BIOANALYTICAL SYSTEMS INC (Form: 10-Q, Received: 02/10/2021 16:32:45)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the quarterly period ended December 31, 2020

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

BIOANALYTICAL SYSTEMS, INC.

(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)

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		BASi		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. YES x 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). YES x 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.

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 February 5, 2021, 11,131,256 of the registrant's common shares were outstanding.

TABLE OF CONTENTS

		Page
PART I	FINANCIAL INFORMATION

Item 1	Condensed Consolidated Financial Statements:
	Condensed Consolidated Balance Sheets as of December 31, 2020 (Unaudited) and September 30, 2020	3
	Condensed Consolidated Statements of Operations for the Three Months Ended December 31, 2020 and 2019 (Unaudited)	4
	Consolidated Statement of Shareholders’ Equity for the Three Months Ended December 31, 2020 and 2019 (Unaudited)	5
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended December 31, 2020 and 2019 (Unaudited)	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3	Quantitative and Qualitative Disclosures about Market Risk	28
Item 4	Controls and Procedures	28

PART II	OTHER INFORMATION	29

Item 1	Legal Proceedings	29
Item 1A	Risk Factors	29
Item 6	Exhibits	29
	Signatures	30

BIOANALYTICAL SYSTEMS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)

	December 31, 2020			September 30, 2020
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	1,155		$	1,406
Accounts receivable
Trade, net of allowance of $561 at December 31, 2020 and September 30, 2020		8,937			8,681
Unbilled revenues and other		2,448			2,142
Inventories, net		876			700
Prepaid expenses		2,546			2,371
Total current assets		15,962			15,300

Property and equipment, net		29,316			28,729
Operating lease right-of use assets, net		4,093			4,001
Finance lease right-of-use assets, net		4,742			4,778
Goodwill		4,368			4,368
Other intangible assets, net		4,104			4,261
Lease rent receivable		131			75
Other assets		82			81
Total assets	$	62,798		$	61,593

Liabilities and shareholders’ equity
Current liabilities:
Accounts payable	$	3,630		$	3,196
Restructuring liability		178			168
Accrued expenses		1,599			2,688
Customer advances		13,635			11,392
Capex lines of credit		3,000			2,613
Current portion on long-term operating lease		949			866
Current portion of long-term finance lease		4,693			4,728
Current portion of long-term debt		6,877			5,991
Total current liabilities		34,561			31,642
Long-term operating leases, net		3,358			3,344
Long-term finance leases, net		40			44
Long-term debt, less current portion, net of debt issuance costs		17,208			18,826
Deferred tax liabilities		175			141
Total liabilities		55,342			53,997

Shareholders’ equity:
Preferred shares, authorized 1,000,000 shares, no par value:
25 Series A shares at $1,000 stated value issued and outstanding at December 31, 2020 and at September 30, 2020		25			25
Common shares, no par value:
Authorized 19,000,000 shares; 11,117,999 issued and outstanding at December 31, 2020 and 10,977,675 at September 30, 2020		2,741			2,706
Additional paid-in capital		26,966			26,775
Accumulated deficit		(22,276	)		(21,910	)
Total shareholders’ equity		7,456			7,596
Total liabilities and shareholders’ equity	$	62,798		$	61,593

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

BIOANALYTICAL SYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)

	Three Months Ended December 31,
	2020			2019
Service revenue	$	17,032		$	12,142
Product revenue		853			776
Total revenue		17,885			12,918

Cost of service revenue		11,597			8,911
Cost of product revenue		411			530
Total cost of revenue		12,008			9,441

Gross profit		5,877			3,477
Operating expenses:
Selling		625			882
Research and development		196			162
General and administrative		5,042			3,453
Total operating expenses		5,863			4,497

Operating income (loss)		14			(1,020	)

Interest expense		(347	)		(311	)
Other income		—			2

Net loss before income taxes		(333	)		(1,329	)

Income taxes expense		33			97

Net loss	$	(366	)	$	(1,426	)


Basic net loss per share	$	(0.03	)	$	(0.13	)
Diluted net loss per share	$	(0.03	)	$	(0.13	)

Weighted common shares outstanding:
Basic		11,016			10,669
Diluted		11,016			10,669

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

BIOANALYTICAL SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(In thousands, except number of shares)

(Unaudited)

	Preferred Shares				Common Shares				Additional Paid-In		Accumulated			Total 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

	Preferred Shares				Common Shares				Additional Paid-In		Accumulated			Total 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

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

BIOANALYTICAL SYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Three Months Ended December 31,
	2020			2019
Operating activities:
Net loss	$	(366	)	$	(1,426	)
Adjustments to reconcile net loss to net cash provided by operating activities, net of acquisition:
Depreciation and amortization		1,065			732
Amortization finance lease		37			32
Change on operating lease		5			—
Employee stock compensation expense		181			81
Provision for doubtful accounts		72			—
Unrealized foreign currency gains		9			18
Financing lease interest expense		69			67
Changes in operating assets and liabilities:
Accounts receivable		(634	)		(1,013	)
Inventories		(176	)		61
Income tax accruals		33			97
Prepaid expenses and other assets		(231	)		(774	)
Accounts payable		435			479
Accrued expenses		(1,089	)		597
Customer advances		2,242			2,501
Net cash provided by operating activities		1,652			1,452

Investing activities:
Capital expenditures		(1,474	)		(2,165	)
Cash paid in acquisition		—			(3,931	)
Net cash used in investing activities		(1,474	)		(6,096	)

Financing activities:
Payments on finance lease liability		(108	)		(104	)
Payments of long-term debt		(712	)		(250	)
Payments of debt issuance costs		(40	)		(110	)
Payments on revolving line of credit		—			(10,531	)
Borrowings on revolving line of credit		—			10,194
Borrowing on construction loans		—			1,183
Borrowing on capex lines of credit		387			728
Proceeds from exercise of stock options		44			—
Borrowing on long-term loan		—			3,439
Net cash (used in) provided by financing activities		(429	)		4,549

Net decrease in cash, cash equivalents, and restricted cash		(251	)		(95	)
Cash, cash equivalents, and restricted cash at beginning of period		1,406			606
Cash, cash equivalents, and restricted cash at end of period	$	1,155		$	511

Supplemental disclosure of cash flow information:
Cash paid for interest	$	256		$	270

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.

BIOANALYTICAL SYSTEMS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands except per share data or as otherwise indicated)

(Unaudited)

DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION

Bioanalytical Systems, Inc. and its subsidiaries, including as operating under the trade name “Inotiv” (“We,” “Our,” “Us,” the “Company,” “BASi” and “Inotiv”) engage in contract laboratory research services and other services related to pharmaceutical development, chemical, and medical device development, biomedical research and government-sponsored research. The Company also manufactures scientific instruments for life sciences research, which we sell with related software for use by pharmaceutical companies, universities, government research centers and medical research institutions. Our customers are located throughout the world.

We have prepared the accompanying unaudited interim condensed consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) 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 our audited consolidated financial statements, and the notes thereto, included in the Company’s annual report on Form 10-K for the year ended September 30, 2020. In the opinion of management, the condensed consolidated financial statements for the three months ended December 31, 2020 and 2019 include all adjustments which are necessary for a fair presentation of the results of the interim periods and of our financial position at December 31, 2020. The results of operations for the three months ended December 31, 2020 may not be indicative of the results for the year ending September 30, 2021.

STOCK-BASED COMPENSATION

In March 2008, the Company’s shareholders approved the 2008 Stock Option Plan (the “Plan”) to replace the 1997 Outside Director Stock Option Plan and the 1997 Employee Stock Option Plan. The purpose of the Plan was to promote our 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 our 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 with us, or ten years from the date of grant. Restricted shares are valued as the average of the high and low 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 our Form 10-K for the fiscal year ended September 30, 2020.

In March 2018, the Company’s shareholders approved the amendment and restatement of the Plan in the form of the Amended and Restated 2018 Equity Incentive Plan and in March 2020 our shareholders approved a further amendment to increase the number of shares issuable under the amended and restated plan by 700 and to make 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 our long-term interests by providing a means of attracting and retaining officers, directors and key employees. The maximum number of new common shares that may be granted under the Equity Plan is 700 shares plus the remaining shares from the 2008 Stock Option Plan. At December 31, 2020, 680 shares remained available for grants under the Plan.

We expense the estimated fair value of stock options over the vesting periods of the grants. We recognize 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 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 months ended December 31, 2020 was $181. Stock based compensation expense for the three months ended December 31, 2019 was $81.

A summary of our stock option activity for the three months ended December 31, 2020 is as follows (in thousands except for share prices):

	Options (shares)			Weighted- Average Exercise Price
Outstanding – October 1, 2020		712		$	2.21
Granted		22		$	5.19
Exercised		(23	)	$	1.90
Forfeited		(5	)	$	3.41
Expired		(1	)	$	1.78
Outstanding – December 31, 2020		704		$	2.31

Exercisable at December 31, 2020		318		$	1.75

The weighted average estimated fair value of stock options granted for the three months ended December 31, 2020 and December 31, 2019 were $3.41 and $3.14, respectively. The weighted-average assumptions used to compute the fair value of the options granted in the three months ended December 31, 2020 were as follows:

Risk-free interest rate	0.41	%
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 December 31, 2020, our total unrecognized compensation cost related to non-vested stock options was $515 and is expected to be recognized over a weighted-average service period of 2.0 years.

During the three months ended December 31, 2020, we granted a total of 117 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 our restricted share activity for the three months ended December 31, 2020 is as follows:

	Restricted Shares		Weighted- Average Grant Date Fair Value
Outstanding – September 30, 2020		128	$	3.88
Granted		117	$	7.86
Forfeited		—		—
Outstanding – December 31, 2020		245	$	5.77

As of December 31, 2020, our total unrecognized compensation cost related to non-vested restricted shares was $1,160 and is expected to be recognized over a weighted-average service period of 2.1 years.

INCOME (LOSS) PER SHARE

The Company computes basic income (loss) per share using the weighted average number of common shares outstanding. The Company has two categories of dilutive potential common shares: Series A preferred shares issued in May 2011 in connection with our registered direct offering and shares issuable upon exercise of options. We compute diluted earnings per share using the if-converted method for preferred shares and the treasury stock method for stock options, respectively. Shares issuable upon exercise of 704 options and 12 common shares issuable upon conversion of preferred shares were not considered in computing diluted income (loss) per share for the three months ended December 31, 2020, because they were anti-dilutive. Shares issuable upon exercise of 785 options and 17 common shares issuable upon conversion of preferred shares were not considered in computing diluted income (loss) per share for the three months ended December 31, 2019, because they were anti-dilutive.

Computation of basic net loss per share is shown in the following table:

	Three Months Ended December 31,
	2020			2019
Basic net loss per share:
Net loss applicable to common shareholders	$	(366	)	$	(1,426	)
Weighted average common shares outstanding		11,016			10,669
Basic net loss per share	$	(0.03	)	$	(0.13	)

INVENTORIES

Inventories consisted of the following:

	December 31, 2020			September 30, 2020
Raw materials	$	573		$	577
Work in progress		67			70
Finished goods		396			230
		1,036			877
Obsolescence reserve		(160	)		(177	)
	$	876		$	700

SEGMENT INFORMATION

The Company operates in two principal segments - research services and research products. The Services segment provides research and development support on a contract basis directly to pharmaceutical companies. The Products segment provides liquid chromatography, electrochemical and physiological monitoring products to pharmaceutical companies, universities, government research centers and medical research institutions. The accounting policies of these segments are the same as those described in the summary of significant accounting policies found in Note 2 to the Consolidated Financial Statements in our annual report on Form 10-K for the fiscal year ended September 30, 2020.

	Three Months Ended December 31,
	2020			2019
Revenue:
Service	$	17,032		$	12,142
Product		853			776
	$	17,885		$	12,918
Operating income (loss):
Service	$	3,111		$	1,263
Product		167			(271	)
Corporate		(3,264	)		(2,012	)
	$	14		$	(1,020	)

Interest expense		(347	)		(311	)
Other income		—			2
Loss before income taxes	$	(333	)	$	(1,329	)

INCOME TAXES

We use the asset and liability method of accounting for income taxes. We recognize 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. We measure 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. We recognize the effect on deferred tax assets and liabilities of a change in tax rates in income in the period that includes the enactment date. We record valuation allowances based on a determination of the expected realization of tax assets.

The difference between the enacted federal statutory rate of 21% and our effective rate of (9.89) % for the quarterly period ended December 31, 2020 is due to changes in our valuation allowance on our net deferred tax assets.

We recognize 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. We measure the amount of the accrual for which an exposure exists as the largest amount of benefit determined on a cumulative probability basis that we believe is more likely than not to be realized upon settlement of the position.

At December 31, 2020 and September 30, 2020, we had no liability for uncertain income tax positions.

We record 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 our effective tax rate. We do not expect the total amount of unrecognized tax benefits to significantly change in the next twelve months.

We file income tax returns in the U.S. and several U.S. states. We remain subject to examination by taxing authorities in the jurisdictions in which we have filed returns for years after 2014.

On March 27, 2020, President Trump signed the Coronavirus Aid, Relief, and Economic Security (CARES) Act, due to the coronavirus pandemic. Among other things, 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, the Company recorded a deferred tax asset for nondeductible expense relating to the PPP funds of $1,276 at September 30, 2020.

On December 27, 2020, the Consolidated Appropriations Act, 2021 was signed into law, clarifying that business expenses paid out of PPP forgivable loan funds may in fact be fully deducted for federal income tax purposes. Based on this clarification in the bill, the Company reversed the $1,276 deferred tax asset related to PPP loan expenses, along with the corresponding valuation allowance for the same amount, as of December 31, 2020.

DEBT

Credit Facility

On December 1, 2019, the Company entered into an Amended and Restated Credit Agreement (as has been amended from time to time, the “Credit Agreement”) with First Internet Bank of Indiana (“FIB”). The Credit Agreement includes five term loans (the “Initial Term Loan,” “Second Term Loan,” “Third Term Loan,” “Fourth Term Loan,” and “Fifth Term Loan,” respectively), a 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” and the “Second Capex Line,” respectively).

The Initial Term Loan for $4,500 bears interest at a fixed rate 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 December 31, 2020 was $3,686. 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 December 31, 2020 was $3,820.

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 December 31, 2020 was $1,067.

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 December 31, 2020 was $1,356.

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 December 31, 2020 was $1,875. We 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, 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 December 31, 2020. On December 18, 2020, the parties amended the Revolving Facility to extend its maturity through May 31, 2021.

The Construction Draw Loan provided for borrowings up to a principal amount not to exceed $4,445 and the Equipment Draw Loan provided for borrowings up to a principal amount not to exceed $1,429. The Construction Draw Loan and Equipment Draw Loan each mature on March 28, 2025. As of December 31, 2020, there was a $4,123 balance on the Construction Draw Loan and a $1,185 balance on the Equipment Draw Loan.

Subject to certain conditions precedent, the Construction Draw Loan and the Equipment Draw Loan each permitted the Company to obtain advances aggregating up to the maximum principal amount available for such loan through March 28, 2020. Amounts outstanding under these loans bear interest at a fixed per annum rate of 5.20%. The Construction Draw Loan and the Equipment Draw Loan each required monthly payments of accrued interest on amounts outstanding through March 28, 2020, and thereafter monthly payments of principal and interest on amounts then outstanding through maturity. We have utilized funds from the Construction Draw Loan and the Equipment Draw Loan in connection with the Evansville facility expansion.

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 December 31, 2020, had a balance of $872. Interest accrues on the principal balance of the Initial Capex Line at a fixed per annum rate equal to 4%. The Company was required to pay accrued but unpaid interest on the Initial Capex Line on a monthly basis until June 30, 2020. Commencing August 1, 2020, and on the first day of each monthly period thereafter until and including on the maturity date, the Initial Capex Line requires payments of principal 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.

The Company’s obligations under the Credit Agreement are guaranteed by BAS Evansville, Inc. (“BASEV”), 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, mortgages on the Company’s BASEV’s and Bronco’s facilities in West Lafayette, Indiana, Evansville, Indiana, and Fort Collins, Colorado, respectively, and pledges of the Company’s ownership interests in its subsidiaries.

The Company entered into a Credit Agreement modification on December 18, 2020 with FIB. Based in part on the impact of COVID-19 on the Company’s operations and financial performance, FIB, among other things, agreed to suspend testing of the Fixed Charge Coverage Ratio under the Credit Agreement for the December 31, 2020 compliance period. The December 18, 2020 modification, also revised the Company’s covenant calculations on a go-forward basis, as described below. Absent these suspensions and modifications, the Company would not have been in compliance with the covenants for the December 31, 2020 measurement period.

As amended, (i) beginning March 31, 2021, the Company is required to maintain a Fixed Charge Coverage Ratio (as defined in the Credit Agreement), tested quarterly, of not less than (a) as of March 31, 2021 1.05 to 1.0, (b) as of June 30, 2021 1.10 to 1.00 and (c) 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 December 31, 2020, 6.00 to 1.00, (b) as of March 31, 2021, 5.75 to 1.00, (c) as of June 30, 2021, 5.00 to 1.00 and (d) 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.

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 agreed to obtain a life insurance policy in an amount not less than $5,000 for its President and Chief Executive Officer and to provide FIB an assignment of such life insurance policy as collateral.

In addition to the indebtedness under our Credit Agreement, as part of the Smithers Avanza acquisition, we have an unsecured promissory note payable to the Smithers Avanza seller in 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 December 31, 2020, the balance on the note payable to the Smithers Avanza seller was $570. As part of the PCRS acquisition, we also have an unsecured promissory note payable to the PCRS seller in the initial principal amount of $800. The promissory note bears interest at 4.5% with monthly payments and a maturity date of December 1, 2024. At December 31, 2020, the balance on the note payable to the PCRS seller was $735.

On April 23, 2020, the Company was granted a loan (the “Loan”) from Huntington National Bank in the aggregate amount of $5,051, pursuant to the Paycheck Protection Program under Division A, Title I of the CARES Act, which was enacted March 27, 2020. The principal and accrued interest under the Loan is to be repaid in eighteen installments of $283 beginning on November 16, 2020 and continuing monthly until the final payment is due on April 16, 2022. The bank is not requiring payments of principal or interest pending the loan forgiveness decision. The Company has applied for forgiveness of the loan in the amount of $4,851.

Long term debt is detailed in the table below.

	As of:
	December 31, 2020			September 30, 2020
Initial term loan	$	3,686		$	3,748
Second term loan		3,820			4,004
Third term loan		1,067			1,115
Fourth term loan		1,356			1,425
Fifth term loan		1,875			1,891
Initial Capex line		872			920
Subtotal term loans		12,676			13,103
Construction and equipment loans		5,308			5,496
Seller Note – Smithers Avanza		570			650
Seller Note – Pre-Clinical Research Services		735			752
Paycheck protection program loan		5,051			5,051
		24,340			25,052
Less: Current portion		(6,877	)		(5,991	)
Less: Debt issue costs not amortized		(255	)		(235	)
Total Long-term debt	$	17,208		$	18,826

ACCRUED EXPENSES

As part of a fiscal 2012 restructuring, we accrued for lease payments at the cease use date for our United Kingdom facility and have considered free rent, sublease rentals and the number of days it would take to restore the space to its original condition prior to our improvements. Based on these matters, we had a $1,117 reserve for lease related costs and for legal and professional fees and other costs to remove improvements previously made to the facility. At December 31, 2020 and September 30, 2020, respectively, we had $178 and $168 reserved for the remaining liability. The reserve is classified as a current liability on the condensed consolidated balance sheets.

NEW ACCOUNTING PRONOUNCEMENTS

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 of the instrument. This ASU departs from the incurred loss model which means the probability threshold is removed. It considers more forward-looking information and requires the entity to estimate its credit losses as far as it can reasonably estimate. This update became effective for the Company on October 1, 2020. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements

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 acquisition

Overview

On November 8, 2019, the Company and Bronco Research Services LLC, a wholly owned subsidiary 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 in connection with PCRS Seller's provision of GLP and non-GLP preclinical testing for the pharmaceutical and medical device industries. The total consideration 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 December 1, 2019.

The Company’s allocation of the $5,857 purchase price to PCRS’s tangible and identifiable intangible assets acquired and liabilities assumed, based on their estimated fair values as of December 1, 2019, is included in the table below. 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 December 31, 2020 is as follows:

	Allocation as of December 31, 2020
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 segment. PCRS recorded revenues of $1,838 and net income of $401 for the three month period ending December 31, 2020.

Pro Forma Results

The Company’s unaudited pro forma results of operations for the three months ended December 31, 2020 assuming the PCRS Acquisition had occurred as of October 1, 2019 are presented for comparative purposes below. These amounts are based on available information of the results of operations of the PCRS Seller’s operations prior to the acquisition date and are not necessarily indicative of what the results of operations would have been had the PCRS Acquisition been completed on October 1, 2018.

The unaudited pro forma information is as follows:

	Three Months Ended
	December 31, 2019
Total revenues	$	13,835

Net loss		(1,299	)

Pro forma basic net loss per share	$	(0.12	)
Pro forma diluted net loss per share	$	(0.12	)

11.

REVENUE RECOGNITION

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

Service revenue

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 our 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 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.

Product revenue

The Company’s 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 products have maintenance agreements available for clients 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.

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 $59 and $256 in the three months ended December 31, 2020 and 2019, respectively.

The following table presents changes in the Company’s contract assets and contract liabilities for the three months ended December 31, 2020.

	Balance at September 30, 2020		Additions		Deductions			Balance at December 31, 2020
Contract Assets: Unbilled receivables	$	1,879	$	720	$	(420	)	$	2,179
Contract liabilities: Customer advances	$	11,392	$	35,042	$	(32,799	)	$	13,635

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.

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 renewal options 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 subsequent annual 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:

	Three months ended		Three months ended
	December 31, 2020		December 31, 2019
Operating right-of-use assets, net	$	4,093	$	4,739

Current portion of operating lease liabilities		949		864
Long-term operating lease liabilities		3,358		4,044
Total operating lease liabilities	$	4,307	$	4,908
Finance right-of-use assets, net		4,742		4,641

Current portion of finance lease liabilities		4,693		4,616
Long-term finance lease liabilities		40		17
Total finance lease liabilities	$	4,733	$	4,633

During the three months ended December 31, 2020, the Company had operating lease of $232 and finance lease amortizations of $37. Finance lease interest recorded in the quarter was $69.

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 months ended December 31, 2020 was $76.

Lease costs included in the condensed consolidated statements of operations consist of the following:

	Three months ended December 31, 2020			Three months ended December 31, 2019
Operating lease costs:
Fixed operating lease costs	$	229		$	214
Short-term lease costs		10			14
Variable lease costs		2			1
Lease income		(160	)		(159	)
Finance lease costs:

Amortization of right-of-use asset expense		37			32
Interest on finance lease liability		69			67
Total lease cost	$	187		$	169

The Company serves as lessor to a lessee in one 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. The Company received rental income of $160 and $159 during the three months ended December 31, 2020 and December 31, 2019, respectively.

Supplemental cash flow information related to leases was as follows:

	Three months ended		Three months ended
	December 31, 2020		December 31, 2019
Cash flows included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	229	$	58
Operating cash flows from finance leases		69		32
Finance cash flows from finance leases		108		104
Non-cash lease activity:
Right-of-use assets obtained in exchange for new operating lease liabilities	$	448	$	377

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

	Three months Ended			Three months Ended
	December 31, 2020			December 31, 2019
Weighted-average remaining lease term (in years)
Operating lease		4.51			5.41
Finance lease		0.88			0.58

Weighted-average discount rate (in percentages)
Operating lease		5.22	%		5.22	%
Finance lease		5.84	%		5.95	%

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

As of December 31, 2020, maturities of operating and finance lease liabilities for each of the following five fiscal years and a total thereafter were as follows:

	Operating Leases			Finance Leases
2021 (remainder of fiscal year)	$	731		$	4,821
2022		1,029			19
2023		1,063			13
2024		1,062			13
2025		609			5
Thereafter		377			-
Total minimum future lease payments		4,871			4,871
Less interest		(564	)		(138	)
Total lease liability		4,307			4,733

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 products and services; (iii) trends in the industries that consume our products and services; (iv) our ability to develop new products and services; (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 of Seventh Wave, Smithers Avanza, and Pre-Clinical Research Services; (ix) our ability to effectively manage current expansion efforts in Evansville and any future expansion or acquisition initiatives undertaken by the Company; (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 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 and (xv) 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. Readers are cautioned that forward-looking statements are not guarantees of future performance and involve risks and uncertainties. Actual results may differ materially from those in the forward-looking statements as a result of various factors, 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 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. 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 recent periods, we have undertaken significant internal and external growth initiatives. We acquired the business of Seventh Wave Laboratories, LLC, in July 2018 (the “Seventh Wave Acquisition”), undertook the expansion of our facilities in Evansville, Indiana, which we began using for operations in March of 2020, acquired the toxicology business of Smithers Avanza on May 1, 2019 (the “Smithers Avanza Acquisition”), acquired the preclinical testing business of Pre-Clinical Research Services, as well as related real property, on December 1, 2019 (the “PCRS Acquisition”), and obtained funding to support these initiatives and other improvements 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, we have made significant investments in upgrading facilities and equipment, added additional services to provide our clients and filled critical leadership and scientific positions. Over the last year, we have also improved our infrastructure and platform to support future growth and additional potential acquisitions. These improvements included establishing the new trade name and brand Inotiv for our combined service businesses, 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.

Our financial results for the three months ended December 31, 2020 were positively impacted by increases in sales and gross margins from the acquisitions and internal growth the Company has experienced in the Service business. During the current quarter, we saw a decrease in operating expenses as a percentage of revenue compared to the same quarter in the prior year. In addition, 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 and there were improved margins on existing sales.

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.

In order to further establish our brand, including in the context of exploring external growth opportunities, we have proposed adopting Inotiv, Inc. as our formal corporate name at the 2021 annual meeting of shareholders scheduled for March 18, 2021.

Business Overview

The Company provides 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 new drugs and products to market quickly and safely. 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 Food and Drug Administration ("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 been involved in the research of drug and products to treat diseases in numerous therapeutic areas for over 45 years since its formation as a corporation organized in Indiana in 1974.

We support both the non-clinical and clinical development needs of researchers and clinicians for primarily small molecule drug candidates, but also including biotherapeutics and devices. We believe that our scientists have the skills in analytical instrumentation development, chemistry, computer software development, 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, drug safety evaluation, clinical trials, drug metabolism studies, pharmacokinetics and basic research from small start-up 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" drugs that are nearing the end of their patent protections. This puts significant pressure on these companies both to 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 pharmaceutical industry has turned to out-sourcing 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" entities, whose success depends on one innovative compound. While several biotech companies have reached the status of major pharmaceutical companies, the industry is still characterized by smaller entities. These developmental companies generally do not have the resources to perform much of their research within their organizations and are therefore 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. We believe that the Company is 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.

We review various metrics to evaluate our financial performance, including revenue, margins and earnings. In the three months ended December 31, 2020, total revenues increased to $17,885 from $12,918, a 38.5% increase as compared to the three months ended December 31, 2019, including incremental PCRS related revenues, given the December 1, 2019 closing for the PCRS acquisition. Gross profit increased to $5,877 from $3,477, a 69.1% increase. Operating expenses were higher by 30.4% in the three months ended December 31, 2020 compared to the three months ended December 31, 2019. The most notable growth in operating expenses is employee-related costs, including benefits and incentive programs, and additional expenses related to operations acquired in the PCRS Acquisition.

As of December 31, 2020, we had $1,155 of cash and cash equivalents as compared to $1,406 of cash and cash equivalents at the end of fiscal 2020. In the first three months of fiscal 2021, we generated $1,652 in cash from operations as compared to $1,452 in the fiscal 2020 period. Capital expenditures for investments in laboratory equipment to increase capacity and improvements to our Fort Collins facility during the first three months of fiscal 2021 totaled $1,474, which is a decrease from $2,165 in the first three months of fiscal 2020.

As of December 31, 2020, we did not have an outstanding balance on our $5,000 general line of credit, we had a $3,000 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 and the PCRS Acquisition and the expansion of facilities and services. Please refer to the Liquidity and Capital Resources section herein for a description of our Amended and Restated Credit Agreement.

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 December 31,
	2020			2019
Service revenue		95.2	%		94.0	%
Product revenue		4.8			6.0
Total revenue		100.0			100.0

Cost of Service revenue *(a)*		68.1			73.4
Cost of Product revenue *(a)*		48.2			68.2
Total cost of revenue		67.1			73.1

Gross profit		32.9			26.9

Total operating expenses		32.8			34.8

Operating income (loss)		0.1			(7.9	)

Other expense		(2.0	)		(2.4	)

Loss before income taxes		(1.9	)		(10.3	)

Income taxes		0.1			0.8

Net loss		(2.0	)%		(11.0	)%

(a)

Percentage of service and product revenues, respectively

Three Months Ended December 31, 2020 Compared to Three Months Ended December 31, 2019

Service and Product Revenues

Revenues for the quarter ended December 31, 2020 increased 38.5% to $17,885 compared to $12,918 for the same period last fiscal year.

Our Service revenue increased 40.3% to $17,032 in the three months ended December 31, 2020 compared to $12,142 for the three months ended December 31, 2019. Nonclinical services revenue increased $3,559 in the three months ended December 31, 2020 due to an expansion at our Evansville location, as well as incremental revenues attributable to the PCRS Acquisition of $479. Bioanalytical analysis revenues increased by $323 in the first quarter of fiscal 2020, mainly due to a higher number of samples received and analyzed. Other laboratory services revenues were positively impacted by a full quarter of revenue from the PCRS Acquisition resulting in incremental revenue of $977 in the three months ended December 31, 2020 as compared to the three months ended December 31, 2019.

	Three Months Ended December 31,
	2020		2019		Change		%
Bioanalytical analysis	$	1,650	$	1,327	$	323		24.3	%
Nonclinical services		13,687		10,128		3,559		35.1	%
Other laboratory services		1,695		687		1,008		146.7	%
	$	17,032	$	12,142	$	4,890

Sales in our Products segment increased 9.9% in the three months ended December 31, 2020 to $853 from $776 for the three months ended December 31, 2019. The majority of the increase in the first fiscal quarter of 2021 stems from higher sales of Culex in-vivo sampling systems and analytical instruments, partially offset by a decrease in other instruments.

	Three Months Ended December 31,
	2020		2019		Change			%
Culex, in-vivo sampling systems	$	261	$	176	$	85			48.3	%
Analytical instruments		504		389		115			29.6	%
Other instruments		88		211		(123	)		(58.3	)%
	$	853	$	776	$	77

Cost of Revenues

Cost of revenues for the three months ended December 31, 2020 was $12,007 or 67.1% of revenue, compared to $9,441, or 73.1% of revenue for the three months ended December 31, 2019.

Cost of Service revenue as a percentage of Service revenue decreased to 68.1% during the three months ended December 31, 2020 from 73.4% in the three months ended December 31, 2019, reflecting operating leverage and the greater utilization of recently expanded capacity.

Cost of Products revenue as a percentage of Products revenue in the three months ended December 31, 2020 decreased to 48.2% from 68.2% in the comparable prior year period due to expense reductions implemented in the last half of fiscal 2020 and improved margins on existing sales.

Operating Expenses

Selling expenses for the three months ended December 31, 2020 decreased 29.1% to $625 from $882 for the three months ended December 31, 2019. This decrease is mainly due to the reduction of non-recurring costs of nearly $140 that was related to the launch of our new trade name Inotiv, 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 three months ended December 31, 2020 increased 21.0% over the three months ended December 31, 2019 to $196 from $162. The increase was primarily due to internal development investments of $118 for new services, partially offset by lower development costs in the Product segment.

General and administrative expenses for the three months ended December 31, 2020 increased 46.0% to $5,042 from $3,453 for the three months ended December 31, 2019. The increase was mainly driven by increased employee-related costs, including benefits and non-cash stock compensation, as we continue to grow and expand our business, as well as additional expenses from the PCRS acquisition, such as depreciation and amortization expenses.

Other Income (Expense)

Other expense for the first quarter of fiscal 2020 was $347, as compared to other expense of $309 for the first quarter of fiscal 2020. The primary reason for the change in expense was the increase in interest expense under the PPP loan received in April 2020 and our credit arrangements with First Internet Bank (“FIB”). We entered into new financing arrangements with FIB, including as part of the PCRS Acquisition.

Net Income/Loss

As a result of the above described factors, we had a net loss of $366 for the three months ended December 31, 2020 as compared to a net loss of $1,426 during the three months ended December 31, 2019.

Income Taxes

Our effective income tax rate for the three months ended December 31, 2020 and 2019 was (9.89)% and (7.32)%, respectively. The expense recorded for each period was $33 and $97, 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.

Accrued Expenses

Liquidity and Capital Resources

Comparative Cash Flow Analysis

At December 31, 2020, we had cash and cash equivalents of $1,155, compared to $1,406 at September 30, 2020.

Net cash provided by operating activities was $1,652 for the three months ended December 31, 2020 compared to net cash provided by operating activities of $1,452 for the three months ended December 31, 2019. Contributing factors to our net cash provided by operations in the first three months of fiscal 2021 were noncash charges of $1,065 for depreciation and amortization, $36 of amortization of finance lease, a net increase in customer advances of $2,242, as a result of increasing orders, and an increase in accounts payable of $435. These items were partially offset by an increase of $634 in accounts receivable, a net increase in prepaid expenses of $229, and a decrease in accrued expenses of $1,087.

Days’ sales in accounts receivable decreased to 49 days at December 31, 2020 from 56 days at September 30, 2020. It is not unusual to see a fluctuation in the Company's pattern of days’ sales in accounts receivable as invoicing is based on billing milestones and may not be consistent with the timing of revenue recognition. Clients 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 first three months of fiscal 2020 are noncash charges of $732 for depreciation and amortization, $32 of amortization of finance lease, a net increase in customer advances of $2,501, as a result of increasing orders, an increase in accrued expenses of $597, and an increase in accounts payable of $479. These items were partially offset by an increase of $1,013 in accounts receivable and a net increase in prepaid expenses of $774.

Investing activities used $1,474 in the first three months of fiscal 2021 for capital expenditures as compared to $6,096 in the first three months of fiscal 2020, which included $2,165 of capital expenditures and $3,931 cash paid for the PCRS Acquisition. The capital additions during the first quarter of fiscal 2021 consisted of investments in laboratory equipment to increase capacity and improvements in our Fort Collins facility.

Financing activities used $429 in the first three months of fiscal 2021, as compared to cash provided of $4,549 during the first three months of fiscal 2020. The use of cash in the first quarter of fiscal 2021 consisted of payments on long-term debt of $712, financing lease payments of $108 and debt issuance costs of $40, which were partially offset from net cash borrowed against the capex line of credit of $387 and proceeds from the exercise of stock options of $44. The main sources of cash in the first three months of fiscal 2020 were from borrowings on the long-term loan of $3,439, and borrowings on the Construction loans and Capex lines of credit of $1,183 and $728, respectively. These items were partially offset by a net payment against the Revolving Facility of $337, long-term loan payments of $250, finance lease payment of $104 and payment of debt issuance cost of $110.

Capital Resources

Credit Facility

On December 1, 2019, we entered into an Amended and Restated Credit Agreement (as has been amended from time to time, the “Credit Agreement”) with First Internet Bank of Indiana (“FIB”). The Credit Agreement includes five term loans (the “Initial Term Loan,” “Second Term Loan,” “Third Term Loan,” “Fourth Term Loan,” and “Fifth Term Loan,” respectively), a 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” and the “Second Capex Line,” respectively).

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 December 31, 2020 was $3,820.

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 December 31, 2020 was $1,067.

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 December 31, 2020, had a balance of $869. Interest accrues on the principal balance of the Initial Capex Line at a fixed per annum rate equal to 4%. The Company was required to pay accrued but unpaid interest on the Initial Capex Line on a monthly basis until June 30, 2020. Commencing August 1, 2020, and on the first day of each monthly period thereafter until and including on the maturity date, the Initial Capex Line requires payments of principal and interest in monthly installments equal to $17.

The Company entered into a Credit Agreement modification on December 18, 2020 with FIB. Based in part on the impact of COVID-19 on the Company’s operations and financial performance, FIB, among other things, agreed to suspended testing of the Fixed Charge Coverage Ratio under the Credit Agreement for the December 31, 2020 compliance period. The December 18, 2020 modification, also revised the Company’s covenant calculations on a go-forward basis, as described below. Absent these suspensions and modifications, the Company would not have been in compliance with the covenants for the December 31, 2020 measurement period.

In addition to the indebtedness under our Credit Agreement, as part of the Smithers Avanza Acquisition, we have an unsecured promissory note payable to the Smithers Avanza Seller in 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 December 31, 2020, the balance on the note payable to the Smithers Avanza Seller was $570. As part of the PCRS Acquisition, we also have an unsecured promissory note payable to the PCRS Seller in the initial principal amount of $800. The promissory note bears interest at 4.5% with monthly payments and a maturity date of December 1, 2024. At December 31, 2020, the balance on the note payable to the PCRS Seller was $735.

On April 23, 2020, we were granted a loan (the “Loan”) from Huntington National Bank in the aggregate amount of $5,051, pursuant to the Paycheck Protection Program under Division A, Title I of the CARES Act, which was enacted March 27, 2020. The principal and accrued interest under the Loan is to be repaid in eighteen installments of $283 beginning on November 16, 2020 and continuing monthly until the final payment is due on April 16, 2022. The bank is not requiring payments of principal or interest pending the loan forgiveness decision. We have applied for forgiveness of the loan in the amount of $4,851.

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, and additional borrowings available under our Credit Agreement. 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

A smaller reporting company is not required to provide the information required by this Item 3.

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 effective as of December 31, 2020.

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 first quarter of fiscal 2021 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

PART II

ITEM 1 – LEGAL PROCEEDINGS

There were no material changes during the first quarter of fiscal 2021 to our disclosure in Item 3 of our Form 10-K for fiscal 2020.

ITEM 1A - RISK FACTORS

Before investing in our securities you should carefully consider the risks described in our Annual Report on Form 10-K for the fiscal year ended September 30, 2020, 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 this Quarterly Report. Realization of any of these risks could have a material adverse effect on our business, financial condition, cash flows and results of operations.

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 6 - EXHIBITS

Number		Description of Exhibits

(10)	10.1	Third Amendment, dated December 18, 2020, to Amended and Restated Credit Agreement, dated December 1, 2019, between Bioanalytical Systems, Inc. and First Internet Bank (filed herewith).

	10.2	Amended and Restated Employment Agreement, dated December 29, 2020, between Bioanalytical Systems, Inc. and Robert W. Leasure, Jr. (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)

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized:

	BIOANALYTICAL SYSTEMS, INC.
	(Registrant)

Date: February 10, 2021	By:	/s/ Robert W. Leasure
	Robert W. Leasure
	President and Chief Executive Officer
	(Principal Executive Officer)

Date: February 10, 2021	By:	/s/ Beth A. Taylor
	Beth A. Taylor
	Chief Financial Officer and Vice President of
	Finance (Principal Financial Officer and
	Accounting Officer)

Exhibit 10.1

THIRD AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT

THIS THIRD AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (this “Amendment”), dated as of December 18, 2020, is entered into by and between BIOANALYTICAL SYSTEMS, INC., an Indiana corporation (“Borrower”), and FIRST INTERNET BANK OF INDIANA, an Indiana state bank (“Bank”).

W I T N E S S E T H T H A T:

WHEREAS, Borrower and Bank entered into certain loan documents, including but not limited to that certain Amended and Restated Credit Agreement dated December 1, 2019, as amended by that certain First Amendment to Amended and Restated Credit Agreement dated March 27, 2020, as further amended by that certain Second Amendment to Amended and Restated Credit Agreement dated August 13, 2020 (the “Loan Agreement”); and

WHEREAS, Borrower has applied to Bank for modifications to the Loan Agreement related to certain definitions and a change in terms of one of the Borrower’s credit facilities; and

WHEREAS, Bank requires certain modifications to the Loan Agreement related to revisions of certain definitions; and

WHEREAS, Bank is willing to make such modifications to the Loan Agreement on the terms and conditions stated herein.

NOW, THEREFORE, in consideration of these premises and the undertakings of the parties hereto, Borrower and Bank hereby agree as follows:

A. Effect of Amendment. This Amendment shall not change, modify, amend or revise the terms, conditions and provisions of the Loan Agreement, the terms and provisions of which are incorporated herein by reference, except as expressly provided herein and agreed upon by the parties hereto. This Amendment is not intended to be nor shall it constitute a novation or accord and satisfaction of the outstanding instruments by and between the parties hereto. Borrower and Bank agree that, except as expressly provided herein, all terms and conditions of the Loan Agreement shall remain and continue in full force and effect. Borrower acknowledges and agrees that the indebtedness under the Loan Agreement remains outstanding and is not extinguished, paid or retired by this Amendment, or any other agreements between the parties hereto prior to the date hereof, and that Borrower is and continues to be fully liable for all obligations to Bank contemplated by or arising out of the Loan Agreement. Except as expressly provided otherwise by this Amendment, the credit facilities contemplated by this Amendment shall be made according to and pursuant to all conditions, covenants, representations and warranties contained in the Loan Agreement, as amended hereby.

B. Definitions. Terms defined in the Loan Agreement which are used herein shall have the same meaning as set forth in the Loan Agreement unless otherwise specified herein.

C. Additional Obligations of Borrower. In addition to the fees stated in the Loan Agreement, Borrower shall also pay to Bank (i) a modification/commitment fee in an amount equal to Thirty Thousand and No/100 Dollars ($30,000.00) and (ii) all reasonable costs and expenses incidental to this Amendment, including, but not limited to, reasonable fees and out-of-pocket expenses of Bank’s counsel.

D. Reaffirmation of Representations and Warranties. Borrower hereby reaffirms all representations and warranties contained in Section 3 of the Loan Agreement and within Section 3 of the Loan Agreement, all references to the Loan Agreement shall be deemed to include this Amendment.

E. Reaffirmation of Covenants. Borrower hereby reaffirms its duty to comply with the covenants contained in Sections 4 and 5 of the Loan Agreement, as the same are modified herein.

F. Reaffirmation of Events of Default and Rights of Bank. Borrower hereby reaffirms the events of default and rights of Bank contained in Section 6 of the Loan Agreement, as amended by this Amendment.

G. Amendments.

(a) Section 2.1(d) of the Loan Agreement is hereby deleted and replaced in its entirety with the following:

(d) The term of the Facility will expire on May 31, 2021, and the Revolving Note will become payable in full on that date.

(b) Section 2.11 of the Loan Agreement is hereby deleted and replaced in its entirety with the following, and the former Exhibit 2.11 is similarly replaced with the Capex Loan Note #2:

2.11 Capex Loan #2. (a) Subject to the terms and conditions hereof, prior to the date of the Third Amendment, Bank made to Borrower a loan consisting of multiple advances (the “Capex Loan #2”) in an aggregate amount of Three Million and No/100 Dollars ($3,000,000.00). The unpaid principal balance, together with all accrued but unpaid interest and reimbursable expenses, shall be payable in accordance with the terms of the Capex Loan #2 as evidenced by a Capex Term Loan Note #2 to be issued by Borrower to Bank dated on the date of the Third Amendment (“Capex Loan Note #2), in substantially the form of Exhibit 2.11. The term of the Capex Loan #2 shall mature on December 31, 2025 (“Capex Loan #2 Maturity Date”) unless the Capex Loan #2 is sooner paid pursuant to the terms hereof.

(b) The proceeds of the Capex Loan #2 were used to fund equipment needs of the Borrower and its Consolidated Subsidiaries.

(c) Borrower shall have the right to prepay the principal of the Capex Loan #2 in accordance with the provisions and prepayment penalties set forth in the Capex Loan Note #2. Early principal payments will not, unless agreed to by Bank in writing, relieve Borrower of Borrower’s obligation to continue to make regular monthly payments required by the Capex Loan Note #2. Rather, early payments will reduce the principal balance due and may result in Borrower’s making fewer payments. Borrower agrees not to send Bank payments marked “paid in full”, “without recourse” or similar language. If Borrower sends such a payment, Bank may accept it without losing any of Bank’s rights under the Capex Loan Note #2, and Borrower will remain obligated to pay any further amount owed to Bank.

5.10. Financial Covenants.

(a) Beginning March 31, 2021, Borrower shall not permit the Fixed Charge Coverage Ratio, tested quarterly, to be less than the following each quarter ending:

(i) 1.05 to 1.00 at March 31, 2021;

(ii) 1.10 to 1.00 at June 30, 2021;

(iii) 1.20 to 1.00 at September 30, 2021 and each quarter thereafter;

For avoidance of doubt, the Fixed Charge Coverage Ratio testing periods ending September 30, 2020 and December 31, 2020 are suspended.

(b) Beginning December 31, 2020, Borrower shall not permit the Cash Flow Leverage Ratio, tested at the end of each fiscal quarter ending as follows:

(i) as of December 31, 2020, to exceed 6.00 to 1.00;

(ii) as of March 31, 2021, to exceed 5.75 to 1.00;

(iii) as of June 30, 2021, to exceed 5.00 to 1.00;

(iv) as of September 30, 2021, and each quarter thereafter, to exceed 4.25 to 1.00.

For avoidance of doubt, the Cash Flow Leverage Ratio testing period ending September 30, 2020 is suspended.

The Financial Covenants set forth in this Section 5.10 shall be calculated excluding the effects of Borrower’s adoption of Accounting Standards Codification Topic 842, Leases.

(d) The following provisions shall be new or amended definitions in Exhibit 1 of the Loan Agreement:

“Adjusted EBITDA” means for the applicable Test Period, the sum of in total for Bioanalytical Systems, Inc. and its Consolidated Subsidiaries (without duplication): (a) EBITDA; plus (b) each of the following to the extent included in the determination of EBITDA for the applicable Test Period, (i) non-cash losses; plus (ii) permitted Run-Rate Cost-Savings & Synergies; plus, (iii) non-cash stock compensation; plus (iv) Approved Non-Recurring Expenses; and minus (c) each of the following to the extent included in the determination of EBITDA for the applicable Test Period, (i) any extraordinary or non-recurring income or gains, and (ii) any gain arising from the sale of capital assets, and plus or minus (d) any non-cash expense or income recognized to the extent included in the determination of EBITDA for the applicable Test Period.

“Fixed Charge Coverage Ratio” means for the applicable Test Period, the ratio resulting from dividing (i) Adjusted EBITDA for such Test Period minus (a) Unfunded Capital Expenditures for such Test Period, minus (b) the aggregate amount of cash payments of income taxes for such Test Period by (ii) Fixed Charges for such Test Period.

“Test Period” means each 12-month period ending at the end of each fiscal quarter. The first Test Period shall be the Test Period ending on December 31, 2019. Notwithstanding the foregoing, solely for purposes of calculating the Fixed Charge Coverage Ratio, the Test Period for the quarter ending 3/31/2021 shall include only the quarter ending 3/31/2021; the Test Period for the quarter ending 6/30/2021 shall include only the quarters ending 3/31/2021 and 6/30/2021; and the Test Period for the quarter ending 9/30/2021 shall include only the quarters ending 3/31/2021, 6/30/2021 and 9/30/2021.

“Third Amendment” means the Third Amendment to Amended and Restated Credit Agreement, dated December 18, 2020 between Borrower and Bank

H. Necessary Documents. The obligation of Bank to make the modifications to the Loan Agreement under this Amendment is subject to the receipt by Bank on or before the date hereof of all of the following, each dated as of the date hereof or another date acceptable to Bank and each to be in the form and substance approved by Bank on the date on which this Amendment is executed and delivered by Borrower and Bank:

(1) This Amendment executed by Borrower.

(2) Capex Loan Note #2 executed by Borrower.

(3) Amended and Restated Revolving Note executed by Borrower.

(4) Amended and Restated Guaranty Agreement executed by Bronco Research Services LLC.

(5) Amended and Restated Guaranty Agreement executed by BAS Evansville, Inc.

(6) Amended and Restated Guaranty Agreement executed by BASi Gaithersburg.

(7) Amended and Restated Guaranty Agreement executed by Seventh Wave Laboratories LLC.

(8) Sixth Modification of Mortgage (Premises #1).

(9) Fourth Modification of Amended and Restated Mortgage (Premises #2).

(10) Second Modification to Deed of Trust (Premises #3)

(11) Such other documents, information, opinions, etc., as Bank may reasonably request.

I. Representations and Warranties of Borrower. Borrower hereby represents and warrants, in addition to any other representations and warranties contained herein, in the Loan Agreement, the Loan Documents (as defined in the Loan Agreement) or any other document, writing or statement delivered or mailed to Bank or its agent by Borrower, as follows:

(1) This Amendment constitutes a legal, valid and binding obligation of Borrower enforceable in accordance with its terms. Borrower has taken all necessary and appropriate corporate action for the approval of this Amendment and the authorization of the execution, delivery and performance thereof.

(2) There is no Event of Default under the Loan Agreement, this Amendment or the Loan Documents.

(3) Borrower hereby specifically confirms and ratifies its obligations, waivers and consents under each of the Loan Documents.

(4) Except as specifically amended herein, all representations, warranties and other assertions of fact contained in the Loan Agreement and the Loan Documents continue to be true, accurate and complete.

(5) Except as provided in writing to Bank prior to the date hereof, there have been no changes to the Articles of Incorporation, By-Laws, the identities of the named executive officers of Borrower, or the composition of the board of directors of Borrower since execution of the Loan Agreement.

(6) Borrower acknowledges that the definition “Loan Documents” shall include this Amendment and all the documents executed contemporaneously herewith.

J. Governing Law. This Amendment has been executed and delivered and is intended to be performed in the State of Indiana and shall be governed, construed and enforced in all respects in accordance with the substantive laws of the State of Indiana.

K. Headings. The section headings used in this Amendment are for convenience only and shall not be read or construed as limiting the substance or generality of this Amendment.

L. Counterparts. This Amendment may be signed in one or more counterparts, each of which shall be considered an original, with the same effect as if the signatures were upon the same instrument.

M. Modification. This Amendment may be amended, modified, renewed or extended only by written instrument executed in the manner of its original execution.

N. Waiver of Certain Rights. Borrower waives acceptance or notice of acceptance hereof and agrees that the Loan Agreement, this Amendment, and all of the other Loan Documents shall be fully valid, binding, effective and enforceable as of the date hereof, even though this Amendment and any one or more of the other Loan Documents which require the signature of Bank, may be executed by an on behalf of Bank on other than the date hereof.

O. Waiver of Defenses and Claims. In consideration of the financial accommodations provided to Borrower by Bank as contemplated by this Amendment, Borrower hereby waives, releases and forever discharges Bank from and against any and all rights, claims or causes of action against Bank arising under Bank’s actions or inactions with respect to the Loan Documents or any security interest, lien or collateral in connection therewith as well as any and all rights of set off, defenses, claims, causes of action and any other bar to the enforcement of the Loan Documents which exist as of the date hereof.

P. Force and Effect. Except as otherwise modified herein, all other terms and conditions of the Loan Agreement remain in full force and effect.

[SIGNATURE PAGE – THIRD AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT]

IN WITNESS WHEREOF, the parties hereto have caused this Third Amendment to Amended and Restated Credit Agreement to be executed by their duly authorized officers as of the day and year first above written.

	Bioanalytical Systems, Inc.


	By:	/s/ Robert Leasure, Jr.
		Robert Leasure, Jr.,
		President and Chief Executive Officer

STATE OF KENTUCKY	)
	) SS:
COUNTY OF JEFFERSON	)

BEFORE ME, a Notary Public in and for said County and State, personally appeared Robert Leasure, Jr., the President and Chief Executive Officer of Bioanalytical Systems, Inc., who executed the foregoing instrument on behalf of such entity, and acknowledged the signing and execution of said instrument to be his voluntary act and deed on behalf of such entity for the uses and purposes therein mentioned.

Witness my hand and Notarial Seal, this 18^th day of December, 2020.

	/s/ Julie A. Spencer
	Notary Public - Signature

My Commission Expires: 1/23/2021
	Julie A. Spencer	Notary Public
Resident of Jefferson County	(Printed)

My Commission No:

569480

FIRST INTERNET BANK OF INDIANA


By:	/s/ Katrina McWilliams
	Katrina McWilliams, Vice President

Exhibit 10.2

Execution Version

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into as of December 29, 2020, by and between BIOANALYTICAL SYSTEMS, INC., an Indiana corporation (the “Company”), and ROBERT LEASURE, JR. (the “Executive”).

R E C I T A L S

WHEREAS, the Company and the Executive are parties to that certain Employment Agreement, dated January 27, 2020, providing for the employment of the Executive by the Company (the "Original Agreement"); and

WHEREAS, the Company and the Executive desire to amend and restate the Original Agreement in its entirety and to continue the Executive's employment with the Company on the terms and conditions set forth herein;

A G R E E M E N T

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants hereinafter set forth and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and intending to be legally bound, the parties hereto agree as follows:

1. Employment. The Company agrees to employ the Executive and the Executive agrees to render his services to the Company, as its President and Chief Executive Officer, during the Term (as defined below). In connection with his employment as President and Chief Executive Officer, the Executive shall serve without additional payment or compensation of any kind as the President and Chief Executive Officer of any direct or indirect subsidiary or affiliate of the Company designated by the Board of Directors of the Company (the “Board”) (collectively, the “Subsidiaries”). The Executive agrees to use his best efforts to promote and further the business, reputation and good name of the Company and the Subsidiaries (collectively, the “Company Group”) and the Executive shall promptly and faithfully comply with all instructions, directions, requests, rules and regulations made or issued from time to time by the Company.

2. Term.

(a) Unless earlier terminated by the Executive's death or Disability (as defined below), the term of the Executive's employment pursuant to this Agreement (the “Term”) shall continue until December 31, 2022, and shall be automatically renewed for successive one-year periods thereafter unless either party shall have given notice to terminate the Executive's employment no later than ninety (90) days prior to the end of the then-current Term.

(b) Notwithstanding the foregoing, the Executive's employment may be terminated by the Company or by the Executive as provided in Section 4.

3. Compensation and Benefits. As full and complete compensation for all the Executive’s services hereunder, during the Term the Company shall pay the Executive the compensation and provide the Executive with the benefits described below.

(a) Base Salary. Beginning January 1, 2021, the Company shall pay the Executive an annual base salary of $480,000 (“Base Salary”) during the Term. The Board shall review the Executive’s Base Salary each year and shall have the right in its discretion to increase such Base Salary. With the Executive's prior consent, the Executive's Base Salary may be reduced by an amount and for a period mutually agreed between the Executive and the Company so long as such reduction is made in conjunction with similar reductions in base salary for other executives or employees of the Company.

(b) Annual Incentive Plan. In addition to the Base Salary, during the Term, the Executive will have an annual incentive opportunity of up to 50% of the Executive’s Base Salary for the year. The amount of the annual incentive (“Bonus”) for any year will be determined, in its sole discretion, by the Compensation Committee based upon certain performance measures which shall be approved by the Compensation Committee in its discretion and communicated to the Executive by the end of each November during the Term; provided that the communication of the performance measures for the Company’s fiscal year ended September 30, 2020 will be communicated to the Executive by February 15, 2020. The Bonus for each year will be determined and payable by January 15 of the following year.

(c) Long-Term Incentive Awards. On the effective date of the Original Agreement, the Executive was awarded options to purchase 45,000 of the Company’s common shares, and (ii) 13,000 restricted common shares (together, the “Fiscal 2020 Awards”) which were issued pursuant to the Plan. On the effective date of this Agreement, the Executive shall be awarded 40,000 restricted stock units (the “Fiscal 2021 Awards”) to be issued pursuant to the Plan. The Executive shall also be eligible to receive additional equity awards at such times, in such forms and in such amounts as may be determined by the Committee (as defined in the Plan) from time to time. The terms of the Fiscal 2020 Awards, the Fiscal 2021 Awards and any such additional awards shall be governed by the Plan and any applicable award agreement related thereto entered into between the Company and the Executive, except as otherwise provided herein.

(d) Vacation. The Executive shall be entitled to vacation in accordance with Company policy, which vacation shall be taken on dates to be selected by mutual agreement of the Company and the Executive.

(e) Reimbursement for Expenses. The Executive shall be entitled to reimbursement for ordinary and necessary business expenses incurred by the Executive in the course of his employment in accordance with the Company's policies from time to time.

4. Termination of Employment Prior to a Change in Control. The Executive's employment hereunder may be terminated during the Term in accordance with this Section 4.

(a) Death. In the event the Executive dies during the Term, the Executive's employment shall automatically terminate on the date of death. In such event, the Executive's estate shall be entitled to receive his Base Salary and a prorated portion of his target Bonus for the year in which termination occurs, in each case through the effective date of the termination of his employment.

(b) Disability. The Company, by written notice to the Executive, may immediately terminate the Executive’s employment in the event of the Executive's Disability. As used herein, "Disability" shall mean the Executive’s inability, with reasonable accommodation, to perform the essential functions of his position, by reason of physical or mental incapacity, for a consecutive period of 90 days or for a total period of 180 days in any 360-day period. In the event the Executive's employment is terminated due to the Executive's Disability, the Executive shall be entitled to receive his Base Salary and a prorated portion of his target Bonus for the year in which termination occurs, in each case through the effective date of the termination of his employment.

(c) Termination for Cause by the Company. The Company, by written notice to the Executive, may immediately terminate the Executive’s employment for Cause. As used herein, a termination by the Company “for Cause” shall mean that the Executive has (i) been convicted of (or entered a plea of nolo contendre with respect to) a felony or any crime or offense lesser than a felony involving misappropriation of the property of the Company or any other member of the Company Group, whether such conviction or plea occurs before or after termination of employment with the Company; (ii) engaged in conduct that has caused demonstrable and material injury to any member of the Company Group, monetary or otherwise; (iii) failed to follow the reasonable instructions of the Board relating to the Executive's employment or the performance of the Executive's duties and responsibilities; (iv) been derelict, or engaged in other misconduct, in the performance of the Executive's duties for the Company or any other member of the Company Group and failed to cure such situation within thirty (30) days after receiving written notice thereof from the Board; and (v) engaged in the intentional disclosure or use of confidential information or trade secrets (each as defined in Section 7 of this Agreement) of the Company Group to a party unrelated to the Company Group, other than as reasonably determined in good faith by the Executive to be not contrary to the interests of the Company Group or reasonably believed in good faith by the Executive to be required by law. In the event the Executive's employment is terminated for Cause, the Executive shall be entitled to receive only his Base Salary through the effective date of the termination of his employment and shall not be entitled to receive any other compensation.

(d) Termination other than for Cause by the Company. The Company, by written notice to the Executive, may terminate the Executive's employment other than for Cause, effective as of the date specified by the Company in the notice, which date shall not be earlier than the date of the notice. In such event, except as provided in Section 5, the Executive shall be entitled to receive his Base Salary and a prorated portion of his target Bonus for the year in which termination occurs, in each case through the effective date of the termination of his employment.

(e) Termination for Good Reason by the Executive. The Executive, by providing at least 30 days prior written notice to the Company, may terminate his employment hereunder for Good Reason, provided that the Company shall have the right to cure such Good Reason within such 30-day period. In order to constitute a valid notice of a termination for Good Reason, the notice must be received by the Board of Directors of the Company no later than 60 days following the initial occurrence of any event asserted to constitute Good Reason. As used herein, a termination by the Executive “for Good Reason” shall mean that (i) the Company has materially diminished the duties and responsibilities of the Executive with respect to the Company, or (ii) the Company has materially breached the terms of this Agreement. In the event the Executive's employment is terminated for Good Reason, except as provided in Section 5, the Executive shall be entitled to receive his Base Salary and a prorated portion of his target Bonus for the year in which termination occurs, in each case through the effective date of the termination of his employment.

(f) Termination other than for Good Reason by the Executive. The Executive, by providing at least 30 days prior written notice to the Company, may terminate his employment other than for Good Reason. In such event, the Executive shall be entitled to receive only his Base Salary through the effective date of the termination of his employment and shall not be entitled to receive any other compensation.

(g) Impact of Termination for Cause or without Good Reason on Equity Awards. If the Executive's employment is terminated (i) by the Company for Cause, or (ii) by the Executive other than for Good Reason, all options to purchase shares of the Company's common stock and other equity awards held by the Executive on the effective date of termination that have not vested as of such date shall terminate immediately following the termination of the Executive's employment.

(h) Timing of Payments. The payment of any amounts due to the Executive pursuant to this Section 4 shall be paid no later than the next regular payroll date following the effective date of the termination of the Executive's employment.

5. Termination Following a Change in Control. If the Executive’s employment is terminated by the Company other than for Cause, or by the Executive for Good Reason, in either case within 12 months after a Change in Control:

(a) the Company shall pay to the Executive as severance compensation an amount equal to two times the Executive’s Base Salary as then in effect plus two times the Executive’s Bonus paid for the Company’s last calendar year. This severance compensation shall be paid in a lump sum on the first day of the month occurring at least 30 days following the effective date of the termination of employment;

(b) all outstanding options to purchase shares of the Company's common stock held by the Executive on the effective date of termination that have not vested as of such date shall vest immediately prior to the termination of the Executive's employment and remain exercisable for a period of 30 days following the effective date of such termination;

(c) all outstanding unvested awards of restricted stock and all unvested restricted stock units held by the Executive on the effective date of termination shall vest immediately prior to the termination of the Executive's employment; and

(d) the Executive shall be entitled to receive, at the time when the severance compensation provided for in clause (a) of this Section 5 is paid, a pro-rata portion (based on the number of days during the applicable performance period on which the Executive was employed) of the number of such performance shares that would have been earned by the Executive if the performance conditions related thereto were satisfied at the target level for such awards and the Executive had been employed on the date required to earn such shares.

As used herein, “Change in Control” shall have the meaning specified in the Plan.

6. No Other Compensation; Withholding. Except as otherwise expressly provided herein, or in any other written document executed by the Company and the Executive, no other compensation or other consideration shall become due or payable to the Executive on account of the services rendered to the Company Group. The Company shall have the right to deduct and withhold from the compensation payable to the Executive hereunder any amounts required to be deducted and withheld under the provisions of any statute, regulation, ordinance, order or any other amendment thereto, heretofore or hereafter enacted, requiring the withholding or deduction of compensation.

7. Confidential Information; Inventions; Code of Conduct.

(a) The Executive recognizes and acknowledges that he shall receive in the course of his employment hereunder certain confidential information and trade secrets concerning the Company Group’s business and affairs which may be of great value to the Company Group. The Executive therefore agrees that he will not disclose any such information relating to the Company Group, the Company Group’s personnel or their operations other than in the ordinary course of business or in any way use such information in any manner which could adversely affect the Company Group’s business. For purposes of this Agreement, the terms “trade secrets” and “confidential information” shall include any and all information concerning the business and affairs of the Company Group and any division or other affiliate of the Company Group that is not generally available to the public. The Company may, formally or informally, establish, adopt, implement or utilize procedures or actions that are designed to monitor or protect Company Group's confidential information. Executive hereby irrevocably consents, without the right to receive further notice, to any or all of these procedures or actions that may be established, adopted, implemented, utilized or enforced by the Company Group. The Company Group shall have the right to establish, adopt, implement, utilize or enforce these procedures at any time during Executive's employment with Company Group and during any period in which any restrictive covenants contained in this Agreement are facially or legally applicable. Executive expressly WAIVES the right to challenge the enforceability of any of these procedures in any legal action seeking to enforce this Agreement or to recover for Executive's breach or alleged breach of this Agreement.

(b) The parties foresee that Executive may make inventions or create other intellectual property in the course of his duties hereunder and agree that in this respect the Executive has a special responsibility to further the interests of the Company and its affiliates. On or before his first day of employment and as a condition to receiving the Inducement Grant and the Fiscal 2020 Awards, Executive shall execute and deliver to the Company a copy of the Company’s standard invention disclosure and assignment agreement.

8. Non-Competition.

(a) The Executive agrees that without the prior written consent of the Board during the Term and for a period of 12 months following the termination of the Executive's employment, he will not participate as an advisor, partner, joint venturer, investor, lender, consultant or in any other capacity in any business transaction or proposed business transaction (i) with respect to which the Executive had a material personal involvement on behalf of the Company Group during the last 12 months of his employment with the Company, or (ii) that could reasonably be expected to compete with the Company Group’s business or operations or proposed or contemplated business or transactions of the Company Group that are (A) known by the Executive as of the date of such termination or expiration, and (B) contemplated by the Company Group to proceed during the 12-month period following such termination or expiration. For these purposes, the mere ownership by the Executive of securities of a public company not in excess of 2% of any class of such securities shall not be considered to be competition with the Company Group.

(b) During any period when the Company is providing severance compensation to the Executive, Executive agrees to refrain from any competition with Company Group.

(c) To the fullest extent permitted by applicable law, for a period of 12 months after the termination of employment with Company (for any reason, including resignation), Executive, on behalf of any entity in competition with the Company Group, in any capacity, may not, directly or indirectly, in a competing capacity, solicit or obtain any business from any present customer of the Company Group with whom Executive had contact or received information from the Company Group. It is understood and agreed that "present customer" is defined to mean any entity with whom the Company Group had an "ongoing business relationship" at the time of the termination of Executive's employment with the Company. An "ongoing business relationship" (specifically excluding non-competing vendor relationships) is generally understood and agreed to mean: (i) services or goods were provided by the Company Group to the entity during the employment of Executive by Company; (ii) services or goods had been contracted for or ordered by the entity during the employment of Executive by the Company Group; or (iii) negotiations were in progress between the entity and the Company Group for the providing of goods or services by the Company Group to the entity at the time of the termination of the employment of Executive. It is understood and agreed that past customers and prospective customers are not "present customers" protected under the terms of this provision.

(d) To the fullest extent permitted by applicable law, in recognition of the global nature of the Company Group's business, and Executive's access to the Company Group's confidential information, for a period of 12 months after the termination of employment with Company (for any reason, including resignation), Executive, on behalf of any entity in competition with the Company Group, may not, directly or indirectly, compete with the Company Group: (i) anywhere in the world; (ii) in North America; (iii) in the United States; (iv) in Indiana; (v) within a 25-mile radius of any location of the Company Group with which Executive had operational involvement.

9. Non-Solicitation. The Executive agrees that during the Term, and for a period of 12 months following the termination of the Executive's employment, he shall not, without the prior written consent of the Company, directly or indirectly, employ or retain, or have or cause any other person or entity to employ or retain, any person who was employed by the Company Group or any of its divisions or affiliates while the Executive was employed by the Company, or directly or indirectly solicit or encourage any such person for employment or to leave the employ of the Company Group.

10. Breach of this Agreement. If the Executive commits a breach, or threatens to commit a breach, of any of the provisions of Sections 7, 8 or 9 of this Agreement, then the Company shall have the right and remedy to have those provisions specifically enforced by any court having equity jurisdiction, it being acknowledged and agreed by the Executive that the rights and privileges of the Company granted in Sections 7, 8 and 9 are of a special, unique and extraordinary character and any such breach or threatened breach will cause great and irreparable injury to the Company and that money damages will not provide an adequate remedy to the Company.

11. Notices. All notices and other communications required or permitted hereunder shall be in writing (including facsimile, telegraphic, telex or cable communication) and shall be deemed to have been duly given when delivered by hand, or mailed, certified or registered mail, return receipt requested and postage prepaid, if to the Executive, to the Executive’s address as set forth on the payroll records of the Company on the date of such notice; if to the Company, as follows, with a copy to each member of the Board:

Bioanalytical Systems, Inc.

2701 Kent Avenue

West Lafayette, IN 47906

Attn: Chief Financial Officer

12. Applicable Law. This Agreement was negotiated and entered into within the State of Indiana. All matters pertaining to this Agreement shall be governed by the laws of the State of Indiana applicable to contracts made and to be performed wholly therein, without regard to conflict of laws.

13. Entire Agreement; Modification; Consents and Waivers. This Agreement contains the entire agreement of the parties with respect to the subject matter hereof and supersedes any and all prior agreements or understandings, written or oral, between the parties with respect to the subject matter hereof. No interpretation, change, termination or waiver of or extension of time for performance under any provision of this Agreement shall be binding upon any party unless in writing and signed by the party intended to be bound thereby. Except as otherwise provided in this Agreement, no waiver of or other failure to exercise any right under or default or extension of time for performance under any provision or this Agreement shall affect the right of any party to exercise any subsequent right under or otherwise enforce said provision or any other provision hereof or to exercise any right or remedy in the event of any other default, whether or not similar.

14. Severability. The parties acknowledge that, in their view, the terms of this Agreement are fair and reasonable as of the date signed by them, including as to the scope and duration of post-termination activities. Accordingly, if any one or more of the provisions contained in this Agreement shall for any reason, whether by application of existing law or law which may develop after the date of this Agreement, be determined by a court of competent jurisdiction to be excessively broad as to scope of activity, duration or territory, or otherwise unenforceable, the parties hereby jointly request such court to construe any such provision by limiting or reducing it so as to be enforceable to the maximum extent in favor of the Company compatible with then-applicable law. If any one or more of the terms, provisions, covenants or restrictions of this Agreement shall nonetheless be determined by a court of competent jurisdiction to be invalid, void or unenforceable, then the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated.

15. Assignment. The Company may, at its election, assign this Agreement or any of its rights hereunder. This Agreement may not be assigned by the Executive.

16. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.

17. Jurisdiction and Venue. Executive agrees to and hereby does submit to jurisdiction before any state or federal court of record in Marion County, Indiana, and Executive hereby waives any right to raise the questions of jurisdiction and venue in any action that the Company may bring to any such court against Executive. Process in any action or proceeding referred to in the preceding sentence may be served on any party by U.S. registered mail to the parties at the respective addresses referenced in Section 11 of this Agreement.

18. Survival. The provisions of Sections 7 through 20 of this Agreement shall survive any expiration or termination of this Agreement.

19. Impact on Equity Awards. In the case of a termination of the Executive's employment under the circumstances provided for in this Agreement, the vesting and other terms of any equity awards (including options to purchase stock of the Company, restricted stock, restricted stock units and performance shares) held by the Executive on the date of such termination shall be governed by the applicable provisions of this Agreement notwithstanding any contrary or conflicting provision of any plan under which any such award may have been made or any award agreement or other agreement related to any such equity award, whether now existing or hereafter executed between the Company and the Executive. Any and all such contrary or conflicting provisions in any such award agreement or other agreement shall be amended by the execution of this Agreement to provide for vesting and other treatment in such circumstances as set forth in this Agreement, but the remaining terms of such agreements shall be unaffected hereby. For the avoidance of doubt, the parties agree that no such outstanding equity award shall vest solely due to the occurrence of a Change in Control.

20. Indemnification. The Company shall, to the fullest extent allowed by law, defend, indemnify and hold harmless the Executive from and against any and all demands, claims, suits, liabilities, actions asserted or brought against the Executive or in which the Executive is made a party, including, without limitation, all litigation costs and attorneys’ fees incurred by the Executive or judgments rendered against the Executive, in connection with any matter arising within the course and scope of Executive’s employment with the Company or service as an officer, director or manager of the Company or any of the Subsidiaries. The right of the Executive to indemnification hereunder shall vest at the time of occurrence or performance of any event, act or omission giving rise to any demand, claim, suit, liability, action or legal proceeding of the nature referred to in this Section 20 and, once vested, shall survive the termination of Executive’s employment with the Company for any reason.

21. Section 409A Compliance.

(a) Any payments conditioned upon a termination of the Executive’s employment will be deemed to be conditioned upon the Executive’s separation from service within the meaning of Treasury Regulation Section 1.409A-1(h) and will be construed and interpreted accordingly. If the Executive is a “specified employee” within the meaning of Treasury Regulation Section 1.409A-1(i) as of the date of the Executive’s separation from service, then the Executive shall not be entitled to any severance payments or other benefits pursuant to this Agreement until the earlier of (a) the date which is six months after the date of the Executive’s separation from service, or (b) the date of the Executive’s death. This paragraph shall only apply if, and to the extent required in order to comply with Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and Treasury Regulation Section 1.409A-3(i)(2). Any amounts otherwise payable to the Executive upon or in the six-month period following the Executive’s separation from service that are not so paid by reason of this paragraph shall be paid to the Executive (or the Executive’s estate, as the case may be) as soon as practicable (and in all events within twenty days) after the expiration of such six-month period or (if applicable, the date of the Executive’s death).

(b) Any taxable reimbursement of expenses payable to the Executive shall be paid to the Executive on or before the last day of the Executive’s taxable year following the taxable year in which the related expense was incurred. Expense reimbursements and in-kind benefits provided to the Executive shall not be subject to liquidation or exchange for another benefit and the amount of such reimbursements or in-kind benefits that the Executive receives in one taxable year shall not affect the amount of such reimbursements or benefits that the Executive may receive in any other taxable year.

(c) It is intended that any amounts payable under this Agreement and the Company’s and the Executive’s exercise of any authority or discretion hereunder shall comply with, and avoid the imputation of any tax, penalty or interest under Section 409A of the Code. This Agreement shall be construed and interpreted consistent with that intent. Should the Company pay the Executive contrary to clause (a) or (b) of Section 21(a) above, the Company shall indemnify the Executive for any taxes due thereon as a result.

22. Adjustments to Payments.

(a) Notwithstanding any other provision of this Agreement, if any payment or benefit Executive would receive pursuant to this Agreement or otherwise, including accelerated vesting of any equity compensation (all such payments and/or benefits hereinafter, “Payment”), would (i) constitute a “parachute payment” within the meaning of Section 280G of the Code, and (ii) but for this sentence, be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then such Payment shall be either (x) provided to the Executive in full, or (y) provided to the Executive to such lesser extent which would result in no portion of such Payment being subject to the excise tax, further reduced by $5,000 (including such further reduction, the “Cutback Amount”), whichever of the foregoing amounts, when taking into account applicable federal, state, local and foreign income and employment taxes, such excise tax and other applicable taxes, (all computed at the highest applicable marginal rates), results in the receipt by the Executive, on an after-tax basis, of the greatest amount of the Payment, notwithstanding that all or a portion of such Payment may be subject to the excise tax. If a reduction in payments or benefits constituting “parachute payments” is necessary so that the Payment equals the Cutback Amount, reduction shall occur in the following order: (A) cash payments shall be reduced first and in reverse chronological order such that the cash payment owed on the latest date following the occurrence of the event triggering such excise tax will be the first cash payment to be reduced; (B) accelerated vesting of performance-based equity awards shall be cancelled or reduced next and in the reverse order of the date of grant for such awards (i.e., the vesting of the most recently granted awards will be reduced first), with full-value awards reduced before any performance-based stock option or stock appreciation rights are reduced; (C) health and welfare benefits shall be reduced and in reverse chronological order such that the benefit owed on the latest date following the occurrence of the event triggering such excise tax will be the first benefit to be reduced; and (D) accelerated vesting of time-based equity awards shall be cancelled or reduced last and in the reverse order of the date of grant for such awards (i.e., the vesting of the most recently granted awards will be reduced first), with full-value awards reduced before any time-based stock option or stock appreciation rights are reduced.

(b) The Company shall appoint a nationally recognized accounting firm to make the determinations required hereunder and perform the foregoing calculations. The Company shall bear all expenses with respect to the determinations by such accounting firm required to be made hereunder. The accounting firm engaged to make the determinations hereunder shall provide its calculations, together with detailed supporting documentation, to the Company and Executive within 15 calendar days after the date on which right to a Payment is triggered (if requested at that time by the Company or Executive). Any good faith determinations of the accounting firm made hereunder shall be final, binding and conclusive upon the Company and Executive.

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

	BIOANALYTICAL SYSTEMS, INC.


	By:	/s/ Beth A. Taylor
		Beth A. Taylor
		Vice President - Finance and Chief Financial Officer


	ROBERT LEASURE, JR.

	/s/ Robert Leasure, Jr.

Exhibit 31.1

CERTIFICATIONS

I, Robert W. Leasure, Jr., President and Chief Executive Officer, certify that:

I have reviewed this report on Form 10-Q of Bioanalytical Systems, Inc.;

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.

The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions);

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

	/s/ Robert W. Leasure, Jr.
	Robert W. Leasure, Jr.
Date: February 10, 2021	President and Chief Executive Officer

Exhibit 31.2

CERTIFICATIONS

I, Beth A. Taylor, Vice President of Finance and Chief Financial Officer, certify that:

I have reviewed this report on Form 10-Q of Bioanalytical Systems, Inc.;

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

	/s/ Beth A. Taylor
	Beth A. Taylor
Date: February 10, 2021	Vice President of Finance and Chief Executive Officer

Exhibit 32.1

Certifications of Chief Executive Officer

Pursuant to Section 906

Of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350)

The undersigned, the President and Chief Executive Officer of Bioanalytical Systems Inc. (the “Company”), hereby certifies that, to the best of his knowledge:

(a)

the Form 10-Q Quarterly Report of the Company for the three months ended December 31, 2020 filed with the Securities and Exchange Commission (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(b)

the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

	By: /s/ Robert W. Leasure, Jr.
	Robert W. Leasure, Jr.
	President and Chief Executive Officer
	Date: February 10, 2021

Exhibit 32.2

Certifications of Chief Financial Officer

Pursuant to Section 906

Of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350)

The undersigned, the Vice President of Finance and Chief Financial Officer of Bioanalytical Systems Inc. (the “Company”), hereby certifies that, to the best of her knowledge:

(a)

(b)

the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

	By: /s/ Beth A. Taylor
	Beth A. Taylor
	Vice President of Finance and Chief Financial Officer
	Date: February 10, 2021