x
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QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF
1934 for the quarterly period ended December 31, 2008
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OR
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o
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TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 for the transition period from ___________ to
_____________.
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INDIANA
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35-1345024
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(State
or other jurisdiction of incorporation or
organization)
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(I.R.S.
Employer Identification No.)
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2701
KENT AVENUE
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47906
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WEST LAFAYETTE, INDIANA
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(Zip
code)
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(Address
of principal executive offices)
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Page
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PART
I
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FINANCIAL
INFORMATION
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Item
1
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Condensed
Consolidated Financial Statements (Unaudited):
|
|
Condensed
Consolidated Balance Sheets as of December 31, 2008 and September 30,
2008
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3
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Condensed
Consolidated Statements of Operations for the Three Months Ended December
31, 2008 and 2007
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4
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Condensed
Consolidated Statements of Cash Flows for the Three Months Ended December
31, 2008 and 2007
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5
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Notes
to Condensed Consolidated Financial Statements
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6
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Item
2
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Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
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11
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Item
4
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Controls
and Procedures
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18
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PART
II
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OTHER
INFORMATION
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Item
1A
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Risk
Factors
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18
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Item
6
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Exhibits
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19
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Signatures
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20
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December 31,
2008
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September 30,
2008
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|||||||
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(Unaudited)
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|||||||
Assets
|
||||||||
Current
assets:
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||||||||
Cash and cash
equivalents
|
$ | 451 | $ | 335 | ||||
Accounts
receivable
|
||||||||
Trade
|
4,748 | 6,705 | ||||||
Unbilled revenues
and other
|
1,690 | 2,653 | ||||||
Inventories
|
2,196 | 2,184 | ||||||
Deferred income
taxes
|
516 | 516 | ||||||
Refundable income
taxes
|
1,283 | 1,283 | ||||||
Prepaid
expenses
|
541 | 639 | ||||||
Current
assets of discontinued operations
|
65 | 629 | ||||||
Total
current assets
|
11,490 | 14,944 | ||||||
Property
and equipment, net
|
22,646 | 23,135 | ||||||
Deferred
income taxes
|
33 | — | ||||||
Goodwill
|
1,855 | 1,855 | ||||||
Intangible
assets, net
|
136 | 144 | ||||||
Debt
issue costs
|
165 | 177 | ||||||
Other
assets
|
90 | 92 | ||||||
Total
assets
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$ | 36,415 | $ | 40,347 | ||||
Liabilities
and shareholders’ equity
|
||||||||
Current
liabilities:
|
||||||||
Accounts
payable
|
$ | 1,212 | $ | 2,209 | ||||
Accrued
expenses
|
1,933 | 2,061 | ||||||
Customer
advances
|
3,380 | 4,032 | ||||||
Income
tax accruals
|
473 | 473 | ||||||
Revolving
line of credit
|
1,647 | 2,023 | ||||||
Current portion of
capital lease obligation
|
738 | 720 | ||||||
Current portion of
long-term debt
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499 | 491 | ||||||
Current
liabilities of discontinued operations
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35 | 41 | ||||||
Total
current liabilities
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9,917 | 12,050 | ||||||
Capital
lease obligation, less current portion
|
1,251 | 1,443 | ||||||
Long-term
debt, less current portion
|
8,587 | 8,715 | ||||||
Fair
value of interest rate swaps
|
137 | — | ||||||
Deferred
income taxes
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— | 344 | ||||||
Shareholders’
equity:
|
||||||||
Preferred
Shares:
|
||||||||
Authorized
1,000 shares; none issued and outstanding
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— | — | ||||||
Common shares, no
par value:
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||||||||
Authorized 19,000
shares; issued and outstanding 4,915 at
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||||||||
December 31, 2008
and September 30, 2008 December,
2007
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1,191 | 1,191 | ||||||
Additional
paid-in capital
|
12,719 | 12,561 | ||||||
Retained
earnings
|
2,589 | 4,173 | ||||||
Accumulated
other comprehensive income (loss)
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24 | (130 | ) | |||||
Total
shareholders’ equity
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16,523 | 17,795 | ||||||
Total
liabilities and shareholders’ equity
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$ | 36,415 | $ | 40,347 |
Three
Months Ended
December
31,
|
||||||||
2008
|
2007
|
|||||||
Service
revenue
|
$ | 5,987 | $ | 8,035 | ||||
Product
revenue
|
2,089 | 2,530 | ||||||
Total
revenue
|
8,076 | 10,565 | ||||||
Cost
of service revenue
|
5,288 | 5,445 | ||||||
Cost
of product revenue
|
741 | 1,034 | ||||||
Total
cost of revenue
|
6,029 | 6,479 | ||||||
Gross
profit
|
2,047 | 4,086 | ||||||
Operating
expenses:
|
||||||||
Selling
|
1,005 | 792 | ||||||
Research
and development
|
205 | 188 | ||||||
General
and administrative
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2,390 | 1,819 | ||||||
Loss
on sale of property and equipment
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20 | 6 | ||||||
Total
operating expenses
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3,621 | 2,805 | ||||||
Operating
income (loss)
|
(1,574 | ) | 1,281 | |||||
Interest
income
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2 | 27 | ||||||
Interest
expense
|
(392 | ) | (248 | ) | ||||
Other
income
|
1 | 3 | ||||||
Income
(loss) from continuing operations before income taxes
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(1,963 | ) | 1,063 | |||||
Income
taxes (benefit)
|
(379 | ) | 476 | |||||
Net
income (loss) from continuing operations
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$ | (1,584 | ) | $ | 587 | |||
Discontinued
Operations (Note 5)
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||||||||
Loss
from discontinued operations before income taxes
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$ | — | $ | (995 | ) | |||
Tax
benefit
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— | 392 | ||||||
Net
loss from discontinued operations after income taxes
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$ | — | $ | (603 | ) | |||
Net
loss
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$ | (1,584 | ) | $ | (16 | ) | ||
Basic
net income (loss) per share:
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||||||||
Net
income (loss) per share from continuing operations
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$ | (0.32 | ) | $ | 0.12 | |||
Net
loss per share from discontinued operations
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(0.00 | ) | (0.12 | ) | ||||
Basic
net loss per share
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$ | (0.32 | ) | $ | (0.00 | ) | ||
Diluted
net income (loss) per share:
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||||||||
Net
income (loss) per share from continuing operations
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$ | (0.32 | ) | $ | 0.12 | |||
Net
loss per share from discontinued operations
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(0.00 | ) | (0.12 | ) | ||||
Diluted
net loss per share
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$ | (0.32 | ) | $ | (0.00 | ) | ||
Weighted
common shares outstanding:
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||||||||
Basic
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4,915 | 4,910 | ||||||
Diluted
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4,915 | 5,036 |
Three Months Ended December 31,
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||||||||
2008
|
2007
|
|||||||
Operating
activities:
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||||||||
Net loss
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$ | (1,584 | ) | $ | (16 | ) | ||
Adjustments to reconcile net
loss from continuing operations to net cash provided by operating
activities:
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||||||||
Net
loss from discontinued operations
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— | 603 | ||||||
Depreciation and
amortization
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680 | 713 | ||||||
Employee stock compensation
expense
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158 | 110 | ||||||
Bad
debt expense
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1 | 1 | ||||||
Loss
on interest rate swap
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137 | — | ||||||
Loss on sale of property
and equipment
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20 | 6 | ||||||
Deferred
income taxes
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(377 | ) | — | |||||
Changes in operating assets and
liabilities:
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||||||||
Accounts
receivable
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2,920 | 336 | ||||||
Inventories
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(12 | ) | (28 | ) | ||||
Refundable income
taxes
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— | 630 | ||||||
Prepaid expenses and other
assets
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99 | 110 | ||||||
Accounts payable
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(997 | ) | 991 | |||||
Accrued expenses
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(128 | ) | (792 | ) | ||||
Customer advances
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(652 | ) | 49 | |||||
Net cash
provided by continuing operating activities
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265 | 2,713 | ||||||
Investing
activities:
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||||||||
Capital
expenditures
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(304 | ) | (706 | ) | ||||
Proceeds from sale of property
and equipment
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— | 1 | ||||||
Net cash used
by continuing investing activities
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(304 | ) | (705 | ) | ||||
Financing
activities:
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||||||||
Payments of long-term
debt
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(120 | ) | (4,560 | ) | ||||
Borrowings on long-term
debt
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— | 1,400 | ||||||
Payments
on revolving line of credit
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(4,668 | ) | — | |||||
Borrowings
on revolving line of credit
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4,292 | — | ||||||
Payments on capital lease
obligations
|
(174 | ) | (139 | ) | ||||
Net proceeds from the exercise
of stock options
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— | 13 | ||||||
Net cash used
by continuing financing activities
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(670 | ) | (3,286 | ) | ||||
Cash
Flow of Discontinued Operations:
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||||||||
Cash
provided (used) by operating activities
|
558 | (734 | ) | |||||
Net
cash used by investing activities
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— | (143 | ) | |||||
Net
cash provided (used) by discontinued operations
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558 | (877 | ) | |||||
Effect
of exchange rate changes
|
267 | (41 | ) | |||||
Net
increase (decrease) in cash and cash equivalents
|
116 | (2,196 | ) | |||||
Cash
and cash equivalents at beginning of period
|
335 | 2,837 | ||||||
Cash
and cash equivalents at end of period
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$ | 451 | $ | 641 |
1.
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DESCRIPTION
OF THE BUSINESS AND BASIS OF
PRESENTATION
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2.
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STOCK-BASED
COMPENSATION
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Options
(shares)
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Weighted-
Average Exercise
Price
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Weighted-
Average Grant
Date Fair
Value
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||||||||||
Outstanding - October 1, 2008
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754 | $ | 6.06 | $ | 3.50 | |||||||
Exercised
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- | $ | - | $ | - | |||||||
Granted
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60 | $ | 4.07 | $ | 2.73 | |||||||
Terminated
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(148 | ) | $ | 5.67 | $ | 3.60 | ||||||
Outstanding - December 31, 2008
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666 | $ | 5.97 | $ | 3.40 |
3.
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INCOME
(LOSS) PER SHARE
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Three Months Ended
December 31,
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||||||||
2008
|
2007
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|||||||
Basic
net income(loss) per share from continuing operations:
|
||||||||
Net
income (loss) applicable to common shareholders
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$ | (1,584 | ) | $ | 587 | |||
Weighted
average common shares outstanding
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4,915 | 4,910 | ||||||
Basic
net income (loss) per share from continuing operations
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$ | (0.32 | ) | $ | 0.12 | |||
Diluted
net income (loss) per share from continuing operations:
|
||||||||
Diluted
net income (loss) applicable to common shareholders
|
$ | (1,584 | ) | $ | 587 | |||
Weighted
average common shares outstanding
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4,915 | 4,910 | ||||||
Dilutive
stock options/shares
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— | 126 | ||||||
Diluted
weighted average common shares outstanding
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4,915 | 5,036 | ||||||
Diluted
net income (loss) per share from continuing operations
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$ | (0.32 | ) | $ | 0.12 |
4.
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INVENTORIES
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December 31,
2008
|
September 30,
2008
|
|||||||
Raw
materials
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$ | 1,746 | $ | 1,748 | ||||
Work
in progress
|
176 | 202 | ||||||
Finished
goods
|
274 | 234 | ||||||
$ | 2,196 | $ | 2,184 |
5.
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DISCONTINUED
OPERATIONS
|
Three
Months Ended
December
31,
|
||||||||
2008
|
2007
|
|||||||
Net
Sales
|
$ | — | $ | 887 | ||||
Loss
before income taxes and disposal
|
— | (995 | ) | |||||
Loss
on disposal
|
— | — | ||||||
Loss
from operations before tax benefit
|
— | (995 | ) | |||||
Income
tax benefit
|
— | 392 | ||||||
Net
loss
|
$ | — | $ | (603 | ) |
December 31,
2008
|
September 30,
2008
|
|||||||
Receivables,
net of allowance for doubtful accounts
|
$ | 28 | $ | 346 | ||||
Other
current assets
|
37 | 283 | ||||||
Total
assets
|
$ | 65 | $ | 629 | ||||
Accounts
payable, accrued liabilities and other liabilities
|
35 | 41 | ||||||
Equity
|
30 | 588 | ||||||
Total
liabilities and equity
|
$ | 65 | $ | 629 |
6.
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SEGMENT
INFORMATION
|
Three Months Ended
December 31,
|
||||||||
2008
|
2007
|
|||||||
Revenue:
|
||||||||
Service
|
$ | 5,987 | $ | 8,035 | ||||
Product
|
2,089 | 2,530 | ||||||
$ | 8,076 | $ | 10,565 | |||||
Operating
income (loss) from continuing operations:
|
||||||||
Service
|
$ | (1,311 | ) | $ | 940 | |||
Product
|
(263 | ) | 341 | |||||
$ | (1,574 | ) | $ | 1,281 | ||||
7.
|
INCOME
TAXES
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Tax
Jurisdiction
|
Years
|
|
US
Federal and State
|
2004-2008
|
|
United
Kingdom
|
2001-2008
|
8.
|
DEBT
|
•
|
Risk-free interest
rate. The risk-free interest rate is based on U.S. Treasury
yields in effect at the time of grant for the expected term of the
option.
|
|
•
|
Expected volatility. We
use our historical stock price volatility on our common stock for our
expected volatility assumption.
|
|
•
|
Expected term. The
expected term represents the weighted-average period the stock options are
expected to remain outstanding. The expected term is determined based on
historical exercise behavior, post-vesting termination patterns, options
outstanding and future expected exercise behavior.
|
|
•
|
Expected dividends. We
assumed that we will pay no
dividends.
|
Three Months Ended
December 31,
|
||||||||
2008
|
2007
|
|||||||
Service
revenue
|
74.1 | % | 76.1 | % | ||||
Product
revenue
|
25.9 | 23.9 | ||||||
Total
revenue
|
100.0 | 100.0 | ||||||
Cost
of service revenue (a)
|
88.3 | 67.8 | ||||||
Cost
of product revenue (a)
|
35.5 | 40.9 | ||||||
Total
cost of revenue
|
74.7 | 61.3 | ||||||
Gross
profit
|
25.3 | 38.7 | ||||||
Total
operating expenses
|
44.8 | 26.5 | ||||||
Operating
income (loss)
|
(19.5 | ) | 12.2 | |||||
Other
expense
|
(4.8 | ) | (2.1 | ) | ||||
Income
(loss) from continuing operations before income taxes
|
(24.3 | ) | 10.1 | |||||
Income
tax provision (benefit)
|
(4.7 | ) | 4.5 | |||||
Net
income (loss) from continuing operations
|
(19.6 | )% | 5.6 | % |
|
(a)
|
Percentage
of service and product revenues,
respectively
|
Number
|
Description of Exhibits
|
||
(3)
|
3.1
|
Second
Amended and Restated Articles of Incorporation of Bioanalytical Systems,
Inc. (incorporated by reference to Exhibit 3.1 to Form 10-Q for the
quarter ended December 31, 1997).
|
|
3.2
|
Second
Amended and Restated Bylaws of Bioanalytical Systems, Inc., as
subsequently amended (filed herewith).
|
||
(4)
|
4.1
|
Specimen
Certificate for Common Shares (incorporated by reference to Exhibit 4.1 to
Registration Statement on Form S-1, Registration No.
333-36429).
|
|
10.1
|
Severance
Agreement and Release of All Claims between Edward M. Chait and
Bioanalytical Systems, Inc., dated November 7, 2008 (incorporated by
reference to Exhibit 10.29 to Form 10-K for the fiscal year ended
September 30, 2008).
|
||
10.2
|
Employment
Agreement between Jon Brewer and Bioanalytical Systems, Inc., effective as
of October 1, 2008 (incorporated by reference to Exhibit 10.1 to Form 8-K
filed September 26, 2008).
|
||
10.3
|
Employee
Incentive Stock Option Agreement between Jon Brewer and Bioanalytical
Systems, Inc., dated October 1, 2008 (incorporated by reference to Exhibit
10.35 to Form 10-K for the fiscal year ended September 30,
2008).
|
||
10.4
|
Employment
Agreement between Anthony S. Chilton and Bioanalytical Systems, Inc.,
dated December 1, 2008 (incorporated by reference to Exhibit 10.1 to Form
8-K filed November 14, 2008).
|
||
10.5
|
Employee
Incentive Stock Option Agreement between Anthony S. Chilton and
Bioanalytical Systems, Inc., dated December 1, 2008 (incorporated by
reference to Exhibit 10.36 to Form 10-K for the fiscal year ended
September 30, 2008).
|
||
10.6
|
Waiver
letter, dated December 19, 2008, from National City Bank regarding the
Second Amendment to Amended and Restated Credit Agreement by and between
Bioanalytical Systems, Inc. and National City Bank (incorporated by
reference to Exhibit 10.9 to Form 10-K for the fiscal year ended September
30, 2008).
|
||
10.7
|
Waiver
letter, dated February 17, 2009, from Regions Bank (filed
herewith).
|
||
(31)
|
31.1
|
Certification
of Richard M. Shepperd (filed herewith).
|
|
31.2
|
Certification
of Michael R. Cox (filed herewith).
|
||
(32)
|
32.1
|
Written
Statement of Chief Executive Officer and Chief Financial Officer Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350)
(filed herewith).
|
BIOANALYTICAL
SYSTEMS, INC.
(Registrant)
|
|
Date:
February 23, 2009
|
By: /s/ Richard
M. Shepperd
|
Richard
M. Shepperd
President
and Chief Executive Officer
|
|
Date: February
23, 2009
|
By: /s/ Michael
R. Cox
|
Michael
R. Cox
Vice
President, Finance and Administration,
Chief
Financial Officer and
Treasurer
|