Good day, ladies and gentlemen, and welcome to the Bioanalytical Systems’ Q3 2016 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to Jacqueline Lemke, President and CEO of BASI. Please go ahead.

Thank you, operator. Good morning. Thank you to everyone for joining us for BSI’s fiscal 2016 third quarter earnings conference call and webcast. As you know, this earnings call has been preceded by a press release this morning which contains summary information about our financial performance for the third quarter and year to date and will be followed with more details in the 10-Q when timely filed with the United States Securities and Exchange Commission. This call will proceed with BSI’s Chief Financial Officer and Director of Investor Relations Jill Blumhoff outlining BSI’s key financial performance. Then I will discuss our progress and objectives and then as previously mentioned we will open the lines for questions and comments. We at BSI are very proud of the scientific connection that we provide to our independent research and laboratory instruments and of the hundreds and thousands of people who have benefited from our hard work and dedication. Our ability to deliver innovative services and products with attention to the details that allow our clients to proceed with critical go/no-go decisions enabling them to bring revolutionary new drugs providing medical relief and cures to our friends and family continues to be as strong as ever. I will now turn the call over to Jill Blumhoff who will provide details on our financial performance for the quarter and first nine months of fiscal 2016 followed by my remarks.

Thank you, Jackie. Good morning everyone. Thank you for joining us for BSI’s fiscal 2016 third quarter conference call. Before we begin the discussion, I would like to remind you that the statements we may make during today's conference call about future expectations, plans end 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 these statements. In addition, we will discuss certain non-GAAP financial measures, adjusted EBITDA, this quarter on this call, which should be considered a supplement to and not a substitute for financial measures prepared in accordance with GAAP. A reconciliation of these non-GAAP measures to the comparable GAAP measures is included in the press release and conference call presentation. Briefly before I get into the numbers, I want to address the credit arrangement. Here is the latest information with regard to our non-compliance condition with the financial covenant in our credit facility. We executed a second forbearance and third amendment to the credit agreement on July 1 of this year that extended the maturity date on our term loan and our line of credit to September 30, the end of our current fiscal year. We are currently in the [fog] of these arrangements with Huntington Bank. They have reserved their right but as of today August 11, have not exercised any of their remedies. We are exploring solutions to address the cash flow issues,…

Thanks, Jill. I understand that fiscal year 2016 revenue results today are below expectations and that investors are growing impatient of waiting an upturn. Although I cannot predict to the quarter when you will see the results of our progress, I want to assure you that we are making real strides in our progress to grow revenue. You may be thinking BSI can deliver once the projects are in-house but can they bring them in-house? I just want to talk a little bit about us and the industry. Regulatory experience and longevity are critical factors in the CRO industry. When I began my leadership at BSI in mid-fiscal 2012, to stay competitive we faced the challenge of reducing our footprint by closing excess capacity, our laboratories in Europe and on the West Coast. This was the right move for our company but difficult for our people and difficult when seeking to retain and attract clients. We needed to realign our leadership which we did and our business development team. In an industry with a multi-year development cycle, our current and prospective clients needed to know that their researchers were going to be available to answer regulators’ questions years into the future. With clients shaken by our footprint reduction, we needed to continue to deliver quality services and products. We needed to create a consistent message regarding our capabilities and to share it with our current, past and prospective clients. We needed quite clearly to pursue business and to evidence the longevity that our client required. So we immediately began to rebuild. Our business development capability increased our marketing capabilities which included a modern interactive website, took some time but we were able to launch that earlier this fiscal year. We built a strong internal team approach to quote follow up…

[Operator Instructions] And our first question comes from Ethan Star, Private Investor.

Good morning. So you mentioned the quotes accepted, is that a very firm commitment to do business with BASI?

Yes, it is.

Okay, but you just don’t know when it’s going to start?

Right. Each one is different, each project starts at a different time and often a client will say I want to start November, December and then they’ll have some type of delay, and they might not start till January, February. So we try – we try to predict when they're coming in and we try to make sure that we fill our pipeline but we have to be stand ready to deliver when the client needs it. But those are all signed accepted quotes.

Okay, you can't tell us what the quotes have been, totals.

I don't want to start a precedent of giving that, the level because then people try to extrapolate and -- I'm a financial person, I tried to do that when I got here. It's really hard. You've got to test, we're doing that as a company, we’re watching it closely.

The one other I have is that I prefer that BASI not sell the building but if the board decided that, that’s the best course of action, so be it.

Well, if you can help us with other alternate source of financing, I am further looking for option. So if we sold it, we would lease it back but I understand -- I had modeled that years ago and we had this great bank loan at 3%. So we went for that. So we're continuing to talk to all various level of financing. Bank of course has the lowest level of interest rate. Maybe they're a little more risk averse. Individual groups of lenders or potentially monetizing our assets.

And our next question comes from Lenny Dunn of Freedom Investors.

Good morning. We sit here very patiently and it really sounds like you've got things pointed in the right direction but it's taken – what, it's almost four years now, four years to get there. And it sounds like the sales is starting to work the way we needed. So we got the pipeline going but that also took all however than expected. Are you comfortable with the current sales personnel that you feel that this is going to continue to work in the right direction?

Yeah, I'm not going to say that we won't add more but I'm comfortable that what we're doing as a team is what we need to do. We’re getting quite a few opportunities, identified and that haven't even become quotes accepted yet, they’re issuing quotes. Yeah I am comfortable with the approach that we are taking.

Are we going to lease in the current quarter? See, some fruits come in, I don't expect it's going to be full blast but is it – are we going to see some improvement in the current quarter?

I really was ready to tell you that and at the last minute we had somebody who had a problem with their additive, their API for their drugs and they are pushing us off. They call it indefinitely, but it’d probably be two, three more months. That would have been a substantial project in the fourth quarter. So right now I can't tell you anything more for the fourth quarter than we have –

What exactly do we owe on the building right now, 3.8 – 3.8 million and it’s being amortized with about $85,000 principal a month; is that accurate?

I think it's around $65,000.

$65,000, so that's roughly $200,000 a quarter. The size of the mortgage versus the value of the building, which seem to be highly financeable with a good interest rate. Are you talking to other banks? Because it doesn't seem insurmountable and I do agree with the first caller selling the building, I don't think, is your best alternative if you're backed into it, that’s another story but getting a $3.5 million mortgage on their property does not seem –

Right, right. No, I agree but the issue is what do you want to get the loan at? So the bank, I would classify, as the most risk averse. So we can make our payments all day long but what we’re worried about is covenants. Payments and covenants, right. And so it’s an issue to sell that to the bank right now and that's what we’re working on. We do have a few banks pretty well interested. But then there is various levels of getting financing, like the financing we have when I came here, which was effectively in a double digit, I don't want to go there either. Is it sale and leaseback of the building, if you can do that in a strong real estate market, still not disrupt our operations in any way, if the cost to us to do that is somewhere in between the banks who aren’t ready to write us and the more high level interest, then that what we're going to look at.

The sale and leaseback is permanent where getting it refinanced at a reasonable rate with a bank, with that kind of collateral, will make your –

I agree and I stand ready to tell anybody our story who can – who you guys can bring to me and I'm looking right now for -- I know there are people out there who can invest in a company our size and can understand, probably is it better than a bank because they're not and they are very – their hands are tied, regulatory wise as to what they can look into, when you talk about the future. But I can tell you as I've told you on this call that we have quite a foundation built up. But is it showing up in current revenue? No, and that would care the banks. So I need to find somebody who understands exactly what you're saying that there's a lot of equity in this company and there's a lot of ability to attract the business and the revenue will start picking up.

Now the Evansville facility is also mortgaged with this, I assume and that has real value to it.

Yes, it does. Right, there’s quite – we have quite a – we’re in a good position when it comes to having equity.

Yes, I understand that. So it doesn't seem like it would be that difficult to find financing at a reasonable rate. So if you pay an extra quarter a point more than you’re paying now and you had to pay a small premium to get the loan it wouldn’t seem that difficult to find. I mean I'm out there shopping for you but -- and I'm sure you’re shopping.

Yes, we are.

It doesn't seem that difficult in today's real estate market. I mean the building in the last time you were thinking of selling it, the real estate market wasn’t as strong as it is now and you've already leased out more than half of it to another company. So it is a far more valuable just based on that.

Right, right. So you're saying you like the sale and leaseback idea or you don’t like it?

I don't like it because it's a permanent move.

Well, it’s a permanent move but it’s a way to unlock the equity we have in an asset that is not critical to how we deliver our services and our products. So it does look better because we have 40% of the building leased out to a very strong – financially strong business.

Well I guess if it was done at the right price but you need to see to give it away at 12 million or something because I think it's worth substantially more than that, and particularly with the lease you have.

Well we're going to work on every option we can.

And as far as getting sales into the current quarter to replace the one deal that you don't think is going to happen for during the quarter. Are there other things that can be done?

Sure. Yeah, we’re working on them all the time.

I mean with somebody who's ready to be at least start doing business.

Well, it depends what area we're in, in pre-clinical services or bioanalytical. The bioanalytical right now is soft, pre-clinical is going pretty strong. So even as we bring on more projects, we have to watch closely to see if we can fit them in in the most recent quarter. So the area that we need to drop some more projects into the fourth quarter is bio which is a little longer of a decision stream although we've been working with clients for quite a while. So we might have something come in but I can't tell you exactly.

You're not having trouble closing now because people are worried about tenuous financing.

No, no. A lot of our clients are smaller bio-tech who have been -- I don't want to say at the mercy of banks but they've been up and down with fundings, so they understand what's going on. I mean the reality is we still have the cash and we are paying everybody. So we don't have a problem at this moment. We haven't experienced any problems with clients, shying away.

Okay. The number of sales people you have now may be the right amount for your current financial position. So kind of counsel you to stay away from hiring more people because you've got this long lead time, now you've got to start paying somebody in addition to the other people you have. You’ve got to watch the cash flows or with your financial background, I'm sure you understand that. But I have some concerns, I don't want to see you take yourself into a corner.

No, we understand there is a balance.

Well we've been patient for these years I guess. We will continue to be but it’s sort of – it is disappointing that it has taken so long to get this turned around and I do hear you that you feel you have it finally turned around. But it’d be nice if we got a little more guidance and you weren't as afraid to step out on the [nimble] little further and make us feel better.

Okay.

And. I guess hats off. So if anybody who have question is up to them. End of Q&A

Thank you. And I'm showing no further questions at this time. I’d like to turn the conference back over to Ms. Lemke for closing remarks.

Okay. Thank you everyone for joining us this morning and we look forward to speaking with you on our fiscal year end earnings conference call in December.

Ladies and gentlemen thank you for participating in today's conference. This does conclude the program. You may all disconnect. Have a great day everyone.