Good day, ladies and gentlemen, and welcome to the Bioanalytical Systems Q4 2015 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, today’s conference is being recorded. I would now like to introduce your host for today’s conference, Ms. Jacqueline Lemke, CEO and President. Ma’am, please go ahead.

Thank you, operator. Good morning and thank you all for joining us for the BASI’s 2015 full year and fourth quarter financial results conference call and webcast. For those of you who are long-term followers of BASi, I’d like to happily note that this is the earliest we’ve been able to issue results, since I began in fiscal year ‘12. For that, I’d like to thank our excellent finance team for their efforts in making this happen. Over the past three years, the BASi team has focused on targeted initiatives that were designed to stabilize our business, improve our liquidity and lower our breakeven point. Jeff will review the numbers shortly, but in summary, I think you can see evidence of incredible progress towards these targeted initiatives. As reported on the fiscal year ‘15 statement of comprehensive income, the P&L, fiscal year ‘15 net income and earnings per share improved substantially versus fiscal year ’14, despite a $1.9 million or 7.7% revenue decline year-on-year, indicating a stabilized business with a lower breakeven point. The fiscal year ‘15 balance sheet and cash flow from operations show improvements in liquidity, even as BASi increased investment in the business by threefold. These fiscal year ‘15 improvements mark BASi’s third consecutive year of competitive positive EBITDA margin. For fiscal year ‘15, we have achieved some very aggressive goals. We successfully relocated our production and shipping and receiving operations to allow for more efficient use of our space in West Lafayette, as well as a lease of a vacated space to Cook, led by our new VP of Business Development and Marketing, Connie Dougherty as well as our experienced business leaders, VP of Preclinical Services, Philip Downing and VP of Bioanalytical Operations, Dr. Jim Bourdage, we achieved a record level of services quote request and…

Thanks Jackie and good morning everyone, and thank you for joining us on today's conference call as we address our 2015 full-year and fourth-quarter financial results. Consistent with other calls before we begin the discussion, we'd like to remind you that the statements we make during today's conference call about future expectations, plans and prospects for the Company constitute forward-looking statements for the purposes of Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. Actual results may vary materially from those indicated by these forward-looking statements as a result of various important factors including those discussed in the Company's filings with the Securities and Exchange Commission. The statements made on this call are made only as of the date of this call and the Company assumes no obligation to update those statements. In addition, we will discuss certain non-GAAP financial measures on this call which should be considered a supplement to and not a substitute for financial measures prepared in accordance with Generally Accepted Accounting Principles. A reconciliation of those non-GAAP measures to the comparable GAAP measures is included in the press release and conference call presentation. Now to the results. For fiscal year 2015, annual revenues amounted to $22.7 million and for the fourth-quarter revenue amounted to $5 million. These 2015 results represent decreases of 7.7% and 22.5% respectively compared to the comparable periods one-year ago. Overall, our service revenue was negatively impacted by fewer bioequivalence studies in fiscal ‘15 and by the increase in method development and validation projects, which tend to generate more lower revenue, but actually involve more dedicated resources. The decline in service revenue was partially offset by an increase in our preclinical services revenue in fiscal ‘15. The improvement in pre-clinical services was due in part to an increase in the…

[Operator Instructions] Our first question comes from the line of Evan Greenberg with LegendCap Funds. Your line is now open. Please go ahead.

Jackie, how are you?

Good, Evan. How are you?

I want to get an idea on the unbilled revenues and the other line was on having to do with what I consider to be future business. I saw both of those were up significantly. So I wanted to get an idea, are they both up double-digit percentage wise. I want to get an idea where that was coming from, if that’s something of a new business that’s -- that we’ll anticipate next quarter or whether those were already existing contracts, whether those are bookings that are -- that we had this quarter.

Yeah, these are -- and I am looking at them, it’s a good question. Our customer advance is basically when we signed contracts with customers, they put down quite a bit of a deposit depending on the business on pre-clinical side between -- it’s a pretty decent amount. So yes, I look at this all the time to see if that’s telling us what’s coming, the customer advances. The unbilled revenues, I always can explain that one as well. It’s basically receivable and its based upon whether we did a milestone billing or we bill active services. So we accrued for the accounts receivable before the annual.

Those are certain milestones that have not really given us the opportunity to force collection.

Right. So the work has been done, it’s committed work.

And that one is probably more from a cash flow standpoint. You would say that has the potential absent any issues with collection meeting our milestones of trading into cash according to the terms of the project. And then down below the customer advances what truly kind of gives you an idea of the kinds of revenue that is essentially hung up in the balance sheet until we meet our expectation, different set of milestones, but in terms of the earning portion of that deposit. So again, it’s an indication of future revenue.

Okay, great. Because I think that those indications really show where – these reports show where the company was, those show where the company is going, and that’s the way I am looking at and I hope I am just not being too much of an internal optimistic.

No, you’re right.

And then the second question I had had to do with the new Board member, I was very enthused about her and her background as she has been a traditional pharma and in biotech. Is she going to be able to help introduce you to some more clients and more customers as she bring the Rolodex with her or I should think her contact list now, Rolodex is 20th century.

Yeah, I hope that too. Yeah, definitely that is why we invited her and asked her to be on the Board, she has great qualifications, she has a lot of contacts in the industry and she can help us with some of our strategies to get to market.

Okay. And last question is, are you going to any financial conferences or do any meetings coming up to get the story out because I think people are looking at this company as a formerly an unprofitable scientific company and not looking at it as a really good scientific company with a dynamic future and earnings prospects.

Yeah, I don't have that on the agenda for the next nine months, but doesn't mean I wouldn't be open to doing that. It just takes a lot of time and effort to put together the financial presentations and I'm trying to focus on getting up to the clients and growing the topline. But if you have some in mind, why don't you just send me a note and let me know. The ones I have been going to, I'm not going to be repeating.

The one that we have on the calendar, I mean it’s a little further out, it's in September. It's more a Midwest region, but it is going to give an opportunity for Jackie to tell the BASi story.

Well, there's one in June that the company did a couple of years ago that I’ll recommend, but I'm going to let other people ask questions, I don’t to hog up all the time.

Our next question comes from the line of Raymond Young with Dolphin Asset Management. Your line is now open.

Jackie can you comment on the number of business development personnel at the company today and whether that’s going?

We have two on the product side. We have two on the services side dedicated 100% to business development, as well as the Vice President of Business Development. We are currently recruiting someone on the services side for the West Coast and another products person for the West Coast. And the reason I hesitated for a minute is because we’ve had a little turnover and because we really are as a company focusing the whole company on business development. So we get as we talk to new clients or even exiting clients and we go out to visit them, we make sure that we have a team that's not just the business development, but also the scientists and myself. So myself, Jim, Philip and all of their PIs are part of our business development team and part of helping us to reach out and grow the business.

So, now in the full hire, I think it would be a total of six plus the VPs, so its seven.

Can you comment on the size of the, I guess your pipeline. Where is it today versus a year ago, so we can understand why there is optimism for revenue growth in 2016?

Well, I can comment on the relative size of the quotes issued. The quotes issued has probably increased by 50%. Now, the quotes accepted, that’s the tricky part, right because we’re in so many different business lines there is a different habit for acceptance for each type of business lines. Preclinical, for example, will have some rather large quotes, in the millions of dollars, yet people don't sign on the dotted lines, so they’re really ready to go, which means they have all their financing in line. So those quotes could be open for 18 months, although in some cases they drop right in. Bioanalytical, when we get some quotes signed there, it could be another three to six months before we start working on the project. Whereas product quotes, you get a quote acceptance and then you are delivering within a few weeks. So, I’d rather not tell you the actual numbers underlying it. I don't have that. I'm a financial person since I got here, I've been trying to be able to commit to what is that pipeline look like, but because we are such a varied mix in our company, I think it will be misleading to just give you one number, but I can tell you that relative to prior years, it's gone up substantially because we are out there a lot more. And we’re explaining things and people like what we do and we're making sure that people who we've done work before who might not have much worked with now but they understand that we are here delivering the same quality of work as ever.

Lastly, can you comment on Culex? Will there be a new iteration or new generation for that product line in 2016?

Yeah, I don't know that it will be new, but what we are trying to do with Culex and we have it ready to roll out and hopefully it will be pretty easy to find on our website the way we are setting it up. We realize that we are trying to sell Culex as a whole package. Everyone should want a four station cart and run multiple studies, yet most of the market is not converted to automated sampling. So we are going to feed the market with some loaner. Culex is at a bench top, because most of the experimentation is done bench top. And we put out the bench top and then people can, in a modular way, convert to just a single station and then work their way up to four station. Right now we are in several of the bigger companies Genentech, Covance, with multiple, 40 station carts and they love it and they use it on a regular basis, but we want to get to the market that might not necessarily need that much volume or not even think they need that technology and that’s what we are trying to do. And we are tweaking somethings as we go in terms of new product introduction, but we are not going to – and we are also chipping it a different way, so that’s easier. Since you get it, you can use it, but I don’t think that I can say we have a new product iteration in the next year, no.

Okay. Great. Lastly, is there any movement on the biosimilar front with FDA?

I don’t know what you mean by that, any more regulatory movement?

Meaning have they made it easier to prove biosimilars?

No, nothing has really changed in the regulations in the past several years.

Okay, great. Thank you.

We are building our capabilities to work on the large market only.

Our next question comes from line of Lenny Dunn with Freedom Investors Corporation. Your line is now open.

Yeah, good morning. I am trying to digest this still, because it looks to me like each time I think that you have all the right people in place, you had to put new people in place. Do you think that we have finally and it looks to me like the hires you’ve made recently are the right hires, but are we where we need to be so we can actually start to really grow the sales like we should?

I think that the hires we have including the whole company, not just BD is where we – is in a great spot. They're all capable and they are all willing and everybody is pushing in the same direction. I don't think we have the BD team filled up yet, we need a few more people in order to cover the bigger regions. But, yeah, we are just going to keep incrementally improving the ability to get the word out. Does that answer that?

Partially, I mean I want to be optimistic and I do know that we can't get in trouble financially because of the rock solid balance sheet and cash flows but to earn money we need to increase sales, I don’t need to tell you that. And we’ll certainly have some terrific earnings if we got sales back to the type of levels we used to have. So, do you think that this time we actually are going to get there?

I think every three months, every six months, every year, we make more progress in that direction. I guess I am not good at predicting when that time will come, but as you heard Evan point out there are some indicators that tell us it’s coming. I look at the indicators that you don’t even see yet, because I want to see what’s the foundation, what are we building. I look at the new clients that we've been able to recruit, how times we’ve visited our former clients. And everything I see, said, we're doing it, we are getting there in the right direction. And of course you can’t just get the clients or the business; you have to be able to deliver it. And we’ve been working on making sure that that is a consistent ability and we've always had it, we just want to make sure as we grow that, we can deliver. So I think everything is pointing in that direction, but you have to keep taking the steps towards it. This is an industry that's very, as you know, as we change our customer base, can we grab a few million-dollar projects from a bigger customer? Probably. Once we do that, that's going to change things overnight, right. But do we still want to recruit and help our biotech customers? Absolutely. They are becoming the way that drugs come to market, right. So the indicators are there.

Okay. Well, again, the recent announcements you’ve made, the very recent ones, it sounded like very well-qualified people and I know that when you hired Connie, she's extremely well-qualified. So it looks to me like you’ve got the right people in place to finally get us moving. So, so much flows to the bottom line as you all know, once we increase sales, we have to.

Right.

Okay, and we are paying off the mortgage debt or whatever you want to call it, roughly $1 million a year, so that's going to just disappear for at least, so we’re going to have a clean balance sheet, which is a good thing too.

Yeah. I mean think of where we were three years ago and we are light years ahead of that and we are on our way. But I know, we need the top line to really show that we are doing this.

Okay. Well, I look forward to the next conference call and some optimistic news about how business is growing. So, thank you.

Okay. Thanks, Lenny.

[Operator Instructions] Our next question comes from the line of Ethan Star [ph], Private Investor. Your line is now open.

Good morning. I think, did I hear correctly that quotes have gone up 50%?

Quotes issued.

Quotes issued, yeah, that's what I meant. And do you see any increasing rate of conversion from quotes to actual business?

Increasing rate.

The hit rate.

Yeah. No, it depends on the business, right, because like I said, the preclinical business versus bioanalytical and the products are all distinctly different. We do see, as we put in our press release, we’re getting more massive development work on the bio side, which is lower dollar for the client and for us, but it's kind of a first step in seeing if we can help them get the method that they need before they get into the bigger dollar needs in terms of the clinical trial.

Okay. Well, even if conversion rate stays the same with the increasing quotes issued, it still will increase overall within your numbers?

Right. So that's what we are looking at. We have a process with our new sales force technology that we’ve put in where we make sure that we get the proper follow-up on every single quote. A lot of the quotes, they are looking for quotes and then as they compare them and it takes a month, so we just want to make sure that we make sure that we are in that range for that.

Okay, great. And is there anything you can comment on as far as the first quarter goes thus far?

No, my finance guys are sick in their head. Sorry.

Okay. Thought I would ask. I am hopeful for increased revenue in the near future.

Thank you.

Okay, thank you very much.

Thanks, Ethan.

Our next question comes from the line of George Gestar [ph], Private Investor. Your line is open.

Hello. Good morning. Can you hear me?

Yes.

Okay. Question, if you look ahead to turning the revenue number around, if you look at whatever that number is relative to the past fiscal year, how much of the increase is going to come from existing product service areas and how much would come from innovation that you’re attempting to put into the system?

Yeah, I will give Jackie a chance to mold that just for a second, but on the product side, I think you heard Jackie earlier talk about, that’s really is more market penetration and not necessarily upgrading. We are not ready to comment on the ECLC side of things, but that’s an area that can provide some innovation and opportunity for us. And Jackie mentioned about finishing off the investment in engineers for us. When we talk about engineers at BASi, it’s really in the ECLC area and Culex as well. So that will be part of it, but I’ll kind of turn it back to Jackie for her to think about and respond back in terms of how much from existing product clients and existing customers versus new customers and really focus on both.

Yeah, I would say when we talk about innovation on the services side, it can be either we go into a new line like, we go more aggressively into large molecule, which is what we are trying right now. Dr. Bourdage has quite a bit of experience in large molecule and he has just hired an experienced scientists. So we are trying to grow that. Our innovation can also be the fact that our scientists are very up-to-date on the most recent ways of doing things and [indiscernible] patient to use and we can help the client get an innovative approach to the testing that they need. And then of course on the product side, we have a few things coming up. But I would say, if you’re asking me for a mix at the top of my head, probably 90% are current offerings and maybe another 10% is innovation based.

And then another element to that is, can we tie ourselves to the customer that much stronger in creating that bond not only on the good service and our regulatory expertise that we have had in the past, even from a technology standpoint, we are making investment in electronic notebooks in allowing the customers in terms of access to their studies and so forth. These, we are not there yet for making the investment now and it’s that kind of step that is an innovative step for us that is necessarily changing the way we – essentially, yeah maybe changing the way we offer our services, but it’s also a way to get the customer more tied in to BASi and creating that relationship that might make it more difficult to switch in the future.

Okay, and thank you. Just ongoing from what we are talking about, there seems to be a lot of movement in the biotech area and pharmaceutical, emerging acquisitions, going on both domestic and international. And how do you perceive the changing environment from your opportunity to grow? That’s the first part. Second is in the backyard, you have Lilly and I see that they are going to make a very major expansion program to their facilities, does something like that – is that a positive for you or how do you see this perspective overall?

Well, on the first question, the changing landscape, I think that’s been in happening probably for the past 10 years or so. And we have seen that benefit us and hurt us because we might have worked with one company and then it gets purchased by another company and they just use a different supplier of services, for example. So that we just have to make sure that we are giving the best service possible to both. Often times, there was just one recently announced that we worked with both of those companies, so we want to make sure, it’s all personal contacts though in this industry and we have quite a few personal contacts all over the country and all over the world. So to me it’s a matter of keeping in touch with them and they have a good impression of you which I consistently hear as I have been now visiting clients, both existing clients and new clients that there is -- they really like our services and our products. So we just have to keep the relationships open. So I don’t see the mergers as anything different than what’s been going on. It’s just at that point where it switches ownership, we have that trickiness of whether they already have in their mind another loyal researcher that they want to use and how do we get ourselves in the top of the mind. With regard to Lilly, I am going to hand that one to Jeff, he has been talking about Lilly and the strategy to increase our revenues. We have worked with Lilly for 40 years, I think since we started, but go ahead, Jeff.

Yeah, I mean, on the Lilly side, the expansion that they are talking about is important to us in a lot of ways. One is the existing relationship that's been long-term, however, it’s had its, I won't call it cycle of higher activity, less activity, but there's been a very high regard in terms of the work we've done. There has been the element of Covance coming in and taking the piece of the Lilly business and then with that was the guarantee of some future business, some of that is coming off. But in the meantime, it really also harks back, here is Lilly in our backyard and Jackie has talked about how well have we done to basically remind people of the capabilities of BASi and Lenny was asking earlier about the other people and I think we're really getting the feeling now that we've got a plan with the right people that if the contexts were good, we have to even be stronger and maybe further up the chain at Lilly in order to make some of those service capabilities more visible. But again, they are in our backyard and it's going to be important for us to target selected clients in certain parts of the US that depend on services that we’re strong in. Jackie mentioned the large molecule is something that we have with Jim Bourdage and we've just hired another individual working in Jim’s shop who has got a heavy focus on large molecules. So, again, that will be important, but as far as Lilly is concerned, they are focused as we go forward and we want to build on the past and we think there are some opportunities given the current situation in the relationship they’ve had with some of their other service providers.

Very good. And one if I could, one last question on financial side, how much benefit will you get in the new fiscal year that you didn't have an opportunity to enjoy this last fiscal year. The sublease that you've accomplished and facility, is there a measurement that you could give us?

There is. The monthly rent is in the vicinity of 55, 52,000 that started in full on the full square footage that was subject to lose May 1. So essentially, when you look at it, it's about five months, we will get a full complement of that in fiscal ‘16 that we did not get in fiscal ‘15.

That’s 350 incrementally.

350,000.

Got you. Okay, thank you. Thanks very much.

I'm showing no further questions on the phone lines at this time. I'd like to turn the call back to Jacqueline Lemke for closing remarks.

Okay. Thank you, operator and thank you all for joining us this morning. I hope you all have a happy and safe holiday and New Year and I look forward to speaking with you on our first quarter conference call to be held in February. Thank you.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program and you may now disconnect. Everyone have a great day.