UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q/A

~~FORM 10-Q~~(Amendment No. 1)

(Mark One)

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the quarterly period ended ~~March~~December 31, 2021

OR
¨ ☐	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 000-23357

INOTIV, INC.

~~(Exact~~(Exact name of the registrant as specified in its charter)


INDIANA (State or other jurisdiction of incorporation or organization)		35-1345024 (I.R.S. Employer Identification No.)

2701 KENT AVENUE WEST LAFAYETTE, INDIANA (Address of principal executive offices)		47906 (Zip code)

~~(765) 463-4527~~	~~(Registrant’s telephone number, including area code)~~

(765) 463-4527

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Shares	NOTV	NASDAQ Capital Market

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. YESx⌧ NO ¨◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). YESx⌧ NO ¨◻

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check):


Large accelerated filer ◻	Accelerated filer ◻	Non-accelerated filer ⌧	Smaller Reporting Company ☒	Emerging growth company ☐

~~Large accelerated filer~~ ¨ ~~Accelerated filer~~ ¨ ~~Non-accelerated filer~~ x

~~Smaller Reporting Company~~ x ~~Emerging growth company~~ ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨◻

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ¨☐ NO x☒

As of ~~May 6, 2021, 15,827,839~~February 11, 2022, 25,459,361 of the ~~registrant’s~~registrant's common shares were outstanding.

Table of Contents

EXPLANATORY NOTE

Inotiv, Inc. (the “Company,” “we,” “us” or “our”) is filing this Amendment No. 1 (the “Amendment”) to its Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2021 originally filed with the Securities and Exchange Commission (the “SEC”) on February 16, 2021 (the “Original Report”). The Original Report includes certain information regarding the issuance of unregistered shares in two acquisitions completed during the quarter in Note 10 Business Combinations to the Condensed Consolidated Financial Statements included response to Part I, Item 1 Financial Statements of the Original Report. This Amendment amends the Original Report to include this same information and the exemptions claimed in response to Part II, Item 2 Unregistered Sales of Equity Securities and Use of Proceeds. This Amendment also includes as exhibits new certifications required by Sections 302 and 906 of the Sarbanes-Oxley Act of 2002, as amended, from the Company's Chief Executive Officer and Chief Financial Officer dated as of the filing date of this Form 10-Q/A. Item 6 of Part II of the Original Report is amended to reflect the filing of these new certifications.

Except as described above, this Amendment does not amend, update or change any other items or disclosures in the Original Report and does not purport to reflect any information or events subsequent to the filing thereof. As such, this Amendment speaks only as of the date the Original Report was filed, and we have not undertaken herein to amend, supplement or update any information contained in the Original Report to give effect to any subsequent events.

Table of Contents

TABLE OF CONTENTS


		~~Page~~
~~PART I~~	~~FINANCIAL INFORMATION~~		Page
PART I	FINANCIAL INFORMATION

Item 1	Condensed Consolidated Financial Statements:
	Condensed Consolidated Balance Sheets as of ~~March~~December 31, 2021 (Unaudited) and September 30, ~~2020~~2021	3	1
	Condensed Consolidated Statements of Operations for the Three Months ~~and Six Months~~ Ended ~~March~~December 31, 2021 and 2020 (Unaudited)	4	2
	Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended December 31, 2021 and 2020 (Unaudited)		3
	Consolidated Statement of Shareholders’ Equity for the Three Months ~~and Six Months~~ Ended ~~March~~December 31, 2021 and 2020 (Unaudited)	5	4
	Condensed Consolidated Statements of Cash Flows for the ~~Six~~Three Months Ended ~~March~~December 31, 2021 and 2020 (Unaudited)	6	5
	Notes to Condensed Consolidated Financial Statements	7	6
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17	28
Item 3	Quantitative and Qualitative Disclosures about Market Risk	25	36
Item 4	Controls and Procedures	25

~~PART II~~	~~OTHER INFORMATION~~	25

~~Item 1~~	~~Legal Proceedings~~	25
~~Item 1A~~	~~Risk Factors~~	25
~~Item 6~~	~~Exhibits~~		2636
	~~Signatures~~
27PART II	OTHER INFORMATION		37

Item 1	Legal Proceedings		37
Item 1A	Risk Factors		38
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds		38
Item 6	Exhibits		39
	Signatures		40

Table of Contents

INOTIV, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)


	December 31,		September 30,
	2021		2021
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	42,418	$	138,924
Restricted cash		436		18,000
Trade receivables and contract assets, net of allowances for doubtful accounts of $3,068 and $668, respectively		71,949		28,364
Inventories, net		36,066		602
Prepaid expenses and other current assets		23,390		3,129
Total current assets		174,259		189,019

Property and equipment, net		132,823		47,978
Operating lease right-of-use assets, net		24,469		8,358
Goodwill		451,810		51,927
Other intangible assets, net		215,132		24,233
Other assets		5,394		341
Total assets	$	1,003,887	$	321,856

Liabilities, shareholders' equity and noncontrolling interest
Current liabilities:
Accounts payable	$	28,141	$	6,163
Accrued expenses and other liabilities		23,518		8,968
Capex line of credit		0		1,749
Fees invoiced in advance		44,525		26,614
Current portion on long-term operating lease		5,674		1,959
Current portion of long-term debt		5,223		9,656
Total current liabilities		107,081		55,109
Long-term operating leases, net		18,705		6,554
Long-term debt, less current portion, net of debt issuance costs		255,395		154,209
Other liabilities		3,296		512
Deferred tax liabilities, net		29,007		344
Total liabilities		413,484		216,728

Contingencies (Note 14)

Shareholders’ equity and noncontrolling interest:
Preferred shares, authorized 1,000,000 shares, 0 par value:
Common shares, 0 par value:
Authorized 74,000,000 shares; 24,348,594 issued and outstanding at December 31, 2021 and 15,931,485 at September 30, 2021		6,050		3,945
Additional paid-in capital		679,261		112,198
Accumulated deficit		(94,426)		(11,015)
Accumulated other comprehensive loss		137		0
Total shareholders’ equity		591,022		105,128
Noncontrolling interest		(619)		0
Total shareholders’ equity and noncontrolling interest		590,403		105,128
Total liabilities and shareholders’ equity and noncontrolling interest	$	1,003,887	$	321,856

March 31,
2021 September 30,
2020
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 2,186 $ 1,406
Accounts receivable
Trade, net of allowance of $500 at March 31, 2021 and $561 at September 30, 2020 9,340 8,681
Unbilled revenues and other 3,338 2,142
Inventories, net 872 700
Prepaid expenses 2,135 2,371
Total current assets 17,871 15,300

Property and equipment, net 29,353 28,729
Operating lease right-of-use assets, net
4,105 4,001
Finance lease right-of-use assets, net
4,710 4,778
Goodwill 4,368 4,368
Other intangible assets, net 3,949 4,261
Lease rent receivable 129 75
Other assets 86 81

Total assets $ 64,571 $ 61,593

Liabilities and shareholders’ equity
Current liabilities:
Accounts payable $ 3,967 $ 3,196
Restructuring liability 168
Accrued expenses 2,932 2,688
Customer advances 15,186 11,392
Capex line of credit — 2,613
Current portion on long-term operating lease 1,004 866
Current portion of long-term finance lease 4,664 4,728
Current portion of long-term debt 8,317 5,991
Total current liabilities 36,070 31,642
Long-term operating leases, net 3,278 3,344
Long-term finance leases, net 42 44
Long-term debt, less current portion, net of debt issuance costs 17,925 18,826
Deferred tax liabilities 180 141
Total liabilities 57,495 53,997

Shareholders’ equity:
Preferred shares, authorized 1,000,000 shares, no par value:
No Series A shares at March 31, 2021 and 25 shares at September 30, 2020 issued and outstanding at $1,000 stated value — 25
Common shares, no par value:
Authorized 19,000,000 shares; 11,179,041 issued and outstanding at March 31, 2021 and 10,977,675 at September 30, 2020 2,756 2,706
Additional paid-in capital 27,319 26,775
Accumulated deficit (22,999 ) (21,910 )
Total shareholders’ equity 7,076 7,596
Total liabilities and shareholders’ equity $ 64,571 $ 61,593

The accompanying notes are an integral part of the condensed consolidated financial statements

Table of Contents

INOTIV, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)


	Three Months Ended
	December 31,
	2021		2020
Service revenue	$	38,176	$	17,032
Product revenue		46,035		853
Total revenue	$	84,211	$	17,885
Costs and expenses:
Cost of services provided		24,209		11,597
Cost of products sold		40,677		411
Selling		2,738		625
General and administrative		13,252		4,882
Amortization of intangible assets		3,396		160
Other operating expense		33,580		196
Operating income (loss)	$	(33,641)	$	14
Other income (expense):
Interest expense		(4,828)		(347)
Other (expense) income		(57,727)		-
Income (loss) before income taxes	$	(96,196)	$	(333)
Provision for income taxes		12,785		(33)
Consolidated net income (loss)	$	(83,411)	$	(366)
Less: Net income (expense) attributable to noncontrolling interests		(364)		-
Net income (loss) attributable to common shareholders	$	(83,047)	$	(366)

Loss per common share
Net income attributable to common shareholders:
Basic and diluted	$	(3.93)	$	(0.03)

Weighted-average number of common shares outstanding:
Basic and diluted		21,124		11,016

Three Months Ended March 31, Six Months Ended March 31,
2021 2020 2021 2020
Service revenue $ 17,902 $ 15,191 $ 34,934 $ 27,333
Product revenue 849 821 1,702 1,597
Total revenue 18,751 16,012 36,636 28,930

Cost of service revenue 11,949 10,207 23,502 19,118
Cost of product revenue 522 612 933 1,142
Total cost of revenue 12,471 10,819 24,435 20,260

Gross profit 6,280 5,193 12,201 8,670
Operating expenses:
Selling 1,175 1,447 2,138 2,665
Research and development 203 162 399 324
General and administrative 5,423 3,779 10,171 6,896
Total operating expenses 6,801 5,388 12,708 9,885

Operating loss (521 ) (195 ) (507 ) (1,215 )

Interest expense (366 ) (392 ) (713 ) (703 )
Other income 179 10 179 12
Net loss before income taxes (708 ) (577 ) (1,041 ) (1,906 )

Income tax expense 15 11 48 108

Net loss $ (723 ) $ (588 ) $ (1,089 ) $ (2,014 )

Basic net loss per share $ (0.06 ) $ (0.05 ) $ (0.10 ) $ (0.19 )
Diluted net loss per share $ (0.06 ) $ (0.05 ) $ (0.10 ) $ (0.19 )

Weighted common shares outstanding:
Basic 11,151 10,843 11,083 10,756
Diluted 11,151 10,843 11,083 10,756

The accompanying notes are an integral part of the condensed consolidated financial statements.

Table of Contents

INOTIV, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(In thousands, except share amounts)

Three Months Ended

December 31,

2021

2020
Consolidated net income (loss)

$
(83,411)

$
(366)

Other comprehensive income (loss), net of tax

Foreign currency translation

247

—
Defined benefit plans:

Actuarial gains (losses), net of taxes

(110)

—
Foreign currency translation

—

—
Other comprehensive income (loss), net of tax

137

—
Consolidated comprehensive income (loss)

(83,274)

(366)
Comprehensive loss attributable to non-controlling interests

(364)

��
—
Comprehensive income (loss) attributable to the common stockholders

$
(83,638)

$
(366)

Table of Contents

INOTIV, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY AND NONCONTROLLING INTEREST (UNAUDITED)

(In thousands, except number of shares)

Six Month Period Ended March 31, 2021
Additional Total
Preferred Shares Common Shares paid-in Accumulated shareholders’
Number Amount Number Amount capital deficit equity
Balance at September 30, 2020 25 $ 25 10,977,675 $ 2,706 $ 26,775 $ (21,910 ) $ 7,596
Net loss (366 ) (366 )
Stock option exercises 23,350 6 39 45
Stock based compensation 116,974 29 152 181

Balance at December 31, 2020 25 $ 25 11,117,999 $ 2,741 $ 26,966 $ (22,276 ) $ 7,456
Net loss (723 ) (723 )
Stock based compensation 12,502 3 275 278
Stock option exercises 36,040 9 56 65
Preferred stock conversion (25 ) (25 ) 12,500 3 22
Balance March 31, 2021 0 $ 0 11,179,041 $ 2,756 $ 27,319 (22,999 ) $ 7,076


	Three Month Period Ended December 31, 2021
											Accumulated
							Additional				Other		Non-		Total
	Preferred Shares			Common Shares			paid-in		Accumulated		Comprehensive		Controlling		shareholders’
	Number	Amount		Number	Amount		capital		deficit		Loss		Interests		equity
Balance at September 30, 2021	0	$	0	15,931,485	$	3,945	$	112,198	$	(11,015)	$	—	$	—	$	105,128
Consolidated net income (loss)	0		0	0		0		0		(83,411)		—		364		(83,047)
Stock issued in acquisitions	0		0	8,374,138		2,094		459,289		0		—		—		461,383
Non-controlling interest related to Envigo acquisition	0		0	0		0		0		0		—		(983)		(983)
Issuance of stock under employee stock plans	0		0	42,971		11		38		0		—		—		49
Stock based compensation	0		0	0		0		19,160		0		—		—		19,160
Pension cost amortization	0		0	0		0		0		0		(110)		—		(110)
Foreign currency translation adjustment	0		0	0		0		0		0		247		—		247
Reclassification of convertible note embedded derivative to equity (Note 7)	0		0	0		0		88,576		0		—		—		88,576
Balance at December 31, 2021	0	$	0	24,348,594	$	6,050	$	679,261	$	(94,426)	$	137	$	(619)	$	590,403

Six Month Period Ended March 31, 2020
Additional Total
Preferred Shares Common Shares paid-in Accumulated shareholders’
Number Amount Number Amount capital deficit equity
Balance at September 30, 2019 35 $ 35 10,510,694 $ 2,589 $ 25,183 $ (17,097 ) $ 10,710
Adoption of accounting standard (128 ) (128 )
Net loss (1,426 ) (1,426 )
Stock issued in acquisition 240,000 60 1,073 1,133
Stock based compensation 54,363 14 67 81

Balance at December 31, 2019 35 $ 35 10,805,057 $ 2,663 $ 26,323 $ (18,651 ) $ 10,370
Net loss (588 ) (588 )
Stock based compensation 26,521 7 116 123
Stock option exercises 32,703 8 12 20
Balance March 31, 2020 35 $ 35 10,864,281 $ 2,678 $ 26,451 (19,239 ) $ 9,925


	Three Month Period Ended December 31, 2020
											Accumulated
							Additional				Other		Non-		Total
	Preferred Shares			Common Shares			paid-in		Accumulated		Comprehensive		Controlling		shareholders’
	Number	Amount		Number	Amount		capital		deficit		Loss		Interests		equity
Balance at September 30, 2020	25	$	25	10,977,675	$	2,706	$	26,775	$	(21,910)	$	—	$	—	$	7,596
Consolidated net loss	0		0	0		0		0		(366)	$	0	$	0		(366)
Stock option exercises	—		—	23,350		6		39		0		—		—		45
Stock based compensation	0		0	116,974		29		152		0		0		0		181
Balance at December 31, 2020	25	$	25	11,117,999	$	2,741	$	26,966	$	(22,276)	$	—	$	—	$	7,456

The accompanying notes are an integral part of the consolidated financial statements.

Table of Contents

INOTIV, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Three Months Ended
	December 31,
	2021		2020
Operating activities:
Net income (loss)	$	(83,411)	$	(366)
Adjustments to reconcile net income (loss) to net cash provided by operating activities, net of acquisitions:
Depreciation and amortization		6,035		1,065
Undistributed earnings of noncontrolling interest		(364)		—
Change on operating lease		(229)		5
Employee stock compensation expense		19,159		181
Changes in deferred taxes		(14,281)		—
Provision for doubtful accounts		—		72
Foreign currency (gain) loss		320		9
Loss on fair value remeasurement of embedded derivative		56,714		—
Other non-cash operating activities		2,021		37
Loss on debt extinguishment		877		—
Non-cash amortization of inventory fair value step-up		3,668		—
Gain on disposal of fixed assets		(247)		—
Financing lease interest expense		1		69
Changes in operating assets and liabilities:
Accounts receivable		1,517		(634)
Inventories		(3,393)		(176)
Income tax accruals		1,438		33
Prepaid expenses and other current assets		(1,432)		(231)
Accounts payable		4,491		435
Accrued expenses		(10,974)		(1,089)
Customer advances		10,806		2,242
Other asset and liabilities, net		6,141		—
Net cash used in operating activities		(1,143)		1,652

Investing activities:
Capital expenditures		(5,655)		(1,474)
Proceeds from sale of equipment		284		—
Cash paid in acquisitions		(227,022)		—
Net cash used in investing activities		(232,393)		(1,474)

Financing activities:
Payments on finance lease liability		—		(108)
Payments of long-term debt		(37,747)		—
Payments of debt issuance costs		(7,102)		(712)
Payments on promissory notes		(167)		(40)
Payments on capex lines of credit		(1,749)		—
Borrowings on construction loans		1,184		—
Borrowings on capex lines of credit		—		387
Proceeds from issuance of senior term notes		165,000		—
Proceeds from exercise of stock options		47		44
Net cash provided by financing activities		119,466		(429)

Effect of exchange rate changes on cash and cash equivalents		—		—

Net increase in cash and cash equivalents		(114,070)		(251)
Cash, cash equivalents, and restricted cash at beginning of period		156,924		1,406
Cash, cash equivalents, and restricted cash at end of period	$	42,854	$	1,155

Noncash financing activity:
Seller financed acquisition	$	3,000		—

Supplemental disclosure of cash flow information:
Cash paid for interest	$	1,351	$	256
Income taxes paid, net	$	163	$	—

Six Months Ended March 31,
2021 2020
Operating activities:
Net loss $ (1,089 ) $ (2,014 )
Adjustments to reconcile net loss to net cash provided by operating activities, net of acquisition:
Depreciation and amortization 2,154 1,673
Amortization finance lease 72 75
Change on operating lease (31 ) 81
Employee stock compensation expense 460 204
Provision for doubtful accounts 72 —
Gain on disposal of property and equipment (1 ) —
Unrealized foreign currency gains 9 5
Financing lease interest expense 137 133
Interest payment true up (3 ) —
Changes in operating assets and liabilities:
Accounts receivable (1,927 ) (1,873 )
Inventories (172 ) (109 )
Income tax accruals — 102
Prepaid expenses and other assets 178 (723 )
Accounts payable 770 (577 )
Accrued expenses 66 (422 )
Customer advances 3,831 3,791
Net cash provided by operating activities 4,526 346
Investing activities:
Capital expenditures (2,427 ) (3,351 )
Proceeds from sale of equipment 2 —
Cash paid in acquisition — (4,000 )
Net cash used in investing activities (2,425 ) (7,351 )

Financing activities:
Payments on finance lease liability (206 ) (212 )
Payments of long-term debt (1,436 ) (603 )
Payments of debt issuance costs (41 ) (111 )
Payments on capex lines of credit (135 ) —
Payments on revolving line of credit — (22,711 )
Borrowings on revolving line of credit — 24,263
Borrowings on construction loans — 1,089
Borrowings on capex lines of credit 387 1,329
Borrowings on long-term loan — 3,533
Proceeds from exercise of stock options 111 20
Change in finance lease (1 ) —
Net cash used/provided by financing activities (1,321 ) 6,597

Net increase in cash and cash equivalents 780 (408 )
Cash, cash equivalents, and restricted cash at beginning of period 1,406 606
Cash, cash equivalents, and restricted cash at end of period $ 2,186 $ 198

Supplemental disclosure of cash flow information:
Cash paid for interest $ 520 $ 494
Preclinical Research Services acquisition:
Assets acquired $ — $ 6,442
Liabilities assumed — (1,378 )
Common shares issued — (1,133 )
Cash paid $ — $ 3,931

The accompanying notes are an integral part of the condensed consolidated financial statements.

Table of Contents

INOTIV, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands except ~~per~~ share ~~data or as~~amounts, unless otherwise indicated)

(Unaudited)

1. DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION

1.	~~DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION~~

Inotiv, Inc. and its subsidiaries and a variable interest entity (“VIE”) (“We,” “Our,” “Us,” the “Company,” and “Inotiv”) comprise a leading contract research organization specializing in nonclinical and analytical drug discovery and development services. The Company also manufactures scientific instruments for life sciences research, which it sells with related software for use by pharmaceutical companies, universities, government research centers and medical research institutions. ~~The Company’s customers are located throughout the world.~~

On ~~March 18,~~November 5, 2021, the Company ~~filed Articles~~completed the acquisition of ~~Amendment to~~Envigo RMS Holding Corp. (“Envigo acquisition”) by merger of a wholly owned subsidiary of the Company with and into Envigo.

As a result of the Envigo transaction, the Company’s ~~Second Amended~~business now includes breeding, importing and ~~Restated Articles~~selling research-quality animal models for use in laboratory tests, manufacturing and distributing standard and custom diets, distributing bedding and enrichment products, and providing other services associated with these products. With over 130 different species and strains, the Company is a global leader in the production and sale of ~~Incorporation, as amended,~~some of the most widely used rodent research model strains, among other species. The Company maintains production and ~~amended its Second Amended~~distribution facilities in the United States (“U.S.”), United Kingdom (“U.K.”), mainland Europe, and ~~Restated Bylaws, as amended, to reflect a corporate name change from Bioanalytical Systems, Inc. to Inotiv, Inc.~~Israel.

Basis of Presentation

The Company has prepared the accompanying unaudited interim condensed consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles (“GAAP”), and therefore should be read in conjunction with the Company’s audited consolidated financial statements, and the notes thereto, included in the Company’s annual report on Form 10-K for the fiscal year ended September 30, ~~2020.~~2021. In the opinion of management, the condensed consolidated financial statements for the three ~~and six~~ months ended ~~March~~December 31, 2021 and 2020 include all adjustments which are necessary for a fair presentation of the results of the interim periods and of the Company’s financial position at ~~March~~December 31, 2021. The results of operations for the three ~~and six~~ months ended ~~March~~December 31, 2021 may not be indicative of the results for the fiscal year ending September 30, ~~2021.~~2022.

~~Certain prior period amounts~~The acquisition of Envigo was transformational to the Company’s underlying business. As a result, certain reclassifications have been ~~reclassified~~made to prior periods in the unaudited condensed consolidated financial statements and accompanying notes to conform with current presentation, which more closely reflects management’s perspective of the business as it currently exists.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires the Company to make estimates and judgements that may affect the reported amounts of assets, liabilities, revenues, and expenses, and related disclosures of contingent assets and liabilities. These include, but are not limited to, management estimates in the calculation and timing of revenue recognition, pension liabilities, deferred tax assets and liabilities and the related valuation allowance. Although estimates are based upon management’s best estimate using historical experience, current events, and actions, actual results could differ from those estimates. Changes in estimates are reflected in reported results in the period in which they become known.

Consolidation

The accompanying condensed consolidated financial statements are unaudited and have been prepared by the Company, including all subsidiaries and a VIE it consolidates in accordance with GAAP. The Company consolidates a VIE, as a result of the Envigo acquisition. The VIE does not have a material impact to net assets or net income.

The Company accounts for ~~consistency~~noncontrolling interests in accordance with Accounting Standard Codification (“ASC”) 810, “Consolidation” (“ASC 810”). ASC 810 requires companies with noncontrolling interests to disclose such interests as a portion of equity but separate from the Parent’s equity. The noncontrolling interests’ portion of net income (loss) is presented on the condensed consolidated statement of operations.

Table of Contents

Summary of Significant Accounting Policies

The Company’s significant accounting policies are described in Note 2, “Summary of Significant Accounting Policies” in the Company’s Annual Report on Form 10-K for fiscal year 2021. As a result of the Envigo acquisition, certain policies have been added or adjusted to reflect our combined business.

Pension Costs

As a result of the Envigo acquisition, the Company has a defined benefit pension plan for one of its U.K. subsidiaries.

The projected benefit obligation and funded position of the defined benefit plan is estimated by actuaries and the Company recognizes the funded status of its defined benefit plan on its consolidated balance sheet and recognizes gains and losses. Prior service costs or credits that arise during the period are not recognized as components of net periodic benefit cost as a component of accumulated other comprehensive income (loss), net of tax. The Company measures plan assets and obligations as of the date of the Company’s year-end consolidated balance sheet; making assumptions to anticipate future events. The valuation of assets acquired and liabilities assumed has not yet been finalized as of December 31, 2021. The purchase price allocation is preliminary and subject to change, including the valuation of the unfunded defined benefit plan obligation, among other items.

Additional information about certain effects on net periodic benefit cost for the next fiscal year that arise from delayed recognition of the gains or losses, prior service costs or credits, and transition assets or obligations are disclosed in the notes to the consolidated financial statements (see Note 13 – Defined Benefit Plan).

Comprehensive Income (Loss)

Comprehensive income (loss) for the periods presented is comprised of consolidated net income (loss) plus the change in the cumulative translation adjustment equity account and the adjustments, net of tax, for the current year ~~presentation. These reclassifications had no effect~~actuarial gains (losses) in connection with the Company’s defined benefit plan.

Foreign Currencies

Transactions in currencies other than the functional currency of each entity are recorded at the rates of exchange on the date of the transaction. Monetary assets and liabilities in currencies other than the functional currency are translated at the rates of exchange on the balance sheet date and the related transaction gains and losses are reported in the consolidated statements of operations, in Operating income. The Company records gains and losses from re-measuring intercompany loans separately in Foreign exchange gain (loss) in the consolidated statement of operations.

The results of ~~operations.~~ operations of subsidiaries whose functional currency is other than the U.S. dollar are translated into U.S. dollars at the average exchange rate, assets and liabilities are translated at period-end exchange rates, capital accounts are translated at historical exchange rates, and retained earnings are translated at the weighted average of historical rates. Translation adjustments are excluded from the determination of net income and are recorded as a separate component of equity within accumulated other comprehensive income (loss) in the consolidated financial statements.

2.	~~STOCK-BASED COMPENSATION~~

~~In March 2008,~~

2. EQUITY

Common Stock Offering

On April 23, 2021, we closed an underwritten public offering of 3,044,117 of our common shares, including 397,058 common shares sold pursuant to the full exercise by the underwriter of its option to purchase additional shares to cover over-allotments. All of the shares were sold at a price to the public of $17.00 per share. Net proceeds from the offering were approximately $49.0 million, after deducting the underwriting discount and estimated offering expenses.

On November 4, 2021, the Company’s shareholders approved an amendment to the ~~2008 Stock Option Plan (the “Plan”)~~Company’s Second Amended and Restated Articles of Incorporation to ~~replace~~increase the ~~1997 Outside Director Stock Option Plan~~number of authorized Common Shares from 20,000,000 shares, consisting of 19,000,000 Common Shares and 1,000,000 Preferred Shares, to 75,000,000 shares, consisting of 74,000,000 Common Shares and 1,000,000 Preferred Shares. Approval of this matter by the ~~1997 Employee Stock Option Plan. The purpose~~Inotiv shareholders was a condition to the closing of the ~~Plan~~Envigo acquisition (described below). The amendment was to promote the Company’s long-term interests by providing a means of attracting and retaining officers, directors and key employees. The Compensation Committee administered the Plan and approved the particular officers, directors or employees eligible for grants. Under the Plan, employees were granted options to purchase common shares at an exercise price equal to the fair market value of the common shares of the end of the trading day prior to the date of the grant. Generally, options granted vest and become exercisable in three equal installments commencing one year from date of grant and expire upon the earlier of the employee’s termination of employment, or ten years from the date of grant. Restricted shares are valued as the average of the high and loweffective on the day prior to the date of the grant. The Plan is described more fully in Note 9 in the Notes to the Consolidated Financial Statements in the Company’s Form 10-K for the fiscal year ended September 30, 2020.

~~In March 2018,~~November 4, 2021. On November 4, 2021, the Company’s shareholders approved an amendment to the ~~amendment and restatement of the Plan in the form of the Amended and Restated~~Company’s 2018 Equity Incentive Plan ~~and in March 2020 the Company’s shareholders approved a further amendment~~ to increase the number of shares ~~issuable under the amended and restated plan~~available for awards thereunder by ~~700~~1,500,000

Table of Contents

shares and to make certain corresponding changes to the number of shares issuable as incentive options and as restricted stock or pursuant to restricted stock units (as amended, the “Equity Plan”). The Company currently grants equity awards from the Equity Plan. The purpose of the Equity Plan is to promote the Company’s long-term interests by providing a means of attracting and retaining officers, directors and key employees.plan. At ~~March~~December 31, 2021, ~~663~~1,820,933 shares remained available for grants under the Equity Plan.

Stock Issued in Connection with Acquisitions

During the three months ended December 31, 2021, 8,374,138 common shares were issued in relation to acquisitions. See Note 10 for further discussion of consideration for each acquisition.

Stock Based Compensation

The Company expenses the estimated fair value of stock options over the vesting periods of the grants. The Company recognizes expense for awards subject to graded vesting using the straight-line attribution method. The Company adopted a change in accounting policy effective October 1, 2020 for forfeitures. Prior to October 1, 2020, stock-based compensation expense was reduced for estimated forfeitures, and if necessary, an adjustment was recognized in future periods if actual forfeitures differed from those estimates. The accounting change was made prospectively; therefore, stock-based compensation for equity grants subsequent to October 1, 2020, will not be reduced for estimated forfeitures as expense will be adjusted in the period that a forfeiture occurs. The Company ~~feels~~believes that this accounting change will more accurately account for expense relating to forfeitures. The Company has assessed the cumulative effect of this change in accounting policy and has deemed the impact to be immaterial; therefore, an adjustment has not been recorded to beginning retained earnings. Stock based compensation expense for the three ~~and six~~ months ended ~~March 31,~~December 30, 2021 and 2020, was ~~$278~~$23,932 and ~~$460,~~$181, respectively. ~~Stock based~~Of the $23,932 stock compensation expense, ~~for~~$23,014 relates to post-combination expense recognized in connection with the ~~three and six months ended March 31, 2020 was $123 and $204, respectively.~~Envigo transaction (see Note 10 – Business Combinations), which is inclusive of $4,772 of cash.

~~A summary of the Company’s stock option activity for the six months ended March 31, 2021 is as follows (in thousands except for share prices):~~

Options
(shares) Weighted-
Average
Exercise Price
Outstanding – October 1, 2020 712 $ 2.21
Granted 43 $ 10.12
Exercised (60 ) $ 1.86
Forfeited (22 ) $ 3.99
Expired (2 ) $ 2.02
Outstanding – March 31, 2021 671 $ 2.69

Exercisable at March 31, 2021 392 $ 1.82

The weighted average estimated fair value of stock options granted for the six months ended March 31, 2021 and March 31, 2020 were $6.64 and $3.41, respectively. The weighted-average assumptions used to compute the fair value of the options granted in the six months ended March 31, 2021 were as follows:

~~Risk-free interest rate~~	~~0.40~~	%
~~Dividend yield~~	~~0.00~~	%
~~Volatility of the expected market price of the Company’s common shares~~	~~76.56~~	%
~~Expected life of the options (years)~~	~~5.95~~

~~As of March 31, 2021, total unrecognized compensation cost related to non-vested stock options was $592 and is expected to be recognized over a weighted-average service period of 2.1 years.~~

During the six months ended March 31, 2021, the Company granted a total of 132 restricted shares to members of the Company’s leadership team, including 40 restricted shares granted on December 29, 2020 to the CEO under his employment agreement. A summary of restricted share activity for the six months ended March 31, 2021 is as follows:

Restricted Shares Weighted-
Average
Grant
Date Fair
Value
Outstanding – September 30, 2020 128 $ 3.88
Granted 132 $ 8.74
Vested (10 ) $ 1.28
Forfeited (2 ) 6.63
Outstanding – March 31, 2021 248 $ 6.54

~~As of March 31, 2021, total unrecognized compensation cost related to non-vested restricted shares was $1,193 and is expected to be recognized over a weighted-average service period of 1.9 years.~~

3.	~~INCOME (LOSS)~~3. LOSS PER SHARE

The Company computes basic income (loss) per share using the weighted average number of common shares outstanding. As of March 31, 2021, the Company had two categories of dilutive potential common shares: Series A preferred shares issued in May 2011 in connection with the Company’s registered direct offering and shares issuable upon exercise of options. The Company computes diluted earnings per share using the if-converted method for preferred shares, if any, and the treasury stock method for stock options, respectively. As of December 31, 2021, the Company only had dilutive potential common shares, which related to shares issuable upon exercise of options. Shares issuable upon exercise of ~~671~~1,654,270 options were not considered in computing diluted income (loss) per share for the three months ended December 31, 2021 because they were anti-dilutive. Additionally, there are 3,040,268 shares issuable upon conversion in connection with the convertible debt entered into on September 27, 2021. The Company computes diluted earnings per share using the if-converted method for the shares issuable in connection with the convertible debt. These shares were not considered in computing diluted (loss) per share for the three months ended December 31, 2021 because they were anti-dilutive. Shares issuable upon exercise of 704,340 options and 712 common shares issuable upon conversion of preferred shares were not considered in computing diluted ~~income~~ (loss) per share for the three ~~and six~~ months ended March 31, 2021 because they were anti-dilutive. Shares issuable upon exercise of 802 options and 17 common shares issuable upon conversion of preferred shares were not considered in computing diluted income (loss) per share for the three and six months ended MarchDecember 31, 2020 because they were anti-dilutive.

The following table reconciles the computation of basic net loss per share to diluted loss per share:


	Three Months Ended
	December 31,
	2021		2020
Basic and diluted net income (loss) per share:
Net loss applicable to common shareholders	$	(83,047)	$	(366)
Weighted average common shares outstanding
Basic		21,124		11,016
Diluted		21,124		11,016

Basic net loss per share	$	(3.93)	$	(0.03)
Diluted net loss per share	$	(3.93)	$	(0.03)

Three Months Ended
March 31, Six Months Ended
March 31,
2021 2020 2021 2020
Basic net loss per share:
Net loss applicable to common shareholders $ (723 ) $ (588 ) $ (1,089 ) $ (2,014 )
Weighted average common shares outstanding 11,151 10,843 11,083 10,756
Basic net loss per share $ (0.06 ) $ (0.05 ) $ (0.10 ) $ (0.19 )

4.	~~INVENTORIES~~

Table of Contents

4. OTHER OPERATING EXPENSE

~~Inventories~~Other operating expense consisted of the following:

March 31,
2021 September 30,
2020
Raw materials $ 545 $ 577
Work in progress 69 70
Finished goods 421 230
1,035 877
Obsolescence reserve (163 ) (177 )
$ 872 $ 700


	Three Months Ended
	December 31,
	2021		2020
Acquisition costs	$	7,977	$	—
Startup costs		957		160
Remediation costs		439		—
Integration costs		831		—
Other costs		362		36
Acquisition-related stock compensation costs		23,014		—
	$	33,580	$	196

5.	~~SEGMENT INFORMATION~~

5. SEGMENT INFORMATION

Due to the Envigo acquisition, the Company reports its results in 2 reportable segments – Discovery and Safety Assessment (DSA) and Research Models and Services (RMS).

The ~~Company operates in two principal segments -~~DSA segment provides preclinical research services ~~and research products. The Services segment provides research and development support~~ on a contract basis directly to biopharma and pharmaceutical ~~companies. The Products segment~~companies as well as certain research products. Preclinical research services include screening and pharmacological testing, nonclinical safety testing, formulation development, regulatory compliance and quality control testing, which are services required to take a drug through the early development process including discovery services, which are non-regulated services to assist clients with the identification, screening, and selection of a lead compound for drug development, and regulated and non-regulated (GLP and non-GLP) safety assessment services. Research products provides liquid chromatography, electrochemical and physiological monitoring products to pharmaceutical companies, universities, government research centers and medical research institutions.

The ~~accounting policies~~Company’s RMS reportable segment includes the research models, research model services and Teklad diet, bedding and enrichment businesses (Teklad). Research models include the commercial production and sale of ~~these segments are~~small research models and large research models and the ~~same~~production and sale of certain biological products. Research model services include: Genetically Engineered Models and Services (GEMS), which performs contract breeding and other services associated with genetically engineered models; client-owned animal colony care; and health monitoring and diagnostics services related to research models. Teklad includes standard, custom and medicated diets as ~~those described in~~well as bedding and environmental enrichment products, which enhance the ~~summary~~welfare of ~~significant accounting policies found in Note 2 to~~research animals.

During the ~~Consolidated Financial Statements in~~three months ended December 31, 2021, the ~~Company’s annual report on Form 10-K for~~RMS segment reported intersegment revenue of $320 from the ~~fiscal year ended September 30, 2020.~~DSA segment. The following table presents revenue and other financial information by reportable segment:

Three Months Ended
March 31, Six Months Ended
March 31,
2021 2020 2021 2020
Revenue:
Service $ 17,902 $ 15,191 $ 34,934 $ 27,333
Product 849 821 1,702 1,597
$ 18,751 $ 16,012 $ 36,636 $ 28,930

Operating Income (Loss)
Service $ 3,794 $ 2,575 $ 6,905 $ 3,933
Product (26 ) (200 ) 141 (470 )
Corporate (4,289 ) (2,570 ) (7,553 ) (4,678 )
$ (521 ) $ (195 ) $ (507 ) $ (1,215 )

Interest expense (366 ) (392 ) (713 ) (703 )
Other income 179 10 179 12
Loss before income taxes $ (708 ) $ (577 ) $ (1,041 ) $ (1,906 )


	Three Months Ended
	December 31,
	2021		2020
Revenue
DSA	$	32,825	$	17,885
RMS		51,386		—

Operating Income (Loss)
DSA	$	6,042	$	3,277
RMS		80		—
Unallocated Corporate		(39,763)		(3,263)
	$	(33,641)	$	14

Interest expense		(4,828)		(347)
Other expense		(57,727)		—
Loss before income taxes	$	(96,196)	$	(333)

Table of Contents

Total assets by reporting segment is as follows:



	December 31,		September 30,
	2021		2021
DSA	$	208,886	$	321,856
RMS		795,001		—
	$	1,003,887	$	321,856

Revenue by geographic area is as follows:


	Three Months Ended
	December 31,
	2021		2020
United States	$	71,142	$	17,885
Netherlands		6,536		—
Other		6,533		—
	$	84,211	$	17,885

6. INCOME TAXES

The Company uses the asset and liability method of accounting for income taxes. The Company recognizes deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry-forwards. The Company measures deferred tax assets and liabilities using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The Company recognizes the effect on deferred tax assets and liabilities of a change in tax rates in income in the period that includes the enactment date. The Company records valuation allowances based on a determination of the expected realization of tax assets.

The difference between the enacted federal statutory rate of 21% and the Company’s effective rate of ~~(4.58)%~~13.3% for the ~~six~~three months ended ~~March~~December 31, 2021 is ~~due~~primarily related to ~~changes~~deferred tax liabilities established as part of the acquisition of Envigo, which resulted in ~~the~~a release of valuation allowance, as well as, the impact on ~~its net deferred~~ tax ~~assets.~~

expense of certain book to tax differences on the deductibility of certain transaction costs and non-deductibility of the loss on fair value remeasurement of the embedded derivative component of the convertible notes.

The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not to be sustained upon examination based on the technical merits of the position. The Company measures the amount of the accrual for which an exposure exists as the largest amount of benefit determined on a cumulative probability basis that it believes is more likely than not to be realized upon settlement of the position.

At ~~March~~December 31, 2021 and September 30, ~~2020,~~2021, the Company had no0 liability for uncertain income tax positions.

The Company records interest and penalties accrued in relation to uncertain income tax positions as a component of income tax expense. Any changes in the liability for uncertain tax positions would impact the effective tax rate. The Company does not expect the total amount of unrecognized tax benefits to significantly change in the next twelve months.

The Company ~~files~~is subject to income ~~tax returns~~taxes in the U.S. federal jurisdiction, and ~~several U.S. states. The~~the various states and local jurisdictions in which it operates. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. In the normal course of business, the Company ~~remains~~is subject to examination by the federal, state, local and foreign taxing ~~authorities in the jurisdictions in which it has filed~~authorities. State and other income tax returns are generally subject to examination for a period of three to five years after ~~2014.~~

the filing of the respective returns The Company has open tax years for state and foreign income tax filings generally starting in 2017.

On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief and Economic Security ~~(CARES)~~ Act ~~due~~(the “CARES Act”). The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferral of the employer portion of social security payments (FICA deferral), and expanded income tax net operating loss carryback provisions. As of December 31, 2021, the Company has a FICA deferral of approximately $916 related to the ~~coronavirus pandemic. Among other things,~~Envigo acquisition. During the legislation provides tax relief for businesses. The Company is still assessing the tax benefit, if any, that it could receive under this legislation. The Company received a Payroll Protection Program (“PPP”) loan of $5,051 and applied for forgiveness of $4,851. Based on satisfaction of requirements under the CARES Act for forgiveness,three months ended December 31, 2021, the Company ~~recorded a deferred tax asset for nondeductible expense relating to~~paid $916, and the ~~PPP funds~~remaining amount of ~~$1,276 at September 30, 2020.~~$916 is due on December 31, 2022.

Table of Contents

On December 27, 2020, the U.S. enacted the Consolidated Appropriations Act of 2021 ~~was signed into law, clarifying that business expenses paid out~~(“CAA”) which extended and expanded certain tax relief measures created by the CARES Act, including, but not limited to, (1) second round of ~~PPP forgivable loan funds may in fact be fully deducted~~Payroll Protection Program loans, and (2) the Employer Retention Credit for ~~federal income tax purposes. Based on this clarification in~~2021.

On March 11, 2021, the ~~bill,~~U.S. enacted the ~~Company reversed~~American Rescue Plan Act of 2021 (“ARPA”) which expands Section 162(m) to cover the ~~$1,276 deferred tax asset related to PPP loan expenses, along with the corresponding valuation allowance~~next five most highly compensated employees for the ~~same amount, as of~~taxable year, in addition to the “covered employees” effective for taxable years beginning after December 31, ~~2020.~~ 2026. We continue to examine the elements of the CAA and ARPA and the impact they may have on our future business.

7. DEBT

Credit Facility

On ~~April 30,~~November 5, 2021, the Company, refinanced its credit arrangements with First Internet Bank (“FIB”) in order to, among other things, secure additional debt financing. The discussion below describes our credit arrangements with FIB ascertain of ~~March 31, 2021. For a description of our credit arrangements with FIB as~~subsidiaries of the ~~April 30, 2021 refinancing, refer to Note 13 “Subsequent Events” to these Notes to Condensed Consolidated Financial Statements.~~

~~On December 1, 2019,~~Company (the “Subsidiary Guarantors”), the ~~Company~~lenders party thereto, and Jefferies Finance LLC, as administrative agent, entered into ~~an Amended and Restated~~a Credit Agreement ~~(as had previously been amended from time to time, the~~(the “Credit Agreement”) ~~with FIB. As~~. The Credit Agreement provides for a term loan facility in the original principal amount of ~~March 31, 2021,~~$165,000, a delayed draw term loan facility in the original principal amount of $35,000 (available to be drawn up to 18 months from the date of the Credit Agreement), and a revolving loan facility in the original principal amount of $15,000. In addition, the Credit Agreement ~~included five term loans (the “Initial Term Loan,” “Second Term Loan,” “Third Term Loan,” “Fourth Term Loan,” and “Fifth Term Loan,” respectively), a~~provides for an aggregate combined increase of the revolving ~~line of credit (the “Revolving Facility”), a construction draw~~ loan ~~(the “Construction Draw Loan”), an equipment draw loan (the “Equipment Draw Loan”), and two capital expenditure instruments (the “Initial Capex Line”~~facility and the ~~“Second Capex Line,” respectively).~~

~~The Initial Term Loan for $4,500 bears interest at a fixed rate~~term loan facility of 3.99%, with monthly principal and interest payments of approximately $33. The Initial Term Loan matures June 23, 2022. The balance on the Initial Term Loan at March 31, 2021 was $3,622. The Company used the proceeds from the Initial Term Loan to satisfy its indebtedness with Huntington Bank and terminated the related interest rate swap.

The Second Term Loan for $5,500 was used to fund a portion of the cash consideration for the Seventh Wave acquisition. Amounts outstanding under the Second Term Loan bear interest at a fixed per annum rate of 5.06%, with monthly principal and interest payments equal to $78. The Second Term Loan matures July 2, 2023 and the balance on the Second Term Loan at March 31, 2021 was $3,634.

The Third Term Loan for $1,271 was used to fund the cash consideration for the Smithers Avanza acquisition. Amounts outstanding under the Third Term Loan bear interest at a fixed per annum rate of 4.63%. The Third Term Loan required monthly interest only payments until December 1, 2019, from which time payments of principal and interest in monthly installments of $20 are required, with all accrued but unpaid interest, cost and expenses due and payable at the maturity date. The Third Term Loan matures November 1, 2025 and the balance on the Third Term Loan at March 31, 2021 was $1,018.

The Fourth Term Loan in the principal amount of $1,500 has a maturity of June 1, 2025. Interest accrues on the Fourth Term Loan at a fixed per annum rate equal to 4%, with interest payments only having commenced January 1, 2020 through June 1, 2020, with monthly payments of principal and interest thereafter through maturity. The balance on the Fourth Term Loan at March 31, 2021 was $1,286.

The Fifth Term loan in the principal amount of $1,939 has a maturity of December 1, 2024. Interest accrues on the Fifth Term Loan at a fixed per annum rate equal to 4%, with payments of principal and interest due monthly through maturity. The balance on the Fifth Term Loan at March 31, 2021 was $1,858. The Company entered into the Fourth Term Loan and the Fifth Term Loan in connection with the PCRS Acquisition.

~~The Revolving Facility provides a line of credit for~~ up to ~~$5,000,~~$35,000, which amount will be available to be drawn once the delayed draw term loan facility is no longer available. On November 5, 2021, the Company ~~may borrow from time to time, subject to~~borrowed the ~~terms of the Credit Agreement, including as may be limited by the~~full amount of the ~~Company’s outstanding eligible receivables.~~ term loan facility, but did not borrow any amounts on the delayed draw term loan facility or the revolving loan facility.

The ~~Revolving Facility requires monthly accrued and unpaid~~Company may elect to borrow on each of the loan facilities at either an adjusted LIBOR rate of interest ~~payments only until maturity~~or an adjusted prime rate of interest. Adjusted LIBOR rate loans shall accrue interest at ~~a floating per annum~~an annual rate equal to the ~~greater~~LIBOR rate plus a margin of ~~(a) 4%~~between 6.00% and 6.50%, ~~or (b) the sum of the Prime Rate plus Zero Basis Points (0.0%), which rate shall change concurrently with the Prime Rate. The Company did not have an outstanding balance~~depending on the ~~Revolving Facility as~~Company’s then current Secured Leverage Ratio (as defined in the Credit Agreement). The LIBOR rate must be a minimum of ~~March 31, 2021. On April 30, 2021,~~1%. The initial adjusted LIBOR rate of interest is the ~~parties amended the Revolving Facility to extend its maturity through April 30, 2023. Refer to Note 13 “Subsequent Events” to these Notes to Condensed Consolidated Financial Statements.~~

The Construction Draw Loan and the Equipment Draw Loan were utilized in connection with the Evansville facility expansion and provided for borrowings up to principal amounts not to exceed $4,445 and $1,429, respectively. Amounts outstanding under theseLIBOR rate plus 6.25%. Adjusted prime rate loans ~~bear~~shall accrue interest at a fixed per annum rate of 5.20%. The Construction Draw Loan and Equipment Draw Loan each mature on March 28, 2025. As of March 31, 2021, there was a $4,015 balance on the Construction Draw Loan and a $1,103 balance on the Equipment Draw Loan.

The Initial Capex Line previously provided for borrowings up to the principal amount of $1,100, which the Company could borrow from time to time, subject to the terms of the Credit Agreement. On March 27, 2020, the parties amended the Initial Capex Line to eliminate the revolving nature of the line in favor of a term loan in the principal amount of $948, equivalent to the amount of borrowings then outstanding on the Initial Capex Line. As amended, the Initial Capex Line matures on June 30, 2025, and as of March 31, 2021, had a balance of $826. Interest accrues on the principal balance of the Initial Capex Line at a fixed per annuman annual rate equal to ~~4%. The Initial Capex Line requires payments~~the prime rate plus a margin of ~~principal~~between 5.00% and ~~interest in monthly installments equal to $17.~~

The Second Capex Line previously provided for borrowings up to the principal amount of $3,000, which the Company could borrow from time to time, subject to the terms of the Credit Agreement. On December 18, 2020, the parties amended the Second Capex Line to eliminate the revolving nature of the line in favor of a term loan in the principal amount of $3,000, equivalent to the amount of borrowings then outstanding on the Second Capex Line. As amended, the Second Capex Line matures on December 31, 2025. Interest accrues on the principal balance of the Second Capex Line at a fixed per annum rate equal to 4.25%. Commencing January 31, 2021, and on the last day of each monthly period thereafter until and including on the maturity date, the Second Capex Line requires payments of principal and interest in monthly installments equal to $55, and as of March 31, 2021, had a balance of $2,865.

~~The Company’s obligations under the Credit Agreement are guaranteed by BAS Evansville, Inc. (“BASEV”)~~5.50%, Seventh Wave Laboratories, LLC, BASi Gaithersburg LLC, as well as Bronco Research Services LLC (“Bronco”), each a wholly owned subsidiary of the Company (collectively, the “Guarantors”). The Company’s obligations under the Credit Agreement and the Guarantor’s obligations under their respective guaranties are secured by first priority security interests in substantially all of the assets of the Company and the Guarantors, respectively, mortgagesdepending on the Company’s ~~BASEV’s and Bronco’s facilities in West Lafayette, Indiana, Evansville, Indiana, and Fort Collins, Colorado, respectively, and pledges~~then current Secured Leverage Ratio. The initial adjusted prime rate of interest is the prime rate plus 5.25%. Actual interest accrued at 7.25% through December 31, 2021.

The Company must pay (i) a fee based on a percentage per annum equal to 0.50% on the average daily undrawn portion of the ~~Company’s ownership interests~~commitments in respect of the revolving loan facility and (ii) a fee based on a percentage per annum equal to 1.00% on the average daily undrawn portion of the commitments in respect of the delayed drawn loan facility. In each case, such fee shall be paid quarterly in arrears.

Each of the term loan facility and delayed draw term loan facility require annual principal payments in an amount equal to 1.0% of their respective original principal amounts. The Company shall also repay the term loans on an annual basis in an amount equal to a percentage of its ~~subsidiaries.~~Excess Cash Flow (as defined in the Credit Agreement), which percentage will be determined by its then current Secured Leverage Ratio. Each of the loan facilities may be repaid at any time with premium or penalty.

~~As amended, (i) beginning March 31, 2021, the~~The Company is required to maintain an initial Secured Leverage Ratio (as defined in the Credit Agreement) of not more than 4.25 to 1.00. The maximum permitted Secured Leverage Ratio shall reduce to 3.00 to 1.00 beginning with the Company’s fiscal quarter ending March 31, 2025. The Company is required to maintain a minimum Fixed Charge Coverage Ratio (as defined in the Credit Agreement), ~~tested quarterly,~~which ratio shall be 1.00 to 1.00 during the first year of ~~not less than (a) as of March 31, 2021 1.05 to 1.0, (b) as of June 30, 2021~~the Credit Agreement and shall be 1.10 to 1.00 from and ~~(c)~~after the Credit Agreement’s first anniversary.

Each of the loan facilities is secured by all assets (other than certain excluded assets) of the Company and each of the Subsidiary Guarantors. Repayment of each of the loan facilities is guaranteed by each of the Subsidiary Guarantors.

Utilizing proceeds from the Credit Agreement on November 5, 2021, the Company repaid all indebtedness and terminated the credit agreement related to the First Internet Bank of Indiana (“FIB”) credit facility as described in Note 10 and recognized $877 loss on debt extinguishment.

Table of Contents

Long term debt as of September 30, 2021 and for each quarter thereafter 1.20 to 1.00 and (ii) the Company is required to maintain a Cash Flow Leverage Ratio (as defined in the Credit Agreement), tested quarterly, not to (a) as of MarchDecember 31, 2021, 5.75 to 1.00, (b) as of June 30, 2021, 5.00 to 1.00 and (c) as of September 30, 2021 and for each quarter thereafter, 4.25 to 1.00. The Fixed Charge Coverage Ratio and Cash Flow Leverage Ratio are measured on a trailing twelve (12) month basis, provided, however, that in the case of Fixed Charge Coverage Ratio calculations for the remainder of fiscal 2021 (i) the measurement period for the quarter ending March 31, 2021 includes only the quarter ending March 31, 2021, (ii) the measurement period for the quarter ending June 30, 2021 includes only the quarters ending March 31, 2021 and June 30, 2021 and (iii) the measurement period for the quarter ending September 30, 2021 includes only the quarters ending March 31, 2021, June 30, 2021 and September 30, ~~2021.~~

2021 is detailed in the table below.


	As of:
	December 31, 2021		September 30, 2021
FIB Term Loans	$	—	$	36,185
Seller Note – Bolder BioPath		1,455		1,500
Seller Note – Smithers Avanza		175		280
Seller Note – Preclinical Research Services		667		685
Seller Note – Plato BioPharma		3,000		—
EIDL Loan		141		—
Convertible Senior Notes		101,062		131,673
Senior Term Loan		165,000		—
		271,500		170,323
Less: Current portion		(5,223)		(9,656)
Less: Debt issue costs not amortized		(10,882)		(6,458)
Total Long-term debt	$	255,395	$	154,209

Upon an event of default, which includes certain customary events such as, among other things, a failure to make required payments when due, a failure to comply with covenants, certain bankruptcy and insolvency events, and defaults under other material indebtedness, FIB may cease advancing funds, increase the interest rate on outstanding balances, accelerate amounts outstanding, terminate the agreement and foreclose on all collateral. The Company has also obtained a life insurance policy in an amount of $5,000 for its President and Chief Executive Officer and provided FIB an assignment of such life insurance policy as collateral.Acquisition-related Debt

In addition to the indebtedness under the Credit Agreement, ~~as part~~certain of the ~~Smithers Avanza acquisition,~~Company’s subsidiaries have issued unsecured notes as partial payment of the ~~Company has an unsecured promissory note payable~~purchase prices of certain acquisitions as described herein. Each of these notes is subordinated to the ~~Smithers Avanza seller in~~indebtedness under the initial principal amount of $810 made by BASi Gaithersburg and guaranteed by the Company. The promissory note bears interest at 6.5% with monthly payments and a maturity date of May 1, 2022. At March 31, 2021, the balance on the note payable to the Smithers Avanza seller was $480. Credit Agreement.

As part of the ~~PCRS Acquisition,~~acquisition of Plato BioPharma, which is a part of the ~~Company also has an~~Company’s Inotiv Boulder subsidiary, Inotiv Boulder, LLC, issued unsecured subordinated promissory ~~note~~notes payable to the ~~PCRS seller in the initial principal amount~~former shareholders of $800. The promissory note bears interest at 4.5% with monthly payments and a maturity date of December 1, 2024. At March 31, 2021, the balance on the note payable to the PCRS seller was $719. In connection with the Merger (as defined below), the Company has also issued seller notesPlato BioPharma in an aggregate principal amount of ~~$1,500. Refer to Note 13 “Subsequent Events” to these~~$3,000. The promissory notes bear interest at a rate of 4.5% per annum, with monthly payments of principal and interest and a maturity date of June 1, 2023.

Convertible Senior Notes ~~to Condensed Consolidated Financial Statements.~~

On ~~April 23, 2020,~~September 27, 2021, the Company ~~was granted a loan (the “Loan”) from Huntington National Bank in the aggregate~~issued $140,000 principal amount of ~~$5,051,~~its 3.25% Convertible Senior Notes due 2027. The Notes were issued pursuant to, and are governed by, an indenture, dated as of September 27, 2021, among the Company, the BAS Evansville, as guarantor, and U.S. Bank National Association, as trustee. Pursuant to the purchase agreement between the Company and the initial purchaser of the Notes, the Company granted the initial purchaser an option to purchase, for settlement within a period of 13 days from, and including, the date the Notes were first issued, up to an additional $15,000 principal amount of Notes. The Notes issued on September 27, 2021 include $15,000 principal amount of Notes issued pursuant to the ~~Paycheck Protection Program~~full exercise by the initial purchaser of such option. The Company used the net proceeds from the offering of Notes, together with borrowings under ~~Division A, Title I~~a new senior secured term loan facility, to fund the cash portion of the ~~CARES Act, which was enacted March 27, 2020. The terms~~purchase price of the ~~Loan call for repayment~~Envigo Acquisition and related fees and expenses, as described in Note 16.

The Notes are the Company’s senior, unsecured obligations and are (i) equal in right of payment with the Company’s existing and future senior, unsecured indebtedness; (ii) senior in right of payment to the Company’s existing and future indebtedness that is expressly subordinated to the Notes; (iii) effectively subordinated to the Company’s existing and future secured indebtedness, to the extent of the value of the collateral securing that indebtedness; and (iv) structurally subordinated to all existing and future indebtedness and other liabilities, including trade payables, and (to the extent the Company is not a holder thereof) preferred equity, if any, of the Company’s non-guarantor subsidiaries. The Notes are fully and unconditionally guaranteed, on a senior, unsecured basis, by BAS Evansville (the “Guarantor”).

The Notes accrue interest at a rate of 3.25% per annum, payable semi-annually in arrears on April 15 and October 15 of each year, beginning on April 15, 2022. The Notes will mature on October 15, 2027, unless earlier repurchased, redeemed or converted. Before April 15, 2027, noteholders have the right to convert their Notes only upon the occurrence of certain events. From and after April 15, 2027, noteholders may convert their Notes at any time at their election until the close of business on the scheduled trading day immediately before the maturity date. The Company will settle conversions by paying or delivering, as applicable, cash, its common shares or a combination of cash and its common shares, at the Company’s election. The initial conversion rate is 1.7162 common shares per $1,000 principal amount of Notes, which represents an initial conversion price of approximately $46.05 per common share. The conversion rate and conversion price are subject to customary adjustments upon the occurrence of certain events.

Table of Contents

In addition, if certain corporate events that constitute a “Make-Whole Fundamental Change” (as defined in the Indenture) occur, then the conversion rate will, in certain circumstances, be increased for a specified period of time.

The Notes are redeemable, in whole and not in part, at the Company’s option at any time on or after October 15, 2024 and on or before the 40th scheduled trading day immediately before the maturity date, but only if the last reported sale price per common share of the Company exceeds 130% of the conversion price on (i) each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the trading day immediately before the date the Company sends the related redemption notice; and (ii) the trading day immediately before the date the Company sends such notice. The redemption price is a cash amount equal to the principal amount of the Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. In addition, calling the Notes for redemption pursuant to the provisions described in this paragraph will constitute a Make-Whole Fundamental Change, which will result in an increase to the conversion rate in certain circumstances for a specified period of time.

If certain corporate events that constitute a “Fundamental Change” (as defined in the Indenture) occur, then noteholders may require the Company to repurchase their Notes at a cash repurchase price equal to the principal amount of the Notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the fundamental change repurchase date. The definition of Fundamental Change includes certain business combination transactions involving the Company and certain de-listing events with respect to the Company’s common shares.

The Notes have customary provisions relating to the occurrence of “Events of Default” (as defined in the Indenture), which include the following: (i) certain payment defaults on the Notes (which, in the case of a default in the payment of interest on the Notes, are subject to a 30-day cure period); (ii) the Company’s failure to send certain notices under the ~~Loan~~Indenture within specified periods of time; (iii) the failure by the Company or the Guarantor to comply with certain covenants in ~~eighteen installments~~the Indenture relating to the ability of ~~$283 beginning on November 16, 2020~~the Company or the Guarantor to consolidate with or merge with or into, or sell, lease or otherwise transfer, in one transaction or a series of transactions, all or substantially all of the assets of the Company or the Guarantor, as applicable, and ~~continuing monthly until~~its subsidiaries, taken as a whole, to another person; (iv) a default by the ~~final payment is due on April 16, 2022. However,~~Company or the ~~bank~~Guarantor in its other obligations or agreements under the Indenture or the Notes if such default is not ~~requiring payments~~cured or waived within 60 days after notice is given in accordance with the Indenture; (v) certain defaults by the Company, the Guarantor or any of ~~principal~~their respective subsidiaries with respect to indebtedness for borrowed money of at least $20,000; (vi) the rendering of certain judgments against the Company, the Guarantor or ~~interest pending~~any of their respective subsidiaries for the ~~loan forgiveness decision. The~~payment of at least $20,000, where such judgments are not discharged or stayed within 60 days after the date on which the right to appeal has expired or on which all rights to appeal have been extinguished; (vii) certain events of bankruptcy, insolvency and reorganization involving the Company, ~~has applied for forgiveness~~the Guarantor or any of their respective significant subsidiaries; and (viii) the guarantee of the ~~loan~~Notes ceases to be in full force and effect (except as permitted by the Indenture) or the Guarantor denies or disaffirms its obligations under its guarantee of the Notes.

If an Event of Default involving bankruptcy, insolvency or reorganization events with respect to the Company or the Guarantor (and not solely with respect to a significant subsidiary of the Company or the Guarantor) occurs, then the principal amount of, and all accrued and unpaid interest on, all of the Notes then outstanding will immediately become due and payable without any further action or notice by any person. If any other Event of Default occurs and is continuing, then, the Trustee, by notice to the Company, or noteholders of at least 25% of the aggregate principal amount of Notes then outstanding, by notice to the Company and the Trustee, may declare the principal amount of, and all accrued and unpaid interest on, all of the Notes then outstanding to become due and payable immediately. However, notwithstanding the foregoing, the Company may elect, at its option, that the sole remedy for an Event of Default relating to certain failures by the Company to comply with certain reporting covenants in the Indenture consists exclusively of the right of the noteholders to receive special interest on the Notes for up to 180 days at a specified rate per annum not exceeding 0.50% on the principal amount of ~~$4,851.~~the Notes.

~~Long term debt~~In accordance with ASC 815, at issuance, the Company evaluated the convertible feature of the Notes and determined it was required to be bifurcated as an embedded derivative and did not qualify for equity classification. The convertible feature of the Notes is subject to fair value remeasurement as of ~~March 31, 2021~~each balance sheet date or until it meets equity classification requirements and ~~September 30, 2020~~ is ~~detailed in~~valued utilizing level three inputs as described below. The discount resulting from the ~~table below.~~initial fair value of the embedded derivative will be amortized to interest expense using the effective interest method. Non-cash interest expense during the period primarily related to this discount.

As of:
March 31,
2021 September 30,
2020
Initial Term Loan $ 3,622 $ 3,748
Second Term Loan 3,634 4,004
Third Term Loan 1,018 1,115
Fourth Term Loan 1,286 1,425
Fifth Term Loan 1,858 1,891
Initial Capex Line 826 920
Second Capex Line 2,865 —
Subtotal Term Loans 15,109 13,103
Construction and Equipment loans 5,119 5,496
Seller Note – Smithers Avanza 480 650
Seller Note – Preclinical Research Services 719 752
Paycheck protection program loan 5,051 5,051
26,478 25,052
Less: Current portion (8,317 ) (5,991 )
Less: Debt issue costs not amortized (235 ) (235 )
Total Long-term debt $ 17,925 $ 18,826

8.	~~ACCRUED EXPENSES~~

~~As part~~In the first quarter of ~~a fiscal 2012 restructuring,~~2022, the Company ~~accrued~~early adopted Accounting Standards Update (“ASU”) ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06)”. The update simplifies the accounting for ~~lease payments at the cease use date for its United Kingdom facility~~convertible debt instruments and ~~have considered free rent, sublease rentals and~~convertible preferred stock by reducing the number of ~~days it would take to restore~~accounting models and limiting the ~~space to its original condition prior to improvements.~~ number of embedded conversion features separately recognized from the

Table of Contents

primary contract. As a result of the approval for the increase in authorized shares on November 4, 2021 (See Note 2 – Equity), the convertible note conversion rights met all equity classification criteria in ASC 815. As a result, the derivative liability was remeasured as of November 4, 2021 and reclassified out of long-term liabilities and into additional paid-in capital.

Based ~~on these matters,~~upon the above, the Company ~~had~~remeasured the fair value of the embedded derivative as of November 4, 2021 which resulted in a ~~$1,117 reserve~~fair value measurement of $88,576 and a loss on remeasurement included in other income (loss) for ~~lease related costs and for legal and professional fees and other costs~~the three-months ended December 31, 2021 of $56,714. The embedded derivative liability of $88,576 was then reclassified to ~~remove improvements previously made to~~additional paid-in capital in accordance with ASC 815.

In connection with the ~~facility. During the three and six months ended March 31,~~evaluation at November 4, 2021, the Company ~~released all~~rechallenged its analysis of the ~~remaining reserve for lease related liabilities. At March 31, 2021~~initial allocation of value between the embedded derivative and debt component of the convertible debt included in long-term liabilities at September 30, ~~2020, respectively,~~2021. This resulted in a change in the ~~Company had $0~~allocation of the underlying long-term debt from $76,716 to $99,776 and ~~$168 reserved for~~ the ~~remaining liability. The reserve was classified as a current liability on~~allocation of the ~~condensed consolidated balance sheets~~conversion feature from $54,922 to $31,862. These changes did not result in any change to long-term liabilities or any material changes to net income as of September 30, ~~2020.~~2021.

9.	~~NEW ACCOUNTING PRONOUNCEMENTS~~

Fair Value

In June 2016, the FASB issued ASU 2016-13 “Financial Instruments (Topic 326) Measurement of Credit Losses on Financial Instrument” “CECL”). ASU 2016-13 requires an allowance for expected credit losses on financial assets to be recognized as early as day one

The provisions of the ~~instrument.~~Fair Value Measurements and Disclosure Topic defines fair value, establishes a consistent framework for measuring fair value and provides the disclosure requirements about fair value measurements. This ~~ASU departs~~Topic also establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the ~~incurred loss model which means~~Company. Unobservable inputs are inputs that reflect the ~~probability threshold is removed. It considers more forward-looking information and requires~~Company’s judgment about the ~~entity to estimate its credit losses as far as it can reasonably estimate. This update became effective for~~assumptions market participants would use in pricing the ~~Company on October 1, 2020. The adoption of this guidance did not have a material impact~~asset or liability based on the ~~Company’s consolidated financial statements.~~ best information available in the circumstances. The hierarchy is broken down into three levels based on the inputs as follows:

~~10.~~●

~~BUSINESS COMBINATIONS~~Level 1 – Valuations based on quoted prices for identical assets or liabilities in active markets that the Company has the ability to access.

●

Level 2 – Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.

●

Level 3 – Valuations based on inputs that are unobservable and significant to the overall fair value measurement.

The embedded conversion feature of the convertible senior notes is subject to fair value measurement on a recurring basis as they include unobservable and significant inputs in determining the fair value. The Company utilized a single factor trinomial lattice model to determine the related fair value of the embedded derivative convertible feature of the notes at November 4, 2021, and the inputs used included a volatility of 40.0%, a bond yield assumption of 10.44% and a remaining maturity period of 5.95 years.

Former Credit Agreement

On October 4, 2021, the Company entered into a Third Amendment to Amended and Restated Credit Agreement, which amended the Amended and Restated Credit Agreement between the Company and First Internet Bank of Indiana (“FIB”), as amended. Pursuant to the Amendment, FIB consented to the acquisition by the Company of Plato by merger of Plato with a wholly owned subsidiary of the Company and the subsequent merger of the surviving corporation of that merger with another wholly owned subsidiary of the Company. In addition, the Amendment amended the Credit Agreement to (i) add the promissory notes to be issued to former Plato shareholders in the Plato Acquisition as permitted indebtedness, which notes will be issued by the surviving company, guaranteed by the Company and subordinated in favor of the Lender, and (ii) add references to the Plato Acquisition to certain provisions of the Credit Agreement relating to subordination agreements, representations and warranties, and certain covenants to permit the Plato Acquisition to occur. The Amendment includes agreements by the Company to obtain certain landlord waivers within 30 days of the closing of the Plato Acquisition and to deliver to the Lender signed subordination agreements.

The Company consummated the Envigo Acquisition and repaid all of its obligations under the FIB Credit Facility in November 2021, as described in Note 10.

Table of Contents

8. SUPPLEMENTAL BALANCE SHEET INFORMATION

Trade receivables and contract assets, net consisted of the following:


	December 31,		September 30,
	2021		2021
Trade receivables	$	66,771	$	21,402
Unbilled revenue		8,246		7,630
Total		75,017		29,032
Less: Allowance for doubtful accounts		(3,068)		(668)
Trade receivables and contract assets, net of allowances for doubtful accounts	$	71,949	$	28,364

Inventories, net consisted of the following:


	December 31,		September 30,
	2021		2021
Raw materials	$	1,455	$	513
Work in progress		114		37
Finished goods		4,456		192
Animal Inventory		33,682		—
Total		39,707		742
Less: Obsolescence reserve		(3,641)		(140)
Inventories, net	$	36,066	$	602

Prepaid expenses and other current assets consisted of the following:


	December 31,		September 30,
	2021		2021
Advances to suppliers	$	10,319	$	—
Income tax receivable		2,851		—
Other		8,245		1,198
Prepaid research models		1,975		1,931
Prepaid expenses and other current assets	$	23,390	$	3,129

The composition of other assets is as follows:


	December 31,		September 30,
	2021		2021
Long-term advances to suppliers	$	2,144	$	—
Security deposits and guarantees		2,511		51
Finance lease right-of-use assets, net		54		60
Other		685		230
Other assets	$	5,394	$	341

Accrued expenses consisted of the following:


	December 31,		September 30,
	2021		2021
Accrued compensation	$	11,030	$	3,528
Non-income taxes		1,888		18
Accrued interest		2,339		169
Current portion of long-term finance lease		22		24
Other		8,072		4,887
Current portion of contingent liability		167		167
Consideration payable		—		175
Accrued expenses and other liabilities	$	23,518	$	8,968

Table of Contents

The composition of fees invoiced in advance is as follows:


	December 31,		September 30,
	2021		2021
Customer deposits	$	12,511	$	—
Deferred revenue		32,014		26,614
Fees invoiced in advance	$	44,525	$	26,614

Other liabilities consisted of the following:


	December 31,		September 30,
	2021		2021
Long-term customer deposits	$	1,161	$	—
Accrued pension liability		865		—
Long-term finance leases		35		39
Other		762		—
Long-term portion of contingent liability		473		473
Other liabilities	$	3,296	$	512

9. NEW ACCOUNTING PRONOUNCEMENTS

In the first quarter of 2022, the Company early adopted Accounting Standards Update (“ASU”) ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06)”. The update simplifies the accounting for convertible debt instruments and convertible preferred stock by reducing the number of accounting models and limiting the number of embedded conversion features separately recognized from the primary contract. The guidance also includes targeted improvements to the disclosures for convertible instruments and earnings per share. ASU 2020-06 is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020.

10. BUSINESS COMBINATIONS

The Company accounts for acquisitions in accordance with guidance found in ASC 805, Business Combinations. The guidance requires consideration given, including contingent consideration, assets acquired, and liabilities assumed to be valued at their fair market values at the acquisition date. The guidance further provides that: (1) in-process research and development will be recorded at fair value as an indefinite-lived intangible asset; (2) acquisition costs will generally be expensed as incurred, (3) restructuring costs associated with a business combination will generally be expensed subsequent to the acquisition date; and (4) changes in deferred tax asset valuation allowances and income tax uncertainties after the acquisition date generally will affect income tax expense. ASC 805 requires that any excess of purchase price over fair value of assets acquired, including identifiable intangibles and liabilities assumed, be recognized as goodwill.

~~PCRS~~HistoTox Labs acquisition

Overview

On ~~November 8, 2019,~~April 30, 2021, the Company ~~and Bronco Research Services LLC, a wholly owned subsidiary~~completed the acquisition of the Company (the “PCRS Purchaser”), entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Pre-Clinical Research Services, Inc., a Colorado corporation (the “PCRS Seller”), and its shareholder. Pursuant to the Purchase Agreement, on December 1, 2019, the Company indirectly acquired (the “PCRS Acquisition”) substantially all of the assets of ~~PCRS Seller used or useful by PCRS Seller~~HistoTox Labs, Inc. (“HistoTox Labs”). HistoTox Labs is a provider of services in connection with ~~PCRS Seller's provision of GLP~~non-clinical consulting, laboratory and ~~non-GLP preclinical testing~~strategic support services and products related to routine and specialized histology, immunohistology, histopathology and image analysis/digital pathology. Consideration for the ~~pharmaceutical~~HistoTox Labs Acquisition consisted of $22,389 in cash, including $68 payable in net working capital adjustments.

HistoTox Labs, Bolder BioPATH and ~~medical device industries. The total consideration~~Plato BioPharma (discussed below) were combined into 1 business unit and recorded combined revenues of $9,316 and combined net income of $1,830 for the PCRS Acquisition was $5,857, which consisted of $1,500 in cash, subject to certain adjustments, 240 of the Company’s common shares valued at $1,133 using the closing price of the Company’s common shares on November 29, 2019 and an unsecured promissory note in the initial principal amount of $800 made by PCRS Purchaser. The promissory note bears interest at 4.5%. The Company also purchased certain real property located in Fort Collins, Colorado, comprising the main facility for the PCRS Seller’s business and additional property located next to the facility available for future expansion, for $2,500. The Company funded the cash portion of the purchase price for the PCRS Acquisition with cash on hand and the net proceeds from the refinancing of its credit arrangements with FIB, as described in Note 7. As contemplated by the Purchase Agreement, the Company also entered into a lease arrangement for an ancillary property used by Seller’s business, located in Livermore, Colorado.

~~Accounting for the Transaction~~

~~Results are included in the Company’s results from the acquisition date of~~three month periods ending December ~~1, 2019.~~

31, 2021.

The ~~Company’s allocation~~valuation of ~~the $5,857 purchase price to PCRS Purchaser’s tangible and identifiable intangible~~ assets acquired and liabilities assumed has not yet been finalized as of December 31, 2021. The purchase price allocation is preliminary and subject to change, including the valuation of property and equipment, intangible assets, income taxes, goodwill, among other items. The amounts recognized will be finalized as the information necessary to complete the analysis is obtained, but 0 later than one year after the acquisition date. Finalization of the valuation during the measurement period could result in a change in the amounts recorded for the acquisition date fair value. This business is reported as part of our DSA reportable

Table of Contents

segment. The following table summarizes the preliminary fair value of assets acquired and liabilities assumed as of the acquisition date:


	Preliminary
	Allocation as of
	December 31, 2021
Assets acquired and liabilities assumed:
Accounts receivable		982
Unbilled revenues		337
Operating lease ROU asset		2,239
Property and equipment		4,021
Intangible assets		8,500
Other Assets		25
Goodwill		9,129
Accounts payable		(132)
Accrued expenses		(266)
Customer advances		(207)
Operating lease liability		(2,239)
	$	22,389

Property and equipment is mostly composed of equipment (including lab equipment, furniture and fixtures, and computer equipment). The fair value of property and equipment was determined using a combination of cost and market-based methodologies. The fair value of property and equipment as of December 31, 2021 is based on ~~their~~preliminary assumptions which are subject to change as we complete our valuation procedures.

Intangible assets primarily relate to customer relationships and a non-compete agreement. The acquired definite-lived intangible assets are being amortized over a weighted-average estimated useful life of approximately 8 years for customer relationships and 5 years for the non-compete agreement on a straight-line basis. The estimated fair values of identifiable intangible assets were determined using the "income approach," which is a valuation technique that provides an estimate of the fair value of an asset based on market participant expectations of the cash flows an asset would generate over its remaining useful life. Some of the significant assumptions inherent in the development of these asset valuations include the estimated net cash flows for each year for each asset or product (including revenues, cost of services, marketing, selling and administrative expenses, and contributory asset charges), the appropriate discount rate necessary to measure the risk inherent in each future cash flow stream, the life cycle of each asset, the potential regulatory and commercial success risk, and competitive trends impacting the asset and each cash flow stream, as well as other factors. The fair value of intangible assets as of December ~~1, 2019,~~31, 2021 is ~~included in the table below.~~ based on preliminary assumptions which are subject to change as we complete our valuation procedures.

Goodwill, which is derived from the enhanced scientific expertise, expanded client base and our ability to provide broader service solutions through a comprehensive portfolio, is recorded based on the amount by which the purchase price exceeds the fair value of the net assets acquired and is deductible for tax purposes. ~~The purchase price allocation as of March 31,2021 is as follows:~~

Allocation as of
March 31, 2021
Assets acquired and liabilities assumed:
Receivables $ 578
Property and equipment 2,836
Unbilled receivables 162
Prepaid expenses 27
Intangible assets 2,081
Goodwill 751
Accounts payable (109 )
Accrued expenses (118 )
Customer advances (351 )
$ 5,857

~~The allocation of the purchase price is based on valuations performed to determine the fair value of such assets and liabilities as of the acquisition date.~~ Goodwill from this transaction is allocated to the Company’s ~~Services~~DSA reportable segment. ~~PCRS Purchaser~~

Bolder BioPATH acquisition

Overview

On May 3, 2021, the Company completed the acquisition of Bolder BioPATH in a merger of Bolder BioPATH with a wholly owned subsidiary of the Company. Bolder BioPATH is a provider of services specializing in in vivo models of rheumatoid arthritis, osteoarthritis, and inflammatory bowel disease as well as other autoimmune and inflammation models. Consideration for the Bolder BioPATH acquisition consisted of (i) $17,530 in cash, including net working capital adjustment receivable of approximately $970 and inclusive of $1,250 being held in escrow for purposes of securing any amounts payable by the selling parties on account of indemnification obligations, purchase price adjustments, and other amounts payable under the merger agreement, (ii) 1,588,235 of the Company’s common shares valued at $34,452 using the closing price of the Company’s common shares on May 3, 2021 and (iii) unsecured subordinated promissory notes payable to the former shareholders of Bolder BioPATH in an aggregate principal amount of $1,500. The promissory notes bear interest at a rate of 4.5% per annum, with monthly payments of principal and interest and a maturity date of May 1, 2026.

Table of Contents

In accordance with ASC 805-740, the Company established a deferred tax liability with an offset to goodwill in connection with the accounting for the opening balance sheet of the Bolder BioPATH acquisition as a result of book-to-tax differences primarily related to the customer relationship intangible and property and equipment.

The valuation of assets acquired and liabilities assumed has not yet been finalized as of December 31, 2021. The purchase price allocation is preliminary and subject to change, including the valuation of property and equipment, intangible assets, income taxes and goodwill, among other items. The amounts recognized will be finalized as the information necessary to complete the analysis is obtained, but 0 later than one year after the acquisition date. Finalization of the valuation during the measurement period could result in a change in the amounts recorded for the acquisition date fair value. This business is reported as part of our DSA reportable segment.

The following table summarizes the preliminary fair value of assets acquired and liabilities assumed as of the acquisition date:


	Preliminary
	Allocation as of
	December 31, 2021
Assets acquired and liabilities assumed:
Accounts receivable		2,258
Unbilled revenues		1,798
Prepaid expenses		6
Operating lease ROU asset		2,750
Property and equipment		6,609
Intangible asset		12,500
Other assets		70
Goodwill		36,223
Accounts payable		(159)
Accrued expenses		(294)
Deferred revenue		(662)
Deferred tax liability		(4,867)
Operating lease liability		(2,750)
	$	53,482

Property and equipment is mostly composed of equipment (including lab equipment, furniture and fixtures, and computer equipment). The fair value of property and equipment was determined using a combination of cost and market-based methodologies. The fair value of intangible assets as of December 31, 2021 is based on preliminary assumptions which are subject to change as we complete our valuation procedures.

Intangible assets primarily relate to customer relationships. The acquired definite-lived intangible assets are being amortized over a weighted-average estimated useful life of approximately 8 years on a straight-line basis. The estimated fair values of identifiable intangible assets were determined using the "income approach," which is a valuation technique that provides an estimate of the fair value of an asset based on market participant expectations of the cash flows an asset would generate over its remaining useful life. Some of the significant assumptions inherent in the development of these asset valuations include the estimated net cash flows for each year for each asset or product (including revenues, cost of ~~$3,813~~services, marketing, selling and administrative expenses, and contributory asset charges), the appropriate discount rate necessary to measure the risk inherent in each future cash flow stream, the life cycle of each asset, the potential regulatory and commercial success risk, and competitive trends impacting the asset and each cash flow stream, as well as other factors. The fair value of intangible assets as of December 31, 2021 is based on preliminary assumptions which are subject to change as we complete our valuation procedures.

Goodwill, which is derived from the enhanced scientific expertise, expanded client base and our ability to provide broader service solutions through a comprehensive portfolio, is recorded based on the amount by which the purchase price exceeds the fair value of the net assets acquired and NaN is deductible for tax purposes. Goodwill from this transaction is allocated to the Company’s DSA reportable segment.

Table of Contents

Gateway acquisition

Overview

On August 2, 2021, the Company completed the acquisition of Gateway Pharmacology Laboratories LLC (“Gateway Laboratories”) to further expand its drug metabolism and pharmacokinetics technology and capability as well as expand service offerings to include in vitro solutions in pharmacology and toxicology early in drug discovery. Consideration for the Gateway Laboratories acquisition consisted of (i) $1,671 in cash, including working capital and subject to customary purchase price adjustments, and (ii) 45,323 of the Company’s common shares valued at $1,182 using the closing price of the Company’s common shares on August 2, 2021. This business is reported as part of our DSA reportable segment.

In accordance with ASC 805-740, the Company established a deferred tax liability with an offset to goodwill in connection with the accounting for the opening balance sheet of the Gateway Laboratories acquisition as a result of book-to-tax differences primarily related to the customer relationship intangible and property and equipment.

The valuation of assets acquired and liabilities assumed has not yet been finalized as of December 31, 2021. The purchase price allocation is preliminary and subject to change, including the valuation of property and equipment, intangible assets, income taxes, and goodwill, among other items. The amounts recognized will be finalized as the information necessary to complete the analysis is obtained, but no later than one year after the acquisition date. Finalization of the valuation during the measurement period could result in a change in the amounts recorded for the acquisition date fair value.

Goodwill, which is derived from the enhanced scientific expertise, expanded client base and the Company’s ability to provide broader service solutions through a comprehensive portfolio, is recorded based on the amount by which the purchase price exceeds the fair value of the net assets acquired and NaN is deductible for tax purposes. Goodwill from this transaction is allocated to the Company’s DSA reportable segment.

The following table summarizes the preliminary fair value of assets acquired and liabilities assumed as of the acquisition date:


	Preliminary
	Allocation as of
	December 31, 2021
Assets acquired and liabilities assumed:
Accounts receivable		422
Operating lease ROU asset		120
Property and equipment		359
Intangible asset		100
Other assets		9
Goodwill		2,207
Accounts payable		(54)
Accrued expenses		(72)
Deferred tax liability		(118)
Operating lease liability		(120)
	$	2,853

BioReliance acquisition

Overview

On July 9, 2021, the Company completed the acquisition of certain assets of BioReliance Corporation (“BioReliance”) to further expand its service offerings to include in genetic toxicology services. The assets acquired consisted of fixed assets and an intangible asset related to customer relationships. The Company accounted for the transaction as a business combination as it was determined that the transaction included inputs and substantive processes capable of producing outputs which constitute a business. Consideration for the BioReliance acquisition consisted of (i) $175 in cash and (ii) 10% of net sales through December 2023 derived from the provision by the Company of services comprising the business to existing customers related to the intangible asset acquired. The Company estimated the fair value of 10% of net sales and recorded a contingent consideration liability of $640 in the consolidated balance sheets for the year ended September 30, 2021. The $175 consideration payable was included in accrued expenses in the consolidated balance sheets for the year ended September 30, 2021 and subsequently paid in the first quarter of fiscal 2022.

Table of Contents

The valuation of assets acquired and liabilities assumed has not yet been finalized as of December 31, 2021. The purchase price allocation is preliminary and subject to change, including the valuation of property and equipment and intangible assets. The amounts recognized will be finalized as the information necessary to complete the analysis is obtained, but 0 later than one year after the acquisition date. Finalization of the valuation during the measurement period could result in a change in the amounts recorded for the acquisition date fair value. This business is reported as part of our DSA reportable segment.

The following table summarizes the preliminary fair value of assets acquired and liabilities assumed as of the acquisition date:


	Preliminary
	Allocation as of
	December 31, 2021
Assets acquired and liabilities assumed:
Property and equipment		175
Intangible asset		640
	$	815

As of December 31, 2021, the Company had approximately $640 of contingent consideration related to the BioReliance acquisition that is subject to fair value measurement on a recurring basis as it includes unobservable and significant inputs in the determination of the fair value. The fair value of the contingent consideration related to BioReliance was estimated using a discounted cash flow analysis and level 3 inputs including projections representative of a market participant view for net sales through December 2023 and an estimated discount rate. The amount to be paid is calculated as a percentage of net sales as described above.

Plato BioPharma acquisition

Overview

On October 4, 2021, the Company completed the acquisition of Plato BioPharma, Inc. (“Plato”) to expand its market reach in early-stage drug discovery. Consideration for the Plato acquisition consisted of (i) $10,462 in cash, including working capital and subject to customary purchase price adjustments, (ii) 57,587 of the Company’s common shares valued at $1,776 using the closing price of the Company’s common shares on October 4, 2021 and (iii) a $3,000 seller note.

The valuation of assets acquired and liabilities assumed has not yet been finalized as of December 31, 2021. The purchase price allocation is preliminary and subject to change, including the valuation of property and equipment, intangible assets, income taxes, goodwill and net ~~income~~working capital among other items. The amounts recognized will be finalized as the information necessary to complete the analysis is obtained, but 0 later than one year after the acquisition date. Finalization of ~~$711~~the valuation during the measurement period could result in a change in the amounts recorded for the ~~six month~~acquisition date fair value. This business is reported as part of our DSA reportable segment.

The following table summarizes the preliminary fair value of assets acquired and liabilities assumed as of the acquisition date:


	Preliminary
	Allocation as of
	December 31, 2021
Assets acquired and liabilities assumed:
Cash		1,027
Accounts receivable		842
Property and equipment		1,148
Operating lease ROU asset		2,582
Intangible asset		5,100
Goodwill		8,898
Operating lease liability		(2,566)
Other liabilities, net		(242)
Deferred tax liability		(1,551)
	$	15,238

Table of Contents

Envigo RMS Holding Corp acquisition

Overview

On November 5, 2021, the Company completed the acquisition of Envigo RMS Holding Corp. (“Envigo”) by merger of a wholly owned subsidiary of the Company with and into Envigo to expand its market reach in early-stage drug discovery. The aggregate consideration paid to the holders of outstanding capital stock in Envigo in the merger consisted of cash of $218,205, including adjustments for net working capital, and 8,245,918 of the Company’s common shares valued at $439,590 using the opening price of the Company’s common shares on November 5, 2021. In addition, the Company assumed certain outstanding Envigo stock options, including both vested and unvested options, that were converted in the right to purchase 790,620 Company common shares at an exercise price of $9.93 per share. The stock options were valued at $44.80 per option utilizing a Black-Scholes option valuation model with the inputs below. The total value of options issued of $35,418, of which $18,242 was excluded from the purchase price as those options were determined to be post-combination expense. The previously vested stock options are reflected as purchase consideration of approximately $17,176.


Stock price			53.31
Strike price			9.93
Volatility			75.93%
Expected term			3.05
Risk-free rate			0.62%

The Company recognized transaction costs related to the acquisition of Envigo of $8,491 for the three months ended December 31, 2021. These costs were associated with legal and professional services related to the acquisition and are reflected within other operating expenses in the Company’s consolidated statement of operations.

The valuation of assets acquired and liabilities assumed has not yet been finalized as of December 31, 2021. The purchase price allocation is preliminary and subject to change, including the valuation of property and equipment, inventory, intangible assets, income taxes, goodwill, and the finalization of net working capital, among other items. The amounts recognized will be finalized as the information necessary to complete the analysis is obtained, but 0 later than one year after the acquisition date. Finalization of the valuation during the measurement period ~~ending March~~could result in a change in the amounts recorded for the acquisition date fair value. This business is reported as part of our RMS reportable segment.

The following table summarizes the preliminary fair value of assets acquired and liabilities assumed as of the acquisition date:


	Preliminary
	Allocation as of
	December 31, 2021
Assets acquired and liabilities assumed:
Cash		3,287
Trade receivables and contract assets		44,734
Inventory		35,739
Prepaid expenses and other current assets		18,758
Operating lease right-of-use assets, net		7,231
Property and equipment		80,712
Other assets		9,078
Intangible asset		184,000
Goodwill		390,037
Accounts payable		(17,743)
Fees invoiced in advance		(7,283)
Current portion on long-term operating lease		(2,600)
Accrued expenses and other liabilities		(25,884)
Long-term operating leases, net		(4,631)
Long-term deferred tax liabilities		(41,379)
Non-controlling interest		915
	$	674,971

Table of Contents

Robinson Services, Inc. acquisition

Overview

On December 29, 2021, the Company completed the acquisition of the rabbit breeding and supply business of Robinson Services, Inc. (“RSI”). The acquisition is another step in Inotiv’s strategic plan for building its RMS business and will be reported in the RMS reporting segment. The aggregate consideration paid in the transaction consisted of cash consideration of $3,250 and 70,633 of the Company’s common shares valued at $2,898 using the closing price of the Company’s common shares on December 29, 2021.

The valuation of assets acquired and liabilities assumed has not yet been finalized as of December 31, 2021. The purchase price allocation is preliminary and subject to change, including the valuation of intangible assets, non-compete agreement, supply agreement and goodwill. The amounts recognized will be finalized as the information necessary to complete the analysis is obtained, but no later than one year after the acquisition date. Finalization of the valuation during the measurement period could result in a change in the amounts recorded for the acquisition date fair value. This business is reported as part of our RMS reportable segment.

The following table summarizes the preliminary fair value of assets acquired and liabilities assumed as of the acquisition date:


	Preliminary
	Allocation as of
	December 31, 2021
Assets acquired and liabilities assumed:
Customer relationship		4,700
Non-complete agreement		300
Supply agreement		200
Goodwill		948
	$	6,148

Pro Forma Results

The Company’s unaudited pro forma results of operations for the ~~six~~three months ended ~~March~~December 31, 2021 and December 31, 2020, assuming ~~the PCRS Acquisition~~Envigo acquisition had occurred as of October 1, ~~2019~~2020 are presented for comparative purposes below. These amounts are based on available information of the results of operations of ~~the PCRS Seller’s~~Envigo operations prior to the acquisition date and are not necessarily indicative of what the results of operations would have been had the ~~PCRS Acquisition~~acquisitions and the merger been completed on October 1, ~~2019.~~

2020.

The unaudited pro forma information is as follows:

Six Months Ended
March 31, 2020
Total revenues $ 29,847

Net loss (1,887 )

Pro forma basic net loss per share $ (0.17 )
Pro forma diluted net loss per share $ (0.17 )


	Three Months Ended		Three Months Ended
	December 31, 2021		December 31, 2020
Total revenues	$	111,025	$	89,077

Net income (loss)		(85,841)		(35,324)

~~11.~~

11. REVENUE RECOGNITION

In accordance with Accounting Standards Codification (“ASC”) 606, the Company disaggregates its revenue from clients into ~~three~~two revenue streams, service revenue and product ~~revenue, and royalties.~~revenue. At contract inception the Company assesses the services promised in the contract with the clients to identify performance obligations in the arrangements.

Service revenue

DSA

The Company enters into contracts with clients to provide drug discovery and development services with payments based on mainly fixed-fee arrangements. The Company also offers archive storage services to its clients.

The Company’s fixed fee arrangements may involve nonclinical research services (toxicology, pathology, pharmacology), bioanalytical, and pharmaceutical method development and validation, nonclinical research services and the analysis of bioanalytical

Table of Contents

and pharmaceutical samples. For bioanalytical and pharmaceutical method validation services and nonclinical research services, revenue is recognized over time using the input method based on the ratio of direct costs incurred to total estimated direct costs. For contracts that involve in-life study conduct, method development or the analysis of bioanalytical and pharmaceutical samples, revenue is recognized over time when samples are analyzed or when services are performed. The Company generally bills for services on a milestone basis. These contracts represent a single performance obligation and due to the Company’s right to payment for work performed, revenue is recognized over time. Research services contract fees received upon acceptance are deferred until earned and classified within customer advances on the condensed consolidated balance sheets. Unbilled revenues represent revenues earned under contracts in advance of billings.

Archive services provide climate controlled archiving for client’s data and samples. The archive revenue is recognized over time, generally when the service is provided. These arrangements include one performance obligation. Amounts related to future archiving or prepaid archiving contracts for clients where archiving fees are billed in advance are accounted for as deferred revenue and recognized ratably over the period the applicable archive service is performed.

RMS

The Company provides Genetically Engineered Models and Services (GEMS), which performs contract breeding and other services associated with genetically engineered models; client-owned animal colony care; and health monitoring and diagnostics services related to research models. For contracts that involve creation of a specific type of animal, revenue is recognized over time with each milestone as a separate performance obligation. The Company is due payment for work performed even if subsequent milestones are unable to be met. Contract breeding and client-owned animal colony care is recognized over time and are billed as per diems. Health monitoring and diagnostic services are recognized once the service is performed.

Product revenue

~~The~~DSA

Products revenues included internally manufactured scientific instruments for life sciences research and the related software for use by pharmaceutical companies, universities, government research centers and medical research institutions under the Company’s BASi product line. These products can be sold to multiple clients and have alternative use. Both the transaction sales price and shipping terms are agreed upon in the client order. For these products, all revenue is recognized at a point in time, generally when title of the product and control is transferred to the client based upon shipping terms. These arrangements typically include only one performance obligation. ~~Certain~~

RMS

Product revenues included research models, diets and bedding, bioproducts and transgenic models and services. Research models revenue represents the commercial production and sale of research models, principally purpose-bred rats and mice for use by researchers, and large-animal models. Diets and bedding revenues represent laboratory animal diets, bedding, and enrichment products ~~have maintenance agreements available for clients~~under the Company’s Teklad product line. Bioproducts revenues represents the sale of serum and plasma, whole blood, tissues, organs and glands, embryo culture serum and growth factors. Research models and diets and bedding include freight costs associated with the delivery of the product to purchase. These are typically billed in advance and are accounted for as deferred revenue, are recognized ratably over the applicable maintenance period and are included in customer advances on the condensed consolidated balance sheet.customers.

~~Royalty revenue~~

The Company has an agreement with Teva Pharmaceuticals (formerly Biocraft Laboratories, Inc,) which manufactures and markets pharmaceutical products. The Company receives royalties in accordance with sales of certain pharmaceuticals that Teva manufactures and sells. The royalties are received on a quarterly basis and the revenue is recognized over the quarter. Royalty revenue is included in service revenue on the condensed consolidated statement of operations. Total revenue recognized was $94 and $179 in the three months ended March 31, 2021 and 2020, respectively. Total revenue recognized was $153 and $436 in the six months ended March 31, 2021 and 2020, respectively.

The following table presents changes in the Company’s contract assets and contract liabilities for the ~~six~~three months ended ~~March~~December 31, 2021.

Balance at
September 30,
2020 Additions Deductions Balance at
March 31,
2021
Contract Assets: Unbilled receivables $ 1,879 $ 1,371 $ (857 ) $ 2,393
Contract liabilities: Customer advances $ 11,392 $ 77,700 $ (73,906 ) $ 15,186


	Balance at						Balance at
	September 30,						December 31,
	2021		Additions		Deductions		2021
Contract Assets: Unbilled revenue	$	6,194	$	5,362	$	(3,310)	$	8,246
Contract liabilities: Fees invoiced in advance	$	26,614	$	124,057	$	(106,146)	$	44,525

~~12.~~

12. LEASES

The Company records a right-of-use (“ROU”) asset and lease liability for substantially all leases for which it is a lessee, in accordance with ASU 842. Leases with an initial term of 12 months or less are not recorded on the balance sheet. The Company recognizes lease expense for the leases on a straight-line basis over the lease term. At inception of a contract, the Company considers all relevant facts and circumstances to assess whether or not the contract represents a lease by determining whether or not the contract conveys the right to control the use of an identified asset, either explicit or implicit, for a period of time in exchange for consideration.

1423

Table of Contents

The Company has various operating and finance leases for facilities and equipment. Facilities leases provide office, laboratory, warehouse, or land, the company uses to conduct its operations. Facilities leases range in duration from two to ten years, with either renewaloptions for additional terms as the initial lease term expires, or purchase options. Facilities leases are considered as either operating or financing leases.

Equipment leases provide for office equipment, laboratory equipment or services the Company uses to conduct its operations. Equipment leases range in duration from 30 to 60 months, with either subsequentannual renewals, additional terms as the initial lease term expires, or purchase options.

Right-of-use lease assets and lease liabilities that are reported in the Company’s condensed consolidated balance sheets are as follows:


	As of		As of
	December 31, 2021		September 30, 2021
Operating right-of-use assets, net	$	24,469	$	8,358

Current portion of operating lease liabilities		5,674		1,959
Long-term operating lease liabilities		18,705		6,554
Total operating lease liabilities	$	24,379	$	8,513

Finance right-of-use assets, net	$	54	$	60

Current portion of finance lease liabilities		22		24
Long-term finance lease liabilities		35		39
Total finance lease liabilities	$	57	$	63

As of As of
March 31,
2021 September 30,
2020
Operating right-of-use assets, net $ 4,105 $ 4,001

Current portion of operating lease liabilities 1,004 866
Long-term operating lease liabilities 3,278 3,344
Total operating lease liabilities $ 4,282 $ 4,210

Finance right-of-use assets, net $ 4,710 $ 4,778

Current portion of finance lease liabilities 4,664 4,728
Long-term finance lease liabilities 42 44
Total finance lease liabilities $ 4,706 $ 4,772

During the three ~~and six~~ months ended ~~March~~December 31, 2021, the Company had operating lease amortizations of ~~$242 and $474, respectively,~~$1,083 and had finance lease amortization of ~~$35 and $72, respectively.~~$6. Finance lease interest recorded in the three ~~and six~~ months ended ~~March~~December 31, 2021 was ~~$68 and $137, respectively.~~

One of the operating leases contains a variable lease component based on revenue for one component of the Company. The total variable payments for this lease for the three and six months ended March 31, 2021was $69 and $145.

$1.

Lease expense for lease payments is recognized on a straight-line basis over the lease term. The components of lease expense related to the Company’s leases for the three ~~and six~~ months ended ~~March~~December 31, 2021 and December 31, 2020 were:

	Three months ended			Six months ended
	March 31, 2021			March 31, 2021

							Three months ended		Three months ended
							December 31, 2021		December 31, 2020
Operating lease costs:
Fixed operating lease costs	$	242		$	474		$	1,083	$	229
Short-term lease costs		42			52			25		10
Variable lease costs								—		2
Lease income		(159	)		(318	)		(177)		(160)
Finance lease costs:
Amortization of right-of-use asset expense		35			72			6		37
Interest on finance lease liability		68			137			1		69
Total lease cost	$	228		$	417		$	938	$	187

The Company serves as lessor to a lessee in ~~one~~1 facility through the end of calendar year 2024. The gross rental income and underlying lease expense are presented gross in the Company’s condensed consolidated balance ~~sheet.~~sheets. The Company received rental income of ~~$159~~$177 and ~~$318~~$160 for the three ~~and six~~ months ended ~~March~~December 31, 2021 and December 31, 2020, respectively.

Supplemental cash flow information related to leases was as follows:

Three months Ended Six months Ended
March 31, 2021 March 31, 2021
Cash flows included in the measurement of lease liabilities:
Operating cash flows from operating leases $ 240 $ 469
Operating cash flows from finance leases 68 137
Finance cash flows from finance leases 103 206

Non-cash lease activity:
Right-of-use assets obtained in exchange for new operating lease liabilities $ 772 $ 1,175
Right-of-use assets obtained in exchange for new finance lease liabilities 9 —


	Three months ended		Three months ended
	December 31, 2021		December 31, 2020
Cash flows included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	1,096	$	229
Operating cash flows from finance leases		1		69
Finance cash flows from finance leases		6		108
Non-cash lease activity:
Right-of-use assets obtained in exchange for new operating lease liabilities	$	17,036	$	448

1424

Table of Contents

The weighted average remaining lease term and discount rate for the Company’s operating and finance leases as of ~~March~~December 31, 2021 and December 31, 2020 were:

	~~As of~~
	~~March 31, 2021~~
~~Weighted-average remaining lease term (in years)~~
~~Operating lease~~		~~4.49~~
~~Finance lease~~		~~0.37~~

~~Weighted-average discount rate (in percentages)~~
~~Operating lease~~		~~5.24~~	%
~~Finance lease~~		~~5.82~~	%


	As of		As of
	December 31, 2021		December 31, 2020
Weighted-average remaining lease term (in years)
Operating lease	6.18		4.51
Finance lease	2.90		0.88
Weighted-average discount rate (in percentages)
Operating lease	5.10	%	5.22	%
Finance lease	4.86	%	5.84	%

Lease duration was determined utilizing renewal options that the Company is reasonably certain to execute.

As of ~~March~~December 31, 2021, maturities of operating and finance lease liabilities for each of the following five years and a total thereafter were as follows:


	Operating Leases		Finance Leases
2022 (remainder of fiscal year)	$	5,136	$	18
2023		5,227		18
2024		4,373		18
2025		3,601		7
2026		2,937		—
Thereafter		7,011		—
Total minimum future lease payments		28,285		61
Less interest		(3,906)		(4)
Total lease liability		24,379		57

Operating Leases Finance Leases
2021 (remainder of fiscal year) $ 522 $ 4,777
2022 1,069 22
2023 1,113 16
2024 1,231 16
2025 393 5
Thereafter 494 -
Total minimum future lease payments 4,822 4,836
Less interest (540 ) (130 )
Total lease liability 4,282 4,706

~~13.~~

~~SUBSEQUENT EVENTS (Amounts not in thousands)~~

13. DEFINED BENEFIT PLAN

The Company has a defined benefit plan in the U.K., the Harlan Laboratories UK Limited Occupational Pension Scheme (the "Pension Plan"), which operated through April 2012. As of April 30, 2012, the accumulation of plan benefits of employees in the Pension Plan was permanently suspended and therefore the Pension Plan was curtailed. During the year ending September 30, 2022, the Company expects to contribute $1,078 to the Pension Plan. As of December 31, 2021, the unfunded defined benefit plan obligation of $865 is included in other liabilities (non-current) in the condensed consolidated balance sheets.

The following table provides the components of net periodic benefit costs for the Pension Plan, which is included in general and administrative in the condensed consolidated statement of operations.


	Three Months Ended
	December 31,
	2021		2020
Components of net periodic benefit expense:
Interest cost	$	58	$	-
Expected return on assets		(109)		-
Amortization of prior loss		161		-
Net periodic benefit cost	$	110	$	-

14. CONTINGENCIES

Litigation

Envigo is a defendant in a purported class action and a related action under California’s Private Attorney General Act of 2004 (“PAGA”) brought by Jacob Greenwell, a former employee of Envigo, on June 25, 2021 in the Superior Court of California, Alameda County. The complaints allege that Envigo violated certain wage and hour requirements under the California Labor Code. PAGA authorizes private attorneys to bring claims on behalf of the State of California and aggrieved employees for violations of California’s wage and hour laws. The class action complaint seeks certification of a class of similarly situated employees and the award of actual,

Table of Contents

consequential and incidental losses and damages for the alleged violations. The PAGA complaint seeks civil penalties pursuant to the California Labor Code and attorney’s fees. The Company intends to vigorously defend these claims.

The Company is party to certain other legal actions arising out of the normal course of its business. In management's opinion, none of these actions will have a material effect on the Company's operations, financial condition or liquidity. No form of proceedings has been brought, instigated or is known to be contemplated against the Company by any government agency.

Government Investigations

During the period from July through December 2021, one of Envigo’s U.S. facilities was inspected on several occasions by the U.S. Department of Agriculture (“USDA”). USDA issued inspection reports with findings of non-compliance with certain USDA laws and regulations. Envigo formally appealed certain of the findings. USDA has indicated it intends to conduct a formal investigation. The inspections and/or the investigation could lead to enforcement action resulting in penalties that could include a temporary restraining order or injunction, civil and/or criminal penalties, and/or license suspension or revocation. As of December 31, 2021, no investigation has been initiated.

On June 15, 2021, Envigo Global Services, Inc., a subsidiary of the Company acquired in the Envigo acquisition, was served with a grand jury subpoena issued by the Department of Justice in Miami, Florida requiring the production of documents related to the importation into the United States of live non-human primates originating from or transiting through China, Cambodia and/or Vietnam from April 1, 2014 through March 28, 2019. The Company is cooperating with the Department of Justice.

15. ACCUMULATED OTHER COMPREHENSIVE LOSS


			Cumulative
			translation
	Pension		adjustment		Total
Balance as of September 30, 2021	$	—	$	—	$	—
Amortization of actuarial loss		110		—		110
Cumulative translation adjustment		—		(247)		(247)
Balance as of December 31, 2021	$	110	$	(247)	$	(137)

16.SUBSEQUENT EVENTS

On ~~April 13, 2021, the Company~~January 10, 2022, Inotiv, Inc. and Inotiv ~~- Boulder HTL,~~Morrisville, LLC, a wholly owned subsidiary of the Company ~~(”Inotiv – Boulder HTL”~~(the “ILS Purchaser”), entered into ~~an Asset~~a Membership Interest Purchase Agreement (the “Purchase Agreement”) with ~~HistoTox Labs, Inc.,~~Integrated Laboratory Systems Holdings, LLC, a ~~Colorado corporation~~Delaware limited liability company (the ~~“HistoTox Labs”~~“Seller”), and ~~its stockholder. On April 30, 2021,~~Integrated Laboratory Systems, LLC, a North Carolina limited liability company ("ILS") providing for the ~~Company closed the transactions contemplated~~acquisition by the ~~Purchase Agreement, indirectly acquiring (the “HistoTox Labs Acquisition”) substantially~~Purchaser of all of the ~~assets~~outstanding membership interests of ~~HistoTox Labs used or useful by HistoTox Labs~~ILS (the "Acquisition"). ILS is a preclinical contract research organization offering a suite of toxicology testing solutions, including genetic toxicology, in ~~connection with HistoTox Labs’ business of non-clinical consulting, laboratory~~vivo and ~~strategic support~~in vitro toxicology, histology and pathology, molecular biology and bioinformatics and computational toxicology and data science services, to governmental and ~~products related to routine and specialized histology, immunohistology, histopathology and image analysis/digital pathology.~~commercial clients. Consideration for the ~~HistoTox Labs Acquisition~~ILS membership interests consisted of ~~$22.0 million~~$38,800 in cash (after giving effect to an adjustment for estimated net working capital), subject to certain adjustments and inclusive of a ~~$1.65 million~~$3,800 escrow for purposes of securing any amounts payable by the selling parties on account of indemnification obligations ~~and other amounts payable~~ under the Purchase ~~Agreement.~~Agreement, and 429,118 of the Company's common shares having a value of $18.0 million based on the volume weighted average closing price of Company shares as reported by NASDAQ for the 20 trading-day period ending on January 6, 2022. In ~~addition, Inotiv – Boulder HTL assumed certain specified liabilities~~order to fund a portion of ~~HistoTox Labs.~~

~~On April 15, 2021,~~the purchase price for the ILS Acquisition, on January 10, 2022, the Company ~~entered into an~~borrowed the full amount of its existing $35,000 delayed draw term loan facility (the "DDTL") under the Credit Agreement, ~~and Plan of Merger (the “Merger Agreement”) with Rock Mergeco, Inc., a Colorado corporation and a wholly-owned subsidiary~~dated November 5, 2021, among the Company, certain subsidiaries of the Company ~~Inotiv Boulder, LLC, an Indiana limited liability company and a wholly-owned subsidiary of the Company (“Inotiv Boulder”~~(the "Subsidiary Guarantors"), ~~Bolder BioPATH,~~the lenders party thereto and Jefferies Finance LLC as administrative agent (the "Credit Agreement").

On January 27, 2022, Inotiv, Inc., and Envigo Global Services Inc., a Colorado corporation (“Bolder BioPATH”), and the holders of all of the outstanding common shares of Bolder BioPATH (the “Selling Shareholders”). On April 30, 2021, the Company closed (the “Closing”) the transactions contemplated by the Merger Agreement and the merger under the Merger Agreement was consummated on May 3, 2021 (the “Merger”). Following the Merger, Inotiv Boulder, as the surviving wholly owned subsidiary of the Company ~~serves as~~(the “Orient Purchaser”), entered into a ~~contract pharmacology and pathology company specializing~~Stock Purchase Agreement (the “Orient Purchase Agreement”) with Orient Bio, Inc., a corporation formed in ~~in vivo models~~the Republic of ~~rheumatoid arthritis, osteoarthritis, and inflammatory bowel disease as well as other autoimmune and inflammation models.~~

AsKorea ("Orient Seller"), providing for the acquisition by the Purchaser of all of the ~~Closing,~~outstanding capital stock of Orient BioResource Center, Inc. ("OBRC" and such acquisition, the ~~Company paid consideration to~~"Orient Acquisition"). OBRC owns and operates a primate quarantine and holding facility located near Alice, Texas. The Orient Acquisition was consummated on January 27, 2022. Consideration for the ~~Selling Shareholders, consisting~~OBRC stock consisted of ~~(i) $18.5~~$28,200 million in cash, subject to ~~customary purchase price~~certain adjustments, and ~~inclusive~~677,339 of ~~$1.25~~the Company's common shares having a value of $23.0 million ~~being held~~based on the volume weighted average closing price of Company shares as reported by NASDAQ for the 20 trading-day period ending on January 24, 2022. As part of the purchase consideration, the Purchaser agreed to leave in ~~escrow for purposes~~place a payable owed by

Table of ~~securing~~Contents

OBRC to the Seller in the amount of $3,700. The payable will not bear interest and is required to be paid to Seller on the date that is 18 months after the Closing. Purchaser will have the right to set off against the payable any amounts that become payable by the ~~selling parties~~Seller on account of indemnification obligations ~~purchase price adjustments, and other amounts payable~~ under the ~~Merger Agreement, (ii) 1,588,235~~Purchase Agreement.

On January 27, 2022, the Company, certain of subsidiaries of the ~~Company’s common shares~~Company (the “Subsidiary Guarantors”), the lenders party thereto, and ~~(iii) seller notes~~Jefferies Finance LLC, as administrative agent, entered into a First Amendment (“Amendment”) to its existing Credit Agreement (the “Credit Agreement”). The Amendment provides for, among other things, an increase to the existing term loan facility in ~~an aggregate~~the amount of $40,000 (the “Incremental Term Loans”) and a new delayed draw term loan facility in the original principal amount of ~~$1.5 million.~~

~~On April 23, 2021, the Company closed an underwritten public offering of 3,044,117 of its common shares, including 397,058 common shares sold pursuant~~$35,000, which amount is available to ~~the full exercise by the underwriter of its option~~be drawn up to ~~purchase additional shares to cover over-allotments. All of the shares were sold at a price to the public of $17.00 per share. Net proceeds to the Company~~24 months from the offering were approximately $49.0 million, after deducting the underwriting discount and estimated offering expenses, a portion of which net proceeds were used to fund parts of the cash consideration under the HistoTox Labs Acquisition and the Merger.

~~On April 30, 2021, the Company entered into an Amended and Restated Credit Agreement (the “Credit Agreement”) with First Internet Bank of Indiana (“FIB~~”) to, among other things, secure additional debt financing in order to fund portions of the consideration for the HistoTox Labs Acquisition and the Merger, respectively. The Credit Agreement includes eleven term loans (the “~~Term Loans” ), an equipment draw loan (the “Equipment Loan”), and a revolving line of credit (the “Revolving Facility~~”). The terms of each such loans are set forth below. The obligations of the Company under the Credit Agreement are secured by all of the assets of the Company and are guaranteed by each of its subsidiaries and secured by the assets thereof.

Included in the Credit Agreement is a requirement that the Company maintain certain financial covenants, including maintaining a senior funded debt to adjusted EBITDA ratio (as defined in the Credit Agreement) of not greater than (i) 5.25 to 1.00 as of the date of the ~~Credit Agreement~~Amendment (the “DDTL”). The Incremental Term Loans and any amounts borrowed under the DDTL are referred to herein as ~~of June 30, 2021, (ii) 4.75 to 1.00 as of September 30, 2021, (iii) 4.50 to 1.00 as of December 31, 2021, (iv) 4.25 to 1.00 as of March 31,~~the “Additional Term Loans”. On January 27, 2022, ~~(v) 4.00 to 1.00 as of June 30, 2022, and (vi) 3.50 to 1.00 as of September 30, 2022 and as of each fiscal quarter end thereafter.~~

~~Also included in the Credit Agreement is a requirement that~~ the Company ~~maintain a fixed charge coverage ratio (as defined in~~borrowed the Credit Agreement) of not less than (i) 1.20 to 1.00, commencing as of September 30, 2021, and continuing as of each fiscal quarter end thereafter up to and including June 30, 2022, and (ii) 1.25 to 1.00 as of September 30, 2022 and as of each fiscal quarter end thereafter.

~~(a) Terms of the Equipment Loan~~.

~~The Company may borrower under the Equipment Loan on or before April 30, 2022 in the aggregate principal amount of up to $3.0 million (the “Equipment Loan Commitment”). The Equipment Loan Commitment shall automatically terminate upon the earlier of (x) any funding of the maximum~~full amount of the ~~Equipment Loan Commitment and (y) at 5:00 p.m., Indianapolis time, April 30, 2022. Until April 30, 2022, the Company must pay interest on the amount outstanding~~Incremental Term Loans, but did not borrower any amounts under the ~~Equipment Loan at a fixed annual rate~~DDTL.

Table of 4.00%. On April 30, 2022, all amounts outstanding under the Equipment Loan shall be converted to a term loan and repaid monthly in installments of principal based on a five (5) year amortization schedule together with the interest that shall accrue thereon. A final installment representing the entire unpaid principal of the Equipment Loan, and all accrued and unpaid interest thereon and all fees and charges in connection therewith, shall be due and payable on April 30, 2027. Advances under the Equipment Loan shall be used to fund equipment needs of the Company as approved by FIB.

~~(b) Terms of the Revolving Facility.~~

The Revolving Facility provides a line of credit for up to $5.0 million, which the Company may borrow from time to time, subject to the terms of the Credit Agreement, including as may be limited by the amount of the Company’s outstanding eligible receivables. The Revolving Facility requires monthly accrued and unpaid interest payments only until maturity at a floating per annum rate equal to the greater of (a) 4%, or (b) the sum of the Prime Rate plus Zero Basis Points (0.0%), which rate shall change concurrently with the Prime Rate. The Company did not have an outstanding balance on the Revolving Facility as of the effective date of the Credit Agreement. Advances under the Revolving Facility shall be used for general working capital purposes of the Company.

~~(c) Terms of the Term Loans:~~

Loan Name Principal
Amount as of
date of Credit
Agreement Annual
Interest
Rate Monthly
Payment
Amount
(000) Maturity Date Use of Proceeds
Term Loan 1 $3.980 million 5.20 % $ 36 March 28, 2025 Funded expansion of building on real property in Mount Vernon, IN
Term Loan 2 $3.571 million 5.06 % $ 78 July 2, 2023 Funded a portion of the cash consideration for the Seventh Wave Laboratories acquisition
Term Loan 3 $1.076 million 5.20 % $ 32 March 28, 2025 Funded equipment needs associated with expansion of real property in Mount Vernon, IN
Term Loan 4 $1.001 million 4.63 % $ 20 November 1, 2025 Funded the cash consideration for the Smithers Avanza acquisition
Term Loan 5 $810 thousand 4.00 % $ 17 June 30, 2025 Funded certain capital expenditures
Term Loan 6 $2.865 million 4.25 % $ 56 December 31, 2025 Funded certain capital expenditures
Term Loan 7 $1.263 million 4.00 % $ 28 June 1, 2025 Financed aspects of the Pre-Clinical Research Services and related real property acquisitions
Term Loan 8 $1.853 million 4.00 % $ 12 December 1, 2024 Financed aspects of the Pre-Clinical Research Services and related real property acquisitions
Term Loan 9 $10.000 million 3.85 % $ 184 * April 30, 2026 Funded a portion of the cash consideration of the Merger
Term Loan 10 $5.000 million 3.85 % $ 92 * April 30, 2026 Funded a portion of the cash consideration of the HistoTox Labs Acquisition
Term Loan 11 $3.622 million 3.99 % $ 33 June 23, 2022 Refinanced debt with The Huntington Bank for general business purposes

*See Mandatory Prepayments information below

16Contents

~~(d) Mandatory Prepayments.~~

Commencing with the fiscal year ending September 30, 2021 and for each fiscal year thereafter until the Term Loan 9 and/or Term Loan 10, in each case, are paid in full, the Company shall prepay Term Loan 9 and Term Loan 10 on a pro rata basis on the following January 31^st~~, in an amount equal to 50% of the excess cash flow of the Company (as defined in the Credit Agreement) for such fiscal year (in each case, an “Excess Cash Flow Payment~~”), provided that for the fiscal year ending September 30, 2021 the Excess Cash Flow Payment, if any, shall be calculated only for the period from April 30, 2021 through September 30, 2021. Excess Cash Flow shall be calculated for each fiscal year based on (a) the Company’s adjusted EBITDA (as defined in the Credit Agreement), minus (b) cash interest expense, minus (c) cash taxes paid or cash distributions made for payment of taxes, minus (d) principal payments paid in respect of long-term indebtedness (excluding any principal reduction on Term Loan 9 or Term Loan 10, in each case, with respect to Excess Cash Flow and excluding principal payments on the Revolving Facility), minus (e) capital expenditures not funded by advances under the Equipment Loan as specified under the Credit Agreement.

Upon an event of default, which includes certain customary events such as, among other things, a failure to make required payments when due, a failure to comply with covenants, certain bankruptcy and insolvency events, and defaults under other material indebtedness, FIB may cease advancing funds, increase the interest rate on outstanding balances, accelerate amounts outstanding, terminate the agreement and foreclose on all collateral. The Company has also obtained a life insurance policy in an amount not less than $5.0 million for its President and Chief Executive Officer and provided FIB an assignment of such life insurance policy as collateral.

In addition to the financing arrangements described above, the Company has secured a commitment for approximately $5.0 million of additional debt financing from FIB to be used in connection with the exercise of the Company’s option to buy our St. Louis facility for approximately $4.7 million and to complete associated expansion, contingent on the Company’s receipt of related business incentives.

ITEM 2 -– MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This report contains statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Those statements appear in a number of places in this Report and may include, but are not limited to, statements regarding our intent, belief or current expectations with respect to (i) our strategic plans; (ii) trends in the demand for our services and products; (iii) trends in the industries that consume our services and products; (iv) our ability to develop or acquire new services and products; (v) our ability to make capital expenditures and finance operations; (vi) global economic conditions, especially as they impact our markets; (vii) our cash position; (viii) our ability to successfully integrate the operations and personnel related to recent acquisitions; (ix) our ability to effectively manage current expansion efforts or any future expansion or acquisition initiatives undertaken by us; (x) our ability to develop and build infrastructure and teams to manage growth and projects; (xi) our ability to continue to retain and hire key talent; (xii) our ability to market our services and products under our corporate name and relevant brand names; (xiii) our ability to service our outstanding indebtedness, (xiv) our expectations regarding the volume of new bookings, pricing, gross profit margins and liquidity, (xv) our ability to manage recurring and non-recurring costs, (xvi) the impact of COVID-19 on the economy, demand for our services and products and our operations, including the measures taken by governmental authorities to address the pandemic, which may precipitate or exacerbate other risks and/or uncertainties, and additional risks set forth in our filings with the Securities and Exchange Commission (the “SEC”). Actual results may differ materially from those in the forward-looking statements as a result of various factors, including but not limited to the risk factors disclosed in our reports with the SEC, many of which are beyond our control.

In addition, we have based these forward-looking statements on our current expectations and projections about future events. Although we believe that the assumptions on which the forward-looking statements contained herein are based on are reasonable, actual events may differ from those assumptions, and as a result, the forward-looking statements based upon those assumptions may not accurately project future events. The following discussion and analysis should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto included or incorporated by reference elsewhere in this Report. In addition to the historical information contained herein, the discussions in this Report may contain forward-looking statements that may be affected by risks and uncertainties, including those discussed in Item 1A, Risk Factors contained in our annual report on Form 10-K for the fiscal year ended September 30, ~~2020.~~2021. Our actual results could differ materially from those discussed in the forward-looking statements.

Amounts in this Item 2 are in thousands, unless otherwise indicated.

Recent Developments and Executive Summary

During the recent ~~periods,~~period, we have ~~undertaken significant internal and external~~continued to focus on our growth ~~initiatives. Through March 31, 2021, we acquired the business of Seventh Wave Laboratories, LLC, in July 2018 (the “Seventh Wave Acquisition”), undertook the~~initiatives, which are (1) strategic acquisitions, (2) expansion of ~~our facilities in Evansville, Indiana, which we began using for operations in March~~existing and acquired businesses, and (3) startup of ~~2020, acquired~~new services. As a result, the ~~toxicology business~~Company has gained momentum on its path to being a comprehensive provider of ~~Smithers Avanza on May 1, 2019 (the “Smithers Avanza Acquisition”), acquired~~preclinical research services, while adding a highly complementary research model platform through the ~~preclinical testing business~~strategic acquisition of ~~Pre-Clinical~~Envigo. Our full spectrum solutions now span two segments: Discovery and Safety Assessment, or DSA, and Research Models and Services, ~~as well as related real property, on December 1, 2019 (the “PCRS Acquisition”), and obtained funding to support these initiatives and other improvements~~or RMS. The acquisition of Envigo was transformative to our ~~laboratories, facilities and equipment in order to support future growth and enhance our scientific capabilities, client service offerings and client experiences. In addition,~~Company as we have ~~made significant investments~~grown from 240 employees in ~~upgrading facilities and equipment, added additional services~~2018 to provide our clients and filled critical leadership and scientific positions. Among other undertakings subsequent to March 31, 2021, we acquired two additional businesses and completed a public offering or our common shares and a refinancing of our credit arrangements with First Internet Bank to fund portions of the cash consideration for the business acquisitions and to support other corporate initiatives. Refer to the discussions below and in Note 13 “Subsequent Events” to the Notes to Condensed Consolidated Financial Statements.over 2,000 employees today.

Over the last year, we have also improved our infrastructure and platform to support future growth and additional potential acquisitions. These improvements included establishing our new corporate name Inotiv, Inc., installing new accounting software systems, investments in our information technology platforms, building program management functions to enhance management and communication with clients and multi-site programs, further enhancements to client services and improving the client experience. We believe these internal infrastructure initiatives, investments, acquisitions and recruiting efforts, combined with our existing team and the continuing development of our sales and marketing team, have led and will continue to lead to growth in revenue and the ability to improve the service offerings to our clients. We recognize the recent investments in growth, continuing development of a strong leadership team, improving our platform, recruiting new employees, enhancing and building our scientific strength and adding services are critical to meeting the future expectations of our clients, employees and shareholders. We believe the actions taken and investments made in recent periods form a solid foundation upon which we can build.

Significant Accomplishments during three months ended ~~March~~December 31, 2021

·●

~~Announcement~~Acquired Plato BioPharma, Inc. (“Plato”)

●

Acquired Envigo RMS Holding Corp. (“Envigo”)

●

Entered into a credit agreement, which includes a senior secured term loan facility of ~~an initiative~~$165,000, a delayed draw term loan facility (the “DDTL”) in the original principal amount of $35,000, and a revolving loan facility in the original principal amount of $15,000

●

Repaid all indebtedness due to ~~broaden clinical pathology service offerings~~

First Internet Bank under its credit facility using borrowings under the senior secured term loan facility of $165,000

●

Pursuant to the Envigo Merger Agreement, we entered into a Shareholders Agreement with certain stockholders of Envigo, and our Board of Directors was expanded to seven members, including newly appointed members Nigel Brown, Ph.D. and Scott Cragg, pursuant to the terms of the Shareholders Agreement

Table of Contents

●

Opened modern drug metabolism and pharmacokinetics (DMPK) and cell & molecular biology laboratories at our St. Louis facility in November 2021

●

Acquired Robinson Services Inc. (“RSI”)

Events subsequent to December 31, 2021

·●

~~Appointment of Greg Beattie as Chief Operating Officer~~Announced a collaboration with Synexa Life Sciences

·●

~~Announcement of investments in laboratory infrastructure, data and study management technologies and internal expertise for SEND (Standard for Exchange of Nonclinical Data) capabilities~~Acquired Integrated Laboratory Systems, LLC (“ILS”)

·●

~~Announcement of investments in additional vivarium capacity at facility in West Lafayette, IN~~

~~Announcement for plans to expand offerings to include cardiovascular safety pharmacology~~

~~Corporate name change to Inotiv, Inc.~~

~~Events subsequent to March 31, 2021~~

~~Announcement of partnership with PhoenixBio Co., Ltd. to expand discovery pharmacology offering~~

~~On April 19, 2021, the Company announced plan to expand internal operations at its St. Louis location contingent upon receiving financing and obtaining related business incentives.~~

~~On April 23, 2021, the Company closed an underwritten public offering of 3,044,117 of its common shares, including 397,058 common shares sold pursuant to~~Borrowed the full ~~exercise by the underwriter of its option to purchase additional shares to cover over-allotments. All~~amount of the ~~shares were sold at a price~~existing $35,000 DDTL under our credit agreement dated November 5, 2021 to the public of $17.00 per share. Net proceeds to the Company from the offering were approximately $49,000, after deducting the underwriting discount and estimated offering expenses. . Part of the net proceeds were used to fund ~~portions of the cash consideration for the HistoTox Labs Acquisition and the Merger.~~

~~On April 30, 2021, the Company closed~~ the purchase of ~~substantially all~~ILS

●

Acquired Orient BioResource Center, Inc. (“OBRC), from Orient Bio, Inc.

●

Entered into a first amendment to our existing credit agreement. which provides for an increase to the existing term loan facility in the original principal amount of $40,000 (“Incremental Term Loans”) and a new delayed draw term loan in the amount of $35,000

●

Borrowed the full amount of the assets used or useful in HistoTox Labs, Inc.’s business (the “HistoTox Labs Acquistion”) of non-clinical consulting, laboratory and strategic support services and products related to routine and specialized histology, immunohistology, histopathology and image analysis/digital pathology.

~~On April 30, 2021, the Company closed transactions~~Incremental Term Loans, but did not borrow any amounts under the Agreement and Plan of Merger with Bolder BioPATH, Inc. Following the consummation of the merger (the “Merger”) on May 3, 2021, Inotiv Boulder, LLC (“Inotiv Boulder”), as the surviving wholly owned subsidiary of the Company, serves as a contract pharmacology and pathology company specializing in in vivo models of rheumatoid arthritis, osteoarthritis, and inflammatory bowel disease as well as other autoimmune and inflammation models.new delayed draw term loan.

Business Overview

On April 30, 2021, the Company refinanced its debt arrangement with First Internet Bank of Indiana, to, among other things, raise additional debt capital to fund portions of the cash consideration for the HistoTox Labs Acquisition and the Merger. The Company also secured a commitment for approximately $5,000 of additional debt financing to be used in connection with the exercise of the Company’s option to buy its St. Louis facility for approximately $4,700 and to complete associated expansion, contingent on the Company’s receipt of related business incentives.

As a result of the strategic Envigo acquisition, which added a complementary research model platform, our full spectrum solutions now span two segments: Discovery and Safety Assessment, or DSA, and Research Models and Services, or RMS.

DSA

Our ~~financial results for the three months ended March 31, 2021 were positively impacted by increases~~DSA segment specializes in ~~sales~~providing nonclinical and gross margins attributable to internal growth the Company has experienced in the Service business. During the quarter ended March 31, 2021, we saw an increase in operating expenses as a percentage of revenue compared to the same quarter in the prior year due to higher expenses for recruiting and relocation, higher compensation, including non-cash stock compensation, new systems and transaction costs related to the HistoTox Labs and Bolder BioPATH acquisitions. The financial results were positively impacted by the Products segment of the business as expense reductions were implemented in last half of fiscal year 2020 which improved margins.

Notwithstanding the COVID-19 pandemic, we have maintained our operations. As part of the “essential critical infrastructure” industry, we believe we continue to have a special responsibility to maintain business continuity and a normal work schedule to the greatest extent practicable. We are doing the important work of supporting our clients in their efforts towards drug discovery and development, including working with multiple clients, at our multiple sites, on a variety of therapy or vaccine candidates for COVID-19 and many other lifesaving medicines.

Our team has implemented measures to promote a safe working environment and mitigate risk related to COVID-19, including allowing for work-from-home arrangements where possible, while continuing to support each other and our clients. Among other initiatives related to COVID-19, the Company applied for and accepted funds from the SBA Payroll Protection Program (“PPP”) as part of the CARES Act. The PPP loan was received in April 2020 in the amount of $5,051. The funds were used over the eight weeks following the receipt of the funds for payroll, utility and rent expenses, in step with our business continuity measures and as allowed under the PPP. The Company applied for forgiveness of the PPP loan in the amount of $4,851, which represents qualified expenses. The PPP debt is recorded as a liability on the balance sheet.

We believe that the HistoTox Labs Acquisition and the Merger, along with the remaining net proceeds from our recent public offering and the refinancing of our indebtedness with First Internet Bank to be used for internal expansion initiatives, will drive significant long-term value for our customers and shareholders.

~~Business Overview~~

~~The Company provides~~analytical drug discovery and development services to the pharmaceutical, chemical, and medical device industries, and sells analytical instruments to the pharmaceutical development and contract research industries. Our mission is to ~~provide drug and product developers with superior scientific research and innovative analytical instrumentation in order to bring revolutionary~~focus on bringing new drugs and ~~products~~medical devices through the discovery and preclinical phases of development, all while increasing efficiency, improving data, and reducing the cost of taking new drugs to ~~market quickly~~market. Inotiv is committed to supporting discovery and ~~safely.~~development objectives as well as helping researchers realize the full potential of their critical R&D projects, all while working together to build a healthier and safer world. Our strategy is to provide services that will generate high-quality and timely data in support of new drug and product approval or expand their use. Our clients and partners include pharmaceutical, biotechnology, biomedical device, academic and government organizations. We provide innovative technologies and products and a commitment to quality to help clients and partners accelerate the development of safe and effective drugs and products and maximize the returns on their research and development investments. We believe that we offer an efficient, variable-cost alternative to our clients’ internal drug and product development programs. Outsourcing development work to reduce overhead and speed product approvals through the U.S. Food and Drug Administration ~~(“FDA”~~("FDA") and other regulatory authorities is an established alternative to in-house product development efforts. We derive our revenues from sales of our research services and instruments, both of which are focused on evaluating drug and product safety and efficacy. ~~The Company has~~We have been involved in the research of drug and products to treat diseases in numerous therapeutic areas for over 4547 years since ~~its~~our formation as a corporation organized in Indiana in ~~1974.~~

1974, under the name Bioanalytical Systems, Inc. On March 18, 2021, we changed our name from Bioanalytical Systems, Inc. to Inotiv, Inc.

We support both the non-clinical and clinical development needs of researchers and clinicians for primarily small molecule drug candidates, but also ~~including~~provide services to biotherapeutics and ~~devices.~~device companies. We believe that our scientists have the skills in analytical instrumentation development, chemistry, computer software development, pharmacology, histology, pathology, physiology, medicine, surgery, analytical chemistry, drug metabolism, pharmacokinetics, and toxicology to make the services and products we provide increasingly valuable to our current and potential clients. Our principal clients are scientists engaged in analytical chemistry, pharmacology, drug safety evaluation, clinical trials, drug metabolism studies, pharmacokinetics and basic research from small ~~start-up~~startup biotechnology companies to some of the largest global pharmaceutical companies. We are committed to bringing scientific expertise, quality and speed to every drug discovery and development program to help our clients develop safe and effective life-changing therapies.

Developments within the industries we serve have a direct, and sometimes material, impact on our operations. Currently, many large pharmaceutical companies have major ~~“blockbuster”~~"blockbuster" drugs that are nearing the end of their patent protections. This puts significant pressure on these companies to discover, acquire or develop new drugs with large market opportunity, and to re-evaluate their cost structures and the time-to-market of their products. Contract research organizations have benefited from these developments, as the

Table of Contents

pharmaceutical industry has turned to ~~out-sourcing~~outsourcing to both reduce fixed costs and to increase the speed of research and data development necessary for new product applications. The number of significant drugs that have reached or are nearing the end of their patent protection has also benefited the generic drug industry. Generic drug companies provide a significant source of new business for CROs as they develop, test and manufacture their generic compounds.

A significant portion of innovation in the pharmaceutical industry is now driven by smaller, venture capital funded drug discovery companies. Many of these companies are ~~“single-molecule”~~"single-molecule" entities, whose success depends on one or a few innovative ~~compound.~~compounds. While several biotech companies have reached the status of major pharmaceutical companies, the industry is still characterized by numerous smaller entities. These developmental companies generally do not have the resources to perform much of their research within their organizations and are therefore increasingly dependent on the CRO industry for both their research and for guidance in preparing their regulatory submissions. These companies have provided significant new opportunities for the CRO industry, including ~~the Company.~~Inotiv. We believe that ~~the Company is~~we are ideally positioned to serve these clients as they look for alternatives to the large CROs that cater primarily to the large pharmaceutical company segment of the marketplace.

RMS

Our RMS segment breeds, imports and sells research-quality animal models for use in laboratory tests, manufactures and sells standard and custom diets, distributes bedding and enrichment products, and provides other services associated with these products. We are the second largest commercial provider of research models and services globally, and our predecessors have been supplying research models since 1931. With over 130 different species and strains, we are a global leader in the production and sale of the most widely used rodent research model strains, among other species. We maintain production facilities, including barrier and isolator facilities, in the U.S., U.K., mainland Europe, and Israel.

Financial Performance Highlights

We review various metrics to evaluate our financial performance, including revenue, margins and earnings. In the ~~six~~three months ended ~~March~~December 31, 2021, total revenues increased to ~~$36,636~~$84,211 from ~~$28,930,~~$17,885, a ~~26.6%~~370.8% increase from the ~~six~~three months ended ~~March~~December 31, 2020. ~~Gross profit increased to $12,201 from $8,670, a 40.7% increase.~~ Operating expenses ~~were higher~~increased by ~~28.6% in the six months ended March 31, 2021 compared~~803.3%, or $47,103, due to ~~the six months ended March 31, 2020. The most notable growth in operating expenses is related to our investment~~acquisitions and ~~focus to continue~~cost increases as we continued to build the infrastructure for growth, which included additional headcount, recruiting, ~~and~~ relocation expense, ~~transaction costs related~~post combination non-cash stock compensation expense relating to the ~~HistoTox Labs Acquisition and~~assumption of certain outstanding stock options of the ~~Merger,~~Envigo Equity Plan recognized in connection with the Envigo acquisition of $23,014 and investments in ~~research~~building out new service offerings. Additionally, there was an increase in selling expenses due to an increase in travel cost as our sales and ~~development, technology,~~marketing teams have traveled more as the COVID-19 pandemic eases and ~~systems. During the quarter, we announced services that we are bringing~~an increase in ~~house such as clinical pathology, cardiovascular safety pharmacology and~~ ~~investments in software solutions and human resources~~commissions due to ~~support existing internal expertise in the area of SEND (Standard for Exchange of Nonclinical Data) data management and delivery. In addition, we announced investments being made in laboratory infrastructure and data and study management technologies through a partnership with Centric Consulting, LLC.~~

higher sales awards.

As of ~~March~~December 31, 2021, we had ~~$2,186~~$42,418 of cash and cash equivalents as compared to ~~$1,406~~$138,924 of cash and cash equivalents at the end of fiscal ~~2020. In~~2021.

During the first ~~six months~~quarter of fiscal ~~2021,~~2022, we ~~generated $4,526~~obtained a credit agreement in ~~cash from operations as compared~~relation to ~~$346 in~~ the ~~same period in fiscal 2020. During the six months ended March 31, 2021, cash from operations, cash on hand,~~Envigo acquisition and ~~$387 from a cap ex line~~repaid our previous borrowings with First Internet Bank of ~~credit together funded capital expenditures of $2,427 for the investment in laboratory equipment to increase capacity at all locations and facility improvements at the Fort Collins location.~~

As of March 31, 2021, we did not have an outstanding balance on our $5,000 available general line of credit, we had a $2,865 balance on our $3,000 capex line of credit. As described herein, we incurred indebtedness in connection with financing the Seventh Wave Acquisition, the Smithers Avanza Acquisition, the PCRS Acquisition, the HistoTox Labs Acquisition, the Merger and the expansion of facilities and services. Please referIndiana. Refer to the Liquidity and Capital Resources section herein ~~as well as Note 13 “Subsequent Events” to the Notes to Condensed Consolidated Financial Statements~~ for a description of our cash flows from operating, investing and financing activities and details related to our credit ~~arrangements with First Internet Bank.~~arrangement, our convertible notes and the related fair value remeasurement of the embedded derivative component of our convertible notes.

Table of Contents

Results of Operations

The following table summarizes our condensed consolidated statement of operations as a percentage of total revenues for the periods shown:

Three Months Ended
March 31, Six Months Ended
March 31,
2021 2020 2021 2020
Service revenue 95.5 % 94.9 % 95.4 % 94.5 %
Product revenue 4.5 5.1 4.6 5.5
Total revenue 100.0 100.0 100.0 100.0

Cost of Service revenue (a) 66.7 67.2 67.3 69.9
Cost of Product revenue (a) 61.5 74.6 54.8 71.5
Total cost of revenue 66.5 67.6 66.7 70.0

Gross profit 33.5 32.4 33.3 30.0

Total operating expenses 36.3 33.7 34.7 34.2

Operating income (loss) (2.8 ) (1.2 ) (1.4 ) (4.2 )

Other expense (1.0 ) (2.4 ) (1.4 ) (2.4 )

Loss before income taxes (3.8 ) (3.6 ) (2.8 ) (6.6 )

Income taxes 0.1 0.1 0.1 0.4

Net loss (3.9 )% (3.7 )% (2.9 )% (7.0 )%


	Three Months Ended
	December 31,
	2021		2020
Services revenue	45.3	%	95.2	%
Products revenue	54.7		4.8
Total revenue	100.0		100.0

Cost of services revenue ^(a)	63.4		68.1
Cost of products revenue ^(a)	88.4		48.2
Total cost of revenue	77.1		67.1

Operating expenses	62.9		32.8

Operating income (loss)	(40.0)		(32.8)

Other income (expense)	(74.3)		(1.9)
Income (loss) before income taxes	(114.3)		(34.7)
Income tax expense (benefit)	15.2		(0.2)
Consolidated net income (loss)	(99.1)	%	(2.0)	%

~~(a)~~

a)Percentage of service and product revenues, respectively

Three Months Ended ~~March~~December 31, 2021 Compared to Three Months Ended ~~March~~December 31, 2020

DSA and RMS Revenue

~~Service and Product Revenues~~

~~Revenues for the quarter ended March 31, 2021 increased 17.1% to $18,751 compared to $16,012 for the same period last fiscal year.~~

~~Our Service~~Total revenue increased ~~17.8%~~370.8% to ~~$17,902~~$84,211 from $17,885 in Q1 FY 2021, driven by a $14,940 increase in DSA revenue and $51,386 of incremental RMS revenue. The acquisitions of HistoTox Labs, Bolder BioPATH, Gateway Pharmacology and Plato BioPharma added approximately $10,000 of service revenue and internal growth generated approximately $4,940 of service revenue in our DSA segment during Q1 FY 2022. Our acquisition of Envigo contributed $45,085 of product revenue and $6,301 of service revenue to our RMS segment during Q1 FY 2022. RMS revenue in Q1 FY 2022 reflected a partial quarter contribution from Envigo, which was acquired on November 5, 2021. We did not have any RMS revenue in the three months ended March 31, 2021 compared to $15,191 for the three months ended March 31, 2020. Nonclinical services revenues increased $1,903 due to an overall increase in the number of studies from thecomparable prior year period and increased capacity to perform studies. Other laboratory services revenues increased by $974 in the three months ended March 31, 2021 compared to the three months ended March 31, 2020, due to internal growth.period.

Three Months Ended
March 31,
2021 2020 Change %
Bioanalytical analysis $ 2,220 $ 2,386 $ (166 ) (7.0 )%
Nonclinical services 14,157 12,254 1,903 15.5 %
Other laboratory services 1,525 551 974 176.8 %
$ 17,902 $ 15,191 $ 2,711

Sales in our Products segment increased 3.4% in the three months ended March 31, 2021 to $849 from $821 in the three months ended March 31, 2020. The increase in the second fiscal quarter of 2021 stems from higher sales of analytical instruments and other instruments, partially offset by a decrease in Culex in-vivo sampling systems.

Three Months Ended
March 31,
2021 2020 Change %
Culex, in-vivo sampling systems $ 210 $ 230 $ (20 ) (8.7 )%
Analytical instruments 561 532 29 5.5 %
Other instruments 78 59 19 32.2 %
$ 849 $ 821 $ 28

Cost of Revenues

Cost of revenues for the three months ended ~~March~~December 31, 2021 was ~~$12,471~~$64,886 or ~~66.5%~~77.1% of revenue, compared to ~~$10,819,~~$11,842, or ~~67.6%~~66.2% of revenue for the three months ended ~~March~~December 31, 2020.

Cost of ~~Service~~service revenue as a percentage of Service revenue decreased to ~~66.7%~~63.4% during the three months ended ~~March~~December 31, 2021 from ~~67.2%~~68.1% in the three months ended ~~March~~December 31, 2020, reflecting greater utilization of recently expanded capacity.

Cost of ~~Products~~products revenue as a percentage of Products revenue in the three months ended ~~March~~December 31, 2021 ~~decreased~~increased to ~~61.5%~~88.4% from ~~74.6%~~48.2% in the three months ended ~~March~~December 31, 2020 due to ~~expense reductions implemented in~~acquisition of Envigo whose products have a lower gross profit as a percent of revenue compared to the ~~last half of fiscal 2020, which created improved margins on existing sales.~~historic DSA product-based revenue.

Operating Expenses

Selling expenses for the three months ended ~~March~~December 31, 2021 ~~decreased 18.8%~~increased 338.1% to ~~$1,175~~$2,738 from ~~$1,447~~$625 compared to the three months ended ~~March~~December 31, 2020. This ~~decrease~~increase is mainly due to ~~the reduction of non-recurring costs related to the launch of the trade name Inotiv prior to the formal change of our corporate name to Inotiv, Inc., as well as a decrease~~an increase in ~~trade show and~~ travel expenses ~~due to the COVID-19 pandemic,~~ as our sales and marketing teams have ~~been conducting meetings virtually.~~

~~Research~~begun traveling more as the COVID-19 pandemic eases and ~~development expenses for the three months ended March 31, 2021 increased 25.3% compared to the three months ended March 31, 2020 to $203 from $162. The~~an increase ~~was primarily~~in commissions due to ~~internal development investments for new services, such as clinical pathology and cardiovascular safety pharamacology.~~higher sales awards.

General and administrative expenses for the three months ended ~~March~~December 31, 2021 increased ~~43.5%~~171.4% to ~~$5,423~~$13,252 from ~~$3,779~~$4,882 compared to the three months ended ~~March~~December 31, 2020, as the Company ~~increased operating expenses related~~continued to ~~strategic investment in corporate general and administrative expense to support anticipated future revenue~~build the infrastructure for growth, which included additional headcount, recruiting and ~~relocations~~relocation expense and higher ~~compensation expense, including~~compensation.

Table of Contents

Amortization of intangible assets for the three months ended December 31, 2021 increased to $3,396 from $160 compared to the three months ended December 31, 2020, as the Company obtained various intangible assets related to the Gateway, HistoTox, Bolder BioPATH, Plato and Envigo acquisitions that were amortized during the three months ended December 31, 2021.

Other operating expenses for the three months ended December 31, 2021 increased to $33,580 from $196 compared to the three months ended December 31, 2020. The increase in other operating expenses reflects post combination non-cash stock compensation ~~new systems and~~expense relating to the assumption of certain outstanding stock options the Envigo Equity Plan recognized in connection with the Envigo acquisition of $23,014. The Company has also incurred transaction costs related to the ~~HistoTox Labs Acquisition~~acquisitions of Plato, Envigo and ~~the Merger. In addition, we announced investments being made~~RSI and an increase in ~~laboratory infrastructure and data and study management technologies through a partnership with Centric Consulting, LLC and~~startup costs for internal investments in ~~software solutions and human resources~~new service offerings. The acquisition of Envigo was transformational to ~~support existing internal expertise~~the Company’s underlying business. As a result, certain reclassifications have been made to prior periods in the ~~area~~unaudited condensed consolidated financial statements and accompanying notes to conform with current presentation, which more closely reflects management’s perspective of ~~SEND (Standard for~~ the ~~Exchange of Nonclinical Data) data management and delivery.~~business as it currently exists.

Other Income (Expense)

Interest expense for the three months ended ~~March~~December 31, 2021 ~~decreased 6.6%~~increased to ~~$366~~$4,828 from ~~$392~~$347 compared to the three months ended ~~March~~December 31, 2020. The increase in interest expense is due primarily to the convertible senior notes and the senior term loan, as well as various promissory notes, entered into subsequent to December 31, 2020. Interest expense for the three months ended December 31, 2021 includes approximately $1,659 of non-cash interest expense.

Other expense for the three months ended December 31, 2021 increased to $57,727 from $0 compared to the three months ended December 31, 2020 as the Company recognized a $56,714 fair value remeasurement of the embedded derivative component of the convertible notes issued in September 2021 and $877 loss on debt extinguishment.

Income Taxes

Our effective income tax rates for the three months ended ~~March~~December 31, 2021 and 2020 were ~~(2.09) %~~13.33% and ~~(2.15) %,~~(9.89)% respectively. The ~~expense~~benefit (expense) recorded for each period was ~~$15~~$12,785 and ~~$11, respectively,~~($33), respectively. The benefit from income taxes in the first quarter of fiscal 2022 was primarily related to deferred tax liabilities established as part of the acquisition of Envigo, which resulted in a release of valuation allowance, as well as, the impact on tax expense of certain book to tax differences on the deductibility of certain transaction costs and non-deductibility of the loss on fair value remeasurement of the embedded derivative component of the convertible notes. The expense from income taxes in the first quarter of 2021 relates primarily to certain credits that arise when deferred tax liabilities that are created by indefinite-lived assets cannot be used as a source of taxable income to support the realization of deferred tax assets for valuation allowance purposes. ~~The tax expense associated with such certain credits is required to be recorded.~~

Net Income/Loss

As a result of the above described factors, we had a consolidated net loss of ~~$723~~$83,411 for the three months ended ~~March~~December 31, 2021 as compared to a consolidated net loss of ~~$588~~$366 during the three months ended ~~March~~December 31, 2020.

~~Six Months Ended March 31, 2021 Compared to Six Months Ended March 31, 2020~~

~~Service and Product Revenues~~

~~Revenues for the six months ended March 31, 2021 increased 26.6% to $36,636 as compared to $28,930 for the six months ended March 31, 2020.~~

Our Service revenue increased 27.8% to $34,934 in the six months ended March 31, 2021 compared to $27,333 for the six months ended March 31, 2020. The increase in service revenue was due to incremental revenue of $1,500 in the first quarter of fiscal 2021 attributable to a full six months of Fort Collins, CO, related operations, combined with additional revenue as a result of organic growth.

Six Months Ended
March 31,
2021 2020 Change %
Bioanalytical analysis $ 3,870 $ 3,712 $ 158 4.3 %
Nonclinical services 27,845 22,382 5,463 24.4 %
Other laboratory services 3,219 1,239 1,980 159.8 %
$ 34,934 $ 27,333 $ 7,601

Sales in our Product segment increased 6.6% in the first six months ended March 31, 2021 to $1,702 from $1,597 when compared to the six months ended March 31, 2020 reflecting higher sales of Culex in-vivo sampling systems and analytical instruments, partially offset by a decrease in other instruments.

Six Months Ended
March 31,
2021 2020 Change %
Culex, in-vivo sampling systems $ 471 $ 406 $ 65 16.0 %
Analytical instruments 1,065 921 144 15.6 %
Other instruments 166 270 (104 ) (38.5 )%
$ 1,702 $ 1,597 $ 105

~~Cost of Revenues~~

~~Cost of revenues for the six months ended March 31, 2021 was $24,435 or 66.7% of revenue, compared to $20,260, or 70.0% of revenue compared to the six months ended March 31, 2020.~~

Cost of Service revenue as a percentage of Service revenue decreased to 67.3% during the six months ended March 31, 2021 from 69.9% in the six months ended March 31, 2020 reflecting operating leverage and the greater utilization of recently expanded capacity.

Cost of Product revenue as a percentage of Product revenue in the six months ended March 31, 2021 decreased to 54.8% from 71.5% in the six months ended March 31, 2020 due to expense reductions implemented in the last half of fiscal 2020, which created improved margins on existing sales.

~~Operating Expenses~~

Selling expenses for the six months ended March 31, 2021 decreased 19.8% to $2,138 from $2,665 compared to the six months ended March 31, 2020. This decrease is mainly due to the reduction of non-recurring costs of nearly $190 that was related to the launch of the trade name Inotiv prior to the formal change of our corporate name to Inotiv, Inc., as well as a decrease in trade show and travel expenses due to the COVID-19 pandemic, as our sales and marketing teams have been conducting meetings virtually.

Research and development expenses for the six months ended March 31, 2021 increased 23.1% compared to the six months ended March 31, 2020 to $399 from $324. The increase was primarily due to internal development investments for new services, such as clinical pathology and cardiovascular safety pharamacology.

General and administrative expenses for the six months ended March 31, 2021 increased 47.5% to $10,171 from $6,896 compared to the six months ended March 31, 2020 as the Company increased operating expenses related to higher strategic investment in corporate general and administrative expense to support anticipated future revenue growth, which included recruiting and relocations expense, higher compensation expense, including non-cash stock compensation, new systems and transaction costs related to the HistoTox Labs and Bolder BioPATH acquisitions. In addition, we announced investments being made in laboratory infrastructure and data and study management technologies through a partnership with Centric Consulting, LLC and investments in software solutions and human resources to support existing internal expertise in the area of SEND (Standard for the Exchange of Nonclinical Data) data management and delivery.

~~Other Income (Expense)~~

~~Interest expense for the six months ended March 31, 2021 increased 1.4% to $713 from $703 compared to the six months ended March 31, 2020.~~

~~Income Taxes~~

Our effective income tax rates for the six months ended March 31, 2021 and 2020 were (4.58)% and (5.94)%, respectively. The expense recorded for each period was $48 and $108, respectively, and relates primarily to certain credits that arise when deferred tax liabilities that are created by indefinite-lived assets cannot be used as a source of taxable income to support the realization of deferred tax assets for valuation allowance purposes. The tax expense associated with such certain credits is required to be recorded.

~~Net Income (Loss)~~

~~As a result of the factors described above, net loss for the six months ended March 31, 2021 amounted to $1,089, compared to net loss of $2,014 for the six months ended March 31, 2020.~~

Liquidity and Capital Resources

Comparative Cash Flow Analysis

At ~~March~~December 31, 2021, we had cash and cash equivalents of ~~$2,186,~~$42,418, compared to ~~$1,406~~$138,924 at September 30, ~~2020.~~2021, exclusive of restricted cash.

Net cash ~~provided by~~used in operating activities was ~~$4,526~~$1,143 for the ~~six~~three months ended ~~March~~December 31, 2021 compared to net cash provided by operating activities of ~~$346~~$1,652 for the ~~six~~three months ended ~~March~~December 31, 2020. Contributing factors to our cash ~~provided by~~used in operations in the first ~~six~~three months of fiscal ~~2021~~2022 were noncash charges of ~~$2,154~~$6,035 for depreciation and amortization, ~~$460~~$19,159 for non-cash stock compensation expense, $56,714 for loss on fair value measurement of convertible senior notes, changes in deferred taxes of $14,281 and a net increase due to changes in operating assets and liabilities of $8,594 .

Included in operating activities for the three months ended December 31, 2020 are non-cash charges of $1,065 for depreciation and amortization, $181 of stock compensation expense and a ~~net increase~~decrease of $435 in ~~customer advances of $3,831, as a result of increasing orders.~~accounts payable. These items were partially offset by an increase of ~~$1,927 in accounts receivable.~~

~~Days’ sales~~$634 in accounts receivable decreased to 48 days at March 31, 2021 from 56 days at September 30, 2020 due to an increase in revenue. It is not unusual to see a fluctuation in the Company's pattern of days’ sales in accounts receivable. Customers may expedite or delay payments from period-to-period for a variety of reasons including, but not limited to, the timing of capital raised to fund on-going research and development projects.

Included in operating activities for the six months ended March 31, 2020 were noncash charges of $1,673 for depreciation and amortization, $204 for stock compensation expense, $75 of amortization of finance lease and a net increase in customer advances of $3,791, as a result of increasing orders. These items were partially offset by an increase of $1,873 in accounts receivable, an increase of $723 in prepaid expenses and other assets, a decrease ~~of $422~~ in accrued expenses ~~and a decrease~~ of ~~$577 in accounts payable.~~$1,089.

2232

Table of Contents

Investing activities used ~~$2,425~~$232,393 in the ~~six~~three months ended ~~March~~December 31, 2021 due mainly to cash paid in the acquisition of Plato, Envigo and RSI and capital expenditures of ~~$2,427~~$5,655 as compared to ~~$3,351~~$1,474 used in the first ~~six~~three months of fiscal ~~2020.~~2021. The capital additions during the ~~six~~three months ended ~~March 31,~~December 30, 2021 consisted of ~~investments in laboratory equipment to increase capacity~~the renovation and ~~improvements in~~expansion of the Denver, Pennsylvania facility and continued construction of our ~~Fort Collins facility.~~St. Louis facility, as well as purchases of certain lab equipment.

Financing activities ~~used $1,321~~provided $119,466 in the ~~six~~three months ended ~~March~~December 31, 2021, compared to ~~$6,597 provided during~~$428 used in the ~~six~~three months ended ~~March~~December 31, 2020. The ~~use of~~ cash provided in the first ~~six~~three months of fiscal ~~2021~~2022 included ~~payments~~borrowings on ~~long-term debt~~a senior term loan of ~~$1,436, financing lease~~$165,000 and borrowings on construction loans of $1,184, partially offset by payments of ~~$206 and~~long-term borrowings of $37,747, debt issuance costs of ~~$41, which were partially offset by proceeds from the exercise~~$7,102 and repayment of ~~stock options~~our previous capex line of ~~$111.~~credit of $1,749. The main sources of cash in the first ~~six~~three months of fiscal ~~2020~~2021 were from borrowings on the ~~long-term loan of $3,533, and borrowings on the Construction loans and Capex~~capex lines of credit of ~~$1,089 and $1,329, respectively, and additional borrowings against the Revolving Facility of $1,552. These items were partially offset by~~$387.Total long-term loan payments ~~of $603,~~were $712 and finance lease ~~payment~~payments of ~~$212 and payment~~$108 contributed to the use of ~~debt issuance cost of $111.~~cash.

Capital Resources

Credit Facility

On ~~April 30,~~November 5, 2021, the Company, refinanced its credit arrangements with First Internet Bank (“FIB”) in order to, among other things, secure additional debt financing. The discussion below describes our credit arrangements with FIB ascertain of ~~March 31, 2021. For a description of our credit arrangements with FIB as~~subsidiaries of the ~~April 30, 2021 refinancing, refer to Note 13 “Subsequent Events” to~~Company (the “Subsidiary Guarantors”), the ~~Notes to Condensed Consolidated Financial Statements.~~

~~On December 1, 2019, we~~lenders party thereto, and Jefferies Finance LLC, as administrative agent, entered into ~~an Amended and Restated~~a Credit Agreement ~~(as had previously been amended from time to time, the~~(the “Credit Agreement”) ~~with FIB. As~~. The Credit Agreement provides for a term loan facility in the original principal amount of ~~March 31, 2021,~~$165,000, a delayed draw term loan facility in the original principalirs amount of $25,000 (available to be drawn up to 18 months from the date of the Credit Agreement), and a revolving loan facility in the original principal amount of $15,000. In addition, the Credit Agreement ~~included five term loans (the “Initial Term Loan,” “Second Term Loan,” “Third Term Loan,” “Fourth Term Loan,” and “Fifth Term Loan,” respectively), a~~provides for an aggregate combined increase of the revolving ~~line of credit (the “Revolving Facility”), a construction draw~~ loan ~~(the “Construction Draw Loan”), an equipment draw loan (the “Equipment Draw Loan”), and two capital expenditure instruments (the “Initial Capex Line”~~facility and the ~~“Second Capex Line,” respectively).~~

~~The Initial Term Loan for $4,500 bears interest at a fixed rate~~term loan facility of 3.99%, with monthly principal and interest payments of approximately $33. The Initial Term Loan matures June 23, 2022. The balance on the Initial Term Loan at March 31, 2021 was $3,622. We used the proceeds from the Initial Term Loan to satisfy our indebtedness with Huntington Bank and terminated the related interest rate swap.

The Second Term Loan for $5,500 was used to fund a portion of the cash consideration for the Seventh Wave Acquisition. Amounts outstanding under the Second Term Loan bear interest at a fixed per annum rate of 5.06%, with monthly principal and interest payments equal to $78. The Second Term Loan matures July 2, 2023 and the balance on the Second Term Loan at March 31, 2021 was $3,634.

The Third Term Loan for $1,271 was used to fund the cash consideration for the Smithers Avanza Acquisition. Amounts outstanding under the Third Term Loan bear interest at a fixed per annum rate of 4.63%. The Third Term Loan required monthly interest only payments until December 1, 2019, from which time payments of principal and interest in monthly installments of $20 are required, with all accrued but unpaid interest, cost and expenses due and payable at the maturity date. The Third Term Loan matures November 1, 2025 and the balance on the Third Term Loan at March 31, 2021 was $1,018.

The Fifth Term loan in the principal amount of $1,939 has a maturity of December 1, 2024. Interest accrues on the Fifth Term Loan at a fixed per annum rate equal to 4%, with payments of principal and interest due monthly through maturity. The balance on the Fifth Term Loan at March 31, 2021 was $1,858. We entered into the Fourth Term Loan and the Fifth Term Loan in connection with the PCRS Acquisition.

The ~~Revolving Facility requires monthly accrued and unpaid~~Company may elect to borrow on each of the loan facilities at either an adjusted LIBOR rate of interest ~~payments only until maturity~~or an adjusted prime rate of interest. Adjusted LIBOR rate loans shall accrue interest at ~~a floating per annum~~an annual rate equal to the ~~greater~~LIBOR rate plus a margin of ~~(a) 4%~~between 6.00% and 6.50%, ~~or (b) the sum of the Prime Rate plus Zero Basis Points (0.0%), which rate shall change concurrently with the Prime Rate. The Company did not have an outstanding balance~~depending on the ~~Revolving Facility as~~Company’s then current Secured Leverage Ratio (as defined in the Credit Agreement). The LIBOR rate must be a minimum of ~~December 31, 2020. On April 31, 2021,~~1.00%. The initial adjusted LIBOR rate of interest is the ~~parties amended the Revolving Facility to extend its maturity through April 30, 2023. Refer to Note 13 “Subsequent Events” to the Notes to Condensed Consolidated Financial Statements.~~

Table of Contents

Long term debt as of September 30, 2021 and for each quarter thereafter 1.20 to 1.00 and (ii) the Company is required to maintain a Cash Flow Leverage Ratio (as defined in the Credit Agreement), tested quarterly, not to exceed (a) as of MarchDecember 31, 2021, 5.75 to 1.00, (b) as of June 30, 2021, 5.00 to 1.00 and (c) as of September 30, 2021 and for each quarter thereafter, 4.25 to 1.00. The Fixed Charge Coverage Ratio and Cash Flow Leverage Ratio are measured on a trailing twelve (12) month basis, provided, however, that in the case of Fixed Charge Coverage Ratio calculations for the remainder of fiscal 2021 (i) the measurement period for the quarter ending March 31, 2021 includes only the quarter ending March 31, 2021, (ii) the measurement period for the quarter ending June 30, 2021 includes only the quarters ending March 31, 2021 and June 30, 2021 and (iii) the measurement period for the quarter ending September 30, 2021 includes only the quarters ending March 31, 2021, June 30, 2021 and September 30, ~~2021.~~2021 is detailed in the table below.


	As of:
	December 31, 2021		September 30, 2021
FIB Term Loans	$	—	$	36,185
Seller Note – Bolder BioPath		1,455		1,500
Seller Note – Smithers Avanza		175		280
Seller Note – Preclinical Research Services		667		685
Seller Note – Plato BioPharma		3,000		—
EIDL Loan		141		—
Convertible Senior Notes		101,062		131,673
Senior Term Loan		165,000		—
		271,500		170,323
Less: Current portion		(5,223)		(9,656)
Less: Debt issue costs not amortized		(10,882)		(6,458)
Total Long-term debt	$	255,395	$	154,209

Acquisition-related Debt

In addition to the indebtedness under ~~our~~the Credit Agreement, ~~as part~~certain of the ~~Smithers Avanza Acquisition, we~~Company’s subsidiaries have anissued unsecured ~~promissory note payable~~notes as partial payment of the purchase prices of certain acquisitions as described herein. Each of these notes is subordinated to the ~~Smithers Avanza Seller in~~indebtedness under the initial principal amount of $810 made by BASi Gaithersburg and guaranteed by the Company. The promissory note bears interest at 6.5% with monthly payments and maturity date of May 1, 2022. At March 31, 2021, the balance on the note payable to the Smithers Avanza Seller was $480. Credit Agreement.

As part of the ~~PCRS Acquisition, we also have an~~acquisition of Plato BioPharma, which is a part of the Company’s Inotiv Boulder subsidiary, Inotiv Boulder, LLC, issued unsecured subordinated promissory ~~note~~notes payable to the ~~PCRS Seller in the initial principal amount~~former shareholders of $800. The promissory note bears interest at 4.5% with monthly payments and a maturity date of December 1, 2024. At March 31, 2021, the balance on the note payable to the PCRS Seller was $719. In connection with the Merger, the Company has also issued seller notesPlato BioPharma in an aggregate principal amount of ~~$1,500. Refer~~$3,000. The promissory notes bear interest at a rate of 4.5% per annum, with monthly payments of principal and interest and a maturity date of June 1, 2023.

Convertible Senior Notes

On September 27, 2021, the Company issued $140,000 principal amount of its 3.25% Convertible Senior Notes due 2027. The Notes were issued pursuant to, and are governed by, an indenture, dated as of September 27, 2021, among the Company, the BAS Evansville, as guarantor, and U.S. Bank National Association, as trustee. Pursuant to the purchase agreement between the Company and the initial purchaser of the Notes, the Company granted the initial purchaser an option to purchase, for settlement within a period of 13 days from, and including, the date the Notes were first issued, up to an additional $15,000 principal amount of Notes. The Notes issued on September 27, 2021 include $15,000 principal amount of Notes issued pursuant to the full exercise by the initial purchaser of such option. The Company used the net proceeds from the offering of Notes, together with borrowings under a new senior secured term loan facility, to fund the cash portion of the purchase price of the Envigo Acquisition and related fees and expenses, as described in Note ~~13 “Subsequent Events”~~16.

Table of Contents

~~On April 23, 2020, we were granted a loan (the “Loan”) from Huntington National Bank in~~be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the ~~aggregate amount of $5,051,~~redemption date. In addition, calling the Notes for redemption pursuant to the ~~Paycheck Protection Program under Division A, Title I~~provisions described in this paragraph will constitute a Make-Whole Fundamental Change, which will result in an increase to the conversion rate in certain circumstances for a specified period of time.

If certain corporate events that constitute a “Fundamental Change” (as defined in the Indenture) occur, then noteholders may require the Company to repurchase their Notes at a cash repurchase price equal to the principal amount of the ~~CARES Act,~~Notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the fundamental change repurchase date. The definition of Fundamental Change includes certain business combination transactions involving the Company and certain de-listing events with respect to the Company’s common shares.

The Notes have customary provisions relating to the occurrence of “Events of Default” (as defined in the Indenture), which ~~was enacted March 27, 2020. The terms~~include the following: (i) certain payment defaults on the Notes (which, in the case of a default in the payment of interest on the Notes, are subject to a 30-day cure period); (ii) the Company’s failure to send certain notices under the Indenture within specified periods of time; (iii) the failure by the Company or the Guarantor to comply with certain covenants in the Indenture relating to the ability of the ~~Loan call for repayment~~Company or the Guarantor to consolidate with or merge with or into, or sell, lease or otherwise transfer, in one transaction or a series of transactions, all or substantially all of the ~~principal~~assets of the Company or the Guarantor, as applicable, and ~~accrued interest~~its subsidiaries, taken as a whole, to another person; (iv) a default by the Company or the Guarantor in its other obligations or agreements under the ~~Loan~~Indenture or the Notes if such default is not cured or waived within 60 days after notice is given in ~~eighteen installments~~accordance with the Indenture; (v) certain defaults by the Company, the Guarantor or any of ~~$283 beginning~~their respective subsidiaries with respect to indebtedness for borrowed money of at least $20,000; (vi) the rendering of certain judgments against the Company, the Guarantor or any of their respective subsidiaries for the payment of at least $20,000, where such judgments are not discharged or stayed within 60 days after the date on which the right to appeal has expired or on which all rights to appeal have been extinguished; (vii) certain events of bankruptcy, insolvency and reorganization involving the Company, the Guarantor or any of their respective significant subsidiaries; and (viii) the guarantee of the Notes ceases to be in full force and effect (except as permitted by the Indenture) or the Guarantor denies or disaffirms its obligations under its guarantee of the Notes.

In accordance with ASC 815, at issuance, the Company evaluated the convertible feature of the Notes and determined it was required to be bifurcated as an embedded derivative and did not qualify for equity classification. The convertible feature of the Notes is subject to fair value remeasurement as of each balance sheet date and is valued utilizing level three inputs as described below.

In the first quarter of 2022, the Company early adopted Accounting Standards Update (“ASU”) ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06)”. The update simplifies the accounting for convertible debt instruments and convertible preferred stock by reducing the number of accounting models and limiting the number of embedded conversion features separately recognized from the primary contract. As a result of the approval for the increase in authorized shares on November ~~16, 2020~~4, 2021 (See Note 2 – Equity), the convertible note conversion rights met all equity classification criteria in ASC 815. As a result, the derivative liability was remeasured as of November 4, 2021 and ~~continuing monthly until~~reclassified out of long-term liabilities and into additional paid-in capital.

Table of Contents

Based upon the ~~final payment is due on April 16, 2022. However,~~above, the ~~bank is not requiring payments of principal or interest pending~~Company remeasured the ~~loan forgiveness decision. We have applied for forgiveness~~fair value of the ~~loan~~embedded derivative as of November 4, 2021 which resulted in a fair value measurement of $88,576 and a loss on remeasurement included in other income (loss) for the ~~amount~~three-months ended December 31, 2021 of ~~$4,851.~~

$56,714. The embedded derivative liability of $88,576 was then reclassified to additional paid-in capital in accordance with ASC 815.

On January 28, 2015, the Company entered into a lease agreement with Cook Biotech, Inc. The lease agreement has and will provide the Company with additional cash in the range of approximately $50 per month during the first year of the initial term to approximately $57 per month during the final year of the initial term.

The Company’s sources of liquidity for fiscal 2021 are expected to consist primarily of cash generated from operations, cash on-hand, additional borrowings available under our Credit Agreement, as refinanced on April 30, 2021, an additional commitment from FIB for approximately $5,000 of financing to be used in connection with the exercise of the Company’s option to buy its St. Louis facility for approximately $4,700 and to complete associated expansion, contingent on the Company’s receipt of related business incentives, and remaining net proceeds from our recent public offering. Research services are capital intensive. The investment in equipment, facilities and human capital to serve our markets is substantial and continuing. Rapid changes in automation, precision, speed and technologies necessitate a constant investment in equipment and software to meet market demands. We are also impacted by the heightened regulatory environment and the need to improve our business infrastructure to support our operations, which will necessitate additional capital investment. Our ability to generate capital to reinvest in our capabilities and to obtain additional capital if and as needed through financial transactions is critical to our success. Sustained growth will require additional investment in future periods. Positive cash flow and access to capital will be important to our ability to make such investments. Management believes that the resources described above will be sufficient to fund operations, planned capital expenditures and working capital requirements over the next twelve months.

ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

We are exposed to changes in interest rates while conducting normal business operations as a result of ongoing financing activities. As of December 31, 2021, our debt portfolio was reliant on reference rates. Based on our interest rate exposure at December 31, 2021, assumed debt levels throughout the next 12 months, a one-percentage-point increase in interest rates would result in an estimated $1,673 pre-tax reduction in net earnings over a one-year period.

Foreign Currency Exchange Rate Risk

We operate on a global basis and have exposure to some foreign currency exchange rate fluctuations for our financial position, results of operations, and cash flows.

While the financial results of our global activities are reported in U.S. dollars, our foreign subsidiaries typically conduct their operations in their respective local currency. The principal functional currencies of the Company’s foreign subsidiaries are the Euro, British Pound and Israeli Shekel.

Fluctuations in the foreign currency exchange rates of the countries in which we do business will affect our financial position, results of operations, and cash flows. As the U.S. dollar strengthens against other currencies, the value of our non-U.S. revenue, expenses, assets, liabilities, and cash flows will generally decline when reported in U.S. dollars. The impact to net income as a result of a U.S. dollar strengthening will be partially mitigated by the value of non-U.S. expenses, which will decline when reported in U.S. dollars. As the U.S. dollar weakens versus other currencies, the value of the non-U.S. revenue, expenses, assets, liabilities, and cash flows will generally increase when reported in U.S. dollars.

A ~~smaller reporting company is not required~~hypothetical 10% change in the foreign exchange rates applicable to ~~provide the information required~~our business would change our December 31, 2021 cash balance by ~~this Item 3.~~approximately $1,000 and our revenue by approximately $6,500.

ITEM 4 - CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to provide reasonable assurance that information, which is required to be disclosed timely, is accumulated and communicated to management in a timely fashion. In designing and evaluating such controls and procedures, we recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. Our management is necessarily required to use judgment in evaluating controls and procedures.

Management performs periodic evaluations to determine if our disclosure controls and procedures are effective to provide reasonable assurance that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934, as amended, is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure and are effective to provide reasonable assurance that such information is recorded, processed, summarized and reported within the time periods specified by the SEC's rules and forms. An evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report was performed under the supervision and with the participation of management, which resulted in a determination by our Chief Executive Officer and Chief Financial Officer that our disclosure controls and procedures were not effective as of ~~March~~December 31, 2021.

On December 15, 2021, the Company's management and the Audit Committee of the Board of Directors concluded that, due to a failure to properly account for certain tax attributes related to an acquisition that occurred in the Company's third fiscal quarter, the Company's previously issued unaudited interim financial statements as of and for the three and nine months ended June 30, 2021 included in the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2021 (the "Original Quarterly Report") should no longer be relied upon. The Company’s management, together with the Audit Committee, determined that the Company’s financial

Table of Contents

statements and other financial data as of and for the quarterly period ended June 30, 2021 included in the Original Quarterly Report should be restated and the Company issued restated financials for the period in the Form 10-Q/A filed on December 21, 2021. In connection with the restatement, management reevaluated the effectiveness of the Company’s disclosure controls and procedures and internal control over financial reporting as of June 30, 2021 and concluded that, in light of the error described above, a material weakness existed in the Company’s internal control over financial reporting and that certain of the Company’s disclosure controls and procedures were not effective as of June 30, 2021. Because the error was not discovered until after the end of the first quarter of fiscal 2022 and minimal remedial steps had been taken prior to the end of the first quarter of fiscal 2022, management concluded that the same material weakness in the Company's internal control over financial reporting and deficiency in the Company's disclosure controls and procedures that existed at September 30, 2021 continued to exist at December 31, 2021.

Management has begun and plans to continue to devote significant effort and resources to the remediation and improvement of its internal control over financial reporting and to provide processes and controls over the research and understanding of the tax impact of acquisitions that qualify as stock transactions for tax purposes. While we have processes to identify and appropriately apply applicable accounting requirements, we plan to enhance these processes to better evaluate our research and understanding of the nuances of the tax impact of acquisitions that qualify as stock transactions for tax purposes. We plan to include providing enhanced access to accounting literature, research materials and documents and increased communication among our personnel and third-party professionals with whom we consult regarding the tax impact of acquisitions that qualify as stock transactions for tax purposes. We also plan to re-assess our non-audit third-party professionals with whom we consult regarding application of accounting guidance related to the tax issues and engage more experienced advisers as appropriate. The elements of our remediation plan can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately have the intended effects.

Changes in Internal Controls

There were no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during the ~~second~~first quarter of fiscal ~~2021~~2022 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

PART II

ITEM 1 – LEGAL PROCEEDINGS

Litigation

~~There were~~Envigo is a defendant in a purported class action and a related action under California’s Private Attorney General Act of 2004 (“PAGA”) brought by Jacob Greenwell, a former employee of Envigo, on June 25, 2021 in the Superior Court of California, Alameda County. The complaint alleges that Envigo violated certain wage and hour requirements under the California Labor Code. PAGA authorizes private attorneys to bring claims on behalf of the State of California and aggrieved employees for violations of California’s wage and hour laws. The class action complaint seeks certification of a class of similarly situated employees and the award of actual, consequential and incidental losses and damages for the alleged violations. The PAGA complaint seeks civil penalties pursuant to the California Labor Code and attorney's fees. The Company intends to vigorously defend these claims.

Government Investigations

On June 15, 2021, Envigo Global Services, Inc., a subsidiary of the ~~second quarter~~Company acquired in the Envigo acquisition, was served with a grand jury subpoena issued by the Department of ~~fiscal 2021~~Justice in Miami, Florida requiring the production of documents related to ~~our disclosure in Item 3~~the importation into the United States of ~~our Form 10-K for fiscal 2020.~~live non-human primates originating from or transiting through China, Cambodia and/or Vietnam from April 1, 2014 through March 28, 2019. The Company is cooperating with the Department of Justice.

Table of Contents

ITEM 1A - RISK FACTORS
Before investing in our securities you should carefully consider the risks described below and in our Annual Report on Form 10-K for the fiscal year ended September 30, ~~2020,~~2021, including those disclosed under the heading “Risk Factors” appearing in Item 1A of Part I of the Form ~~10-K, as well as the information contained in our subsequent Quarterly Reports.~~10-K. Realization of any of these risks could have a material adverse effect on our business, financial condition, cash flows and results of operations.
25
The risks described in our Annual Reports on Form 10-K and our Quarterly Reports on Form 10-Q from time to time are not the only risks we face. New risk factors or risks that we currently deem immaterial emerge from time to time and it is not possible for us to predict all such risk factors, nor to assess the impact such risk factors might have on our business, financial condition and operating results, or the extent to which any such risk factor or combination of risk factors may impact our business, financial condition and operating results.
ITEM 2 – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
~~The HistoTox Labs Acquisition and the Merger may present many risks, and we may not realize the strategic and financial goals that were contemplated at the time we entered into the Purchase~~On October 4, 2021, pursuant to an Agreement and Plan of Merger among the Company, Greek Merger ~~Agreement.~~
~~Risks we may face in connection with~~Sub, Inc., Plato BioPharma, Inc. and Shareholder Representative Services, LLC, the ~~HistoTox Labs Acquisition and the Merger (together, the “Acquisitions”) include:~~
· ~~We may not realize the benefits we expect to receive from the Acquisitions, such as anticipated synergies.~~
· ~~We may have difficulties managing Inotiv – Boulder HTL’s and/or Inotiv Boulder’s services or retaining key personnel from HistoTox Labs and/or Bolder BioPATH.~~
· The Acquisitions may not further our business strategy as we expect, we may not successfully integrate HistoTox Labs and/or Bolder BioPATH as planned, there could be unanticipated adverse impacts on HistoTox Labs’ and/or Bolder BioPATH’s businesses, or we may otherwise not realize the expected return on our investments, which could adversely affect our business or operating results and potentially cause impairment to assets that we record as a part of the Acquisitions, including intangible assets and goodwill.
· Our operating results or financial condition may be adversely impacted by (i) claims or liabilities related to HistoTox Labs’ and/or Bolder BioPATH’s businesses including, among others, claims from U.S. regulatory or other governmental agencies, terminated employees, current or former customers or business partners, or other third parties; (ii) pre-existing contractual relationships of HistoTox Labs and/or Bolder BioPATH that we would not have otherwise entered into, the termination or modification of which may be costly or disruptive to our business; (iii) unfavorable accounting treatment as a result of HistoTox Labs’ and/or Bolder BioPATH’s practices; and (iv) intellectual property claims or disputes.
· Neither HistoTox Labs nor Bolder BioPATH was required to maintain an internal control infrastructure that would meet the standards of a public company, including the requirements of the Sarbanes-Oxley Act of 2002. The costs that we may incur to implement such controls and procedures may be substantial and we could encounter unexpected delays and challenges in this implementation. In addition, we may discover significant deficiencies or material weaknesses in the quality of Inotiv – Boulder HTL’s and or Inotiv Boulder’s financial and disclosure controls and procedures.
~~Future sales of our common shares by us or our existing shareholders could cause our share price to decline.~~
Sales of a substantial number of our common shares in the public market, or the perception that these sales might occur, could depress the market price of our common shares and could impair our ability to raise capital through the sale of additional equity securities. Further, we have stock options outstanding. As of March 31, 2021, we had 11,181,506 outstanding common shares and 671,000 common shares issuable upon the exercise of outstanding stock options, of which approximately 3,200,954 shares and 240,500 shares underlying stock options are subject to restrictions on transfer under 90-day lock-up arrangements with the underwriter of our public offering. These shares will become eligible for public sale at the expiration of the lock-up period, subject to vesting requirements and volume limitations applicable to affiliates. If a substantial number of common shares, including common shares underlying outstanding stock options, are sold, or if it is perceived that they will be sold, in the public market, it could have an adverse impact on the market price of our common shares.
~~In addition, as part of the Merger, we~~Company issued ~~1,588,235 common shares as consideration payable to the Bolder BioPATH equity holders. Following a one-year lock-up period from the closing of the Merger, such shares will be freely tradeable.~~
Furthermore, our directors and executive officers may in the future adopt written trading plans that are intended to comply with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), under which they may in the future contract with a broker to sell our common shares. Sales of substantial amounts of our common shares in the public markets pursuant to new Rule 10b5-1 plans, or the perception that these sales could occur, could cause the market price of our57,587 common shares to ~~decline. We are unable to predict~~ the ~~effect that sales may have on~~former shareholders of Plato BioPharma, Inc. The shares were issued in reliance upon the ~~prevailing market price of our common shares.~~
~~We have incurred significant additional indebtedness during recent periods, which may impair our ability to raise further capital or impact our ability to service our debt.~~
~~We have incurred significant additional indebtedness during recent periods, including in order to finance~~exemption from the HistoTox Labs Acquisition and the Merger and to support other corporate endeavors. Our additional indebtedness may impair our ability to raise further capital, including to expand our business, pursue strategic investments, and take advantage of financing or other opportunities that we believe to be in the best interestsregistration requirements of the Company and our shareholders. Our additional indebtedness may also impact our ability to service our debt and to comply with financial covenants and the other terms of our relevant credit arrangements, in which case our lenders might pursue available remedies up to and including terminating our credit arrangements and foreclosing on available collateral.
~~We may need additional capital, and any additional capital we seek may not be available in the amount or at the time we need it.~~
~~We anticipate utilizing additional debt financing in order to fund the exercise~~Securities Act provided by Section 4(a)(2) of the ~~Company’s option~~Securities Act and Regulation D thereunder as sales by an issuer not involving any public offering.
On December 29, 2021, pursuant to ~~buy~~an Asset Purchase Agreement among Robinson Services Incorporated, the owners of Robinson Services Incorporated and Envigo Global Services, Inc., the Company issued 70,633 of its ~~St. Louis facility for approximately $4,700 and to complete associated expansion, contingent on the Company’s receipt of related business incentives.~~
~~In general, additional capital may be raised through the sale of~~ common shares ~~preferred equity or convertible debt securities, entry into debt facilities or other third-party funding arrangements. The sale of equity and convertible debt securities may result in dilution~~ to our shareholders and those securities may have rights senior to those of our common shares. Agreements entered into in connection with such capital raising activities could contain covenants that would restrict our operations or require us to relinquish certain rights. Additional capital may not be available on reasonable terms, or at all. If we cannot timely raise any needed funds, we may be forced to reduce our operating expenses, which could adversely affect our ability to implement our long-term strategic roadmap and grow our business.
Our expected financing needs are based upon management’s estimates as to future revenue and expense. Our business plan and financing needs are subject to change based upon, among other factors, our ability to increase revenues and manage expenses. If our estimates of our financing needs change, we may need additional capital more quickly than we expect or we may need a greater amount of capital.
~~If securities or industry analysts issue an adverse opinion regarding our common shares, our share price and trading volume could decline.~~
~~The trading market for our common shares is influenced by the research and reports that securities or industry analysts may publish about us, our business, our market or our competitors. If any~~one of the ~~analysts who may cover us adversely changes its recommendation regarding our common~~owners of Robinson Services, Inc. The shares ~~or provides more favorable relative recommendations about our competitors,~~were issued in reliance upon the ~~trading price~~exemption from the registration requirements of ~~our common shares could decline. If~~the Securities Act provided by Section 4(a)(2) of the Securities Act as sales by an issuer not involving any ~~analyst who may cover us were to cease coverage~~public offering.

Table of our Company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause the trading price of our common shares or trading volume to decline.Contents

ITEM 6 - EXHIBITS

Number

Description of Exhibits
(3)
3.1

Second Amended and Restated Articles of Incorporation of Inotiv, Inc. as amended through November 4, 2021 (incorporated by reference to Exhibit 3.1 to Form 8-K filed November 5, 2021)

3.2

Second Amended and Restated Bylaws of Inotiv, Inc. as amended through March 18, 2021 (incorporated by reference to Exhibit 3.2 to Form 8-K filed March 19, 2021)

(10)
10.1

Third Amendment to Amended and Restated Credit Agreement, dated October 4, 2021, between Inotiv, Inc. and First Internet Bank of Indiana (incorporated by reference to Exhibit 10.1 to Form 8-K filed October 4, 2021)

10.2

Credit Agreement, dated as of November 5, 2021, by and among Inotiv, Inc, certain subsidiaries of Inotiv, Inc., the lenders party thereto and Jefferies Finance LLC, as administrative agent and collateral agent (incorporated by reference to Exhibit 10.2 to Form 8-K filed November 5, 2021)

10.3

Shareholders Agreement, dated November 5, 2021, by and among Inotiv, Inc. and the shareholders signatory thereto (incorporated by reference to Exhibit 10.1 to Form 8-K filed November 5, 2021)

10.4

Inotiv, Inc. 2018 Equity Incentive Plan, as amended through November 4, 2021 (incorporated by reference to Exhibit 10.3 to Form 8-K filed November 5, 2021)

(31)
31.1

Certification of Principal Executive Officer (filed herewith).

31.2

Certification of Chief Financial Officer (filed herewith).

(32)
32.1

Written Statement of Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350) (filed herewith).

32.2

Written Statement of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350) (filed herewith).

101

Inline XBRL data file (filed herewith)

104

Cover Page Interactive Data File (embedded within the Inline XBRL document)

Number Description of Exhibits
(3) 3.1 Second Amended and Restated Articles of Incorporation of Inotiv, Inc. (formerly known as Bioanalytical Systems, Inc.) as amended through March 18, 2021 (incorporated by reference to the Company’s Form 8-K filed March 19, 2021).

3.2 Second Amended and Restated Bylaws of Inotiv, Inc. (formerly known as Bioanalytical Systems, Inc.) as amended through March 18, 2021 (incorporated by reference to the Company’s Form 8-K filed March 19, 2021)

(10) 10.1 Offer letter from Inotiv, Inc. to John Gregory Beattie (filed herewith)

(31) 31.1 Certification of Principal Executive Officer (filed herewith).

31.2 Certification of Chief Financial Officer (filed herewith).

(32) 32.1 Written Statement of Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350) (filed herewith).

32.2 Written Statement of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350) (filed herewith).

101 XBRL data file (filed herewith)
26
39

Table of Contents

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:

Date: ~~May 14, 2021~~February 18, 2022
INOTIV, INC.
(Registrant)
By:
/s/ Robert W. Leasure
Robert W. Leasure
President and Chief Executive Officer
(Principal Executive Officer)

Date:   ~~May 14, 2021~~February 18, 2022
By:
/s/ Beth A. Taylor
Beth A. Taylor
Chief Financial Officer and Vice President of Finance (Principal Financial Officer and Accounting Officer)

2740

	March 31, 2021			September 30, 2020
		(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	2,186		$	1,406
Accounts receivable
Trade, net of allowance of $500 at March 31, 2021 and $561 at September 30, 2020		9,340			8,681
Unbilled revenues and other		3,338			2,142
Inventories, net		872			700
Prepaid expenses		2,135			2,371
Total current assets		17,871			15,300

Property and equipment, net		29,353			28,729
Operating lease right-of-use assets, net		4,105			4,001
Finance lease right-of-use assets, net		4,710			4,778
Goodwill		4,368			4,368
Other intangible assets, net		3,949			4,261
Lease rent receivable		129			75
Other assets		86			81

Total assets	$	64,571		$	61,593

Liabilities and shareholders’ equity
Current liabilities:
Accounts payable	$	3,967		$	3,196
Restructuring liability					168
Accrued expenses		2,932			2,688
Customer advances		15,186			11,392
Capex line of credit		—			2,613
Current portion on long-term operating lease		1,004			866
Current portion of long-term finance lease		4,664			4,728
Current portion of long-term debt		8,317			5,991
Total current liabilities		36,070			31,642
Long-term operating leases, net		3,278			3,344
Long-term finance leases, net		42			44
Long-term debt, less current portion, net of debt issuance costs		17,925			18,826
Deferred tax liabilities		180			141
Total liabilities		57,495			53,997

Shareholders’ equity:
Preferred shares, authorized 1,000,000 shares, no par value:
No Series A shares at March 31, 2021 and 25 shares at September 30, 2020 issued and outstanding at $1,000 stated value		—			25
Common shares, no par value:
Authorized 19,000,000 shares; 11,179,041 issued and outstanding at March 31, 2021 and 10,977,675 at September 30, 2020		2,756			2,706
Additional paid-in capital		27,319			26,775
Accumulated deficit		(22,999	)		(21,910	)
Total shareholders’ equity		7,076			7,596
Total liabilities and shareholders’ equity	$	64,571		$	61,593

	Three Months Ended March 31,						Six Months Ended March 31,
	2021			2020			2021			2020
Service revenue	$	17,902		$	15,191		$	34,934		$	27,333
Product revenue		849			821			1,702			1,597
Total revenue		18,751			16,012			36,636			28,930

Cost of service revenue		11,949			10,207			23,502			19,118
Cost of product revenue		522			612			933			1,142
Total cost of revenue		12,471			10,819			24,435			20,260

Gross profit		6,280			5,193			12,201			8,670
Operating expenses:
Selling		1,175			1,447			2,138			2,665
Research and development		203			162			399			324
General and administrative		5,423			3,779			10,171			6,896
Total operating expenses		6,801			5,388			12,708			9,885

Operating loss		(521	)		(195	)		(507	)		(1,215	)

Interest expense		(366	)		(392	)		(713	)		(703	)
Other income		179			10			179			12
Net loss before income taxes		(708	)		(577	)		(1,041	)		(1,906	)

Income tax expense		15			11			48			108

Net loss	$	(723	)	$	(588	)	$	(1,089	)	$	(2,014	)

Basic net loss per share	$	(0.06	)	$	(0.05	)	$	(0.10	)	$	(0.19	)
Diluted net loss per share	$	(0.06	)	$	(0.05	)	$	(0.10	)	$	(0.19	)

Weighted common shares outstanding:
Basic		11,151			10,843			11,083			10,756
Diluted		11,151			10,843			11,083			10,756

	Six Month Period Ended March 31, 2021
											Additional					Total
	Preferred Shares						Common Shares				paid-in		Accumulated			shareholders’
	Number			Amount			Number		Amount		capital		deficit			equity
Balance at September 30, 2020		25		$	25			10,977,675	$	2,706	$	26,775	$	(21,910	)	$	7,596
Net loss														(366	)		(366	)
Stock option exercises								23,350		6		39					45
Stock based compensation								116,974		29		152					181

Balance at December 31, 2020		25		$	25			11,117,999	$	2,741	$	26,966	$	(22,276	)	$	7,456
Net loss														(723	)		(723	)
Stock based compensation								12,502		3		275					278
Stock option exercises								36,040		9		56					65
Preferred stock conversion		(25	)		(25	)		12,500		3		22
Balance March 31, 2021		0		$	0			11,179,041	$	2,756	$	27,319		(22,999	)	$	7,076

	Six Month Period Ended March 31, 2020
									Additional					Total
	Preferred Shares				Common Shares				paid-in		Accumulated			shareholders’
	Number		Amount		Number		Amount		capital		deficit			equity
Balance at September 30, 2019		35	$	35		10,510,694	$	2,589	$	25,183	$	(17,097	)	$	10,710
Adoption of accounting standard												(128	)		(128	)
Net loss												(1,426	)		(1,426	)
Stock issued in acquisition						240,000		60		1,073					1,133
Stock based compensation						54,363		14		67					81

Balance at December 31, 2019		35	$	35		10,805,057	$	2,663	$	26,323	$	(18,651	)	$	10,370
Net loss												(588	)		(588	)
Stock based compensation						26,521		7		116					123
Stock option exercises						32,703		8		12					20
Balance March 31, 2020		35	$	35		10,864,281	$	2,678	$	26,451		(19,239	)	$	9,925

	Options (shares)			Weighted- Average Exercise Price
Outstanding – October 1, 2020		712		$	2.21
Granted		43		$	10.12
Exercised		(60	)	$	1.86
Forfeited		(22	)	$	3.99
Expired		(2	)	$	2.02
Outstanding – March 31, 2021		671		$	2.69

Exercisable at March 31, 2021		392		$	1.82

	Restricted Shares			Weighted- Average Grant Date Fair Value
Outstanding – September 30, 2020		128		$	3.88
Granted		132		$	8.74
Vested		(10	)	$	1.28
Forfeited		(2	)		6.63
Outstanding – March 31, 2021		248		$	6.54

	Three Months Ended March 31,						Six Months Ended March 31,
	2021			2020			2021			2020
Basic net loss per share:
Net loss applicable to common shareholders	$	(723	)	$	(588	)	$	(1,089	)	$	(2,014	)
Weighted average common shares outstanding		11,151			10,843			11,083			10,756
Basic net loss per share	$	(0.06	)	$	(0.05	)	$	(0.10	)	$	(0.19	)

	As of:
	March 31, 2021			September 30, 2020
Initial Term Loan	$	3,622		$	3,748
Second Term Loan		3,634			4,004
Third Term Loan		1,018			1,115
Fourth Term Loan		1,286			1,425
Fifth Term Loan		1,858			1,891
Initial Capex Line		826			920
Second Capex Line		2,865			—
Subtotal Term Loans		15,109			13,103
Construction and Equipment loans		5,119			5,496
Seller Note – Smithers Avanza		480			650
Seller Note – Preclinical Research Services		719			752
Paycheck protection program loan		5,051			5,051
		26,478			25,052
Less: Current portion		(8,317	)		(5,991	)
Less: Debt issue costs not amortized		(235	)		(235	)
Total Long-term debt	$	17,925		$	18,826

	Allocation as of March 31, 2021
Assets acquired and liabilities assumed:
Receivables	$	578
Property and equipment		2,836
Unbilled receivables		162
Prepaid expenses		27
Intangible assets		2,081
Goodwill		751
Accounts payable		(109	)
Accrued expenses		(118	)
Customer advances		(351	)
	$	5,857

	Six Months Ended
	March 31, 2020
Total revenues	$	29,847

Net loss		(1,887	)

Pro forma basic net loss per share	$	(0.17	)
Pro forma diluted net loss per share	$	(0.17	)

	Balance at September 30, 2020		Additions		Deductions			Balance at March 31, 2021
Contract Assets: Unbilled receivables	$	1,879	$	1,371	$	(857	)	$	2,393
Contract liabilities: Customer advances	$	11,392	$	77,700	$	(73,906	)	$	15,186

	As of		As of
	March 31, 2021		September 30, 2020
Operating right-of-use assets, net	$	4,105	$	4,001

Current portion of operating lease liabilities		1,004		866
Long-term operating lease liabilities		3,278		3,344
Total operating lease liabilities	$	4,282	$	4,210

Finance right-of-use assets, net	$	4,710	$	4,778

Current portion of finance lease liabilities		4,664		4,728
Long-term finance lease liabilities		42		44
Total finance lease liabilities	$	4,706	$	4,772

	Operating Leases			Finance Leases
2021 (remainder of fiscal year)	$	522		$	4,777
2022		1,069			22
2023		1,113			16
2024		1,231			16
2025		393			5
Thereafter		494			-
Total minimum future lease payments		4,822			4,836
Less interest		(540	)		(130	)
Total lease liability		4,282			4,706

Loan Name	Principal Amount as of date of Credit Agreement	Annual Interest Rate			Monthly Payment Amount (000)			Maturity Date	Use of Proceeds
Term Loan 1	$3.980 million		5.20	%	$	36		March 28, 2025	Funded expansion of building on real property in Mount Vernon, IN
Term Loan 2	$3.571 million		5.06	%	$	78		July 2, 2023	Funded a portion of the cash consideration for the Seventh Wave Laboratories acquisition
Term Loan 3	$1.076 million		5.20	%	$	32		March 28, 2025	Funded equipment needs associated with expansion of real property in Mount Vernon, IN
Term Loan 4	$1.001 million		4.63	%	$	20		November 1, 2025	Funded the cash consideration for the Smithers Avanza acquisition
Term Loan 5	$810 thousand		4.00	%	$	17		June 30, 2025	Funded certain capital expenditures
Term Loan 6	$2.865 million		4.25	%	$	56		December 31, 2025	Funded certain capital expenditures
Term Loan 7	$1.263 million		4.00	%	$	28		June 1, 2025	Financed aspects of the Pre-Clinical Research Services and related real property acquisitions
Term Loan 8	$1.853 million		4.00	%	$	12		December 1, 2024	Financed aspects of the Pre-Clinical Research Services and related real property acquisitions
Term Loan 9	$10.000 million		3.85	%	$	184	*	April 30, 2026	Funded a portion of the cash consideration of the Merger
Term Loan 10	$5.000 million		3.85	%	$	92	*	April 30, 2026	Funded a portion of the cash consideration of the HistoTox Labs Acquisition
Term Loan 11	$3.622 million		3.99	%	$	33		June 23, 2022	Refinanced debt with The Huntington Bank for general business purposes

	Three Months Ended March 31,
	2021		2020		Change			%
Bioanalytical analysis	$	2,220	$	2,386	$	(166	)		(7.0	)%
Nonclinical services		14,157		12,254		1,903			15.5	%
Other laboratory services		1,525		551		974			176.8	%
	$	17,902	$	15,191	$	2,711

	Six Months Ended March 31,
	2021		2020		Change		%
Bioanalytical analysis	$	3,870	$	3,712	$	158		4.3	%
Nonclinical services		27,845		22,382		5,463		24.4	%
Other laboratory services		3,219		1,239		1,980		159.8	%
	$	34,934	$	27,333	$	7,601


Number		Description of Exhibits
(3)	3.1	Second Amended and Restated Articles of Incorporation of Inotiv, Inc. as amended through November 4, 2021 (incorporated by reference to Exhibit 3.1 to Form 8-K filed November 5, 2021)

	3.2	Second Amended and Restated Bylaws of Inotiv, Inc. as amended through March 18, 2021 (incorporated by reference to Exhibit 3.2 to Form 8-K filed March 19, 2021)

(10)	10.1	Third Amendment to Amended and Restated Credit Agreement, dated October 4, 2021, between Inotiv, Inc. and First Internet Bank of Indiana (incorporated by reference to Exhibit 10.1 to Form 8-K filed October 4, 2021)

	10.2	Credit Agreement, dated as of November 5, 2021, by and among Inotiv, Inc, certain subsidiaries of Inotiv, Inc., the lenders party thereto and Jefferies Finance LLC, as administrative agent and collateral agent (incorporated by reference to Exhibit 10.2 to Form 8-K filed November 5, 2021)

	10.3	Shareholders Agreement, dated November 5, 2021, by and among Inotiv, Inc. and the shareholders signatory thereto (incorporated by reference to Exhibit 10.1 to Form 8-K filed November 5, 2021)

	10.4	Inotiv, Inc. 2018 Equity Incentive Plan, as amended through November 4, 2021 (incorporated by reference to Exhibit 10.3 to Form 8-K filed November 5, 2021)

(31)	31.1	Certification of Principal Executive Officer (filed herewith).

	31.2	Certification of Chief Financial Officer (filed herewith).

(32)	32.1	Written Statement of Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350) (filed herewith).

	32.2	Written Statement of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350) (filed herewith).

	101	Inline XBRL data file (filed herewith)
	104	Cover Page Interactive Data File (embedded within the Inline XBRL document)

Number		Description of Exhibits
(3)	3.1	Second Amended and Restated Articles of Incorporation of Inotiv, Inc. (formerly known as Bioanalytical Systems, Inc.) as amended through March 18, 2021 (incorporated by reference to the Company’s Form 8-K filed March 19, 2021).

	3.2	Second Amended and Restated Bylaws of Inotiv, Inc. (formerly known as Bioanalytical Systems, Inc.) as amended through March 18, 2021 (incorporated by reference to the Company’s Form 8-K filed March 19, 2021)

(10)	10.1	Offer letter from Inotiv, Inc. to John Gregory Beattie (filed herewith)

(31)	31.1	Certification of Principal Executive Officer (filed herewith).

	31.2	Certification of Chief Financial Officer (filed herewith).

(32)	32.1	Written Statement of Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350) (filed herewith).

	32.2	Written Statement of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350) (filed herewith).

	101	XBRL data file (filed herewith)


Date: ~~May 14, 2021~~February 18, 2022	INOTIV, INC.
	(Registrant)

	By:	/s/ Robert W. Leasure
	Robert W. Leasure
	President and Chief Executive Officer
	(Principal Executive Officer)



Date: ~~May 14, 2021~~February 18, 2022	By:	/s/ Beth A. Taylor
	Beth A. Taylor
	Chief Financial Officer and Vice President of Finance (Principal Financial Officer and Accounting Officer)