The following table sets forth the roll forward of the restructuring activity for the six months ended March 31, 2015.

Other costs of $117 include legal and professional fees and other costs incurred in connection with transitioning services from sites being closed as well as costs incurred to remove improvements previously made to the UK facility. Other activity in the reserve rollforward primarily reflects a receivable for settlement of the capital lease in the UK.

The provisions of the Fair Value Measurements and Disclosure Topic defines fair value, establishes a consistent framework for measuring fair value and provides the disclosure requirements about fair value measurements. This Topic also establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s judgment about the assumptions market participants would use in pricing the asset or liability based on the best information available in the circumstances. The hierarchy is broken down into three levels based on the inputs as follows:

In May 2011, we issued Class A and B Warrants. The Class B Warrants thatexpired in May 2012 and the liability was reduced to zero. The Class A Warrants expire in May 2016 and are (and the Class B Warrants were) measured at fair value on a recurring basis. We recorded thesethe warrants as a liability determining the fair value at inception on May 11, 2011. Subsequent quarterly fair value measurements, using the Black Scholes model which is considered a level 2 measurement, are calculated with fair value changes charged to the statement of operations and comprehensive income (loss). The Class B Warrants expired in May 2012 and the liability was reduced to zero. The assumptions used to compute the fair value of the Class A Warrantswarrants at DecemberMarch 31, 20142015 and September 30, 2014 wereare as follows:

The carrying amounts for cash and cash equivalents, accounts receivable, inventories, prepaid expenses and other assets, accounts payable and other accruals approximate their fair values because of their nature and respective duration. The carrying value of the note payable approximates fair value due to the variable nature of the interest rates.

We use an interest rate swap, designated as a hedge, to fix 60% of the term loan debt from our credit facility with Huntington Bank. We did not enter into this derivative transaction to speculate on interest rates, but to hedge interest rate risk. The swap is recognized as a liability on the balance sheet at its fair value. The fair value is determined utilizing a cash flow model that takes into consideration interest rates and other inputs observable in the market from similar types of instruments, and is therefore considered a level 2 measurement.

The following table summarizes fair value measurements by level as of DecemberMarch 31, 2014,2015, for the Company’s financial liabilities measured at fair value on a recurring basis:

The following table summarizes fair value measurements by level as of September 30, 2014, for the Company’s financial liabilities measured at fair value on a recurring basis:

The changes in accumulated other comprehensive income (loss) by component were as follows:

No amounts have been reclassified from accumulated other comprehensive income (loss) into the condensed consolidated statement of operations.

Our long-term strategic objective is to maximize the Company’s intrinsic value per share.   While we remain focused on reducing our costs through productivity and better processes and a continued emphasis on generating free cash flow, we are dedicated to the strategies that drive our top-line growth. We are intensifying our efforts to improve our processes, embrace change and wisely employ our stronger liquidity position.

Over the past two years,several periods, we have focused on targeted initiatives that were designed to stabilize our business, improve our liquidity and lower our break-even point. While we remain dedicated to increasing our productivity and internal processes with the intent to continue to grow free cash flow, we are actively pursuing strategies to drive top-line growth. In the remainder of fiscal 2015, we plan to continue focus on sales execution, operational excellence and building strategic partnerships with pharmaceutical and biotechnology companies, to differentiate our company and create value for our clients and shareholders. By improving revenue growth and managing our costs effectively, combined with the availability of our credit facility with Huntington Bank with substantially more favorable terms than the long-term debt and line of credit it replaces, we enhance our ability to implement our growth plan. We have taken several steps to strengthen our management team in roles that will be vital to helping drive our top line performance.  We are expanding our marketing efforts by building on the Company’s inherent strengths in specialty assay and drug discovery, regulatory excellence, and ourCulex® automated sampling system.  We recognize that our growth depends upon our ability to continually improve and create new client relationships. In addition, strengthening the overall leadership team represents an important step forward in the Company’s continuing program to build a management team with the depth, experience and dedication to position the Company to deliver profitable growth over the long-term. We are determined to follow through on the initiatives that support our strategy to strengthen the Company for fiscalIn January 2015, and beyond.

On January 28, 2015, the Companywe entered into a lease agreement (the “Lease Agreement”) with Cook Biotech, Inc. (“Tenant”), pursuant to which the Company will lease to Tenantan initial term of approximately 50,730nine years and 11 months for approximately 51,000 square feet of office, manufacturing and warehouse space located at the Company’s headquarters (the “Building”), 2701 Kent Avenue, West Lafayette, Indiana, 47906.to monetize underutilized space. The initial termlease agreement will provide the Company with additional cash of the Lease Agreement runs for approximately nine years and 11 months, with Tenant options to extend the initial term for two additional five-year terms at market rent, as agreed to by the parties. The Company will deliver possession of the leased space in phases over a three-month period ending May 1, 2015. Once the leased space is fully occupied, base rent under the Lease Agreement will range from 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.

This long term source of cash will help to fund our growth programs. Certain capital improvements up to approximately $800 will be required to relocate manufacturingand update our office and meeting space. The Lease Agreement contains customary events of defaultrelocation and termination provisions. In additionassociated improvements will also help to these customary provisions, Tenant may terminatecreate a more lean manufacturing process. We are determined to follow through on the lease with applicable notice: (i) ifinitiatives that support our strategy to strengthen the Company is unable to deliver possession of the leased space in appropriate condition with separately metered utilities by May 31,for fiscal 2015 and (ii) if an environmental safety assessment to be provided within the first 30 days of the lease term identifies hazardous materials adversely affecting Tenant’s use of the leased space. Tenant may also terminate the lease if Tenant determines, based upon regulatory considerations for its products, that the leased space is not fit for its business use, in which case Tenant must give six months' notice of termination and pays an additional six months’ rent upon termination.beyond.

The Company is responsible for the repair and maintenance of the exterior structure and common areas of the building and all building systems as well as landscaping, parking and driveway areas except for damage caused by the Tenant. The Company also agreed to repair and relayer some or all of the parking lot serving the building with the tenant reimbursing forty percent of the cost, not to exceed a maximum paid by the Tenant of $60.

During the term of the Lease Agreement and so long as Tenant is not in default, Tenant has the right to match any third-party offer to purchase the building. The Company is entering into the Lease Agreement to monetize underutilized space at its headquarters, and management does not believe the lease will materially impact the Company’s business or service capabilities over the foreseeable future.

ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This report contains statements that constitute forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. ThoseThese 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 products and services; (iii) trends in the industries that consume our products and services; (iv) our ability to develop new products and services; (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 integrate a new sales and marketing team; (ix) our ability to refinanceservice our outstanding indebtedness and (x) our expectations regarding the volume of new bookings, pricing, gross profit margins and liquidity. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties. Actual results may differ materially from those in the forward looking statements as a result of various factors, 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, 2014. Our actual results could differ materially from those discussed in the forward-looking statements.

The following amountsAmounts are in thousands, unless otherwise indicated.

GeneralOverview

We are an international contract research organization providing drug discovery and development services. Our clients and partners include pharmaceutical, biotechnology, academic and governmental organizations. We apply innovative technologies and products and a commitment to quality to help clients and partners accelerate the development of safe and effective therapeutics and maximize the returns on their research and development investments. We offer an efficient, variable-cost alternative to our clients' internal product development programs. Outsourcing development work to reduce overhead and speed drug approvals through the Food and Drug Administration ("FDA") is an established alternative to in-house development among pharmaceutical companies. We derive our revenues from sales of our research services and drug development tools, both of which are focused on determining drug safety and efficacy. The Company has been involved in the research of drugs to treat numerous therapeutic areas for over 40 years.

We support the preclinical and clinical development needs of researchers and clinicians for small molecule and large biomolecule drug candidates. We believe our scientists have the skills in analytical instrumentation development, chemistry, computer software development, physiology, medicine, analytical chemistry 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 at many of the small start-up biotechnology companies and the largest global pharmaceutical companies.

Our business is largely dependent on the level of pharmaceutical and biotechnology companies' efforts in new drug discovery and approval. Our services segment is a direct beneficiary of these efforts, through outsourcing by these companies of research work. Our products segment is an indirect beneficiary of these efforts, as increased drug development leads to capital expansion, providing opportunities to sell the equipment we produce and the consumable supplies we provide that support our products.

Developments within the industries we serve have a direct, and sometimes material, impact on our operations. Currently, many large pharmaceutical companies have major "block-buster" drugs that are nearing the end of their patent protections. This puts significant pressure on these companies both to develop new drugs with large market appeal, and to re-evaluate their cost structures and the time-to-market of their products. Contract research organizations ("CRO's") 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 drug 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.

We also believe that the development of innovative new drugs is going through an evolution, evidenced by the significant reduction of expenditures on research and development at several major international pharmaceutical companies, accompanied by increases in outsourcing and investments in smaller start-up companies that are performing the early development work on new compounds. Many of these smaller companies are funded by either venture capital or pharmaceutical investment, or both, and generally do not build internal staffs that possess the extensive scientific and regulatory capabilities to perform the various activities necessary to progress a drug candidate to the filing of an Investigative New Drug application with the FDA.

A significant portion of innovation in the pharmaceutical industry is now being driven by biotech and small, venture capital funded, drug development companies. Many of these companies are "single-molecule" entities, whose success depends on one innovative compound. While several of the biotech companies have reached the status of major pharmaceuticals, the industry is still characterized by smaller entities. These developmental companies generally do not have the resources to perform much of the research within their organizations, and are therefore dependent on the CRO industry for both their research and for guidance in preparing their FDA submissions. These companies have provided significant new opportunities for the CRO industry, including us. They do, however, provide challenges in selling, as they frequently have only one product in development, which causes CROs to be unable to develop a flow of projects from a single company. These companies may expend all their available funds and cease operations prior to fully developing a product. Additionally, the funding of these companies is subject to investment market fluctuations, which changes as the risk profiles and appetite of investors change.

While continuing to maintain and develop our relationships with large pharmaceutical companies, we intend to aggressively promote our services to developing businesses, which will require us to expand our existing capabilities to provide services early in the drug development process, and to consult with clients on regulatory strategy and compliance leading to their FDA filings. We have recently launched our Enhanced Drug Discovery services as part of this strategy, utilizing our proprietary Culex® technology to provide early experiments in our laboratories that previously would have been conducted in the sponsor’s facilities. As we move forward, we must balance the demands of the large pharmaceutical companies with the personal touch needed by smaller biotechnology companies to develop a competitive advantage. We intend to accomplish this through the use of and expanding upon our existing project management skills, strategic partnerships and relationship management.

Research services are capital intensive. The investment in equipment and facilities to serve our markets is substantial and continuing. While our physical facilities are adequate to meet market needs for the near term, 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 infrastructure to support our increasingly diverse operations, which will necessitate additional capital investment. Our ability to generate capital to reinvest in our capabilities, both through operations and financial transactions, is critical to our success. While we are currently committed to fully utilizing recent additions to capacity, sustained growth will require additional investment in future periods. Our financial position could limit our ability to make such investments.

Executive OverviewSummary

Our revenues are dependent on a relatively small number of industries and clients. As a result, we closely monitor the market for our services. In the first threesix months of fiscal 2015, we experienced a 10.5%5.4% decrease in revenues in our Contract Research services segment versus and an 11.0% increasea 1.7% decrease in revenues for our Products segment as compared to the first threesix months of fiscal 2014. Our Contract Research services revenue was impacted by temporary client delays. InThe revenue decline in our Product segment was mainly due to lower other instruments revenue was uppartially offset by slightly increased sales of our analytical instruments and Culex automatedin vivo sampling systems as compared to the prior fiscal year period due in part to increased sales and installations of our Culex®,in vivo sampling systems.period. For the remainder of fiscal 2015, we will continue to focus on sales execution, operational excellence and building strategic partnerships with pharmaceutical and biotechnology companies, to differentiate our company and create value for our clients and shareholders.

We review various metrics to evaluate our financial performance, including revenue, margins and earnings. RevenuesIn the first six months of fiscal 2015, revenues decreased approximately 6.0%4.6%, gross margin decreased 10.8% and operating expenses were lower by 1.5% in the first six months of fiscal 2015 as compared to the same period in fiscal 2014. The lower revenue and gross margin decreased 11.2%decrease, offset in the first quarter of fiscal 2015 from the prior year period. Operating expenses increased 4.7% in the first quarter of fiscal 2015 from the first quarter of fiscal 2014 due in large part to the addition of new finance personnel and increased spending for engineering and product development. Theby slightly lower margins and slightly higher operating expenses, contributed to the reportedlower operating income of $142$170 for the first six months of fiscal quarter of 2015 as compared to $462$567 for the prior year period. For a detailed discussion of our revenue, margins, earnings and other financial results for the three and six months ended DecemberMarch 31, 2014,2015, see “Results of Operations” below.

As of DecemberMarch 31, 2014,2015, we had $747$536 of cash and cash equivalents as compared to $981 of cash and cash equivalents at the end of fiscal 2014. In the first quarterhalf of fiscal 2015, we used $161generated $440 in cash from operations partially due to the lower operating income we reportedan increase in the first fiscal quarter of 2015.customer advances. Total capital expenditures were $122 in$231 for the first quarterhalf of fiscal 2015, up from $51 in$150 for the first quarterhalf of fiscal 2014 reflecting continued investment in our business as a result of our improved liquidity position and our credit facility entered into in fiscal 2014. We are focused on improving our cash flow from operations in the remainder of fiscal 2015.

In January 2015, we entered into a lease agreement with an initial term of approximately nine years and 11 months for 50,730 square feet of office, manufacturing and warehouse space located at the Company’s headquarters to monetize underutilized space. We do not believe the lease will materially impact the Company’s business or service capabilities over the foreseeable future. The lease agreement will provide the Company 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. The Company also agreed to repair and relayer some or all of the parking lot serving the building with the tenant reimbursing forty percent of the cost, not to exceed a maximum paid by the Tenant of $60. OtherCertain capital expenditures mayimprovements up to approximately $800 will be required to relocate manufacturingand update our office and meeting space. The relocation and associated improvements will also help to create a more lean manufacturing process andprocess. We expect to update our office and meeting space.

We believe that the development of innovative new drugs is going through an evolution, evidenced by the significant reduction of expenditures on research and development at several major international pharmaceutical companies, accompanied by increases in outsourcing and investments in smaller start-up companies that are performing the early development work on new compounds. Many ofincur these smaller companies are funded by either venture capital or pharmaceutical investment, or both, and generally do not build internal staffs that possess the extensive scientific and regulatory capabilities to perform the various activities necessary to progress a drug candidate to the filing of an Investigative New Drug (“IND”) application with the FDA.

While continuing to maintain and develop our relationships with large pharmaceutical companies, we intend to aggressively promote our services to developing businesses, which will require us to expand our existing capabilities to provide services earlyimprovements in the drug development process, and to consult with clients on regulatory strategy and compliance leading to their FDA filings. We have launched our Enhanced Drug Discovery services as partsecond half of this strategy, utilizing our proprietary Culex® technology to provide early experiments in our laboratories that previously would have been conducted in the sponsor’s facilities. As we move forward, we must balance the demands of the large pharmaceutical companies with the personal touch needed by smaller biotechnology companies to develop a competitive advantage. We intend to accomplish this balance through the use of and expanding upon our existing project management skills, strategic partnerships and relationship management.fiscal 2015.

Our long-term strategic objective is to maximize the Company’s intrinsic value per share.  While we remain focused on reducing our costs through productivity and better processes and a continued emphasis on generating free cash flow, we are dedicated to the strategies that drive our top-line growth. We are intensifying our efforts to improve our processes, embrace change and wisely employ our stronger liquidity position. We will continue to make BASi a stronger company.

Results of Operations

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

Three Months Ended DecemberMarch 31, 20142015 Compared to Three Months Ended DecemberMarch 31, 20132014

Service and Product Revenues

Revenues for the fiscal quarter ended DecemberMarch 31, 20142015 decreased 6.0%3.13% to $5,845$5,726 compared to $6,220$5,912 for the same period last year.

Our Service revenue decreased 10.5%amounted to $4,398$4,530 in the currentsecond quarter of fiscal 2015 compared to $4,916$4,526 for the prior year period. Preclinical services revenues increased due to an increase in the number of rat studies from the prior year period. Bioanalytical analysis revenues increased due to an increase in samples received and analyzed. Other laboratory services revenues were impacted by lower pharmaceutical analysis revenues due to study delays by clientswhich we believe are temporary. Bioanalytical analysis revenues

Revenues in our firstProducts segment decreased 13.7% in the second fiscal quarter of 2015 from $1,386 to $1,196 when compared to the same period in the prior fiscal year. The decrease stems from lower sales of our analytical products, our Culex automatedin vivo sampling systems, as well as our other instruments versus the same period in the prior fiscal year.

Cost of Revenues

Cost of revenues for the three months ended March 31, 2015 was $3,924 or 68.5% of revenue, compared to $3,900, or 66.0% of revenue for the prior year period.

Cost of Service revenue as a percentage of Service revenue decreased to 71.6% in the current quarter from 73.6% in the comparable period last year. The principal cause of this decrease was reduced spending on supplies along with the slight increase in revenues, which led to higher absorption of the fixed costs in our Service segment. A significant portion of our costs of productive capacity in the Service segment are fixed. Thus, increases in revenues lead to decreases in costs as a percentage of revenue.

Cost of Products revenue as a percentage of Product revenue in the second quarter of fiscal 2015 increased to 57.0% versus 41.1% from the comparable prior year period. The increase is mainly due to the mix of products sold and an increase in our obsolescence reserve compared to the same period of prior fiscal year.

Operating Expenses

Selling expenses for the second quarter of fiscal 2015 decreased 11.1% to $426 from $479 for the comparable period last year. The decrease was primarily due to the elimination of sales personnel in the UK and in our Evansville facility in fiscal 2014, partially offset by slightly higher costs for sales personnel travel and commissions.

Research and development expenses for the second quarter of fiscal 2015 decreased 18.8% over the comparable period last year to $138 from $170. The decrease was primarily due to a reduction in salaries and lower costs for temporary labor, partially offset by slightly increased utilization of outsourced professional engineering services.

General and administrative expenses for the second quarter of fiscal 2015 decreased 3.9% to $1,210 from $1,258 for the comparable prior year period. The principal reasons for the decrease were lower spend on outside consultants as well as lower employee search and moving expenses. The building rent received in the current quarter amounting to $49 was recorded as a reduction to general and administrative expenses.

Other Income (Expense)

Other income (expense) for the second quarter of fiscal 2015 amounted to income of $123 compared to an expense of $(317) for the same quarter of the prior fiscal year.The primary reason for the differential is the change in the fair value of the warrant liability as well as a decrease in interest expense from the credit facility entered into in May of 2014.

Income Taxes

Our effective tax rate for the quarters ended March 31, 2015 and 2014 was 0.5% and (3.3)%, respectively. The current year expense primarily relates to state taxes and federal alternative minimum tax.

Six Months Ended March 31, 2015 Compared to Six Months Ended March 31, 2014

Service and Product Revenues

Revenues for the six months ended March 31, 2015 decreased 4.6% to $11,571 compared to $12,132 for the same period last year.

Our Service revenue decreased 5.4% to $8,928 in the first six months of fiscal 2015 compared to $9,442 for the prior year period. Preclinical services revenues increased due to an increase in the number of rat and primate studies from the prior year period. Bioanalytical analysis revenues were negatively impacted by temporary client delays and fewer samples received to assay. PreclinicalOther laboratory services revenues slightly increasedwere impacted by lower pharmaceutical analysis revenues due to an increase in the number of primate studies from the prior year period. The following table details our Service revenue.study delays by clientswhich we believe are temporary.

SalesRevenues in our Products segment increased 11.0%decreased 1.7% in the currentfirst six months of fiscal quarter2015 from $1,304$2,690 to $1,447$2,643 when compared to the same period in the prior fiscal year. The majority of the increasedecrease stems from higherlower hardware maintenance and service revenues, partially offset by slightly increased sales of our Culex automatedin vivo sampling systems over the same period in the prior fiscal year, as we had new installations recognized as well as an increase in consumables. The following table details our Product revenue.systems.

Cost of Revenues

Cost of revenues for the first quartersix months of fiscal 2015 was $3,940$7,865 or 67.4%68% of revenue, compared to $4,075,$7,975, or 65.5%65.7% of revenue for the prior year period.

Cost of Service revenue as a percentage of Service revenue increased to 74.0% during72.8% in the first quartersix months of fiscal 2015 from 67.6%70.5% in the comparable period lastof the prior year. The principal cause of this increase was the decrease in service revenues which led to lower absorption of the fixed costs in our Service segment. A significant portion of our costs of productive capacity in the Service segment are fixed. Thus, decreases in revenues lead to increases in costs as a percentage of revenue.

CostsCost of Products revenue as a percentage of Product revenue in the first quartersix months of fiscal 2015 decreasedincreased to 47.3%51.7% from 57.7%49.1% in the comparable prior year period. This decreaseincrease is mainly due to a change in the mix of products sold as well as lower expediting fees.in the first six months of fiscal 2015.

Operating Expenses

Selling expenses for the threesix months ended DecemberMarch 31, 20142015 decreased 23.1%16.8% to $336$762 from $437$916 for the comparable period last year. ThisThe decrease is mainlywas primarily due to the terminationelimination of sales personnel in the second half of fiscal 2014 along with a reductionUK and in our Evansville facility in FY14 slightly offset by higher costs for sales promotional spending in the first fiscal quarter of 2015 compared to the same period in fiscal 2014.personnel travel and commissions.

Research and development expenses for the first quarterhalf of fiscal 2015 increased 33.6%5.1% over the comparable prior year period last year to $191$329 from $143.$313. The increase was primarily due to increased utilization of outsourced professional engineering services.

General and administrative expenses for the first quarterhalf of fiscal 2015 increased 12.0%3.6% to $1,235$2,445 from $1,103$2,361 for the comparable prior year period. The principal reasons for the increase were higher personnel costs due to the addition of personnel in Finance and Client Services in the second half of fiscal 2014 andas well as increased employee health care costs and software maintenance fees in the currentfirst six months of fiscal quarter.2015.

Other Income (Expense)

Other income (expense)expense for the first quartersix months of fiscal 2015 increasedamounted to $41 fromincome of $164 as compared to an expense of $(1,124)($1,441) for the same quarterperiod of the prior fiscal year.The primary reason for the increasedifferential is the change in the fair value of the warrant liability as well as a decrease in interest expense from the credit facility entered into in May of 2014.

Income Taxes

Our effective tax rate for the quarterssix months ended DecemberMarch 31, 2015 and 2014 was 0.5% and 2013 was 0.4% and 0.0%(0.8)%, respectively. The current year expense primarily relates to state taxes and federal alternative minimum tax.

Restructuring Activities

In March 2012, we announced a plan to restructure our bioanalytical laboratory operations. We consolidated our laboratory in McMinnville, Oregon into our 120,000 square foot headquarters facility in West Lafayette, Indiana and closed our facility and bioanalytical laboratory in Warwickshire, United Kingdom. We continue to sell our products globally while further consolidating delivery of our CRO services into our Indiana locations.

We reserved for lease payments at the cease use date for our UK facility and have considered free rent, sublease rentals and the number of days it would take to restore the space to its original condition prior to our improvements. In the first quarter of fiscal 2013, we began amortizing into general and administrative expense, equally through the cease use date, the estimated rent income of $200 when the reserve was originally established. We have been unsuccessful at subleasing the facility. Based on these matters,factors, we have $981$1,000 reserved for UK lease related costs.

The following table sets forth the rollforward of the restructuring activity for the threesix months ended DecemberMarch 31, 2014.2015.

Other costs of $117 include legal and professional fees and other costs incurred in connection with transitioning services from sites being closed as well as costs incurred to remove improvements previously made to the UK facility. Other activity in the reserve rollforward primarily reflects a receivable for settlement of the capital lease in the UK.

Liquidity and Capital Resources

Comparative Cash Flow Analysis

At DecemberMarch 31, 2014,2015, we had cash and cash equivalents of $747,$536, compared to $981 at September 30, 20142014.

Net cash used by operating activities was $161 for the three months ended December 31, 2014 compared to cash provided by operating activities of $1,036was $440 for the threesix months ended DecemberMarch 31, 2013.2015, compared to $1,005 for the six months ended March 31, 2014. The decrease in cash provided by operating activities in the first quartersix months of fiscal 2015 partially resulted from lower operating income versus the prior year period. Other factors contributing factors to our cash from operations were noncash charges of $377$730 for depreciation and amortization, a decrease in prepaid expenses of $244 and a netan increase in accounts payablecustomer advances of $228,$491. These factors were partially offset by a net increase in accounts receivable of $355 and$314 as well as a decrease in accrued expenses of $498. $542. Days’ sales in accounts receivable increased to 59 days at March 31, 2015 from 49 days at September 30, 2014due to a delay in payments from certain customers. 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. Historically, the Company has experienced very few significant bad debt write-offs.

Included in operating activities for the first six months of fiscal quarter of 2014 are non-cash charges of $402$799 for depreciation and amortization, and a decrease in accounts receivable of $939$442, and an increase in customer advances of $272 partially offset slightly by a net decrease in accounts payable of $345$180 and a decreasean increase in accrued expensesprepaid and other assets of $151.$488. The impact on operating cash flow of other changes in working capital was not material.

Investing activities used $122$231 in the first quarterhalf of fiscal 2015 due to capital expenditures as compared to $51$150 in the first threesix months of fiscal 2014. The investing activity in fiscal 2015 consisted of investments in computing infrastructure and other capital improvements and equipment replacement.

Financing activities provided $7used $746 in the first threesix months of fiscal 2015 as compared to $1,422$1,746 used for the first threesix months of fiscal 2014. The main use of cash in the first quarterhalf of fiscal 2015 was for long-term debt and capital lease payments of $271$544 as well as net borrowingspayments on our line of credit of $278.$202. In the first quarterhalf of fiscal 2014, we had long-term debt and capital lease payments of $115,$432 as well as net payments onthe payoff of our prior line of credit of $1,247.$1,415. Additionally, we received $161 from the exercises of Class A warrants in the first six months of fiscal 2014.

Capital Resources

Credit Facility

On May 14, 2014, we entered into a Credit Agreement (“Agreement”(the “Agreement”) with Huntington Bank. The Agreement includes both a term loan and a revolving loan and is secured by mortgages on our facilities in West Lafayette and Evansville, Indiana and liens on our personal property.

The term loan for $5,500 bears interest at LIBOR plus 325 basis points with monthly principal payments of approximately $65 plus interest. The term loan matures in May 2019. On May 15, 2014, we used the proceeds from the term loan to pay off our indebtedness to Regions Bank. The balance on the term loan at DecemberMarch 31, 20142015 and September 30, 2014 was $5,042$4,845 and $5,238, respectively.

The revolving loan for $2,000 matures in May 2016 and bears interest at LIBOR plus 300 basis points with interest paid monthly. The revolving loan also carries a facility fee of .25%, paid quarterly, for the unused portion of the revolving loan. The revolving loan includes an annual clean-up provision that requires the Company to maintain a balance of not more than 20% of the maximum loan of $2,000 for a period of 30 days in any 12 month period while the revolving loan is outstanding. The revolving loan balance was $481$0 and $202 at DecemberMarch 31, 20142015 and September 30, 2014, respectively.