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    NOTV   US45783Q1004

INOTIV, INC.

(NOTV)
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INOTIV : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

08/13/2021 | 03:57pm EDT
This report contains statements that constitute forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995.
Those statements appear in a number of places in this Report and may include,
but are not limited to, statements regarding our intent, belief or current
expectations with respect to (i) our strategic plans; (ii) trends in the demand
for our services and products; (iii) trends in the industries that consume our
services and products; (iv) our ability to develop or acquire new services and
products; (v) our ability to make capital expenditures and finance operations;
(vi) global economic conditions, especially as they impact our markets; (vii)
our cash position; (viii) our ability to successfully integrate the operations
and personnel related to recent acquisitions; (ix) our ability to effectively
manage current expansion efforts or any future expansion or acquisition
initiatives undertaken by us; (x) our ability to develop and build
infrastructure and teams to manage growth and projects; (xi) our ability to
continue to retain and hire key talent; (xii) our ability to market our services
and products under our corporate name and relevant brand names; (xiii) our
ability to service our outstanding indebtedness, (xiv) our expectations
regarding the volume of new bookings, pricing, gross profit margins and
liquidity, (xv) our ability to manage recurring and non-recurring costs, (xvi)
the impact of COVID-19 on the economy, demand for our services and products and
our operations, including the measures taken by governmental authorities to
address the pandemic, which may precipitate or exacerbate other risks and/or
uncertainties, and additional risks set forth in our filings with the Securities
and Exchange Commission (the "SEC"). Actual results may differ materially from
those in the forward-looking statements as a result of various factors,
including but not limited to the risk factors disclosed in our reports with the
SEC, many of which are beyond our control.

In addition, we have based these forward-looking statements on our current
expectations and projections about future events. Although we believe that the
assumptions on which the forward-looking statements contained herein are based
are reasonable, actual events may differ from those assumptions, and as a
result, the forward-looking statements based upon those assumptions may not
accurately project future events. The following discussion and analysis should
be read in conjunction with the unaudited condensed consolidated financial
statements and notes thereto included or incorporated by reference elsewhere in
this Report. In addition to the historical information contained herein, the
discussions in this Report may contain forward-looking statements that may be
affected by risks and uncertainties, including those discussed in Item 1A, Risk
Factors contained in our annual report on Form 10-K for the fiscal year ended
September 30, 2020. Our actual results could differ materially from those
discussed in the forward-looking statements.

Amounts in this Item 2 are in thousands, unless otherwise indicated.

Recent Developments and Executive Summary

During recent periods, we have undertaken significant internal and external
growth initiatives to reposition our Company and provide a platform for future
growth. Our growth initiatives include (1) acquisitions, (2) expansion of
existing and acquired businesses, (3) startup of new services. Through June 30,
2021, we acquired the business of Seventh Wave Laboratories, LLC, in July 2018
(the "Seventh Wave Acquisition"), acquired the toxicology business of Smithers
Avanza on May 1, 2019 (the "Smithers Avanza Acquisition"), acquired the
preclinical testing business of Pre-Clinical Research Services, as well as
related real property, on December 1, 2019 (the "PCRS Acquisition"), acquired
the business of HistoTox Labs on April 30, 2021 (the "HistoTox Acquisition")
 and completed a merger of one of its wholly owned subsidiaries with Bolder
BioPATH on May 3, 2021 (the "Merger"). Following the end of the quarter, we
completed the purchase of all of the outstanding equity interests in Gateway
Pharmacology Laboratories on August 2, 2021. We undertook an expansion of our
facilities in Evansville, Indiana, which we began using for operations in March
of 2020, we recently completed capital improvements to our Ft. Collins facility
to facilitate growth, and in May 2021 we announced the buyout of our St. Louis
facility with the build-out of an additional 20,000 square feet of wet
laboratory and office space.  We announced new service offerings which we are
building internally and start up operations such as: clinical pathology; SEND
data reporting; cardiovascular safety pharmacology; genetic toxicology;
biotherapeutics; and medical devise histology and pathology. On April 23, 2021,
we completed a public offering of our common stock and obtained funding to
support these initiatives and other improvements to our laboratories, facilities
and equipment in order to support future growth and enhance our scientific
capabilities, client service offerings and client experiences.  In addition, we
have made other significant investments in upgrading facilities and equipment
and filled critical leadership and scientific positions.



Over the last year, we have also improved our infrastructure and platform to
support future growth and additional potential acquisitions. These improvements
included establishing our new corporate name Inotiv, Inc., 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 these internal infrastructure initiatives, investments, acquisitions,
mergers and recruiting efforts, combined with our existing team and the
continuing development of our sales and marketing

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team, have led and will continue to lead to growth in revenue and the ability to
improve the service offerings to our clients. We recognize the recent
investments in growth, continuing development of a strong leadership team,
improving our platform, recruiting new employees, enhancing and building our
scientific strength and adding services are critical to meeting the future
expectations of our clients, employees and shareholders. We believe the actions
taken and investments made in recent periods form a solid foundation upon which
we can build.

Significant Accomplishments during nine months ended June 30, 2021

· Announcement of an initiative to broaden clinical pathology service offerings

· Appointment of Greg Beattie as Chief Operating Officer

Investments in laboratory infrastructure, data and study management · technologies and internal expertise for SEND (Standard for Exchange of

Nonclinical Data) capabilities

· Investments in additional vivarium capacity at facility in West Lafayette, IN

· Announcement for plans to expand offerings to include cardiovascular safety

pharmacology

· Changed corporate name to Inotiv, Inc.

· Entered into a partnership with PhoenixBio Co., Ltd. to expand discovery

pharmacology offering

· Acquired assets of HistoTox Labs

? Acquired Bolder BioPath

Completed an underwritten public offering of 3,044 common shares at a price to ? the public of $17.00 per share, resulting in net proceeds to the Company of

approximately $49,000, after deducting the underwriting discount and estimated

offering expenses.

? Obtained $28,000 in additional debt financing from First Internet Bank of

Indiana.

? Announced the purchase of the St. Louis facility and plans to expand capacity

there

? Joined the broad-market Russell 3000® Index and Russell 2000® Index

? Broadened pathology services to include medical device pathology and hired

Nicolette Jackson to lead the medical device pathology effort

Events subsequent to June 30, 2021

· Acquired certain assets from MilliporeSigma's BioReliance portfolio to expand

genetic toxicology offering

· Acquired laboratory instrumentation for discovery and development of novel

therapies

Acquired Gateway Pharmacology Laboratories, LLC to extend an array of in vivo ? capability and integrated laboratory support services to include cardiovascular

and renal pharmacology



Our financial results for the three months ended June 30, 2021 were positively
impacted by increases in sales and gross margins attributable to internal growth
the Company has experienced in the Service business as well as the acquisitions
of HistoTox Labs and Bolder BioPATH. During the quarter ended June 30, 2021, we
saw an increase in operating expenses as a percentage of revenue compared to the
same quarter in the prior year as we continued to build infrastructure for
growth, which included additional headcount, recruiting and relocation expenses
and investments in building out new service offerings. The financial results
were positively impacted by the Products segment of the business as expense
reductions were implemented in last half of fiscal year 2020 which improved
margins.

Our team has implemented measures to promote a safe working environment and mitigate risk related to COVID-19, including allowing for work-from-home arrangements where possible, while continuing to support each other and our clients. Among other initiatives related to COVID-19, the Company applied for and accepted funds from the SBA Payroll Protection Program ("PPP") as part


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of the CARES Act. The PPP loan was received in April 2020 in the amount of
$5,051. The funds were used over the eight weeks following the receipt of the
funds for payroll, utility and rent expenses, in step with our business
continuity measures and as allowed under the PPP. The Company applied for
forgiveness of the PPP loan in the amount of $4,851, which represents qualified
expenses. The PPP debt is recorded as a liability on the balance sheet. On July
16, 2021, the Company received notice from Huntington Bank that the SBA had
approved the Company's application for forgiveness of its PPP Loan in the amount
of $4,851.

We believe that the HistoTox Labs Acquisition and the Merger, along with the
remaining net proceeds from our recent public offering and the refinancing of
our indebtedness with First Internet Bank to be used for internal expansion
initiatives, will drive significant long-term value for our customers and
shareholders.

Business Overview


The Company provides drug discovery and development services to the
pharmaceutical, chemical, and medical device industries, and sells analytical
instruments to the pharmaceutical development and contract research industries.
Our mission is to provide drug and product developers with superior scientific
research and innovative analytical instrumentation in order to bring
revolutionary new drugs and products to market quickly and safely. Our strategy
is to provide services that will generate high-quality and timely data in
support of new drug and product approval or expand their use. Our clients and
partners include pharmaceutical, biotechnology, biomedical device, academic and
government organizations. We provide innovative technologies and products and a
commitment to quality to help clients and partners accelerate the development of
safe and effective drugs and products and maximize the returns on their research
and development investments. We believe that we offer an efficient,
variable-cost alternative to our clients' internal drug and product development
programs. Outsourcing development work to reduce overhead and speed product
approvals through the Food and Drug Administration ("FDA") and other regulatory
authorities is an established alternative to in-house product development
efforts. We derive our revenues from sales of our research services and
instruments, both of which are focused on evaluating drug and product safety and
efficacy. The Company has been involved in the research of drug and products to
treat diseases in numerous therapeutic areas for over 45 years since its
formation as a corporation organized in Indiana in 1974.

We support both the non-clinical and clinical development needs of researchers
and clinicians for primarily small molecule drug candidates, but also including
biotherapeutics and devices. We believe that our scientists have the skills in
analytical instrumentation development, chemistry, computer software
development, histology, pathology, physiology, medicine, 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 scientists 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. We are committed to
bringing scientific expertise, quality and speed to every drug discovery and
development program to help our clients develop safe and effective life-changing
therapies.

Developments within the industries we serve have a direct, and sometimes
material, impact on our operations. Currently, many large pharmaceutical
companies have major "blockbuster" drugs that have lost their patent protection
over the past few years (e.g. Viagra) or are nearing the end of their patent
protections (e.g. Januvia & Janumet). This puts significant pressure on these
companies to acquire or develop new drugs with large market opportunity, and to
re-evaluate their cost structures and the time-to-market of their products.
Contract research organizations have benefited from these developments, as the
pharmaceutical industry has turned to out-sourcing to both reduce fixed costs
and to increase the speed of research and data development necessary for new
product applications. The number of significant drugs that have reached or are
nearing the end of their patent protection has also benefited the generic drug
industry. Generic drug companies provide a significant source of new business
for CROs as they develop, test and manufacture their generic compounds.

A significant portion of innovation in the pharmaceutical industry is now driven
by smaller, venture capital funded drug discovery companies. Many of these
companies are "single-molecule" entities, whose success depends on one
innovative compound. While several biotech companies have reached the status of
major pharmaceutical companies, the industry is still characterized by smaller
entities. These developmental companies generally do not have the resources to
perform much of their research within their organizations and are therefore
dependent on the CRO industry for both their research and for guidance in
preparing their regulatory submissions. These companies, however, are able to
pay for CRO Services and products after a reported seven billion dollars in
private capital invested in private drug development companies in the first
quarter of 2021. These companies have provided significant new opportunities for
the CRO industry, including the Company. We believe that the Company is ideally
positioned to serve these clients as they look for alternatives to the large
CROs that cater primarily to the large pharmaceutical company segment of the
marketplace.

We review various metrics to evaluate our financial performance, including
revenue, margins and earnings. In the nine months ended June 30, 2021, total
revenues increased to $59,529 from $44,695, a 33.2% increase from the nine
months ended June 30, 2020. Gross profit increased to $19,848 from $13,614, a
45.8% increase. Operating expenses were higher by 44.1% in the nine months
ended

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June 30, 2021 compared to the nine months ended June 30, 2020. The most notable
growth in operating expenses is related to our investment and focus to continue
to build our infrastructure for growth, which included additional headcount,
recruiting and relocation expense, transaction costs related to the HistoTox
Labs Acquisition and the Merger, and investments in business development to
build out new service offerings.

As of June 30, 2021, we had $24,660 of cash and cash equivalents as compared to
$1,406 of cash and cash equivalents at the end of fiscal 2020. In the first nine
months of fiscal 2021, we generated $8,049 in cash from operations as compared
to $1,586 in the same period in fiscal 2020. During the nine months ended June
30, 2021, cash from operations, cash on hand, $1,318 from an equipment line of
credit and borrowings on a term loan of $2,100 together funded capital
expenditures of $8,358 for the investment in laboratory equipment to increase
capacity at all locations, facility improvements at the Fort Collins location
and the acquisition of the St. Louis facility.

As of June 30, 2021, we did not have an outstanding balance on our $5,000
available general line of credit and had $900 balance on a $3,000 equipment loan
that is available until April 30 2022. As described herein, we incurred
indebtedness in connection with financing the Seventh Wave Acquisition, the
Smithers Avanza Acquisition, the PCRS Acquisition, the HistoTox Labs
Acquisition, the Merger and the expansion of facilities and services. Refer to
the Liquidity and Capital Resources section herein for a description of our
credit arrangements with First Internet Bank.

Results of Operations

The following table summarizes our condensed consolidated statement of operations as a percentage of total revenues for the periods shown:




                                             Three Months Ended          Nine Months Ended
                                                  June 30,                   June 30,
                                              2021         2020          2021         2020
Services revenue                                95.8 %       94.2 %        95.5 %       94.4 %
Products revenue                                 4.2          5.8           4.5          5.6
Total revenue                                    100          100           100          100
Cost of services revenue (a)                    67.1         68.1          67.2         69.0
Cost of products revenue (a)                    56.3         64.4         
55.3         68.9
Total cost of revenue                           66.6         67.9          66.7         69.5

Gross profit                                    33.4         31.4          33.3         30.5
Operating expenses                              40.8         34.4          37.1         34.2
Operating income (loss)                        (7.4)        (3.0)         (3.8)        (3.8)

Other income (expense)                         (2.0)        (2.4)         (1.7)        (2.4)
Income (loss) before income taxes              (9.4)        (5.4)         (5.5)        (6.2)
Income tax (expense) benefit                     0.5          0.1           0.1          0.3
Net income (loss)                              (9.9) %      (5.6)  %      (5.4) %      (6.5)  %

(a)Percentage of service and product revenues, respectively

Three Months Ended June 30, 2021 Compared to Three Months Ended June 30, 2020

Service and Product Revenues

Revenues for the quarter ended June 30, 2021 increased 45.2% to $22,892 compared to $15,765 for the same period last fiscal year.


Our Service revenue increased 47.6% to $21,924 in the three months ended June
30, 2021 compared to $14,852 for the three months ended June 30, 2020.
Nonclinical services revenues increased $6,190 due to internal growth year
over
year as well as the

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acquisitions of HistoTox Labs and Bolder BioPATH in the third quarter of fiscal
year 2021. Other laboratory services revenues increased by $619 in the three
months ended June 30, 2021 compared to the three months ended June 30, 2020, due
to internal growth.




                               Three Months Ended
                                   June 30,
                                2021         2020      Change      %
Bioanalytical analysis       $    2,248    $  1,985    $   263    13.2 %
Nonclinical services             18,315      12,125      6,190    51.1 %
Other laboratory services         1,361         742        619    83.4 %
                             $   21,924    $ 14,852    $ 7,072



Sales in our Products segment increased 6.1% in the three months ended June 30,
2021 to $968 from $913 in the three months ended June 30, 2020. The increase in
the third fiscal quarter of 2021 stems from higher sales of analytical
instruments, partially offset by a decrease in Culex in-vivo sampling systems
and other instruments.




                                      Three Months Ended
                                          June 30,
                                     2021           2020       Change       %
Culex, in-vivo sampling systems    $     203      $     404    $ (201)    (49.8) %
Analytical instruments                   653            381        272      71.4 %
Other instruments                        112            128       (16)    (12.5) %
                                   $     968      $     913    $    55




Cost of Revenues

Cost of revenues for the three months ended June 30, 2021 was $15,246 or 66.6%
of revenue, compared to $10,701, or 67.9% of revenue for the three months ended
June 30, 2020.

Cost of Service revenue as a percentage of Service revenue decreased to 67.1%
during the three months ended June 30, 2021 from 68.1% in the three months ended
June 30, 2020, reflecting greater utilization of recently expanded capacity.

Cost of Products revenue as a percentage of Products revenue in the three months
ended June 30, 2021 decreased to 56.3% from 64.4% in the three months ended June
30, 2020 due to expense reductions implemented in the last half of fiscal 2020,
which created improved margins on existing sales.

Operating Expenses


Selling expenses for the three months ended June 30, 2021 increased 37.3% to
$950 from $692 compared to the three months ended June 30, 2020. This increase
is mainly due to an increase in travel expenses as our sales and marketing teams
have begun traveling more as the COVID-19 pandemic eases and an increase in
commissions due to higher sales awards.

Research and development expenses for the three months ended June 30, 2021 of $107 were comparable to $105 for the three months ended June 30, 2020.


Costs related to the development and initiation of new service offerings that
are not revenue generating at this time are being identified as Startup costs.
In addition to investments in software solutions and human resources to support
existing internal expertise in the area of SEND (Standard for the Exchange of
Nonclinical Data) data management and delivery investments in SEND reporting,
safety pharmacology and clinical pathology, during the quarter, we began
investing in additional service offerings such as medical device pathology,
biotherapeutics, and genetic toxicology. These expenses include, but are not
limited to, employee compensation expenses, travel expenses, relocation
expenses, and recruiting expenses. While certain of these costs are one-time in
nature, there are certain costs (e.g. employee compensation expenses) that will
be expected to recur once the new offerings are revenue generating at which time
the related costs will be reclassified on the consolidated statement of
operations. Startup costs for the three months ended June 30, 2021 were $479 as
compared to $120 for the three months ended June 30, 2020. Certain prior period
amounts have been reclassified for consistency with the current year
presentation.  These reclassifications had no effect on the reported results of
operations.



General and administrative expenses for the three months ended June 30, 2021
increased 69.0% to $7,813 from $4,624 compared to the three months ended June
30, 2020, as the Company continued to build the infrastructure for growth,
which
included

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additional headcount, recruiting and relocation expense and legal and professional costs related to the acquisition of HistoTox Labs and the Merger

Other Income (Expense)

Interest expense for the three months ended June 30, 2021 increased 17.5% to $449 from $382 compared to the three months ended June 30, 2020.

Income Taxes


Our effective tax rates for the three months ended June 30, 2021 and 2020 were
(5.28) % and (2.40) %, respectively. The expense recorded for each period was
$114 and $21, respectively, and relates primarily to certain credits that arise
when deferred tax liabilities that are created by indefinite-lived assets cannot
be used as a source of taxable income to support the realization of deferred tax
assets for valuation allowance purposes. The tax expense associated with such
credits is required to be recorded.

Net Income/Loss

As a result of the above described factors, we had a net loss of $2,265 for the
three months ended June 30, 2021 as compared to a net loss of $879 during the
three months ended June 30, 2020.

Nine Months Ended June 30, 2021 Compared to Nine Months Ended June 30, 2020

Service and Product Revenues

Revenues for the nine months ended June 30, 2021 increased 33.2% to $59,529 as compared to $44,695 for the nine months ended June 30, 2020.


Our Service revenue increased 34.8% to $56,858 in the nine months ended June 30,
2021 compared to $42,185 for the nine months ended June 30, 2020. The majority
of the increase in service revenue was due to internal growth, augmented by
$4,251 of incremental revenue from operations at the Boulder, CO location, which
we acquired in connection with the acquisition of HistoTox Labs and the Merger
in the third fiscal quarter of 2021.




                               Nine Months Ended
                                   June 30,
                               2021         2020       Change       %
Bioanalytical analysis       $   6,118    $  5,899    $    219      3.7 %
Nonclinical services            46,160      34,301      11,859     34.6 %
Other laboratory services        4,580       1,985       2,595    130.7 %
                             $  56,858    $ 42,185    $ 14,673



Sales in our Product segment increased 6.4% in the first nine months ended June
30, 2021 to $2,671 from $2,510 when compared to the nine months ended June 30,
2020 reflecting higher sales of analytical instruments, partially offset by a
decrease in Culex in-vivo sampling systems and other instruments.


                                     Nine Months Ended
                                         June 30,
                                      2021        2020      Change       %
Culex, in-vivo sampling systems    $      675    $   808    $ (133)      (16) %
Analytical instruments                  1,718      1,304        414      31.7 %
Other instruments                         278        398      (120)    (30.2) %
                                   $    2,671    $ 2,510    $   161




Cost of Revenues

Cost of revenues for the nine months ended June 30, 2021 was $39,681 or 66.7% of
revenue, compared to $30,849, or 69.0% of revenue compared to the nine months
ended June 30, 2020.

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Cost of Service revenue as a percentage of Service revenue decreased to 67.2%
during the nine months ended June 30, 2021 from 69.0% in the nine months ended
June 30, 2020 reflecting operating leverage and the greater utilization of
recently expanded capacity.

Cost of Product revenue as a percentage of Product revenue in the nine months
ended June 30, 2021 decreased to 55.3% from 68.9% in the nine months ended June
30, 2020 due to expense reductions implemented in the last half of fiscal 2020,
which created improved margins on existing sales.

Operating Expenses

Selling expenses for the nine months ended June 30, 2021 decreased 12.3% to
$2,343 from $2,672 compared to the nine months ended June 30, 2020. This
decrease is mainly due to the reduction of non-recurring costs of nearly $190
that was related to the launch of the trade name Inotiv prior to the formal
change of our corporate name to Inotiv, Inc., as well as a decrease in trade
show and travel expenses due to the COVID-19 pandemic, as our sales and
marketing teams have been conducting meetings virtually, although travel has
begun to increase during the third quarter of fiscal year 2021.

Research and development expenses for the nine months ended June 30, 2021 decreased 32.4% compared to the nine months ended June 30, 2020 to $290 from $429.


Costs related to the development and initiation of new service offerings and are
not revenue generating at this time are being identified as Startup costs.
During the nine months ended June 30, 2021, we invested in additional service
offerings such as software solutions and human resources to support existing
internal expertise in the area of SEND (Standard for the Exchange of Nonclinical
Data) data management and delivery investments in SEND reporting, safety
pharmacology, clinical pathology, medical device pathology, biotherapeutics and
genetic toxicology. These expenses include, but are not limited to, employee
compensation expenses, travel expenses, relocation expenses and recruiting
expenses. While certain of these costs are one-time in nature, there are certain
costs (e.g. salaries) that will be expected to recur once the new offerings are
revenue generating at which time the related costs will be reclassified on the
consolidated statement of operations, respectively. Startup costs for the nine
months ended June 30, 2021 were $841 as compared to $232 for the nine months
ended June 30, 2020. Certain prior period amounts have been reclassified for
consistency with the current year presentation. These reclassifications had no
effect on the reported results of operations.

General and administrative expenses for the nine months ended June 30, 2021
increased 52.3% to $18,584 from $12,205 compared to the nine months ended June
30, 2020 as the Company continued to build the infrastructure for growth, which
included additional headcount, recruiting and relocation expense as well as
transaction costs related to the acquisition of HistoTox Labs and the Merger. In
addition, we announced investments being made in laboratory infrastructure and
data and study management technologies through a partnership with Centric
Consulting, LLC.

Other Income (Expense)

Interest expense for the nine months ended June 30, 2021 increased 7.2% to $1,163 from $1,085 compared to the nine months ended June 30, 2020 due to higher debt levels.


Income Taxes

Our effective income tax rates for the nine months ended June 30, 2021 and 2020
were (5.05)% and (4.62)%, respectively. The expense recorded for each period was
$161 and $129, respectively, and relates primarily to certain credits that arise
when deferred tax liabilities that are created by indefinite-lived assets cannot
be used as a source of taxable income to support the realization of deferred tax
assets for valuation allowance purposes. The tax expense associated with such
credits is required to be recorded.

Net Income (Loss)


As a result of the factors described above, net loss for the nine months ended
June 30, 2021 amounted to $3,354, compared to net loss of $2,893 for the nine
months ended June 30, 2020.

Liquidity and Capital Resources

Comparative Cash Flow Analysis

At June 30, 2021, we had cash and cash equivalents of $24,660, compared to $1,406 at September 30, 2020.


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Net cash provided by operating activities was $8,049 for the nine months ended
June 30, 2021 compared to net cash provided by operating activities of $1,586
for the nine months ended June 30, 2020. Contributing factors to our cash
provided by operations in the first nine months of fiscal 2021 were noncash
charges of $4,087 for depreciation and amortization, $1,040 for stock
compensation expense, and a net increase in customer advances of $7,451, as a
result of increasing orders and the acquisitions of HistoTox Labs and Bolder
BioPATH. These items were partially offset by an increase of $1,306 in accounts
payable and an increase of $1,594 in accrued expenses.

Days' sales in accounts receivable increased to 74 days at June 30, 2021 from 56
days at September 30, 2020 due to an increase in accounts receivable from the
acquisitions during the quarter. It is not unusual to see a fluctuation in the
Company's pattern of days' sales in accounts receivable. Customers may expedite
or delay payments from period-to-period for a variety of reasons including, but
not limited to, the timing of capital raised to fund on-going research and
development projects.

Included in operating activities for the nine months ended June 30, 2020 are
non-cash charges of $2,747 for depreciation and amortization, $380 for stock
compensation expense, $327 increase in accrued expenses and a net increase in
customer advances of $4,063, as a result of increasing orders. These items were
partially offset by an increase of $701 in accounts receivable, an increase of
$395 in inventories, and a decrease of $2,040 in accounts payable.

Investing activities used $49,054 in the nine months ended June 30, 2021 due
mainly to cash paid in the acquisition of HistoTox and the Merger of $40,698 and
capital expenditures of $8,358 as compared to $9,094 used in the first nine
months of fiscal 2020. The capital additions during the nine months ended June
30, 2021 consisted of the purchase of our St. Louis facility, facility
improvements in Ft. Collins and investments in laboratory equipment.

Financing activities provided $64,259 in the nine months ended June 30, 2021,
compared to $9,850 provided during the nine months ended June 30, 2020. The cash
provided in the first nine months of fiscal 2021 included  proceeds from the
issuance of common stock of $48,972 and borrowings on long-term loans of
$17,087, partially offset by payments of long-term borrowings of $2,620 and debt
issuance costs of $409. The main sources of cash in the first nine months of
fiscal 2020 were from borrowings on the long-term loan of $3,726, funds received
from the PPP loan of $5,051 and borrowings on the Construction loan and Capex
lines of credit of $1,287 and $2,423, respectively. Total long-term loan
payments were $1,157 and net repayments on the Revolving Credit facility were
$1,063. Finance lease payments of $330 and payment of debt issuance cost of $111
also contributed to the use of cash.

Capital Resources

Credit Facility

On April 30, 2021, we entered into an Amended and Restated Credit Agreement (the
"Credit Agreement") with First Internet Bank of Indiana ("FIB") to, among other
things, secure additional debt financing in order to fund portions of the
consideration for the acquisition of HistoTox Labs and the Merger. The Credit
Agreement included eleven term loans (the "Term Loans"), an equipment draw loan
(the "Equipment Loan"), and a revolving line of credit (the "Revolving
Facility"). On May 26, 2021, we entered into an amendment to the Credit
Agreement to, among other things, provide a new term loan facility to finance
the acquisition and refurbishment of our Maryland Heights, Missouri, facility,
which we had previously leased.  The material terms of each of the loans under
the Credit Agreement, as amended, are described below.

Included in the Credit Agreement is a requirement that we maintain certain
financial covenants, including maintaining a senior funded debt to adjusted
EBITDA ratio (as defined in the Credit Agreement) of not greater than (i) 5.25
to 1.00 as of the date of the Credit Agreement and as of June 30, 2021, (ii)
4.75 to 1.00 as of September 30, 2021, (iii) 4.50 to 1.00 as of December 31,
2021, (iv) 4.25 to 1.00 as of March 31, 2022, (v) 4.00 to 1.00 as of June 30,
2022, and (vi) 3.50 to 1.00 as of September 30, 2022 and as of each fiscal
quarter end thereafter.

Also included in the Credit Agreement is a requirement that we maintain a fixed
charge coverage ratio (as defined in the Credit Agreement) of not less than (i)
1.20 to 1.00, commencing as of September 30, 2021, and continuing as of each
fiscal quarter end thereafter up to and including June 30, 2022, and (ii) 1.25
to 1.00 as of September 30, 2022 and as of each fiscal quarter end thereafter.

Upon an event of default, which includes certain customary events such as, among
other things, a failure to make required payments when due, a failure to comply
with covenants, certain bankruptcy and insolvency events, and defaults under
other material indebtedness, FIB may cease advancing funds, increase the
interest rate on outstanding balances, accelerate amounts outstanding, terminate
the agreement and foreclose on all collateral.

Our obligations under the Credit Agreement are guaranteed by each of our
subsidiaries (collectively, the "Guarantors"). Our obligations under the Credit
Agreement and the Guarantors' obligations under their respective guaranties
are
secured by first priority

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security interests in substantially all of our assets and the assets of the
Guarantors, mortgages on our real property in West Lafayette, Indiana,
Evansville, Indiana, Maryland Heights, Missouri, and Fort Collins, Colorado, and
pledges of our ownership interests in our subsidiaries. We have also obtained a
life insurance policy in the amount of $5.0 million for our President and Chief
Executive Officer and provided FIB an assignment of such life insurance policy
as additional collateral.

(a) Terms of the Equipment Loan.


We may borrow under the Equipment Loan on or before April 30, 2022 in the
aggregate principal amount of up to $3.0 million (the "Equipment Loan
Commitment"). The Equipment Loan Commitment will automatically terminate upon
the earlier of (x) any funding of the maximum amount of the Equipment Loan
Commitment and (y) 5:00 p.m., Indianapolis time, on April 30, 2022. Until April
30, 2022, we must pay interest on the amount outstanding under the Equipment
Loan at a fixed annual rate of 4.00%. On April 30, 2022, all amounts outstanding
under the Equipment Loan will be converted to a term loan and repaid monthly in
installments of principal based on a five (5) year amortization schedule
together with the interest that shall accrue thereon. A final installment
representing the entire unpaid principal of the Equipment Loan, and all accrued
and unpaid interest thereon and all fees and charges in connection therewith,
will be due and payable on April 30, 2027. Advances under the Equipment Loan
will be used to fund our equipment needs as approved by FIB.

(b) Terms of the Revolving Facility.


The Revolving Facility provides a line of credit for up to $5.0 million, which
we may borrow from time to time, subject to the terms of the Credit Agreement,
including as may be limited by the amount of our outstanding eligible
receivables. The Revolving Facility requires monthly accrued and unpaid interest
payments only until maturity at a floating per annum rate equal to the greater
of (a) 4.00%, or (b) the Prime Index (as defined in the Credit Agreement). We
did not have an outstanding balance on the Revolving Facility as of June 30,
2021. Advances under the Revolving Facility will be used for general working
capital purposes.

(c) Terms of the Term Loans:


                  Principal Amount
                 as of date of Credit                                  Monthly
                     Agreement              Balance        Annual      Payment
                   April 30, 2021        June 30, 2021    Interest      Amount
 Loan Name             (000)                 (000)          Rate        (000)        Maturity Date          Use of Proceeds
                                                                                                       Funded expansion of
                                                                                                       building on real property
Term Loan 1    $                3,980   $         3,943       5.20 %  $       36      March 28, 2025   in Mount Vernon, IN
                                                                                                       Funded a portion of the
                                                                                                       cash consideration for the
                                                                                                       Seventh Wave Laboratories
Term Loan 2    $                3,571   $         3,446       5.06 %  $       78        July 2, 2023   acquisition
                                                                                                       Funded equipment needs
                                                                                                       associated with expansion
                                                                                                       of real property in Mount
Term Loan 3    $                1,076   $         1,031       5.20 %  $       32      March 28, 2025   Vernon, IN
                                                                                                       Funded the cash
                                                                                                       consideration for the
                                                                                                       Smithers Avanza
Term Loan 4    $                1,001   $           969       4.63 %  $       20    November 1, 2025   acquisition
                                                                                                       Funded certain capital
Term Loan 5    $                  810   $           781       4.00 %  $       17       June 30, 2025   expenditures
                                                                                                       Funded certain capital
Term Loan 6    $                2,865   $         2,728       4.25 %  $       56   December 31, 2025   expenditures
                                                                                                       Financed aspects of the
                                                                                                       Pre-Clinical Research
                                                                                                       Services and related real
Term Loan 7    $                1,263   $         1,216       4.00 %  $       28        June 1, 2025   property acquisitions
                                                                                                       Financed aspects of the
                                                                                                       Pre-Clinical Research
                                                                                                       Services and related real
Term Loan 8    $                1,853   $         1,842       4.00 %  $       12    December 1, 2024   property acquisitions
                                                                                                       Funded a portion of the
                                                                                                       cash consideration of the
Term Loan 9    $               10,000   $         9,850       3.85 %  $  184 (a)      April 30, 2026   Merger
                                                                                                       Funded a portion of the
                                                                                                       cash consideration of the
Term Loan 10   $                5,000   $         4,925       3.85 %  $   92 (a)      April 30, 2026   HistoTox Labs Acquisition
                                                                                                       Refinanced debt with The
                                                                                                       Huntington Bank for
Term Loan 11   $                3,622   $         3,559       3.99 %  $       33       June 23, 2022   general business purposes
                                                                                                       Financed the acquisition
                                                                                                       of the St. Louis facility
Term Loan 12   $            4,832 (b)   $         2,088       3.85 %  $  

10 (c) December 26, 2026 and associated expansion

(a) See Mandatory Prepayments information below.

(b) Principal amount as of May 26, 2021.

(c) The monthly payment amount increases to $29 on January 1, 2022.



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(d) Mandatory Prepayments.

Commencing with the fiscal year ending September 30, 2021 and for each fiscal
year thereafter until the Term Loan 9 and/or Term Loan 10, in each case, are
paid in full, we must prepay Term Loan 9 and Term Loan 10 on a pro rata basis on
the following January 31st, in an amount equal to 50% of our excess cash flow
(as defined in the Credit Agreement) for such fiscal year (in each case, an
"Excess Cash Flow Payment"), provided that for the fiscal year ending September
30, 2021 the Excess Cash Flow Payment, if any, will be calculated only for the
period from April 30, 2021 through September 30, 2021. Excess cash flow will be
calculated for each fiscal year based on (a) our adjusted EBITDA (as defined in
the Credit Agreement), minus (b) cash interest expense, minus (c) cash taxes
paid or cash distributions made for payment of taxes, minus (d) principal
payments paid in respect of long-term indebtedness (excluding any principal
reduction on Term Loan 9 or Term Loan 10, in each case, with respect to excess
cash flow and excluding principal payments on the Revolving Facility), minus (e)
capital expenditures not funded by advances under the Equipment Loan as
specified under the Credit Agreement.

Acquisition-related Debt

In addition to the indebtedness under the Credit Agreement, certain of our 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 Smithers Avanza acquisition, our BASi Gaithersburg subsidiary
issued an unsecured subordinated promissory note payable to the Smithers Avanza
seller in the initial principal amount of $810, which we guaranteed. The
promissory note bears interest at a rate of 6.5% per annum, with monthly
payments of principal and interest and a maturity date of May 1, 2022. At June
30, 2021, the balance on the note payable to the Smithers Avanza seller was
$385.

As part of the PCRS Acquisition, our Bronco Research Services subsidiary 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 4.5% per annum with monthly payments of principal and interest and a maturity
date of December 1, 2024. At June 30, 2021, the balance on the note payable to
the PCRS seller was $702.

As part of the acquisition of Boulder BioPATH, our Inotiv Boulder subsidiary issued unsecured subordinated promissory notes payable to the former shareholders of Boulder BioPATH in an aggregate principal amount of $1,500.

The

promissory notes bear interest at a rate of 4.5% per annum, with monthly payments of principal and interest and a maturity date of May 1, 2026. At June 30, 2021, the balance on the notes payable to the former Boulder BioPATH shareholders was $1,500.

PPP Loan


On April 23, 2020, we were granted a loan (the "Loan") from Huntington National
Bank in the aggregate amount of $5,051, pursuant to the Paycheck Protection
Program under Division A, Title I of the CARES Act, which was enacted March 27,
2020. The terms of the Loan call for repayment of the principal and accrued
interest under the Loan in eighteen installments of $283 beginning on November
16, 2020 and continuing monthly until the final payment is due on April 16,
2022. However, the bank is not requiring payments of principal or interest
pending the loan forgiveness decision. We applied for forgiveness of the loan in
the amount of $4,851. On July 16, 2021, we received notice from Huntington Bank
that the SBA had approved our application for forgiveness of the PPP Loan in the
full amount requested.

On January 28, 2015, we entered into a lease agreement with Cook Biotech, Inc.
The lease agreement has and will provide us with additional cash in the range of
approximately $50 per month during the first year of the initial term to
approximately $57 per month during the final year of the initial term.

On April 23, 2021, we closed an underwritten public offering of 3,044 of our
common shares. All of the shares were sold at a price to the public of $17.00
per share. Net proceeds from the offering were approximately $49.0 million,
after deducting the underwriting discount and estimated offering expenses, a
portion of which net proceeds were used to fund a portion of the cash
consideration paid in the acquisitions of HistoTox Labs and the Merger. The
remainder of the net proceeds from the offering remain available for general
corporate purposes, including capital expenditures and potential future
acquisitions.

Sources of liquidity for fiscal 2021 are expected to consist primarily of cash
generated from operations, cash on-hand (including the remaining net proceeds
from the April public offering) and additional borrowings available under our
Credit Agreement. Research services are capital intensive. The investment in
equipment, facilities and human capital to serve our markets is substantial and
continuing. Rapid changes in automation, precision, speed and technologies
necessitate a constant investment in equipment and software to meet market
demands. We are also impacted by the heightened regulatory environment and the
need to improve our business

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Table of Contents

infrastructure to support our operations, which will necessitate additional
capital investment. Our ability to generate capital to reinvest in our
capabilities and to obtain additional capital if and as needed through financial
transactions is critical to our success. Sustained growth will require
additional investment in future periods. Positive cash flow and access to
capital will be important to our ability to make such investments. Management
believes that the resources described above will be sufficient to fund
operations, planned capital expenditures and working capital requirements over
the next twelve months.

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Sales 2021 84,0 M - -
Net income 2021 -5,14 M - -
Net Debt 2021 - - -
P/E ratio 2021 -87,6x
Yield 2021 -
Capitalization 539 M 539 M -
Capi. / Sales 2021 6,42x
Capi. / Sales 2022 4,16x
Nbr of Employees 409
Free-Float 66,6%
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Robert Leasure President, Chief Executive Officer & Director
Beth A. Taylor Chief Financial Officer, Secretary & VP-Finance
Gregory C. Davis Chairman
John Gregory Beattie Chief Operating Officer
Richard Allen Johnson Independent Director
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