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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 Liquidity</b></font></p>
<p style="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">Astrotech Corporation (Nasdaq:
ASTC) (“Astrotech,” “the Company,” “we,” “us” or “our”), a State of 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. We have designed, operated and built space hardware and processing facilities.
We currently own, operate and maintain world-class spacecraft processing facilities; prepare and process scientific research from
microgravity and develop and manufacture sophisticated chemical sensor equipment.</font></p>
<p style="text-align: justify; 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"><b><i>Our Business Units</i></b></font></p>
<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"><b><i>Astrotech Space Operations </i>(“ASO”)</b></font></p>
<p style="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">ASO provides support to its government
and commercial customers as they 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 and launch pad delivery; and communication linked launch control. Our
ASO facilities can accommodate up to five meter class satellites, which includes almost all U.S. based satellites. 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 100% of our consolidated revenues for the three months ended September 30, 2013. Revenue for our ASO business unit is generated
primarily from various fixed-priced contracts with launch service providers in both government and commercial markets and from
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 by
ASO are primarily driven by the number of spacecraft launches and the fabrication of Ground Support Equipment (“GSE”)
for the U.S. Government.</font></p>
<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"><b><i>Spacetech</i></b></font></p>
<p style="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">Our other business unit is a
technology incubator designed to commercialize space-industry technologies. This business unit is currently pursuing two distinct
opportunities:</font></p>
<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"><b>1<sup>st</sup> Detect</b></font></p>
<p style="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
develops, manufactures and sells ultra-small mass spectrometers and related equipment. Mass spectrometers, in general,
measure the mass and relative abundance of ions in a sample to create a “mass spectrum”. This resulting mass
spectrum is a unique fingerprint for each chemical that can be compared to a reference library of mass spectra to verify the
identity of a sample. Mass spectrometers can identify chemicals with more accuracy and precision than competing instruments
given their extreme sensitivity and specificity and they are a staple of almost all analytical laboratories. By leveraging
technology initiated by an engagement with the National Aeronautics and Space Administration (“NASA “) to develop
a mass spectrometer for the International Space Station (“ISS”), the Company has developed a series of instruments that are
significantly smaller, lighter, faster and less expensive than competing mass spectrometers, and significantly more sensitive
and accurate than other competing chemical detectors. Our efforts have resulted in a technology that can provide mass
spectrometry performance in real-time or in the field.</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 MMS-1000<sup>TM</sup> is
a small, low power mass spectrometer designed initially for the laboratory market. The unique design of this unit enables mass
spectrometric quality chemical analysis in a small package (about the size of a shoebox) that operates off less power than a typical
light bulb. This allows high quality chemical analysis to be performed in locations where mass spectrometers have not been used
before, such as directly on the factory floor or in the battlefield, without compromising the quality of the analysis.</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 OEM-1000 is a mass spectrometer
component that was developed for applications where customers need the high quality analysis provided by a mass spectrometer but
in a platform that can be integrated into customer specific packages. The OEM-1000 uses the same high performance analyzer as
the MMS-1000<sup>TM</sup> but is provided as an open platform for customers and development partners to integrate with their complementary
technologies, with application-specific sample preparation, inlets and software.</font></p>
<p style="text-align: justify; 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"><b>Astrogenetix</b></font></p>
<p style="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">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 and the team are currently researching a Salmonella vaccine as part of its
ongoing commercialization strategy. Concurrently, the team is evaluating a vaccine target for Methicillin-Resistant
Staphylococcus Aureus (“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: 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"><b>Liquidity and Capital Resources</b></font></p>
<p style="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">Our future capital requirements
will depend on a number of factors, including our success in developing and expanding markets for our products, payments under
possible future strategic arrangements, continued progress of our research and development of potential products, the need to
acquire licenses to new technology, costs associated with increasing our manufacturing and development facilities, costs associated
with strategic acquisitions including integration costs and assumed liabilities, litigation expense, the status of competitive
products and potential cost associated with both protecting and defending our intellectual property. Additionally, actions taken
as a result of the ongoing internal evaluation of our business could result in expenditures not currently contemplated in our
estimates for 2014. We believe, however, that our existing cash and cash equivalents are sufficient to fund our operating expenses,
capital equipment requirements and other expected liquidity requirements for the coming year. Factors that could affect our capital
requirements, in addition to those listed above include continued collections of accounts receivable consistent with our historical
experience, uncertainty surrounding mission launch schedules, and our ability to manage product development efforts.</font></p>
<p style="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">At September 30, 2013, we had
cash and cash equivalents of $4.4 million and our working capital was approximately $6.8 million.</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’s remaining
debt repayments are due as follows (in thousands):</font></p>
<p style="margin: 0"></p>
<table cellspacing="0" cellpadding="0" style="width: 100%; margin-top: 0px; font-size: 10pt">
<tr style="font-size: 1pt">
<td style="width: 61%"><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: 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: 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="vertical-align: bottom"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="vertical-align: bottom; font-size: 8.5pt; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Fiscal
Year</b></font></td>
<td style="vertical-align: bottom; font-size: 9pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="vertical-align: bottom; font-size: 8.5pt; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Fiscal
Year</b></font></td>
<td style="vertical-align: bottom; font-size: 9pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="vertical-align: bottom; font-size: 8.5pt; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Fiscal
Year</b></font></td></tr>
<tr style="vertical-align: bottom">
<td style="font-size: 9pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 9pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="border-bottom: #000000 1px solid; font-size: 8.5pt; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>2014</b></font></td>
<td style="font-size: 9pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="border-bottom: #000000 1px solid; font-size: 8.5pt; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>2015</b></font></td>
<td style="font-size: 9pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="border-bottom: #000000 1px solid; font-size: 8.5pt; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>2016</b></font></td></tr>
<tr style="vertical-align: bottom; background-color: #f3f3f3">
<td style="font-size: 9pt"><font style="font: 10pt Times New Roman, Times, Serif">Term Note</font></td>
<td style="font-size: 9pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 9pt"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="font-size: 9pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">292</font></td>
<td style="font-size: 9pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 9pt"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="font-size: 9pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">403</font></td>
<td style="font-size: 9pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 9pt"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="font-size: 9pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">5,252</font></td></tr>
</table>
<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">Our bank
financing facilities contain certain affirmative and negative covenants with which we must comply, including the maintenance
by us of a debt service coverage ratio of not less than 1.00 to 1.00, maintaining a tangible net worth of not less than
$32.50 million, and maintaining a leverage ratio of not greater than .50 to 1.00. These financial covenants are applicable
to the results of ASO. In the event we are not in compliance with a covenant, the bank may, among other things, accelerate
all outstanding borrowings, cease extending credit or foreclose on collateral. As of September 30, 2013, we were in
compliance with our affirmative and negative debt covenants. However, our financial projections for fiscal year 2014
indicated that we would likely not be in compliance with our debt service coverage ratio and minimum tangible net worth
covenants by the third quarter ended March 31, 2014. As such, on October 11, 2013, we amended the debt agreement with our
bank that updated the following with respect to our debt covenants: 1) provided a credit of $0.50 million and $2.25 million
for the third and fourth quarter of fiscal year 2014, respectively, to our debt service coverage calculation, 2) reduced our
minimum tangible net worth requirement to $32.0 million for the third and fourth fiscal quarter of fiscal year 2014, and 3)
required that we maintain a minimum cash balance at the bank of $2.0 million through June 30, 2014 and $0.75 million
thereafter. Under the terms of the amendment, we expect to be compliant with our affirmative and negative covenants through
June 30, 2014. Therefore, we have classified our debt as noncurrent for any principal payments due after September 30,
2014.</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; color: Black">In October, 2014
we were notified by a customer that a previously booked payload processing contract would be deferred several weeks. As a result
of this deferral, we updated our financial projections for fiscal year 2014 which indicated that it is possible that we may not
meet the minimum tangible net worth covenant in the third quarter of 2014. We will continue to monitor this matter during the
remainder of fiscal year 2014 and if necessary pursue a debt amendment with our bank.</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; color: Black"> </font></p>
<p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">We believe we have sufficient
liquidity and backlog to fund ongoing operations for at least the next fiscal year. We expect to utilize existing cash and proceeds
from operations to grow our core business offering in ASO and to support strategies for Spacetech.</font></p>
<p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="margin: 0pt"></p>
<table cellspacing="0" cellpadding="0" style="width: 100%; margin-top: 0px; font-size: 10pt">
<tr style="font-size: 1pt">
<td style="width: 61%"><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: 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: 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="vertical-align: bottom"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="vertical-align: bottom; font-size: 8.5pt; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Fiscal
Year</b></font></td>
<td style="vertical-align: bottom; font-size: 9pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="vertical-align: bottom; font-size: 8.5pt; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Fiscal
Year</b></font></td>
<td style="vertical-align: bottom; font-size: 9pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="vertical-align: bottom; font-size: 8.5pt; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Fiscal
Year</b></font></td></tr>
<tr style="vertical-align: bottom">
<td style="font-size: 9pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 9pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="border-bottom: #000000 1px solid; font-size: 8.5pt; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>2014</b></font></td>
<td style="font-size: 9pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="border-bottom: #000000 1px solid; font-size: 8.5pt; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>2015</b></font></td>
<td style="font-size: 9pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="border-bottom: #000000 1px solid; font-size: 8.5pt; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>2016</b></font></td></tr>
<tr style="vertical-align: bottom; background-color: #f3f3f3">
<td style="font-size: 9pt"><font style="font: 10pt Times New Roman, Times, Serif">Term Note</font></td>
<td style="font-size: 9pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 9pt"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="font-size: 9pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">292</font></td>
<td style="font-size: 9pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 9pt"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="font-size: 9pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">403</font></td>
<td style="font-size: 9pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 9pt"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="font-size: 9pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">5,252</font></td></tr>
</table>
More than 300 projects
23 projects
6800000
As of September 30, 2013, we were in compliance with our affirmative and negative debt covenants. However, our financial projections for fiscal year 2014 indicated that we will likely not be in compliance with our debt service coverage ratio and minimum tangible net worth covenants by the third quarter ended March 31, 2014. October 11, 2013, we amended the debt agreement with our bank that updated the following with respect to our debt covenants: 1) provided a credit of $0.50 million and $2.25 million for the third and fourth quarter of fiscal year 2014, respectively, to our debt service coverage calculation, 2) reduced our minimum tangible net worth requirement to $32.0 million for the third and fourth fiscal quarter of fiscal year 2014, and 3) required that we maintain a minimum cash balance at the bank of $2.0 million through June 30, 2014 and $0.75 million thereafter. Under the terms of the amendment, we expect to be compliant with our affirmative and negative covenants through June 30, 2014.
<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"><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 accompanying unaudited condensed
consolidated financial statements have been prepared by Astrotech Corporation in accordance with United States generally accepted
accounting principles (“GAAP”) 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 GAAP 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, 2013 are not necessarily indicative
of the results that may be expected for the year ending June 30, 2014. 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,
2013.</font></p>
<p style="margin: 0pt"></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"><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 accompanying unaudited condensed
consolidated financial statements have been prepared by Astrotech Corporation in accordance with United States generally accepted
accounting principles (“GAAP”) 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 GAAP 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, 2013 are not necessarily indicative
of the results that may be expected for the year ending June 30, 2014. 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,
2013.</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"><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">In January 2010, restricted
shares of Astrotech subsidiaries, 1st 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 period ended September 30, 2013, 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 income (loss), net income (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 income (loss); while our basic and diluted net income (loss) per share
calculations reflect net income (loss) attributable to Astrotech Corporation.</font></p>
<p style="margin: 0"></p>
<table cellspacing="0" cellpadding="0" style="width: 100%; margin-top: 0px; font-size: 9pt">
<tr style="font-size: 1pt">
<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"> </font></td>
<td colspan="2" style="border-bottom: #000000 1px solid; vertical-align: bottom; font-size: 8.5pt; 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><font style="font: 10pt Times New Roman, Times, Serif"><b>Beginning balance at June 30, 2013</b></font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"><b>$</b></font></td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"><b>2,788 </b></font></td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 12px"><font style="font: 10pt Times New Roman, Times, Serif">Net loss attributable to noncontrolling
interest</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(245)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #f3f3f3">
<td style="text-indent: 12px"><font style="font: 10pt Times New Roman, Times, Serif">Capital contribution</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">299 </font></td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 12px"><font style="font: 10pt Times New Roman, Times, Serif">Stock based compensation</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">- </font></td></tr>
<tr style="vertical-align: bottom; background-color: #f3f3f3">
<td><font style="font: 10pt Times New Roman, Times, Serif"><b>Ending balance at September 30, 2013</b></font></td>
<td style="border-bottom: #000000 3px double; border-top: #000000 1px solid"><font style="font: 10pt Times New Roman, Times, Serif"><b>$</b></font></td>
<td style="border-bottom: #000000 3px double; border-top: #000000 1px solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"><b>2,842
</b></font></td></tr>
</table>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">As of September 30, 2013, the
Company’s share of income and losses is 86% for 1<sup>st </sup>Detect and 84% for Astrogenetix.</font></p>
<p style="margin: 0pt"></p>
<table cellspacing="0" cellpadding="0" style="width: 100%; margin-top: 0px; font-size: 9pt">
<tr style="font-size: 1pt">
<td style="width: 86%"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 13%"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr>
<td style="vertical-align: bottom"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="border-bottom: #000000 1px solid; vertical-align: bottom; font-size: 8.5pt; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>(In
thousands)</b></font></td></tr>
<tr style="vertical-align: bottom; background-color: #f3f3f3">
<td><font style="font: 10pt Times New Roman, Times, Serif"><b>Beginning balance at June 30, 2013</b></font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"><b>$</b></font></td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"><b>2,788 </b></font></td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 12px"><font style="font: 10pt Times New Roman, Times, Serif">Net loss attributable to noncontrolling
interest</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(245)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #f3f3f3">
<td style="text-indent: 12px"><font style="font: 10pt Times New Roman, Times, Serif">Capital contribution</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">299 </font></td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 12px"><font style="font: 10pt Times New Roman, Times, Serif">Stock based compensation</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">- </font></td></tr>
<tr style="vertical-align: bottom; background-color: #f3f3f3">
<td><font style="font: 10pt Times New Roman, Times, Serif"><b>Ending balance at September 30, 2013</b></font></td>
<td style="border-bottom: #000000 3px double; border-top: #000000 1px solid"><font style="font: 10pt Times New Roman, Times, Serif"><b>$</b></font></td>
<td style="border-bottom: #000000 3px double; border-top: #000000 1px solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"><b>2,842
</b></font></td></tr>
</table>
0.86
0.84
2842000
2788000
299000
292000
403000
5252000
<p style="margin: 0pt"></p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b>(4) Net Income (Loss) per Share</b></font></p>
<p style="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">Basic net income (loss) per share
is computed on the basis of the weighted average number of shares of common stock outstanding during the period. Diluted net income
(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 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="margin: 0"></p>
<table cellspacing="0" cellpadding="0" style="margin-top: 0px; font-size: 9pt; width: 100%">
<tr style="font-size: 1pt">
<td><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: 62px"><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: 65px"><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 colspan="5" style="border-bottom: #000000 1px solid; vertical-align: bottom"><p style="font-size: 8pt; 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: 8pt; 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: 8pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="border-bottom: #000000 1px solid; font-size: 8pt; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>2013</b></font></td>
<td style="font-size: 8pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="border-bottom: #000000 1px solid; font-size: 8pt; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>2012</b></font></td></tr>
<tr style="vertical-align: bottom; background-color: #f3f3f3">
<td><font style="font: 10pt Times New Roman, Times, Serif"><b>Numerator:</b></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><font style="font: 10pt Times New Roman, Times, Serif">Net income (loss) attributable to Astrotech Corporation, basic
and diluted</font></td>
<td style="border-bottom: #000000 1px solid"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">1,253</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(1,417)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #f3f3f3">
<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><font style="font: 10pt Times New Roman, Times, Serif"><b>Denominator:</b></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; background-color: #f3f3f3">
<td><font style="font: 10pt Times New Roman, Times, Serif">Denominator for basic net income (loss) per share attributable to
Astrotech Corporation — weighted average common stock outstanding</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">19,470</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 style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">18,951</font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font: 10pt Times New Roman, Times, Serif">Dilutive common stock equivalents — common stock options and
share-based awards</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">108</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 style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">—</font></td></tr>
<tr style="vertical-align: bottom; background-color: #f3f3f3">
<td><font style="font: 10pt Times New Roman, Times, Serif">Denominator for diluted net income (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: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">19,578</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">18,951</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></tr>
<tr style="vertical-align: bottom; background-color: #f3f3f3">
<td><font style="font: 10pt Times New Roman, Times, Serif">Basic net income (loss) per share attributable to Astrotech Corporation</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">0.06</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(0.07)</font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font: 10pt Times New Roman, Times, Serif">Diluted net income (loss) per share attributable to Astrotech Corporation</font></td>
<td style="border-bottom: #000000 3px double"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 3px double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">0.06</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 3px double"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 3px double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(0.07)</font></td></tr>
</table>
<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">Options to purchase 539,500 shares
of common stock at exercise prices ranging from $1.03 to $24.10 per share outstanding for the three months ended September 30,
2013 were not included in diluted net income per share, as the impact to diluted net income per share is anti-dilutive. Stock
options are included in the calculation of diluted EPS based on the treasury-stock method. Under the treasury-stock method, options
will have a dilutive effect only when the average market price of the common stock during the respective period, $0.73 for the
three months ended September 30, 2013, exceeds the exercise price of the options. 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.</font></p>
<p style="margin: 0pt"></p>
<table cellspacing="0" cellpadding="0" style="margin-top: 0px; font-size: 9pt; width: 100%">
<tr style="font-size: 1pt">
<td><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: 62px"><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: 65px"><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 colspan="5" style="border-bottom: #000000 1px solid; vertical-align: bottom"><p style="font-size: 8pt; 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: 8pt; 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: 8pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="border-bottom: #000000 1px solid; font-size: 8pt; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>2013</b></font></td>
<td style="font-size: 8pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="border-bottom: #000000 1px solid; font-size: 8pt; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>2012</b></font></td></tr>
<tr style="vertical-align: bottom; background-color: #f3f3f3">
<td><font style="font: 10pt Times New Roman, Times, Serif"><b>Numerator:</b></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><font style="font: 10pt Times New Roman, Times, Serif">Net income (loss) attributable to Astrotech Corporation, basic
and diluted</font></td>
<td style="border-bottom: #000000 1px solid"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">1,253</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(1,417)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #f3f3f3">
<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><font style="font: 10pt Times New Roman, Times, Serif"><b>Denominator:</b></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; background-color: #f3f3f3">
<td><font style="font: 10pt Times New Roman, Times, Serif">Denominator for basic net income (loss) per share attributable to
Astrotech Corporation — weighted average common stock outstanding</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">19,470</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 style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">18,951</font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font: 10pt Times New Roman, Times, Serif">Dilutive common stock equivalents — common stock options and
share-based awards</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">108</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 style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">—</font></td></tr>
<tr style="vertical-align: bottom; background-color: #f3f3f3">
<td><font style="font: 10pt Times New Roman, Times, Serif">Denominator for diluted net income (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: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">19,578</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">18,951</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></tr>
<tr style="vertical-align: bottom; background-color: #f3f3f3">
<td><font style="font: 10pt Times New Roman, Times, Serif">Basic net income (loss) per share attributable to Astrotech Corporation</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">0.06</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(0.07)</font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font: 10pt Times New Roman, Times, Serif">Diluted net income (loss) per share attributable to Astrotech Corporation</font></td>
<td style="border-bottom: #000000 3px double"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 3px double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">0.06</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 3px double"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 3px double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(0.07)</font></td></tr>
</table>
1253
-1417
19470000
18951000
108000
0
19578000
18951000
0.06
-0.07
0.06
-0.07
539500
1205900
1.03
0.30
24.10
24.10
<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"><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">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"><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">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="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"><b>A Summary of Revenue Recognition
Methods</b></font></p>
<p style="margin: 0"></p>
<table cellspacing="0" cellpadding="0" align="center" style="margin-top: 0px; font-size: 9.5pt">
<tr style="font-size: 1pt">
<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 style="font: 10pt Times New Roman, Times, Serif"><b>Services/Products
Provided</b></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; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"><b>Contract
Type</b></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; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"><b>Method
of Revenue Recognition</b></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"><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">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="text-align: justify; margin: 0"> </p>
<p style="text-align: justify; margin: 0"><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 revolvin<font style="color: Black">g
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 Company had no outstanding balance on the revolving credit facility. 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 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, 2013 and 2012 was $5.9 million and $6.3 million, respectively.</font></font></p>
<p style="margin: 0"> </p>
<p style="margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">Our bank financing facilities
contain certain affirmative and negative covenants with which we must comply, including the maintenance by us of a debt service
coverage ratio of not less than 1.00 to 1.00, maintaining a tangible net worth of not less than $32.50 million, and maintaining
a leverage ratio of not greater than .50 to 1.00. These financial covenants are applicable to the results of ASO. In the event
we are not in compliance with a covenant, the bank may, among other things, accelerate all outstanding borrowings, cease extending
credit or foreclose on collateral. As of September 30, 2013, we were in compliance with our affirmative and negative debt covenants.
However, our financial projections for fiscal year 2014 indicated that we would likely not be in compliance with our debt service
coverage ratio and minimum tangible net worth covenants by the third quarter ended March 31, 2014. As such, on October 11, 2013,
we amended the debt agreement with our bank that updated the following with respect to our debt covenants: 1) provided a credit
of $0.50 million and $2.25 million for the third and fourth quarter of fiscal year 2014, respectively, to our debt service coverage
calculation, 2) reduced our minimum tangible net worth requirement to $32.0 million for the third and fourth fiscal quarter of
fiscal year 2014, and 3) required that we maintain a <font style="color: Black">minimum cash balance at the bank of $2.0 million
through June 30, 2014 and $0.75 million thereafter.</font></font></p>
<p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif; color: Black"> </font></p>
<p style="color: #ff0000; text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif; color: Black">In
October, 2014 we were notified by a customer that a previously booked payload processing contract would be deferred several weeks.
As a result of this deferral, we updated our financial projections for fiscal year 2014 which indicated that it is possible that
we may not meet the minimum tangible net worth covenant in the third quarter of 2014. We will continue to monitor this matter
during the remainder of fiscal year 2014 and if necessary pursue a debt amendment with our bank.</font></p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif; color: Black"> </font></p>
<p style="text-align: justify; margin: 0"></p>
7000000
3000000
5900000
0
6300000
Term loan requires monthly payments of principal plus interest. Secured by the assets of ASO, including accounts receivable and require us to comply with designated covenants.
Prime plus 0.25%, but not less than 4.0%
2010-10-31
2010-10-31
2015-10-31
2012-10-31
The Company was compliance with covenants as of September, 2013
<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"><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 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"> </font></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"><font style="font: 10pt Times New Roman, Times, Serif"> </font></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"><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">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"><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">Level 3—Unobservable inputs
that are supported by little or no market activity and are significant to the fair value of the assets or liabilities.</font></p>
<p style="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 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, 2013 and June 30, 2013 (in thousands):</font></p>
<p style="margin: 0"></p>
<table cellspacing="0" cellpadding="0" style="width: 100%; margin-top: 0px; font-size: 8.5pt">
<tr style="font-size: 1pt">
<td style="width: 46%"><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: 9%"><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: 8%"><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: 9%"><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: 9%"><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 colspan="5" style="border-bottom: #000000 1px solid; vertical-align: bottom; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>September
30, 2013</b></font></td>
<td style="vertical-align: bottom"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="5" style="border-bottom: #000000 1px solid; vertical-align: bottom; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>June
30, 2013</b></font></td>
<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></tr>
<tr style="vertical-align: bottom">
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="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"> </font></td>
<td colspan="2" style="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"> </font></td>
<td colspan="2" style="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"> </font></td>
<td colspan="2" style="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"> </font></td>
<td style="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"> </font></td>
<td colspan="2" style="border-bottom: #000000 1px solid; 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"> </font></td>
<td colspan="2" style="border-bottom: #000000 1px solid; 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"> </font></td>
<td colspan="2" style="border-bottom: #000000 1px solid; 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"> </font></td>
<td colspan="2" style="border-bottom: #000000 1px solid; 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"> </font></td>
<td style="border-bottom: #000000 1px solid; 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: 10pt Times New Roman, Times, Serif">Debt</font></td>
<td style="border-bottom: #000000 1px solid; font-size: 9pt"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 1px solid; font-size: 9pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">5,947</font></td>
<td style="font-size: 9pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid; font-size: 9pt"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 1px solid; font-size: 9pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">5,947</font></td>
<td style="font-size: 9pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid; font-size: 9pt"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 1px solid; font-size: 9pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">6,042</font></td>
<td style="font-size: 9pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid; font-size: 9pt"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 1px solid; font-size: 9pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">6,042</font></td>
<td style="font-size: 9pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 9pt; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif">Level 2</font></td></tr>
</table>
<p style="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 carrying value of the Company’s
debt at September 30, 2013 approximates fair value based on rates available for similar debt available to comparable companies
in the marketplace. The carrying amounts of the Company’s Level 1 securities include cash and cash equivalents.</font></p>
<p style="margin: 0pt"></p>
<table cellspacing="0" cellpadding="0" style="width: 100%; margin-top: 0px; font-size: 8.5pt">
<tr style="font-size: 1pt">
<td style="width: 46%"><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: 9%"><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: 8%"><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: 9%"><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: 9%"><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 colspan="5" style="border-bottom: #000000 1px solid; vertical-align: bottom; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>September
30, 2013</b></font></td>
<td style="vertical-align: bottom"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="5" style="border-bottom: #000000 1px solid; vertical-align: bottom; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>June
30, 2013</b></font></td>
<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></tr>
<tr style="vertical-align: bottom">
<td><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="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"> </font></td>
<td colspan="2" style="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"> </font></td>
<td colspan="2" style="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"> </font></td>
<td colspan="2" style="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"> </font></td>
<td style="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"> </font></td>
<td colspan="2" style="border-bottom: #000000 1px solid; 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"> </font></td>
<td colspan="2" style="border-bottom: #000000 1px solid; 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"> </font></td>
<td colspan="2" style="border-bottom: #000000 1px solid; 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"> </font></td>
<td colspan="2" style="border-bottom: #000000 1px solid; 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"> </font></td>
<td style="border-bottom: #000000 1px solid; 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: 10pt Times New Roman, Times, Serif">Debt</font></td>
<td style="border-bottom: #000000 1px solid; font-size: 9pt"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 1px solid; font-size: 9pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">5,947</font></td>
<td style="font-size: 9pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid; font-size: 9pt"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 1px solid; font-size: 9pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">5,947</font></td>
<td style="font-size: 9pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid; font-size: 9pt"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 1px solid; font-size: 9pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">6,042</font></td>
<td style="font-size: 9pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid; font-size: 9pt"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 1px solid; font-size: 9pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">6,042</font></td>
<td style="font-size: 9pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 9pt; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif">Level 2</font></td></tr>
</table>
5947000
6042000
5947000
6042000
<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"><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">A substantial portion of our
revenue has been generated under contracts with the U.S. Government. During the three months ended September 30, 2013 and 2012,
approximately 43% and 60%, respectively, of our revenues were generated under U.S. Government contracts. Accounts receivable totaled
$6.4 million at September 30, 2013, of which 72% was attributable to the U.S. Government.</font></p>
<p style="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 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>
0.43
0.60
0.72
<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"><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">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"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">Key financial metrics for the three months ended September
30, 2013 and 2012 are as follows (in thousands):</font></p>
<p style="margin: 0"></p>
<table cellspacing="0" cellpadding="0" style="width: 100%; margin-top: 0px; font-size: 9pt">
<tr style="font-size: 1pt">
<td style="width: 39%"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 3%"><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: 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: 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"> </font></td>
<td style="vertical-align: bottom"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="5" style="vertical-align: bottom; font-size: 8.5pt; 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"> </font></td>
<td colspan="5" style="vertical-align: bottom; font-size: 8.5pt; 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"> </font></td>
<td style="font-size: 8.5pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="5" style="border-bottom: #000000 1px solid; font-size: 8.5pt; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>September
30, 2013</b></font></td>
<td style="font-size: 8.5pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="5" style="border-bottom: #000000 1px solid; font-size: 8.5pt; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>September
30, 2012</b></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="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="font-size: 8.5pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2"><p style="font-size: 8.5pt; text-align: center; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"><b>Income
(loss)</b></font></p>
<p style="font-size: 8.5pt; text-align: center; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"><b>before</b></font></p></td>
<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="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 colspan="2"><p style="font-size: 8.5pt; text-align: center; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"><b>Income
(loss)</b></font></p>
<p style="font-size: 8.5pt; text-align: center; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"><b>before</b></font></p></td></tr>
<tr style="vertical-align: bottom">
<td style="border-bottom: #000000 1px solid; font-size: 8.5pt"><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"> </font></td>
<td colspan="2" style="border-bottom: #000000 1px solid; font-size: 8.5pt; 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"> </font></td>
<td colspan="2" style="border-bottom: #000000 1px solid; font-size: 8.5pt; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>income
taxes</b></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; 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"> </font></td>
<td colspan="2" style="border-bottom: #000000 1px solid; font-size: 8.5pt; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>income
taxes</b></font></td></tr>
<tr style="vertical-align: bottom; background-color: #f3f3f3">
<td><font style="font: 10pt Times New Roman, Times, Serif"><b>ASO</b></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 style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">6,689</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">2,802</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">5,996</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(538)</font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font: 10pt Times New Roman, Times, Serif"><b>Spacetech</b></font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(1,794)</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">132</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(1,020)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #f3f3f3">
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 3px double"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 3px double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">6,689</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 3px double"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 3px double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">1,008</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 3px double"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 3px double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">6,128</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 3px double"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 3px double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(1,558)</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">Key financial metrics for the balance sheet are as
follows (in thousands):</font></p>
<p style="margin: 0"></p>
<table cellspacing="0" cellpadding="0" style="width: 100%; margin-top: 0px; font-size: 9pt">
<tr style="font-size: 1pt">
<td style="width: 39%"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 3%"><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: 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: 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"> </font></td>
<td style="vertical-align: bottom"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="5" style="border-bottom: #000000 1px solid; vertical-align: bottom; font-size: 8.5pt; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>September
30, 2013</b></font></td>
<td style="vertical-align: bottom; font-size: 8.5pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="5" style="border-bottom: #000000 1px solid; vertical-align: bottom; font-size: 8.5pt; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>June
30, 2013</b></font></td></tr>
<tr style="vertical-align: bottom">
<td style="border-bottom: #000000 1px solid; font-size: 8.5pt"><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"> </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"> </font></td>
<td colspan="2" style="border-bottom: #000000 1px solid; font-size: 8.5pt; 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"> </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"> </font></td>
<td colspan="2" style="border-bottom: #000000 1px solid; font-size: 8.5pt; 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><font style="font: 10pt Times New Roman, Times, Serif"><b>ASO</b></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 style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">35,127</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">45,787</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">35,625</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">46,159</font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font: 10pt Times New Roman, Times, Serif"><b>Spacetech</b></font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">1,367</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">2,149</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">1,410</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">1,843</font></td></tr>
<tr style="vertical-align: bottom; background-color: #f3f3f3">
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 3px double"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 3px double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">36,494</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 3px double"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 3px double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">47,936</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 3px double"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 3px double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">37,035</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 3px double"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 3px double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">48,002</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"> </font></p>
<p style="margin: 0pt"></p>
<table cellspacing="0" cellpadding="0" style="width: 100%; margin-top: 0px; font-size: 9pt">
<tr style="font-size: 1pt">
<td style="width: 39%"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 3%"><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: 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: 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"> </font></td>
<td style="vertical-align: bottom"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="5" style="vertical-align: bottom; font-size: 8.5pt; 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"> </font></td>
<td colspan="5" style="vertical-align: bottom; font-size: 8.5pt; 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"> </font></td>
<td style="font-size: 8.5pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="5" style="border-bottom: #000000 1px solid; font-size: 8.5pt; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>September
30, 2013</b></font></td>
<td style="font-size: 8.5pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="5" style="border-bottom: #000000 1px solid; font-size: 8.5pt; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>September
30, 2012</b></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="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="font-size: 8.5pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2"><p style="font-size: 8.5pt; text-align: center; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"><b>Income
(loss)</b></font></p>
<p style="font-size: 8.5pt; text-align: center; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"><b>before</b></font></p></td>
<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="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 colspan="2"><p style="font-size: 8.5pt; text-align: center; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"><b>Income
(loss)</b></font></p>
<p style="font-size: 8.5pt; text-align: center; margin: 0"><font style="font: 8pt Times New Roman, Times, Serif"><b>before</b></font></p></td></tr>
<tr style="vertical-align: bottom">
<td style="border-bottom: #000000 1px solid; font-size: 8.5pt"><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"> </font></td>
<td colspan="2" style="border-bottom: #000000 1px solid; font-size: 8.5pt; 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"> </font></td>
<td colspan="2" style="border-bottom: #000000 1px solid; font-size: 8.5pt; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>income
taxes</b></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; 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"> </font></td>
<td colspan="2" style="border-bottom: #000000 1px solid; font-size: 8.5pt; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>income
taxes</b></font></td></tr>
<tr style="vertical-align: bottom; background-color: #f3f3f3">
<td><font style="font: 10pt Times New Roman, Times, Serif"><b>ASO</b></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 style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">6,689</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right">2<font style="font: 10pt Times New Roman, Times, Serif">,802</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">5,996</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(538)</font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font: 10pt Times New Roman, Times, Serif"><b>Spacetech</b></font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(1,794)</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">132</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(1,020)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #f3f3f3">
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 3px double"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 3px double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">6,689</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 3px double"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 3px double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">1,008</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 3px double"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 3px double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">6,128</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 3px double"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 3px double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(1,558)</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"> </font></p>
<table cellspacing="0" cellpadding="0" style="width: 100%; margin-top: 0px; font-size: 9pt">
<tr style="font-size: 1pt">
<td style="width: 39%"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 3%"><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: 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: 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"> </font></td>
<td style="vertical-align: bottom"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="5" style="border-bottom: #000000 1px solid; vertical-align: bottom; font-size: 8.5pt; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>September
30, 2013</b></font></td>
<td style="vertical-align: bottom; font-size: 8.5pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="5" style="border-bottom: #000000 1px solid; vertical-align: bottom; font-size: 8.5pt; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>June
30, 2013</b></font></td></tr>
<tr style="vertical-align: bottom">
<td style="border-bottom: #000000 1px solid; font-size: 8.5pt"><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"> </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"> </font></td>
<td colspan="2" style="border-bottom: #000000 1px solid; font-size: 8.5pt; 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"> </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"> </font></td>
<td colspan="2" style="border-bottom: #000000 1px solid; font-size: 8.5pt; 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><font style="font: 10pt Times New Roman, Times, Serif"><b>ASO</b></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 style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">35,127</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">45,787</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">35,625</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">46,159</font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font: 10pt Times New Roman, Times, Serif"><b>Spacetech</b></font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">1,367</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">2,149</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">1,410</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">1,843</font></td></tr>
<tr style="vertical-align: bottom; background-color: #f3f3f3">
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 3px double"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 3px double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">36,494</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 3px double"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 3px double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">47,936</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 3px double"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 3px double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">37,035</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 3px double"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 3px double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">48,002</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"><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">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, 2013, 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"><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 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 did not occur within 18 months of the agreement’s effective date, which has been extended to June 30, 2014 as a result
of extensions granted by the State of Texas, the number of shares available for purchase would equal the total disbursements (numerator)
divided by $100 (denominator). As of September 30, 2013 no QFE has occurred.</font></p>
<p style="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 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 June 30, 2014, but repayment does not cancel the State of Texas’ common stock
purchase right.</font></p>
<p style="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">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 prior to the period ended September 30, 2013, was accounted for as a contribution to equity. As of September 30, 2013,
no default events have occurred.</font></p>
<p style="margin: 0pt"></p>
In March 2010, the Texas Emerging Technology Fund awarded 1st 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. As of September 30, 2013, 1st Detect has received $1.8 million in disbursements.
0.08
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="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"><b><i>The 1994 Plan (“1994
Plan”)</i></b></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">Under the terms of the 1994 Plan,
the number and price of the stock incentive awards granted to employees is determined by the Board of Directors and such grants
vest, in most cases, incrementally over a period of four years and expire no more than ten years after the date of grant. At the
time of approval, 395,000 shares of our common stock were reserved for issuance under this plan. As of September 30, 2013, there
are no shares available for grant. Based on the Articles of the 1994 stock incentive plan, no awards shall be granted more than
ten years after the effective date of the plan unless amended.</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"><b><i>The Directors’ Stock
Option Plan (“Director’s Plan”)</i></b></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">Options under the Director’s
Plan vest after one year and expire seven years from the date of grant. At the time of approval, 50,000 shares of our common stock
were reserved for issuance under this plan. As of September 30, 2013, there are 41,500 shares available for future grant.</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-top: 0; margin-bottom: 11px"><font style="font: 10pt Times New Roman, Times, Serif"><b><i>2008
Stock Incentive Plan (“2008 Plan”)</i></b></font></p>
<p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">The 2008 Plan was created to
promote growth of the Company by aligning the long-term financial success of the Company with the employees, consultants and directors.
At the time of approval, 5,500,000 shares of our common stock were reserved for issuance under this plan. The 2008 Plan, administered
by the Compensation Committee of the Board of Directors, provides for granting of incentive awards in the form of stock options,
stock appreciation rights (SARs) and restricted stock to employees, directors and consultants of the Company. Stock options awarded
will vest upon the Company’s stock achieving a closing price of $1.50 and expire ten years from grant date or upon employee
or director termination. Restricted shares awarded will vest 33.33% a year over a three year period and expire upon employee or
director termination. There have been no SARs granted from the 2008 Plan. As of September 30, 2013, there are 342,501 shares available
for grant under the 2008 Plan.</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"><b><i>2011 Stock Incentive Plan
(“2011 Plan”)</i></b></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 2011 Plan was designed to
increase shareholder value by compensating employees over the long term. The plan is to be used to promote long-term financial
success and execution of our business strategy. At the time of approval, 1,750,000 shares of our common stock were reserved for
issuance under this plan. The 2011 Plan, administered by the Compensation Committee of the Board of Directors, provides for granting
of incentive awards in the form of stock options, stock appreciation rights (SARs) and restricted stock to employees, directors
and consultants of the Company. Stock options awarded will vest upon the Company’s stock achieving a closing price of $1.50
and expire ten years from the grant date or upon employee or director termination. Additionally, a single 200,000 stock option
grant was awarded to a third party consultant intended to provide incentive which is aligned with management and the shareholders.
Vesting for these option shares will occur once certain performance conditions have been fulfilled. There have been no SARs or
restricted stock granted from the 2011 Plan. As of September 30, 2013, there are 1,056,000 shares available for grant under the
2011 Plan.</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">At September 30, 2013, 1,440,001
shares of Common Stock were reserved for future grants of stock incentive grants under the Company’s four stock incentive
plans.</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"><b><i>1<sup>st </sup></i></b>Detect
2011 Stock Incentive Plan</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 2011 Plan was designed to
increase shareholder value by compensating employees over the long term. The plan is to be used to promote long-term financial
success and execution of our business strategy. At the time of approval, 2,500 shares of 1<sup>st</sup> Detect stock were reserved
for issuance under this plan. The 2011 Plan, administered by the Board of Directors of 1<sup>st</sup> Detect, provides for granting
of incentive awards in the form of stock options to certain directors, officers and employees of 1<sup>st</sup> Detect. The awards
vest upon certain performance conditions being met and expire ten years from the 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. As of September 30, 2013, there are 1,800 shares available for grant under the 2011 Plan.</font></p>
<p style="margin: 0pt"></p>
50000
5500000
1750000
2500
1440001
395000
41500
342501
1056000
1800
Vest after one year and expire seven years from the date of grant
Vest upon the Company’s stock achieving a closing price of $1.50 and expire ten years from grant date or upon employee or director termination
Vest upon the Company’s stock achieving a closing price of $1.50 and expire ten years from the grant date or upon employee or director termination. Vesting for the 200,000 stock option grant will occur once certain performance conditions have been fulfilled.
Vest upon certain performance conditions being met and expire ten years from the grant date
Vest 33.33% a year over a three year period and expire upon employee or director termination
200000
<p style="margin: 0pt"></p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif; color: Black"><b>(12) Income Taxes</b></font></p>
<p style="margin: 0"></p>
<p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif; color: Black"> </font></p>
<p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif; color: Black">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, 2013, the Company has established a full valuation allowance against all of its net deferred tax assets.</font></p>
<p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif; color: Black"> </font></p>
<p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif; color: Black">FASB ASC 740, Income
Taxes (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. The Company has an unrecognized tax benefit of $0.1 million for the three months ended September
30, 2013 and 2012.</font></p>
<p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif; color: Black"> </font></p>
<p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif; color: Black">For the three months
ended September 30, 2013 and 2012, 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="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif; color: Black"> </font></p>
<p style="color: #ff0000; text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif; color: Black">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: 0"><font style="font: 10pt Times New Roman, Times, Serif; color: Black"> </font></p>
<p style="text-align: justify; margin: 0"></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.
100000
100000
<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"><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">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"><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">As of September 30, 2013, 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. All of these repurchases were made prior to the period ended September 30,
2013. 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"><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"> </font></p>
<p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b><i>Legal Proceedings</i></b></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 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">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"><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">On January 10, 2013, a lawsuit
was filed against Astrotech Corporation by John Porter, the former Senior Vice President, Chief Financial Officer, Treasurer and
Secretary of the Company. In the lawsuit, Mr. Porter alleges various breaches of contract claims in connection with his termination
from the Company on August 3, 2012. Mr. Porter seeks monetary damages of at least $639,808. The Company is vigorously
defending the lawsuit filed by Mr. Porter.</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">On February 20, 2013, a shareholder
derivative lawsuit was filed in the District Court of Travis County, Texas against the current directors and chief executive officer
of Astrotech Corporation and against the Company, as nominal defendant. The complaint alleges, among other things, that the directors
and chief executive officer breached fiduciary duties to the Company in connection with certain corporate transactions, including
loans to subsidiaries and purchases of outstanding shares of the Company’s common stock. The Company intends to vigorously
defend the lawsuit.</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"><b><i>State of Texas Funding</i></b></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">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 industrial, environmental, security and healthcare markets (See Note 10). As
of June 30, 2012, 1<sup>st</sup> Detect had received $1.8 million in disbursements. The disbursed amount of $1.8 million represents
a contingency through March 2020, the date of cancellation. If an event of default should occur, the Company would calculate and
expense accrued interest and reclassify principal from equity to notes payable in the consolidated financial statements as amounts
due to the State of Texas. Management considers the likelihood of an event of default to be remote. As of September 30, 2013,
no default events have occurred.</font></p>
<p style="margin: 0pt"></p>
On January 10, 2013, a lawsuit was filed against Astrotech Corporation by John Porter, the former Senior Vice President, Chief Financial Officer, Treasurer and Secretary of the Company. Mr. Porter alleges various breaches of contract claims in connection with his termination from the Company on August 3, 2012.
On February 20, 2013, a shareholder derivative lawsuit was filed in the District Court of Travis County, Texas against the current directors and chief executive officer of Astrotech Corporation and against the Company, as nominal defendant. The complaint alleges, among other things, that the directors and chief executive officer breached fiduciary duties to the Company in connection with certain corporate transactions, including loans to subsidiaries and purchases of outstanding shares of the Company's common stock.
639808
<p style="margin: 0pt"></p>
<p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif; color: Black"><b>(15) NASDAQ
Listing Qualifications</b></font></p>
<p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif; color: Black"> </font></p>
<p style="text-align: justify; margin: 0"></p>
<p style="color: #ff0000; text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif; color: Black">On
November 13, 2012, we received written notification from NASDAQ indicating that the minimum bid price of our common stock had
fallen below $1.00 for 30 consecutive trading days and that we were therefore not in compliance with NASDAQ Listing Rule 5550(a)(2).
On October 30, 2013, we received written notification from NASDAQ that for the previous ten business days, from October 16, 2013
to October 29, 2013, the closing bid price of the Company’s common stock had been at $1.00 per share or greater and the
Company has regained compliance with Listing Rule 5550(a)(2).</font></p>
<p style="text-align: justify; margin: 0"></p>
<p style="margin: 0pt"></p>
<p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b>(16) Subsequent Events</b></font></p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"> </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">On October 11, 2013, we amended
the debt agreement with our bank that updated the following with respect to our debt covenants: 1) provided a credit of $0.50
million and $2.25 million for the third and fourth quarter of fiscal year 2014, respectively, to our debt service coverage calculation,
2) reduced our minimum tangible net worth requirement to $32.0 million for the third and fourth fiscal quarter of fiscal year
2014, and 3) required that we maintain a minimum cash balance at the bank of $2.0 million through June 30, 2014 and $0.75 million
thereafter. Under the terms of the amendment, we expect to be compliant with our affirmative and negative covenants through June
30, 2014.</font></p>
<p style="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">On October 30, 2013, we received
written notification from NASDAQ that for the previous ten business days, from October 16, 2013 to October 29, 2013, the closing
bid price of the Company’s common stock had been at $1.00 per share or greater and the Company has regained compliance with
Listing Rule 5550(a)(2).</font></p>
<p style="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">Carlisle Kirkpatrick resigned
as the Chief Financial Officer, Treasurer and Secretary of the Company effective October 30, 2013. The Company has entered into
a separation and consulting agreement with Mr. Kirkpatrick, the terms of which were disclosed in a Form 8-K on October 30, 2013.</font></p>
<p style="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">On November 13, 2013, the Board
of Directors of the Company elected and appointed Eric Stober, 36, to serve as Chief Financial Officer, Treasurer and Secretary
of the Company. Mr. Stober (i) is eligible to receive a cash and stock performance bonus to be determined by the Company’s
compensation committee, based on the achievement of performance criteria established by the Company’s compensation committee,
and (ii) is entitled to participate in the Company’s eligible customary health, welfare and fringe benefit plans. Mr. Stober
joined Astrotech Corporation in August of 2008 as a Senior Staff Financial Analyst. In the same year, he was promoted to Principal
Financial Analyst and from 2012 to the present, Mr. Stober served as Vice President of Corporate Development. Mr. Stober brings
14 years of experience in private equity, finance and business start-ups. Prior to joining Astrotech Corporation, he worked at
the private equity firm Virtus Financial Group, analyzing prospective middle market private equity investments. Additionally,
Mr. Stober founded or co-founded several companies, including a web advertising company, a small business tax and financial advisory
firm, a sports-based media and entertainment company, and a service provider sourcing company. He has helped numerous companies
prepare business plans and raise start-up or growth capital. Mr. Stober began his professional career working for both The Ayco
Company, a Goldman Sachs Company, and Lehman Brothers, where he helped wealthy individuals and families manage their investments,
taxes, insurance, estate plans, and compensation and benefits. Mr. Stober has an MBA from the McCombs School of Business at the
University of Texas where he was the President of the MBA Entrepreneur Society. He also has an undergraduate degree in finance
from the University of Illinois where he graduated with honors.</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"></p>
We amended the debt agreement with our bank that updated the following with respect to our debt covenants: 1) provided a credit of $0.50 million and $2.25 million for the third and fourth quarter of fiscal year 2014, respectively, to our debt service coverage calculation, 2) reduced our minimum tangible net worth requirement to $32.0 million for the third and fourth fiscal quarter of fiscal year 2014, and 3) required that we maintain a minimum cash balance at the bank of $2.0 million through June 30, 2014 and $0.75 million thereafter.