Inotiv, Inc. [NOTV] Filings

10-Q 1 notv-20240630.htm 10-Q notv-20240630

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, 2024
			OR
			o			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 000-23357

INOTIV, INC.

(Exact name of the registrant as specified in its charter)


INDIANA (State or other jurisdiction of incorporation or organization)			35-1345024 (I.R.S. Employer Identification No.)

2701 KENT AVENUE WEST LAFAYETTE, IN (Address of principal executive offices)			47906 (Zip code)

(765) 463-4527

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange
on which registered

Common Shares

NOTV

The Nasdaq Stock Market LLC

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 o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o

Accelerated filer x

Non-accelerated filer o

Smaller Reporting Company x

Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

As of July 31, 2024, 26,003,960 of the registrant's common shares were outstanding.

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TABLE OF CONTENTS


		Page
PART I	FINANCIAL INFORMATION

Item 1	Unaudited Condensed Consolidated Financial Statements:
	Condensed Consolidated Balance Sheets as of June 30, 2024 (Unaudited) and September 30, 2023	5
	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended June 30, 2024 and 2023 (Unaudited)	6
	Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended June 30, 2024 and 2023 (Unaudited)	7
	Condensed Consolidated Statements of Shareholders’ Equity and Noncontrolling Interest for the Three and Nine Months Ended June 30, 2024 and 2023 (Unaudited)	8
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended June 30, 2024 and 2023 (Unaudited)	10
	Notes to Unaudited Condensed Consolidated Financial Statements	11
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	37
Item 3	Quantitative and Qualitative Disclosures about Market Risk	55
Item 4	Controls and Procedures	55

PART II	OTHER INFORMATION

Item 1	Legal Proceedings	57
Item 1A	Risk Factors	57
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	64
Item 3	Defaults Upon Senior Securities	65
Item 4	Mine Safety Disclosures	65
Item 5	Other Information	65
Item 6	Exhibits	67
	Signatures	68

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Index to Unaudited Condensed Consolidated Financial Statements


			Page
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS			11

1. DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION			11

2. REVENUE FROM CONTRACTS WITH CUSTOMERS			16

3. SEGMENT AND GEOGRAPHIC INFORMATION			17

4. BUSINESS COMBINATIONS			18

5. INTANGIBLE ASSETS			20

6. DEBT			20

7. SUPPLEMENTAL BALANCE SHEET INFORMATION			27

8. DEFINED BENEFIT PLAN			29

9. OTHER OPERATING EXPENSE			29

10. RESTRUCTURING AND ASSETS HELD FOR SALE			30

11. LEASES			31

12. EQUITY, STOCK-BASED COMPENSATION AND EARNINGS (LOSS) PER SHARE			32

13. INCOME TAXES			33

14. CONTINGENCIES			34

15. SUBSEQUENT EVENTS			37

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INOTIV, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share amounts)

(unaudited)


	June 30,		September 30,
	2024		2023

Assets
Current assets:
Cash and cash equivalents	$	14,434	$	35,492
Trade receivables and contract assets, net of allowances for credit losses of $5,780 and $7,446, respectively	63,867		87,383
Inventories, net	38,684		56,102
Prepaid expenses and other current assets	32,248		33,408
Assets held for sale	—		1,418
Total current assets	149,233		213,803

Property and equipment, net	189,703		191,068
Operating lease right-of-use assets, net	45,216		38,866
Goodwill	94,286		94,286
Other intangible assets, net	282,540		308,428
Other assets	13,610		10,079
Total assets	$	774,588	$	856,530

Liabilities, shareholders' equity and noncontrolling interest
Current liabilities:
Accounts payable	$	28,325	$	32,564
Accrued expenses and other current liabilities	28,064		25,776
Fees invoiced in advance	38,695		55,622
Current portion of long-term operating lease	11,439		10,282
Current portion of long-term debt	378,550		7,950
Total current liabilities	485,073		132,194
Long-term operating leases, net	35,899		29,614
Long-term debt, less current portion, net of debt issuance costs	3,897		369,795
Other long-term liabilities	34,912		6,373
Deferred tax liabilities, net	32,700		50,064
Total liabilities	592,481		588,040

Contingencies (Note 14)

Shareholders’ equity and noncontrolling interest:
Common shares, no par value:
Authorized 74,000,000 shares at June 30, 2024 and at September 30, 2023; 26,006,460 issued and outstanding at June 30, 2024 and 25,777,169 at September 30, 2023	6,463		6,406
Additional paid-in capital	718,459		715,696
Accumulated deficit	(543,272)		(453,278)
Accumulated other comprehensive income	457		330
Total equity attributable to common shareholders	182,107		269,154
Noncontrolling interest	—		(664)
Total shareholders’ equity and noncontrolling interest	182,107		268,490
Total liabilities and shareholders’ equity and noncontrolling interest	$	774,588	$	856,530

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

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INOTIV, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(unaudited)


	Three Months Ended June 30,				Nine Months Ended June 30,
	2024		2023		2024		2023
Service revenue	$	54,364	$	56,295	$	165,188	$	165,095
Product revenue	51,422		101,173		195,134		266,590
Total revenue	$	105,786	$	157,468	$	360,322	$	431,685
Costs and expenses:
Cost of services provided (excluding depreciation and amortization of intangible assets)	39,622		37,555		117,362		108,359
Cost of products sold (excluding depreciation and amortization of intangible assets)	45,083		60,520		161,728		189,709
Selling	5,030		4,780		15,781		14,045
General and administrative	16,782		25,705		56,505		82,296
Depreciation and amortization of intangible assets	14,119		13,864		42,524		40,117
Other operating expense	5,902		6,261		39,661		14,712
Goodwill impairment loss	—		—		—		66,367
Operating (loss) income	$	(20,752)	$	8,783	$	(73,239)	$	(83,920)
Other (expense) income:
Interest expense	(12,116)		(10,786)		(34,568)		(31,751)
Other (expense) income	(82)		(12)		1,092		(1,345)
Loss before income taxes	$	(32,950)	$	(2,015)	$	(106,715)	$	(117,016)
Income tax benefit	6,863		2,380		16,721		20,820
Consolidated net (loss) income	$	(26,087)	$	365	$	(89,994)	$	(96,196)
Less: Net loss attributable to noncontrolling interests	—		(1,475)		(440)		(719)
Net (loss) income attributable to common shareholders	$	(26,087)	$	1,840	$	(89,554)	$	(95,477)

(Loss) Income per common share
Net (loss) income attributable to common shareholders:
Basic	$	(1.00)	$	0.07	$	(3.46)	$	(3.72)
Diluted	$	(1.00)	$	0.07	$	(3.46)	$	(3.72)
Weighted-average number of common shares outstanding:
Basic	25,993		25,726		25,862		25,690
Diluted	25,993		26,021		25,862		25,690

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

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INOTIV, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

(unaudited)


	Three Months Ended June 30,				Nine Months Ended June 30,
	2024		2023		2024		2023
Consolidated net (loss) income	$	(26,087)	$	365	$	(89,994)	$	(96,196)
Foreign currency translation	(284)		(392)		133		5,651
Defined benefit plan:
Pension cost amortization	47		(55)		140		(163)
Foreign currency translation	(76)		137		(146)		404
Other comprehensive (loss) income, net of tax	(313)		(310)		127		5,892
Consolidated comprehensive (loss) income	(26,400)		55		(89,867)		(90,304)
Less: Comprehensive (loss) income attributable to non-controlling interests	—		(1,475)		(440)		(719)
Comprehensive (loss) income attributable to common stockholders	$	(26,400)	$	1,530	$	(89,427)	$	(89,585)

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

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INOTIV, INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY AND NONCONTROLLING INTEREST

(in thousands, except number of shares)

(unaudited)


	Common Shares			Additional paid-in capital		Accumulated deficit		Accumulated Other Comprehensive Income (Loss)		Non- Controlling Interests		Total shareholders’ equity
	Number	Amount
Balance at September 30, 2023	25,777,169	$	6,406	$	715,696	$	(453,278)	$	330	$	(664)	$	268,490
Consolidated net (loss) income	—	—		—		(15,828)		—		440		(15,388)
Change in noncontrolling interest				(2,309)						224		(2,085)
Issuance of stock under employee stock plans	13,511	3		(2)		—		—		—		1
Stock-based compensation	—	—		1,897		—		—		—		1,897
Pension cost amortization	—	—		—		—		46		—		46
Foreign currency translation adjustment	—	—		—		—		1,201		—		1,201
Balance at December 31, 2023	25,790,680	$	6,409	$	715,282	$	(469,106)	$	1,577	$	—	$	254,162
Consolidated net loss	—	—		—		(48,079)		—		—		(48,079)
Issuance of stock under employee stock plans	114,715	29		(27)		—		—		—		2
Stock-based compensation	—	—		1,884		—		—		—		1,884
Pension cost amortization	—	—		—		—		47		—		47
Foreign currency translation adjustment	—	—		—		—		(854)		—		(854)
Balance at March 31, 2024	25,905,395	$	6,438	$	717,139	$	(517,185)	$	770	$	—	$	207,162
Consolidated net loss	—	—		—		(26,087)		—		—		(26,087)
Issuance of stock under employee stock plans	101,065	25		(17)		—		—		—		8
Stock-based compensation	—	—		1,337		—		—		—		1,337
Pension cost amortization	—	—		—		—		47		—		47
Foreign currency translation adjustment	—	—		—		—		(360)		—		(360)
Balance at June 30, 2024	26,006,460	$	6,463	$	718,459	$	(543,272)	$	457	$	—	$	182,107

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	Common Shares			Additional paid-in capital		Accumulated deficit		Accumulated Other Comprehensive (Loss) Income		Non- Controlling Interests		Total shareholders’ equity
	Number	Amount
Balance at September 30, 2022	25,598,289	$	6,362	$	707,787	$	(348,277)	$	(5,500)	$	(606)	$	359,766
Consolidated net loss	—	—		—		(86,932)		—		(391)		(87,323)
Issuance of stock under employee stock plans	8,347	1		23		—		—		—		24
Stock-based compensation	—	—		2,046		—		—		—		2,046
Pension cost amortization	—	—		—		—		(54)		—		(54)
Foreign currency translation adjustment	—	—		—		—		5,348		—		5,348
Balance at December 31, 2022	25,606,636	$	6,363	$	709,856	$	(435,209)	$	(206)	$	(997)	$	279,807
Consolidated net loss	—	—		—		(9,629)		—		(365)		(9,994)
Issuance of stock under employee stock plans	152,471	128		(46)		—		—		—		82
Stock-based compensation	—	—		1,781		—		—		—		1,781
Pension cost amortization	—	—		—		—		(54)		—		(54)
Foreign currency translation adjustment	—	—		—		—		962		—		962
Other										$	51	51
Balance at March 31, 2023	25,759,107	$	6,491	$	711,591	$	(444,838)	$	702	$	(1,311)	$	272,635
Consolidated net income	—	—		—		365		—		1,475		1,840
Issuance of stock under employee stock plans	23,635	22		(19)		—		—		—		3
Noncontrolling interest related to Envigo acquisition	—	—		—		—		—		(961)		(961)
Stock-based compensation	—	—		2,029		—		—		—		2,029
Pension cost amortization	—	—		—		—		(55)		—		(55)
Foreign currency translation adjustment	—	—		—		—		(255)		—		(255)
Other	—	—		—		30		—		64		94
Balance at June 30, 2023	25,782,742	$	6,513	$	713,601	$	(444,443)	$	392	$	(733)	$	275,330

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

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INOTIV, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(unaudited)


	Nine Months Ended June 30,
	2024		2023
Operating activities:
Consolidated net loss	$	(89,994)	$	(96,196)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization	42,524		40,117
Employee stock compensation expense	5,118		5,856
Changes in deferred taxes	(17,407)		(27,114)
Provision for expected credit losses	(1,282)		2,175
Amortization of debt issuance costs and original issue discount	2,575		2,339
Non-cash interest and accretion expense	5,553		4,608
Other non-cash operating activities	(711)		2,486
Goodwill impairment loss	—		66,367
Changes in operating assets and liabilities:
Trade receivables and contract assets	24,876		13,047
Inventories	17,520		16,550
Prepaid expenses and other current assets	942		6,272
Operating lease right-of-use assets and liabilities, net	1,092		779
Accounts payable	(4,931)		4,128
Accrued expenses and other current liabilities	2,254		(11,048)
Fees invoiced in advance	(17,017)		(18,098)
Other asset and liabilities, net	24,455		(3,148)
Net cash (used in) provided by operating activities	(4,433)		9,120

Investing activities:
Capital expenditures	(17,015)		(21,324)
Proceeds from sale of property and equipment	5,432		268
Net cash used in investing activities	(11,583)		(21,056)

Financing activities:
Payments on revolving credit facility	—		(21,000)
Payments on senior term notes and delayed draw term loans	(2,073)		(2,070)
Borrowings on revolving credit facility	—		6,000
Borrowings on delayed draw term loan	—		35,000
Other financing activities, net	(2,816)		(1,748)
Net cash (used in) provided by financing activities	(4,889)		16,182

Effect of exchange rate changes on cash and cash equivalents	(153)		753

Net (decrease) increase in cash and cash equivalents	(21,058)		4,999
Less: cash, cash equivalents, and restricted cash held for sale	—		(1,759)
Cash, cash equivalents, and restricted cash at beginning of period	35,492		18,980
Cash, cash equivalents, and restricted cash at end of period, net of cash, cash equivalents and restricted cash held for sale	$	14,434	$	22,220

Non-cash financing activity:
Paid in kind debt issuance costs	$	—	$	1,363

Supplemental disclosure of cash flow information:
Cash paid for interest	$	27,398	$	26,889
Income taxes paid, net	$	1,517	$	5,979

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

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INOTIV, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(amounts in thousands except share amounts, unless otherwise indicated)

(unaudited)

1. DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION

Inotiv, Inc. and its subsidiaries (“we,” “our,” “us,” the “Company,” and “Inotiv”) comprise a leading contract research organization (“CRO”) dedicated to providing nonclinical and analytical drug discovery and development services to the pharmaceutical and medical device industries and selling a range of research-quality animals and diets to the same industries as well as academia and government clients. Our products and services focus on bringing new drugs and medical devices through the discovery and preclinical phases of development, all while increasing efficiency, improving data, and reducing the cost of discovering and taking new drugs and medical devices to market. Inotiv is committed to supporting discovery and development objectives as well as helping researchers realize the full potential of their critical research and development projects, all while working together to build a healthier and safer world. We are dedicated to practicing high standards of laboratory animal care and welfare.

As a result of our strategic acquisition of Envigo RMS Holding Corp. in November 2021, which added a complementary research model platform, our full spectrum solutions span two segments: Discovery and Safety Assessment (“DSA”) and Research Models and Services (“RMS”).

Through our DSA segment, we support the discovery, nonclinical development and clinical development needs of researchers and clinicians for primarily small molecule drug candidates, as well as biotherapeutics and biomedical devices. Our scientists have skills in analytical instrumentation development, chemistry, computer software development, histology, pathology, physiology, surgery, analytical chemistry, drug metabolism, pharmacokinetics, and toxicology to make the services and products we provide increasingly valuable to our current and potential clients. Our principal clients are companies whose scientists are engaged in analytical chemistry, drug safety evaluation, clinical trials, drug metabolism studies, pharmacokinetics and basic research, from small start-up biotechnology companies to some of the largest global pharmaceutical companies.

Through our RMS segment, we offer access to a wide range of small and large research models for basic research and drug discovery and development, as well as specialized models for specific diseases and therapeutic areas in addition to diet and bedding. We combine deep animal husbandry expertise and expanded access to scientists across the discovery and preclinical continuum, which reduces nonclinical lead times and provides enhanced project delivery. In conjunction with our DSA business, we have the ability to run selected nonclinical studies directly on-site at closely located research model facilities and provide access to innovative genetically engineered models and services solutions. Our principal clients include biopharmaceutical companies, CROs, and academic and government organizations.

Resolution and Plea Agreements

On June 3, 2024, Inotiv, Inc. announced that it had reached agreement with the U.S. Department of Justice (“DOJ”) to resolve a previously-announced criminal investigation into its shuttered canine breeding facility located in Cumberland, Virginia, which was operated originally by Envigo RMS, LLC (“Envigo RMS”), an entity acquired by the Company in November 2021. In connection with such resolution, the Company and its related entities have entered into a Resolution Agreement (the “Resolution Agreement”) with the DOJ and the United States Attorney’s Office for the Western District of Virginia (“USAO-WDV”), and Envigo RMS and Envigo Global Services, Inc. (“EGSI” and together with Envigo RMS, “Envigo”) have entered into a Plea Agreement (the “Plea Agreement”) with the DOJ and the USAO-WDV. On June 3, 2024, before the United States District Court for the Western District of Virginia, Envigo RMS pleaded guilty to one misdemeanor count of conspiracy to violate the Animal Welfare Act and EGSI pleaded guilty to one felony count of conspiracy to violate the Clean Water Act. While the terms of the resolution are subject to Court approval at a sentencing hearing, which is currently scheduled for October 7, 2024, the obligations of the Company and Envigo under the Resolution Agreement, the Plea Agreement and related documents apply beginning on the date of execution of June 3, 2024. Refer to Note 14 – Contingencies for additional information.

Pursuant to the Resolution Agreement and the Plea Agreement, the Company and Envigo, among other matters, have agreed to: (i) make payments totaling $22,000 in fines, with $5,000 payable on each of June 3, 2025, 2026 and 2027, and $7,000 (plus accrued interest beginning on the sentencing date) payable on June 3, 2028; (ii) on June 3, 2024, pay $3,000, split between the Virginia Animal Fighting Taskforce and the Humane Society of the United States in recognition of

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assistance provided to the U.S. Government’s investigation; (iii) on June 3, 2024, pay $3,500 to the National Fish and Wildlife Foundation to fund environmental projects, studies, and initiatives in Cumberland County, Virginia; (iv) expend at least $7,000 ($2,500 by June 3, 2025, $2,500 by June 3, 2026, and $2,000 by June 3, 2027) for improvements to its facilities and personnel related to the welfare of animals; (v) provide a lien to the United States against sufficient Company assets to secure the deferred payments in connection with the $22,000 fine, which lien will be junior to only the lien provided by the Company to lenders under its credit facility as of April 1, 2024 and additional liens to secure up to $100,000 of additional debt; (vi) meet specified standards with respect to the health, safety and well-being of animals under the Company’s care; (vii) develop, adopt, implement, fund and comply with a comprehensive nationwide compliance plan related to applicable laws; and (viii) the appointment of a Compliance Monitor to review the Company’s care of animals and compliance with certain laws, and to pay all associated costs, which Compliance Monitor shall serve for a term that expires five years after the completion of the selection process for the Compliance Monitor, unless Envigo is released from probation prior to completion of the five-year term, in which case the monitorship term shall expire three years after the completion of the selection process, or two months after the completion of probation, whichever is later. In addition, the pleas result in Envigo RMS and EGSI being subject to probation for up to five years, with the potential to end the term early at a minimum of three years if the Company complies with the elements of the resolution.

For the nine months ended June 30, 2024, the Company has expensed $28,500 related to the Resolution and Plea Agreements, which is presented within other operating expense in the Company’s Condensed Consolidated Statement of Operations. In line with the Resolution and Plea Agreements, the Company paid $6,500 during the three months ended June 30, 2024 and expects to pay an additional $22,000 over multiple years. Accordingly, the Company has included $5,000 in accrued expenses and other current liabilities on the Condensed Consolidated Balance Sheets as of June 30, 2024 and within “Changes in operating assets and liabilities – accrued expenses and other current liabilities” in its Condensed Consolidated Statements of Cash Flows for the nine months ended June 30, 2024 and the Company has included $17,000 in other long-term liabilities on its Condensed Consolidated Balance Sheets as of June 30, 2024 and “Changes in operating assets and liabilities – other assets and liabilities” in its Condensed Consolidated Statement of Cash Flows for the nine months ended June 30, 2024. The total $28,500 charge is reflected in the operating loss of the RMS segment. The charge of $28,500 is non-deductible for U.S. federal income tax purposes. Further, the Fifth Amendment (as defined in Note 6 - Debt), among other changes to the Credit Agreement, permits charges or expenses attributable to or related to the Resolution Agreement and the Plea Agreement to be added back to the Company’s Consolidated EBITDA in an amount up to $28,500 for purposes of the financial covenants under the Credit Agreement. The Company expects to have additional cash outlays in connection with certain costs related to the Resolution Agreement, which would be paid over the next three to five years. The additional cash outlays could include ongoing monitoring and compliance costs, legal expenses and other payments required to comply with the Resolution Agreement, subject to final approvals, and at this time, the Company expects that such costs would be expensed as incurred.

Operational Update

On November 16, 2022, the Company became aware that the U.S. Attorney’s Office for the Southern District of Florida (“USAO-SDFL”) had criminally charged employees of the principal supplier of non-human primates ("NHPs") to the Company, along with two Cambodian government officials, with conspiring to illegally import NHPs into the U.S. from December 2017 through January 2022 and in connection with seven specific imports between July 2018 and December 2021 (the "November 16, 2022 event"). The Company has not been directed to refrain from selling the Cambodian NHPs in its possession in the U.S. However, due to the allegations contained in the indictment involving the supplier and the Cambodian government officials, the Company believed that it was prudent, at the time, to refrain from selling or delivering any of its Cambodian NHPs held in the U.S. until the Company’s staff and external experts could evaluate what additionally could be done to satisfy itself that the NHPs in inventory from Cambodia can be reasonably determined to be purpose-bred. Historically, the Company relied on the Convention on International Trade in Endangered Species of Wild Fauna and Flora (“CITES”) documentation and related processes and procedures, including release of each import by U.S. Fish and Wildlife Service. After a thorough review of the documentation we have for the Cambodian NHPs in our inventory and their colonies, we resumed shipping Cambodian NHPs. In addition, we completed audits on site at our Cambodian supplier and we worked to establish even more robust procedures for future imports. Inotiv has continued to monitor and respond to the evolving environment around non-human primates. Although Cambodia has remained closed as a source through the third quarter of fiscal 2024, we have identified and extensively audited multiple additional sources of purpose-bred animals that can be made available for life-saving medical research. This has allowed us to diversify our sourcing of NHPs outside of Cambodia to satisfy demand at our DSA business segment and to our RMS clients. In addition, we have developed, and sourced, novel genetic testing techniques to further bolster our auditing capabilities to

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determine whether the animals we import are purpose-bred, and we are assessing the ability to introduce these techniques into our supply chain.

NHPs are critical for scientific research and are required by international regulatory guidance to develop and evaluate the safety and effectiveness of a range of life-saving drugs and treatments prior to their assessment in human clinical trials. Without a consistent source of NHP’s in the U.S., Drug discovery and development in the U.S. could be materially impacted.

NHP imports into the U.S. for drug discovery significantly declined from 2022 to 2023. The decrease in overall NHP supply drove an increase in pricing in 2023. Furthermore, we now believe the decreased U.S. NHP supply caused some studies to be shifted outside of the U.S. We also believe some clients increased their inventory levels of NHP’s during 2023 and therefore recently, clients appear to be utilizing existing NHP inventory without purchasing historical levels of NHPs. RMS revenue decreased $49,143 in the three months ended June 30, 2024 compared to the three months ended June 30, 2023 due primarily to lower NHP-related product and service revenue of $45,667. For the 2024 period, the reduction in sales volumes adversely affected our business, financial condition and results of operations.

During 2022 and 2023 there were decreases in biotech funding which contributed to a reduced demand for preclinical studies. While U.S. biotech funding increased in the first half of calendar 2024, the Company has yet to see a meaningful increase in demand from biotech clients.

Liquidity and Going Concern

The accompanying unaudited interim condensed consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles ("GAAP") applicable to a going concern. This presentation contemplates the realization of assets and the satisfaction of liabilities in the normal course of business and does not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of the uncertainties described below.

As of June 30, 2024, the Company has cash and cash equivalents of approximately $14,434 and access to a $15,000 revolver, which had no balance outstanding as of June 30, 2024 and a $12,000 balance outstanding as of the date of this report. The proceeds from the recent draw on the revolver were used for working capital demands, such as timing of an NHP deposit. The November 16, 2022 event and subsequent decision to refrain from selling or delivering Cambodian NHPs held in the U.S. triggered a material adverse event clause in our Credit Agreement discussed in Note 6 - Debt to these condensed consolidated financial statements resulting in, among other things, a limitation of our ability to draw on our revolving credit facility. The loss of access to our revolving credit facility at the time and reduced liquidity resulting from the decision to refrain from selling Cambodian NHPs held in the U.S. resulted in reduced forecasted liquidity. As a result of these events, the Company took steps to improve its liquidity, which included negotiating an amendment to its Credit Agreement in January 2023 to reinstate its ability to borrow under its revolving credit facility. Without the amendment, the Company was at the time at risk of not having the revolving credit facility available.

In 2023, we implemented several initiatives to integrate and optimize several of the facilities we acquired through acquisitions in 2021 and 2022. The initiatives included significant investments in existing facilities and were also designed to enhance animal welfare and customer experience, reduce our operating costs and provide additional scale and create efficiencies in our remaining operations. Additionally, we identified and have been implementing new strategies to improve the efficiency and cost effectiveness of the transportation of our products. We announced several site consolidation plans in the U.S. and certain European and U.K. sites. Our site optimization plans allow us to reduce overhead and create efficiencies through scale. During fiscal 2023, we completed all planned fiscal year 2023 consolidations and closures and sold our Israeli businesses. The consolidation of the operations at our Blackthorn, U.K., facility with the operations in Hillcrest, U.K., is complete as of the date of this report and we expect to exit the leased facility before the end of the fourth quarter of fiscal 2024. Over the last year, we have continued to improve our infrastructure and worked to optimize our operating platform to support future growth. These improvements included investments in our information technology platforms, building program management functions to enhance management and communication with clients and multi-site programs, further enhancing client services and improving the client experience. We believe the actions taken and investments made in recent periods form a solid foundation upon which we can continue to build. However, there is no assurance that such actions will ultimately have the intended effects.

In connection with the site optimizations noted above and other restructuring initiatives, we reduced our workforce. We also took steps to reduce our budgeted capital expenditures and certain forecasted expenses, including a reduction of nonessential travel and employee-related expenses among other efficiency-based reductions. Additionally, we identified

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and executed new strategies to improve the efficiency and cost effectiveness of the transportation of our products. In December 2023, we announced that we would be partnering with Vanguard Supply Chain Solutions LLC, a provider of our transportation services, to enable the in-house integration of our North American transportation operations. By taking direct control of our transportation operations, we believe we have achieved key efficiencies to strengthen internal operations, improve our outgoing supply chain, and bolster service and scientific continuity for clients. In the second quarter of fiscal 2024, we completed the in-house integration of our North American transportation operations as described above. During the three months ended June 30, 2024, the Company worked on route optimization projects, which are designed for further efficiencies and cost reductions and is continuing to work on route optimization projects in the fourth quarter of fiscal 2024.

The financial covenants under the Company's Credit Agreement include, among others, a requirement to not permit the consolidated debt to consolidated EBITDA of the Company to exceed certain leverage thresholds under the Credit Agreement. On June 2, 2024, the Company entered into the Fifth Amendment to the Credit Agreement, which provides that any charges or expenses attributable to or related to the Resolution and Plea Agreements may be added back to the Company’s consolidated EBITDA (up to $28,500) for purposes of the financial covenants under the Credit Agreement.

As of the date of filing the Quarterly Report on Form 10-Q, due to the decrease in the Company's revenue during the three months ended June 30, 2024, the Company entered into the Sixth Amendment (as defined in Note 15 - Subsequent Events) to the Credit Agreement, which waives the testing of the secured leverage ratio and fixed charge coverage ratio financial covenants thereunder as of June 30, 2024. As a result of the unexpected shift in NHP demand as discussed in the Operational Update above, there is no assurance that the Company will experience an increase in revenue for the remainder of the 2024 fiscal year. If the Company's revenue and related operating margins do not increase, it would result in non-compliance with the financial covenants under the Credit Agreement beginning with the September 30, 2024 test date. If at the time the Company files its Annual Report on Form 10-K it reports a failure to comply with its financial covenants which remains unremedied for the period of time stipulated under the Credit Agreement, this would constitute an event of default under the Credit Agreement and the lenders may, among other remedies set out under the Credit Agreement, declare all or any portion of the outstanding principal amount of the borrowings plus accrued and unpaid interest to be immediately due and payable. Furthermore, if the lenders were to accelerate the loans under the Credit Agreement, such acceleration would constitute a default under our indenture governing the Company's Convertible Senior Notes (the "Notes") which, if not cured within 30 days following notice of such default from the trustee or holders of 25 percent of the Notes, would permit the trustee or such holders to accelerate the Notes. If the lenders accelerate the loans under the Credit Agreement, the Company does not believe its existing cash and cash equivalents, together with cash generated from operations, would be sufficient to fund its operations, satisfy its obligations, including cash outflows for planned targeted capital expenditures, and repay the entirety of its outstanding senior term loans, repay the entirety of its outstanding Notes and repay the entirety of the $12,000 balance of the revolving credit facility in the next twelve months. Additionally, access to the revolver would be restricted and such funds would not be available to pay for any operating activities.

Our evaluation of the Company's ability to continue as a going concern in accordance with U.S. generally accepted accounting principles entailed analyzing prospective fully implemented operating budgets and forecasts for expectations of our cash needs and comparing those needs to the current cash and cash equivalent balances in order to satisfy our obligations, including cash outflows for planned targeted capital expenditures, and to comply with minimum liquidity and financial covenant requirements under our debt covenants related to borrowings pursuant to its Credit Agreement for at least the next twelve months. This evaluation initially does not take into consideration the potential mitigating effect of management’s plans that have not been fully implemented and are outside of its control as of the date the financial statements are issued. When substantial doubt exists under this methodology, we evaluate whether the mitigating effect of our plans sufficiently alleviates substantial doubt about our ability to continue as a going concern. The mitigating effect of management’s plans, however, is only considered if both (1) it is probable that the plans will be effectively implemented within one year after the date that the financial statements are issued, and (2) it is probable that the plans, when implemented, will mitigate the relevant conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that these condensed consolidated financial statements are issued. After considering the factors outlined above, substantial doubt about our ability to continue as a going concern exists.

We plan to continue our efforts to optimize our capital allocation and expense base, which reduced our cash expenses in the three and nine months ended June 30, 2024 compared to the three and nine months ended June 30, 2023, and which are expected to continue to reduce cash expenses in the remainder of fiscal 2024 and into fiscal 2025. Further, we have invested and plan to continue to invest in our DSA capacity and added to our service offerings in recent periods which we plan to utilize in order to support future revenue growth and margins. The Company also continues to collaborate with its

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lenders with regard to its current business conditions. The Company plans to request amendments to the Credit Agreement, which may include potential additional financial covenant requirements, in an effort to avoid an acceleration of the loans under the Credit Agreement prior to their existing maturity. In the event that the Company fails to comply with the requirements of the financial covenants set forth in the Credit Agreement, the Company has approximately 55 days subsequent to any fiscal quarter, and approximately 100 days subsequent to fiscal year-end to cure noncompliance (the "grace period"). Additionally, the Company has and may continue to seek additional financing and evaluate financing alternatives to meet its cash requirements for the next 12 months. There is no assurance that the Company’s lenders will agree to any amendment to the Credit Agreement, nor can there be any assurance that the Company would be able to raise additional capital, whether through selling additional equity or debt securities or obtaining a line of credit or other loan on terms acceptable to the Company or at all.

Basis of Presentation

The Company has prepared the accompanying unaudited interim condensed consolidated financial statements 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 GAAP, and therefore should be read in conjunction with the Company’s audited consolidated financial statements, and the notes thereto, included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2023. In the opinion of management, the unaudited condensed consolidated financial statements for the three and nine months ended June 30, 2024 and 2023 include all adjustments which are necessary for a fair presentation of the results of the interim periods and of the Company’s financial position at June 30, 2024. The results of operations for the three and nine months ended June 30, 2024 are not necessarily indicative of the results for the fiscal year ending September 30, 2024. Certain prior year amounts have been reclassified within the condensed consolidated statements of operations and the condensed consolidated statement of cash flows for consistency with the current year presentation. Specifically, depreciation expense has been combined with amortization of intangible assets. These reclassifications had no effect on the reported results of operations. Further, certain financing activities have been reclassified within the condensed consolidated statements of cash flows for consistency with the current year presentation.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires the Company to make estimates and judgments that may affect the reported amounts of assets, liabilities, revenues, and expenses, and related disclosures of contingent assets and liabilities. These include, but are not limited to, management estimates in the calculation and timing of revenue recognition, pension liabilities, deferred tax assets and liabilities and the related valuation allowance. Although estimates are based upon management’s best estimate using historical experience, current events, and actions, actual results could differ from those estimates. Changes in estimates are reflected in reported results in the period in which they become known.

Consolidation

The accompanying condensed consolidated financial statements are unaudited and have been prepared by the Company, including all subsidiaries and prior to December 23, 2023, a variable interest entity (“VIE”) it previously consolidated in accordance with GAAP. During December 2023, the Company entered into a transition services agreement with Vanguard Supply Chain Solutions LLC, one of the Company's transportation providers, to enable the in-house integration of Inotiv’s North American transportation operations. Following this transaction, Inotiv was no longer required to consolidate this entity. The VIE has not materially impacted our net assets or net loss. The Company successfully completed the in-house integration of its North American transportation operations during the second fiscal quarter of 2024.

The Company accounts for noncontrolling interests in accordance with Accounting Standards Codification (“ASC”) 810, “Consolidation” (“ASC 810”). ASC 810 requires companies with noncontrolling interests to disclose such interests as a portion of equity but separate from the parent’s equity. The noncontrolling interests’ portion of net loss is presented on the condensed consolidated statements of operations.

Summary of Significant Accounting Policies

The Company’s significant accounting policies are described in Note 2, “Summary of Significant Accounting Policies” in the Company’s Annual Report on Form 10-K for the twelve months ended September 30, 2023, and there have been no material changes to those significant accounting policies.

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Concentration of Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of trade receivables from customers in the biopharmaceutical, contract research, academic, and governmental sectors. The Company believes its exposure to credit risk is minimal, as the majority of the customers are predominantly well established and viable. Additionally, the Company maintains allowances for potential credit losses. The Company’s exposure to credit loss in the event that payment is not received for revenue recognized equals the outstanding trade receivables and contract assets less fees invoiced in advance.

During the three months ended June 30, 2024, no clients accounted for more than 10% of sales. During the nine months ended June 30, 2024, one client accounted for 16.1% of sales. During the three and nine months ended June 30, 2023, one client accounted for 19.7% and 22.5% of sales, respectively. During the three and nine months ended June 30, 2024 and June 30, 2023, no vendors accounted for more than 10% of the sum of cost of services and cost of products.

2. REVENUE FROM CONTRACTS WITH CUSTOMERS

DSA

The DSA segment generates service revenue through drug discovery and development services. The DSA segment generates product revenue through internally-manufactured scientific instruments for life sciences research and the related software for use by pharmaceutical companies, universities, government research centers and medical research institutions under the Company’s BASi product line.

RMS

The RMS segment generates product revenue through the commercial production, procurement and sale of research models, diets and bedding and bioproducts. The RMS segment generates service revenue through Genetically Engineered Models and Services ("GEMS"), client-owned animal colony care, and health monitoring and diagnostics services related to research models.

Contract Assets and Liabilities from Contracts with Customers

The timing of revenue recognition, billings and cash collections results in billed receivables (trade receivables), contract assets (unbilled revenue), and contract liabilities (customer deposits and deferred revenue) on the condensed consolidated balance sheets. The following table provides information about contract assets (trade receivables and unbilled revenue, excluding allowances for credit losses), and fees invoiced in advance (customer deposits and deferred revenue):


	Balance at June 30, 2024		Balance at September 30, 2023
Contract assets: Trade receivables	$	53,737	$	77,618
Contract assets: Unbilled revenue	15,910		17,211
Contract liabilities: Customer deposits	22,374		36,689
Contract liabilities: Deferred revenue	16,321		18,933

When the Company does not have the unconditional right to advanced billings, both advanced client payments and unpaid advanced client billings are excluded from deferred revenue, with the advanced billings also being excluded from client receivables. The Company excluded approximately $10,807 and $10,220 of unpaid advanced client billings from both client receivables and deferred revenue as of June 30, 2024 and September 30, 2023, respectively.

The Company expects a majority of deferred revenue to be recognized as revenue within twelve months.

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Changes in the contract asset and the contract liability balances during the nine months ended June 30, 2024 include the following:

•Changes in the time frame for a right for consideration to become unconditional – approximately 79.0% of unbilled revenue as of September 30, 2023, was billed during the nine months ended June 30, 2024; and

•Changes in the time frame for a performance obligation to be satisfied – approximately 75.0% of deferred revenue as of September 30, 2023, was recognized as revenue during the nine months ended June 30, 2024.

3. SEGMENT AND GEOGRAPHIC INFORMATION

Segment Information

During the three and nine months ended June 30, 2024, the RMS segment reported intersegment revenue of $396 and $5,230, respectively, related to sales to the DSA segment. During the three and nine months ended June 30, 2023, the RMS segment reported intersegment revenue of $3,471 and $7,858, respectively, related to sales to the DSA segment. The following tables present revenue and other financial information by reportable segment:


	Three Months Ended June 30,				Nine Months Ended June 30,
	2024		2023		2024		2023
Revenue
DSA:
Service revenue	$	43,086	$	45,197	$	131,951	$	131,313
Product revenue	1,133		1,561		3,597		3,561
RMS:
Service revenue	11,278		11,098		33,237		33,782
Product revenue	50,289		99,612		191,537		263,029
	$	105,786	$	157,468	$	360,322	$	431,685

Operating Income (Loss)
DSA	$	2,325	$	4,182	$	6,771	$	8,478
RMS	(7,447)		21,886		(32,973)		(36,661)
Unallocated Corporate	(15,630)		(17,285)		(47,037)		(55,737)
	$	(20,752)	$	8,783	$	(73,239)	$	(83,920)

Interest expense	(12,116)		(10,786)		(34,568)		(31,751)
Other (expense) income	(82)		(12)		1,092		(1,345)
Loss before income taxes	$	(32,950)	$	(2,015)	$	(106,715)	$	(117,016)

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	Three Months Ended June 30,				Nine Months Ended June 30,
	2024		2023		2024		2023
Depreciation and amortization:
DSA	$	4,488	$	4,235	$	13,260	$	11,826
RMS	9,401		9,629		28,781		28,291
Unallocated Corporate	230		—		483		—
	$	14,119	$	13,864	$	42,524	$	40,117

Capital expenditures:
DSA	$	1,390	2,403		$	4,594	$	9,667
RMS	3,031		2,081		12,421		11,657
	$	4,421	$	4,484	$	17,015	$	21,324

Geographic Information

The following represents revenue originating in entities physically located in the identified geographic area:


	Three Months Ended June 30,				Nine Months Ended June 30,
	2024		2023		2024		2023
United States	$	89,707	$	132,265	$	303,905	$	361,254
Netherlands	8,545		15,682		36,331		42,426
Other	7,534		9,521		20,086		28,005
	$	105,786	$	157,468	$	360,322	$	431,685

Long-lived assets shown below include property and equipment, net. The following represents long-lived assets where they are physically located:


	June 30,		September 30,
	2024		2023
United States	$	171,036	$	178,021
Netherlands	6,600		6,656
Other	12,067		6,391
	$	189,703	$	191,068

4. BUSINESS COMBINATIONS

The Company accounts for acquisitions in accordance with ASC 805, Business Combinations. The guidance requires consideration given, including contingent consideration, assets acquired, liabilities assumed and non-controlling interests to be valued at their fair market values at the acquisition date. The guidance further provides that: (1) in-process research and development will be recorded at fair value as an indefinite-lived intangible asset; (2) acquisition costs will generally be expensed as incurred; (3) restructuring costs associated with a business combination will generally be expensed subsequent to the acquisition date; and (4) changes in deferred tax asset valuation allowances and income tax uncertainties after the acquisition date generally will affect income tax expense (benefit). ASC 805 requires that any excess of the purchase price over the fair value of assets acquired, including identifiable intangibles and liabilities assumed, be recognized as goodwill.

Histion Acquisition

On April 25, 2022, the Company completed the acquisition of Histion, LLC (“Histion”), which was a strategic element of the Company’s expansion of its specialized pathology services. Consideration for the Histion acquisition consisted of (i) $950 in cash, subject to working capital adjustments, (ii) 17,618 of the Company’s common shares valued at $364 based on

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the closing stock price of the Company’s common shares as reported by Nasdaq on the closing date and (iii) unsecured subordinated promissory notes payable to the former shareholders of Histion in an aggregate principal amount of $433.

Protypia Acquisition

On July 7, 2022, the Company entered into a Stock Purchase Agreement with Protypia, Inc. (“Protypia”), which was a strategic element of the Company’s expansion of its mass spectrometry-based bioanalytical offerings, providing for the acquisition by the Company of all of the outstanding stock of Protypia on that date. Consideration for the Protypia stock consisted of (i) $9,460 in cash, subject to certain adjustments, (ii) 74,997 of the Company's common shares valued at $806 based on the opening stock price of the Company’s common shares as reported by Nasdaq on the closing date and (iii) $600 in seller notes.

The following table summarizes the fair value of assets acquired and liabilities assumed as of the acquisition date:


	July 7, 2022
Assets acquired and liabilities assumed:
Goodwill	6,002
Intangible assets	5,600
Other liabilities, net	(84)
Deferred tax liabilities	(652)
	$	10,866

Intangible assets primarily relate to client relationships and technology associated with the ability to perform specialized protein and peptide mass spectrometry analysis. The acquired definite-lived intangible assets are being amortized over a weighted-average estimated useful life of approximately 8.1 years on a straight-line basis. The estimated fair values of identifiable intangible assets were determined using the "income approach," which is a valuation technique that provides an estimate of the fair value of an asset based on market participant expectations of the cash flows an asset would generate over its remaining useful life. Some of the significant assumptions inherent in the development of these asset valuations include the estimated net cash flows for each year for each asset or product (including revenues and EBITDA), the appropriate discount rate necessary to measure the risk inherent in each future cash flow stream, the life cycle of each asset, the potential regulatory and commercial success risk, and competitive trends impacting the asset and each cash flow stream, as well as other factors.

Goodwill, which is derived from the enhanced scientific expertise and our ability to provide broader service solutions through a comprehensive portfolio, is recorded based on the amount by which the purchase price exceeds the fair value of the net assets acquired and none is deductible for tax purposes. Goodwill from this transaction is allocated to the Company’s DSA reportable segment.

In accordance with ASC 805-740, the Company established a deferred tax liability with an offset to goodwill in connection with the accounting for the opening balance sheet of the Protypia acquisition as a result of book-to-tax differences primarily related to the intangible assets.

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5. INTANGIBLE ASSETS

The following table displays intangible assets, net by major class:


	June 30, 2024
	Carrying Amount, Gross		Accumulated Amortization		Carrying Amount, Net
Client relationships	$	317,026	$	(75,585)	$	241,441
Intellectual property	56,362		(17,077)		39,285
Other	4,837		(3,023)		1,814
	$	378,225	$	(95,685)	$	282,540


	September 30, 2023
	Carrying Amount, Gross		Accumulated Amortization		Carrying Amount, Net
Client relationships	$	316,820	$	(54,711)	$	262,109
Intellectual property	56,337		(12,234)		44,103
Other	4,837		(2,621)		2,216
	$	377,994	$	(69,566)	$	308,428

The decrease in intangible assets, net during the nine months ended June 30, 2024 related to amortization over the applicable useful lives, partially offset by the impact of foreign exchange rates.

6. DEBT

Long-term debt as of June 30, 2024 and September 30, 2023 is detailed in the table below.


	June 30, 2024		September 30, 2023
Seller Note – Bolder BioPath (Related party)	$	432	$	602
Seller Note – Preclinical Research Services	484		541
Seller Payable - Orient BioResource Center	3,690		3,649
Seller Note – Histion (Related party)	120		229
Seller Note – Protypia (Related party)	—		400
Economic Injury Disaster Loan	—		140
Convertible Senior Notes	115,296		110,651
Term Loan Facility, DDTL and Incremental Term Loans	274,048		272,930
Total debt before unamortized debt issuance costs	$	394,070	$	389,142
Less: Debt issuance costs not amortized	(11,623)		(11,397)
Total debt, net of unamortized debt issuance costs	$	382,447	$	377,745
Less: Current portion	(378,550)		(7,950)
Total Long-term debt	$	3,897	$	369,795

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of the 2024 fiscal year. If the Company's revenue and related operating margins do not increase, it would result in non-compliance with the financial covenants under the Credit Agreement beginning with the September 30, 2024 test date. If at the time the Company files its Annual Report on Form 10-K it reports a failure to comply with its financial covenants which remains unremedied for the period of time stipulated under the Credit Agreement, this would constitute an event of default under the Credit Agreement and the lenders may, among other remedies set out under the Credit Agreement, declare all or any portion of the outstanding principal amount of the borrowings plus accrued and unpaid interest to be immediately due and payable. Furthermore, if the lenders were to accelerate the loans under the Credit Agreement, such acceleration would constitute a default under our indenture governing the Company's Convertible Senior Notes (the "Notes") which, if not cured within 30 days following notice of such default from the trustee or holders of 25 percent of the Notes, would permit the trustee or such holders to accelerate the Notes. Refer to Note 1 - Description of the Business and Basis of Presentation for the Company's Operational Update and the Company's analysis of Liquidity and Going Concern.

Revolving Credit Facility

As of June 30, 2024 and September 30, 2023, the Company had no outstanding balance on the revolving credit facility. Refer to the statements of cash flows for information related to payments on the revolving credit facility during the nine months ended June 30, 2023. As of the date of this report, there is a $12,000 balance under the revolving credit facility.

Significant Transactions

On October 12, 2022, the Company drew its $35,000 delayed draw term loan (the “Additional DDTL”) allowed under the First Amendment to the Credit Agreement (“First Amendment”). A portion of the proceeds was used to repay the $15,000 balance on the Company’s revolving credit facility, while the remaining amount was drawn to fund a portion of the Company’s capital expenditures in fiscal year 2022 and those planned for fiscal year 2023.

On December 29, 2022 and January 9, 2023, the Company, the lenders party thereto, and Jefferies Finance LLC, as administrative agent (the “Agent”), entered into the Second and Third Amendments, respectively, to the Credit Agreement. Refer below for further information related to those amendments.

On May 14, 2024 and June 2, 2024, the Company, the lenders party thereto, and the Agent, entered into the Fourth and Fifth Amendments, respectively, to the Credit Agreement. Refer below for further information related to those amendments.

Absent the Sixth Amendment (as defined in Note 15 - Subsequent Events), the Company would not have complied with its financial covenants under the Credit Agreement and the Company believes that if it does not see an increase in revenue, and related operating margins, it is probable that the Company will fail its financial covenants within twelve months of the balance sheet date. As a result, we have classified the Term Loan Facility, DDTL and Incremental Term Loans (each as defined below) and the Notes as current. Refer to Note 1 - Description of the Business and Basis of Presentation for the Company's Operational Update and the Company's analysis of Liquidity and Going Concern.

Term Loan Facility, DDTL and Incremental Term Loans

Below are the weighted-average effective interest rates for the loans available under the Credit Agreement (as defined below):


	Three Months Ended June 30,				Nine Months Ended June 30,
	2024		2023		2024		2023
Effective interest rates:
Term Loan	11.67	%	10.25	%	11.43	%	10.29	%
Initial DDTL	11.66	%	10.22	%	11.41	%	10.31	%
Additional DDTL	11.78	%	10.35	%	11.54	%	10.47	%

Credit Agreement

On November 5, 2021, the Company, certain subsidiaries of the Company (the “Subsidiary Guarantors”), the lenders party thereto, and the Agent, entered into a Credit Agreement (the “Credit Agreement”). The Credit Agreement provides for a term loan facility (the "Term Loan") in the original principal amount of $165,000, a delayed draw term loan facility in the

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original principal amount of $35,000 (available to be drawn up to 18 months from the date of the Credit Agreement) (the “Initial DDTL” and together with the Additional DDTL, the “DDTL”) and a revolving credit facility in the original principal amount of $15,000. On November 5, 2021, the Company borrowed the full amount of the term loan facility, but did not borrow any amounts on the delayed draw term loan facility or the revolving credit facility.

The Company could have elected to borrow on each of the loan facilities at either an adjusted LIBOR rate of interest or an adjusted prime rate of interest. Adjusted LIBOR rate loans accrued interest at an annual rate equal to the LIBOR rate plus a margin of between 6.00% and 6.50%, depending on the Company’s then current Secured Leverage Ratio (as defined in the Credit Agreement). The LIBOR rate had to be a minimum of 1.00%. The initial adjusted LIBOR rate of interest was the LIBOR rate plus 6.25%. Adjusted prime rate loans accrued interest at an annual rate equal to the prime rate plus a margin of between 5.00% and 5.50%, depending on the Company’s then current Secured Leverage Ratio. The initial adjusted prime rate of interest was the prime rate plus 5.25%.

The Company must pay (i) a fee based on a percentage per annum equal to 0.50% on the average daily undrawn portion of the commitments in respect of the revolving credit facility and (ii) a fee based on a percentage per annum equal to 1.00% on the average daily undrawn portion of the commitments in respect of the delayed draw loan facility. In each case, such fee shall be paid quarterly in arrears.

Each of the term loan facility and delayed draw term loan facility require annual principal payments in an amount equal to 1.00% of their respective original principal amounts. The Company shall also repay the term loan facility on an annual basis in an amount equal to a percentage of its Excess Cash Flow (as defined in the Credit Agreement), which percentage will be determined by its then current Secured Leverage Ratio. Each of the loan facilities may be repaid at any time. Voluntary prepayments were subject to a 1.00% prepayment premium if made on or prior to November 5, 2023 and other breakage penalties, as defined in the Credit Agreement. Voluntary prepayments made after November 5, 2023 are not subject to any prepayment premium.

The Company is required to maintain a Secured Leverage Ratio of not more than 4.25 to 1.00 for the Company's fiscal quarters through the fiscal quarter ended June 30, 2023, 3.75 to 1.00 beginning with the Company’s fiscal quarter ending September 30, 2023, and 3.00 to 1.00 beginning with the Company’s fiscal quarter ending March 31, 2025. The Company is required to maintain a minimum Fixed Charge Coverage Ratio (as defined in the Credit Agreement), which ratio was 1.00 to 1.00 during the first year of the Credit Agreement and is 1.10 to 1.00 from and after the Credit Agreement’s first anniversary.

Each of the loan facilities is secured by all assets (other than certain excluded assets) of the Company and each of the Subsidiary Guarantors. Repayment of each of the loan facilities is guaranteed by each of the Subsidiary Guarantors.

On January 7, 2022, the Company drew $35,000 on the Initial DDTL. Amounts outstanding under the Initial DDTL accrued interest at an annual rate equal to the LIBOR rate plus a margin of between 6.00% and 6.50%, depending on the Company’s then current Secured Leverage Ratio (as defined in the Credit Agreement). The initial adjusted LIBOR rate of interest was the LIBOR rate plus 6.25%.

The Term Loan and the Initial DDTL will mature on November 5, 2026.

First Amendment to Credit Agreement

On January 27, 2022, the Company, Subsidiary Guarantors, the lenders party thereto, and the Agent entered into the First Amendment to the existing Credit Agreement. The First Amendment provides for, among other things, an increase to the existing term loan facility in the amount of $40,000 (the “Incremental Term Loans”) and the Additional DDTL in the original principal amount of $35,000, which amount is available to be drawn up to 24 months from the date of the First Amendment. The Incremental Term Loans and any amounts borrowed under the Additional DDTL are referred to herein as the “Additional Term Loans”. On January 27, 2022, the Company borrowed the full amount of the Incremental Term Loans, and on October 12, 2022, the Company borrowed the full $35,000 under the Additional DDTL.

Amounts outstanding under the Additional Term Loans accrued interest at an annual rate equal to the LIBOR rate plus a margin of between 6.00% and 6.50%, depending on the Company’s then current Secured Leverage Ratio (as defined in the Credit Agreement). The initial adjusted LIBOR rate of interest was the LIBOR rate plus 6.25%.

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The Additional Term Loans require annual principal payments in an amount equal to 1.00% of the original principal amount. Voluntary prepayments of the Additional Term Loans were subject to a 1.00% prepayment premium if made on or prior to November 5, 2023 and other breakage penalties, as defined in the Credit Agreement. Voluntary prepayments made after November 5, 2023 are not subject to any prepayment premium.

The Company shall also repay the term loans on an annual basis in an amount equal to a percentage of its Excess Cash Flow (as defined in the Credit Agreement), which percentage will be determined by its then current Secured Leverage Ratio.

The Additional Term Loans are secured by all assets (other than certain excluded assets) of the Company and each of the Subsidiary Guarantors. Repayment of the Additional Term Loans is guaranteed by each of the Subsidiary Guarantors.

The Additional Term Loans will mature on November 5, 2026.

Second Amendment to Credit Agreement

On December 29, 2022, the Company, the Subsidiary Guarantors, the lenders party thereto, and the Agent, entered into a Second Amendment (the “Second Amendment”) to the Credit Agreement.

The Second Amendment provided for, among other things, an extension of the deadline for the Company to provide to the lenders the audited financial statements for the Company’s fiscal year ended September 30, 2022 and an annual budget for 2023; the Company satisfied these requirements by the extended deadline. The Second Amendment added a requirement that the Company provide, within 30 days after the end of each month, an unaudited consolidated balance sheet, statement of income and statement of cash flows as of the end of, and for, such month, as well as a “key performance indicator” report. The Second Amendment also requires that, within 10 business days after the end of each month, the Company will provide a rolling 13-week cash flow forecast prepared on a monthly basis. The Second Amendment further provides that, upon the request of the Required Lenders (as defined in the Credit Agreement), the Company will permit a financial advisor designated by the Required Lenders to meet with management of the Company to discuss the affairs, finances, accounts and condition of the Company during the six-month period following the effective date of the Second Amendment. In addition, the Second Amendment requires the Company to deliver an updated organization chart and certain supplemental information regarding the Company’s subsidiaries in connection with each quarterly report required pursuant to the Credit Agreement.

Under the Second Amendment, the Company could have elected to borrow on each of the loan facilities at either an adjusted term secured overnight financing rate (“Term SOFR”) rate of interest or an alternate base rate of interest. Term SOFR loans accrued interest at an annual rate equal to the applicable Term SOFR rate plus (i) an adjustment percentage equal to between 0.11448% and 0.42826%, depending on the term of the loan (“Adjusted Term SOFR”); provided that, Adjusted Term SOFR could never be less than 1.00%, and (ii) a margin of between 6.00% and 6.50%, depending on the Company’s then current Secured Leverage Ratio (as defined in the Credit Agreement). Alternate base rate loans could accrue interest at an annual rate equal to (i) the highest of (a) the Federal Funds Effective Rate (as defined in the Credit Agreement) plus 0.50%, (b) the Agent’s prime rate and (c) Adjusted Term SOFR for a one-month tenor plus 1.00% (the “Second Amendment Alternate Base Rate”); provided that, the Second Amendment Alternate Base Rate could never be less than 2.00%, plus (ii) a margin of between 5.00% and 5.50%, depending on the Company’s then current Secured Leverage Ratio.

The Second Amendment also provides that the Company may not request any credit extensions under the revolving credit facility under the Credit Agreement, if any of the conditions precedent set forth in Section 4.02 of the Credit Agreement cannot be satisfied, including, without limitation, the making of the representation and warranty that as of the date of the most recent audited financial statements delivered to the Agent, no event, change, circumstance, condition, development or occurrence has had, or would reasonably be expected to result in, either individually or in the aggregate, a Material Adverse Effect (as defined in the Credit Agreement).

In addition, the Second Amendment provided that, no later than January 13, 2023 (or such later date as the Required Lenders shall agree in their discretion), the Company shall (i) appoint a financial advisor on terms reasonably acceptable to the Required Lenders and the Company for a term of at least six months, (ii) provide a 13-week budget to the Agent, and (iii) deliver a perfection certificate supplement updating certain information previously provided with respect to each of the Company and the Subsidiary Guarantors, including information regarding certain collateral and other assets owned by such parties. The Company timely satisfied each of these requirements.

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Third Amendment to Credit Agreement

On January 9, 2023, the Company, the Subsidiary Guarantors, the lenders party thereto, and the Agent, entered into a Third Amendment (“Third Amendment”) to the Credit Agreement. The Third Amendment provides that, among other things, during the period beginning on January 9, 2023 and, subject to the terms of the Credit Agreement, ending on the date on which financial statements for the Company’s fiscal quarter ending March 31, 2024 are delivered or are required to be delivered, as long as no event of default has occurred (the “Amendment Relief Period”):

•the Cambodian NHP-related matters, to the extent existing and disclosed to the lenders prior to December 29, 2022, shall not constitute a Material Adverse Effect under the Credit Agreement and will not restrict the Company’s ability to request credit extensions under the revolving credit facility;

•the use of borrowings under the revolving credit facility is limited to funding operational expenses of the Company in the ordinary course and cannot be used for the making or funding of investments, permitted acquisitions or restricted payments, payments or purchases with respect to any indebtedness, bonuses or executive compensation, or judgments, fines or settlements; and

•additional limitations are imposed on the Company under the Credit Agreement, including restrictions on permitted asset sales, a prohibition on making permitted acquisitions, and significant limitations on the ability to incur additional debt, make investments and make restricted payments.

The Third Amendment provides that from and after the date thereof, no incremental facilities under the Credit Agreement may be established or incurred. The Third Amendment also provides for additional mandatory prepayments of borrowed amounts following the receipt by the Company of certain cash receipts, including proceeds from certain equity issuances and cash received by the Company not in the ordinary course of business. Under the Third Amendment, after any draw on the revolving credit facility, the Company’s cash and cash equivalents held on hand domestically within the U.S. cannot exceed $10,000.

Under the Third Amendment, the Company may elect to borrow on each of the loan facilities accruing interest at either an adjusted Term SOFR or an alternate base rate of interest. Term SOFR loans shall accrue interest at an annual rate equal to the applicable Term SOFR rate plus (i) an adjustment percentage equal to between 0.11448% and 0.42826%, depending on the term of the loan, provided that, the Adjusted Term SOFR shall never be less than 1.00% per annum, plus (ii) an applicable margin of 6.75% per annum for term loans maintained as SOFR loans or 9.50% per annum for revolving loans maintained as SOFR loans. Alternate base rate loans shall accrue interest at an annual rate equal to (i) the highest of (a) the Federal Funds Effective Rate (as defined in the Credit Agreement) plus 0.50%, (b) the Agent’s prime rate and (c) Adjusted Term SOFR for a one-month tenor plus 1.00% (the “Alternate Base Rate”), provided that, the Alternate Base Rate is subject to a floor of 2.00% per annum plus (ii) an applicable margin of 5.75% per annum for term loans maintained as Alternate Base Rate loans or 8.50% per annum for revolving loans maintained as Alternate Base Rate loans.

The fee consideration payable by the Company for each consenting lender party to the Third Amendment is: (i) 0.50% of the aggregate outstanding principal amount of the term loans held by each consenting term loan lender, to be paid in-kind and capitalized to the principal amounts of the term loans held by such lender; (ii) 0.50% of the aggregate outstanding principal amount of the term loans held by each consenting term loan lender, to be paid in cash upon the occurrence of certain prepayments of the term loan under the Credit Agreement; and (iii) 7.00% of the aggregate amount of the revolving commitments held by each consenting revolving lender, to be paid in cash upon the occurrence with certain permanent reductions of the revolving loans under the Credit Agreement.

Fourth Amendment to Credit Agreement

On May 14, 2024, the Company, the Subsidiary Guarantors and the lenders party thereto entered into a Fourth Amendment (the “Fourth Amendment”) to the Credit Agreement. The Fourth Amendment provided that any charges or expenses attributable to or related to an agreement in principle (subsequently replaced by the Resolution and Plea Agreements) could be added back to the Company’s Consolidated EBITDA (up to $26,500) for purposes of the financial covenants under the Credit Agreement.

The fee consideration payable by the Company for each consenting lender party to the Fourth Amendment is 0.50% of the aggregate outstanding principal amount of the term loans held by each consenting term loan lender, to be paid in-kind and capitalized to the principal amounts of the term loans held by such lender.

Fifth Amendment to Credit Agreement

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On June 2, 2024, the Company, the Subsidiary Guarantors and the lenders party thereto entered into a Fifth Amendment (the “Fifth Amendment”) to the Credit Agreement. The Fifth Amendment, among other changes, permits charges or expenses attributable to or related to the Resolution Agreement and the Plea Agreement to be added back to the Company’s Consolidated EBITDA in an amount up to $28,500; excludes any direct effects to the Company resulting from the Resolution Agreement and the Plea Agreement from being deemed a material adverse effect under the Credit Agreement; permits liens on the Company and certain subsidiaries in favor of DOJ in connection with the Resolution Agreement and the Plea Agreement; provides that certain uncured or unwaived breaches of the terms and conditions of the Resolution Agreement and the Plea Agreement shall be considered an event of default under the Credit Agreement; and enables the lenders to cause, at their discretion, material foreign subsidiaries to be joined as guarantors of the Company’s obligations under the Credit Agreement.

The fee consideration payable by the Company for each consenting lender party to the Fifth Amendment is 0.50% of the aggregate outstanding principal amount of the term loans held by each consenting term loan lender, to be paid in-kind and capitalized to the principal amounts of the term loans held by such lender.

Acquisition-related Debt (Seller Notes)

In addition to the indebtedness under the Credit Agreement, certain of the Company’s subsidiaries have issued unsecured notes as partial payment of the purchase prices of certain acquisitions as described herein. Each of these notes is subordinated to the indebtedness under the Credit Agreement.

As part of the acquisition of Pre-Clinical Research Services, Inc. ("PCRS"), the Company issued an unsecured subordinated promissory note payable to the PCRS seller in the initial principal amount of $800. The promissory note bears interest at a rate of 4.50% per annum with monthly payments of principal and interest and a maturity date of December 1, 2024.

As part of the acquisition of Bolder BioPATH, the Company issued unsecured subordinated promissory notes payable to the former shareholders of Bolder BioPATH in an aggregate principal amount of $1,500. As part of the working capital adjustment in March 2022, a reduction of the promissory note of $470 was recorded. The promissory notes bear interest at a rate of 4.50% per annum, with monthly payments of principal and interest and a maturity date of May 1, 2026.

As part of the acquisition of Plato BioPharma, Inc. ("Plato"), the Company issued unsecured subordinated promissory notes payable to the former shareholders of Plato in an aggregate principal amount of $3,000. The promissory notes bore interest at a rate of 4.50% per annum, with monthly payments of principal and interest and a maturity date of June 1, 2023. The promissory notes were paid in full as of June 1, 2023.

As part of the acquisition of Orient BioResource Center, Inc. ("OBRC"), the Company agreed to leave in place a payable owed by OBRC to Orient Bio, Inc. (the "Seller") in the amount of $3,700, which the Company determined to have a fair value of $3,325 as of January 27, 2022. The payable does not bear interest and was originally required to be paid to the Seller 18 months after the closing date of January 27, 2022. The Company has the right to set off against the payable any amounts that become payable by the Seller on account of indemnification obligations under the purchase agreement. On April 4, 2023, the Company and the Seller entered into a First Amendment to extend the maturity date of the payable to July 27, 2024. On May 24, 2024, the Company and the Seller entered into a Second Amendment to extend the maturity date of the payable to July 27, 2025. Further, beginning on July 27, 2024, the note bears interest at a rate of 4.60% per annum. Accrued interest and principal will be paid at the maturity date. Neither the first nor the second amendment to the payable affected the rights and remedies of any party under the stock purchase agreement, nor did either alter, modify or amend or in any way affect any of the terms and conditions, obligations, covenants or agreements contained in the stock purchase agreement.

As part of the acquisition of Histion, the Company issued unsecured subordinated promissory notes payable to the former shareholders of Histion in an aggregate principal amount of $433. The promissory notes bear interest at a rate of 4.50% per annum, with monthly payments of principal and interest and a maturity date of April 1, 2025.

As part of the acquisition of Protypia, the Company issued unsecured subordinated promissory notes payable to the former shareholders of Protypia in an aggregate principal amount of $600. The promissory notes bear interest at a rate of 4.50% per annum, with monthly interest payments, as well as principal payments on July 7, 2023 and on the maturity date, January 7, 2024. These notes were paid in full on January 7, 2024.

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Convertible Senior Notes

On September 27, 2021, the Company issued $140,000 principal amount of its 3.25% Convertible Senior Notes due 2027 (the “Notes”). The Notes were issued pursuant to, and are governed by, an indenture, dated as of September 27, 2021, among the Company, the Company’s wholly-owned subsidiary, BAS Evansville, Inc., as guarantor (the “Guarantor”), and U.S. Bank National Association, as trustee (the “Indenture”). Pursuant to the purchase agreement between the Company and the initial purchaser of the Notes, the Company granted the initial purchaser an option to purchase, for settlement within a period of 13 days from, and including, the date the Notes were first issued, up to an additional $15,000 principal amount of the Notes. The Notes issued on September 27, 2021 included $15,000 principal amount of the Notes issued pursuant to the full exercise by the initial purchaser of such option. The Company used the net proceeds from the offering of the Notes, together with borrowings under a new senior secured term loan facility, to fund the cash portion of the purchase price of the Envigo acquisition and related fees and expenses.

The Notes are the Company’s senior, unsecured obligations and are (i) equal in right of payment with the Company’s existing and future senior, unsecured indebtedness; (ii) senior in right of payment to the Company’s existing and future indebtedness that is expressly subordinated to the Notes; (iii) effectively subordinated to the Company’s existing and future secured indebtedness, to the extent of the value of the collateral securing that indebtedness; and (iv) structurally subordinated to all existing and future indebtedness and other liabilities, including trade payables, and (to the extent the Company is not a holder thereof) preferred equity, if any, of the Company’s non-guarantor subsidiaries. The Notes are fully and unconditionally guaranteed, on a senior, unsecured basis, by the Guarantor.

The Notes accrue interest at a rate of 3.25% per annum, payable semi-annually in arrears on April 15 and October 15 of each year, beginning on April 15, 2022. The Notes will mature on October 15, 2027, unless earlier repurchased, redeemed or converted. Before April 15, 2027, noteholders have the right to convert their Notes only upon the occurrence of certain events. From and after April 15, 2027, noteholders may convert their Notes at any time at their election until the close of business on the scheduled trading day immediately before the maturity date. The Company will settle conversions by paying or delivering, as applicable, cash, its common shares or a combination of cash and its common shares, at the Company’s election. The initial conversion rate is 21.7162 common shares per $1 principal amount of Notes, which represents an initial conversion price of approximately $46.05 per common share. The conversion rate and conversion price are subject to customary adjustments upon the occurrence of certain events. In addition, if certain corporate events that constitute a “Make-Whole Fundamental Change” (as defined in the Indenture) occur, then the conversion rate will, in certain circumstances, be increased for a specified period of time.

As of June 30, 2024 and September 30, 2023, there were $3,468 and $4,172, respectively, in unamortized debt issuance costs related to the Notes. For the three months ended June 30, 2024, the total interest expense was $2,948, including coupon interest expense of $1,131, accretion expense of $1,580, and the amortization of debt discount and issuance costs of $237. During the three months ended June 30, 2023, the total interest expense was $2,726, including coupon interest expense of $1,071, accretion expense of $1,436, and the amortization of debt discount and issuance costs of $219. For the nine months ended June 30, 2024, the total interest expense was $8,755, including coupon interest expense of $3,406, accretion expense of $4,645, and the amortization of debt discount and issuance costs of $704. During the nine months ended June 30, 2023, the total interest expense was $8,229, including coupon interest expense of $3,371, accretion expense of $4,200, and the amortization of debt discount and issuance costs of $658.

The Notes are redeemable, in whole and not in part, at the Company’s option at any time on or after October 15, 2024 and on or before the 40th scheduled trading day immediately before the maturity date, but only if the last reported sale price per common share of the Company exceeds 130.00% of the conversion price on (i) each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the trading day immediately before the date the Company sends the related redemption notice; and (ii) the trading day immediately before the date the Company sends such notice. The redemption price is a cash amount equal to the principal amount of the Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. In addition, calling the Notes for redemption pursuant to the provisions described in this paragraph will constitute a Make-Whole Fundamental Change, which will result in an increase to the conversion rate in certain circumstances for a specified period of time.

If certain corporate events that constitute a “Fundamental Change” (as defined in the Indenture) occur, then noteholders may require the Company to repurchase their Notes at a cash repurchase price equal to the principal amount of the Notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the Fundamental Change repurchase date. The definition of Fundamental Change includes certain business combination transactions involving the Company and certain de-listing events with respect to the Company’s common shares.

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The Notes have customary provisions relating to the occurrence of “Events of Default” (as defined in the Indenture), which include the following: (i) certain payment defaults on the Notes (which, in the case of a default in the payment of interest on the Notes, are subject to a 30-day cure period); (ii) the Company’s failure to send certain notices under the Indenture within specified periods of time; (iii) the failure by the Company or the Guarantor to comply with certain covenants in the Indenture relating to the ability of the Company or the Guarantor to consolidate with or merge with or into, or sell, lease or otherwise transfer, in one transaction or a series of transactions, all or substantially all of the assets of the Company or the Guarantor, as applicable, and its subsidiaries, taken as a whole, to another person; (iv) a default by the Company or the Guarantor in its other obligations or agreements under the Indenture or the Notes if such default is not cured or waived within 60 days after notice is given in accordance with the Indenture; (v) certain defaults by the Company, the Guarantor or any of their respective subsidiaries with respect to indebtedness for borrowed money of at least $20,000; (vi) the rendering of certain judgments against the Company, the Guarantor or any of their respective subsidiaries for the payment of at least $20,000, where such judgments are not discharged or stayed within 60 days after the date on which the right to appeal has expired or on which all rights to appeal have been extinguished; (vii) certain events of bankruptcy, insolvency and reorganization involving the Company, the Guarantor or any of their respective significant subsidiaries; and (viii) the guarantee of the Notes ceases to be in full force and effect (except as permitted by the Indenture) or the Guarantor denies or disaffirms its obligations under its guarantee of the Notes.

If an Event of Default involving bankruptcy, insolvency or reorganization events with respect to the Company or the Guarantor (and not solely with respect to a significant subsidiary of the Company or the Guarantor) occurs, then the principal amount of, and all accrued and unpaid interest on, all of the Notes then outstanding will immediately become due and payable without any further action or notice by any person. If any other Event of Default occurs and is continuing, then the trustee, by notice to the Company, or noteholders of at least 25.00% of the aggregate principal amount of Notes then outstanding, by notice to the Company and the trustee, may declare the principal amount of, and all accrued and unpaid interest on, all of the Notes then outstanding to become due and payable immediately. However, notwithstanding the foregoing, the Company may elect, at its option, that the sole remedy for an Event of Default relating to certain failures by the Company to comply with certain reporting covenants in the Indenture consists exclusively of the right of the noteholders to receive special interest on the Notes for up to 180 days at a specified rate per annum not exceeding 0.50% on the principal amount of the Notes.

At issuance, the Company evaluated the convertible feature of the Notes and determined it was required to be bifurcated as an embedded derivative and did not qualify for equity classification. In subsequent periods, the Notes conversion rights met all equity classification criteria and the fair value of the embedded derivative was reclassified to additional paid-in-capital. The discount resulting from the initial fair value of the embedded derivative has and will continue to be amortized to interest expense using the effective interest method. Non-cash interest expense during the period primarily related to this discount.

7. SUPPLEMENTAL BALANCE SHEET INFORMATION

Trade receivables and contract assets, net consisted of the following:


	June 30,		September 30,
	2024		2023
Trade receivables	$	53,737	$	77,618
Unbilled revenue	15,910		17,211
Total	69,647		94,829
Less: Allowance for credit losses	(5,780)		(7,446)
Trade receivables and contract assets, net of allowances for credit losses	$	63,867	$	87,383

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Inventories, net consisted of the following:


	June 30,		September 30,
	2024		2023
Raw materials	$	2,071	$	2,259
Work in progress	78		124
Finished goods	4,483		4,439
Research Model Inventory	34,866		52,524
Total	41,498		59,346
Less: Obsolescence reserve	(2,814)		(3,244)
Inventories, net	$	38,684	$	56,102

Prepaid expenses and other current assets consisted of the following:


	June 30,		September 30,
	2024		2023
Advances to suppliers	$	19,949	$	19,247
Prepaid research models	3,509		4,300
Income tax receivable	2,545		1,813
Note receivable	1,280		1,226
Other	4,965		6,822
Prepaid expenses and other current assets	$	32,248	$	33,408

The composition of other assets is as follows:


	June 30,		September 30,
	2024		2023
Long-term advances to suppliers	$	6,033	$	3,681
Funded status of defined benefit plan	3,181		3,036
Other	4,396		3,362
Other assets	$	13,610	$	10,079

Accrued expenses and other current liabilities consisted of the following:


	June 30,		September 30,
	2024		2023
Accrued compensation	$	7,552	$	12,966
Non-income taxes	5,268		4,596
Accrued interest	2,488		2,975
Other	7,756		5,239
Resolution and Plea Agreements (Note 1)	5,000		—
Accrued expenses and other current liabilities	$	28,064	$	25,776

The composition of fees invoiced in advance is as follows:


	June 30,		September 30,
	2024		2023
Customer deposits	$	22,374	$	36,689
Deferred revenue	16,321		18,933
Fees invoiced in advance	$	38,695	$	55,622

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The composition of other liabilities is as follows:


	June 30,		September 30,
	2024		2023
Long-term client deposits	$	17,000	$	5,250
Other	912		1,123
Resolution and Plea Agreements (Note 1)	17,000		—
Other liabilities	$	34,912	$	6,373

8. DEFINED BENEFIT PLAN

The Company has a defined benefit plan in the U.K., the Harlan Laboratories UK Limited Occupational Pension Scheme (the "Pension Plan"), which operated through April 2012. As of April 30, 2012, the accumulation of plan benefits of employees in the Pension Plan was permanently suspended and therefore the Pension Plan was curtailed. During the year ending September 30, 2024, the Company expects to contribute $0 to the Pension Plan. As of June 30, 2024, the funded status of the defined benefit plan obligation of $3,181 is included in other assets (non-current) in the condensed consolidated balance sheets. Net periodic expense is included in the statements of operations in general and administrative expenses.

The following table provides the components of net periodic benefit costs for the Pension Plan, which is included in general and administrative expenses in the condensed consolidated statements of operations.


	Three Months Ended June 30,				Nine Months Ended June 30,
	2024		2023		2024		2023
Components of net periodic expense:
Interest cost	$	185	$	187	$	551	$	551
Expected return on assets	(196)		(203)		(585)		(600)
Amortization of prior loss	(36)		(39)		(106)		(114)
Net periodic expense	$	(47)	$	(55)	$	(140)	$	(163)

Inotiv, Inc. [NOTV] Filings
10-Q	[2024-08-09]
10-Q	[2024-05-15]
10-Q	[2024-02-07]
10-K	[2023-12-12]
10-Q	[2023-08-11]
10-Q	[2023-05-15]
10-Q	[2023-02-14]
10-K	[2023-01-13]
10-Q	[2022-08-12]
10-Q	[2022-05-16]
10-Q	[2022-02-16]
S-1	[2021-12-23]
10-K	[2021-12-21]
10-Q	[2021-08-13]
10-Q	[2021-05-14]
10-Q	[2021-02-10]
10-K	[2020-12-22]
10-Q	[2020-08-14]
10-Q	[2020-05-14]
10-Q	[2020-02-14]
10-K	[2019-12-26]
10-Q	[2019-08-14]
10-Q	[2019-05-15]
10-Q	[2019-02-14]
10-K	[2018-12-21]
10-Q	[2018-08-14]
10-Q	[2018-05-15]
10-Q	[2018-02-14]
10-K	[2017-12-22]
10-Q	[2017-08-14]
10-Q	[2017-05-15]
10-Q	[2017-02-14]
10-K	[2016-12-28]
10-Q	[2016-08-15]
10-Q	[2016-05-16]
10-Q	[2016-02-16]
10-K	[2015-12-24]
10-Q	[2015-08-14]
10-Q	[2015-05-15]
10-Q	[2015-02-17]
10-K	[2014-12-29]
10-Q	[2014-08-14]
10-Q	[2014-05-15]
10-Q	[2014-02-14]
10-K	[2013-12-30]
10-Q	[2013-10-18]
10-Q	[2013-05-15]
10-Q	[2013-02-14]
10-K	[2012-12-31]
10-Q	[2012-08-14]
10-Q	[2012-05-14]
10-Q	[2012-02-14]