Good day, ladies and gentlemen, and welcome to the First Quarter 2015 Bioanalytical Systems, Incorporated Earnings Conference Call. My name is Tony and I will be your moderator for today’s 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, this conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Ms. Jacqueline Lemke, President and CEO. Please proceed.

Thank you, operator. Good morning and thank you all for joining us for BASi’s 2015 first quarter earnings conference call and webcast. Since the prior BASi earnings call in late December, we’ve continued to make several improvements in the foundation of the business, some of which I’d like to briefly share with you. First, we continue to add to our already strong scientific and functional talent with the recent hiring of a principal investigator in our discovery lab and an attending veterinarian for our preclinical services business. Second, we recently signed a long-term lease with Cook Biotech, Inc. which will not only supplement our cash flow and our ability to service our debt, but as we relocate manufacturing from the leased space, allows us to create a more lean manufacturing process to update our office and meeting space and to continue to deliver high-quality products and services to our clients. Third, we are reporting this quarter an 11% increase in products revenue. This is due to an increase in the sale of our premier product, BASi Culex Automated Sampling System, versus the first quarter of fiscal year 2014. There is more intensity to be applied to the education and selling process for this revolutionary system but we are encouraged by the recent progress. Fourth, we delivered positive operating income and positive net income this quarter despite a reduction in our services revenue, indicating a close stewardship with regard to our variable expenses. Fifth, we have personally visited clients and potential clients in San Francisco, Boston, Philadelphia, New York City and Miami to share the message regarding BASi’s capabilities and to listen and to respond to their needs. We are very encouraged by our reception from these clients. Sixth, we have taken what we feel is a temporary decline in service revenues this quarter to motivate us to work smarter and to intensify our focus on the client’s needs and the active recruitment of additional quotes. Seventh, in January we had a record level of monthly quotes issued for services. We know that the next step is to turn these quotes into accepted quotes and to deliver the high-quality custom work that we are known for. And we are committed to this success. These improvements encourage us to continue striving to add value to both our clients and our shareholders. I will now turn the call over to Jeff Potrzebowski, our Vice President of Finance and CFO, who will provide more details on our performance for the quarter, followed by my closing comments. Jeff?

Thanks, Jackie, and good morning, everyone. Thank you for joining us on today’s first quarter conference call. Before we begin the discussion, I would like to remind you that the statements we make during today’s conference call about our future expectations, plans and prospects for the company constitute forward-looking statements for the purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. Our actual results may vary materially from those indicated by these forward-looking statements and as a result of the various important factors including those 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 our 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 these non-GAAP measures to the comparable GAAP measures is included in the press release and conference call presentation. Now, the results for the first quarter. Revenues for the first quarter amounted to $5.845 million which is a decrease of 6% compared to the first quarter one year ago. Increased volume for our products segment and our preclinical services business were more than offset by the lower revenue reported by our bioanalytical and other laboratory services. Net income for the first three months of fiscal 2015 amounted to $182,000 or $0.01 per diluted share. This compares to a net loss for the first quarter one year ago of $662,000 or $0.09 per diluted share. Excluding the effect of the non-cash movement in the fair value of warrant liability in both periods, net income for the first quarter…

Thanks, Jeff. As I mentioned at the beginning of the call, we are constantly improving in our ability to deliver custom, high-quality drug discovery services and laboratory instruments to our clients while keeping in mind our goal to increase shareholder value. Over the past two years, we have focused on targeted initiatives designed to enhance our ability to grow by building our skills and improving our liquidity. These initiatives included adding skills in leadership, engineering and business development to drive top line growth; realigning our debt to maximize our investment options; monetizing our underutilized assets and most importantly, delivering high-quality services and instruments which help our clients to increase efficiency and to reduce the cost of taking a new drug to market. The result of fully not meeting our revenue expectations this quarter has just intensified our commitment to creating a sustainable, competitive advantage through client focus, innovation and an established record of regulatory excellence. I remain solidly convinced that the changes we are undertaking are required to position BASi for long-term success. The journey will have many twists and turns but we will always be committed to making BASi a stronger company. In closing, let me emphasize that I have the utmost confidence in our team and we remain dedicated to focusing on delivering long-term value to our shareholders. Operator, we are ready for the first question.

[Operator Instructions] Your first question comes from the line of Mr. George Gaspar. Please proceed.

Yes, good morning. The question, could you just break down, Jackie, a little bit more of the quarterly revenue streams more than what has already been indicated? Can you divide it out a little bit more to product area or service area?

Yes. We have about 75% of our revenue is services and 25% is products. In the products, about half of that is from the Culex in vivo and microdialysis systems and the other half is related more to our analytical instruments. On the service side, I’ll have to defer to Jeff in terms of the breakdown but I think it’s roughly a third is preclinical toxicology, a third is bioanalytical and then a third is our more startup laboratory services.

Yes, I think just to clarify on that split, we see a slightly larger percent for - when Jackie says breakdown a third, and again, it’s more probably 40-40-20 but --

Yes.

-- you can get the magnitude for our tox, our preclinical business as well as our bioanalytical services kind of match up equally and then the balance is made up of our other laboratory services.

Okay. And can you highlight within those - in the outline that you’ve given here where the weakness particularly was? Was it across the board or was there one particular area within that service area, for example? And on the product area, it sounded like the Culex was better but maybe it was on the analytical side, can you give us a further color on that?

Yes, I think if we take that breakdown, George, we just gave you, it’s really our - the major element of the shortfall is in the other laboratory services. We actually saw improvement year-over-year in the quarter from the preclinical, the tox side. And the bio was down year-over-year but the shortfall was really driven out of our other laboratory services.

Okay. Okay. And also, on this quarterly dilutive impact, can you explain a little bit more of the effect of the warrant dilution evaluation on a quarterly basis? What’s the necessary need to do it quarterly and then how does that impact - can you describe where the impact comes plus or minus?

It is a generally accepted accounting principle that we have to update this quarterly. And if we look at the weighted average common shares outstanding, we have to look at the series A [ph], preferred shares, the class A warrants, as well as dilutive stock options and make conversion on it as [ph] converted basis in order to arrive at what we what referred to as diluted weighted average. So that’s really the essence of what the accountants are looking for in terms of taking your actual outstanding and then taking the profile of those, I call it, convertible instruments, in converting those as if they were transacted all at once and then as a result you could see the share count in the queue, you’ll see it more clearly in the calculation in the footnote. But it will take that weighted average from 8 million shares to almost 9.6 million in terms of the dilution for the assumed conversions.

Okay. So yes, that was going to be my follow-on question. So at this particular point, there’s approximately 8 million shares outstanding. But if you look at the diluted impact, it would be 9.6 million?

Yes.

Okay. And there are nothing beyond that as this point in time that could affect the total diluted impact, correct?

No. And then as we also - keep in mind the, I believe it’s May of 16, we see an expiration of the class A warrants.

And those are to buy stock at what again?

$2.

$2, okay. So there’s an expiration in May 16 on that at this point.

2016.

2016.

2016, excuse me. And that’s a $2. And could you just give me an indication again. How many warrants are we talking about associated with that?

Right now, the warrants are about 799,000.

Okay.

So it’s almost $1.6 million in cash.

Got you, got you. I see. Okay. All right. And as you’re in that, it looks you’re continuing as Jackie pointed out adding to your staff, bringing some additional hopefully positive talent to broaden your perspective. Do you have a strategy on trying to broaden your existing product, service areas? Is there something that you see where there’s a real opportunity to raise the potential revenue-generating level of the company that you may not be in it this in point time, but you would feel comfortable about moving into?

Yes. I’m looking into those options as we get out and talk to more people and find out maybe what more they want to add to their expectations from us. But I do think there’s a lot of untapped potential, just from the fact that a lot of our income has been passive, people know us. We’ve been around 40 years, they come to us which is great and we want that. And it’s a lot of relationships that have been established over the years. But we are trying to get more active in our recruiting of business.

So organically, we can see a lot of growth potential right there. But we’re always looking for what would be synergistic to what we do.

Right. Okay. And then if I could ask a follow-on on customer, the way you view the marketplace, do you do any - I don’t know if you can site this on a percentage basis or - in the generic market in terms of connections with the generic market relative to brand drug area, can you define that as an opportunity of you? Because I’m asking the question simply because of the generic side of the market is growing very rapidly. In fact, there’s enormous, something like $20 billion of generic brands that are going to come into the generic range. Is that an opportunity to provide services for you?

Yes. When we talk about other laboratory services, that is exactly what we’re doing there. We do bioequivalent studies for quite few with the large generic producers. We just went to - we just got packed yesterday a conference in Miami on generics. And we want to reach to that market because we are able, capable of running the bioequivalent work for them which is what they need. Yes.

Oh, okay. All right. Thank you.

Thanks, George.

Your next question comes from the line of Eden Star [ph]. Please proceed.

Yes. Hi. I’m wondering where the manufacturing of the two instruments we moved? In the Press Release, I believe mentioned that some of the space lease to cook biotech is currently used by BASI for manufacturing.

Right. Yes. There is a portion of that space that we are going to be vacating. And we are going to relocate manufacturing to some of our existing space in the same building. We have three buildings that are attached. And one of those buildings will be leased to a single-floor building is being leased to cook. And as we empty out, we are going to into our existing other two buildings that have two floors. So we’re just going to realigning. We’re not touching the lab space for the services, but we’re going to realign the office space and then lay it out and build a new dock and do some things to make it much more efficient.

Okay. Any thoughts on how much money you’ll be saved on that or once you get it up and running?

No. We really haven’t been able to quantify that yet. I mean we’re going with the idea that as we’ve leased the space and we get more cash flow, we’re talking to general contractors as to how to do that. We’re talking to lien efficiency experts. So we absolutely will free upside. But I don’t have that quantified yet.

Sure. Okay. Thank you very much.

Your next question comes from the line of Lenny Dunn. Please proceed.

Good morning, Jackie. And the top line, particularly in the lab services, is disappointing. And you mentioned in the Press Release that some of this was pushed into the current quarter. Now we’re half through the current quarter. Are you seeing the work that you anticipated in the last quarter are coming true?

Well, I don’t think we did mention that because I don’t think that’s necessarily true. What we mentioned is there were some delays. And there are delays.

Right.

So we picked up some work that could have been in the first quarter. But what I am seeing as encouraging is we have a lot more quote activity. We have a lot more people interested in what we do because we’re out there talking to them. Will that quote activity turn into a revenue growth services just in this particular second quarter, I don’t think so. I mean they don’t turn around that quickly. I would like them to. But we are working on it. So I’m hoping to see some growth in this quarter, but I’m really looking for the year. What can I do for the year that will show that we are moving in the right direction? And that really requires getting a lot more quotes, a lot more discussion with clients to make sure that what we offer matches up to what they need.

Okay. Clearly, versus where we were, we are a very viable company. And people that may have been a little nervous about doing business with you a few years ago would no longer be. So I would have assumed that when this happened, that it would be easier to close sales.

Yes, we are finding that. We’re not getting any of the resistance that - the big differentiator in our business is staying power, right? It’s how long you’re going to be here. You’re going to be around five years from now when the FDA finally comes to audit. And we have that, we’ve always had that. But people got a little nervous when we were realigning some things. But yes, we don’t hear that objection anymore. We’re just getting down to what do we exactly do and what do we need.

Okay. And you hired some new people who obviously, or I shouldn’t say obviously, but I would hope would come in with some enthusiasm to replace people that perhaps had lost their enthusiasm for the business. So are you encouraged by the new staff that you now have?

Yes, absolutely. I mean I don’t know about prior people’s enthusiasm or not. But what I do know is that my staff is leaning forward. They’re looking for what can we do to help BASi grow and they love the company, they love what we deliver. And they like working with the clients. So we’re getting a lot more client contact.

Okay. And though it isn’t to your primary business, but from a cash flow standpoint, the leasing of this space and the expiration out to cash in England has already been expensed, should make for a very good second half of the calendar year as far as cash flows. Is that accurate?

Yes.

Okay.

You said it well.

Okay. Well, I just want to make sure I’m not misreading something because we have new management.

No. I think it’s a great positive for the business since having underutilized space. If you can rent it out, it’s a win-win for everybody. Cook is excited to move into that space. They’re expanding. And for us, it gives us a chance to get a little more efficient in our existing space as well as to have some money to cover the capital improvements, investments, things like that.

Okay. And now, with your latest moves, probably and correct me if I’m wrong, have the staff in place that you want going forward so that we can start seeing some increases in sales. Is that accurate?

Yes. There’s always, right? There’s always people coming and going. And we’re going to try to make sure that we continue to keep our talent on the cutting edge. So I can’t commit that I won’t hire another person or that another person might not leave. But we’re going to make it so that we are sustainable.

Okay. Well, we want not just sustainability but growth.

Right, absolutely.

And I think sales round up to double the current rate which is really not extraordinary because it’s been there.

Yes.

You could have a huge difference in the bottom line.

Absolutely. It’s all leverage. It’s totally leverage in a service business, right? But once we feel like we have already and capable of delivering the service, we need to get the revenue and the studies here. And a lot of that drops to the bottom line.

Okay. Well, again, well, hopefully this is the, if not now, when, and we’re going to see it.

Yes.

Okay. Well, thank you. You’ve answered my questions.

Thanks, Lenny.

There are no further questions in the queue at the moment.

Okay. Thank you all for joining us this morning. We look forward to speaking with you on our fiscal 2015 on our next conference call for the second quarter. And anytime you need to know anything, just give us a call. Thank you.

Ladies and gentlemen, that concludes today’s presentation. You may now disconnect. And everyone have a great day.