UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the quarterly period ended | |
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OR | |
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o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ___________ to _____________
Commission File Number 0-23357
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BIOANALYTICAL SYSTEMS, INC. |
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(Exact name of the registrant as specified in its charter) |
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INDIANA | 35-1345024 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
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2701 KENT AVENUE |
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WEST LAFAYETTE, IN | 47906 |
(Address of principal executive offices) | (Zip code) |
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(765) 463-4527 |
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(Registrant’s telephone number, including area code) |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
YES | x | NO | o |
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer (as definedor a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act).
(Check one)
Large Accelerated Filer o Accelerated Filer o Non-accelerated Filer x
Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act).
YES | o | NO | x |
As of AugustFebruary 10, 2005, 4,870,752 common shares2006, 4,871,127 Common Shares of the registrant were outstanding.
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| PAGE NUMBER |
PART I | FINANCIAL INFORMATION | |
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Item 1 | Condensed Consolidated Financial Statements (Unaudited): |
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| Condensed Consolidated Balance Sheets as of |
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| Condensed Consolidated Statements of Operations for the Three Months |
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| Condensed Consolidated Statements of Cash Flows for the |
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| Notes to Condensed Consolidated Financial Statements | 6 |
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Item 2 | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 9 |
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Item 3 | Quantitative and Qualitative Disclosures About Market Risk |
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Item 4 | Controls and Procedures |
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PART II | OTHER INFORMATION |
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Item 1A | Risk Factors | 15 |
Item 6 | Exhibits and Reports on Form 8-K |
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SIGNATURES |
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2
PART I—Part I. Financial Information
Statements
Item 1. Condensed Consolidated Financial Statements
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
June 30, 2005 (Unaudited) | September 30, 2004 | |||||||
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Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 1,011 | $ | 773 | ||||
Accounts receivable | ||||||||
Trade | 9,009 | 5,352 | ||||||
Unbilled revenues and other | 2,998 | 1,086 | ||||||
Inventories | 2,243 | 1,570 | ||||||
Deferred income taxes | 469 | 469 | ||||||
Refundable income taxes | 392 | 603 | ||||||
Prepaid expenses | 603 | 503 | ||||||
Total current assets | 16,725 | 10,356 | ||||||
Property and equipment, net | 26,612 | 31,901 | ||||||
Goodwill | 1,445 | 1,445 | ||||||
Intangible assets, net | 2,239 | 2,491 | ||||||
Debt issue costs | 308 | 340 | ||||||
Other assets | 250 | 262 | ||||||
Total assets | $ | 47,579 | $ | 46,795 | ||||
Liabilities and shareholders' equity | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 1,726 | $ | 2,021 | ||||
Accrued expenses | 2,226 | 2,332 | ||||||
Customer advances | 6,339 | 2,817 | ||||||
Revolving line of credit | — | 2,826 | ||||||
Current portion of capital lease obligation | 280 | 73 | ||||||
Current portion of long-term debt | 694 | 783 | ||||||
Total current liabilities | 11,265 | 10,852 | ||||||
Capital lease obligation, less current portion | 872 | 80 | ||||||
Long-term debt, less current portion | 8,639 | 8,893 | ||||||
Subordinated debt, long-term | 4,828 | 5,188 | ||||||
Deferred income taxes | 2,362 | 2,362 | ||||||
Shareholders' equity: | ||||||||
Preferred shares: Authorized shares - 1,000, | ||||||||
Issued and outstanding shares - none | — | — | ||||||
Common shares: Authorized shares - 19,000, | ||||||||
Issued and outstanding shares - 4,871 at June 30, 2005 | ||||||||
and 4,870 at September 30, 2004 | 1,177 | 1,177 | ||||||
Additional paid-in capital | 11,268 | 11,263 | ||||||
Retained earnings | 7,158 | 7,295 | ||||||
Accumulated other comprehensive income (loss) | 10 | (315 | ) | |||||
Total shareholders' equity | 19,613 | 19,420 | ||||||
Total liabilities and shareholders' equity | $ | 47,579 | $ | 46,795 | ||||
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| December 31, 2005 |
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| September 30, 2005 |
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Assets | |||||||||
Current assets: |
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Cash and cash equivalents |
| $ | 680 |
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| $ | 1,254 |
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Accounts receivable |
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Trade |
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| 11,483 |
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| 10,352 |
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Unbilled revenues and other |
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| 2,162 |
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| 2,677 |
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Inventories |
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| 2,260 |
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| 2,041 |
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Deferred income taxes |
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| 826 |
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| 381 |
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Refundable income taxes |
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| 191 |
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| — |
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Prepaid expenses |
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| 458 |
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| 430 |
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Total current assets |
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| 18,060 |
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| 17,135 |
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Property and equipment, net |
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| 26,372 |
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| 26,565 |
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Goodwill |
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| 1,445 |
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| 1,445 |
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Intangible assets, net |
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| 2,072 |
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| 2,156 |
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Debt issue costs |
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| 257 |
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| 280 |
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Other assets |
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| 2561 |
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| 257 |
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Total assets |
| $ | 48,462 |
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| $ | 47,838 |
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Liabilities and shareholders’ equity |
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Current liabilities: |
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Accounts payable |
| $ | 1,550 |
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| $ | 1,681 |
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Accrued expenses |
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| 2,461 |
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| 2,791 |
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Customer advances |
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| 7,347 |
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| 5,974 |
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Income tax payable |
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| — |
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| 31 |
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Revolving line of credit |
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| 1,371 |
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| 920 |
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Current portion of capital lease obligation |
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| 211 |
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| 278 |
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Current portion of long-term debt |
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| 704 |
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| 700 |
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Total current liabilities |
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| 13,644 |
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| 12,375 |
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Capital lease obligation, less current portion |
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| 1,300 |
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| 807 |
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Long-term debt, less current portion |
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| 8,466 |
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| 8,579 |
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Subordinated debt, long-term |
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| 4,477 |
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| 4,829 |
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Deferred income taxes |
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| 1,651 |
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| 1,651 |
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Shareholders equity: |
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Preferred Shares: |
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Authorized shares – 1,000,000 |
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Issued and outstanding shares - none |
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| — |
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| — |
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Common Shares: |
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Authorized shares – 19,000,000 |
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Issued and outstanding shares – 4,871 at December 31, 2005 |
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and at September 30, 2005 |
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| 1,177 |
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| 1,177 |
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Additional paid-in capital |
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| 11,312 |
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| 11,268 |
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Retained earnings |
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| 6,478 |
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| 7,194 |
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Accumulated other comprehensive loss |
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| (43 | ) |
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| (42 | ) |
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Total shareholders’ equity |
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| 18,924 |
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| 19,597 |
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Total liabilities and shareholders’ equity |
| $ | 48,462 |
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| $ | 47,838 |
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See accompanying notes to condensed consolidated financial statements.
3
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended June 30, | Nine Months Ended June 30, | |||||||||||||
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2005 | 2004 | 2005 | 2004 | |||||||||||
Service revenue | $ | 9,078 | $ | 7,684 | $ | 23,910 | $ | 19,270 | ||||||
Product revenue | 2,226 | 2,948 | 6,226 | 8,789 | ||||||||||
Total revenue | 11,304 | 10,632 | 30,136 | 28,059 | ||||||||||
Cost of service revenue | 5,434 | 5,217 | 16,570 | 15,493 | ||||||||||
Cost of product revenue | 844 | 1,191 | 2,352 | 3,503 | ||||||||||
Total cost of revenue | 6,278 | 6,408 | 18,922 | 18,996 | ||||||||||
Gross profit | 5,026 | 4,224 | 11,214 | 9,063 | ||||||||||
Operating expenses: | ||||||||||||||
Selling | 718 | 672 | 1,919 | 1,963 | ||||||||||
Research and development | 261 | 260 | 653 | 801 | ||||||||||
General and administrative | 3,115 | 2,054 | 7,781 | 5,686 | ||||||||||
Total operating expenses | 4,094 | 2,986 | 10,353 | 8,450 | ||||||||||
Operating income | 932 | 1,238 | 861 | 613 | ||||||||||
Interest income | 2 | 2 | 7 | 5 | ||||||||||
Interest expense | (250 | ) | (306 | ) | (782 | ) | (720 | ) | ||||||
Other income | 78 | 21 | 56 | 39 | ||||||||||
Gain (loss) on sale of property and equipment | 34 | (10 | ) | 21 | (10 | ) | ||||||||
Income (loss) before income taxes | 796 | 945 | 163 | (73 | ) | |||||||||
Income taxes (benefit) | 440 | 310 | 300 | (75 | ) | |||||||||
Net income (loss) | $ | 356 | $ | 635 | $ | (137 | ) | $ | 2 | |||||
Net income (loss) per share: | ||||||||||||||
Basic | $ | 0.07 | $ | 0.13 | $ | (0.03 | ) | $ | 0.00 | |||||
Diluted | $ | 0.07 | $ | 0.13 | $ | (0.03 | ) | $ | 0.00 | |||||
Weighted common and common equivalent | ||||||||||||||
shares outstanding: | ||||||||||||||
Basic | 4,871 | 4,870 | 4,870 | 4,857 | ||||||||||
Diluted | 5,020 | 5,150 | 4,870 | 4,902 |
| Three Months Ended December 31, |
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| 2005 |
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| 2004 |
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Service revenue |
| $ | 7,539 |
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| $ | 7,290 |
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Product revenue |
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| 2,305 |
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| 2,404 |
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Total revenue |
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| 9,844 |
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| 9,694 |
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Cost of service revenue |
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| 5,864 |
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| 5,215 |
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Cost of product revenue |
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| 834 |
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| 852 |
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Total cost of revenue |
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| 6,698 |
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| 6,067 |
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Gross profit |
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| 3,146 |
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| 3,627 |
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Operating expenses: |
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Selling |
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| 733 |
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| 576 |
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Research and development |
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| 439 |
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| 219 |
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General and administrative |
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| 2,887 |
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| 1,927 |
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Total operating expenses |
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| 4,059 |
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| 2,722 |
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Operating income (loss) |
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| (913 | ) |
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| 905 |
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Interest income |
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| 2 |
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| 3 |
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Interest expense |
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| (258 | ) |
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| (275 | ) |
Other income |
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| — |
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| 6 |
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Income (loss) before income taxes |
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| 1,169 |
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| 639 |
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Income tax expense (benefit) |
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| (453 | ) |
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| 235 |
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Net income (loss) |
| $ | (716 | ) |
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| $ | 404 |
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Net income (loss) per share |
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Basic |
| $ | (0.15 | ) |
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| $ | 0.08 |
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Diluted |
| $ | (0.15 | ) |
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| $ | 0.08 |
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Weighted average common shares outstanding |
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Basic |
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| 4,871 |
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| 4,870 |
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Diluted |
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| 4,871 |
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| 4,932 |
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See accompanying notes to condensed consolidated financial statements.
4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Nine Months Ended June 30, | ||||||||
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2005 | 2004 | |||||||
Operating activities | ||||||||
Net income (loss) | $ | (137 | ) | $ | 2 | |||
Adjustments to reconcile net income (loss) to net | ||||||||
cash provided by operating activities: | ||||||||
Depreciation and amortization | 2,462 | 2,771 | ||||||
(Gain) loss on sale of property and equipment | (21 | ) | 10 | |||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | (5,569 | ) | (1,582 | ) | ||||
Inventories | (673 | ) | 222 | |||||
Prepaid expenses and other assets | (100 | ) | (199 | ) | ||||
Accounts payable | (295 | ) | 84 | |||||
Refundable income taxes | 211 | (261 | ) | |||||
Accrued expenses | (106 | ) | (1,162 | ) | ||||
Customer advances | 3,522 | 812 | ||||||
Net cash provided (used) by operating activities | (706 | ) | 697 | |||||
Investing activities | ||||||||
Capital expenditures | (1,631 | ) | (2,029 | ) | ||||
Proceeds from sale of property and equipment | 5,887 | — | ||||||
Net cash provided (used) by investing activities | 4,256 | (2,029 | ) | |||||
Financing activities | ||||||||
Borrowings on line of credit | 6,968 | 9,629 | ||||||
Payments on line of credit | (9,794 | ) | (8,908 | ) | ||||
Borrowings on construction line of credit | — | 574 | ||||||
Exercise of stock options | 5 | — | ||||||
Payments on capital lease obligations | (113 | ) | (3 | ) | ||||
Payments of long-term debt | (703 | ) | (536 | ) | ||||
Net cash provided (used) by financing activities | (3,637 | ) | 756 | |||||
Effects of exchange rate changes | 325 | (24 | ) | |||||
Net increase (decrease) in cash and cash equivalents | 238 | (600 | ) | |||||
Cash and cash equivalents at beginning of period | 773 | 1,373 | ||||||
Cash and cash equivalents at end of period | $ | 1,011 | $ | 773 | ||||
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| Three Months Ended December 31, |
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| 2005 |
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| 2004 |
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Operating activities |
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Net income (loss) |
| $ | (716 | ) |
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| $ | 404 |
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Adjustments to reconcile net income (loss) to net |
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cash used by operating activities: |
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Depreciation and amortization |
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| 950 |
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| 758 |
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Deferred and refundable income taxes |
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| (667 | ) |
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| 235 |
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Employee stock option expense |
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| 44 |
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Changes in operating assets and liabilities: |
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Accounts receivable |
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| (616 | ) |
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| (1,911 | ) |
Inventories |
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| (219 | ) |
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| (150 | ) |
Prepaid expenses and other assets |
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| (27 | ) |
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| (438 | ) |
Accounts payable |
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| (131 | ) |
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| (915 | ) |
Accrued expenses |
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| (330 | ) |
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| 237 |
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Customer advances |
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| 1,373 |
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| 1,186 |
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Net cash used by operating activities |
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| (339 | ) |
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| (594 | ) |
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Investing activities |
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Capital expenditures |
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| (146 | ) |
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| (532 | ) |
Net cash used by investing activities |
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| (146 | ) |
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| (532 | ) |
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Financing activities |
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Borrowings on line of credit |
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| 4,663 |
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| 3,052 |
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Payments on line of credit |
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| (4,212 | ) |
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| (1,096 | ) |
Payments on capital lease obligations |
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| (78 | ) |
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| (17 | ) |
Payments of long-term debt |
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| (461 | ) |
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| (439 | ) |
Net cash provided (used) by financing activities |
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| (88 | ) |
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| 1,500 |
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Effects of exchange rate changes |
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| (1 | ) |
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| 247 |
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Net increase (decrease) in cash and cash equivalents |
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| (574 | ) |
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| 621 |
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Cash and cash equivalents at beginning of period |
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| 1,254 |
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| 773 |
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Cash and cash equivalents at end of period |
| $ | 680 |
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| $ | 1,394 |
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See accompanying notes to condensed consolidated financial statements.
5
BIOANALYTICAL SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except per share data)
(Unaudited)
1. | Description of the Business and Basis of Presentation |
Bioanalytical Systems, Inc. and its subsidiaries (“We,” “the Company”(the “Company” or “BASi”) engage in laboratory services and other services related to pharmaceutical development. We also manufacture scientific instruments for medical research, which we sell with related software for use in industrial, governmental and academic laboratories. Our customers are located throughout the world.
We have prepared the accompanying unaudited interim condensed consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"(“SEC”) regarding interim financial reporting. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted accounting principlesin the United States (“GAAP”), and therefore should be read in conjunction with our audited consolidated financial statements, and the notes thereto, included in our Form 10-K for the year ended September 30, 2004.2005. In the opinion of management, the condensed consolidated financial statements for the three and nine months ended June 30,December 31, 2005 and 2004 include all adjustments which are necessary for a fair presentation of the results of the interim periods and of our financial position at June 30,December 31, 2005. The results of operations for the three and nine months ended June 30,December 31, 2005 are not necessarily indicative of the results to be expected for the year ending September 30, 2005.2006.
All amounts in the condensed consolidated financial statements and the notes thereto are presented in thousands, except for per share data or where otherwise noted.
2. | Stock Based Compensation |
At June 30,December 31, 2005, we had four stock-based employee and outside director compensation plans, which are described more fully in Note 9 in the Notes to the Consolidated Financial Statements in our Form 10-K for the year ended September 30, 2004. Because all2005. All options granted under these plans had an exercise price equal to or greater than the market value of the underlying common stock on the date of grant. Effective October 1, 2005, we began expensing the estimated fair value of stock options over the vesting periods of the grants, in accordance with Financial Accounting Standard 123 (Revised). Utilizing Modified Prospective Application, we expensed that portion of the estimated fair value of awards at grant we do not recognize any stock-based employee compensation costdate related to the outstanding options that vested during the period. The assumptions used are detailed in Note 1(k) to our financial statements in our financial statements.Annual Report on Form 10K for the year ended September 30, 2005. This resulted in compensation expense of $67 and a related deferred tax benefit of $23 in the quarter ended December 31, 2005. The following table illustratespresents the effect on net income (loss)earnings and earnings (loss) per share had we applied the alternativesame treatment of recognizing costs asto stock-based employee compensation.compensation in the quarter ended December 31, 2004:
Three Months Ended June 30, | Nine Months Ended June 30, | |||||||||||||
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2005 | 2004 | 2005 | 2004 | |||||||||||
Net income (loss) as reported | $ | 356 | $ | 635 | $ | (137 | ) | $ | 2 | |||||
Deduct: Total stock-based employee | ||||||||||||||
compensation expense determined under the | ||||||||||||||
fair value based method for all awards, | ||||||||||||||
net of related tax effects | (37 | ) | (49 | ) | (130 | ) | (67 | ) | ||||||
Pro forma net income (loss) | $ | 319 | $ | 586 | $ | (267 | ) | $ | (65 | ) | ||||
Earnings (loss) per share: | ||||||||||||||
Basic and diluted — as reported | $ | 0.07 | $ | 0.13 | $ | (0.03 | ) | $ | 0.00 | |||||
Basic — pro forma | $ | 0.07 | $ | 0.12 | $ | (0.05 | ) | $ | (0.01 | ) | ||||
Diluted — pro forma | $ | 0.06 | $ | 0.12 | $ | (0.05 | ) | $ | (0.01 | ) |
Net income (loss) as reported |
| $ | 404 |
|
Deduct: Total stock-based employee compensation expense determined under the fair value based method for all awards, net of related tax effects |
|
| (43 | ) |
Pro forma net income (loss) |
| $ | 361 |
|
Earnings (loss) per share: |
|
|
|
|
Basic and diluted – as reported |
| $ | 0.08 |
|
Basic and diluted – pro forma |
| $ | 0.07 |
|
No options were granted or exercised in the quarter ended December 31, 2005.
3. |
|
We compute basic income or lossearnings per share using the weighted average number of common shares outstanding. We compute diluted lossearnings per share using the weighted average number of common and potential common shares outstanding.
Potential common shares include the dilutive effect of shares issuable upon exercise of options to purchase common shares. Shares issuable upon conversion of convertible subordinated debt have not been included as they were not dilutive. No shares issuable upon exercise of options or conversion of debt are included in the computation of loss per share as they are anti-dilutive.
6
6
3. Earnings per Share (continued)
The following table reconciles our computation of basic earnings per share to diluted earnings per share:
Three Months Ended June 30, | Nine Months Ended June 30, | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2005 | 2004 | 2005 | 2004 | |||||||||||
Shares: | ||||||||||||||
Basic shares | 4,871 | 4,870 | 4,870 | 4,857 | ||||||||||
Effect of dilutive securities | ||||||||||||||
Options | 149 | 8 | — | 45 | ||||||||||
Convertible subordinated debt | — | 272 | — | — | ||||||||||
Diluted shares | 5,020 | 5,150 | 4,870 | 4,902 | ||||||||||
Basic net income (loss) | $ | 356 | $ | 635 | $ | (137 | ) | $ | 2 | |||||
Diluted net income (loss) | $ | 356 | $ | 674 | $ | (137 | ) | $ | 2 | |||||
Basic earnings (loss) per share | $ | 0.07 | $ | 0.13 | $ | (0.03 | ) | $ | 0.00 | |||||
Diluted earnings (loss) per share | $ | 0.07 | $ | 0.13 | $ | (0.03 | ) | $ | 0.00 |
|
| Three Months Ended December 31, |
| ||||||
|
| 2005 |
|
|
| 2004 |
| ||
Shares: |
|
|
|
|
|
|
|
|
|
Basic shares |
|
| 4,871 |
|
|
|
| 4,870 |
|
Effect of dilutive securities |
|
|
|
|
|
|
|
|
|
Options |
|
| — |
|
|
|
| 62 |
|
Convertible subordinated debt |
|
| — |
|
|
|
| — |
|
Diluted shares |
|
| 4,871 |
|
|
|
| 4,932 |
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net income (loss) |
| $ | (716 | ) |
|
| $ | 404 |
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share |
| $ | (0.15 | ) |
|
| $ | 0.08 |
|
Diluted earnings (loss) per share |
| $ | (0.15 | ) |
|
| $ | 0.08 |
|
4. |
|
On January 5, 2005 we sold the building which houses our clinical research unit in Baltimore for a $6,500 cash selling price, with a three-year leaseback of approximately 85% of the space in the building for $800 annually, plus operating expenses, which approximates market rental. We are accounting for the transaction as a sale/leaseback. The net cash received in the transaction, after expenses, approximated the carrying value of the building. The net proceeds of the sale were used to pay off our revolving credit facility and for working capital.
| Inventories |
Inventories consisted of the following:
June 30, 2005 | September 30, 2004 | |||||||
---|---|---|---|---|---|---|---|---|
Raw materials | $ | 1,229 | $ | 1,392 | ||||
Work in progress | 360 | 196 | ||||||
Finished goods | 801 | 129 | ||||||
2,390 | 1,717 | |||||||
Less LIFO reserve | (147 | ) | (147 | ) | ||||
$ | 2,243 | $ | 1,570 | |||||
|
| December 31, 2005 |
|
|
| September 30, 2005 |
| ||
|
|
|
|
|
|
|
|
|
|
Raw materials |
| $ | 1,547 |
|
|
| $ | 1,426 |
|
Work in progress |
|
| 468 |
|
|
|
| 375 |
|
Finished goods |
|
| 428 |
|
|
|
| 424 |
|
|
|
| 2,443 |
|
|
|
| 2,225 |
|
Less LIFO reserve |
|
| (184 | ) |
|
|
| (184 | ) |
|
| $ | 2,260 |
|
|
| $ | 2,041 |
|
7
5. We have certain financial ratio covenants in our loan agreements with our banks. As a result of the loss for the quarter ended December 31, 2005, we were not in compliance with our fixed charge coverage ratio on our revolving credit facility. We have obtained a waiver from our bank of this event of non-compliance. | 6. Segment Information |
We operate in two principal segments - research servicesServices and research products.Products. Our Services segment provides research and development support on a contract basis directly to pharmaceutical companies. Our Products segment provides liquid chromatography, electrochemical and physiological monitoring products to pharmaceutical companies, universities, government research centers and medical research institutions. Our accounting policies in these segments are the same as those described in the summary of significant accounting policies.policies found in Note 1 to Consolidated Financial Statements in our annual report on Form 10-K for the year ended September 30, 2005.
The following table presents operating results by segment:
Three Months Ended June 30, | Nine Months Ended June 30, | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2005 | 2004 | 2005 | 2004 | |||||||||||
Operating income (loss): | ||||||||||||||
Services | $ | 352 | $ | 1,164 | $ | 656 | $ | (581 | ) | |||||
Products | 580 | 74 | 205 | 1,194 | ||||||||||
Total operating income (loss) | 932 | 1,238 | 861 | 613 | ||||||||||
Corporate expenses | (136 | ) | (293 | ) | (698 | ) | (686 | ) | ||||||
Income (loss) before income taxes | $ | 796 | $ | 945 | $ | 163 | $ | (73 | ) | |||||
|
|
|
| Three Months Ended December 31, |
| |||||||||
|
| 2005 |
|
|
| 2004 |
| |||||
Operating income (loss): |
|
|
|
|
|
|
|
|
| |||
Services |
| $ | (854 | ) |
|
| $ | 611 |
| |||
Products |
|
| (59 | ) |
|
|
| 294 |
| |||
Total operating income (loss) |
|
| (913 | ) |
|
|
| 905 |
| |||
Corporate expenses |
|
| (256 | ) |
|
|
| (266 | ) | |||
Income (loss) before income taxes |
| $ | (1,169 | ) |
|
| $ | 639 |
| |||
In November, 2004 the FASB issued Statement of Financial Accounting Standards ("SFAS") Number 151 dealing with inventory costs. The statement clarifies what costs can be included in inventory, requiring that absorption factors be based on normal capacities of manufacturing facilities and excess capacity be expensed as incurred. Our current costing methodology substantially conforms with the new standard; therefore, we do not expect a material change in our costing methods from adoption of this statement.
In December, SFAS No. 123 (Revised) was issued dealing with Share-Based Payments. In general, this statement requires that companies compute the fair value of options and other stock-based employee incentives, and charge this value to operations over the period earned, generally the vesting period. The only instruments we use that are governed by this statement are stock options for Directors and employees. The impact on reported results of adoption of this statement, required for interim and annual periods after June 15, 2005, is presented in footnote 2 above. The impact on operations in future periods will be determined by amortizing the remaining value of our currently outstanding options, plus the value imputed to future option grants using the above described methods. There is no impact on cash flow. Subsequent to the issuance of SFAS No. 123 (R), the Securities and Exchange Commission has altered the adoption period to annual periods beginning after June 15, 2005, which means that our initial adoption will be for our fiscal period beginning on October 1, 2005.
Other recent pronouncements are not relevant to our businesses.
8
ITEM 2. MANAGEMENT'SMANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Form 10-Q may contain "forward-looking“forward-looking statements,"” within the meaning of Section 27A of the Securities Act of 1933, as amended, and/or Section 21E of the Securities Exchange Act of 1934, as amended. Those statements may include, but are not limited to, discussions regarding BASi'sBASi’s intent, belief or current expectations with respect to (i) BASi'sBASi’s strategic plans; (ii) BASi'sBASi’s future profitability; (iii) BASi'sBASi’s capital requirements; (iv) industry trends affecting the Company'sCompany’s financial condition or results of operations; (v) the Company'sCompany’s sales or marketing plans; or (vi) BASi'sBASi’s growth strategy. Investors in BASi's common sharesBASi’s Common Shares are cautioned that reliance on any forward-looking statement involves risks and uncertainties, including the risk factors contained in Exhibit 99.1 to BASi’s annual report on Form 10-K for the year ended September 30, 2004.2005. Although the Company believes that the assumptions on which the forward-looking statements contained herein are based are reasonable, any of those assumptions could prove to be inaccurate, and as a result, the forward-looking statements based upon those assumptions also could be incorrect. In light of the uncertainties inherent in any forward-looking statement, the inclusion of a forward-looking statement herein should not be regarded as a representation by the Company that BASi'sBASi’s plans and objectives will be achieved.
All dollar amounts presented in this discussion and analysis are presented in thousands, except per share data.
GENERAL
The business of Bioanalytical Systems, Inc. is very much dependent on the level of pharmaceutical and biotech companies’ efforts in new drug discovery and approval. Our Services segment is the direct beneficiary of these efforts, through their outsourcing of laboratory and analytical needs, and our Products segment is the indirect beneficiary, as increased drug development leads to capital expansion, providing opportunities to sell the equipment we produce and the consumable supplies we provide that support our products.
In our annual reportAnnual Report on Form 10-K for the year ended September 30, 2004,2005, we commented on the impacts and anticipated impacts developments in the pharmaceutical industry have on our businesses, as well as some of the potential risks. Those comments are still applicable, and are found under “General” in Part I, Item 2 of that report. We have also commented on developments during the current year in the pharmaceutical industry in previous quarterly reports.
9
RESULTS OF OPERATIONS
The following table summarizes the consolidated statement of operations as a percentage of total revenues:
Three Months Ended June 30, | Nine Months Ended June 30, | ||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2005 | 2004 | 2005 | 2004 | ||||||||||||||
Service revenue | 80 | .3 | 72 | .3 | 79 | .3 | 68 | .7 | |||||||||
Product revenue | 19 | .7 | 27 | .7 | 20 | .7 | 31 | .3 | |||||||||
Total revenue | 100 | .0 | 100 | .0 | 100 | .0 | 100 | .0 | |||||||||
Cost of service revenue (a) | 59 | .9 | 67 | .9 | 69 | .3 | 80 | .4 | |||||||||
Cost of product revenue (a) | 37 | .9 | 40 | .4 | 37 | .8 | 39 | .9 | |||||||||
Total cost of revenue | 55 | .5 | 60 | .3 | 62 | .8 | 67 | .7 | |||||||||
Gross profit | 44 | .5 | 39 | .7 | 37 | .2 | 32 | .3 | |||||||||
Total operating expenses | 36 | .3 | 28 | .1 | 34 | .4 | 30 | .1 | |||||||||
Operating income | 8 | .2 | 11 | .6 | 2 | .8 | 2 | .2 | |||||||||
Other expense | (1 | .2) | (2 | .8) | (2 | .3) | (2 | .5) | |||||||||
Income (loss) before income taxes | 7 | .0 | 8 | .8 | 0 | .5 | (0 | .3) | |||||||||
Income tax (expense) benefit | (3 | .9) | (2 | .9) | (1 | .0) | 0 | .3 | |||||||||
Net income (loss) | 3 | .1 | 5 | .9 | (0 | .5) | 0 | .0 | |||||||||
|
| Three Months Ended |
| ||
|
| 2005 |
| 2004 |
|
Service revenue |
| 76.6 | % | 75.2 | % |
Product revenue |
| 23.4 |
| 24.8 |
|
Total revenue |
| 100.0 |
| 100.0 |
|
|
|
|
|
|
|
Cost of service revenue (a) |
| 77.8 |
| 71.5 |
|
Cost of product revenue (a) |
| 36.3 |
| 35.4 |
|
Total cost of revenue |
| 68.1 |
| 62.6 |
|
|
|
|
|
|
|
Gross profit |
| 31.9 |
| 37.4 |
|
|
|
|
|
|
|
Total operating expenses |
| 41.2 |
| 28.1 |
|
|
|
|
|
|
|
Operating income (loss) |
| (9.3 | ) | 9.3 |
|
|
|
|
|
|
|
Other (expense) |
| (2.6 | ) | (2.7 | ) |
|
|
|
|
|
|
Income (loss) before income taxes |
| (11.9 | ) | 6.6 |
|
|
|
|
|
|
|
Income tax expense (benefit) |
| (4.6 | ) | 2.4 |
|
Net income |
| (7.3 | )% | 4.2 | % |
(a) Percentage of service and product revenues, respectively.
9
Three Months Ended June 30,December 31, 2005 Compared to Three Months Ended June 30,December 31, 2004
Service and Product Revenues
Revenues for the thirdWe increased our revenues in our first fiscal quarter ended June 30, 2005 increased 6% to $11.3 million compared to $10.6 million forof the third fiscalcurrent year by $150, or 2% over the comparable quarter last year. In our Service segment, revenue from our bioanalytical services declined $1.6 million, a 34% decline, offset by increases were the result of strong demand by the Company’s traditional pharmaceutical customers for our services, particularly bioanalytical laboratory services. We experienced a 24% decline$650 in our product revenues, a resultBaltimore clinical research unit (a 36% increase) and our Evansville, Indiana toxicology unit of continued softness$890 (an 85% increase). The largest decline was in our Culex product line. Our major customers tend to place large orders for these units onlaboratory in West Lafayette, which had a sporadic basis, and bothsignificant project delayed until our second fiscal quarter. The improvements in our clinical and third quarterstoxicology operations reflect our continued investment in improving the operations and capabilities of fiscal 2005 were negatively impacted bythe sites, as well as our successful sales efforts for those services. Product segment revenues had a decline in these large shipments.of $99, or 4%, from the comparable period last year.
Cost of Revenues
Cost of revenues for the fiscal quarter ended June 30, 2005 was $6.3 million or 56%Total cost of revenue comparedincreased to $6.4 million, or 60%68.0% in the current quarter from 62.6% in the same period of revenue for the third fiscal quarter last year. This decrease in cost of revenues is2004, primarily as a result of the changelower service revenues in the mix of our revenues. Service costs are relatively fixed, and are charged directly tocurrent quarter. Our cost of revenues. Product costs are more variable, with a significant portion of the costs being comprised of consumed raw materials. The decline in productservice revenues resulted in a decline in costs that exceeded the increase in costs associated with increased service revenues. This also reduced the percentage of our total revenues represented by cost of revenues, as the more service revenue we have above our break even point, the higher our gross profit. The Product segment cost of revenue as a percentage of revenues increased to 77.8% in the current quarter, compared to 71.5% for the same period last year. A substantial portion of our cost of productive capacity (personnel, facilities and laboratory equipment) is relatively fixed. When our revenues decrease, these costs are spread over a smaller revenue amount, resulting in a decline of our margins as a percentage of sales. Additionally, our margins in our clinical research unit and our toxicology unit, while improving with our increased volume, are lower than what we experience in our bioanalytical laboratories when we have higher capacity utilization. Our margin deterioration for the Service segment in the current fiscal quarter is therefore the result of both our mix of services and underutilized capacity. Our cost of product revenue fluctuation is similarpredominately a factor of sales volume. The variance in the relationship of these costs to revenues, 36.3% this quarter compared to 35.4% in the same quarter last year.
year, is within the range of variations we experience from period to period as a result of changes in product mix.
10
Operating Expenses
SellingOur selling expenses forincreased by $157 in our first fiscal quarter compared to the three months ended June 30, 2005same quarter in the prior year, which was the result of an increasing number of people devoted full time to sales, as well as adding a senior executive to direct our sales and marketing efforts. We are investing in our sales capabilities in order to expand our reach in the markets we serve. Research and development expenses increased 7%by $220 in the first fiscal quarter over the comparable period last year as a result of a higher level of activities in the first fiscal quarter compared to $718,000 from $672,000 for the three months ended June 30, 2004. There was nolast year. We do not currently anticipate a significant change in the overall level of our sales effort in the quarter, and year-to-date expenditures are still below last year. There was littlie change in research and development expensesexpenditures from those of $261,000 for the three months ended June 30, 2005 compared to $260,000 for the three months ended June 30, 2004.
our last full fiscal year. General and administrative expenses for the three months ended June 30,December 31, 2005 increased 52%50% to $3.1 million, up$2,887, from $2.1 million$1,927 for the three months ended June 30,December 31, 2004. HalfOur Baltimore clinical research unit accounted for 56% of this increase occurredas a result of increased occupancy costs as a result of the sales/leaseback of the building we occupy, and additional personnel and other costs that our higher business volume in Baltimore, with approximately $55,000 in monthly rent on the Baltimore facility that was previously ownedoperation requires. Our Evansville toxicology unit increased these expenses by 14% as a result of increased business volume. General and increased operatingadministrative expenses as we have upgraded both the facility and our staff. We also are absorbing depreciation on new facilities placed in service that were not in service last year, as well as additional overhead in our toxicology operationWest Lafayette location increased by $184. The largest single component of this increase was $67 of expenses for improved operational systems.employee stock options which we began expensing in the current fiscal year.
Other Income(Expense)
InterestOur interest expense declined 18%decreased 6% to $250,000$258 in the three months ended June 30, 2005current fiscal quarter from $306,000$275 in the comparable quarter of the prior year. ThisThe decrease is dueattributable to lower levels of borrowing in the pay-down in January 2005current year. Although our revolving line of credit withfacility has a floating interest rate, which has increased since last year, our long-term debt and capital leases were at the proceeds fromsame interest rates in the sale of our Baltimore building, even though rates are higher this year and we have financed additional laboratory equipment with $1.1 million of capital leases.comparable periods.
Income Taxes
We computed our tax provisionbenefit using an overall effective tax rate for both the three months ended June 30, 2005on domestic losses of 40%, which is our estimate of our combined federal and local tax rates for the three months ended June 30, 2004 of 40% on the US taxable income. In the current quarter, we had a loss on foreign operations for which we recognized no benefit, compared to the three months ended June 30, 2004, when we had foreign income that was not taxed due to a foreign tax loss carryforward. We did not provide a benefit on the foreign losses in the current quarter because we had no foreign carrybacks or deferred taxes against which to utilize those benefits.year.
Net Income
As a result of the above factors, we earned $356,000had a net loss of $716 ($.07.15 per share, both basic and diluted) in the quarter ended June 30,December 31, 2005, compared to net income of $635,000$404 ($.13.08 per share, both basic and diluted) in the same period last year.
Nine Months Ended June 30, 2005 Compared to Nine Months Ended June 30, 2004
Service and Product Revenues
Revenues for the nine months ended June 30, 2005 increased 7% to $30.1 million compared to $28.1 million for the first nine months The computation of fiscal 2004. Service revenue increases 24% were the result of the factors cited above foraverage outstanding shares in the current quarter. Revenues for our products declined 29% for the nine months, a larger percentage decline thanperiod did not include options which are anti-dilutive in the current quarter as a result of very weak product salesyear, whereas options were included in the second quartercomputation of diluted earnings in the current fiscal year.
Cost of Revenues
Cost of revenues for the nine months ended June 30, 2005 was $18.9 million or 63% of revenue compared to $19.0 million, or 68% of revenue for the samesimilar period last year. The decrease in costeffect of revenue as a percentage of revenue is impacted by increased capacity utilizationconversion of our service segment due to the strong demand mentioned aboveoutstanding convertible subordinated debentures was anti-dilutive in the current quarter. The product segment cost of revenue as a percentage of product revenue was similar to the prior year’s first nine months.
both years.
11
Operating Expenses
Selling expenses for the nine months ended June 30, 2005 decreased 2% to $1.9 million from $2.0 million for the nine months ended June 30, 2004 as the result of reduced number of people devoted to full-time sales and reduced commissions due to lower product sales. Research and development expenses for the nine months ended June 30, 2005 decreased 18% to $653,000 from $801,000 for the nine months ended June 30, 2004. This decrease is attributable to the timing of Company’s developmental efforts, which resulted in lower costs in the current fiscal year.
General and administrative expenses for the nine months ended June 30, 2005 increased 37% to $7.8 million, up from $5.7 million for the nine months ended June 30, 2004. The principal reasons for this increase are the same as those discussed above for the current quarter.
Other Income
Interest expense increased 9% to $782,000 in the nine months ended June 30, 2005 from $720,000 in the comparable period of the prior year. This increase is due to higher interest rates in the current period, additional financing of equipment through capital leases, and, in the first quarter of fiscal 2005, higher amounts outstanding under our revolving line of credit. As described in the discussion of the current quarter, our interest costs have been lower recently due to the pay down of debt with the proceeds from the sale of our Baltimore facility.
Income Taxes
We computed our taxes for the nine months ended June 30, 2005 and our benefit for the nine months ended June 30, 2004 using an effective tax rate of 40% on the US taxable income or loss. We did not provide a benefit on foreign losses because we had no foreign carrybacks or deferred taxes against which to utilize those benefits.
Net Loss
As a result of the taxes on US income exceeding our consolidated income before tax, we experienced a net loss of $137,000 ($.03 loss per share, both basic and diluted) for the first nine months of the current year, compared to net income in the prior year of $2,000 ($.00 income per share, both basic and diluted). Last year’s net income was the result of the benefit from US taxable losses exceeding consolidated loss before income taxes.
12
LIQUIDITY AND CAPITAL RESOURCES
Comparative Cash Flow Analysis
Since its inception, BASi’s principal sources of cash have been cash flow generated from operations and funds received from bank borrowings and other financings. At June 30,December 31, 2005, we had cash and cash equivalents of $1.1 million,$680 compared to cash and cash equivalents of $773,000$1,254 at September 30, 2004.20, 2005. Approximately 20%70% of our cash balances were in the U.K. We monitor our U.K. cash needs to avoid currency conversion costs, which, in the current interest rate environment, can exceed interest.
Our net cash used by operating activities was $706,000$339 for the ninethree months ended June 30,December 31, 2005. Although our earned revenues were down in the quarter, we had a significant amount of new bookings on which we bill up to 30% of the contracts upon signing. Our customer advances increased business resulted in increased investments in accounts receivable and inventories of $6.2 million, which was partially offset by advance billings to our clients of $3.5 million. Our accounts payablefrom $5,974 at JuneSeptember 30, 2005 were back to normal terms$7,347 at December 31, 2005. This balance represents work that will be performed, and revenues that will be recognized, in the third quarter after having been paid down significantly in the second quarter to avoid the cost and difficulty of converting these to our new ERP system installed in April.future periods.
Net cash providedused by investing activities was $4.3 milliondecreased to $146 for the three months ended December 31, 2005 from $532 for the three months ended December 31, 2004. We did, however, add $504 of equipment in the nine months ended June 30, 2005 as a result of the sale/leaseback transaction of our Baltimore building, net of a routine level of new equipment purchases.current quarter that we financed with capital leases. We paid down a net amount$461 of $3.5 million of outstanding debt with these proceeds.long-term debt.
11
Capital Resources
A condition of our leaseback of the Baltimore building was the securing ofWe have a substantial portion of our lease obligation with a three year irrevocable letter of credit issued to the purchaser. The letter of credit is for $2.8 million the first year, $2.0 million the second year, and $1.0 million the final year. In order to arrange this letter of credit, we extended our $6,000,000$6,000 revolving credit agreement with oura commercial bank for three additional years towhich extends until December 31, 2007. We may utilize up to that amount based upon our qualifying inventory and accounts receivable.
TheWe have an outstanding letter of credit securing our lease on our Baltimore facility for $2,000. This letter of credit reduces the amount of funds available under the borrowing base formula. Our recent monthly average qualifying assets for our borrowing base have been approximately $5,000,000. The presence of this outstandingits terms to $1,000 in January, 2007, and expires in January, 2008. This letter of credit could therefore substantially reduce the amount of cashreduces our amounts available under our revolving credit facility.facility by the balance outstanding.
We expect our total capital additionsexpenditures in the current fiscal year to be in the range of $2.0$2,000 to $2.5 million.$2,500. We have arrangedexpect to complete leases with our bank’s leasing affiliate to finance $1.5 million$1,500 of this with capital leases with three3 and five5 year terms.
Liquidity
We do not foresee the need to borrow extensively under our revolving credit agreement to finance current operations, except for periods when rapid growth of new business may necessitate amounts to finance the buildup of receivables and inventory.
At June 30,December 31, 2005, we had $1.0 million$680 in cash, and approximately $3.2 million$2,629 of available borrowings under our revolving credit facility.
Our revolving line of credit expires December 31, 2007. The maximum amount available under the terms of the agreement is $6.0 million$6,000 with outstanding borrowings limited to the borrowing base as defined in the agreement. Interest accrues monthly on the outstanding balance at the bank'sbank’s prime rate to prime rate plus 25 basis points, or at the Eurodollar rate plus 250 to 300 basis points, at our election, depending upon the ratio of our interest bearing indebtedness (less subordinated debt) to EBITDA. We pay a fee equal to 25 basis points on the unused portion of the line of credit. We have certain financial ratio covenants in our loan agreement. As a result of the loss for the quarter ended December 31, 2005, we were not in compliance with our fixed charge coverage ratio. We have obtained a waiver from our bank of this event of non-compliance, and expect to be in compliance in future periods.
We are required to make cash payments in the future on debt and lease obligations. The following table summarizes BASi’s contractual term debt, lease obligations and other commitments at December 31, 2005 and the effect such obligations are expected to have on our liquidity and cash flows in future periods:
2006 | 2007 | 2008 | 2009 | 2010 | After 2010 | Total | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Capital expenditures | $ | 500 | — | — | — | — | — | $ | 500 | ||||||||||||||
Mortgage notes payable | 346 | $ | 362 | $ | 384 | $ | 406 | $ | 430 | $ | 6,881 | 8,809 | |||||||||||
Subordinated debt | 360 | 360 | 4,117 | — | — | — | 4,837 | ||||||||||||||||
Capital lease obligations | 333 | 314 | 329 | 346 | 182 | 6 | 1,510 | ||||||||||||||||
Operating leases | 2,109 | 1,846 | 631 | — | — | — | 4,586 | ||||||||||||||||
$ | 3,648 | $ | 2,882 | $ | 5,461 | $ | 752 | $ | 612 | $ | 6,887 | $ | 20,242 | ||||||||||
For further details on our indebtedness, see Note 7 to our Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended September 30, 2005.
The covenants in the Company'sCompany’s credit agreement requiring the maintenance of certain ratios of interest bearing indebtedness (not including subordinated debt) to EBITDA and net cash flow to debt servicing requirements may restrict the amount the Company can borrow to fund future operations, acquisitions and capital expenditures. Based on our current business activities, we believe cash generated from our operations and amounts available under our existing credit facilities and cash on hand, will be sufficient to fund the Company'sCompany’s working capital and capital expenditure requirements for the foreseeable future. We have been in compliance with all of our debt covenants throughout the current fiscal year.
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We are required to make cash payments in the future on debt and lease obligations. The following table summarizes BASi's contractual term debt, lease obligations and other commitments at June 30, 2005 and the effect such obligations are expected to have on our liquidity and cash flows in future periods (amounts presented for 2005 are those items required in the final quarter):
2005 | 2006 | 2007 | 2008 | 2009 | After 2009 | Total | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Capital expenditures | $ | 250 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 250 | |||||||||
Mortgage notes payable | 81 | 342 | 362 | 1,993 | 277 | 5,918 | 8,973 | ||||||||||||||||
Subordinated debt | — | 360 | 360 | 4,468 | — | — | 5,188 | ||||||||||||||||
Capital lease | 70 | 239 | 171 | 183 | 197 | 292 | 1,152 | ||||||||||||||||
obligations | |||||||||||||||||||||||
Operating leases | 527 | 2,109 | 1,598 | 631 | 10 | — | 4,875 | ||||||||||||||||
$ | 928 | $ | 3,050 | $ | 2,491 | $ | 7,275 | $ | 484 | $ | 6,210 | $ | 20,438 | ||||||||||
For further details on our indebtedness, see Note 7 to our Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended September 30, 2004.12
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
BASi’s primary market risk exposure with regard to financial instruments is changes in interest rates. Borrowings under the credit agreement between BASi and National City Bank dated January 4, 2005 bear interest at a rate of either the bank’s prime rate to prime plus 25 basis points, or at the Eurodollar rate plus 250 to 300 basis points, depending in each case upon the ratio of BASi’s interest-bearing indebtedness (less subordinated debt) to EBITDA, at BASi’s option. As discussed previously, we have taken steps to fix the interest rate on a significant amount of our debt through May, 2007. Historically, BASi has not used derivative financial instruments to manage exposure to interest rate changes. BASi estimates that a hypothetical 10% adverse change in interest rates would not affect the consolidated operating results of BASi by a material amount.
BASi operates internationally and is, therefore, subject to potentially adverse movements in foreign currency exchange rates. The effect of movements in the exchange rates was not material to the consolidated operating results of BASi during the first nine months of fiscal 2005 or in fiscal years 20042005 and 2003.2004. BASi estimates that a hypothetical 10% adverse change in foreign currency exchange rates would not affect the consolidated operating results of BASi by a material amount.
ITEM 4. CONTROLS AND PROCEDURES
Based on their most recent evaluation, the Company'sCompany’s Chief Executive Officer and Chief Financial Officer believe that, because of the situation described below, the Company'sCompany’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) were not effective as of June 30,December 31, 2005 to ensure that information required to be disclosed by the Company in this Form 10-Q was recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange Commission'sCommission’s rules and forms. As disclosed in its annual report on Form 10-K forIn the second and third quarters of fiscal year ended September 30, 2004,2005, the Company previouslyimplemented a new ERP system at its five locations. Previously, the Company operated on accounting systems that were different at its various locations, and which were decentralized and obsolete. DuringAs a result, financial transactions in the quarter ended June 30, 2005,prior fiscal year were recorded in both the old and new systems. The Chief Executive Officer and Chief Financial Officer have concluded that the Company’s current accounting systems have prevented the Company convertedfrom completing and having audited on a timely basis the accounting information necessary to complete its Form 10-K for the fiscal year ended September 30, 2005. As the Company completes steps to standardize and capture all its operating locations to a new, centralized Enterprise Resources Planning (“ERP”)of fiscal 2006 data in one system, which was utilized to produce financial information contained in this quarterly report. Thethe Chief Executive Officer and Chief Financial Officer believe that implementation of thesethe new accounting systems have greatly improvedwill allow the Company’s abilityCompany to record, process, summarize and report accounting information to timely file its Exchange Act reports. Nevertheless, there is a considerable ongoing effort to refine and debug the recently installed system before the Company’s officers can conclude that our previously noted deficiencies have been corrected.
We believe the implementation of the above noted ERP system is a material changeThere were no significant changes in the Company’s internal control over financial reporting duringcontrols or other factors that could significantly affect those controls subsequent to the Company’s most recentlydate of their evaluation, which was completed fiscal quarter. It is our intent to build our system documentation and testing required by section 404as of Sarbanes-Oxley around this newly installed system to timely comply with those requirements. Additionally, we believe that additional enhancements available in our new system will improve the availability and timeliness of information required to manage our business.December 31, 2005.
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PART II - OTHER INFORMATION
ITEM 1A. | Risk Factors |
Although the Company was not required to disclose risk factors in response to Item 1A to Part I in its Form 10-K for the fiscal year ended September 30, 2005 (the "2005 Form 10-K"), the Company did file as Exhibit 99.1 to the 2005 Form 10-K a list of risks that may impact the Company. There have been no material changes to the risks set forth on Exhibit 99.1 to the Form 10-K.
ITEM 6. | EXHIBITS |
Exhibits
Number assigned
in Regulation S-K |
| |
Item 601 | Description of Exhibits | |
(3) | 3.1 |
| Second Amended and Restated Articles of Incorporation of Bioanalytical Systems, Inc. (incorporated by reference to Exhibit 3.1 to Form 10-Q for the quarter ended December 31, 1997).
| 3.1 |
| Second Amended and Restated Articles of Incorporation of Bioanalytical Systems, Inc. (incorporated by reference to Exhibit 3.1 to Form 10-Q for the quarter ended December 31, 1997).
|
| 3.2 |
| Second Restated Bylaws of Bioanalytical Systems, Inc. (incorporated by reference to Exhibit 3.2 Form 10-Q for the quarter ended December 31, 1997).
| 3.2 |
| Second Restated Bylaws of Bioanalytical Systems, Inc. (incorporated by reference to Exhibit 3.2 Form 10-Q for the quarter ended December 31, 1997).
|
(4) | 4.1 |
| Specimen Certificate for Common Shares (incorporated by reference to Exhibit 4.1 to Registration Statement on Form S-1, Registration No. 333-36429).
| 4.1 |
| Specimen Certificate for Common Shares (incorporated by reference to Exhibit 4.1 to Registration Statement on Form S-1, Registration No. 333-36429).
|
(10) | 10.1 |
| Employment Agreement between Bioanalytical Systems, Inc. and Edward M. Chait, Ph.D., dated August 1, 2005 (incorporated by reference to Exhibit 10.01 to the 8-K filed August 5, 2005).
| 10.1 |
| Second Amendment to the Purchase and Sale Agreement between BASi Maryland, Inc. and 300 W. Fayette, LLC (incorporated by reference to Exhibit 10.21 of Form 10-K filed January 13, 2005) |
(31) | 31.1 |
| Certification of Peter T. Kissinger †
| 31.1 |
| Certification of Peter T. Kissinger †
|
| 31.2 |
| Certification of Michael R. Cox †
| 31.2 |
| Certification of Michael R. Cox †
|
(32) | 32.1 |
| Section 1350 Certifications † | 32.1 |
| Section 1350 Certifications † |
(99) | 99.1 |
| Risk factors (incorporated by reference to Exhibit 99.1 to Form 10-K for the year ended September 30, 2004).
| 99.1 |
| Risk factors (incorporated by reference to Exhibit 99.1 to Form 10-K for the year ended September 30, 2005).
|
† Filed with this Quarterly Report on Form 10-Q.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized:
BIOANALYTICAL SYSTEMS, INC. |
|
|
|
|
By: /s/ PETER T. KISSINGER Peter T. Kissinger President and Chief Executive Officer (Principal Executive Officer) |
Date: |
|
|
|
|
By: /s/ MICHAEL R. COX Michael R. Cox Vice President-Finance and Chief Financial Officer (Principal Financial and Accounting Officer) |
|
Date: February 11, 2005 |
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