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<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; text-indent: 48px; 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
successfully 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 in microgravity and develop and manufacture sophisticated and cutting edge chemical sensor equipment.</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>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; text-indent: 48px; 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 97% and 99% of our consolidated revenues for the three and six months ended December
31, 2013, respectively. 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.</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; text-indent: 48px; 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="text-align: justify; text-indent: 48px; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b>1<sup>st </sup>Detect
– </b>1<sup>st</sup> Detect 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 analytics in real-time for explosive devise detection in airports
and the battlefield, industrial quality and process control, environmental field applications and laboratory research.</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; text-indent: 48px; 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 at a fraction
of the cost of competing mass spectrometers. The unique design of this unit enables mass spectrometric quality chemical
analysis in a small (about the size of a shoebox), light and transportable package that operates from 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 without compromising the quality of the analysis. The OEM-1000 is a mass spectrometer component that is
designed to be integrated into an OEM customers’ complementary technology and application. The OEM-1000 has recently
been integrated into a Thermogravimetric Analyzer (“TGA”) manufactured by RIGAKU of Tokyo, Japan. The integrated
instrument named Thermo iMS2 is the world’s first integrated TGA with MS/MS capabilities and is expected to be well
received by the international research and development market.</font></p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="text-align: justify; text-indent: 48px; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b>Astrogenetix
– </b>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 we flew experiments twelve times
over a three year period. In collaboration with NASA, NASA has engaged leading vaccine development experts through a premier educational
institution to independently evaluate Astrogenetix’s platform with specific direction to aid in the filing of an Investigational
New Drug (“IND”) application for Salmonella. While investment in Astrogenetix has been scaled back considerably until
Astrogenetix’s platform is independently verified, the team is also 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; text-indent: 48px; 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; text-indent: 48px; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">At December
31, 2013, we had cash and cash equivalents of $6.7 million and our working capital was approximately $3.8 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; text-indent: 48px; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">The Company
has outstanding debt of $5.9 million as of December 31, 2013, with remaining debt repayments 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: 9pt">
<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 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 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><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td><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><b><font style="font: 7pt Times New Roman, Times, Serif"><sup>(1)</sup></font></b></td>
<td><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><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><font style="font: 10pt Times New Roman, Times, Serif">Term Note</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">196</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">403</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">5,252</font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font: 10pt Times New Roman, Times, Serif">(1) Represents remaining six months in fiscal year 2014.</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
</table>
<p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="text-align: justify; text-indent: 48px; 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 December 31, 2013, we were in compliance with our affirmative and negative
debt covenants.</font></p>
<p style="text-align: justify; margin: 0"><br /></p>
<p style="text-align: justify; text-indent: 48px; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">In October,
2013 we were notified by a customer that a previously booked payload processing contract would be deferred several weeks. Consequently,
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. In November, 2013 we were subsequently notified by the same customer that this mission would be deferred several additional
weeks. As a result of this deferral, it is possible that we may not meet the debt service coverage ratio and minimum tangible
net worth covenants 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"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="text-align: justify; text-indent: 48px; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">We believe
we have sufficient liquidity and backlog to fund ongoing operations. 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>
<table cellspacing="0" cellpadding="0" style="width: 100%; margin-top: 0px; font-size: 9pt">
<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 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 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><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td><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><b><font style="font: 7pt Times New Roman, Times, Serif"><sup>(1)</sup></font></b></td>
<td><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><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><font style="font: 10pt Times New Roman, Times, Serif">Term Note</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">196</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">403</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">5,252</font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font: 10pt Times New Roman, Times, Serif">(1) Represents remaining six months in fiscal year 2014.</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
</table>
403000
5252000
More than 300 projects
23 projects
As of December 31, 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. 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. In November, 2013 the company was notified by a customer that a previously booked payload processing contract would be deferred several additional weeks. As a result of this deferral, it is possible that we may not meet the debt service coverage ratio and minimum tangible net worth covenants in the third quarter of 2014.
<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; text-indent: 48px; 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 six months ended December 31, 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: 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; text-indent: 48px; 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 six months ended December 31, 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>
3800000
<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; text-indent: 48px; 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 December 31, 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 income (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="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="text-align: justify; text-indent: 48px; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">A rollforward
of noncontrolling interest for the six months ended December 31, 2013 is as follows:</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">(466)</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">560 </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 December 31, 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>$</b></font></td>
<td style="border-bottom: #000000 3px double; border-top: #000000 1px solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"><b>2,882
</b></font></td></tr>
</table>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="text-align: justify; text-indent: 48px; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">As of December
31, 2013, the Company’s share of income and losses is 86% for 1<sup>st </sup>Detect and 84% for Astrogenetix.</font></p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<table cellspacing="0" cellpadding="0" style="width: 100%; margin-top: 0px; font-size: 9pt">
<tr style="font-size: 1pt">
<td style="width: 86%"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 13%"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr>
<td style="vertical-align: bottom"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="border-bottom: #000000 1px solid; vertical-align: bottom; font-size: 8.5pt; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>(In
thousands)</b></font></td></tr>
<tr style="vertical-align: bottom; background-color: #f3f3f3">
<td><font style="font: 10pt Times New Roman, Times, Serif"><b>Beginning balance at June 30, 2013</b></font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"><b>$</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">(466)</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">560 </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 December 31, 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>2,882
</b></font></td></tr>
</table>
560000
0.86
0.84
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b>(4) Net Loss per Share</b></font></p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="text-align: justify; text-indent: 48px; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">Basic net
loss per share is based on the weighted average number of common shares outstanding during each period. Diluted net loss per share
is based on the weighted average number of common shares outstanding 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. The following table reconciles the numerators and denominators used in the computations
of both basic and diluted net loss per share (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: 63px"><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>
<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: 63px"><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>December
31,</b></font></p></td>
<td style="vertical-align: bottom; font-size: 8pt"><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>Six
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>December
31,</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>
<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>
<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">Net 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">(2,554)</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">$</font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(810)</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(1,301)</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">(2,227)</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>
<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>
<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">Denominator for basic net loss per share attributable to Astrotech
Corporation — weighted average common stock outstanding</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">19,479 </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">19,428 </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">19,476 </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">19,189 </font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #f3f3f3">
<td><font style="font: 10pt Times New Roman, Times, Serif">Dilutive common stock equivalents — common stock options
and share-based awards</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">— </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">— </font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #f3f3f3">
<td><font style="font: 10pt Times New Roman, Times, Serif">Denominator for diluted net loss per share attributable to Astrotech
Corporation — weighted average common stock outstanding and dilutive common stock equivalents</font></td>
<td style="border-bottom: #000000 1px solid"><font style="font: 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">19,479</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">19,428 </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">19,476 </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">19,189 </font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #f3f3f3">
<td><font style="font: 10pt Times New Roman, Times, Serif">Basic net 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">(0.13)</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(0.04)</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(0.07)</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(0.12)</font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font: 10pt Times New Roman, Times, Serif">Diluted net loss per share attributable to Astrotech Corporation</font></td>
<td style="border-bottom: #000000 3px double"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 3px double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(0.13)</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">$</font></td>
<td style="border-bottom: #000000 3px double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(0.04)</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 3px double"><font style="font: 10pt Times New Roman, Times, Serif">$</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>
<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">(0.12)</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; text-indent: 48px; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">Options to
purchase 1,137,150 and 1,184,150 shares of common stock at exercise prices ranging from $0.32 to $24.10 per share outstanding
for the three and six month periods ended December 31, 2013 and 2012 respectively, were not included in diluted net loss per share,
as the impact to net loss per share is anti-dilutive.</font></p>
<p style="margin: 0pt"></p>
<p style="margin: 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: 63px"><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>
<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: 63px"><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>December
31,</b></font></p></td>
<td style="vertical-align: bottom; font-size: 8pt"><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>Six
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>December
31,</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>
<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>
<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">Net 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">(2,554)</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">$</font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(810)</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(1,301)</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">(2,227)</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>
<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>
<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">Denominator for basic net loss per share attributable to Astrotech
Corporation — weighted average common stock outstanding</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">19,479 </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">19,428 </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">19,476 </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">19,189 </font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #f3f3f3">
<td><font style="font: 10pt Times New Roman, Times, Serif">Dilutive common stock equivalents — common stock options
and share-based awards</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">— </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">— </font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #f3f3f3">
<td><font style="font: 10pt Times New Roman, Times, Serif">Denominator for diluted net loss per share attributable to Astrotech
Corporation — weighted average common stock outstanding and dilutive common stock equivalents</font></td>
<td style="border-bottom: #000000 1px solid"><font style="font: 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">19,479 </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">19,428 </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">19,476 </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">19,189 </font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: #f3f3f3">
<td><font style="font: 10pt Times New Roman, Times, Serif">Basic net 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">(0.13)</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(0.04)</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(0.07)</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(0.12)</font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font: 10pt Times New Roman, Times, Serif">Diluted net loss per share attributable to Astrotech Corporation</font></td>
<td style="border-bottom: #000000 3px double"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 3px double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(0.13)</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">$</font></td>
<td style="border-bottom: #000000 3px double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(0.04)</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 3px double"><font style="font: 10pt Times New Roman, Times, Serif">$</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>
<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">(0.12)</font></td></tr>
</table>
<p style="margin: 0pt"></p>
-1301
-2554
-810
-2227
1137150
1137150
1184150
1184150
0.32
0.32
0.32
0.32
24.10
24.10
24.10
24.10
<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; text-indent: 48px; 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; text-indent: 48px; 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="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>A Summary of Revenue Recognition Methods</b></font></p>
<p style="margin: 0"></p>
<table cellspacing="0" cellpadding="0" style="width: 100%; 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; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Services/Products
Provided</b></font></td>
<td style="vertical-align: top; font-size: 8.5pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid; vertical-align: top; font-size: 8.5pt; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Contract
Type</b></font></td>
<td style="vertical-align: top; font-size: 8.5pt"><font style="font: 8pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid; vertical-align: top; font-size: 8.5pt; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Method
of Revenue Recognition</b></font></td></tr>
<tr style="vertical-align: top">
<td><font style="font: 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="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><br /></p>
<p style="text-align: justify; text-indent: 48px; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">Under certain
contracts, we make expenditures for specific enhancements and/or additions to our facilities where the customer agrees to pay
a fixed fee to deliver the enhancement or addition. We account for such agreements as a reduction in the cost of such investments
and recognize any excess of amounts collected above the expenditure as revenue.</font></p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b>(6) Debt</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>Credit Facilities</i></b></font></p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="text-align: justify; text-indent: 48px; 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 revolving
credit facility. The $7.0 million term loan terminates in October 2015, and the $3.0 million revolving credit facility expired
in October 2012. The 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 December 31, 2013 and 2012 was $5.9 million and $6.2 million, respectively.</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; text-indent: 48px; 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 December 31, 2013, we were in compliance with our affirmative and negative
debt covenants.</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; text-indent: 48px; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">In October,
2013 we were notified by a customer that a previously booked payload processing contract would be deferred several weeks. Consequently,
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. In November, 2013 we were subsequently notified by the same customer that this mission would be deferred several additional
weeks. As a result of this deferral, it is possible that we may not meet the debt service coverage ratio and minimum tangible
net worth covenants 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>
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
As of December 31, 2013, we were in compliance with our affirmative and negative debt covenants.
7000000
3000000
5900000
0
6200000
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b>(7) Fair Value Measurements</b></font></p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="text-align: justify; text-indent: 48px; 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="text-align: justify; text-indent: 48px; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">The fair value
hierarchy established in the standard prioritizes the inputs used in valuation techniques into three levels as follows:</font></p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="margin: 0; text-indent: 48px"><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; text-indent: 48px"><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; text-indent: 48px"><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"><br /></p>
<p style="text-align: justify; text-indent: 48px; 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 December 31, 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: 45%"><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: 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>December
31, 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">5,851</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">$</font></td>
<td style="border-bottom: #000000 1px solid; font-size: 9pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">5,851</font></td>
<td style="font-size: 9pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid; font-size: 9pt"><font style="font: 10pt Times New Roman, Times, Serif">$</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; text-indent: 48px; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">The carrying
value of the Company’s debt at December 31, 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>
<table cellspacing="0" cellpadding="0" style="width: 100%; margin-top: 0px; font-size: 8.5pt">
<tr style="font-size: 1pt">
<td style="width: 45%"><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: 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>December
31, 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">5,851</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">$</font></td>
<td style="border-bottom: #000000 1px solid; font-size: 9pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">5,851</font></td>
<td style="font-size: 9pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid; font-size: 9pt"><font style="font: 10pt Times New Roman, Times, Serif">$</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>
5851000
6042000
5851000
6042000
<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; text-indent: 48px; 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 six months ended December 31, 2013
and 2012, approximately 47% and 58%, respectively, of our revenues were generated under U.S. Government contracts. Accounts receivable
(net of allowance) totaled $306,000 at December 31, 2013, of which 61% 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; text-indent: 48px; 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>
0.47
0.58
0.61
<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; text-indent: 48px; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">We currently
have two reportable business units: ASO and Spacetech.</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; text-indent: 48px; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">ASO is our
core business unit with operating facilities located in Titusville, Florida and Vandenberg AFB, California. 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.</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; text-indent: 48px; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">Our Spacetech
business unit is a technology incubator designed to commercialize space-industry technologies. This business unit is currently
pursuing two distinct opportunities: 1<sup>st</sup> Detect and Astrogenetix. Our 1<sup>st</sup> Detect platform develops, manufactures
and sells ultra-small mass spectrometers and related equipment. Our Astrogenetix platform is a biotechnology company formed to
commercialize products processed in the unique environment of microgravity.</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; text-indent: 48px; 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="text-indent: 48px; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">Key financial metrics for the six
months ended December 31, 2013 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>Six
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>Six
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>December
31, 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>December
31, 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" style="font-size: 8.5pt; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Loss
before</b></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" style="font-size: 8.5pt; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Loss
before</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>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">9,145</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">1,570 </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">10,118</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(641)</font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font: 10pt Times New Roman, Times, Serif"><b>Spacetech</b></font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">82</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">$</font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(3,331)</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">133</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">9,227</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">$</font></td>
<td style="border-bottom: #000000 3px double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(1,761)</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 3px double"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 3px double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">10,251</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">(2,484)</font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="font-size: 8.5pt"><font style="font: 8pt Times New Roman, Times, Serif"> </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>December
31, 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>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">34,745</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">41,555</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">$</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">1,335</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">$</font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">2,292</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid"><font style="font: 10pt Times New Roman, Times, Serif">$</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">36,080</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">$</font></td>
<td style="border-bottom: #000000 3px double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">43,847</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 3px double"><font style="font: 10pt Times New Roman, Times, Serif">$</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>
<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>Six
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>Six
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>December
31, 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>December
31, 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" style="font-size: 8.5pt; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Loss
before</b></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" style="font-size: 8.5pt; text-align: center"><font style="font: 8pt Times New Roman, Times, Serif"><b>Loss
before</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>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">9,145</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">1,570 </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">10,118</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(641)</font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font: 10pt Times New Roman, Times, Serif"><b>Spacetech</b></font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">82</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">$</font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(3,331)</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">133</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">9,227</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">$</font></td>
<td style="border-bottom: #000000 3px double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(1,761)</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 3px double"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: #000000 3px double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">10,251</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">(2,484)</font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="font-size: 8.5pt"><font style="font: 8pt Times New Roman, Times, Serif"> </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>December
31, 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>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">34,745</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">41,555</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">$</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">1,335</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">$</font></td>
<td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">2,292</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 1px solid"><font style="font: 10pt Times New Roman, Times, Serif">$</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">36,080</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">$</font></td>
<td style="border-bottom: #000000 3px double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">43,847</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: #000000 3px double"><font style="font: 10pt Times New Roman, Times, Serif">$</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"><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; text-indent: 48px; 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, environmental and industrial markets.
In exchange for the award, 1<sup>st </sup>Detect granted a stock purchase right and a note payable to the State of Texas. As of
December 31, 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; text-indent: 48px; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">The stock
purchase right is exercisable at the first Qualifying Financing Event (“QFE”), which is generally a change in control
or third party equity investment in 1<sup>st</sup> Detect. The number of shares of stock (common stock or the class or series
issued in the financing) of 1<sup>st</sup> Detect available for purchase by the State of Texas, at the price $0.001 per share
(par value), is calculated as the total disbursements of $1.8 million (numerator) divided by 80% of the stock price established
in the QFE (denominator). If a QFE has not occurred before June 30, 2014, the number of shares of common stock of 1<sup>st</sup>
Detect available for purchase would equal the total disbursements of $1.8 million (numerator) divided by $100 (denominator). As
of December 31, 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; text-indent: 48px; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">The principal
value of the note is equal to the total disbursements to 1<sup>st</sup> Detect to date of $1.8 million, 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’ 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; text-indent: 48px; 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 December 31, 2013, was accounted for as a contribution to equity. As
of December 31, 2013, no default events have occurred.</font></p>
1800000
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 December 31, 2013, 1st Detect has received $1.8 million in disbursements.
0.08
<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; text-indent: 48px; 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 December 31, 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; text-indent: 48px; 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 December 31, 2013, there are 44,000 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; text-indent: 48px; 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 under this plan to date vested 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 under this plan to date 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 December 31, 2013, there are 362,501 shares available for grant under the 2008 Plan.</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"><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; text-indent: 48px; 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 under this plan to date vested 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 December 31, 2013, there are 1,066,000 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; text-indent: 48px; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">At December
31, 2013, 1,472,501 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; text-indent: 48px; 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 December 31, 2013, there are 1,800 shares available for grant under the 2011 Plan.</font></p>
50000
5500000
1750000
2500
1472501
395000
44000
362501
1066000
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: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b>(12) Income Taxes</b></font></p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="text-align: justify; text-indent: 48px; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">The Company
accounts for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the expected
tax consequences of temporary differences between the tax bases of assets and liabilities and their reported amounts. Valuation
allowances are established, when necessary, to reduce deferred tax assets to amounts that are more likely than not to be realized.
As of December 31, 2013, the Company has established a full valuation allowance against all of its net deferred tax assets.</font></p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="text-align: justify; text-indent: 48px; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">FASB ASC 740,
<i>Income Taxes </i>(FASB ASC 740) addresses the accounting for uncertainty in income taxes recognized in an entity’s financial
statements and prescribes a recognition threshold and measurement attribute for financial statement disclosure of tax positions
taken or expected to be taken on a tax return. The Company has an unrecognized tax benefit of $0.1 million for the six months
ended December 31, 2013 and 2012.</font></p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="text-align: justify; text-indent: 48px; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">For the three
and six months ended December 31, 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="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="text-align: justify; text-indent: 48px; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">The Company
is currently under examination by the Internal Revenue Service for the fiscal years ended June 30, 2008 through 2010. Loss carryovers
are generally subject to modification by tax authorities until 3 years after they have been utilized; as such, the Company is
subject to examination for the fiscal years ended 2000 through present for federal purposes and fiscal years ended 2006 through
present for state purposes.</font></p>
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: 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; text-indent: 48px; 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"> </p>
<p style="margin: 0; text-indent: 48px; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">As of December 31, 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 December 31, 2013. As a result, the Company
is authorized to repurchase an additional $5.7 million of securities under this program.</font></p>
311660
200000
0.76
1100000
5700000
<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; text-indent: 48px; 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; text-indent: 48px; 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; text-indent: 28px; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b><i>Litigation,
Investigations and Audits </i></b>– We are not party to, nor are our properties the subject of, any material pending legal
proceedings, other than as set forth below:</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; text-indent: 48px; 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. The parties are now engaged in the discovery process.</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; text-indent: 48px; 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.
There are preliminary jurisdictional issues that are being litigated in this suit, and there are substantive underlying in this
suit that are still in the early stages of litigation and the parties have not yet exchanged written discovery responses. 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; text-indent: 48px; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">Astrotech
has been named as a party to a suit filed in the Circuit Court of the Eighteenth Judicial Circuit for Brevard County, Florida.
This is an action for foreclosure of certain real estate and for debt. The Company is named as a party because it holds an inferior
lien against the property at issue and must be named in the foreclosure action. No monetary relief has been requested against
Astrotech.</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; text-indent: 28px; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b><i>Contingent
obligation related to 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; text-indent: 48px; 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, environmental and industrial 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
December 31, 2013, no default events have occurred.</font></p>
<p style="text-align: justify; text-indent: 48px; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="text-align: justify; text-indent: 48px; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"></font></p>
<p style="text-align: justify; text-indent: 28px; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b><i>Contingent
obligation related to our five-meter high-bay at VAFB in California</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; text-indent: 48px; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">In September
2009, we completed construction of a 23,000 square foot payload processing facility at VAFB in California which enhanced our capability
to process five-meter class satellite payloads. Additionally, in December 2009, we completed construction of a 5,600 square foot
office building used by customers for administrative and operational support of teams processing satellites in the new five-meter
payload facility. ASO presently leases the 60-acre site located on VAFB in California, where we own four buildings totaling over
50,000 square feet of space. The Company has extended the original land lease, which expired in September 2013. The new lease
expires in September 2018, with provisions to extend the lease at the request of the lessee and the concurrence of the lessor.
Upon final expiration of the land lease, all improvements on the property revert, at the lessor’s option, to the lessor
at no cost or we will be required to return the land to the original condition at our cost. We currently have not accrued anything
for this potential obligation.</font></p>
<p style="text-align: justify; text-indent: 48px; margin: 0"></p>
<p style="text-align: justify; text-indent: 48px; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
Astrotech has been named as a party to a suit filed in the Circuit Court of the Eighteenth Judicial Circuit for Brevard County, Florida. This is an action for foreclosure of certain real estate and for debt. The Company is named as a party because it holds an inferior lien against the property at issue and must be named in the foreclosure action. No monetary relief has been requested against Astrotech.
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
0
0
0.99
0.97
ASO presently leases the 60-acre site located on VAFB in California, where we own four buildings totaling over 50,000 square feet of space. The Company has extended the original land lease, which expired in September 2013. The new lease expires in September 2018, with provisions to extend the lease at the request of the lessee and the concurrence of the lessor. Upon final expiration of the land lease, all improvements on the property revert, at the lessor's option, to the lessor at no cost or we will be required to return the land to the original condition at our cost.
Represents remaining six months in fiscal year 2014.