Inotiv, Inc. - Quarter Report: 2002 June (Form 10-Q)
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 June 30, 2002.
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: 0-23357
BIOANALYTICAL SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
| INDIANA | 35-1345024 | |
|
(State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.) | |
|
2701 Kent Avenue West Lafayette, IN |
47906 | |
| (Address of principal executive offices) | (Zip Code) | |
| (765) 463-4527 | ||
|
(Registrant's telephone number, including area code) |
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 [ ]
As of June 30, 2002, 4,578,516 Common Shares of the registrant were outstanding.
– 1 –
INDEX
Page Number
| PART I. | FINANCIAL INFORMATION | ||
| Item 1. | Financial Statements (Unaudited): | ||
| Consolidated Balance Sheets as of | |||
| September 30, 2001 | 3 | ||
| Consolidated Statements of Income for the | |||
| Three Months and Nine Months ended June 30, 2002 and 2001 | 5 | ||
| Consolidated Statements of Cash Flows for the | |||
| Nine Months Ended June 30, 2002 and 2001 | 6 | ||
| Notes to Consolidated Financial Statements | 7 | ||
| Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations |
9 | |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk |
11 | |
| PART II. | OTHER INFORMATION | ||
| Item 4. | Submission of Matters to a Vote of Security Holders | 11 | |
| Item 6. | Exhibits and Reports on Form 8-K | 12 | |
| Signatures | 13 |
– 2 –
PART I — INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BIOANALYTICAL SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
June 30, September 30,
2002 2001
(Unaudited) (Note)
----------- ------
ASSETS
Current assets:
Cash and cash equivalents $ 209 $ 374
Accounts receivable, net 4,523 4,266
Inventories 2,712 2,391
Other current assets 193 71
Refundable income taxes 422 325
Deferred income taxes 443 443
------- -------
Total current assets 8,502 7,870
Property and equipment:
Land and improvements 496 496
Buildings and improvements 14,408 13,508
Machinery and equipment 12,826 10,795
Office furniture and fixtures 1,109 1,092
Construction in process 1,342 113
------- -------
Total property and equipment 30,181 26,004
Less accumulated depreciation (8,453) (7,082)
------- -------
Net property & equipment 21,728 18,922
Goodwill, less accumulated amortization
of $337 and $281 907 963
Other assets 207 222
------- -------
Total assets $31,344 $27,977
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,324 $ 2,619
Income taxes payable 0 176
Accrued expenses 689 747
Customer advances 221 1,063
Revolving line of credit 3,303 236
Current portion of capital lease obligation 261 261
Current portion of long-term debt 279 233
------- -------
Total current liabilities 7,077 5,335
– 3 –
Capital lease obligation, less current portion 228 403
Long-term debt, less current portion 3,193 2.742
Deferred income taxes 1,960 1,667
Shareholders equity:
Preferred Shares:
1,000,000 shares authorized;
no shares issued
and outstanding --- ---
Common Shares: 19,000,000 shares
authorized; 4,578,516 and 4,569,416
shares issued and outstanding 1,014 1,012
Additional paid-in capital 10,521 10,506
Retained earnings 7,392 6,345
Accumulated other comprehensive loss
(41) (33)
------- -------
Total shareholders' equity 18,886 17,830
------- -------
Total liabilities and shareholders' equity $31,344 $27,977
======= =======
The balance sheet at September 30, 2001 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements.
See accompanying notes.
– 4 –
BIOANALYTICAL SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
(Unaudited)
Three Months Three Months Nine Months Nine Months
Ended June 30, Ended June 30, Ended June 30, Ended June 30,
2002 2001 2002 2001
---- ---- ---- ----
Service revenue $ 4,086 $ 3,693 $ 11,902 $ 11,056
Product revenue 2,490 2,707 8,082 7,612
------- ------- -------- --------
Total revenue 6,576 6,400 19,984 18,668
Cost of service revenue 3,050 2,414 8,463 7,167
Cost of product revenue 1,034 886 3,326 2,507
------- ------- -------- --------
Total cost of revenue 4,084 3,300 11,789 9,674
Gross profit 2,492 3,100 8,195 8,994
Operating expenses:
Selling 621 817 2,275 2,505
Research and development 393 390 1,105 1,201
General and administrative 1,170 925 3,275 2,710
------- ------- -------- --------
Total operating expenses 2,184 2,132 6,655 6,416
------- ------- -------- --------
Operating income 308 968 1,540 2,578
Interest income 0 2 2 5
Interest expense (62) (89) (177) (361)
Other income 13 10 65 15
Gain (loss) on sale of property and
equipment 0 5 (13) 5
- - ---- -
Income before income taxes 259 896 1,417 2,242
Income taxes (benefit) (22) 381 370 950
---- --- --- ---
Net income $ 281 $ 515 $ 1,047 $ 1,292
======= ======= ======== ========
Basic net income per common share $ .06 $ .11 $ .23 $ .28
Diluted net income per common and common
equivalent share $ .06 $ .11 $ .23 $ .28
Basic weighted average common shares
outstanding 4,578,261 4,563,547 4,575,146 4,563,395
Diluted weighted average common and common
equivalent shares outstanding 4,614,622 4,601,040 4,620,150 4,589,095
See accompanying notes.
– 5 –
BIOANALYTICAL SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
Nine Months Ended Nine Months Ended
Jun 30, 2002 Jun 30, 2001
------------ ------------
Operating activities:
Net income $ 1,047 $ 1,292
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,478 1,230
Loss on sale of property and equipment 13 (5)
Deferred income taxes 293 335
Changes in operating assets and liabilities:
Accounts receivable (257) (338)
Inventories (321) (193)
Other assets (165) (149)
Accounts payable (295) 349
Income taxes payable (273) 263
Accrued expenses and customer advances (1,297) 5
------- -------
Net cash provided by operating activities 223 2,789
Investing activities:
Capital expenditures (3,786) (884)
------- -------
Net cash used by investing activities (3,786) (884)
Financing activities:
Borrowings of long-term debt 680 ---
Payments of long-term debt (358) (354)
Borrowings on line of credit 3,774 1,213
Payments on line of credit (707) (2,865)
Net proceeds from the exercise of stock options 17 3
------- -------
Net cash provided (used) by financing activities 3,406 (2,003)
Effects of exchange rate changes (8) 21
------- -------
Net decrease in cash and cash equivalents (165) (77)
Cash and cash equivalents at beginning of period 374 477
------- -------
Cash and cash equivalents at end of period $ 209 $ 400
======= =======
See accompanying notes.
– 6 –
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) DESCRIPTION OF THE BUSINESS
Bioanalytical Systems, Inc. and its subsidiaries (the "Company") engage in supporting drug development with products and research services supplied globally to pharmaceutical and biotechnology firms and research institutes. The Company provides productivity tools, software and services required to obtain numerical data supporting new drug and medical device applications. Company personnel have special expertise for research on central nervous system diseases, diabetes, in vivo sampling devices, veterinary instrumentation and biosensors. Antidepressants, anti psychotics, chemotherapeutics, antihypertensives, antibiotics and antivirals are among the drug programs in which the Company has participated.
(2) INTERIM FINANCIAL STATEMENT PRESENTATION
The accompanying interim financial statements are unaudited and have been prepared by the Company 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 for complete financial statements, and therefore these consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements, and the notes thereto, for the year ended September 30, 2001. In the opinion of management, the consolidated financial statements for the three month periods and the nine month periods ended June 30, 2002 and 2001 include all normal and recurring adjustments which are necessary for a fair presentation of the results of the interim periods. The results of operations for the three month period and the nine month period ended June 30, 2002 are not necessarily indicative of the results for the year ending September 30, 2002.
(3) INVENTORIES
Inventories consisted of (in thousands):
June 30, 2002 September 30, 2001
-------------- ------------------
Raw materials $ 1,415 $ 1,322
Work in progress 406 303
Finished goods 1,002 877
------- -------
2,823 2,502
LIFO reserve (111) (111)
------- -------
$ 2,712 $ 2,391
======= =======
(4) DEBT
The Company has a revolving line of credit, which expires April 1, 2004 and allows borrowings of up to $3,500,000. Interest accrues monthly on the outstanding balance at the bank’s prime rate minus 25 to plus 75 basis points (4.50% at June 30, 2002) or at the London Interbank Offered Rate (LIBOR) plus 200 to 300 basis points, as elected by the Company, depending upon certain financial ratios. The line is collateralized by inventories and accounts receivable and requires the Company to maintain certain financial ratios. The Company pays a fee equal to 0.125 to 0.5 basis points, depending on certain financial ratios, on the unused portion of the line of credit. As of June 30, 2002 and September 30, 2001 interest on the entire outstanding balance was based on the prime rate minus 25 basis points. The balance outstanding on this line of credit at June 30, 2002 was $3,302,641.
– 7 –
On June 24, 1999 the Company obtained a $3,500,000 commercial mortgage with a bank. The mortgage note requires 59 monthly principal payments of $19,444 plus interest, followed by a final payment for the unpaid principal amount of $2,352,804 due June 24, 2004. Interest is charged at the one-month LIBOR rate plus 200 basis points (3.84% at June 30, 2002).
On April 30 , 2002 the Company obtained a $680,000 commercial mortgage with a bank. The mortgage note requires 59 monthly principal payments of $3,800 plus interest, followed by a final payment for the unpaid principal amount of 455,800 due April 30, 2007. Interest is charged at the one-month LIBOR rate plus 200 basis points (3.84% at June 30, 2002).
(5) SEGMENT INFORMATION
The Company operated in two principal segments - analytical services and analytical products. The Company’s analytical services unit provides chemistry support on a contract basis directly to pharmaceutical companies. The Company’s products unit provides liquid chromatography, electrochemical and physiological monitoring products to pharmaceutical companies, universities, government research centers and medical research institutions. The Company evaluates performance and allocates resources based on these segments.
The following table presents required segment information:
Three Months Ended Three Months Ended Nine Months Ended Nine Months Ended
(In thousands) June 30, 2002 June 30, 2001 June 30, 2002 June 30, 2001
------------- ------------- ------------- -------------
Services $ 123 $ 547 $ 885 $ 1,828
Products 185 421 655 750
----- ----- ------- -------
Total operating income 308 968 1,540 2,578
Corporate expenses (49) (72) (123) (336)
----- ----- ------- -------
Income before income taxes $ 259 $ 896 $ 1,417 $ 2,242
===== ===== ======= =======
(6) NEW ACCOUNTING PRONOUNCEMENTS
In June 2001, the FASB issued Statements of Financial Accounting Standards ("SFAS") No. 141, "Business Combinations" and No. 142, "Goodwill and Other Intangible Assets." Under the new rules, goodwill and indefinite lived intangible assets are no longer be amortized, but are reviewed annually for impairment. Separable intangible assets that are not deemed to have an indefinite life will continue to be amortized over their useful lives. The amortization provisions of SFAS No. 142 apply to goodwill and intangible assets acquired after June 30, 2001. With respect to goodwill and intangible assets acquired prior to July 1, 2001, the Company will apply the new accounting rules beginning October 1, 2002. Application of the nonamortization provisions of the Statement is expected to result in an increase in net income of $77,000 (approximately $.02 per share) per year. The Company will perform the first of the required impairment tests of goodwill and indefinite lived intangible assets as of October 1, 2002 and has not yet determined what the effect of these tests will be on the earnings and financial position of the Company.
In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS No. 144 supercedes FASB Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" and also supercedes the accounting and reporting provisions of APB Opinion No. 30, "Reporting the Results of Operations-Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions," for segments of a business to be disposed of. Among its many provisions, SFAS No. 144 retains the fundamental requirements of both previous standards, however, it resolves significant implementation issues related to FASB Statement No. 121 and broadens the separate presentation of discontinued operations in the income statement required by APB Opinion No. 30 to include a component of an entity (rather than a segment of a business). The provisions of SFAS No. 144 are effective for financial statements issued for fiscal years beginning after December 15, 2001, with early application encouraged. The Company does not believe, based on current circumstances, the effect of adoption of SFAS No. 144 will be material.
– 1 –
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Form 10-Q may contain "forward-looking statements," within the meaning of Section 27A of the Securities Act of 1933, as amended, and/or Section 21E of the Securities Exchange Act of 1934, as amended. Those statements may include, but are not limited to, discussions regarding the Company's intent, belief or current expectations with respect to (i) the Company's strategic plans; (ii) the Company's future profitability; (iii) the Company's capital requirements; (iv) industry trends affecting the Company's financial condition or results of operations; (v) the Company's sales or marketing plans; or (vi) the Company's growth strategy. Investors in the Company's Common Shares are cautioned that reliance on any forward-looking statement involves risks and uncertainties, including the risk factors contained in Exhibit 99.1 to the Company's annual report on Form 10-K for the year ended September 30, 2001. Although the Company believes that the assumptions on which the forward-looking statements contained herein are reasonable, any of those assumptions could prove to be inaccurate, and as a result, the forward-looking statements based upon those assumptions also could be incorrect. In light of the uncertainties inherent in any forward-looking statement, the inclusion of a forward-looking statement herein should not be regarded as a representation by the Company that the Company's plans and objectives will be achieved.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2002 COMPARED WITH THREE MONTHS ENDED JUNE 30, 2001
Total revenue for the three months ended June 30, 2002 increased 2.8% to $6.6 million from $6.4 million for the three months ended June 30, 2001. The net increase of $200,000 was primarily due to service revenue which increased to $4.1 million for the three months ended June 30, 2002 from $3.7 million for the three months ended June 30, 2001. This was primarily due to increased revenue from the bioanalytical services group. The increase in services revenue was partially offset by a reduction in product revenue.
Total cost of revenue for the three months ended June 30, 2002 increased 23.8% to $4.1 million from $3.3 million for the three months ended June 30, 2001. This increase of $800,000 was primarily due to the cost of revenue related to the additional bioanalytical services provided. Cost of service revenue increased to 74.6% as a percentage of services revenue for the three months ended June 30, 2002 from 65.4% of service revenue for the three months ended June 30, 2001 primarily due to an increase in staffing and corresponding costs. Cost of product revenue increased to 41.5% as a percentage of product revenue for the three months ended June 30, 2002 from 32.7% of product revenue for the three months ended June 30, 2001, primarily due to a change in product mix.
Selling expenses for the three months ended June 30, 2002 decreased 24.0% to $621,000 from $817,000 for the three months ended June 30, 2001 primarily due to the decrease in foreign jobbers commission. Research and development expenses for the three months ended June 30, 2002 increased .8% to $ 393,000 from $390,000 for the three months ended June 30, 2001. General and administrative expenses for the three months ended June 30, 2002 increased 26.5% to $1,170,000 from $925,000 for the three months ended June 30, 2001, primarily from the reorganization of management functions at the preclinical operation.
Other expense was $49,000 in the three months ended June 30, 2002, as compared to other expense of $72,000 in the three months ended June 30, 2001, primarily as a result of decreased interest expense due to the decrease in the interest rates.
The Company's effective tax rate for the three months ended June 30, 2002 was (8.5%) as compared to 42.5% for the three months ended June 30, 2001, primarily due to an adjustment to the provision to properly reflect the utilization of the tax benefit of foreign net operating losses.
NINE MONTHS ENDED JUNE 30, 2002 COMPARED WITH NINE MONTHS ENDED JUNE 30, 2001
Total revenue for the nine months ended June 30, 2002 increased 7.1% to $20.0 million from $18.7 million for the nine months ended June 30, 2001. The net increase of $1.3 million was primarily due to revenue from services, which increased to $11.9 million for the nine months ended June 30, 2002 from $11.0 million for the nine months ended June 30, 2001. This was primarily due to increased revenue from pharmaceutical services group. Product revenue increased to $8.1 million in the nine months ended June 30, 2002 from $7.6 million for the nine months ended June 30, 2001. This was primarily due to increased sales of physiology products.
Total cost of revenue for the nine months ended June 30, 2002 increased 21.9% to $11.8 million from $9.7 million for the nine months ended June 30, 2001. This increase of $2.1 million was primarily due to the increase in service revenue. Cost of service revenue increased to 71.1% as a percentage of service revenue for the nine months ended June 30, 2002 from 64.8% of service revenue for the nine months ended June 30, 2001 primarily due to an increase in staffing and corresponding costs. Cost of product revenue increased to 41.1% as a percentage of product revenue for the nine months ended June 30, 2002 from 32.9% of product revenue for the nine months ended June 30, 2001, primarily due to the change in product mix.
Selling expenses for the nine months ended June 30, 2002 decreased 9.2% to $2,275,000 from $2,505,000 for the nine months ended June 30, 2001 primarily due to the decrease in foreign jobbers commission. Research and development expenses for the nine months ended June 30, 2002 decreased 8.1% to $1,104,000 from $1,201,000 for the nine months ended June 30, 2001 primarily due to the increase in grant reimbursements. General and administrative expenses for the nine months ended June 30, 2002 increased 20.9% to $3,275,000 from $2,710,000 for the nine months ended June 30, 2001, primarily from the reorganization of management functions at the preclinical operation.
Other expense was $123,000 in the nine months ended June 30, 2002, as compared to $336,000 in the nine months ended June 30, 2001 as a result of an decrease in interest expense due to the decrease in the interest rate of the Company's line of credit.
The Company's effective tax rate for the nine months ended June 30, 2002 was 26.1% as compared to 42.4% for the nine months ended June 30, 2001, primarily due to an adjustment to the provision to properly reflect the utilization of the tax benefit of foreign net operating losses.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 2002, the Company had cash and cash equivalents of $209,000 compared to cash and cash equivalents of $374,000 at September 30, 2001.
The Company's net cash provided by operating activities was $223,000 for the nine months ended June 30, 2002 as compared to $2,789,000 for the first nine months of fiscal 2001. The decreased cash flow from operations during the nine months ended June 30, 2002 was primarily related to customer advances, which decreased $842,000 to $221,000, inventories which increased $321,000 to $2,712,000, accounts payable which decreased $295,000 to $2,324,000.
Cash used by investing activities was $3,786,000 for the nine months ended June 30, 2002 as compared to $884,000 for the nine months ended June 30, 2001, primarily due to the construction at the preclinical site, the purchase of additional facilities for the services group and the purchase of additional lab equipment. Cash provided (used) by financing activities for the nine months ended June 30, 2002 was $3,406,000 as compared to ($2,003,000) for the nine months ended June 30, 2001, primarily due to the increased utilization of the revolving line of credit.
On June 20, 2002 the Company and PharmaKinetics Laboratories, Inc., a Maryland corporation ("PKLB") entered into an Agreement and Plan of Merger (the "Merger Agreement") which provides for, subject to the terms and conditions set forth therein, the merger of PKLB and the Company (the "Merger").
As a result of the merger, PKLB will become a wholly-owned subsidiary of BAS. Each holder of PKLB common shares will be entitled to receive one-twelfth (1/12) of one BAS common share for each of their PKLB common shares. Each holder of PKLB Class B Preferred shares will be entitled to receive one-twelfth (1/12) of one BAS common share for each PKLB common share into which their Class B Preferred shares are convertible. Each Class B Preferred share is currently convertible into 1.00621 PKLB common shares. In addition, the warrant held by the holders of PKLB Class B Preferred shares to purchase 100,000 PKLB common shares at a price of $6.00 per share will be exchanged for a warrant to purchase 8,333 BAS common shares at a price of $72.00 per share. Each holder of PKLB Class A Preferred shares will be entitled to receive a 6% Subordinated Convertible Note due 2008 issued by BAS with a principal amount equal to $6.00 per Class A Preferred share. Assuming the conversion of all of the notes on the first anniversary of their issuance, BAS will issue approximately 312,488 of its common shares to PKLB shareholders in connection with the merger. The transaction is subject to customary closing conditions, including registration of the BAS securities to be issued in the merger and the approval of PKLB's shareholders. The merger is currently expected to close in the first quarter of BAS' next fiscal year. Holders of more than 85% of PKLB's Class A convertible preferred stock have agreed to vote those shares in favor of the merger.
On June 13, 2002 the Company loaned PKLB $100,000. The six month unsecured note requires payment of principal and interest on December 13, 2002. Interest is charged at the rate of 8.0%.
On June 26, 2002 the Company loaned PKLB $100,000. The six month unsecured note requires payment of principal and interest on December 26, 2002. Interest is charged at the rate of 8.0%.
On July 25, 2002 the Company loaned PKLB $100,000. The six month unsecured note requires payment of principal and interest on January 25, 2003. Interest is charged at the rate of 8.0%.
On June 20, 2002 the Company announced that it had reached an agreement in principle to acquire LC Resources, Inc., a privately-held company based in Walnut Creek, California. The agreement outlines the purchase by the Company of all of the outstanding shares of LC Resources, Inc. (LCR) for $2.5 million, subject to adjustment for certain changes in net tangible assets of LCR prior to closing. BAS would pay cash of $250,000 at closing, and the remainder of the purchase price would be in the form of promissory notes maturing on October 1, 2007 and bearing interest at a rate of 10% per annum. The holders of the notes will have the option to require BAS to repay up to 20% of the outstanding principal balance of the notes on each October 1 prior to maturity, commencing October 1, 2003. The agreement in principle also contemplates that certain assets comprising separate lines of business of LCR will be sold to an unrelated third party contemporaneously with the closing of the purchase by BAS, and the proceeds of that sale would be distributed to the LCR shareholders. The LCR transaction is subject to BAS' ability to obtain financing for the transaction, the subsequent operation of LCR's business on terms acceptable to it and the receipt of certain required consents and approvals. The parties currently anticipate that closing of the LCR transaction will occur near the end of BAS' current fiscal year.
Total expenditures by the Company for property and equipment were $4,183,000 and $884,000 for the nine months ended June 30, 2002 and 2001, respectively. Expenditures made in connection with the expansion of the Company's operating facilities and purchases of laboratory equipment accounted for the largest portions of these expenditures. The Company also expects to make other investments to expand its operations through internal growth and, as attractive opportunities arise, through strategic acquisitions, alliances and joint ventures. The Company is currently expanding facilities at its preclinical site in Evansville, Indiana. The commitment is for approximately $3.5 million. Construction on the facilities expansion is expected to be completed in December 2002. In August 2002, the Company obtained financing for the expansion with a commercial lender (discussed below). The Company is currently expanding facilities at its site in West Lafayette, Indiana. The commitment is for approximately $4.0 million. Construction on the facilities expansion is expected to be completed during the summer of 2003. The Company plans to obtain funding with a commercial lender to finance this construction. During the quarter ended June 30, 2002, the Company purchased a building near its headquarters in West Lafayette, Indiana. The Company obtained a mortgage with a commercial lender to finance this purchase (discussed below).
Based on its current business activities, the Company believes that cash generated from its operations and amounts available under its existing credit arrangements will be sufficient to fund its anticipated working capital and capital expenditure requirements.
The Company has a revolving line of credit, which expires April 1, 2004 and allows borrowings of up to $3,500,000. Interest accrues monthly on the outstanding balance at the bank's prime rate minus 25 to plus 75 basis points (4.50 % at June 30, 2002) or at the London Interbank Offered Rate (LIBOR) plus 200 to 300 basis points, as elected by the Company, depending upon certain financial ratios. The line is collateralized by inventories and accounts receivable and requires the Company to maintain certain financial ratios. The Company pays a fee equal to 0.125 to 0.5 basis points, depending on certain financial ratios, on the unused portion of the line of credit. As of June 30, 2002 and September 30, 2001 interest on the entire outstanding balance was based on the prime rate minus 25 basis points. The balance outstanding on this line of credit at June 30, 2002 was $3,302,641.
On June 24, 1999 the Company obtained a $3,500,000 commercial mortgage with a bank. The mortgage note requires 59 monthly principal payments of $19,444 plus interest, followed by a final payment for the unpaid principal amount of $2,352,804 due June 24, 2004. Interest is charged at the one-month LIBOR rate plus 200 basis points (3.84% at June 30, 2002).
On April 30, 2002 the Company obtained a $680,000 commercial mortgage with a bank to finance the purchased building near its headquarters in West Lafayette, Indiana. The mortgage note requires 59 monthly principal payments of $3,800 plus interest, followed by a final payment for the unpaid principal amount of 455,800 due April 30, 2007. Interest is charged at the one-month LIBOR rate plus 200 basis points (3.84% at June 30, 2002).
On August 5, 2002 the Company obtained a $2,340,000 construction loan with a bank to finance the expansion of the preclinical site in Evansville, Indiana. The note requires 59 monthly principal payments of $13,000 plus interest commencing September 5, 2003, followed by a final payment for the unpaid principal amount of $1,573,000 due August 5, 2008. Interest is charged at the one-month LIBOR rate plus 200 basis points.
The Company has capital lease arrangements to finance the acquisition of equipment. Future minimum lease payments for the capital leases are $489,394 with $38,787 representing interest. The capital lease obligations will be paid in full by fiscal year 2004.
On July 3, 2002 the Company obtained a $1,500,000 lease line with a bank. The payment schedule is determined at certain intervals as the line is utilized. The Company utilized $659,000 of the line in July 2002. Interest is charged at the prime rate minus 25 basis points.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable
PART II — OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
| 3.1 | Second Amended and Restated Articles of Incorporation of Bioanalytical Systems, Inc. (Incorporated by reference to Exhibit 3.1 to Form 10-Q for the quarter ended December 31, 1997). |
| 3.2 | Second Restated Bylaws of Bioanalytical Systems, Inc. (Incorporated by reference to Exhibit 3.2 to Form 10-Q for the quarter ended December 31, 1997). |
| 4.1 | Specimen Certificate for Common Shares (Incorporated by reference to Exhibit 4.1 to Registration Statement on Form S-1, Registration No. 333-36429). |
| 10.2 | Bioanalytical Systems, Inc. Outside Director Stock Option Plan (Incorporated by reference to Exhibit 10.2 to Registration Statement on Form S-1, Registration No. 333-36429). |
| 10.3 | Form of Bioanalytical Systems, Inc. Outside Director Stock Option Agreement (Incorporated by reference to Exhibit 10.3 to Registration Statement on Form S-1, Registration No. 333-36429). |
| 10.4 | Bioanalytical Systems, Inc. 1990 Employee Incentive Stock Option Plan (Incorporated by reference to Exhibit 10.4 to Registration Statement on Form S-1, Registration No. 333-36429). |
| 10.5 | Form of Bioanalytical Systems, Inc. 1990 Employee Incentive Stock Option Agreement (Incorporated by reference to Exhibit 10.5 to Registration Statement on Form S-1, Registration No. 333-36429). |
| 10.6 | Bioanalytical Systems, Inc. 1997 Employee Incentive Stock Option Plan (Incorporated by reference to Exhibit 10.26 to Registration Statement on Form S-1, Registration No. 333-36429). |
| 10.7 | Form of Bioanalytical Systems, Inc. 1997 Employee Incentive Stock Option Agreement (Incorporated by reference to Exhibit 10.27 to Registration Statement on Form S-1, Registration No. 333-36429). |
| 10.8 | 1997 Bioanalytical Systems, Inc. Outside Director Stock Option Plan (Incorporated by reference to Exhibit 10.28 to Registration Statement on Form S-1, Registration No. 333-36429). |
| 10.9 | Form of Bioanalytical Systems, Inc. 1997 Outside Director Stock Option Agreement (Incorporated by reference to Exhibit 10.29 to Registration Statement on Form S-1, Registration No. 333-36429). |
| 10.10 | Business Loan Agreement by and between Bioanalytical Systems, Inc., and Bank One, Indiana, N.A. dated April 1, 2001 (Incorporated by reference to Exhibit 10.10 to Form 10-Q for the quarter ended June 30, 2001). |
| 10.11 | Commercial Security Agreement by and between Bioanalytical Systems, Inc. and Bank One, Indiana, N.A., dated March 1, 1998 (Incorporated by reference to Exhibit 10.15 to Form 10-Q for the quarter ended March 31, 1998). |
| 10.12 | Negative Pledge Agreement by and between Bioanalytical Systems, Inc. and Bank One, Indiana, N.A., dated March 1, 1998 (Incorporated by reference to Exhibit 10.16 to Form 10-Q for the quarter ended March 31, 1998). |
| 10.13 | Promissory Note by and between Bioanalytical Systems, Inc. and Bank One, Indiana, N.A., dated June 24, 1999 related to loan in the amount of $3,500,000 (Incorporated by reference to exhibit 10.18 to Form 10-Q for the quarter ended June 30, 1999). |
| 10.14 | Promissory Note for $3,500,000 executed by Bioanalytical Systems, Inc. in favor of Bank One, Indiana, N.A., dated April 1, 2001 (Incorporated by reference to exhibit 10.14 to Form 10-Q for the quarter ended June 30, 2001). |
| 10.15 | Agreements and Plans of Merger between Bioanalytical Systems, Inc. and Pharmakinetics Laboratories Inc. (Incorporated by reference to exhibit 2.1 to Form 8-K filed July 3, 2002). |
| 11.1 | Statement Regarding Computation of Per Share Earnings. |
| 99.1 | Risk factors (Incorporated by reference Exhibit 99.1 to Form 10-K for the year ended September 30, 2001). |
| 99.2 | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002 |
| 99.3 | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002 |
(b) Reports on Form 8-K
No report on Form 8-K was filed during the quarter for which this report is filed.
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. | |
| Date: August 15, 2002 | /s/ PETER T. KISSINGER Peter T. Kissinger President and Chief Executive Officer |
| Date: August 15, 2002 | /s/
DOUGLAS P. WIETEN Douglas P. Wieten Vice President–Finance, Chief Financial Officer, and Treasurer (Principal Financial and Accounting Officer) |