10-Q

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 March 31, 2004

or

       [   ]     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:  0-23357


BIOANALYTICAL SYSTEMS, INC.
(Exact name of registrant as specified in its charter)

INDIANA		35-1345024
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)
2701 Kent Avenue West Lafayette, IN		47906
(Address of principal executive offices)		(Zip Code)
	(765) 463-4527
	(Registrant's telephone number, including area code)

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 [   ]

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
      Yes  [   ]      No  [X]

        As of April 30, 2004, 4,869,502 common shares of the registrant were outstanding.

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PAGE
NUMBER

PART I	FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements (Unaudited):
	Condensed Consolidated Balance Sheets as of
	March 31, 2004 and September 30, 2003	3
	Condensed Consolidated Statements of Operations for the
	Three Months and Six Months Ended March 31, 2004 and 2003	4
	Condensed Consolidated Statements of Cash Flows for the
	Six Months Ended March 31, 2004 and 2003	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	10
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	16
Item 4.	Controls and Procedures	16
PART II.	OTHER INFORMATION
Item 4.	Submission of Matters to Vote of Security Holders	17
Item 6.	Exhibits and Reports on Form 8-K	17
SIGNATURES		18

–  2  –

CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)

	(Unaudited) March 31, 2004			September 30, 2003
Assets
Current assets:
Cash and cash equivalents	$	507		$	1,378
Accounts receivable
Trade		4,509			3,978
Grants		13			13
Unbilled revenues and other		844			954
Inventories		1,925			2,055
Deferred income taxes		465			465
Refundable income taxes		467			84
Prepaid expenses		724			397
Total current assets		9,454			9,324
Property and equipment, net		32,347			31,171
Goodwill		1,499			984
Intangible assets, net		2,589			2,778
Debt issue costs		399			428
Other assets		364			300
Total assets	$	46,652		$	44,985
Liabilities and shareholders' equity
Current liabilities:
Accounts payable	$	3,097		$	3,073
Accrued expenses		1,418			1,245
Customer advances		3,100			1,658
Revolving line of credit		2,270			2,388
Current portion of capital lease obligation		120			123
Current portion of long-term debt		788			1,132
Total current liabilities		10,793			9,619
Capital lease obligation, less current portion		101			---
Long-term debt, less current portion		6,850			6,949
Construction line of credit		2,250			1,676
Subordinated debt, long-term		5,188			5,188
Deferred income taxes		2,252			1,827
Shareholders' equity:
Preferred shares: Authorized shares - 1,000,
Issued and outstanding shares - none		---			---
Common shares: Authorized shares - 19,000,
Issued and outstanding shares - 4,870 at March 31, 2004
and 4,831 at September 30, 2003		1,177			1,168
Additional paid-in capital		11,263			11,122
Retained earnings		6,865			7,498
Accumulated other comprehensive loss		(87	)		(62	)
Total shareholders' equity		19,218			19,726
Total liabilities and shareholders' equity	$	46,652		$	44,985

See accompanying notes to condensed consolidated financial statements.

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)

	Three Months Ended March 31,						Six Months Ended March 31,
	2004			2003			2004			2003
Service revenue	$	5,608		$	4,564		$	11,586		$	9,096
Product revenue		3,042			2,386			5,841			4,828
Total revenue		8,650			6,950			17,427			13,924
Cost of service revenue		5,217			3,721			10,276			6,976
Cost of product revenue		1,229			972			2,312			2,006
Total cost of revenue		6,446			4,693			12,588			8,982
Gross profit		2,204			2,257			4,839			4,942
Operating expenses:
Selling		665			884			1,291			1,642
Research and development		295			323			541			691
General and administrative		1,785			1,197			3,632			2,287
Total operating expenses		2,745			2,404			5,464			4,620
Operating income (loss)		(541	)		(147	)		(625	)		322
Interest income		2			1			3			2
Interest expense		(207	)		(138	)		(414	)		(248	)
Other income (expense)		2			30			18			59
Gain (loss) on sale of property and equipment		---			(5	)		---			32
Income (loss) before income taxes		(744	)		(259	)		(1,018	)		167
Income taxes		(241	)		(92	)		(385	)		59
Net income (loss)	$	(503	)	$	(167	)	$	(633	)	$	108
Net income (loss) per share:
Basic	$	(0.10	)	$	(0.04	)	$	(0.13	)	$	0.02
Diluted	$	(0.10	)	$	(0.04	)	$	(0.13	)	$	0.02
Weighted common and common equivalent
shares outstanding:
Basic		4,870			4,601			4,851			4,590
Diluted		4,870			4,601			4,851			4,619

See accompanying notes to condensed consolidated financial statements.

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

	Six Months Ended March 31,
	2004			2003
Operating activities
Net income (loss)	$	(633	)	$	108
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization		1,617			1,155
Gain on sale of property and equipment		---			(32	)
Deferred income taxes		(93	)		(124	)
Changes in operating assets and liabilities:
Accounts receivable		(421	)		(234	)
Inventories		130			208
Prepaid expenses and other assets		(735	)		86
Accounts payable		24			(592	)
Income taxes payable		---			(101	)
Accrued expenses		173			(137	)
Customer advances		1,442			(83	)
Net cash provided by operating activities		1,504			254
Investing activities
Capital expenditures		(2,229	)		(3,217	)
Proceeds from sale of property and equipment		---			892
Payments for purchase of net assets from LC Resources, Inc. net of cash acquired		---			(163	)
Loans to PharmaKinetics Laboratories, Inc.		---			(517	)
Deferred acquisition costs for PharmaKinetics Laboratories, Inc.		---			(239	)
Net cash used by investing activities		(2,229	)		(3,244	)
Financing activities
Borrowings on line of credit		6,705			3,826
Payments on line of credit		(6,823	)		(4,428	)
Borrowings on construction line of credit		574			3,179
Payments on capital lease obligations		(130	)		(998	)
Borrowings of long-term debt, net of issuance costs		---			4,950
Payments of long-term debt		(293	)		(3,515	)
Net proceeds from the exercise of stock options		---			39
Net cash provided by financing activities		33			3,053
Effects of exchange rate changes		(179	)		---
Net increase (decrease) in cash and cash equivalents		(871	)		63
Cash and cash equivalents at beginning of period		1,378			826
Cash and cash equivalents at end of period	$	507		$	889

See accompanying notes to condensed consolidated financial statements.

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BIOANALYTICAL SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1.        Description of the Business and Basis of Presentation

Bioanalytical Systems, Inc. and its subsidiaries (“We,” the “Company” or “BASi”) engage in laboratory services and other services related to pharmaceutical development. We also manufacture scientific instruments for medical research, which we sell with related software for use in industrial, governmental and academic laboratories. Our customers are located throughout the world.

We have 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 generally accepted accounting principles (“GAAP”), and therefore should be read in conjunction with our audited consolidated financial statements, and the notes thereto, for the year ended September 30, 2003. In the opinion of management, the condensed consolidated financial statements for the three and six months ended March 31, 2004 and 2003 include all adjustments which are necessary for a fair presentation of the results of the interim periods and of our financial position at March 31, 2004. The results of operations for the three and six months ended March 31, 2004 are not necessarily indicative of the results for the year ending September 30, 2004.

All amounts in the condensed consolidated financial statements and the notes thereto are presented in thousands, except for per share data or where otherwise noted.

2.        Stock Based Compensation

At March 31, 2004, we had four stock-based employee compensation plans, which are described more fully in Note 9 in the Notes to the Consolidated Financial Statements in our Form 10-K for the year ended September 30, 2003. Because all options granted under these plans had an exercise price equal to the market value of the underlying common stock on the date of grant, we do not recognize any stock-based employee compensation cost in our financial statements. The following table illustrates the effect on net income (loss) and earnings (loss) per share had we applied the alternative treatment of recognizing costs as stock-based employee compensation.

	Three Months Ended March 31,						Six Months Ended March 31,
	2004			2003			2004			2003
Net income (loss) as reported	$	(503	)	$	(167	)	$	(633	)	$	108
Deduct: Total stock-based employee
compensation expense determined under the
fair value based method for all awards,
net of related tax effects		(16	)		(5	)		(22	)		(10	)
Pro forma net income (loss)	$	(519	)	$	(172	)	$	(655	)	$	98
Earnings (loss) per share:
Basic and diluted - as reported	$	(0.1	0)	$	(0.0	4)	$	(0.1	3)	$	0.02
Basic and diluted - pro forma	$	(0.1	1)	$	(0.0	4)	$	(0.1	4)	$	0.02

3.        Earnings per Share

We compute basic earnings per share using the weighted average number of common shares outstanding. We compute diluted earnings per share using the weighted average number of common and common equivalent shares outstanding. Common equivalent shares include the dilutive effect of shares issuable upon exercise of options to purchase common shares. Shares issuable upon conversion of convertible subordinated debt have not been included as they were not dilutive.

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The following table reconciles our computation of basic earnings per share to diluted earnings per share:

	Three Months Ended March 31,						Six Months Ended March 31,
	2004			2003			2004			2003
Shares:
Basic shares		4,870			4,601			4,851			4,590
Effect of dilutive securities
Options		---			---			---			29
Convertible subordinated debt		---			---			---			---
Diluted shares		4,870			4,601			4,851			4,619
Basic and diluted net income (loss)	$	(503	)	$	(167	)	$	(633	)	$	108
Basic earnings (loss) per share	$	(0.10	)	$	(0.04	)	$	(0.13	)	$	0.02
Diluted earnings (loss) per share	$	(0.10	)	$	(0.04	)	$	(0.13	)	$	0.02

4.        Acquisitions

LC Resources, Inc.

On December 13, 2002 we acquired LC Resources, Inc. (“LCR”), now BASi Northwest Laboratories, Inc., purchasing all of the outstanding shares of LCR for $1,999. The purchase price consisted of cash payments of $199 and issuance of $1,800 in 10% subordinated notes payable. We engaged an independent valuation firm to determine the fair value of identifiable intangible assets. The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of acquisition:

Current assets	$	639
Property and equipment		347
Intangible assets		1,251
Goodwill		561
Total assets acquired		2,798
Liabilities assumed		(799	)
Net assets acquired	$	1,999

As of December 31, 2003 we recorded a deferred tax liability in the amount of $518 with a corresponding increase in goodwill. The intangible assets arising from this transaction include $180 assigned to methodologies, $359 assigned to customer relationships and $712 assigned to the regulated facility/FDA compliant laboratory site. We estimated the economic useful lives of the acquired methodologies and customer relationships to be 5 years, using straight-line amortization, and determined that the acquired regulated facility/FDA compliant laboratory site is an indefinite-lived intangible asset not subject to amortization.

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PharmaKinetics Laboratories, Inc.

On May 26, 2003, we converted our $791 of convertible notes of PharmaKinetics Laboratories, Inc. (“PKLB”) into 4,992,300 shares of PKLB common stock, representing a 67% ownership interest in PKLB. On June 30, 2003, we purchased the remaining common stock and all preferred stock of PKLB through the exchange of 228,857 shares of the Company’s common stock valued at $1,179 and the issuance of $4,000 of 6% convertible notes due 2008. These notes plus any accrued interest are convertible into shares of the Company’s common stock at the holder’s option any time after June 1, 2004 at the conversion rate of sixteen dollars per share of our common stock.

The Company paid cash aggregating $1,506 representing acquisition costs and cash advances made to PKLB from June 2002 through May 2003. PKLB was a publicly traded company based in Baltimore, Maryland, that provides clinical research and development services to the pharmaceutical and biotechnology industries in the development of prescription and non-prescription drug products. PKLB has been renamed BASi Maryland, Inc.

The purchase price has been allocated based on the estimated fair values of the assets and liabilities acquired. The purchase price has been preliminarily allocated as follows:

Current assets	$	626
Property and equipment		6,321
Intangible assets		1,579
Goodwill		55
Total assets acquired		8,581
Liabilities assumed		(1,896	)
Net assets acquired	$	6,685

During the fiscal quarter March 31, 2004, we recorded adjustments from our earlier estimates to reduce deferred revenue at the acquisition date by $189, record taxes on the revaluation of the basis of property of $86, and record acquisition costs of $48, resulting in reductions of intangible assets of $64 and goodwill of $4.

Of the $1,579 in preliminary value of the acquired intangible assets, $227 was assigned to methodologies, $453 was assigned to customer relationships and $899 has been assigned to the regulated facility/FDA compliant laboratory site. We estimated the economic useful lives of the acquired methodologies and customer relationships to be 5 years, using straight-line amortization, and determined that the acquired regulated facility/FDA compliant laboratory site is an indefinite-lived intangible asset not subject to amortization.

Our estimate of fair values and allocation of the purchase price is preliminary and subject to change pending the final valuation, to be determined with the assistance of the independent valuation firm we engaged. Accordingly, we may revise the carrying value of assets subject to amortization and the related estimated useful economic lives.

6.        Inventories

Inventories consisted of the following:

	March 31, 2004			September 30, 2003
Raw materials	$	1,020		$	1,161
Work in progress		288			338
Finished goods		719			658
		2,027			2,157
Less LIFO reserve		(102	)		(102	)
	$	1,925		$	2,055

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7.        Segment Information

We operate in two principal segments — research services and research products. Our Services segment provides research and development support on a contract basis directly to pharmaceutical companies. Our Products segment provides liquid chromatography, electrochemical and physiological monitoring products to pharmaceutical companies, universities, government research centers and medical research institutions. Our accounting policies in these segments are the same as those described in the summary of significant accounting policies.

The following table presents operating results by segment:

	Three Months Ended March 31,						Six Months Ended March 31,
	2004			2003			2004			2003
Operating income (loss):
Services	$	(1,035	)	$	(189	)	$	(1,745	)	$	193
Products		494			42			1,120			129
Total operating income (loss)		(541	)		(147	)		(625	)		322
Corporate expenses		(203	)		(112	)		(393	)		(155	)
Income (loss) before income taxes	$	(744	)	$	(259	)	$	(1,018	)	$	167

8.        Related Party Transactions

Prior to the acquisition of PKLB in June 2003, a current director of the Company who had been a director of PKLB made loans to PKLB to support their cash needs under the terms of a $350 convertible promissory note (“Old Note”) dated November 22, 2002. On December 31, 2003, the Company issued a $350 8% convertible note payable (“New Note”) in exchange for the Old Note. The New Note was convertible into the Company’s common shares at a price based upon the market price of the common shares at or about the time of the conversion and was scheduled to mature on June 1, 2005. On that same day, the Company prepaid $100 of the outstanding principal amount of the New Note, plus approximately $31 in accrued interest, and the holder converted $150 of the New Note into 38 of the Company’s common shares. The Company issued the holder a new 8% note due June 1, 2005, on substantially the same terms as the New Note, for the remaining $100 principal amount.

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

This Form 10-Q may contain “forward-looking statements,” within the meaning of Section 27A of the Securities Act of 1933, as amended, and/or Section 21E of the Securities Exchange Act of 1934, as amended. Those statements may include, but are not limited to, discussions regarding BASi’s intent, belief or current expectations with respect to (i) BASi’s strategic plans; (ii) BASi’s future profitability; (iii) BASi’s capital requirements; (iv) industry trends affecting the Company’s financial condition or results of operations; (v) the Company’s sales or marketing plans; or (vi) BASi’s growth strategy. Investors in BASi’s Common Shares are cautioned that reliance on any forward-looking statement involves risks and uncertainties, including the risk factors contained in Exhibit 99.1 to BASi’s annual report on Form 10-K for the year ended September 30, 2003. Although the Company believes that the assumptions on which the forward-looking statements contained herein are based are reasonable, any of those assumptions could prove to be inaccurate, and as a result, the forward-looking statements based upon those assumptions also could be incorrect. In light of the uncertainties inherent in any forward-looking statement, the inclusion of a forward-looking statement herein should not be regarded as a representation by the Company that BASi’s plans and objectives will be achieved.

GENERAL

The business of Bioanalytical Systems, Inc. is very much dependent on the level of pharmaceutical and biotech companies’ efforts in new drug discovery and approval. Our Services segment is the direct beneficiary of their efforts, through their outsourcing of laboratory and analytical needs, and our Products segment is the indirect beneficiary, 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. One significant development in the past decade has been the continuing consolidation among large pharmaceutical corporations. We believe that, on the whole, this consolidation should have a positive impact on our business, as these increasingly larger pharmaceutical companies will devote their internal resources, our main competitor, to only those drug candidates with the potential to have a material impact on their operations, and will outsource more of their lesser opportunities. Additionally, many drug candidates will not meet the financial hurdles established by the major pharmaceutical companies, and will be developed by smaller, specialty pharmaceutical companies that do not possess internal capabilities to test and analyze the drug candidate, or have the capability to scientifically monitor the product once approved. Offsetting those potential positive impacts, the major pharmaceutical companies tend to reevaluate their development programs after major acquisitions, which sometimes causes them to defer, or cancel, work that we were scheduled to perform. We are also at risk that a significant client for us may be acquired by a corporation that prefers to perform the work internally, or has a long-standing relationship with one of our competitors. We do not anticipate that the pending acquisition of Aventis by Sanofi-Synthelabo will have any impact on our operations, as neither of the companies currently provides significant business for us. We anticipate that as companies in our markets consolidate, our competitors will also consolidate, which will result in fewer, but much stronger, competitors for our business.

Two very significant demographic developments are impacting pharmaceutical companies, and therefore, our markets. The first is the well-documented aging of Western populations, with the incident increase of diseases associated with aging and the increasing periods of treatment. The other is the so-called genomic era, where the knowledge of the genome, including human and other organisms, is spawning the technologies and investment to develop additional therapies. We believe that both will positively impact our markets by increasing the amount of drug development and monitoring activity.

Research and analytical services are capital intensive. The investment in equipment and facilities to serve our markets is substantial and continuing. While our physical facilities are excellent 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. 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 our capacity, sustained growth will require additional investment in future periods.

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One of the more important factors in our profitability is the utilization of our capacity. In the past two years, we have added significant new capacity through acquisitions in Baltimore, Maryland and McMinville, Oregon, and through facility expansions in West Lafayette and Evansville, Indiana. These expansions created a higher level of basic operating expenses. Those related to productive capacity are included in cost of services. As a result, after expansion, while we are developing the sales to fill these facilities, our percentage margins on services have declined because many of these costs are the same as they will be at full capacity, but are being spread over less-than-capacity revenues. While the capacity and capabilities added have the potential to positively impact future operating results, their costs have had a negative impact in the current quarter and six months.

RESULTS OF OPERATIONS

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

	Three Months Ended March 31,				Six Months Ended March 31,
	2004		2003		2004		2003
Service revenue	64	.8	65	.7	66	.5	65	.3
Product revenue	35	.2	34	.3	33	.5	34	.7
Total revenue	100	.0	100	.0	100	.0	100	.0
Cost of service revenue (a)	93	.0	81	.5	88	.7	76	.7
Cost of product revenue (a)	40	.4	40	.7	39	.6	41	.6
Total cost of revenue	74	.5	67	.5	72	.2	64	.5
Gross profit	25	.5	32	.5	27	.8	35	.5
Total operating expenses	31	.7	34	.6	31	.4	33	.2
Operating income (loss)	(6	.3)	(2	.1)	(3	.6)	2	.3
Other income (expense)	(2	.4)	(1	.6)	(2	.3)	(1	.1)
Income (loss) before income taxes	(8	.6)	(3	.7)	(5	.8)	1	.2
Income tax expense (benefit)	(2	.8)	(1	.3)	(2	.2)	0	.4
Net income (loss)	(5	.8)	(2	.4)	(3	.6)	0	.8

                 (a)        Percentage of service and product revenues, respectively.

Three Months Ended March 31, 2004 Compared to Three Months Ended March 31, 2003

Service and Product Revenues

Revenues for the second fiscal quarter ended March 31, 2004 increased 24% to $8.7 million compared to $7.0 million for the second quarter last year. Service revenue increases were the result of the Company’s two acquisitions completed in fiscal 2003. Preclinical services capacity utilization and UK-based bioanalytical services (aided by a strong pound sterling that causes U.K. revenues to translate into more U.S. dollars), showed significant improvement for the quarter, while US-based bioanalytical services revenues were negatively impacted by the deferral of the commencement of work on a contract for which we had reserved capacity. Product revenues were essentially flat compared to the prior year.

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Cost of Revenues

Cost of revenues for the second quarter ended March 31, 2004 was $6.5 million or 75% of revenue compared to $4.7 million, or 68% of revenue for the second quarter last year. The increase in cost of revenues is related to the Company’s Services segment and is due to the inclusion of costs from acquired operations in fiscal 2003 that were not included in the prior year. The increase in cost of revenues as a percentage of revenues is impacted by operating inefficiencies in the Service segment as the Company integrates the acquired businesses, and underutilization of capacity. The costs of the underutilized capacity in our Services segment are included in costs of services, thereby reducing Services margins. The Product segment cost of revenue as a percentage of product revenue is the same as last year.

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Operating Expenses

Selling expenses for the three months ended March 31, 2004 decreased 24% to $665,000 from $884,000 for the three months ended March 31, 2003. Research and development expenses, which are net of grant reimbursements, for the three months ended March 31, 2004 decreased 9% to $295,000 from $323,000 for the three months ended March 31, 2003. These decreases are primarily attributable to the Company’s efforts to control expenses through elimination or deferral of discretionary expenditures and reduction of staff.

General and administrative expenses for the three months ended March 31, 2004 increased 49% to $1,785,000, up from $1,197,000 for the three months ended March 31, 2003. This increase is primarily attributable to the Company’s acquisitions in fiscal 2003 and incremental financial consulting fees incurred due to the resignation of the Company’s Chief Financial Officer as previously disclosed. Subsequent to March, 2004, we filled that position, as well as hired a controller, which should reduce consulting expenses in future periods. As the Company integrates its acquisitions, we expect to decrease overall general and administrative costs.

Other Income (Expense)

Interest expense increased 50% to $207,000 in the three months ended March 31, 2004 from $138,000 in the comparable quarter of the prior year. This increase is due to interest expense on the subordinated debt issued in connection with the Company’s 2003 acquisitions and increases in long-term debt due to facility expansions at its Evansville and West Lafayette sites.

Income Taxes

We computed our tax benefit using an effective tax rate for the three months ended March 31, 2004 of 32.4% compared to 35.5% for the three months ended March 31, 2003.

Net Income (Loss)

As a result of the above factors, we lost $503,000 ($.10 loss per share, both basic and diluted) in the quarter ended March 31, 2004, compared to a loss of $167,000 ($.04 loss per share, both basic and diluted) in the same period last year.

Six Months Ended March 31, 2004 Compared to Six Months Ended March 31, 2003

Service and Product Revenues

Revenues for the six months ended March 31, 2004 increased 25% to $17.4 million compared to $13.9 million for the six month period last year. Service revenue increases were the result of the Company’s two acquisitions completed in fiscal 2003. For the six month period, our revenues were largely impacted by the same items as in the discussion above of the second quarter.

Cost of Revenues

Cost of revenues for the six months ended March 31, 2004 was $12.6 million or 72% of revenue compared to $9.0 million, or 65% of revenue for the same period last year. The increase in cost of revenues is related to the Company’s Services segment and is due to the acquisitions in fiscal 2003. The increase in cost of revenue as a percentage of revenue is impacted by operating inefficiencies in the service segment as the Company integrates the acquired businesses, and by underutilization of capacity. We devoted significant manpower to changing site infrastructure and absorbing new job methodologies, which reduced billable work. During the first quarter of the current year, we absorbed the costs of a client project overrun, new staff in training, and lower than optimal capacity utilization. The product segment cost of revenue as a percentage of product revenue decreased over the prior year’s first six months due to a higher margin product mix.

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Operating Expenses

Selling expenses for the six months ended March 31, 2004 decreased 21% to $1,291,000 from $1,642,000 for the six months ended March 31, 2003. Research and development expenses, which are net of grant reimbursements, for the six months ended March 31, 2004 decreased 22% to $541,000 from $691,000 for the six months ended March 31, 2003. As described in the three month discussion above, these decreases are primarily attributable to the Company’s efforts to control expenses.

General and administrative expenses for the six months ended March 31, 2004 increased 59% to $3,632,000, up from $2,287,000 for the six months ended March 31, 2003. The principal reasons for this increase are the same as those discussed above for the current quarter.

Other Income (Expense)

Interest expense increased 67% to $414,000 in the six months ended March 31, 2004 from $248,000 in the comparable quarter of the prior year. This increase is due to interest expense on the subordinated debt issued in connection with the Company’s fiscal 2003 acquisitions and increases in long-term debt due to facility expansions at its Evansville and West Lafayette sites.

Income Taxes

The effective tax rate we used in computing our tax benefit for the six months ended March 31, 2004 was 37.8% compared to 35.3% for the provision for the six months ended March 31, 2003.

Net Income (Loss)

As a result of the above, we experienced a net loss of $633,000 ($.13 loss per share, both basic and diluted) for the first six months of the current year, compared to net income in the prior year of $108,000 ($.02 income per share, both basic and diluted).

The Company discloses earnings before interest, taxes, depreciation and amortization (EBITDA), which is not a measure of performance calculated in accordance with generally accepted accounting principles (GAAP) in the United States. The Company has presented this to supplement GAAP measures because management believes it to be an indicator of operating health of the Company. EBITDA should not be considered in isolation or as an alternative to net income (loss), cash flows from operating, investing or financing activities or other financial statement data presented in the consolidated financial statements as an indicator of financial performance or liquidity. Because EBITDA is not a measurement determined in accordance with GAAP and is thus susceptible to varying calculations, the benchmarks presented may not be comparable to other similarly titled measures of other companies. EBITDA for the second quarter ended March 31, 2004 and 2003 was $0.3 million compared to $0.5 million, respectively, and $1.0 million and $1.6 million for the six months ended March 31, 2004 and 2003, respectively.

Set forth below is a reconciliation of the Company’s GAAP net income (loss) to EBITDA (in thousands):

	Three Months Ended March 31,						Six Months Ended March 31,
	2004			2003			2004			2003
Net income (loss)	$	(503	)	$	(167	)	$	(633	)	$	108
Interest expense		207			138			414			248
Income tax expense (benefit)		(241	)		(92	)		(385	)		59
Depreciation and amortization		789			586			1,618			1,155
EBITDA	$	252		$	465		$	1,014		$	1,570

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LIQUIDITY AND CAPITAL RESOURCES

Comparative Cash Flow Analysis

Since its inception, BASi’s principal sources of cash have been cash flow generated from operations and funds received from bank borrowings and other financings. At March 31, 2004, BASi had cash and cash equivalents of $507,000, compared to cash and cash equivalents of $1,378,000 at September 30, 2003. The decrease in cash resulted primarily from payments for capital expenditures and to support the operations of the recently acquired Baltimore clinical research unit.

BASi’s net cash provided by operating activities was $1,504,000 for the six months ended March 31, 2004. Cash provided by operations during the six months ended March 31, 2004 consisted of net losses of $633,000, offset by non-cash charges of $1,524,000 and a net decrease of $613,000 in operating assets and liabilities. During the current six month period, we received significant customer advance payments for work begun in April, which contributed $1,442,000 to cash flow. In addition to funding the Baltimore clinical research unit, the other driving factors that consumed cash from operations were a reduction in the rate of receivable collections from some of the Company’s larger customers and significant shipments of its Culex ABS.

Cash used by investing activities decreased to $2,229,000 for the six months ended March 31, 2004 from $3,244,000 for the six months ended March 31, 2003. This decrease is due to reduced capital expenditures in the six months ending March 31, 2004. Additionally, the Company expended cash for its acquisition of LC Resources, Inc. in December 2002 and for loans and advances to PharmaKinetics Laboratories, Inc., which was acquired in June 2003.

Cash provided by financing activities for the six months ended March 31, 2004 was $33,000 due to additional borrowings from our construction line of credit, offset by payments on long term debt and leases. In the six months ended March 31, 2003, the Company refinanced its existing revolving line of credit and term loan and secured new financing for facilities expansion and improvements. Throughout fiscal 2003, BASi used these funds to finance its expansions and improvements in Evansville and West Lafayette and for other capital expenditures. As the availability from the new facilities financings was expended by late fiscal 2003, the Company began to support these expansions with available funds from operations and its revolving credit line. This resulted in negative cash flows being generated from operations. However, expansions are now complete in Evansville and nearly complete in West Lafayette and as the Company continues to integrate its new acquisitions and fill its new facilities with business, cash from operations should begin to show improvements.

Capital Resources

Total expenditures by BASi for property and equipment were $2,229,000 and $3,217,000 for the six months ended March 31, 2004 and 2003, respectively. Expenditures for the first half of 2004 include the construction of the new early development facility in West Lafayette, accounting for the largest portion of these expenditures, and expenditures to bring the Baltimore facility to Company standards. Capital expenditures also include the purchase of new toxicology and pathology software in the Company’s Evansville location that will improve efficiency and ensure future regulatory compliance. The software is in the validation process and is expected to be fully operational in November 2004. These expenditures were primarily funded by the Company’s construction line of credit and revolving line of credit. Capital investments correspond to anticipated increases in research services to be provided by BASi. BASi expects to make other investments to expand its operations through internal growth, strategic acquisitions, alliances, and joint ventures as demand and capital allow.

The Company has implemented a phased plan to improve the operations of its Baltimore clinical research unit and expects to fund the operations with cash provided from company-wide operations supplemented by its revolving line of credit. The planned improvements include renovation of the clinic, selectively updating equipment and hiring highly qualified, experienced management personnel. Improvements already completed and in process have had measurable effects on attracting new clients.

BASi’s revolving line of credit expires September 30, 2006. The maximum amount available under the terms of the agreement is $6,000,000 with outstanding borrowings limited to the borrowing base as defined in the agreement. Interest accrues monthly on the outstanding balance at the bank’s prime rate to prime rate plus 125 basis points, or at the Eurodollar rate plus 200 to 350 basis points, as elected by BASi, depending upon the ratio of BASi’s interest bearing indebtedness (less subordinated debt) to EBITDA. BASi pays a fee equal to 25 to 50 basis points, depending upon the same financial ratio, on the unused portion of the line of credit. As of March 31, 2004, BASi had approximately $2.1 million of availability subject to limitations by its bank debt covenant ratios.

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During 2002, the Company began expanding facilities at its site in West Lafayette, Indiana. Phase one of this facility is expected to be fully functional in the third fiscal quarter of 2004 at a cost of $3.4 million. Phases two and three will be completed as business justifies. Construction on the West Lafayette facilities is expected to have a total cost of $4.0 million when complete. The Company funded part of this expansion by obtaining a $2,250,000 construction loan with a bank. The loan expires November 1, 2012 and requires interest payments only until completion of the project in West Lafayette, Indiana. Interest is charged at the prime rate. The Company exhausted this construction loan in the first quarter and expects to convert the $2,250,000 to a term note in May 2004. Future expenditures to complete the site will be funded by cash from operations, as new business is generated and facilities are filled, and the Company’s revolving line of credit.

Liquidity

BASi is required to make cash payments in the future on debt and lease obligations. The following table summarizes BASi’s contractual term debt and lease obligations at March 31, 2004 and the effect such obligations are expected to have on its liquidity and cash flows in future periods (amounts presented for 2004 are those items required in the final two fiscal quarters):

	Fiscal Years Ending September 30,
	2004		2005		2006		After 2006		Total
	(in thousands)
Mortgage notes payable	$	183	$	390	$	395	$	6,171	$	7,139
Subordinated debt*		401		460		360		4,467		5,688
Future debt obligations**		36		69		56		2,089		2,250
Capital lease obligations		62		74		80		---		216
Operating leases		327		529		518		274		1,648
	$	1,009	$	1,522	$	1,409	$	13,001	$	16,941

  *  Subordinated debt includes notes to related parties.

**  Future debt obligations is an estimate of payments upon the conversion in May 2004 of the current construction line of credit into a $2,250,000 mortgage note payable.

The covenants in the Company’s credit agreement requiring the maintenance of certain ratios of interest bearing indebtedness (not including subordinated debt) to EBITDA and net cash flow to debt servicing requirements may restrict the amount the Company can borrow to fund future operations, acquisitions and capital expenditures. The Company was in violation of one of the credit agreement’s financial covenants for both the first fiscal quarter ended December 31, 2003 and the second fiscal quarter ended March 31, 2004. On January 8, 2004 and May 13, 2004, the banks waived compliance with this financial covenant for the twelve months ended March 31, 2004 and have amended certain of the financial covenants through September 30, 2004. As a condition to these waivers, we have granted our banks a secured mortgage on our Baltimore facility.

We have undertaken steps to improve our liquidity, operations and cash flow, with the objectives of reducing our debt, strengthening our financial position and meeting our financial covenants. We have reorganized our business development efforts to increase new business, added information technology improvements to become more efficient, and are attempting to sell our Baltimore physical facility. We are tightly monitoring and managing our cash flow, and we are not incurring new capital expenditures for expansion.

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Based on our current business activities, we believe cash generated from our operations and amounts available under our existing credit facilities, combined with the action plan described above, will be sufficient to fund the Company’s working capital and capital expenditure requirements for the foreseeable future and through September 30, 2004.

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ITEM 3.        QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

BASi’s primary market risk exposure with regard to financial instruments is changes in interest rates. The credit agreement between BASi and The Provident Bank dated October 29, 2002 bears interest at a rate of either the bank’s prime rate plus 0 to 125 basis points, or at Eurodollar rate plus 200 to 350 basis points, depending in each case upon the ratio of BASi’s interest-bearing indebtedness (less subordinated debt) to EBITDA, at BASi’s option. BASi also has a construction loan and a commercial mortgage which bear interest at the prime rate. Historically, BASi has not used derivative financial instruments to manage exposure to interest rate changes. BASi estimates that a hypothetical 10% adverse change in interest rates would not affect the consolidated operating results of BASi by a material amount.

BASi operates internationally and is, therefore, subject to potentially adverse movements in foreign currency exchange rates. The effect of movements in the exchange rates was not material to the consolidated operating results of BASi in fiscal years 2003 and 2002. BASi estimates that a hypothetical 10% adverse change in foreign currency exchange rates would not affect the consolidated operating results of BASi by a material amount.

ITEM 4.        CONTROLS AND PROCEDURES

Based on their most recent evaluation, which was completed as of the end of the period covered by this report, BASi’s Chief Executive Officer and Chief Financial Officer believe BASi’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) are effective in timely alerting BASi’s management to material information required to be included in this Form 10-Q and other Exchange Act filings.

There were no significant changes in the Company’s internal controls or other factors that could significantly affect those controls subsequent to the date of their evaluation, and there were no significant deficiencies or material weaknesses which required corrective action.

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PART II — OTHER INFORMATION

ITEM 4.        SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS

On February 26, 2004, the Annual Meeting of Shareholders of BASi was held at the principal executive offices of BASi. The following matters were voted on at the meeting:

MATTER:	VOTES CAST FOR:		VOTES CAST AGAINST OR WITHHELD: (1)
Election of the directors of BASi:
Peter T. Kissinger, Ph.D		4,323,861		218,609
Ronald E. Shoup, Ph.D		4,356,902		185,568
Candice B. Kissinger		4,219,653		322,817
William E. Baitinger		4,534,788		7,682
Leslie B. Daniels		4,526,438		16,032
W. Leigh Thompson, Ph.D., M.D		4,390,491		151,981
Ratification of the selection by the Board of Directors of Ernst & Young LLP as independent auditors of BASi for the fiscal year ending September 30, 2004		4,526,159		3,964
(1)  Includes abstentions and broker non-votes

ITEM 6.        EXHIBITS AND REPORTS ON FORM 8-K

(a)        Exhibits

Number assigned
in Regulation S-K
Item 601 Description of Exhibits

(3) 3.1 Second Amended and Restated Articles of Incorporation of Bioanalytical Systems, Inc. (incorporated by reference to Exhibit 3.1 to Form 10-Q for the quarter ended December 31, 1997).

3.2 Second Restated Bylaws of Bioanalytical Systems, Inc. (incorporated by reference to Exhibit 3.2 Form 10-Q for the quarter ended December 31, 1997).

(4) 4.1 Specimen Certificate for Common Shares (incorporated by reference to Exhibit 4.1 to Registration Statement on Form S-1, Registration No. 333-36429).

(10) 10.1 Form of Employment agreement dated March 18, 2004 with Michael R. Cox+

10.2 Form of Grant of qualified stock options dated April 1, 2004 to Michael R. Cox+

10.3 Form of Grant of non-qualified stock options dated April 1 to Michael R. Cox+

10.4 Form of Fourth Amendment dated May 13, 2004 to Credit Agreement dated October 29, 2002 with The Provident Bank+

(31) 31.1 Certification of Peter T. Kissinger +

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31.2 Certification of Michael R. Cox +

(32) 32.1 Section 1350 Certifications +

(99) 99.1 Risk factors (incorporated by reference to Exhibit 99.1 to Form 10-K for the year ended September 30, 2002).

+ Filed with this Quarterly Report on Form 10-Q.

(b)        Reports on Form 8-K

        Form 8-K furnished February 17, 2004, reporting under Item 12 “Results of Operations and Financial Condition,” relating to the Company’s announcement of its results for the year ended September 30, 2003.

        Form 8-K furnished February 17, 2004, reporting under Item 12” “Results of Operations and Financial Condition,” relating to the Company’s announcement of its results for the quarter ended December 31, 2003.

        Form 8-K furnished March 18, 2004, reporting under Items 7 & 9 “Financial Statements and Exhibits” and “Regulation FD Disclosure,” relating to the hiring of a new CFO.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized:

BIOANALYTICAL SYSTEMS, INC.



By:  /s/ PETER T. KISSINGER Peter T. Kissinger
President and Chief Executive Officer

Date:  May 17, 2004



By:  /s/ MICHAEL R. COX Michael R. Cox
Chief Financial Officer
(Principal Financial and Accounting Officer)

Date:  May 17, 2004

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EX-10.1

EMPLOYMENT AGREEMENT

        THIS AGREEMENT (“Agreement”) is made and entered into effective the 1st day of April, 2004 by and among BIOANALYTICAL SYSTEMS, INC. (“BASi”, “Company”) a corporation organized under the laws of the State of Indiana (“Company”), and Michael R. Cox, (“Employee”) as Chief Financial Officer (CFO) of BASi.

Preliminary Statements:

        A.         BASi provides contract research services, conducting laboratory research on behalf of other businesses, and manufactures and sells analytical chemical and physiology monitoring instruments (“Business”). All are operated to significantly increase the value of the Company.

        B.         Employee is experienced in the Business, and is familiar with the management and operations of the Company. The Company wishes to employ Employee on the terms and conditions contained herein. Employee and the Company view entry into this employment agreement as a mutually beneficial, long-term investment by both parties.

        In consideration of the premises and mutual covenants and agreements contained herein, the parties hereby agree as follows:

ARTICLE 1

Term, Compensation, and Benefits

        Section 1.1.    Term    The Company hereby agrees to employ the Employee, and the Employee hereby accepts employment with the Company, on the terms and conditions set forth in this Agreement until September 30, 2006 (the “Initial Term”). The Initial Term shall be extended for successive one year periods (the “Additional Terms,” and together with the Initial Term, the “Employment Period”), except that if either Employee or Company gives the other party written notice at least ninety days (90) before the end of the Initial Term, or any extended term, then this Agreement shall expire at the end of its then current term. The Employee shall take absences at such time as shall be approved by the Chief Executive Officer.

        Section 1.2.    Compensation and Benefits

        Section 1.2.1.    Salary:    BASi will pay a base salary of $12,500.00 per month. Salary shall be paid in equal semi-monthly installments in arrears. All amounts to be paid hereunder shall be paid in accordance with normal payroll procedures of the Company and shall be subject to all required withholdings and deductions.

        Section 1.2.2.    Stock Options:    To induce the Employee to accept employment the Company grants options to purchase 25,000 BASi common shares to the Employee under the 1997 Employee Incentive Option Plan and amendment. Amount, terms and conditions are described in the attached Draft Example Employee Incentive Option Agreement (Exhibit A). In addition you will receive non-qualified options to purchase 25,000 shares of BASi common stock under the agreement shown in Exhibit C. These grants are given at the discretion of BASi Board of Directors.

        Section 1.2.3.    Bonus:    All employees of BASi are eligible for a bonus grant which is based on the net income of the corporation reaching or exceeding 7% after tax. The distribution of this bonus component is at the discretion of the Compensation Committee of the Board of Directors.

        Section 1.2.4.    Relocation:    Through March 31, 2005 Employee may relocate to the Lafayette area. BASi Human Resources will assist with relocation to the area as described in the BASi Employee Handbook. Employee will be required to complete a Reimbursement Agreement for all relocation expenses.

        Section 1.2.5.    Vacation Policy:    During the initial term, Employee will accumulate one (1) vacation day per month in accordance with policies described in the BASi Employee Handbook. Employee shall also be granted an additional two (2) weeks’ vacation at the start of the initial term, effectively granting employee 15 years seniority. Employee’s compensation shall continue to be paid in full during this period. Any vacation at the end of any year ending on an anniversary date shall carry over to the following one-year period commencing on such anniversary date (the “Following Year”), but shall not carry over beyond the Following Year. Vacation time not used prior to the expiration will be banked for short-term disability as described in the BASi Employee Handbook. If the employee devotes time to BASi by using vacation days while remaining employed by his current employer those days will be added to the initial vacation days granted by BASi for the first year of employment.

        Section 1.2.5.    Other Benefits:    During the Employment Period, the Employee shall be entitled to participate in all employee benefit plans which are generally made available to employees of the Company, subject to the eligibility, qualification, waiting period and other terms and conditions of such plans as they shall be in effect from time to time unless listed herein as exceptions from those terms and conditions. The highlights of the benefits are as follows: group health insurance (after ninety days); two weeks unpaid vacation (optional); term life insurance ($10,000); long term disability insurance; and a 401K deferred tax savings incentive/profit sharing plan. Optional participation benefits include a flexible spending account, dental, vision, and short-term disability.

ARTICLE 2

Duties

        Section 2.1.    Duties:

During the Employment Period, the Employee will be the ranking financial officer of the company. This position will be responsible for the development, implementation, control, and communication of financial plans and policies of BASi.

In partnership with the executive management team, the CFO will play a pivotal role in insuring the financial infrastructure to plan for, support, and position the company for growth.

With the CEO, The CFO will be personally responsible for accuracy and truthfulness of all corporate financial reporting and will mentor the CEO and Board of Directors accordingly.

        Section 2.1.1.    Accounting:    Oversee all accounting activities for the corporation including:

a. Recruit, train, monitor, and manage corporate accounting staff at all sites in appropriate current practices and regulatory requirements.

b. Develop, monitor and guide optimization of divisional and corporate performance vs. capital and operating budgets. Optimize cash and debt management.

c. Assist the Board of Directors Audit Committee with the selection and management of a corporate auditor. Satisfy audit and tax requirements.

d. Ensure internal controls that meet Board of Directors’ expectations.

e. Maintain operating and control systems including ERP software.

        Section 2.1.2.    SEC Compliance

a. Provide accurate, timely financial reports (internal & external) including Sarbanes-Oxley compliance.

b. Ensure that infrastructure, timeliness, communications, and archiving are appropriate to meet disclosure rules.

c. Manage external legal and financial advisors to assure timely, cost effective, SEC compliant reporting.

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d. Adopt and fulfill all the obligations of a Certifying Officer of Bioanalytical Systems, Inc. under the Company Disclosure Committee Charter.

        Section 2.1.3.    Finance

a. Guide, secure, and manage financing needed to meet corporate operating and growth requirements.

b. Establish credibility and rapport based on personal, candid, truthful, SEC compliant interaction with current and potential investors, market analysts, investment bankers, etc. Balance Investor Relations strategy to satisfy both BASi needs and shareholder expectations.

c. Participate in selection, valuation and negotiation of mergers, acquisitions, partnerships, licensing and other business building opportunities.

         Section 2.1.4.    Advice and Consent

a. Participate as a key member of the executive management team.

b. Interact closely with the Board of Directors, particularly the Audit and Compensation Committees.

c. Train and lead staff, department heads, the executive team and the Board of Directors on financial issues.

d. Establish personal credibility throughout the organization by effectively developing solutions to business challenges.

e. Lead strategic planning.

f. Guide financial aspects of internal and external client and vendor relations. Advise on all corporate contracts.

g. Benchmark against competitors, present alternate strategies and become knowledgeable about the drug development and medical device industries.

        Section 2.2.    The Employee shall serve the Company by performing such other services as the Company may reasonably require to conduct the Company’s business. The Company shall also have the absolute right and power to direct and control the Employee in carrying out duties assigned by the Company, including, but not limited to, the right (1) to review, modify and cancel all work performed, and (2) to assign specific duties to be performed, including the general means and manner by which such duties shall be performed. Notwithstanding any other provisions of this Agreement, the Company shall not impose employment duties or constraints of any kind upon the Employee which would require the Employee to violate any ordinance, regulation, statute or other law. The Employee shall devote his full working time, attention and energy to the performances of the duties imposed hereunder. The Employee shall conform to such hours of work as may from time to time reasonably be required of him and shall not be entitled to receive any additional remuneration for work outside his normal hours. The Employee will NOT be held financially, legally, or otherwise liable for any past practices or actions or decisions made by BASi, or its predecessors prior to the start of the Employee’s beginning date of employment.

ARTICLE 3

Confidentiality and Other Matters

        Section 3.1.    Confidentiality Agreement.    The Employee, prior to and during the term of employment under this Agreement, has had and will have access to and has become or will become familiar with information, whether or not originated by the Employee, which is used in or related to the Business or the business of BASi or certain subsidiaries or affiliates of BASi and is (a) proprietary to, about, or created by the Company its subsidiaries or its affiliates; (b) designated as confidential by the Company, its subsidiaries or its affiliates; or (c) not generally known to or ascertainable by proper means by the public (“Confidential Information”).

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        Further, the Employee has had and will have access to items proprietary to the Company, its subsidiaries or its affiliates (“Proprietary Items”). “Proprietary Items” shall mean all legally-recognized rights which result from or are derived from the Employee’s work product or the work product of others made for the Company, its subsidiaries or its affiliates, including all past, present and future work product made for the Company, its subsidiaries or its affiliates, or with knowledge, use or incorporation of Confidential Information, including, but not limited to works of authorship, developments, inventions, innovations, designs, discoveries, improvements, trade secrets, trademarks, applications, techniques, know-how and ideas, whether or not patentable or copyrightable, conceived or made or developed by the Employee (solely or in cooperation with others) or others during the term of this Agreement or prior to or during his tenure with the Company, or which are reasonably related to the Business or the business of BAS or certain subsidiaries or affiliates of BAS or the actual or demonstrably anticipated research and development of the Company.

        The Employee agrees that any Confidential Information and Proprietary Items will be treated in full confidence and shall not be used, directly or indirectly, by him, nor shall the same be disclosed to any other firms, organizations, or persons outside of the Company’s employees bound by similar agreement, during the term of this Agreement or at any time thereafter, except as required in the course of his employment with the Company. All Confidential Information and Proprietary Items, whether prepared by the Employee or otherwise, coming into his possession, shall remain the exclusive property of the Company and shall not be permanently removed from the premises of the Company under any circumstances whatsoever, without the prior written consent of the Company.

        The Employee will not be obliged to keep information confidential to the extent that the information has ceased to be confidential and has entered the public domain otherwise than due to the Employee’s acts. The provisions of this Section 3.1 shall be in addition to, and shall not affect, the Employee’s common law duty of fidelity to the Company.

        Section 3.2.    The parties foresee that the Employee may make inventions or create other intellectual property in the course of his duties hereunder and agree that in this respect the Employee has a special responsibility to further the interests of the Company and its affiliates.

        Section 3.3.    The Employee agrees that during the Employee’s employment with the Company and for an additional period of the two (2) years immediately following termination of the Employee’s employment with the Company, the Employee shall not directly or indirectly, as an individual or as a director, officer, contractor, employee, consultant, partner, investor or in any other capacity with any corporation, partnership or other person or entity, other than the Company (an “Other Entity”), (i) contact or communicate any then current material customer or client of the Company in the Business, or any person or entity with which the Company is then engaged in material discussions regarding that person or entity becoming a client or customer of the Company in the Business, for the purpose of inducing any such customer or client to move its account from the Company to another company in the Business; provided, however, that nothing in this sentence shall prevent the Employee from becoming employed by or providing consulting services to any such customer or client of the Company in the Business, or (ii) solicit any other employee of the Company for employment or a consulting or other services arrangement with an Other Entity. The restrictions of this Section 3.3 shall not be deemed to prevent the Employee from owning not more than 5% of the issued and outstanding shares of any class of securities of an issuer whose securities are listed on a national securities exchange or registered pursuant to Section 12(g) of the Securities Exchange Act of 1934, as amended. In the event a court of competent jurisdiction determines that the foregoing restriction is unreasonable in terms of geographic scope or otherwise then the court is hereby authorized to reduce the scope of said restriction and enforce this Section 3.3 as so reduced. If any sentence, word or provision of this Section 3.3 shall be determined to be unenforceable, the same shall be severed herefrom and the remainder shall be enforced as if the unenforceable sentence, word or provision did not exist. Notwithstanding any provision of this Agreement to the contrary, the terms and conditions of this Section 3.3 shall survive for a period of two (2) years following termination of the Employee’s employment with the Company, at which time the terms and conditions of this Section 3.3 shall terminate.

        Section 3.4.    The Employee agrees to abide by all the conditions of the Company Code of Conduct and Ethics.

        Section 3.5.    As CFO, the Employee agrees to adopt and fulfill all the obligations dictated in the Company Disclosure Committee Charter as a Certifying Officer of Bioanalytical Systems, Inc.

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ARTICLE 4

As a new employee, your first one hundred eighty days (180) will be a trial period during which BASi can evaluate you and you can evaluate BAS. During this time, employment with BASi is at-will and allows the company or you to terminate the employment relationship for any reason prior to the completion of the trial period.

Termination of Employment

        Section 4.1.     Resignation by the Employee.    The Employee may resign from his employment with the Company at any time after September 30, 2006, by providing written notice to the Company of resignation at least ninety days (90) prior to the effective date of the resignation (the “Resignation Date”). Employee may resign at any time for “good reason,” due to (a) a material breach of this Agreement by the Company which continues after the Employee has given the Company thirty days (30) written notice of such breach, or (b) the assignment to the Employee of duties materially inconsistent with this Agreement other than in accordance with the terms of this Agreement, and the Company has not rectified such assignment within thirty days (30) after the Employee has given the Company written notice of such breach. A termination by the Employee for “good reason” shall entitle the Employee to the same compensation and benefits as if the Employee had been terminated by the Company without cause. In the event of a termination by the Employee for “good reason,” the provisions of Section 3.3 shall not apply and shall be of no force or effect. Upon any resignation by the Employee, the Employee shall use reasonable best efforts to assist the Company in good faith to effect a smooth transition. If employee voluntarily resigns his position without “good reason” prior to the termination of this contract the compensation terms of this agreement are null and void.

        Section 4.2.    Termination by the Company without Cause.     At any time after September 30, 2006, the Company may, in its sole and absolute discretion, terminate the Employee’s employment with the Company (the actual date of termination being referred to as the “Termination Date”) without cause, by providing written notice thereof to the Employee (“Termination Notice”) at least ninety days (90) prior to the Termination Date. In the event of termination of the Employee’s employment pursuant to this Section, the Company shall continue to pay to the Employee the Employee’s then current Annual Salary throughout such ninety-day (90) notice period and shall pay the Employee as compensation for loss of office (a) six months Annual Salary at the Employee’s then current salary in equal monthly installments over the six month period following the Termination Date (reduced pro rata if such termination occurs during the last year of the Initial Term and based on estimated time worked pursuant to Article 1), provided that such payments shall cease if the Employee becomes employed by a company which is in the Business during such six month period, and (b) all vacation accrued as of the Termination Date calculated in accordance with Section 1.2.4. Upon receipt by the Employee of a Termination Notice pursuant to this Section 4.2, (a) the Employee shall assist the Company in good faith to effect a smooth transition, and (b) the Company may request the Employee to vacate the premises owned by the Company and used in connection with the Business within a reasonable time, provided that the obligation of the Company to make payments to the Employee pursuant to this Section 4.2 and the other provisions of this Agreement shall not be affected, provided further, that in the event of a termination by the Company without cause pursuant to this Section 4.2, the provisions of Section 3.3 shall not apply and shall be of no further force or effect.

        Section 4.3.    Termination by the Company With Cause.    This Agreement shall be deemed to be terminated and the employment relationship between the Employee and the Company shall be deemed severed upon written notice to the Employee by the Company after the occurrence of any of the following:

a) The final, non-appealable imposition of any restrictions or limitations by any governmental authority having jurisdiction over the Employee to such an extent that he cannot render the services for which he was employed.

b) The Employee (i) willfully and continually fails or refuses (without proper cause) to substantially perform the duties of his employment and to adhere in all material respects to the provisions of this Agreement and the written policies of the Company, which failure shall not be remedied within thirty (30) days after written notice from the Company to the Employee, or (ii) conducts himself in a fraudulent manner, or (iii) conducts himself in an unprofessional or unethical manner which in the reasonable judgment of the Board of Directors of the Company is detrimental to the Company.

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c) The Employee willfully and continually fails or refuses to adhere to any written agreements to which the Employee and the Company or any of its affiliates are parties, which failure shall not be remedied within thirty (30) days after written notice from the Company to the Employee.

d) In the event of death of the Employee during employment. In such event the Company shall pay to the estate of the Employee the compensation earned by the Employee prior to his death but not yet paid to him by the Company.

ARTICLE 5

Guarantee

        BASi hereby unconditionally and irrevocably guarantees to the Employee the due performance by the Company of all its obligations under or in respect of the terms of this Agreement and shall as primary obligor and not as surety on demand pay to the Employee all sums due to be paid by the Company to the Employee. This guarantee shall be a continuing guarantee and shall inure to the benefit of the Employee, his heirs, successors and assigns.

ARTICLE 6

Miscellaneous

        Section 6.1.    Relationship between the Parties.    The relationship between the Company and the Employee shall be that of an employer and an employee, and nothing contained herein shall be construed or deemed to give the Employee any interest in any of the assets of the Company.

        Section 6.2.    Medical Examination.    Employment is contingent upon your completion of a medical examination from our company physician.

        Section 6.3.    Security Clearance.    Employment us contingent upon the completion of a through background investigation.

        Section 6.4.    Eligibility.    Employee must provide proof of eligibility to work in the United States, within three days of employment, as mandated by current federal employment laws. Proof of eligibility includes a valid driver’s license, original social security card, passport, certified birth certificate, or an unexpired employment eligibility card.

        Section 6.5.    Notices.    Any notice required or permitted to be given under this Agreement shall be in writing and delivered personally or sent by certified mail, addressed to the party entitled to receive said notice, at the following addresses:

If to Company: Bioanalytical Systems Evansville
2701 Kent Avenue
West Lafayette, IN 47906

If to Employee: Michael R. Cox
5521 Turkey Foot Road
Zionsville, IN 46077

or at such other address as may be specified from time to time in notices given in accordance with the provisions of this Section 6.5.

        Section 6.6.    Enforceability.    Both the Company and the Employee stipulate and agree that if any portion, paragraph sentence, term or provision of this Agreement shall to any extent be declared illegal, invalid or unenforceable by a duly authorized court of competent jurisdiction, then, (a) the remainder of this Agreement or the application of such portion, paragraph, sentence, term or provision in circumstances other than those as to which it is so declared illegal, invalid or unenforceable, shall not be affected thereby, (b) this Agreement shall be construed in all respects as if the illegal, invalid or unenforceable matter had been omitted and each portion and provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law and (c) the illegal, invalid or unenforceable portion, paragraph, sentence, term or provision shall be replaced by a legal, valid and enforceable provision which most closely reflects the intention of the parties hereto as reflected herein.

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        Section 6.7.    Nonwaiver.    The failure of either party hereto to insist in any one or more instances upon performance of any of the provisions of this Agreement or to pursue its or his rights hereunder shall not be construed as a waiver of any such provisions or as the relinquishment of any such rights.

        Section 6.8.    Succession.    This Agreement shall inure to the benefit of and be binding upon the parties hereto and upon their heirs, personal representatives, and successor entities. This Agreement may not be assigned by either party without prior written agreement of both parties.

        Section 6.9.    Governing Law.    The laws of the United States and the State of Indiana shall govern the construction and enforceability of this Agreement.

        Section 6.10.    Entire Agreement.    This Agreement constitutes the entire Agreement between the parties as to the subject matter contained herein and all other agreements or understandings are hereby superseded and terminated.

        Section 6.11.    Collective Agreements.    There are no collective agreements which directly affect the terms and conditions of the Employee’s employment.

        Section 6.12.     Grievance and Disciplinary Procedures.    If the Employee wishes to obtain redress of any grievance relating to his employment or if he is dissatisfied with any reprimand, suspension or other disciplinary steps taken by the Company, he shall apply in writing to both the Chairman of the Board of Directors of the Company and the Chairman of the Audit Committee, setting out the nature and details of any such grievance or dissatisfaction.

        Section 6.13.     Heading.    The headings of the sections are inserted for convenience only and do not affect the interpretation or construction of the sections.

        Section 6.14.     Remedies.    Employee acknowledges that a remedy at law for any breach or threatened breach of the provisions of Sections 3.1 through 3.3 of this Agreement would be inadequate and therefore agrees that the Company shall be entitled to injunctive relief, both preliminary and permanent, in addition to any other available rights and remedies in case of any such breach or threatened breach; provided, however, that nothing contained herein shall be construed as prohibiting the Company from pursuing any other remedies available for any such breach or threatened breach. Employee further acknowledges and agrees that in the event of a breach by Employee of any provision of Sections 3.1 through 3.3 of this agreement, the Company shall be entitled, in addition to all other remedies to which the Company may be entitled under this Agreement to recover from Employee its reasonable costs including attorney’s fees if the Company is the prevailing party in an action by the Company. This Agreement is entered into by the Company for itself and in trust for each of its affiliates with the intention that each company will be entitled to enforce the terms of this Agreement directly against Employee.

IN WITNESS WHEREOF, the Company and the Employee have executed, or caused to be executed, this Agreement as of the day and year first written above.

“COMPANY”



Peter T. Kissinger, Ph.D.
President & CEO “EMPLOYEE”



Michael R. Cox

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EXHIBIT A

DRAFT EXAMPLE

BIOANALYTICAL SYSTEMS, INC.
EMPLOYEE INCENTIVE STOCK OPTION AGREEMENT

        THIS AGREEMENT, made this XXX day of April, 2004, by and between Bioanalytical Systems, Inc., an Indiana corporation with its principal office at 2701 Kent Avenue, West Lafayette, Indiana (hereinafter called “Company”), and Michael R. Cox, residing at 5521 Turkey Foot Road, Zionsville, IN 46077 (hereinafter called the “Grantee”), pursuant to the terms, conditions and limitations contained in the Company’s 1997 Employee Incentive Stock Option Plan as amended January 24, 2003 (hereinafter called the “Plan”), a copy of which is attached hereto as Exhibit B.

WITNESSETH THAT:

        WHEREAS, in the interests of affording an incentive to the Grantee to give his best efforts to the Company as a key employee, the Company wishes to provide that the Grantee shall have an option to buy Common Shares of the Company:

        NOW, THEREFORE, it is hereby mutually agreed to as follows:

        1.         The Company hereby grants to the Grantee the right and option to purchase, on the terms and conditions hereinafter set forth, all or any part of an aggregate of 25,000 shares (hereinafter called “Subject Shares”) of the presently authorized, but unissued, or treasury, Common Shares of the Company, hereinafter called the “Common Shares”) at a purchase price of $X.XX per share, exercisable in whole or in part from time to time subject to the limitation that no option may be exercised with respect to fewer than twenty-five (25) shares then subject to opinion hereunder, in which event any exercise must be as to all such shares and subject to the further limitation that the options represented by the Agreement shall be exercisable in two equal installments as set forth in Section 6(e) of the Plan. The option may be exercised as to the shares covered by the first installment from and after the six month anniversary of the grant of the option, with the second installment becoming exercisable on the one year anniversary date of the grant of the option. The option shall expire as to all shares subject to purchase hereunder on the 10^th anniversary date of this Agreement if not exercised on or before such date.

        2.         Subject to the limitation specified in Section 1 hereof and in Section 6(e) of the Plan the Grantee may from time to time exercise this option by delivering a written notice of exercise and subscription agreement to the Secretary of the Company specifying the number of whole shares to be purchased, accompanied by payment (i) in cash, (ii) by certified check or bank cashier’s check, (iii) through the tender to the Company of Common Shares of the Company owned by the Optionee or by withholding of Common Shares of the Company that are subject to the option, which Common Shares shall be valued, for purposes of determining the extent to which the purchase price has been paid, at their fair market value on the date of exercise as determined in Section 6(c) of the Plan, or (iv) by a combination of the methods described in (i), (ii), or (iii). The Company may, in its sole discretion, refuse to withhold Common Shares of the Company as payment of the exercise price of the option. Such exercise shall be effective upon receipt by the Secretary of such written notice, subscription agreement and payment of the purchase price. Only the Grantee may exercise the option during the lifetime of the Grantee. No fractional shares may be purchased at any time hereunder.

        3.         Upon the effective exercise of the option, or any part thereof, certificates representing the shares so purchased, marked fully paid and non-assessable, shall be delivered to the person who exercised the option, except as provided in Section 6(j) of the Plan. Until certificates representing such shares shall have been issued and delivered, the Grantee shall not have any of the rights or privileges of a shareholder of the Company in respect of any such shares.

        4.         In the event that, prior to the delivery by the Company of all the Subject Shares, there shall be an increase or reduction in the number of Common Shares of the Company issued and outstanding by reason of any subdivision or consolidation of Common Shares or any other capital adjustment, the number of shares then subject to this option shall be increased or decreased as provided in Section 6(g) of the Plan.

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        5.         The option and the rights and privileges conferred by this Option Agreement shall not be assigned or transferred by the Grantee in any manner except by will or under the laws of descent and distribution. In the event of any attempted assignment or transfer in violation of this Section 5, the option, rights and privileges conferred by this Option Agreement shall become null and void.

        6.         Nothing herein contained shall be deemed to create any limitation nor restriction upon such rights as the Company would otherwise have to terminate a person as an employee of the Company.

        7.         The option, rights and privileges herein conferred are granted subject to the terms and conditions set forth herein and in the Plan.

        8.         Any notices to be given or served under the terms of this Option Agreement shall be addressed to the Secretary of the Company at 2701 Kent Avenue, West Lafayette, Indiana, and to the Grantee at the address set forth on page one of this Option Agreement, or such other address or addresses as either party may hereafter designate in writing to the other. Any such notice shall be deemed to have been duly given or served, and deposited in the United States mail.

        9.         The interpretation by the Incentive Stock Option Committee, appointed by the Company’s Board of Directors to administer the Plan, or any provisions of the Plan or of this Option Agreement shall be final and binding on the Grantee unless otherwise determined by the Company’s Board of Directors.

        10.         This Option Agreement shall be governed by the laws of the State of Indiana.

        IN WITNESS WHEREOF, the Company and the Grantee have signed this Option Agreement as of the day and year first above written.

ATTEST:


“COMPANY”

BIOANALYTICAL SYSTEMS, INC.



By:  

“GRANTEE”



By:  

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EXHIBIT B

BIOANALYTICAL SYSTEMS, INC.
1997 EMPLOYEE INCENTIVE STOCK OPTION PLAN
(As Amended January 24, 2003)

1.    Purpose.    This 1997 Employee Incentive Stock Option Plan (hereinafter referred to as the “Plan”) is intended to be an incentive to, and to encourage share ownership by, key employees of Bioanalytical Systems, Inc. and its subsidiaries (hereinafter collectively referred to as the “Employer”) in the manner contemplated by Section 422 of the Internal Revenue Code of 1986, as amended (“Code”), in order to provide such employees with a more direct and proprietary interest in the welfare and success of the Employer and to insure their continuation as employees of the Employer.

2.    Administration.    The Plan shall be administered by an Incentive Stock Option Committee (hereinafter referred to as the “Committee”) consisting of three (3) or more members of the Board of Directors of Bioanalytical Systems, Inc. (the “Company”) who are appointed from time to time by the Board of Directors of the Company. The Board of Directors of the Company may from time to time remove members from, or add members to, the Committee. Vacancies on the Committee, howsoever caused, shall be filled by the Board of Directors of the Company. The Committee shall have the power to interpret and construe the provisions of the Plan or any option granted under it, and such interpretation or construction shall be final and binding. The Committee may prescribe, amend and rescind rules and regulations relative to the Plan or its construction or interpretation. A majority of the Committee shall constitute a quorum. All determinations of the Committee shall be made by not less than a majority of its members. No member of the Committee shall be liable for any action or determination made in good faith.

3.    Eligibility.    Only those persons who are employees of the Employer shall be eligible to participate in the Plan. The Committee shall determine from time to time the particular employees of the Employer who shall be eligible to participate in the Plan and the extent of their participation therein. No option shall be granted under the Plan to any employee of the Employer who, at the time such option is granted, owns shares possessing more than ten percent (10%) of the total combined voting power of all classes of shares of the Company or of any parent or subsidiary corporation of the Company or any parent or subsidiary corporation of any of the foregoing (such employee being hereinafter referred to as a “10% Shareholder”), except as provided below. In determining whether the percentage limitations of this paragraph are met, an employee shall be considered as owning any shares owned, directly or indirectly, by or for his brothers or sisters (whether by the whole or half blood), spouse, ancestors, and lineal descendants. For purposes of this paragraph 3, shares owned, directly or indirectly, by or for a corporation, partnership, estate, or trust shall be considered as being owned proportionately by or for its shareholders, partners, or beneficiaries. The percentage limitations of this paragraph 3 shall not apply, however, if at the time such option is granted the option price is at least one hundred ten percent (110%) of the fair market value of the shares subject to the option and such option by its terms is not exercisable after the expiration of five (5)years from the date such option is granted.

4.    Shares.    The shares subject to the options and other provisions of the Plan shall be shares of the Company’s authorized, but unissued, or reacquired Common Shares (the “Common Shares”). The total amount of the Common Shares on which options may be granted shall not exceed in the aggregate Three Hundred Ninety-Five Thousand (395,000) shares, except as such number of shares shall be adjusted in accordance with the provisions set forth in paragraph 6(g) hereof. In the event any outstanding option under the Plan expires or is terminated for any reason prior to the end of the period during which options may be granted, the Common Shares allocable to the unexercised portion of such option may again be subject to an option under the Plan. During the period that any options granted hereunder are outstanding, the Employer shall reserve and keep available such number of Common Shares as will be sufficient to satisfy all outstanding, unexercised options.

5.    Maximum Exercise Rule.     The aggregate fair market value (determined at the time the option is granted) of the shares with respect to which incentive stock options are exercisable for the first time by an employee during any calendar year under all such plans of the Employer and any parent or subsidiary corporation of the Employer shall not exceed One Hundred Thousand Dollars ($100,000.00).

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6.    Terms and Conditions of Options.     Options granted pursuant to the Plan shall be evidenced by agreements in such form as the Committee shall from time to time prescribe, which agreements shall comply with and be subject to the following terms and conditions:

a) Medium and Time of Payment.    The option price shall be payable in United States dollars upon the exercise of the option and shall be paid (i) in cash; (ii) by certified check or by bank cashier’s check; (iii) through the tender to the Company of Common Shares of the Company or through the withholding of Common Shares of the Company that are subject to the option, which Common Shares shall be valued, for purposes of determining the extent to which the purchase price has been paid, at their fair market value on the date of exercise as determined in Section 6(c); or (iv) by a combination of (the methods described in (i), (ii), or (iii); provided, however, that the Committee may in its discretion impose and set forth in the option agreement pertaining to an option such limitations or prohibitions on the use of Common Shares to exercise options as it deems appropriate. Fair market value of the Common Shares shall be determined by the Committee in the same manner that it is determined in establishing option prices. Payment of the option price shall be accompanied by a written subscription agreement in a form to be prescribed by the Committee.

b) Number of Shares.    The option agreement shall state the total number of shares to which it pertains, and the date of the grant of the option. The Committee may prescribe in the option agreement (a minimum number of Common Shares with respect to which an option may be exercised, in whole or in part.

c) Option Price.     The option price shall be an amount per share not less than the fair market value per share of the Common Shares on the date of granting of the option. In the case of options granted to an employee of the Employer who is a 10% Shareholder, the option price shall be an amount per share not less than one hundred ten percent (110%) of the fair market value per share of the Common Shares on the date of the granting of the option. Fair market value shall mean, if the price of the (Shares is so reported, the closing price for the Common Shares on the National Association of Securities Dealers Automated Quotation System or any exchange on which the Common Shares are then traded, as reported in The Wall Street Journal (Midwest Edition). If the price of Common Shares is not so reported, fair market value shall be determined, in good faith, by the Committee in accordance with such procedures as the Committee shall from time to time prescribe.

d) Term of Option.    The term of each option granted under the Plan shall expire within the period prescribed in the agreement relating thereto, which shall not be more than five (5) years from the (date the option is granted if the optionee is a 10% Shareholder and not more than ten (10) years from the date the option is granted if the optionee is not a 10% Shareholder.

e) Date of Exercise.    Each option shall be exercisable as determined by the Committee and set forth in an option agreement, provided, however, that any such limitation on the exercise of an option contained in an option agreement may be rescinded, modified, or waived by the Committee, in its sole (discretion, at any time and from time to time after the date of grant of such option so as to accelerate the time in which the option may be exercised. Except as specifically restricted by the Committee, any option may be exercised in whole at any time or in part from time to time during its term.

f) Termination of Employment.    In the event an optionee shall cease to be employed by the Employer, a parent corporation of the Employer, or a corporation or a parent or a subsidiary corporation of such corporation issuing or assuming an option in a transaction to which Section 424(g) of the Code applies, all options outstanding in the hands of the optionee shall terminate immediately as to any unexercised portion thereof; provided, however, that if any cessation of employment is due to retirement with the consent of the Employer or permanent and total disability, the optionee shall have the right, subject to the provisions of paragraph 6(d) and paragraph 6(e) hereof, to exercise the option, with respect to the shares for which it could have been exercised on the effective date of his cessation of employment, at any time within three (3) months after such cessation of employment due to (retirement with the consent of the Employer or at any time within twelve (12) months after such cessation of employment due to permanent and total disability; and provided further, that if the employee shall die while in the employ of the Employer, the employee’s personal representative shall have the right, subject to the provisions of paragraph 6(d) and paragraph 6(e) hereof, to exercise the option with respect to the shares for which it could have been exercised on the date of death, at any time within twelve (12) months from the date of death. Whether a cessation of employment is to be considered a retirement with the consent of the Employer or due to permanent and total disability, and whether an authorized leave of absence or absence on military or government service shall be deemed to constitute termination of employment, for the purposes of the Plan, shall be determined by the Committee, which determination shall be final and conclusive.

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g) Recapitalization.    The aggregate number of Common Shares on which options may be granted hereunder, the number of shares thereof covered by each outstanding option, and the price per share thereof in each such option, shall all be proportionately adjusted for any increase or decrease in the number of issued Common Shares resulting from a subdivision or consolidation of shares or any other capital adjustment, the payment of a share dividend, or other increase or decrease in the Common Shares (effected without receipt of consideration by the Employer. In the event that, prior to the delivery by the Employer of the Common Shares remaining under any outstanding option hereunder, there shall be a capital reorganization or reclassification of the capital of the Employer resulting in a substitution of other shares for the Common Shares, there shall be substituted the number of substitute shares which would have been issued in exchange for the Common Shares then remaining under the option if such Common Shares had been then issued and outstanding.

h) Merger, Dissolution.     If the Employer shall be a party to any merger or consolidation, the Employer shall have the right to terminate any option outstanding on thirty (30) days written notice; provided, however, if such merger or consolidation is not consummated within 180 days from the date of the (aforementioned notice, all options terminated shall be deemed to have been continuously in effect since the date of execution thereof. In the event of a dissolution or liquidation of the Employer, the Employer shall give each optionee thirty (30) days written notice thereof; every unexercised option outstanding hereunder shall be deemed to be terminated upon such dissolution or liquidation.

i) Assignability.    No option shall be assignable or transferable except by will or under the laws of   (descent and distribution. During the lifetime of an optionee, the option shall be exercisable only by the optionee.

j) Issuance of Shares and Compliance with Securities Laws.    The Employer may postpone the issuance and delivery of certificates representing shares until (a) the admission of such shares to listing on any stock exchange on which shares of the Employer of the same class are then listed and (b) the completion of such registration or other qualification of such shares under any state or federal law, rule or regulation as the Employer shall determine to be necessary or advisable, which registration or other qualification the Employer shall use its best efforts to complete; provided, however, a person (purchasing shares pursuant to the Plan has no right to require the Employer to register the Common Shares under federal or state securities laws at any time. Any person purchasing shares pursuant to the Plan may be required to make such representations and furnish such information as may, in the opinion of counsel for the Employer, be appropriate to permit the Employer, in light of the existence or non-existence with respect to such shares of an effective registration under the Securities Act of 1933, as amended, or any similar state statute, to issue the shares in compliance with the provisions of those or any comparable acts.

k) Rights as a Shareholder.    An optionee shall have no rights as a shareholder with respect to shares covered by an option until the date of issuance of a certificate to him and only after such shares are (fully paid. No adjustment will be made for dividends or other rights for which the record date is prior to the date such certificate is issued.

l) Other Provisions.    The option agreements entered into under the Plan shall contain such other provisions as the committee shall deem advisable.

7.    Term of Plan.    The Plan shall become effective upon the approval by the holders of a majority of the issued and outstanding shares of each class of the voting shares of the Company voting in person or by proxy at a duly held shareholders’ meeting; provided, however, that the Plan shall become effective only if approved by such shareholders within twelve (12) months before or after the date the Plan is adopted by the Company Board of Directors. The Board of Directors may, in its sole discretion, terminate the Plan at any time with respect to any shares as to which options have not been granted. No option shall be granted under the Plan thereafter.

8.    Amendment of the Plan.    The Board of Directors of the Company may from time to time, alter, amend, suspend, or discontinue the Plan with respect to any shares as to which options have not been granted; provided, however, that the Board of Directors may not, without further approval by the holders of a majority of the issued and outstanding shares of each class of voting shares of the Company:

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a) increase the maximum number of shares as to which options may be granted under the Plan (other than to reflect a stock split or stock dividend);

b) change the class of shares for which options may be granted under the Plan; or

c) change the provisions of paragraph 6(c) concerning the option price.

9.    Application of Funds.     The proceeds received by the Company from the sale of shares pursuant to options granted hereunder will be used for general corporate purposes.

10.    No Obligation to Exercise Option.     The granting of an option hereunder shall impose no obligation upon the optionee to exercise such an option.

11.    Continuance of Employment.     Neither the adoption of the Plan nor the granting of an option hereunder shall impose any obligation on the Employer to continue the employment of an optionee.

12.    Applicability of Amendments.     All outstanding options shall be deemed to be amended so as to include, to the extent applicable thereto, any amendments made to the Plan subsequent to the granting of such options.

13.    Withholdings.    The Committee shall have the right to require optionees to remit to the Company amounts sufficient to satisfy any federal, state or local income tax withholding requirements (or make other arrangements satisfactory to the Company with regard to such taxes) at such times as the Company deems necessary or appropriate for compliance with such laws.

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EX-10.2

BIOANALYTICAL SYSTEMS, INC.

EMPLOYEE INCENTIVE STOCK OPTION AGREEMENT

        THIS AGREEMENT, made this 1st day of April, 2004, by and between Bioanalytical Systems, Inc., an Indiana corporation with its principal office at 2701 Kent Avenue, West Lafayette, Indiana (hereinafter called “Company”), and Michael Cox, residing at 5521 Turkey Foot Road, Zionsville, IN 46077 (hereinafter called the “Grantee”), pursuant to the terms, conditions and limitations contained in the Company’s 1997 Employee Incentive Stock Option Plan (hereinafter called the “Plan”), a copy of which is attached hereto as Exhibit A.

WITNESSETH THAT:

        WHEREAS, in the interests of affording an incentive to the Grantee to give his best efforts to the Company as a key employee, the Company wishes to provide that the Grantee shall have an option to buy Common Shares of the Company:

        NOW, THEREFORE, it is hereby mutually agreed to as follows:

        1.        The Company hereby grants to the Grantee the right and option to purchase, on the terms and conditions hereinafter set forth, all or any part of an aggregate of 25,000 shares (hereinafter called “Subject Shares”) of the presently authorized, but unissued, or treasury, Common Shares of the Company, hereinafter called the “Common Shares”) at a purchase price of $4.58 per share, exercisable in whole or in part from time to time subject to the limitation that no option may be exercised with respect to fewer than twenty-five (25) shares then subject to opinion hereunder, in which event any exercise must be as to all such shares and subject to the further limitation that the options represented by the Agreement shall be exercisable in two equal installments as set forth in Section 6(e) of the Plan. The option may be exercised as to the shares covered by the first installment from and after the first anniversary of the grant of the option, with second installment becoming exercisable on the third anniversary date. The option shall expire as to all shares subject to purchase hereunder on the 10^th anniversary date of this Agreement if not exercised on or before such date.

        2.        Subject to the limitation specified in Section 1 hereof and in Section 6(e) of the Plan the Grantee may from time to time exercise this option by delivering a written notice of exercise and subscription agreement to the Secretary of the Company specifying the number of whole shares to be purchased, accompanied by payment (i) in cash, (ii) by certified check or bank cashier’s check, (iii) through the tender to the Company of Common Shares of the Company owned by the Optionee or by withholding of Common Shares of the Company that are subject to the option, which Common Shares shall be valued, for purposes of determining the extent to which the purchase price has been paid, at their fair market value on the date of exercise as determined in Section 6(c) of the Plan, or (iv) by a combination of the methods described in (i), (ii), or (iii). The Company may, in its sole discretion, refuse to withhold Common Shares of the Company as payment of the exercise price of the option. Such exercise shall be effective upon receipt by the Secretary of such written notice, subscription agreement and payment of the purchase price. Only the Grantee may exercise the option during the lifetime of the Grantee. No fractional shares may be purchased at any time hereunder.

        3.        Upon the effective exercise of the option, or any part thereof, certificates representing the shares so purchased, marked fully paid and non-assessable, shall be delivered to the person who exercised the option, except as provided in Section 6(j) of the Plan. Until certificates representing such shares shall have been issued and delivered, the Grantee shall not have any of the rights or privileges of a shareholder of the Company in respect of any such shares.

        4.        In the event that, prior to the delivery by the Company of all the Subject Shares, there shall be an increase or reduction in the number of Common Shares of the Company issued and outstanding by reason of any subdivision or consolidation of Common Shares or any other capital adjustment, the number of shares then subject to this option shall be increased or decreased as provided in Section (g) of the Plan.

        5.        The option and the rights and privileges conferred by this Option Agreement shall not be assigned or transferred by the Grantee in any manner except by will or under the laws of descent and distribution. In the event of any attempted assignment or transfer in violation of this Section 5, the option, rights and privileges conferred by this Option Agreement shall become null and void.

        6.        Nothing herein contained shall be deemed to create any limitation nor restriction upon such rights as the Company would otherwise have to terminate a person as an employee of the Company.

        7.        The option, rights and privileges herein conferred are granted subject to the terms and conditions set forth herein and in the Plan.

        8.        Any notices to be given or served under the terms of this Option Agreement shall be addressed to the Secretary of the Company at 2701 Kent Avenue, West Lafayette, Indiana, and to the Grantee at the address set forth on page one of this Option Agreement, or such other address or addresses as either party may hereafter designate in writing to the other. Any such notice shall be deemed to have been duly given or served, and deposited in the United States mail.

        9.        The interpretation by the Incentive Stock Option Committee, appointed by the Company’s Board of Directors to administer the Plan, or any provisions of the Plan or of this Option Agreement shall be final and binding on the Grantee unless otherwise determined by the Company’s Board of Directors.

        10.        This Option Agreement shall be governed by the laws of the State of Indiana.

        IN WITNESS WHEREOF, the Company and the Grantee have signed this Option Agreement as of the day and year first above written.

ATTEST:


“COMPANY”

BIOANALYTICAL SYSTEMS, INC.



By:  

“GRANTEE”



By:  

EX-10.3

April 1, 2004



Mr. Michael R. Cox
5521 Turkey Foot Road
Zionsville, IN 46027

Dear Mike:

The Board of Directors of Bioanalytical Systems, Inc. (the “Company”) has approved the grant of non-qualified stock options to you. This letter will serve as notice of the grant, effective as of February 27, 2004 (the “date of grant”), of an option to purchase (the “Option”) 25,000 of the Common Shares of the Company (the “Option Shares”) on the terms and conditions set forth herein, and upon your execution and delivery to the Company of the copy of this letter included herein will constitute our agreement as to those terms. This Option has not been granted under the terms of the Company’s employee stock option plans, and is not a “qualified” stock option as defined by the U.S. Internal Revenue Service. You are urged to consult with your tax advisors concerning the tax effect of the grant and exercise of this Option.

1. OPTION PRICE.    The purchase price of the Option Shares is $4.58 per share (the "Option Price").

2. MEDIUM AND TIME OF PAYMENT.    You must pay the Option Price with respect to the Option Shares being purchased at the time you exercise the Option. The Option Price may be paid either (a) in cash; (b) by certified check or by bank cashier's check; (c) if you can do so without violating Section 16(b) of the Securities Exchange Act of 1934, through the tender to the Company of outstanding Common Shares or through the withholding and surrender to the Company of Option Shares being purchased, which shall be valued, for purposes of determining the extent to which the purchase price has been paid, at the fair market value of the Common Shares on the date of exercise of the Option; or (d) or by a combination of (a), (b) or (c).

3. TERM AND EXERCISABILITY OF OPTIONS.    The Option is effective immediately upon your acceptance of this letter and may be exercised as to the shares covered by the first installment six months after the grant of the option and the second installment after the first anniversary of the grant of the option.. The Option will be considered to have been effectively exercised only upon delivery to the Company of the Option Price and a "Notice of Exercise" in the form attached hereto, and the satisfaction to all other conditions described in this letter. The Option shall expire as to all unexercised Option Shares at the close of business on the tenth anniversary of the date of this letter (or on the next business day if that date is a Saturday, Sunday or holiday).

4. CESSATION OF SERVICE WITH THE COMPANY.    In the event you cease to serve as an employee of the Company or any of its subsidiaries, this Option shall terminate immediately upon termination of employment as to any unexercised Option Shares; provided, however, that if termination of employment is due to retirement with the consent of the Company or is due to a permanent and total disability; you shall have the right to exercise the Option with respect to the Common shares for which it could have been exercised on the effective date of termination of employment at any time within three months after the termination date, if termination is due to retirement with the consent of the Company, or at anytime within 12 months after termination date, if termination is due to permanent and total disability. In the event of your death while serving as an employee of the Company or any of its subsidiaries, your personal representative shall have the right to exercise this Option with respect to the Common Shares for which it could have been exercised on the date of your death. Whether termination is a retirement with the consent of the Company or due to permanent and total disability, and whether an authorized leave of absence on military or government service shall be deemed to constitute termination of employment for the purposes of this Option, shall be determined by the Board of Directors in its sole discretion, which determination shall be final and conclusive.

5. RECAPITALIZATION.    The number of Option Shares and the Option Price each shall be proportionally adjusted for any increase or decrease in the number of issued shares of the Common shares resulting from a subdivision or consolidation of shares of the Company, the payment of a share dividend, a share split or other increase or decrease in the outstanding Common Shares effected without receipt of consideration by the Company (including an increase or decrease effected as a part of the Recapitalization of the Company, as defined herein). In the event that there shall be a recapitalization or reorganization of the Company or a reclassification of its outstanding shares (each a "Recapitalization") as a result of which other shares (the "New Shares") are issued in exchange for Common Shares, then there shall be substituted for the Option Shares then issuable hereunder that number of New Shares into which those Option Shares have been converted had they been outstanding at the effective date of the Recapitalization.

6. MERGER, DISSOLUTION.    If the Company shall enter into any agreement of merger or consolidation (whether or not it shall be the surviving entity thereunder), the Company shall have the right to terminate this Option as of any date specified in a written notice given to you not less than 30 days prior to the termination date. If the merger or consolidation described in that notice is not consummated within 180 days following the termination date of this Option specified in the notice, this Option thereafter shall be deemed to have been continuously in effect since the date hereof. In the event of the sale of all or substantially all of the assets of the Company and the distribution of the proceeds thereof to shareholders in liquidation of the company, the Company shall give you 30 days prior written notice specifying record date for the purpose of determining the shareholders entitled to participate in that distribution and this Option shall expire as to all Option Shares that remain unexercised as of the date of that distribution.

7. NONASSIGNABILITY.    This Option is not assignable or transferable except by will or under the laws of descent and distribution. During your lifetime, this Option shall be exercisable only by you (or if you become incapacitated, by your legal guardian or attorney-in-fact).

8. ISSUANCE OF SHARES AND COMPLIANCE WITH SECURITIES LAWS.    The Company may postpone the issuance and delivery of certificates representing Common Shares until (a) the admission of such shares to listing on any exchange on which shares of the Company of the same class are then listed and (b) the completion of any requirements for registration or other qualification of the shares under any state or Federal law, rule or regulation or the rules and regulations of any exchange upon which the Common shares are traded as the Company shall determine to be necessary or advisable. The Company shall use its reasonable commercial efforts to complete any required registration or other qualification. You have no right to require the Company to register the Common Shares acquired upon the exercise of this Option under federal or state securities laws. As a condition to the effective exercise of this Option you may be required to make such representations and furnish such information as may, in the opinion of counsel for the Company, be appropriate to permit the Company to determine whether registration or qualification of those shares is required in connection with that transaction.

9. RIGHTS AS A SHAREHOLDER.    You shall have no rights as a shareholder with respect to Common Shares subject to this Option until the date of issuance of a certificate to you. A certificate will not be issued until you have exercised the Option, fully paid for the Common Shares acquired thereby and satisfied all other details described in this letter. No adjustment will be made for dividends or other rights for which the record date is prior to the date a certificate is issued.

10. NO OBLIGATION TO EXERCISE OPTION.    The grant of this Option imposes no obligation upon you to exercise the Option.

11. NO OBLIGATION TO CONTINUE EMPLOYMENT.    The grant of this Option to you does not constitute any contract of employment between you and the Company, and does not impose any obligation of the Company to continue your employment.

12. WITHHOLDINGS.    As a condition to the effective exercise of this option, the Company may right to require you to remit to the Company amounts sufficient to satisfy any applicable withholding requirements set forth in the Internal Revenue Code of 1986, as amended, or under state or local law relating to the Option. The Company shall have the right, to the extent permitted by law, to deduct from any payment of any kind otherwise due to you any federal, state or local taxes of any kind required by law to be withheld with respect to the exercise of the Option.

13. POWER AND AUTHORITY.    The Board of Directors shall have the full power and authority to take all actions and make all determinations required or provided for under the terms of this Option; to interpret and construe the provisions of this letter, which interpretation or construction shall be final, conclusive and binding on the Company and you; and to take any and all other actions and make any and all other determinations not consistent with the specific terms and provisions of this letter which the Board of Directors deems necessary or appropriate.

Please acknowledge your receipt of this letter and your agreement to the terms set forth herein by signing and returning the copy enclosed for that purpose.

Very Truly Yours,



Peter T. Kissinger
President

Accepted and agreed to:  

Date:  

EX-10.4

FOURTH AMENDMENT TO
CREDIT AGREEMENT

        THIS FOURTH AMENDMENT made as of the 14th day of May, 2004, by and between BIOANALYTICAL SYSTEMS, INC. ("Borrower") and THE PROVIDENT BANK ("Bank");

W I T N E S S E T H:

        WHEREAS, as of October 29, 2002, the parties hereto entered into a certain Credit Agreement, as amended (as amended, the “Agreement”); and

        WHEREAS, the parties desire to further amend the Agreement to, among other things, revise certain financial covenants and to add collateral, subject to the terms contained herein;

        NOW, THEREFORE, in consideration of the premises, and the mutual promises herein contained, the parties agree that the Agreement shall be, and it hereby is, amended as provided herein and the parties further agree as follows:

PART I.    AMENDATORY PROVISIONS

Article 1.    Definitions

        Section 1.1    Defined Terms.    Section 1.1 of the Agreement is hereby amended by substituting the following definitions in lieu of the like existing definitions:

        “Borrowing Base” means, on any date of determination, an amount equal to (a) Eighty Percent (80%) of Borrower’s Eligible Accounts (excluding any Accounts, or any portion thereof, which are considered unacceptable to Bank), plus (b) the lesser of (i) Fifty Percent (50%) of Borrower’s raw materials and finished goods Eligible Inventory or (ii) Sixty-Seven Percent (67%) of Borrower’s Eligible Accounts, minus (c) the maximum credit limit under Borrower’s corporate credit card issued by Bank, plus (d) until the earlier of December 31, 2004 or upon the sale of Borrower’s Baltimore, Maryland real estate, the sum of (i) One Million Five Hundred Thousand Dollars ($1,500,000), minus (ii) the product of (A) Twenty-Five Thousand Dollars ($25,000), multiplied by (B) as of any relevant date, the number of full calendar months that have elapsed after the month of October 2002. (For example, in June, 2003, the amount added as part of the Borrowing Base under clause (d) above will be One Million Five Hundred Thousand Dollars ($1,500,000) minus One Hundred Seventy-Five Thousand Dollars ($175,000) (seven times Twenty-Five Thousand Dollars ($25,000)), or a total of One Million Three Hundred Twenty-Five Thousand Dollars ($1,325,000)).

        “Fixed Charge Coverage Ratio” means, with respect to Borrower, (a) the sum of (i) EBITDA, minus (ii) Unfunded Capital Expenditures, plus (iii) Rentals, divided by (b) the sum of (i) interest expense, plus (ii) mandatory payments of all long term Indebtedness, plus (iii) taxes paid, plus (iv) Rentals; in each instance determined for the trailing four (4) quarter period ending on the date of determination, except that for purposes of determining the Fixed Charge Coverage Ratio for the fiscal periods ending December 31, 2003, June 30, 2004 and September 30, 2004, Unfunded Capital Expenditures shall be exclusive of Unfunded Capital Expenditures related to Borrower’s $1,810,000 construction project and new equipment purchased by Borrower. The Fixed Charge Coverage Ratio shall be determined from the Financial Statements.

FOURTH AMENDMENT TO CREDIT AGREEMENT PAGE 1

Article 3.    Security and Guaranty

        Section 3.1 Security.    Section 3.1 of the Agreement is hereby amended by substituting the following paragraphs (c) and (d) in lieu of the existing paragraph (c) thereof:

        (c)        a Deed of Trust, Security Agreement and Fixture Filing, in the form prescribed by Bank, constituting a first priority mortgage lien upon Borrower’s Baltimore, Maryland real estate; and

        (d)        a such other security interests as may be described in the Loan Documents.

Article 5.    Covenants

        Section 5.3.    Financial Covenants.    Section 5.3 of the Agreement is hereby amended by adding a new Section 5.3.6 as follows:

        5.3.6     Minimum EBITDA.    Obtain EBITDA of not less than (a) Three Million Seven Hundred Thousand Dollars ($3,700,000) as of June 30, 2004, and (b) Four Million Eight Hundred Thousand Dollars ($4,800,000) as of September 30, 2004.

PART II.    WAIVER

        Bank hereby waives compliance by Borrower with the provisions of Section 5.3.3 (Fixed Charge Coverage Ratio) of the Agreement for fiscal period ending March 31, 2004. This waiver shall be in force and effect solely for the referenced period, unless otherwise agreed by Bank in the exercise of its sole discretion.

PART III.    CONTINUING EFFECT

        Except as expressly modified herein:

        (a)        All terms, conditions, representations, warranties and covenants contained in the Agreement shall remain the same and shall continue in full force and effect, interpreted, wherever possible, in a manner consistent with this Fourth Amendment; provided, however, in the event of any irreconcilable inconsistency, this Fourth Amendment shall control;

FOURTH AMENDMENT TO CREDIT AGREEMENT PAGE 2

        (b)        All The representations and warranties contained in the Agreement shall survive this Fourth Amendment in their original form as continuing representations and warranties of Borrower; and

        (c)        All Capitalized terms used in this Fourth Amendment, and not specifically herein defined, shall have the meanings ascribed to them in the Agreement.

        In consideration hereof, Borrower represents, warrants, covenants and agrees that:

        (aa)        All Each representation and warranty set forth in the Agreement, as hereby amended, remains true and correct as of the date hereof in all material respects, except to the extent that such representation and warranty is expressly intended to apply solely to an earlier date and except changes reflecting transactions permitted by the Agreement;

        (bb)        All There currently exist no offsets, counterclaims or defenses to the performance of the Obligations (such offsets, counterclaims or defenses, if any, being hereby expressly waived);

        (cc)        All Except as expressly waived in writing by Bank, there has not occurred any Default or Unmatured Default; and

        (dd)        All After giving effect to this Fourth Amendment and any transactions contemplated hereby, no Default or Unmatured Default is or will be occasioned hereby or thereby.

PART IV.    CONDITIONS PRECEDENT

        Notwithstanding anything contained in this Fourth Amendment to the contrary, Bank shall have no obligation under this Fourth Amendment until each of the following conditions precedent have been fulfilled to the satisfaction of Bank:

        (a)         Each of the conditions set forth in Section 6.2 of the Agreement shall have been satisfied;

        (b)         Bank shall have received this Fourth Amendment, duly executed, and Bank shall have received the Participant’s Consent attached hereto, duly executed by Fifth Third Bank (Central Indiana);

        (c)         A duly executed certificate of the Secretary or any Assistant Secretary of Borrower (A) certifying as to attached copies of Resolutions of the Board of Directors of Borrower authorizing the execution, delivery and performance of the Loan Documents, as amended, (B) certifying as complete and correct as to attached copies of the Articles of Incorporation and By-Laws of Borrower or certifying that such Articles of Incorporation or By-Laws have not been amended (except as shown) since the previous delivery thereof to Bank;

        (d)         Bank shall have received the Deed of Trust for Borrower’s Baltimore, Maryland real estate, duly executed by Borrower in the form prescribed by Bank;

        (e)         Bank shall have received a satisfactory clean title search for Borrower’s Baltimore, Maryland real estate;

FOURTH AMENDMENT TO CREDIT AGREEMENT PAGE 3

        (f)         Bank shall have received satisfactory evidence of insurance as required by the Deed of Trust for Borrower’s Baltimore real estate;

        (g)         Bank shall have received a $32,000 amendment/waiver fee from Borrower, and Borrower shall have reimbursed Bank for all legal fees and other expenses incurred by Bank in connection with this Fourth Amendment and the transactions contemplated hereby.

        IN WITNESS WHEREOF, Borrower and Bank have caused this Fourth Amendment to be executed by their respective officers duly authorized as of the date first above written.

“BORROWER”

BIOANALYTICAL SYSTEMS, INC.



By:  Michael R. Cox Its:  VP-Finance

“BANK”

THE PROVIDENT BANK



By:  Jeffrey A. Salesman Its:  Vice President

FOURTH AMENDMENT TO CREDIT AGREEMENT PAGE 4

PARTICIPANT’S CONSENT

        The undersigned, the “Participant” under that certain Participation Agreement dated as of October 29, 2002 between the The Provident Bank (the “Bank”) and the undersigned, hereby consents to the execution and delivery by the Bank and Bioanalytical Systems, Inc. of the attached Fourth Amendment to Credit Agreement and further consents to the terms contained therein. The undersigned further agrees that the obligations of the undersigned under the Participation Agreement are hereby ratified, confirmed and reaffirmed in all respects.

        IN WITNESS WHEREOF, the undersigned has caused this Consent to be executed by its officer duly authorized as of the 14th day of May, 2004.

FIFTH THIRD BANK (CENTRAL INDIANA)



By:  Sheridan Sanders Its:  Vice President

FOURTH AMENDMENT TO CREDIT AGREEMENT PAGE 5

EX-31.1

Exhibit 31.1

CERTIFICATIONS

        I, Peter T. Kissinger, PhD., Chief Executive Officer, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Bioanalytical Systems, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) [clause omitted pursuant to SEC Release Nos. 33-8238 and 34-47986] for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) [paragraph omitted pursuant to SEC Release Nos. 33-8238 and 34-47986];

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  May 17, 2004 /s/  Peter T. Kissinger Peter T. Kissinger, PhD.
Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATIONS

        I, Michael R. Cox, Chief Financial Officer, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Bioanalytical Systems, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) [clause omitted pursuant to SEC Release Nos. 33-8238 and 34-47986] for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) [paragraph omitted pursuant to SEC Release Nos. 33-8238 and 34-47986];

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  May 17, 2004 /s/  Michael R. Cox Michael R. Cox
Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

        I, Peter T. Kissinger, the President and Chief Executive Officer of Bioanalytical Systems, Inc. certify that (i) the Quarterly Report on Form 10-Q for the quarter ended March 31, 2004, (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and (ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of BASi as of the dates and for the periods set forth therein.

/s/  Peter T. Kissinger Peter T. Kissinger
President and Chief Executive Officer
Date:  May 17, 2004

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

        I, Michael R. Cox, Vice President, Finance and Chief Financial Officer of Bioanalytical Systems, Inc. certify that (i) the Quarterly Report on Form 10-Q for the quarter ended March 31, 2004, (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and (ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of BASi as of the dates and for the periods set forth therein.

/s/  Michael R. Cox Michael R. Cox
Chief Financial Officer
Date:  May 17, 2004