UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

 

FORM 8–K

 

CURRENT REPORT

 

Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934

  

Date of Report (Date of Earliest Event Reported): May 1, 2019

 

Bioanalytical Systems, Inc.

(Exact Name of Registrant as Specified in Charter)

 

Indiana

(State or Other Jurisdiction of Incorporation)

0-23357

(Commission File Number)

35-1345024

(IRS Employer Identification No.)

 

2701 Kent Avenue

West Lafayette, Indiana

(Address of Principal Executive Offices)

47906-1382

(Zip Code)

 

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

 

N/A

(Former Name or Former Address, if Changed Since Last Report)

 

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

 

Title of each class Trading Symbol(s) Name of each exchange where registered
Common Shares BASi NASDAQ Capital Market

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

  

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 or Rule 12b-2 of the Securities Exchange Act of 1934.

 

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 pursuant to Section 13(a) of the Exchange Act. ¨   

 

 

 

 
 

 

Item 1.01 Entry into a Material Definitive Agreement

 

Acquisition

 

On May 1, 2019, Bioanalytical Systems, Inc. (the “Company”), through its wholly-owned subsidiary Oriole Toxicology Services LLC (the “Purchaser”), acquired (the “Acquisition”) from Smithers Avanza Toxicology Services LLC (the “Seller”), a consulting-based contract research laboratory located in Gaithersburg, Maryland, substantially all of the assets used by the Seller in connection with the performance of in-vivo mammalian toxicology CRO services for pharmaceuticals (small molecules and biologics), vaccines, agro and industrial chemicals, under the terms and conditions of an Asset Purchase Agreement, dated May 1, 2019, among the Purchaser, the Company, the Seller and the member of the Seller (the “Purchase Agreement”). The consideration for the Acquisition consisted of $1,270,646.10 in cash, subject to certain adjustments and an indemnity escrow of $125,000, 200,000 of the Company’s common shares and an unsecured promissory note in the initial principal amount of $810,000 made by Purchaser and guaranteed by the Company. The Company funded the cash portion of the purchase price for the Acquisition with cash on hand and the net proceeds from the refinancing of its credit arrangements with First Internet Bank (“FIB”), as described below.

 

The Purchase Agreement contains customary representations, warranties, covenants (including non-competition requirements applicable to the selling parties for a 5 year period) and indemnification provisions. As contemplated by the Purchase Agreement, on May 1, 2019 the Purchaser assumed amended lease arrangements for certain premises in Gaithersburg, Maryland (the “Lease Arrangements”). Under the Lease Arrangements, the Purchaser agreed to lease the premises for a term of 5 years and 8 months, with two 5 year extensions at Purchaser’s option. Annual minimum rental payments under the initial term of the Lease Arrangements range from $400,000 to $800,000, provided that the Lease Arrangements provide the Purchaser with the option to purchase the premises. The Lease Arrangements include customary rights upon a default by landlord or tenant.

 

Amendment to Credit Arrangements

 

In connection with the Acquisition, on May 1, 2019 the Company and FIB entered into a fourth amendment (the “Fourth Amendment”) to the Credit Agreement by and between the parties dated June 23, 2017, as previously amended July 2, 2018, September 6, 2018 and September 28, 2018 (as amended, the “Credit Agreement”) to (i) extend the term of the Company’s $3,500,000 revolving credit facility to June 30, 2020, (ii) provide the Company with an additional term loan (the “New Term Loan”) in the amount of $1,270,641.10, the proceeds of which were used to fund the cash consideration for the Acquisition, and (iii) provide for an additional line of credit in the principal amount of $1,100,000 (the “Capex Line”), which the Company may borrow from time to time, subject to the terms of the Credit Agreement. The New Term Loan and the Capex Line mature November 1, 2025 and June 30, 2020, respectively.

 

Amounts outstanding under the New Term Loan bear interest at a fixed per annum rate of 4.63%, while interest accrues on the principal balance of the Capex Line at a floating per annum rate equal to the sum of the Prime Rate plus Fifty Basis Points (0.5%), which rate shall change concurrently with the Prime Rate. Commencing June 1, 2019, the New Term Loan requires monthly interest only payments until December 1, 2019, from which time payments of principal and interest in monthly installments equal to $20,288.97 become due, with all accrued but unpaid interest, cost and expenses due and payable at the maturity date. The Company is required to pay accrued but unpaid interest on the Capex Line on a monthly basis commencing on June 1, 2019, until June 30, 2020, at which time the entire balance of the Capex Line, together with accrued but unpaid interest, costs and expenses, shall be due and payable in full.

 

Following its amendment, the Company’s obligations under the Credit Agreement are guaranteed by BAS Evansville, Inc. (“BASEV”), Seventh Wave Laboratories, LLC (“Seventh Wave”), as well as the Purchaser, each a wholly owned subsidiary of the Company. The Company’s obligations under the Credit Agreement and BASEV’s, Seventh Wave’s and the Purchaser’s obligations under their respective Guaranties are secured by first priority security interests in substantially all of the assets of the Company, BASEV, Seventh Wave and the Purchaser respectively, as well as mortgages on the Company’s and BASEV’s facilities in West Lafayette, Indiana and Evansville, Indiana, respectively, and pledges of the Company’s ownership interests in its subsidiaries.

 

The various restrictive covenants under the Credit Agreement remain consistent, provided that the parties agreed (i) to modify the computation of the minimum debt service coverage ratio and lower the ratio itself during certain periods to 1.15 to 1.0 or 1.20 to 1.0 to appropriately reflect relevant aspects of the Acquisition and (ii) to suspend application of the cash flow coverage ratio through the fiscal quarter ending December 31, 2019, with the ratio of the Company’s total funded debt (as defined in the Credit Agreement) as of the last day of each fiscal quarter to its EBITDA (as defined in the Credit Agreement) for the 12 months ended as of March 31, 2020 and June 30, 2020 not to exceed 5.00 to 1.00 and 4.50 to 1.00, respectively. The Company also agreed to obtain a life insurance policy in an amount not less than $2,000,000 for its President and Chief Executive Officer and to provide FIB an assignment of such life insurance policy as collateral.

 

The foregoing descriptions of the Purchase Agreement, the Fourth Amendment and the Lease Arrangements do not purport to be complete and are qualified in their entirety by the terms and conditions of those agreements, copies of which will be filed as exhibits to the Company’s Quarterly Report on Form 10-Q for the period ending June 30, 2019.

 

Item 2.01 Completion of Acquisition or Disposition of Assets.

 

The information included in Item 1.01 of this Current Report on Form 8-K is incorporated by reference into this Item 2.01.

 

Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

 

The information set forth in Item 1.01 with respect to the Fourth Amendment and the Lease Arrangements is incorporated herein by reference.

 

 

 

 

Item 3.02 Unregistered Sales of Equity Securities.

 

Pursuant to the Purchase Agreement, the Company issued 200,000 of the Company’s common shares to the Seller. The shares were issued in reliance upon the exemption from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), provided by Section 4(a)(2) of the Securities Act as sales by an issuer not involving any public offering.

 

The information set forth in Item 1.01 with respect to the Acquisition is incorporated herein by reference.

 

Item 7.01 Regulation FD Disclosure.

 

On May 1, 2019 and May 7, 2019, the Company issued press releases relating to the Acquisition, the corrected copy of which is attached to this Current Report on Form 8-K as Exhibit 99.1 and is incorporated herein by reference. This information shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

 

Item 9.01 Financial Statements and Exhibits

 

The financial statements and pro forma financial information with respect to the Acquisition required by Item 9.01 of Form 8-K will be included in an amendment to this Form 8-K by not later than 71 calendar days after the date that the initial report on Form 8-K is required to be filed.

 

(d) Exhibits

 

  Exhibit Number Description
     
  99.1 Copy of press release, dated May 1, 2019, as corrected May 7, 2019, issued by the Company.

   

 

 

 

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 hereunto duly authorized.

 

 

  Bioanalytical Systems, Inc.  
       
       
Date: May 7, 2019 By: /s/ Jill C. Blumhoff  
    Name: Jill C. Blumhoff  
    Title: CFO and VP Finance  

 

 

 

 

Exhibit 99.1

 

NEWS RELEASE

 

FOR MORE INFORMATION: BASi Company Contacts:

Joe Flynn

Chief Commercial Officer

Phone: 314.882.2218

jflynn@BASinc.com

 

Jill C. Blumhoff

Chief Financial Officer

Phone: 765.497.8381

jblumhoff@BASinc.com

 

Smithers Company Contact:

David L. Schwarz

Vice President

Marketing and Strategic Planning

Phone: 330.762.7441

dschwarz@smithers.com

 

CORRECTED PRESS RELEASE: BASi Acquires the Smithers Avanza
Toxicology Services Business Unit to Support Growing Toxicology Business
and Broaden Scientific Talent

 

WEST LAFAYETTE, Ind., May 7, 2019 -- This press release corrects a prior version published on May 1, 2019, and is updated to revise the amount of one of the loans previously reported. The corrected release reads:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BASi Acquires the Smithers Avanza Toxicology Services Business Unit to
Support Growing Toxicology Business and Broaden Scientific Talent

 

WEST LAFAYETTE, Ind., May 1, 2019 --  Bioanalytical Systems, Inc . , (NASDAQ:BASI) (“BASi” or the “Company”) today announced its acquisition of the Smithers Avanza Toxicology Services business unit, a contract research organization (CRO) located in Gaithersburg, Maryland, which specializes in general toxicology, vaccine safety and developmental and reproductive toxicology (DART) studies, in support of pharmaceutical and chemical industry research and development. The acquired business will operate as a wholly owned subsidiary of BASi under the name BASi Gaithersburg.

 

“The acquisition of the Smithers Avanza Toxicology Services business unit solidly supports BASi’s vision of strategic growth,” said Robert Leasure, Jr., BASi’s President and Chief Executive Officer. “ With strong demand for our toxicology and drug disposition services, we needed to add space and talent. The team that is joining us from Smithers in Gaithersburg will allow us to provide more resources to our clients, while remaining small enough to be flexible, responsive and consultative. Not only will the Gaithersburg site provide increased capacity for routine safety assessment, we also acquired significant expertise in developmental and reproductive toxicology.”

 

Michael Hochschwender, President and Chief Executive Officer, The Smithers Group, Inc., commented, “Selling a business unit is never an easy decision, but we recognized that the scope and scale of BASi coupled with our team’s scientific expertise would benefit our clients and team tremendously. Operating as a single site toxicology business presented operational efficiency challenges that could be overcome with the added sites and in-house capabilities of BASi. We are very proud of the accomplishments and reputation of the Gaithersburg Toxicology Services team. We are thankful to our loyal clients who supported this business and are confident they will enjoy a seamless transition to BASi.”

 

BASi provides contract research services and monitoring instruments to emerging pharmaceutical companies, drug development companies, and medical research organizations—primarily in drug discovery and development, and integrating services across commercial and academic settings. The acquisition of the Smithers Avanza Toxicology Services business unit is another strategic milestone for the Company which made several key appointments to its organizational leadership in recent months, invested in the multi-phase expansion of its GLP toxicology facility near Evansville, Indiana, and acquired the Missouri-based Seventh Wave Laboratories in July of last year.

  

With this transaction, BASi adds immediate capacity and expects to further capitalize on its assets and broadened scientific expertise to guide clients through drug safety and disposition evaluations utilizing a comprehensive portfolio of tools and services:

 

· Lead optimization through candidate selection;

 

· In vivo toxicology and pharmacology;

 

· Vaccine safety testing;

 

· Developmental and Reproductive Toxicology (DART);

 

· GLP in vivo services;

 

· GLP and non-GLP/discovery bioanalysis;

 

· Histopathology including immunohistochemistry and image analysis;

 

· Drug Metabolism & Pharmacokinetics;

 

· In vitro and in vivo bioequivalence testing; and

 

· BASi Culex ®  Automated Sampling Systems.

 

 

 

 

Michael Dorato, PhD, DABT, Fellow ATS, former Executive Vice President of Smithers Avanza Toxicology Services and newly-appointed Senior Vice President at BASi Gaithersburg, added, “Our group strengthens BASi’s core capabilities, adds scientific depth, and expands the offerings, all while providing a moderate-sized CRO experience, focused on clients that value flexibility and responsiveness.”

 

Transaction Summary

 

Pursuant to the terms of an asset purchase agreement (the “APA”), BASi acquired substantially all of the assets used by the seller in connection with the performance of in-vivo mammalian toxicology CRO services for pharmaceuticals (small molecules and biologics), vaccines, agro and industrial chemicals for approximately $1.27 million in cash (a portion of which remains in escrow), 200,000 Common Shares of BASi and an unsecured subordinated promissory note in the initial principal amount of $810,000. In connection with the transaction, BASi amended its credit arrangements with First Internet Bank to, among other things, renew the Company’s revolving loan of $3.5 million and to add two new term loans in the amounts of $1.27 million and $1.1 million, respectively, a portion of the proceeds of which were used to fund the acquisition, with the remaining proceeds to be used for capital equipment financing and for future general corporate needs.

 

A Current Report on Form 8-K containing further details regarding the APA and the transaction will be filed by BASi.

 

About Bioanalytical Systems, Inc.

 

BASi is a pharmaceutical development company providing contract research services and monitoring instruments to emerging pharmaceutical companies and the world's leading drug development companies and medical research organizations. The Company focuses on developing innovative services supporting its clients’ discovery and development objectives for improved decision-making and accelerated goal attainment. BASi’s products focus on increasing efficiency, improving data, and reducing the cost of taking new drugs to market. Visit www.BASinc.com for more information about BASi.

 

This release may contain forward-looking statements that are subject to risks and uncertainties including, but not limited to, risks and uncertainties related to changes in the market and demand for our products and services, the development, marketing and sales of products and services, changes in technology, industry and regulatory standards, and various market and operating risks detailed in the company's filings with the U.S. Securities and Exchange Commission.