 0"> </p>
<p style="margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">As of September 30, 2012, we had repurchased 311,660
shares 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. As a result, the Company is authorized to repurchase an additional $5.7 million of securities under
this program.</font></p>
<p style="margin: 0pt"></p>
311660
200000
0.76
1100000
5700000
<p style="margin: 0pt"></p>
<p style="text-align: justify; margin: 0"></p>
<p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b>(15) Subsequent Events</b></font></p>
<p style="text-align: justify; margin: 0"> </p>
<p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">In October 2012 the Company’s
$3.0 million revolving credit facility expired. The Company had no outstanding balance on the revolving credit facility</font>.</p>
<p style="text-align: justify; margin: 0"> </p>
<p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">As disclosed in the Company’s
Current Report on Form 8-K, filed with the Securities and Exchange Commission on August 9, 2012, the Company terminated Mr. Porter’s
employment on August 3, 2012. In a letter to the Company dated October 17, 2012, Mr. Porter demanded substantial monetary compensation
from the Company as a result of his termination. The Company has not yet been served with a formal complaint. The Company believes
that Mr. Porter’s claims are without merit and intends to vigorously defend any such actions by Mr. Porter.</font></p>
<p style="text-align: justify; margin: 0"> </p>
<p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"> As disclosed in the
Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on November 7, 2012, on October
31, 2012, the Company received a notice from Mr. Porter, stating that he intends to nominate four of the six directors
eligible for election to the Board of Directors of the Company at the Company’s 2012 Annual Meeting of
Shareholders.</font></p>
<p style="text-align: justify; margin: 0"> </p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><br /></font></p>
<p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">As disclosed in the Company’s
Current Report on Form 8-K filed with the Securities and Exchange Commission on November 5, 2012, on November 1, 2012, the Board
of Directors of the Company approved a waiver of the Company’s Code of Ethics and Business Conduct to the extent necessary
to allow Thomas B. Pickens III, Chairman and Chief Executive Officer of the Company, to purchase shares of the Company’s
common stock in one or more transactions and agreed to waive certain provisions of the Company’s Rights Agreement, dated
July 29, 2009, between the Company and American Stock Transfer & Trust Company, LLC, as Rights Agent (as amended, the “Rights
Plan”), in order to allow a Mr. Pickens to consummate these acquisitions without triggering the operative provisions of
the Rights Plan. Mr. Pickens subsequently purchased 1,783,746 shares of our common stock at $0.90 per share.</font></p>
<p style="margin: 0; text-align: justify"> </p>
<p style="margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">On November 13, 2012, the Company
received a notification letter from The Nasdaq Stock Market (“NASDAQ”) stating that, based upon the closing bid price
of the Company’s common stock for the last 30 consecutive business days, the Company no longer meets the requirement that
listed securities maintain a minimum bid price of $1.00 per share in accordance with NASDAQ Marketplace Rule 5550(a)(2). The notification
has no immediate effect on the listing of the Company’s common stock, which will continue to trade on the NASDAQ Capital
Market.</font></p>
<p style="text-align: justify; margin: 0"> </p>
<p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">The notification letter states
that the NASDAQ listing rules provide the Company a compliance period of 180 calendar days, or until May 13, 2013, in which to
regain compliance. If at any time during this 180 day period the closing bid price of the Company’s security is at least
$1.00 per share for a minimum of ten consecutive business days, the Company will have regained compliance.</font></p>
<p style="text-align: justify; margin: 0"> </p>
<p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">The notification letter also
states that, in the event the Company does not regain compliance, the Company may be eligible for additional time. To qualify,
the Company will be required to meet the continued listing requirement for market value of publicly held shares and all other
NASDAQ initial listing standards, with the exception of the minimum bid price requirement, and will need to provide written notice
of its intention to cure the deficiency during the second compliance period. If the Company meets these requirements, NASDAQ will
inform the Company that it has been granted an additional 180 calendar days. However, if it appears to NASDAQ staff that the Company
will not be able to cure the deficiency, or if the Company is otherwise not eligible, NASDAQ will provide the Company with notice
that its securities will be subject to delisting.</font></p>
<p style="text-align: justify; margin: 0"> </p>
<p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">The Company intends to actively
monitor the bid price for its common stock between now and May 13, 2013, and will consider available options to regain compliance
with the minimum bid price requirement.</font></p>
<p style="margin: 0pt"></p>
3000000
<p style="margin: 0pt"></p>
<p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b>(14) Commitments and Contingencies</b></font></p>
<p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><br /></font></p>
<p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">The Company is subject
to various lawsuits and other claims in the normal course of business. In addition, from time to time, the Company receives communications
from government or regulatory agencies concerning investigations or allegations of</font></p>
<p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">noncompliance with laws or regulations
in jurisdictions in which the Company operates.</font></p>
<p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><br /></font></p>
<p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">The Company establishes reserves
for the estimated losses on specific contingent liabilities, for regulatory and legal actions where the Company deems a loss to
be probable and the amount of the loss can be reasonably estimated. In other instances, the Company is not able to make a reasonable
estimate of liability because of the uncertainties related to the outcome or the amount or range of potential loss.</font></p>
<p style="text-align: justify; margin: 0"> </p>
<p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><br /></font></p>
<p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">On August 3, 2012, the Company
terminated John Porter, the Company’s former Senior Vice President, Chief Financial Officer and Secretary. In a letter to
the Company dated October 17, 2012, Mr. Porter demanded substantial monetary compensation totaling approximately $1.0 million
from the Company as a result of his termination. The Company has not yet been served with a formal complaint. While the Company
intends to vigorously defend any such actions by Mr. Porter, the Company recorded a liability at September 30, 2012 for its estimate
of the probable loss in this matter.</font></p>
<p style="margin: 0pt"></p>
In the first and second quarters of the fiscal year ended June 30, 2010, the Compensation Committee of the Board of Directors granted directors, named executive officers and employees 1,995,559 and 410,000, respectively, of restricted shares. The shares were issued from the 2008 Stock Incentive Plan, vest 33.33% a year over a three-year period and expire upon employee termination. In the first quarter of fiscal year ended June 30, 2012, the Compensation Committee of the Board of Directors granted directors, named executive officers and employees 579,000 stock options designed to increase shareholder value by compensating employees over the long term. The options were issued from the 2008 and 2011 Stock Incentive Plans, vest upon the Company’s stock achieving a closing price of $1.50 and expire 10 years from grant date. In July 2011, the Compensation Committee of the Board of Directors granted a third party consultant 200,000 stock options intended to provide incentive which is aligned with management and the shareholders. The options were issued out of the 2011 Stock Incentive Plan, vest upon certain performance conditions and expire 7 years from grant date. Management considers the likelihood of the performance conditions being met as remote, and therefore no expense was recorded for the three months ended September 30, 2011. In the first quarter of fiscal year 2013, the Compensation Committee of the Board of Directors granted directors, named executive officers and employees 330,000 stock options designed to increase shareholder value by compensating employees over the long term. The options were issued from the 2011 Stock Incentive Plans, vest upon the Company’s stock achieving a closing price of $1.50 and expire 10 years from grant date.
In August 2009, the Board of Directors granted 525,000 total restricted shares valued at $0.6 million to directors from the 2008 Stock Incentive Plan. The restricted shares vest 33.33% a year for three years and expire upon termination. Compensation expense of $0.1 million was recorded in the three months ended September 30, 2012 for these awards. In September 2011, the Board of Directors granted 150,000 total stock options valued at $0.1 million to directors from the 2011 Stock Incentive Plan. The stock options vest upon the Company’s stock achieving a closing price of $1.50 and expire 10 years from grant date. Compensation expense of $0.1 million was recorded in the three months ended September 30, 2012. In August 2012, the Board of Directors granted 150,000 total stock options valued at $0.1 million to directors from the 2011 Stock Incentive Plan. The stock options vest upon the Company’s stock achieving a closing price of $1.50 and expire 10 years from grant date. Compensation expense of $0.1 million was recorded in the three months ended September 30, 2012.
In January 2010, an independent committee of the Board of Directors of 1st Detect approved a grant of 1,180 restricted stock shares, of which 75 have been subsequently cancelled, and 1,820 stock purchase warrants, of which 45 have been cancelled, to certain officers, directors and employees of 1st Detect. The awards vest 50% a year over a 2 year period. The restricted stock awards are equal to the fair market value of 1st Detect’s common stock on the date of grant as determined by an independent valuation firm. The number of shares and warrants underlying each award to a named executive officer is as follows: Thomas B. Pickens III: 300 shares, 680 warrants. There was no compensation expense for the three months ended September 30, 2012 and in the three months ended September 30, 2011, we recognized compensation expense of $0.1 million, for restricted stock and warrants outstanding. In September 2012, the Board of Directors of 1st Detect approved a grant of 965 stock options, of which 230 have been subsequently cancelled, to certain officers, directors and employees of 1st Detect. The awards vest upon certain performance conditions being met and expire 10 years from grant date. The stock options have an exercise price equal to the fair market value of 1st Detect’s common stock on the date of grant as determined by an independent valuation firm. The number of options underlying each award to a named executive officer is as follows: Thomas B. Pickens III: 200 stock options. In the three months ended September 30, 2012 and 2011, the Company recognized compensation expense of $0.1 million and $0.1 million, respectively. Assuming a business event occurred which resulted in the vesting of all restricted stock, stock purchase warrants and stock options, then Thomas B. Pickens III would hold 11% and the Company would hold 66% of the outstanding shares of 1st Detect.
In January 2010, an independent committee of the Board of Directors of Astrogenetix approved a grant of 1,550 restricted stock shares, of which 375 have been cancelled. There were 2,050 stock purchase warrants, of which 50 have been subsequently cancelled, that were also granted to certain officers, directors and employees of Astrogenetix. The awards vest 50% a year over a 2 year period. The restricted stock awards are equal to the fair market value of Astrogentix’s common stock on the date of grant as determined by an independent valuation firm. The number of shares and warrants underlying each award to a named executive officer is as follows: Thomas B. Pickens III: 500 shares, 1,000 warrants. There was no compensation expense for the three months ended September 30, 2012 and in the three months ended September 30, 2011, we recognized compensation expense of $0.1 million, for restricted stock and warrants outstanding. Assuming a business event occurred which resulted in the vesting of all restricted stock and stock purchase warrants, then Thomas B. Pickens III would hold 16% and the Company would hold 65% of the outstanding shares of Astrogenetix.
In September 2012, 330,000 stock options were granted. At September 30, 2012 and 2011, there were $0.5 million and $0.3 million, respectively, of total unrecognized compensation costs related to non-vested stock options, which is expected to be recognized over a weighted average period of 9.5 years.
333501
1056000
-100000
300000
300000
200000
100000
100000
500000
300000
100000
100000
100000
100000
100000
100000
P1Y6M0D
P9Y0M0D
6322000
6414000
6322000
6414000
0.86
.84