10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10K

(Mark One)

x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the fiscal year ended September 30, 2005.
	OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the transition period from ___________ to _____________.

Commission File Number 000-23357

BIOANALYTICAL SYSTEMS, INC.

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

INDIANA (State or other jurisdiction of incorporation or organization)	35-1345024 (I.R.S. Employer Identification No.)
2701 KENT AVENUE WEST LAFAYETTE, INDIANA (Address of principal executive offices)	47906 (Zip code)
(765) 463-4527 (Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to section 12(g) of the Act: Common Shares

Indicate by checkmark if the registrant is a well-known seasoned issuer, as defined by Rule 405 of the Securities Act.

YES o NO x

Indicate by checkmark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

YES o NO x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES x        NO o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).

YES o NO x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

YES o NO x

Based on the closing price on the NASDAQ stock market on March 31, 2005, the aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant is $36,073,000. As of January 10, 2005, 4,871,127 shares of registrant's common shares were outstanding. No shares of registrant's Preferred Stock were outstanding as of January 10, 2005.

Portions of the following documents have been incorporated by reference into this report:

Registrant's Document	Parts Into Which Incorporated
Annual Report to security holders for the fiscal year ended September 30, 2005	Part II
Proxy Statement for Annual Meeting of Shareholders to be held February 16, 2006	Part III

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TABLE OF CONTENTS

		Page
PART I		1
Item 1.	Business	1
Item 2.	Properties	15
Item 3.	Legal Proceedings	16
Item 4.	Submission of Matters to a Vote of Security Holders	16
PART II		16
Item 5.	Market for Registrant's Common Equity and Related Stockholder Matters	16
Item 6.	Selected Financial Data	17
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	17
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	27
Item 8.	Financial Statements and Supplementary Data	28
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	49
Item 9A.	Controls and Procedures	49
Item 9B.	Other Information	50
PART III		50
Item 10.	Directors and Executive Officers of the Registrant	50
Item 11.	Executive Compensation	51
Item 12.	Security Ownership of Certain Beneficial Owners and Management	51
Item 13.	Certain Relationships and Related Transactions	52
Item 14.	Principal Accounting Fees and Services	52
PART IV		53
Item 15.	Exhibits, Financial Statement Schedules and Reports on Form 8-K	53

PART I

This Report contains certain statements that are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Readers of this Report are cautioned that reliance on any forward-looking statement involves risks and uncertainties. Although Bioanalytical Systems, Inc. (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 given the inherent uncertainties as to the occurrence or nonoccurrence of future events. There can be no assurance that the forward-looking statements contained in this Report will prove to be accurate. The inclusion of a forward-looking statement herein should not be regarded as a representation by the Company that the Company's objectives will be achieved.

Item 1. Business.

General

The Company, which is a corporation organized in Indiana, provides contract development services and research equipment to many leading global pharmaceutical, medical research and biotechnology companies and institutions. It has played a significant role in understanding the underlying causes of central nervous system disorders, diabetes, osteoporosis and other diseases since its start in 1974.

We offer an efficient, variable cost alternative to our clients' internal product development programs. Outsourcing development work to reduce overhead and speed drug approvals through the Food and Drug Administration ("FDA") is an established alternative to in-house development among pharmaceutical companies. We derive our revenues from sales of our research services and drug development tools, both focused on determining drug safety and efficacy.

We support preclinical and clinical development needs of researchers and clinicians for small molecule through large biomolecule drug candidates. The Company believes its scientists have the skills in analytical instrumentation development, chemistry, computer software development, physiology, medicine, and toxicology to make the services and products it provides increasingly valuable to its current and potential clients. Scientists engaged in analytical chemistry, clinical trials, drug metabolism studies, pharmacokinetics and basic neuroscience research at many of the largest global pharmaceutical companies are our principal clients.

Acquisitions

PharmaKinetics Laboratories, Inc.

On May 26, 2003, PharmaKinetics Laboratories, Inc., a Maryland corporation ("PKLB"), became a majority owned subsidiary of the Company. Following the acquisition, PKLB was renamed BASi Maryland, Inc. The Company acquired this site to broaden its service offering base, which now includes Phase I through III clinical trials services and a fourth bioanalytical lab complementing sites in Indiana, Oregon and the United Kingdom. In addition, the Company wanted to establish a meaningful operating presence physically near current and potential clients on the East Coast of the U.S. This site's operating performance prior to the acquisition had been poor. Since the acquisition, the Company has made significant organizational, managerial, staff, and physical plant changes to improve performance at the Baltimore clinic.

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LC Resources, Inc.

On December 13, 2003, the Company acquired LC Resources, Inc. ("LCR"), a privately held company with its operations in McMinnville, Oregon. The Company believes that LCR had a strong reputation in liquid chromatography and bioanalysis, and provides a location that is significantly closer to clients on the West Coast of the U.S., which is an additional benefit of the acquisition.

Changing Nature of the Pharmaceutical Industry

The Company's services and products are marketed globally to pharmaceutical, medical research and biotech companies and institutions engaged in drug research and development. The research services industry is highly fragmented among many niche vendors led by a small number of larger companies; the latter offer an ever-growing portfolio of cradle-to-grave pharmaceutical development services. The Company's products are also marketed to academic and government institutions. The Company's services and products may have distinctly different customers (often separate divisions in a single large pharmaceutical company) and requirements. The Company believes that all clients are facing increased pressure to outsource facets of their research and development activities and that the following factors will increase client outsourcing:

Accelerated Drug Development

Clients continue to demand faster, more efficient, more selective development of a larger pool of drug candidates. Clients demand fast, high quality service in order to make immediate, well-informed decisions to quickly exclude poor candidates and speed development of successful ones. The need for additional development capacity to exploit more opportunities, accelerate development, extend market exclusivity and increase profitability drives the demand for outsourced services.

Cost Containment

Pharmaceutical companies continue to push for more efficient operations through outsourcing to optimize profitability as development costs climb, staff costs increase, generic competition challenges previously secure profit generators, political and social pressures to reduce health care costs escalate, and shareholder expectations mount.

Patent Expiration

As exclusivity ends with patent expiry, drug companies defend their proprietary positions against generic competition with various patent extension strategies. Both the drug company creating these extensions and the generic competitors should provide additional opportunities for the Company.

Alliances

Strategic alliances allow pharmaceutical companies to share research know-how and to develop and market new drugs faster in more diverse, global markets. The Company believes that alliances will lead to a greater number of potential drugs in testing, many under study by small companies lacking broad technical resources. Those small companies can add shareholder value by further developing new products through outsourcing, reducing risk for potential allies.

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Mergers and Acquisitions

Consolidation in the pharmaceutical industry is commonplace. As firms blend personnel, resources and business activities, the Company believes they will continue to streamline operations, minimizing staffing which should lead to more outsourcing. This may result in short-term disruption in placement of, or progress on, drug development programs as merging companies rationalize their respective drug development pipelines.

Biotechnology Industry and Virtual Drug Company Growth

The biotech industry continues to grow and has introduced many new developmental drugs. Many biotech drug developers do not have in-house resources to conduct development. Many new companies choose only to carry a product to a developed stage sufficient to attract a partner who will manufacture and market the drug. Efficient use of limited funds motivates smaller firms to seek outside service providers like the Company rather than build expensive infrastructure.

Unique Technical Expertise

The increasing complexity of new drugs requires highly specialized, innovative, solution-driven research not available in all client labs. The Company believes that this need for unique technical expertise will increasingly lead to outsourcing of research activity.

Data Management Expertise

Our clients and the FDA require more data, greater access to that data, consistent and auditable management of that data, and greater security and control of that data.

The Company is making significant investments in software throughout its contract services groups to optimize efficiency and ensure it complies with FDA regulations and client expectations.

Globalization of the Marketplace

Foreign firms are relying on independent development companies with experience in the U.S. to provide integrated services through all phases of product development and to assist in preparing complex regulatory submissions. Domestic drug firms are broadening product availability globally, demanding local regulatory approval. The Company believes that domestic service providers with global reach, established regulatory expertise, and a broad range of integrated development services will benefit from this trend. The Company has a significant European presence and experience in managing foreign operations from its West Lafayette offices.

The Company's Role in the Drug Development Process

After a new drug candidate is identified and carried through preliminary screening, the development process for new drugs has three distinct phases.

1)The preclinical phaseincludes safety testing to prepare an Investigational New Drug ("IND") exemption for submission to the FDA. The IND must be accepted by the FDA before the drug can be tested in humans. Once a pharmacologically active molecule is fully analyzed to confirm its integrity, the initial dosage form for clinical trials is created. An analytical chemistry method is developed to enable reliable quantification. Stability and purity of the formulation is also determined.

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Clients work with the Company's preclinical services group to establish pharmacokinetics, pharmacodynamics and safety testing of the new drug. These safety studies range from acute safety monitoring on drugs and medical devices to chronic, multi-year oncogenicity studies. Bioanalyses of blood sampled under these protocols by the Company's bioanalytical services group provide kinetic, metabolism and dose-ranging data. Upon successful completion of preclinical safety studies, an IND submission is prepared and provided to the FDA for review prior to human clinical trials.

Many of the Company's products are designed for use in preclinical development. The Culex® APS, a robotic automated pharmacology system, enables researchers to develop pharmacokinetic profiles of drugs during early screening in rodents quickly and cost effectively. Several variations of this technology are in development. Clients and the Company's bioanalytical services group sometimes use the Company's electrochemistry and chromatography products to develop a single, quick, proprietary method to screen drugs in biological samples. Liquid chromatography coupled to mass spectrometry is now a mainstay of the Company's bioanalytical laboratories. The Company has invested heavily in robotics and mass spectrometry systems over the last ten years.

2)The clinical phasefurther explores the safety and efficacy of the substance in humans. The sponsor conducts Phase I human clinical trials in a limited number of healthy individuals to determine safety and tolerability. Bioanalytical assays determine the availability and metabolism of the active ingredient following administration. Expertise in method development and validation is critical, particularly for new chemical entities.

Exhaustive safety, tolerability and dosing regimens are established in sick humans in Phase II trials. Phase III clinical trials verify efficacy and safety. After successful completion of Phase III trials, the sponsor of the new drug submits a New Drug Application ("NDA") or Product License Application ("PLA") to the FDA requesting that the product be approved for marketing. Early manufacturing demonstrates production of the substance in accordance with FDA Good Manufacturing Practices ("GMP") guidelines. Data are compiled in an NDA, or for biotechnology products a PLA, for submission to the FDA requesting approval to market the drug or product. The Company's bioanalytical work per study grows rapidly from Phase I through III. The number of samples per patient declines as the number of patients grows in later studies. Phase II and III studies take several years, supported by well-proven, consistently applied analytical methods. It is unusual for a sponsor to change laboratories unless there are problems in the quality or timely delivery of results.

The Company's acquisition of its clinic in fiscal 2004 enables it to perform Phase I studies in Baltimore and manage small Phase II and III trials through its Clinical Trials Management group, also in Baltimore. Phase I services include bioavailability testing to monitor the rate and extent to which a drug becomes available in the blood. Bioavailability can also be used to compare the bioequivalence of similar generic and brand name drugs.

3)Post-approval follows FDA approval of the NDA or PLA. This includes production and continued analytical and clinical monitoring of the drug. The post-approval phase also tracks development and regulatory approval of product modifications and line extensions, including improved dosage forms. The drug manufacturer must comply with quality assurance and quality control requirements throughout production and must continue analytical and stability studies of the drug during commercial production to continue to validate production processes and confirm product shelf life. Samples from each manufactured batch must be tested prior to release of the batch for distribution to the public.

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The Company also provides services in all areas during the post-approval phase, concentrating on bioequivalence studies of new formulations, line extensions, new disease indications and drug interaction studies.

The Company's ability to solve client problems combining its knowledge base, services and products has been a factor in the Company's selection by major pharmaceutical companies to assist in several preclinical and Phase I, II and III clinical trials, as well as in the post-approval phase.

Company Services and Products

Overview

The Company operates in two business segments – contract research services and research products, both of which address the bioanalytical, preclinical, and clinical research needs of drug developers. Both segments arose out of the Company's expertise in a number of core technologies designed to quantify trace chemicals in complex matrices. The Company evaluates performance and allocates resources based on these segments.

Services

The Company's contract research services segment provides screening and pharmacological testing, preclinical safety testing, formulation development, clinical trials, regulatory compliance and quality control testing. Revenues from the Company's services segment were $33.0 million for fiscal 2005. For additional financial information regarding the services segment, please see Note 11 to the Notes to Consolidated Financial Statements included in Item 8 of this report. The following is a description of the services provided by the Company's contract research services segment:

•Product Characterization, Method Development and Validation: Analytical methods determine potency, purity, chemical composition, structure and physical properties of a compound. Methods are validated to ensure that data generated are accurate, precise, reproducible and reliable and are used consistently throughout the drug development process and in later product support.

•Bioanalytical Testing: The Company analyzes specimens from preclinical and clinical trials to measure drug and metabolite concentrations in complex biological matrices. Bioanalysis is performed at Company facilities in Indiana, Oregon, Maryland and the UK.

•Stability Testing: The Company tests stability of drug substances and formulated drug products and maintains secure storage facilities necessary to establish and confirm product purity, potency and shelf life in West Lafayette, Indiana. The Company has multiple ICH (International Conference on Harmonization) validated controlled climate GMP (Good Manufacturing Practices) systems.

•In Vivo Pharmacology: The Company provides preclinical in vivo sampling services for the continuous monitoring of chemical changes in life, in particular, how a drug enters, travels through, and is metabolized in living systems. Most services are performed in customized facilities in West Lafayette, Indiana using the Company's robotic Culex® APS (Automated Pharmacology System) system and in Evansville, Indiana.

•Preclinical and Pathology Services: The Company provides pharmacokinetic and safety testing in studies ranging from acute safety monitoring of drugs and medical devices to chronic, multi-year oncogenicity studies in its newly expanded Evansville, Indiana site. Depending on protocol, multiple tissues may be collected to monitor pathological changes.

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•Phase I, II & III Clinical Trials: The Company performs Phase I human clinical trials in its 110-bed clinic in Baltimore. These are principally bioavailability and bioequivalence studies, both for generic drug and innovator pharmaceutical firms. It also coordinates Phase II and III studies through its Clinical Trials Management group in Baltimore.

Research Products

The Company is focusing its products business on expediting preclinical screening of developmental drugs. The Company competes in very small niches of the multibillion dollar analytical instrument industry. The Company's products business targets, and in some cases dominates, unique niches in life science research. The Company designs, develops, manufactures and markets state-of-the-art:

• Robotic sampling systems and accessories (disposables, training, systems qualification)

• In vivo microdialysis collection systems

• Physiology monitoring tools

• Liquid chromatography and electrochemistry instruments platform

Revenues for the Company's products segment were $9.4 million for fiscal 2005. For additional financial information regarding the products segment, please see Note 11 to the Notes to Consolidated Financial Statements included in Item 8 of this report. The following is a description of the products offered by the Company:

•The Culex® APS robotic automated pharmacology system is used by pharmaceutical researchers to monitor drug concentrations and response as a function of time. Compared to current manual methods, the Culex® offers greater than 80% reduction in test model use and comparable reduction in labor. The Culex® also offers computer-controlled blood sampling protocol, behavioral monitoring, flexibility to collect other biological samples, exceptional cost savings, significant reduction in model stress and expeditious data delivery.

•Bioanalytical separation systems (liquid chromatography) used in connection with Windows® software, detect and quantify low concentrations of substances tracking complex chemical, physiological and behavioral effects in biological fluids and tissues from humans and laboratory animal models.

•Specialized chemical analyzers monitor trace levels of organic chemicals such as neurotransmitters in biological samples using core electrochemistry, liquid chromatography and enzymology technologies to separate and quantify drugs, xenobiotics, metabolites and other chemicals in blood, cerebrospinal fluid and other biological media.

•epsilon™ is a single liquid chromatography and electrochemistry instrument control platform for the separation systems and chemical analyzers noted above.

•A line of miniaturized in vivo sampling devices sold to drug developers and medical research centers, assist in the study of a number of medical conditions including stroke, depression, Alzheimer's and Parkinson's diseases, diabetes and osteoporosis.

•Vetronics small animal diagnostic ECG and vital signs monitors are used primarily in veterinary clinics with growing applications in preclinical research.

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Clients

Over the past five years, the Company has regularly provided its services and/or products to most of the top 25 pharmaceutical companies in the world, as ranked by 2005 research and development spending.

The Company has been balancing its business development effort between large pharmaceutical developers and the next tier of smaller drug development companies. The Company believes that smaller companies are more inclined to establish a consistent, long-term, strategic relationship with the Company but realizes that they may be poorly funded. The Company has adapted by increasing its focus on a larger number of specialist service buyers at large and small clients and by engaging in a more active and more diversified business development effort staffed with specialists.

Approximately 20% of the Company's products and services revenues are generated from customers outside of North America.

Pfizer (including predecessor companies) is the Company's largest client. Pfizer accounted for approximately 10.1%, 12.5% and 16.0% of the Company's total revenues in fiscal 2005, 2004 and 2003, respectively. Pfizer accounted for 6.0% and 11.0% of total trade accounts receivable at September 30, 2005 and 2004, respectively.

The Company deals with at least 20 different research groups within Pfizer, each focused on a particular development function, each having little intercourse with any other. After the acquisition of Pharmacia in 2003, Pfizer restructured and repatriated their preclinical development effort in Kalamazoo, MI, minimizing outsourcing for the short-term and possibly long-term as well. This change significantly reduced revenue in Evansville for fiscal 2003 and 2004. Subsequently, the Company has redirected its sales effort for its toxicology services offered in Evansville, and, by the end of fiscal 2005, had replaced that revenue with contracts from a variety of pharmaceutical and biotech clients.

There can be no assurance that the Company's business will not continue to be dependent on continued relationships with Pfizer or other clients, or that annual results will not be dependent on a few large projects. In addition, there can be no assurance that significant clients in any one period will continue to be significant clients in other periods. In any given year, there is a possibility that a single pharmaceutical company may account for 5% or more of the Company's total revenue. Since the Company does not have long-term contracts with its clients, the importance of a single client may vary dramatically from year to year.

Sales and Marketing

Capitalizing on its long history of innovation and technical excellence, the current sales and marketing plan of the Company targets key accounts among the top 200 global pharmaceutical companies and approaches smaller companies opportunistically. The Company recognizes that its growth and customer satisfaction depend upon its ability to continually improve client relationships.

The Company's products and services are sold directly to the client. The Company has thirteen employees on its business development staff and an equal number providing technical and development support. In late fiscal 2005, this team was reorganized under a new executive vice president, with more clearly defined sales objectives, territories and incentives. Although it is too early to assess the results of the Company's new approaches, management believes that the increasing size and scope of the products and services offered by the Company required additional resources in sales and marketing. The Company also attends multiple trade shows in many disciplines and has created a collection of web sites, catalogs,

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training and technical support literature, media presentations, branding, workshops and academic publications.

Sales, marketing and technical support are based in the Company's corporate headquarters located in West Lafayette, Indiana. The Company also maintains offices in Baltimore, Maryland; Evansville, Indiana; McMinnville, Oregon; and Warwickshire, UK. For additional financial information relating to geographic segments, please see Note 11 to the Notes to Consolidated Financial Statements included in Item 8 of this report.

Bioanalytical Services, Ltd., a wholly owned, UK-based subsidiary, provides a direct liaison with research service clients in Europe and maintains a laboratory to provide those services, as well as a distribution center for the Company's European sales of products. In addition, the Company has a network of 18established distributors covering Japan, the Pacific Basin, South America, the Middle East, India, South Africa and Eastern Europe. All of the Company's distributor relationships are managed from the Company's headquarters in West Lafayette, Indiana. International growth is planned through stronger local promotion to support the Company's distributor network.

Contractual Arrangements

The Company's service contracts typically establish an estimated fee to be paid for identified services. In most cases, some percentage of the contract costs is paid in advance. While the Company is performing a contract, clients often adjust the scope of services to be provided by the Company based on interim project results. Fees are adjusted accordingly. Generally, the Company's fee-for-service contracts are terminable by the client upon written notice of 30 days or less for a variety of reasons, including the client's decision to forego a particular study, the failure of product prototypes to satisfy safety requirements, and unexpected or undesired results of product testing. Cancellation or delay of ongoing contracts may result in fluctuations in the Company's quarterly and annual results. The Company is generally able to recover at least its invested costs when contracts are terminated.

The Company's products business offers annual service agreements on most product lines.

Backlog

The contracts pursuant to which the Company provides its services are terminable upon written notice of 30 days or less. The Company maintains projections based on bids and contracts to optimize asset utilization. Similarly, virtually all of the Company's products are made to order. Backlog may not be a good indicator of future sales trends. Management does not believe that backlog is material to an understanding of the Company's business taken as a whole.

Competition

Services

The Company competes primarily with in-house research, development, quality control and other support service departments of pharmaceutical and biotechnology companies. There are also full-service Contract Research Organizations ("CROs") that compete in this industry. The largest CRO competitors offering research services similar to the Company's include:

• Covance, Inc.

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• Pharmaceutical Product Development, Inc.

• AAIpharma, Inc.

• MDS Health Group Ltd.

CROs generally compete on:

• regulatory compliance record and quality system

• previous experience

• medical and scientific expertise in specific therapeutic areas

• scientist-to-scientist relationships

• quality of contract research

• financial viability

• database management

• statistical and regulatory services

• recruiting investigators

• integrating information technology with systems to optimize research efficiency

• an international presence with strategically located facilities

• price

Several of the Company's competitors have significantly greater financial resources than the Company.

Products

Culex® APS: Two small vendors have offered simple, semi-automated blood sampling systems. However, the Company does not believe that either vendor presents significant competition for Culex®. In addition, the Company has established strong relationships with the largest vendors of animal models who now provide catheterized "Culex® ready" models to the Company's customers on a just-in-time basis, further increasing convenience and lowering cost to the customer.

Bioanalytical Separation Systems: The Company competes with several large equipment manufacturers, including Agilent, Waters Corporation and Perkin Elmer Corporation. Competitive factors include market presence, product quality, reliability and price. The Company believes it competes well in its niche markets because of its reputation and the quality of its products, together with the technical assistance and service it offers. Many of the Company's competitors are much larger and have greater resources than the Company, which makes it difficult for the Company to capture business from clients other than those who need the Company's unique capabilities.

Vetronics/in vivo sampling devices: There are few competitors in this area of the Company's business. The Company is the largest vendor in these very small, technically demanding niches.

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Government Regulation

The Company is subject to various regulatory requirements designed to ensure the quality and integrity of its data and products. These regulations are governed primarily under the Federal Food, Drug and Cosmetic Act, as well as by associated Good Laboratory Practice ("GLP"), Good Manufacturing Practice ("GMP"), and Good Clinical Practice ("GCP") guidelines administered by the FDA. The standards of GLP, GMP, and GCP are required by the FDA and by similar regulatory authorities around the world. These guidelines demand rigorous attention to employee training; detailed, authorized documentation; equipment validation; careful tracking of changes and routine auditing of compliance. Noncompliance with these standards could result in disqualification of project data collected by the Company. Material violation of GLP, GMP, or GCP guidelines could result in additional regulatory sanctions and, in severe cases, could also result in a discontinuance of selected Company operations.

Analytical Services

Laboratories that provide information included in INDs, NDAs and PLAs must conform to regulatory requirements that are designed to ensure the quality and integrity of the testing process. Most of the Company's contract research services are subject to government standards for laboratory practices that are embodied in guidelines for GLP. The FDA and other regulatory authorities require that test results submitted to such authorities be based on studies conducted in accordance with GLP. These guidelines are set out to help the researcher perform work in compliance with a pre-established plan and standardized procedures. These guidelines include but are not restricted to:

• Resources – organization, personnel, facilities and equipment

• Rules – protocols and written procedures

• Characterization – test items and test systems

• Documentation – raw data, final report and archives

• Quality assurance unit – formalized internal audit function

Preclinical Services

The Company must also maintain reports for each study for specified periods for auditing by the study sponsor and by the FDA or similar regulatory authorities in other parts of the world. Noncompliance with GLP can result in the disqualification of data collection during the preclinical trial.

The Company's animal research facilities are subject to a variety of federal and state laws and regulations, including The Animal Welfare Act and the rules and regulations enforced by the United States Department of Agriculture ("USDA") and the National Institutes of Health ("NIH"). These regulations establish the standards for the humane treatment, care and handling of animals by dealers and research facilities. The Company's animal research facilities maintain detailed standard operating procedures and the documentation necessary to comply with applicable regulations for the humane treatment of the animals in its custody. Besides being licensed by the USDA as a research facility, this business is also accredited by the Association for Assessment and Accreditation of Laboratory Animal Care International ("AAALAC") and has registered assurance with the NIH.

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Clinical Services

The Company's Clinical Research Unit in Baltimore is principally subject to GCP and GLP guidelines that cover activities such as obtaining informed consent, verifying qualifications of investigators, complying with Standard Operating Procedures ("SOP"), reporting adverse reactions to drugs and maintaining thorough and accurate records. The Company must maintain source documents for each study for specified periods. Such documents are frequently reviewed by the study sponsor during visits to the Company's facility and may be reviewed by the FDA during audits. In the fall of 2005, the facility was audited by the FDA, and we are awaiting their inspection report.

The Company is subject to regulation and inspection by local, state, federal and foreign agencies where the Company's facilities are located. The Company has not experienced any significant problems to date in complying with the regulations of such agencies and does not believe that any existing or proposed regulations will require material capital expenditures or changes in its method of operation.

Quality Assurance and Information Technology

To assure compliance with applicable regulations, the Company has established quality assurance programs at its facilities that audit test data, train personnel and review procedures and regularly inspect facilities. In addition, FDA regulations and guidelines serve as a basis for the Company's SOPs where applicable. In fiscal 2004 and 2003, the Company endeavored to standardize SOPs across all relevant operations. This standardization is an ongoing process. In addition, the Company purchased software to ensure compliant documentation, handling and reporting of all laboratory generated study data. In fiscal 2004, the Company purchased similar 21 CFR part 11 compliant software for its preclinical research group and is currently revalidating the recent revisions to that software.

Also in fiscal 2004, the Company initiated implementation of a new Enterprise Resource Planning ("ERP") system, which was launched at all the Company's locations in the third quarter of fiscal 2005. The implementation of this system is ongoing, with various additional phases planned for fiscal 2006 and 2007. The introduction of a new ERP system is part of the Company's response to the Sarbanes-Oxley Act (the "Act"). The Company determined that it was not practicable to comply with the control, documentation and testing requirements of Section 404 of the Act while operating on different, decentralized, obsolete systems at its various locations. As part of the implementation of the new system, documentation will be developed, and testing procedures initiated, in preparing for management's assessment and report on internal controls over financial reporting required by the Act for fiscal 2007. Although the Company is working diligently to ensure that the ERP system and related procedures will be adequately installed and successfully tested by September 30, 2007, there can be no assurance that all necessary procedures required by the Act will be completed by that date.

Controlled, Hazardous, and Environmentally Threatening Substances

Some of the Company's development and testing activities are subject to the Controlled Substances Act administered by the Drug Enforcement Agency ("DEA"), which strictly regulates all narcotic and habit-forming substances. The Company maintains restricted-access facilities and heightened control procedures for projects involving such substances due to the level of security and other controls required by the DEA. In addition, the Company is subject to other federal and state regulations concerning such matters as occupational safety and health and protection of the environment.

Our U.S. laboratories are subject to licensing and regulation under federal, state and local laws relating to hazard communication and employee right-to-know regulations, the handling and disposal of medical specimens and hazardous waste, as well as the safety and health of laboratory employees. All of our

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laboratories are subject to applicable federal and state laws and regulations relating to the storage and disposal of all laboratory specimens including the regulations of the Environmental Protection Agency, the Department of Transportation, the National Fire Protection Agency and the Resource Conservation and Recovery Act. Although we believe that the Company is currently in compliance in all material respects with such federal, state and local laws, failure to comply could subject the Company to denial of the right to conduct business, fines, criminal penalties and other enforcement actions.

The regulations of the U.S. Department of Transportation, the U.S. Public Health Service and the U.S. Postal Service apply to the surface and air transportation of laboratory specimens. The Company's laboratories also comply with the International Air Transport Association regulations which govern international shipments of laboratory specimens. Furthermore, when materials are sent to a foreign country, the transportation of such materials becomes subject to the laws, rules and regulations of such foreign country.

Safety

In addition to its comprehensive regulation of safety in the workplace, the Occupational Safety and Health Administration has established extensive requirements relating to workplace safety for health care employers whose workers may be exposed to blood-borne pathogens such as HIV and the hepatitis B virus. These regulations, among other things, require work practice controls, protective clothing and equipment, training, medical follow-up, vaccinations and other measures designed to minimize exposure to chemicals, and transmission of blood-borne and airborne pathogens. Furthermore, relevant employees of the Company receive initial and periodic training focusing on compliance with applicable hazardous materials regulations and health and safety guidelines.

HIPAA

The Department of Health and Human Services has promulgated final regulations under the Health Insurance Portability and Accountability Act of 1996 ("HIPAA") that govern the disclosure of confidential medical information in the United States. The Company has had a global privacy policy in place since January 2001, which includes a designated privacy officer, and believe that we are in compliance with the current EU (European Union) and HIPAA requirements. Nevertheless, we will continue to monitor our compliance with these new regulations and we intend to take appropriate steps to ensure compliance as these and other privacy regulations come into effect.

Product Liability and Insurance

The Company maintains product liability and professional errors and omissions liability insurance, providing approximately $6.0 million in coverage on a claims-made basis. Additionally, in certain circumstances the Company seeks to manage its liability risk through contractual provisions with clients requiring the Company to be indemnified by the client or covered by clients' product liability insurance policies. Also, in certain types of engagements the Company seeks to limit its contractual liability to clients to the amount of fees received by the Company. The contractual arrangements are subject to negotiation with clients, and the terms and scope of such indemnification, liability limitation and insurance coverage vary by client and project.

Research and Development

In fiscal 2005, 2004 and 2003 the Company spent $1.3 million, $1.1 million, and $1.3 million, respectively, on research and development. Separate from the Company's contract research services business, the Company maintains applications research and development to enhance its products business.

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Expenditures cover hardware and software engineering costs, laboratory supplies, animals, drugs/reagents, labor, prototype development and laboratory demonstrations of new products and applications for those products.

Hardware and software engineering and prototype development in fiscal 2005 continued to generate Culex®-related products. Laboratory demonstrations are published in peer-reviewed journals, scientific seminars or at scientific association meetings as promotional tools for existing and new products. Culex®-related products and demonstrations consumed most of our research and development dollars in fiscal 2005. The Company also makes small expenditures in novel research and development, some under partial grants.

Intellectual Property

The Company believes that its patents, trademarks, copyrights and other proprietary rights are important to its business and, accordingly, it actively seeks protection for those rights both in the United States and abroad. Where the Company deems it to be an appropriate course of action, it will vigorously prosecute patent infringements. The Company does not believe, however, that the loss of any one of its patents, trademarks, copyrights or other proprietary rights would be material to its consolidated revenues or earnings.

The Company currently holds six federally registered trademarks and has two pending federal trademark applications, as well as one copyright registration for software. The Company also maintains a small pool of issued and pending patents. Most of these patents are related to the Company's Culex® or in vivo product line. Of these patents, most are either issued or pending in the United States, although there are also patents issued and pending in the European Union and Japan. Although the Company believes that at least two of these patents are important to the Culex® product line, the success of the Culex® business is not dependent on the Company's intellectual property rights because the Company also generates client value through continuing client support, hardware and software upgrades, system reliability and accuracy. In addition to these formal intellectual property rights, the Company relies on trade secrets, unpatented know-how and continuing applications research which it seeks to protect through means of reasonable business procedures, such as confidentiality agreements. The Company believes that the greatest value that it generates for its clients comes from these trade secrets, know-how and applications research.

Raw Materials

There are no specialized raw materials that are particularly essential to the Company's business, and the Company has a variety of alternative suppliers for its essential components.

Employees

At September 30, 2005, the Company had 370 full-time employees. All employees enter into confidentiality agreements intended to protect the Company's proprietary information. The Company believes that its relations with its employees are good. None of the employees of the Company are represented by a labor union. The Company's performance depends on its ability to attract and retain qualified professional, scientific and technical staff. The level of competition among employers for skilled personnel is high. The Company believes that its employee benefit plans enhance employee morale, professional commitment and work productivity and provide an incentive for employees to remain with the Company.

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Executive Officers of the Registrant

The following information concerns the persons who served as the executive officers of the Company as of September 30, 2005. Except as indicated in the following paragraphs, the principal occupations of these persons has not changed in the past five years. Officers are elected annually at the annual meeting of the board of directors.

Name	Age	Position
Peter T. Kissinger, Ph.D.	61	Chairman of the Board; President; Chief Executive Officer; Director
Ronald E. Shoup, Ph.D.	54	Chief Operating Officer, BASi Contract Research Services
Michael R. Cox	59	Vice President, Finance; Chief Financial Officer; Treasurer
Edward M. Chait, Ph.D.	62	Executive Vice President, Chief Scientific Officer
Candice B. Kissinger	54	Senior Vice President, Marketing; Secretary and Director
Craig S. Bruntlett, Ph.D.	56	Senior Vice President, International Sales
Lina L. Reeves-Kerner	55	Vice President, Human Resources
Michael P. Silvon, Ph.D.	58	Vice President, Planning and Development

Peter T. Kissinger, Ph.D. founded the Company in 1974 and has served as its Chairman, President and Chief Executive Officer since 1974. He is also a part-time Professor of Chemistry at Purdue University, where he has been teaching since 1975. Dr. Kissinger has a Bachelor of Science degree in Analytical Chemistry from Union College and a Ph.D. in Analytical Chemistry from the University of North Carolina.

Dr. Kissinger is a highly recognized pioneer in hydrodynamic electroanalytical techniques for the neurosciences, modern liquid chromatography and in vivo methodology for drug metabolism. Dr. Kissinger has published over 220 scientific papers and has presented more than 400 invited lectures. He is a Fellow of the AAPS and the AAAS and was a finalist for Ernst & Young Entrepreneur of the Year Award ® in the Indiana Heartland region for 2001 and 2003. Dr. Kissinger is the husband of Candice B. Kissinger.

Ronald E. Shoup, Ph.D. serves as Chief Operating Officer of the Company's Contract Research Services and is Managing Director of BAS Analytics, Ltd. in the UK. His current responsibilities include directing operations at the Company's Contract Research Services sites. He joined the Company in 1980 as an applications chemist, became Research Director in 1983 and launched the Contract Research Services group within the Company in 1988. Dr. Shoup has a Bachelor of Science degree in Mathematics and Chemistry from Purdue University and then attended Michigan State and Purdue University for his Ph.D. in Analytical Chemistry.

Dr. Shoup has served on the editorial board of the Journal of Chromatography, participated in NIH Special study sections, and is a member of the external advisory board to the Purdue University Department of Chemistry. He has published over 40 scientific papers.

Michael R. Cox has been Vice President, Finance, Chief Financial Officer and Treasurer since April 2004. He was Vice President, Finance and CFO of Integrity Pharmaceutical Corporation, a private specialty pharmaceutical company, from October, 2003 until its acquisition and merger in March, 2004. Prior to that he was Senior Vice President, Finance of Intergen Company, a private biotech manufacturing and research products company, from 1997 until its acquisition in 2001, and continued with the acquirer, Serologicals Corporation, on special projects until joining Integrity. Prior to that, Mr. Cox held various executive positions in two environmental services firms and an investment firm. He was a partner in

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Touche Ross & Co., where he began his career after obtaining a BS in business administration from the University of North Carolina.

Edward M. Chait, Ph.D. has been Executive Vice President, Chief Scientific Officer since August, 2005. Prior to that, from August 2003, Dr. Chait served as the Chief Executive Officer of Spectral Genomics, Inc., a developer of products and services related to molecular genetics and diagnostics enabling the identification of the causal factors of disease at the genetic level. From 2001 to 2003, Dr. Chait served as the Chief Executive Officer of PharmaCore, Inc., a small-molecule drug discovery company providing molecular building blocks, custom organic synthesis and GMP services to biotechnology and pharmaceutical companies. From 1991 to 2001, Dr Chait was Senior Vice President in charge of Business Development for Intergen Company, a manufacturer of cell culture, diagnostic and research products. Since 2002, Dr. Chait has also served as an advisor to the Purdue Cancer Center, a National Cancer Center designated basic-research cancer center. From 1968 to 1991, Dr. Chait held positions of increasing responsibility in marketing and business development at DuPont in instrument and life science products. Dr. Chait has a Ph.D. in chemistry from Purdue.

Candice B. Kissinger currently devotes all of her time to branding, client relationship management, sales, product development, and managing installation and service for in vivo products and services, principally the Culex® APS. She was named Senior Vice President, Marketing in January 2000 and is currently Director of Research. From 1981 to 2000 she served as Vice President, International Sales and Marketing. Ms. Kissinger has a Bachelor of Science degree in Microbiology from Ohio Wesleyan University and a Master of Science degree in Food Science from the University of Massachusetts. Dr. Peter Kissinger is the husband of Ms. Kissinger. She has served as a director and Secretary of the Company since 1978.

Craig S. Bruntlett, Ph.D. has been Senior Vice President of International Sales since January 2000. From 1992 to 1999 he was Vice President, Electrochemical Products. From 1980 to 1990, Dr. Bruntlett was Director of New Products Development for the Company. Dr. Bruntlett has a Bachelor of Arts degree in Chemistry and Mathematics from St. Cloud State University in Minnesota and a Ph.D. in Chemistry from Purdue University.

Lina L. Reeves-Kerner has been Vice President, Human Resources since 1995 and is responsible for the administrative support functions of the Company, including shareholder relations, human resources and community relations. From 1980 to 1990, Ms. Reeves-Kerner served as an Administrative Assistant with the Company. Ms. Reeves-Kerner has a Bachelor of Science degree in Business Administration from Indiana Wesleyan University.

Michael P. Silvon, Ph.D. has been Vice President Planning and Development since March 1997, with responsibility for mergers and acquisitions, and investor relations. Dr. Silvon served as General Manager of BAS Evansville from 2000 through 2003 and directed its expansion. Prior to January 1997, Dr. Silvon was principal in his own consulting firm and Vice President Sales and Marketing at Hi-Port, Inc. in Houston, Texas. Before October 1993, Dr. Silvon was Regional Business Manager, Americas-Fine Chemicals for Zeneca, Inc. He has a Bachelor of Science in Chemistry from Loyola University of Chicago, a Master of Business Administration from Sacred Heart University and a Ph.D. in Chemistry from the University of Vermont.

Item 2. Properties.

The Company operates in the following locations all of which are owned by the Company, except as otherwise indicated:

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•West Lafayette, IN: principal executive offices are located at 2701 Kent Avenue, West Lafayette, Indiana 47906, and constitutes multiple buildings with approximately 135,000 square feet of operations, manufacturing, and administrative space. Both the services segment and the products segment conduct operations at this facility. A new 20,000 square foot ADME preclinical research facility became fully functional in April, 2005. It is custom-designed to provide contract pharmacokinetic and ADME research services based on its Culex® Automated Pharmacology system. Both the new facility and the prior portion of the building have been financed by mortgages.

•BAS Evansville occupies 10 buildings with roughly 100,000 square feet of operating and administrative space on 52 acres. Most of this site is engaged in preclinical toxicology testing of developmental drugs in animal models. A recent addition was financed by a mortgage.

•BASi Clinical Research Unit (BASi Maryland) in Baltimore, Maryland occupies a seven story, 126,000 square foot historic building in downtown Baltimore. On January 5, 2005, this building was sold to a developer and the Company and the developer entered into a three-year lease back for approximately 85% of the space in the building. This site contains a 110 bed, three ward, Phase I Clinical Trials facility and a roughly 20,000 square foot analytical laboratory along with administrative offices committed to recruitment and enrollment of study participants, medical and clinical trials staff, data management, and later phase Clinical Trials Management. The Company intends to use the lease back period to develop its long-term space alternatives.

•Bioanalytical Systems, Ltd., Warwickshire, UK contains the Company's contract services and instruments operations in roughly 12,000 square feet of leased space for laboratories, sales and technical support services in the United Kingdom.

•BASi Northwest Laboratory is in McMinnville, Oregon, approximately 40 miles from Portland. The Company leases roughly 8,600 square feet of laboratory and administrative space, principally used for bioanalytical services.

The Company believes that its facilities are adequate for the Company's operations and that suitable additional space will be available if and when needed. The terms of any mortgages and leases for the above properties are detailed in Item 7 and Notes 4, 6 and 7 to the Notes to Consolidated Financial Statements.

Item 3. Legal Proceedings.

Not applicable.

Item 4. Submission of Matters to a Vote of Security Holders.

Not applicable.

PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters

You can find information regarding the market for the Company's common shares and related stockholder matters under the heading "Common Shares" in our 2005 Annual Report. That information is incorporated herein by reference.

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Equity Compensation Plan Information

The Company maintains stock option plans that allow for the granting of options to certain key employees and directors of the Company. The following table gives information about equity awards under the stock option plans of the Company:

Plan Category	Number of Securities to be Issued upon Exercise of Outstanding Options	Weighted Average Exercise Price of Outstanding Options	Number of Securities Remaining Available for Future Issuance under the Equity Compensation Plan (Excluding Securities Reflected in First Column)
Equity compensation plans approved by security holders	430,300	$4.93	245,000
Equity compensation plans not approved by security holders(1)	50,000	$5.14	—
Total	480,300	$4.95	245,000

(1) Includes option to purchase 25,000 shares at $4.57 granted April 1, 2004, 25,000 shares at $5.69 granted August 1, 2005. Each of these grants vest over one year and expire after 10 years.

For additional information regarding the Company's stock option plans approved by security holders, please see Note 9 to the Notes to Consolidated Financial Statements included in Item 8 of this report.

Item 6. Selected Financial Data.

You can find Selected Financial Data for each of our five most recent fiscal years in our 2005 Annual Report under "Selected Consolidated Financial Data". That information is incorporated herein by reference.

Item 7.Management's Discussion and Analysis of Financial Condition and Results of Operations.

This report contains statements that constitute forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Those statements appear in a number of places in this Report and may include statements regarding the intent, belief or current expectations of the Company or its management with respect to, but are not limited to (i) the Company's strategic plans; (ii) trends in the demand for the Company's products; (iii) trends in the industries that consume the Company's products; (iv) the Company's ability to refinance its debt; (v) the ability of the Company to develop new products; and (vi) the ability of the Company to make capital expenditures and finance operations. Readers are cautioned that any such forward looking statements are not guarantees of future performance and involve risks and uncertainties. Actual results may differ materially from those in the forward looking statements as a result of various factors, many of which are beyond the control of the company.

In addition, the Company has based these forward-looking statements on its current expectations and projections about future events. 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. The following discussion and analysis should be read in conjunction with Selected Consolidated Financial Data and the Company's Consolidated Financial Statements and notes

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thereto included or incorporated by reference elsewhere in this Report. In addition to the historical information contained herein, the discussions in this Report may contain forward-looking statements that involve risks and uncertainties which are discussed in Exhibit 99 to this Form 10-K. The Company's actual results could differ materially from those discussed in the forward-looking statements.

Overview

The business of Bioanalytical Systems, Inc. is dependent on the level of pharmaceutical and biotech companies' efforts in new drug discovery and approval. Our services segment is the direct beneficiary of these efforts, through outsourcing by these companies of research work, 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. Currently, many large pharmaceutical companies have major "block-buster" drugs that are nearing the end of their patent protections. This puts significant pressure on these companies both to develop new drugs with large market appeal, and to re-evaluate their cost structures and the time-to- market of their products. Contract research organizations ("CRO's") have benefited from these developments, as the pharmaceutical industry has turned to out-sourcing to both reduce fixed costs, and to increase the speed of research and data development necessary for new drug applications.

The number of significant drugs that have reached or are nearing the end of their patent protection has also benefited the generic drug industry. That sector of the drug industry has seen significant growth in the past decade, and, we believe, will continue to experience strong growth in the foreseeable future. Generic drug companies provide a significant source of new business for CRO's as they develop, test and manufacture their generic compounds.

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

Although the past year has not seen large mergers in either the pharmaceutical or CRO industries, consolidation continues at a smaller pace in the CRO sector. We believe that consolidation of the CRO sector will continue to be a factor in our markets.

Research 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. We are also impacted by the heightened regulatory environment and the need to improve our business infrastructure to support our increasingly diverse operations, which will necessitate additional capital investment. Our ability to generate capital to reinvest

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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.

Results of Operations

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

	Year Ended September 30,
	2005	2004	2003
Service revenue	77.7%	67.1%	67.0%
Product revenue	22.3	32.9	33.0
Total revenue	100.0%	100.0%	100.0%
Cost of service revenue (a)	71.6	85.6	78.2
Cost of product revenue (a)	36.7	34.9	38.6
Total cost of revenue	63.8	69.0	65.1
Gross profit	36.2	31.0	34.9
Total operating expenses	33.2	30.3	31.0
Operating income	3.0	0.7	3.9
Other (expense)	(2.3)	(2.3)	(2.0)
Income (loss) before income taxes	0.7	(1.6)	1.9
Income tax expense (benefit)	(0.9)	(1.0)	(1.6)
Net income (loss)	(0.2)%	(0.6)%	0.3%

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

Year Ended September 30, 2005, Compared with Year Ended September 30, 2004

Total revenue for the year ended September 30, 2005 increased 14% to $42.4 million from $37.2 million for the year ended September 30, 2004. Service revenue increased to $33.0 million for the year ended September 30, 2005 from $24.9 million for the year ended September 30, 2004, an increase of 33%. This increase came from all domestic locations, as we had strong growth in our bioanalytical laboratories, our toxicology facility, and our clinical research unit. Our laboratory in the UK had a decline in revenues. Our revenues from products declined in the current year to $9.4 million, a 23% decline from last year's product revenues of $12.2 million. This decline was across our product line, following a particularly strong year in product sales in fiscal 2004. In the fiscal year ended September 30, 2005, we did not have any major new adopters of our Culex® system, whereas the prior fiscal year's sales had been strongly influenced by some major buying programs by our customers. Our sales of Culex® supplies, on the other hand, increased due to the larger installed base of Culex® users. Inflation in prices did not have a material impact on revenue increases.

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Costs of revenue increased 6% to $27.1 million for the year ended September 30, 2005 from $25.6 million for the year ended September 30, 2004. This increase of $1.5 million was due to increases in the cost of service revenue as a result of the significant increase in the volume of our services business in fiscal 2005, partially offset by a reduction in the cost of product revenue resulting from the the decrease in the number of products sold and a change in product mix. Cost of service revenue as a percentage of service revenues decreased due to the higher utilization of capacity in our Services segment. A significant portion of our costs in our Services segment are relatively fixed, which results in increasing margins as we increase our utilization of facilities. Costs of revenue for the Company's products segment increased to 36.7% as a percentage of product revenue for the year ended September 30, 2005 from 34.9% of product revenue for the year ended September 30, 2004. This small change was the result of lower utilization of manufacturing capacity.

Selling expenses for the year ended September 30, 2005 decreased by 4% to $2.6 million from $2.7 million during the year ended September 30, 2004, due to decreased headcount in sales. Research and development expenses for the year ended September 30, 2005 increased 18% to $1.3 million from $1.1 million for the year ended September 30, 2004. This increase is primarily due to additional research activities around our Culex® product line.

General and administrative expenses for the year ended September 30, 2005 increased 36% to $10.2 million from $7.5 million for the year ended September 30, 2004. Approximately $1.7 million of the increase was in our Baltimore clinical unit, where we had approximately $700,000 of additional personnel expense as a result of increased business, more expensive new hires and compensation increases, and $800,000 of occupancy cost relating to the sale and leaseback of our building. In our West Lafayette facility, we commissioned approximately 19,000 square feet of new research and laboratory space, causing approximately $500,000 of additional depreciation and other space related costs. The remainder of the increase was related to compensation increases, increases in liability, property and health care coverages, and higher energy costs.

Other income (expense), net, was $(969,000) in the year ended September 30, 2005 as compared to $(832,000) in the year ended September 30, 2004, as a result of increased interest expense. We reduced our average outstanding borrowings from the second fiscal quarter due to the sale of our Baltimore building, but added $1.1 million of capital leases to finance new laboratory equipment and had higher interest rates on our floating rate revolving credit facility.

The Company's effective tax rate was 135% for fiscal 2005 as a result of foreign taxable losses which reduced our pre-tax income by approximately $800,000, without corresponding tax benefit. The prior year's tax benefit was the result of a U.S. loss which we could carry back against prior year's income, and foreign income for which foreign tax loss carryforwards were available.

As a result of the above, the Company earned $0.00 per share in fiscal 2005, both basic and diluted, compared to a net loss fiscal 2004 of $0.04 per share, both basic and diluted.

Year Ended September 30, 2004, Compared with Year Ended September 30, 2003

Total revenue for the year ended September 30, 2004 increased 25% to $37.2 million from $29.8 million for the year ended September 30, 2003. Service revenue increased to $24.9 million for the year ended September 30, 2004 from $20.0 million for the year ended September 30, 2003. The inclusion of two acquired businesses for the entire year in fiscal 2004, compared to the inclusion from the date of acquisition in the prior year, caused a 9% increase in the year-to-year revenues. The other 16% of revenue growth came from increased sales at all operating locations, except West Lafayette research services, which had a decline. These increases were the result of increased sales efforts in the Baltimore

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and Evansville locations, and improvement in our facilities from recent capital expenditures. Product revenue increased to $12.2 million for the year ended September 30, 2004 from $9.9 million for the year ended September 30, 2003, primarily due to sales of the Culex® Automated Blood Sampling System. The increase in Culex® sales was a result of continuing acceptance of the technology by new customers, as well as strong re-orders by existing customers. Inflation in prices did not have a material impact on sales increases.

Costs of revenue increased 32% to $25.6 million for the year ended September 30, 2004 from $19.4 million for the year ended September 30, 2003. This increase of $6.2 million was due to the inclusion of the acquired businesses mentioned in the revenue discussion and the costs of additional revenues. Cost of revenue as a percentage of service revenues increased due to the lower utilization of capacity of the acquired businesses – costs of idle capacity are charged to cost of service revenue. Costs of revenue for the Company's products segment decreased to 35% as a percentage of product revenue for the year ended September 30, 2004 from 39% of product revenue for the year ended September 30, 2003, as a result of product sales growth being driven by Culex® sales, which command higher margins than the Company's older product lines.

Selling expenses for the year ended September 30, 2004 decreased by 7% to $2.7 million from $2.9 million during the year ended September 30, 2003, due to decreased headcount in sales. Research and development expenses, which are net of grant reimbursements, for the year ended September 30, 2004 decreased 15% to $1.1 million from $1.3 million for the year ended September 30, 2003. The decrease of $227,000 is primarily due to reducing the number of research projects in the current year.

General and administrative expenses, for the year ended September 30, 2004 increased 39% to $7.5 million from $5.4 million for the year ended September 30, 2003, as a result of the acquired business mentioned above. The Company also incurred $500,000 of non-recurring consulting expenses necessitated by turnover in the Company's finance department for the first six months of fiscal 2004. The Company utilized a contract chief accounting officer and additional financial consultants to compensate for the resignation of both the chief financial officer and chief accounting officer.

Other income (expense), net, was $(832,285) in the year ended September 30, 2004 as compared to $(592,178) in the year ended September 30, 2003, as a result of the increase in interest expense from $710,000 to $943,000 due to increased borrowings for the acquisitions and additional construction of facilities, and a non-recurring gain from sale of an excess facility of $363,000 in fiscal 2003.

The Company's effective tax rate was a benefit of 66% for 2004 as a result of having a U.S. taxable loss that can be carried back for refunds against prior years' taxes, coupled with profitable operations in the United Kingdom, where the Company is utilizing loss carryforwards to offset taxable income. The Company has tax net operating loss carryforwards for its subsidiaries in the United Kingdom. Such carryforwards, which have an indefinite life, are available to offset taxable income generated by those subsidiaries as provided by United Kingdom tax regulations. The prior year's tax rate was the result of taxable U.S. income with a foreign loss generating no offsetting benefit.

As a result of the above, the Company lost $0.04 per share in fiscal 2004, both basic and diluted, compared to net income in fiscal 2003 of $0.02 per share, both basic and diluted.

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Liquidity and Capital Resources

Comparative Cash Flow Analysis

Since its inception, the Company's principal sources of cash have been cash flow generated from operations and funds received from bank borrowings and other financings. At September 30, 2005, the Company had cash and cash equivalents of $1.3 million compared to $0.8 million at September 30, 2004.

The Company's net cash used by operating activities was $0.5 million for the year ended September 30, 2005. Cash used by operations during the year ended September 30, 2005 consisted of net loss of $101,000, net non-cash charges of $2.8 million and net cash used of $3.2 million related to changes in operating assets and liabilities. The most significant items affecting the change in operating assets and liabilities was an increase in accounts receivable of $6.6 million, offset by increases in customer advances and payables $4.4 million. The increases in accounts receivable and customer advances are the result of higher service revenue activity at the end of fiscal 2005 over 2004. The Company had a decrease in deferred income taxes as a result of the turnaround of earlier year's higher depreciation for tax than for financial statements.

Cash provided by investing activities increased to $3.6 million for the year ended September 30, 2005 compared to cash used of $3.5 million and $4.7 million for the years ended September 30, 2004 and 2003, respectively. During the current fiscal year, the Company sold and leased back its building in Baltimore, compared to the prior two years when the Company was investing in expanding facilities and acquisitions. This transaction resulted in net cash to the Company of $5.9 million, which helped finance the $2.3 million investment in capital assets in the current year.

Cash used by financing activities for the year ended September 30, 2005 was $2.8 million, compared to cash provided of $0.3 million and $2.4 million respectively for fiscal 2004 and 2003. In the current year, the Company utilized the proceeds from the sale of the Baltimore building to reduce outstanding borrowings under its revolving credit facility, plus payments on debt incurred with acquisitions and lease payments on capital leases.

In January, 2005 the Company sold and leased back its facility in Baltimore, Maryland. The sales price was $6.5 million, and the Company leased back much of the space through December, 2007. After transaction expenses, the Company generated $5.9 million in cash from this transaction, which was used to reduce outstanding debt and increase working capital.

Capital Resources

Total expenditures by the Company for property and equipment were $2.3 million (funded by proceeds from the sale of the Baltimore building), $3.6 million (funded by funds generated from operations, long-term debt and revolving credit) and $5.3 million (funded by long-term debt), in fiscal 2005, 2004 and 2003, respectively. Expenditures made in connection with the expansion of the Company's operating facilities in West Lafayette and Evansville, Indiana and in the United Kingdom, physical plant improvements in Baltimore (2004), and purchase or upgrade of laboratory equipment account for the largest portions of these expenditures in prior years. The decline in capital expenditures in fiscal 2005 is the result of the completion of expansion programs. Capital investments for the purchase of additional laboratory equipment are driven by anticipated increases in research services to be provided by the Company, and by the replacement or upgrading of the Company's equipment. Additionally, the Company funded $1.1 million of laboratory equipment in fiscal 2005 through capital leases. Although the Company may consider strategic acquisition opportunities it does not intend to aggressively pursue additional acquisitions until the Company is fully utilizing existing capacity.

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During fiscal 2003 and 2004, the Company expanded facilities at its preclinical site in Evansville, Indiana at a total cost of $3.5 million. During 2003 through April 2005, the Company expanded facilities at its site in West Lafayette, Indiana at a cost of $3.5 million. The Company obtained financing for these construction projects with a bank (discussed below).

On December 13, 2002, the Company acquired LCR, a privately held company with headquarters in Walnut Creek, California and contract research laboratory in McMinnville, Oregon. The Company purchased all of the outstanding shares of LCR for approximately $2.0 million. The purchase price consisted of approximately $200,000 in cash and $1.8 million in 10% subordinated notes maturing on October 1, 2007. The holders of the notes have the option to require the Company to repay up to 20% of the outstanding principal balance of the notes on each October 1 prior to maturity, commencing October 1, 2004. These payments were made in both 2004 and 2005.

On June 30, 2003, the Company completed its acquisition of PKLB through the exchange of approximately 228,857 shares of the Company common stock valued at approximately $1.2 million for all of the outstanding common stock and Class B preferred stock of PKLB, and the issuance of $4.0 million of 6% convertible notes payable due 2008 for all of PKLB's Class A redeemable preferred stock. The notes are convertible at $16 per share into shares of the Company's common stock (no principal payments or conversions have occurred as of December 31, 2005). The Company paid cash aggregating approximately $1.5 million representing acquisition costs and cash advances made to PKLB from June 2002 through May 2003.

The Company has a revolving credit facility of $6 million with a commercial bank and three mortgage notes payable to another bank aggregating $8.9 million. Borrowings under these credit agreements are collateralized by substantially all assets related to the Company's operations and all common stock of the Company's United States subsidiaries and 65% of the common stock of its non-United States subsidiaries, and the assignment of a life insurance policy on the Company's Chairman and CEO. Under the terms of these credit agreements, the Company has agreed to restrict advances to subsidiaries, limit additional indebtedness and capital expenditures as well as to comply with certain financial covenants outlined in the borrowing agreements. These credit agreements contain cross-default provisions. Details of each debt issue are discussed below.

The maximum amount available under the terms of the Company's revolving line of credit is $6 million with outstanding borrowings limited to the borrowing base as defined in the agreement. As of September 30, 2005 the outstanding balance on this line of credit was $920,000. Interest accrues monthly on the outstanding balance at the bank's prime rate to prime rate plus up to 25 basis points or at the Eurodollar rate plus 250 to 300 basis points, depending in each case upon the ratio of the Company's interest-bearing indebtedness (less subordinated debt) to EBITDA, as elected by the Company. As of September 30, 2005 interest on the entire outstanding balance was based on the prime rate of 6.75%. The Company pays a fee equal to 25 basis points on the unused portion of the line of credit. Borrowings under the facility are based on a lending formula utilizing the Company's accounts receivable and inventory. At September 30, 2005 the Company had $2.3 million available under the facility after offsetting outstanding borrowings and a $2.8 million outstanding letter of credit which secures the Baltimore lease (this letter of credit reduces to $2.0 million in January 2006). The Company's line of credit is a revolver against which the Company applies cash receipts, and draws cash as needed. The line of credit is committed until January, 2008.

The Company has three outstanding mortgages with a commercial bank on its facilities in West Lafayette and Evansville, Indiana, with essentially the same terms, which total $8.9 million. The Company has fixed the interest rate on the mortgages at 5.69% through June, 2007. See Note 7 to the Consolidated Financial Statements.

23

The following table summarizes the cash payments under the Company's contractual term debt and lease obligations at September 30, 2005 and the effect such obligations are expected to have on its liquidity and cash flows in future periods (amounts in thousands). The table does not include the Company's revolving credit facility..

	2006	2007	2008	2009	2010	After 2010	Total
Mortgage notes payable	$     340	$         362	$      384	$       406	$      431	$        6,996	$        8,919
Subordinated debt*	360	360	4,468	—	—	—	5,188
Capital lease obligations	278	213	229	245	121	—	1,086
Operating leases	2,109	1,846	631	10	—	—	4,596
	$  3,087	$      2,781	$   5,712	$       661	$      552	$        6,996	$       19,789

* Subordinated debt includes notes to related parties.

The Company expects to spend approximately $2.5 million in fiscal 2006 on capital assets, primarily laboratory equipment. As of September 30, 2005, no firm commitments had been made.

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.

Based on its current business activities, the Company believes cash generated from its operations and amounts available under its existing credit facilities will be sufficient to fund the Company's working capital and capital expenditure requirements for the foreseeable future and through September 30, 2006.

Inflation

The Company believes that inflation has not had a material adverse effect on its business, operations or financial condition.

Critical Accounting Policies

"Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Liquidity and Capital Resources" discusses the consolidated financial statements of the Company, which have been prepared in accordance with accounting principles generally accepted in the United States. Preparation of these financial statements requires management to make judgments and estimates that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosures of contingent assets and liabilities. Certain significant accounting policies applied in the preparation of the financial statements require management to make difficult, subjective or complex judgments, and are considered critical accounting policies by the Company. The Company has identified the following areas as critical accounting policies.

Revenue Recognition

The majority of the Company's service contracts involve the processing of bioanalytical samples for pharmaceutical companies. These contracts generally provide for a fixed fee for each assay method developed or sample processed and revenue is recognized under the specific performance method of accounting. Under the specific performance method, revenue and related direct costs are recognized when services are performed. The Company's other service contracts generally consist of preclinical and clinical trial studies for pharmaceutical companies. Service revenue is recognized based on the ratio of

24

direct costs incurred to total estimated direct costs under the proportional performance method of accounting. Losses on contracts are provided in the period in which the loss becomes determinable. Revisions in profit estimates are reflected on a cumulative basis in the period in which such revisions become known. The establishment of contract prices and total contract costs involves estimates made by the Company at the inception of the contract period. These estimates could change during the term of the contract which could impact the revenue and costs reported in the consolidated financial statements. Projected losses on contracts are provided for in their entirety when known. Revisions to estimates have not been material to the Company. Service contract fees received upon acceptance are deferred and classified within customer advances, until earned. Unbilled revenues represent revenues earned under contracts in advance of billings.

The Company's product revenue is derived primarily from sales of equipment utilized for scientific research. Revenue from equipment not requiring installation, testing or training is recognized upon shipment to customers. One Company product includes internally developed software and requires installation, testing and training, which occur concurrently. Revenue is recognized upon completion of the installation, testing and training.

Impairment of Long-Lived Assets, Including Goodwill

Long lived assets, such as property and equipment, and purchased intangibles subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of would be separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and are no longer depreciated. The assets and liabilities of a disposal group classified as held for sale would be presented separately in the appropriate asset and liability sections of the balance sheet.

Goodwill and other indefinite lived intangible assets, collectively referred to as "indefinite lived assets", are tested annually for impairment, and are tested for impairment more frequently if events and circumstances indicate that the asset might be impaired. An impairment loss is recognized to the extent that the carrying amount exceeds the asset's fair value. This determination is made at the reporting unit level and consists of two steps. First, the Company determines the fair value of a reporting unit and compares it to its carrying amount. Second, if the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recognized for any excess of the carrying amount of the reporting unit's indefinite lived assets over the implied fair value of those indefinite lived assets. The implied fair value of the indefinite lived assets is determined by allocating the fair value of the reporting unit in a manner similar to a purchase price allocation, in accordance with FASB Statement No. 141, Business Combinations. The residual fair value after this allocation is the implied fair value of the reporting unit's indefinite lived assets.

Of the $1,251,000 of intangible assets acquired from LCR, $180,000 was assigned to methodologies, $359,000 to the customer relationships, and $712,000 to the regulated facility/FDA compliant laboratory site. The Company estimated the economic useful life of the acquired methodologies and customer relationships to be 5 years with amortization recognized using the straight-line method. The Company has determined that the acquired regulated facility/FDA compliant laboratory site is an indefinite-lived intangible not subject to amortization.

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Of the $1,691,000 in value of the intangible assets acquired from PKLB, $575,000 in value was assigned to methodologies, $562,000 in value to subject relationships, and $555,000 in value to the regulated facility/FDA compliant laboratory site. The Company estimated the economic useful life of the acquired methodologies and subject relationships to be 5 years with amortization recognized using the straight-line method. The Company has determined that the acquired regulated facility/FDA compliant laboratory site is an indefinite-lived intangible not subject to amortization.

The Company's estimates of fair values and allocation of the purchase prices were determined with the analyses and assistance of an independent valuation firm.

Income Tax Accounting

Income taxes are accounted for in accordance with SFAS No. 109, "Accounting for Income Taxes." SFAS No. 109 requires recognition of deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities. These deferred taxes are measured by applying the provisions of tax laws expected to be in effect at the time the differences reverse.

The Company recognizes deferred tax assets in its balance sheet which typically represent items deducted currently in the financial statements that will be deducted in future periods in tax returns. In accordance with SFAS No. 109, a valuation allowance is recorded against these deferred tax assets to reduce the total deferred tax assets to an amount that will, more likely than not, be realized in future periods. The valuation allowance is based, in part, on management's estimate of future taxable income, the expected utilization of tax loss carry forwards and the expiration dates of tax loss carry forwards. Significant assumptions are used in developing the analysis of future taxable income for purposes of determining the valuation allowance for deferred tax assets which, in the opinion of management, are reasonable under the circumstances.

The Company has an accumulated net deficit in its UK subsidiaries, consequently, United States deferred tax liabilities on such earnings have not been recorded.

New Accounting Pronouncements

The following two pronouncement will be adopted by the Company for periods beginning October 1, 2005.

In November, 2004, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") Number 151 dealing with inventory costs. The statement clarifies what costs can be included in inventory, requiring that absorption factors be based on normal capacities of manufacturing facilities and excess capacity be expensed as incurred. The Company's current costing methodology substantially conforms with the new standard. The Company does not expect a material change in costing methods from adoption of this statement.

In December, 2004, SFAS 123 (Revised) was issued dealing with Share-Based Payments. In general, this statement requires that companies compute the fair value of options and other stock based employee incentives, and charge this value to operations over the period earned, generally the vesting period. The only instruments we use that are governed by this statement are stock options for Directors and employees. The impact on reported results of adoption of this statement, required for interim and annual periods for years beginning after June 15, 2005, is presented in note 1 (k) to the Consolidated Financial Statements. The impact on operations in future periods will be determined by amortizing the remaining value of our currently outstanding options, plus the value imputed to future option grants using those methods. Based on currently outstanding options, the impact on net earnings for fiscal 2006 will be to reduce net earnings by approximately $175,000. There is no impact on cash flow.

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Item 7A. Quantitative and Qualitative Disclosures about Market Risk.

The Company's primary market risk exposure with regard to financial instruments is the changes in interest rates. The Revolving Credit Agreement between the Company and National City Bank bears interest at a rate of either the bank's prime rate plus 0 to 25 basis points, or at LIBOR plus 250 to 300 basis points, depending in each case upon the ratio of the Company's interest-bearing indebtedness (less subordinated debt) to EBITDA, at the Company's option. Historically, the Company has not used derivative financial instruments to manage exposure to interest rate changes. The Company estimates that a hypothetical 10% adverse change in interest rates would not materially affect the consolidated operating results of the Company. While the Company's revolving line of credit is at variable rates, the Company's real estate mortgages are fixed at 5.69% interest until June 2007.

The Company operates internationally and is, therefore, subject to potentially adverse movements in foreign currency rates change. The effect of movements in the exchange rates was not material to the consolidated operating results of the Company in fiscal years 2005, 2004 and 2003. The Company estimates that a hypothetical 10% adverse change in foreign currency exchange rates would not materially affect the consolidated operating results of the Company.

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Item 8. Financial Statements and Supplementary Data.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors

Bioanalytical Systems, Inc.:

We have audited the accompanying consolidated balance sheets of Bioanalytical Systems, Inc. and subsidiaries as of September 30, 2005 and 2004, and the related consolidated statements of operations, shareholders' equity and comprehensive income (loss), and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Bioanalytical Systems, Inc. and subsidiaries as of September 30, 2005 and 2004, and the results of their operations and their cash flows for the yearsthen ended in conformity with U.S. generally accepted accounting principles.

/s/ KPMG LLP

Indianapolis, Indiana

January 7, 2006

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders
Bioanalytical Systems, Inc.:

We have audited the accompanying consolidated statements of operations, shareholders' equity and comprehensive income, and cash flows for the year ended September 30, 2003. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company's internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated results of operations of Bioanalytical Systems, Inc. and its cash flows for the year ended September 30, 2003 in conformity with U.S. generally accepted accounting principles.

/s/ Ernst & Young, LLP
Indianapolis, Indiana
November 28, 2003

29

BIOANALYTICAL SYSTEMS INC.
Consolidated Balance Sheets
At September 30,

Assets	2005			2004
Current assets:
Cash and cash equivalents	$	1,254,269		$	772,889
Accounts receivable:
Trade		10,351,881			5,352,244
Unbilled revenues and other		2,677,130			1,086,121
Inventories		2,041,335			1,569,527
Deferred income taxes		380,765			469,033
Refundable income taxes		—			602,639
Prepaid expenses		429,690			503,492
Total current assets		17,135,070			10,355,945
Property and equipment:
Land and improvements		431,110			653,534
Buildings and improvements		22,333,119			27,910,706
Machinery and equipment		19,104,934			15,927,910
Office furniture and fixtures		1,457,130			1,207,512
Construction in process		57,812			136,920
		43,384,105			45,836,582
Less accumulated depreciation and amortization		(16,818,721	)		(13,935,307	)
		26,565,384			31,901,275
Goodwill		1,444,652			1,444,652
Intangible assets, net of accumulated amortization of $786,587
in 2005 and $451,471 in 2004		2,155,786			2,490,902
Debt issue costs, net		279,858			339,583
Other assets		257,679			262,774
Total assets	$	47,838,429		$	46,795,131

See accompanying notes to consolidated financial statements.

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BIOANALYTICAL SYSTEMS INC.
Consolidated Balance Sheets
At September 30,

Liabilities and Shareholders' Equity 2005 2004	2005			2004
Current liabilities:
Accounts payable	$	1,681,078		$	2,761,960
Accrued expenses		2,789,613			1,590,247
Customer advances		5,974,136			2,816,826
Income tax payable		31,275			—
Revolving line of credit		920,000			2,825,661
Current portion of capital lease obligations		278,398			73,981
Current portion of long-term debt, including $218,670 in
2004 to related parties		700,352			782,748
Total current liabilities		12,374,852			10,851,423
Capital lease obligations, less current portion		807,356			80,124
Long-term debt, less current portion		8,579,123			8,892,937
Subordinated notes payable, including $498,648 in 2005 and
$735,989 in 2004 to related parties, less current portion		4,828,511			5,188,109
Deferred income taxes		1,650,857			2,362,355
Shareholders' equity:
Preferred shares:
Authorized 1,000,000 shares; none issued and outstanding		—			—
Common shares, no par value:
Authorized 19,000,000 shares; issued and
outstanding 4,871,127 shares in 2005 and
4,869,502 shares in 2004		1,177,352			1,176,590
Additional paid-in-capital		11,267,919			11,263,368
Retained earnings		7,194,065			7,295,063
Accumulated other comprehensive loss		(41,606	)		(314,838	)
Total shareholders' equity		19,597,730			19,420,183
Total liabilities and shareholders' equity	$	47,838,429		$	46,795,131

See accompanying notes to consolidated financial statements.

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BIOANALYTICAL SYSTEMS INC.
Consolidated Statements of Operations
Years ended September 30,

	2005			2004			2003
Service revenue	$	32,951,218		$	24,928,305		$	19,986,734
Product revenue		9,443,828			12,224,155			9,852,220
Total revenue		42,395,046			37,152,460			29,838,954
Cost of service revenue		23,588,654			21,347,731			15,624,636
Cost of product revenue		3,462,361			4,270,720			3,804,105
Total cost of revenue		27,051,015			25,618,451			19,428,741
Gross profit		15,344,031			11,534,009			10,410,213
Operating expenses:
Selling		2,591,521			2,703,450			2,853,229
Research and development		1,326,032			1,099,533			1,326,933
General and administrative		10,187,904			7,476,646			5,430,051
(Gain) loss on sale of property and equipment		(21,428	)		28,757			(362,755	)
Total operating expenses		14,084,029			11,308,386			9,247,458
Operating income		1,260,002			225,623			1,162,755
Interest income		18,548			7,621			3,322
Interest expense		(987,914	)		(942,463	)		(709,777	)
Other income		756			102,557			114,277
Income (loss) before income taxes		291,392			(606,662	)		570,577
Income taxes		392,390			(403,308	)		483,271
Net income (loss)	$	(100,998	)	$	(203,354	)	$	87,306
Net income (loss) per share:
Basic	$	(0.02	)	$	(0.04	)		0.02
Diluted	$	(0.02	)	$	(0.04	)		0.02
Weighted average common shares outstanding:
Basic		4,870,370			4,860,095			4,654,595
Diluted		4,870,370			4,860,095			4,673,448

See accompanying notes to consolidated financial statements.

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BIOANALYTICAL SYSTEMS INC.
Consolidated Statements of Shareholders' Equity and Comprehensive Income (Loss)
Years ended September 30, 2005, 2004, and 2003

	Common Shares				Additional paid in		Retained			Accumulated other comprehensive			Total Shareholders'
	Number		Amount		capital		earnings			loss			equity
Balance at September 30, 2002		4,578,516	$	1,014,206	$	10,520,839	$	7,411,111		$	(47,792	)	$	18,898,364
Comprehensive income (loss):
Net income		—		—		—		87,306			—			87,306
Other comprehensive loss:
Foreign currency
translation adjustments		—		—		—		—			(14,119	)		(14,119	)
Total comprehensive income														73,187
Shares issued for acquisitions		228,857		148,621		567,512		—			—			716,133
Exercise of stock options		24,087		5,336		33,444		—			—			38,780
Balance at September 30, 2003		4,831,460		1,168,163		11,121,795		7,498,417			(61,911	)		19,726,464
Comprehensive income:
Net loss		—		—		—		(203,354	)		—			(203,354	)
Other comprehensive loss:
Foreign currency
translation adjustments		—		—		—		—			(252,927	)		(252,927	)
Total comprehensive loss														(456,281	)
Conversion of note		38,042		8,427		141,573		—			—			150,000
Balance at September 30, 2004		4,869,502		1,176,590		11,263,368		7,295,063			(314,838	)		19,420,183
Comprehensive income:
Net loss		—		—		—		(100,998	)		—			(100,998	)
Other comprehensive income:
Foreign currency
translation adjustments		—		—		—		—			273,232			273,232
Total comprehensive income														172,234
Exercise of stock options		1,625		762		4,551		—			—			5,313
Balance at September 30, 2005		4,871,127	$	1,177,352	$	11,267,919	$	7,194,065		$	(41,606	)	$	19,597,730

See accompanying notes to consolidated financial statements.

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BIOANALYTICAL SYSTEMS INC.
Consolidated Statements of Cash Flows
Years ended September 30,

	2005			2004			2003
Operating activities:
Net income (loss)	$	(100,998	)	$	(203,354	)	$	87,306
Adjustments to reconcile net income (loss) to net cash
provided (used) by operating activities:
Depreciation and amortization		3,441,420			3,441,127			2,681,692
(Gain) loss on sale of property and equipment		(21,428	)		28,757			(362,755	)
Deferred income taxes		(623,230	)		12,927			137,662
Changes in operating assets and liabilities:
Accounts receivable		(6,590,646	)		(1,492,620	)		503,049
Inventories		(471,808	)		485,612			618,900
Prepaid expenses and other assets		(84,268	)		(113,471	)		107,269
Accounts payable		(1,080,882	)		(310,906	)		(540,139	)
Refundable income taxes		602,639			(518,763	)		(31,924	)
Income taxes payable		31,275			—			(41,488	)
Accrued expenses		1,199,366			344,894			(130,267	)
Customer advances		3,157,310			1,159,308			(84,111	)
Net cash provided (used) by operating activities		(541,250	)		2,833,511			2,945,194
Investing activities:
Capital expenditures		(2,301,153	)		(3,568,045	)		(5,329,166	)
Proceeds from sale of property and equipment		5,887,428			79,010			1,639,808
Payments for purchase of PharmaKinetics Laboratories,		—			—			(818,011	)
Inc., net of cash acquired
Payments for purchase of LC Resources, Inc., net of cash acquired		—			(8,118	)		(185,398	)
Net cash provided (used) by investing activities		3,586,275			(3,497,153	)		(4,692,767	)
Financing activities:
Borrowings of long-term debt		—			—			7,631,409
Payments of long-term debt		(755,808	)		(504,749	)		(3,704,659	)
Borrowings on line of credit		7,888,423			13,465,370			5,223,054
Payments on line of credit		(9,794,084	)		(13,027,555	)		(6,584,581	)
Borrowings on construction line of credit		—			574,247			1,675,753
Payments on capital lease obligations		(180,721	)		(196,166	)		(1,138,948	)
Payments of debt issue costs		—			—			(490,806	)
Payments on subordinated notes		—			—			(251,730	)
Net proceeds from the exercise of stock options		5,313			—			38,780
Net cash provided (used) by financing activities		(2,836,877	)		311,147			2,398,272
Effect of exchange rate changes		273,232			(252,927	)		(98,352	)
Net increase (decrease) in cash and cash		481,380			(605,422	)		552,347
equivalents
Cash and cash equivalents at beginning of year		772,889			1,378,311			825,964
Cash and cash equivalents at end of year	$	1,254,269		$	772,889		$	1,378,311

See accompanying notes to consolidated financial statements.

34

(1)                  Significant Accounting Policies

(a)                 Nature of Business

Bioanalytical Systems, Inc. and its subsidiaries (the “Company” or “BASi”) engage in research 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. We conduct our businesses through our research facilities in Indiana, Oregon, Maryland and the United Kingdom and our manufacturing facility in Indiana. Our customers are located throughout the world.

(b)                 Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant inter-company accounts and transactions have been eliminated.

(c)                 Revenue Recognition

The majority of our service contracts involve the development of analytical methods and the processing of bioanalytical samples for pharmaceutical companies. These contracts generally provide for a fixed fee for each sample processed, and revenue is recognized under the specific performance method of accounting. Under the specific performance method, revenue and related direct costs are recognized when services are performed. Our other service contracts generally consist of preclinical and clinical trial studies for pharmaceutical companies. We recognize service revenue on these contracts based on the ratio of direct costs incurred to total estimated direct costs under the proportional performance method of accounting. When we revise profit estimates, we adjust on a cumulative basis in the period in which the revisions become known. The establishment of contract prices and total contract costs involves estimates made by us at the inception of the contract period. These estimates could change during the term of the contract, which impacts the revenue and costs we report in the consolidated financial statements. We provide for projected losses on contracts in their entirety when the loss becomes determinable.

We generally bill a portion of service contract fees upon acceptance by our customers. These are classified as customer advances until earned. Unbilled revenues represent revenues earned under contracts in advance of billings.

Our product revenue is derived primarily from sales of instruments utilized for scientific research. Revenue from products not requiring installation, testing, or training is recognized upon shipment to customers. One of our products includes internally developed software and sometimes requires installation, testing, and training, which occur concurrently. Revenue is recognized upon completion of the installation, testing, and training.

(d)                 Cash Equivalents

We consider all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents.

(e)                 Financial Instruments

Our credit risk consists principally of trade accounts receivable. We perform periodic credit evaluations of our customers’ financial conditions and generally do not require collateral on trade accounts receivable. Our allowance for doubtful accounts was $40,000 at September 30, 2005 (no allowance at September 30, 2004).

35

Our cash and cash equivalents, accounts receivable, accounts payable and certain other accrued liabilities are all short-term in nature and their carrying amounts approximate fair value. We have both variable rate borrowings, which adjust to the current market, and borrowings with fixed rates for up to three years. The carrying value of our fixed rate debt also approximates its fair value.

(f)                 Inventories

We state our inventories at the lower of cost or market, using the last-in, first-out (LIFO) method.

(g)                 Impairment of Long-Lived Assets

Long-lived assets, such as property and equipment, and purchased intangibles subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of would be separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and are no longer depreciated. The assets and liabilities of a disposed group classified as held for sale would be presented separately in the appropriate asset and liability sections of the balance sheet.

Goodwill and other indefinite lived intangible assets, collectively referred to as “indefinite lived useful assets”, are tested annually for impairment, and are tested for impairment more frequently if events and circumstances indicate that the asset might be impaired. An impairment loss is recognized to the extent that the carrying amount exceeds the asset’s fair value. This determination is made at the reporting unit level and consists of two steps. First, the Company determines the fair value of a reporting unit and compares it to its carrying amount. Second, if the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recognized for any excess of the carrying amount of the reporting unit’s indefinite lived useful assets over the implied fair value of those indefinite lived useful assets. The implied fair value of the indefinite lived useful assets is determined by allocating the fair value of the reporting unit in a manner similar to a purchase price allocation, in accordance with FASB Statement No. 141, Business Combinations. The residual fair value after this allocation is the implied fair value of the reporting unit’s indefinite lived useful assets.

(h)                 Property and Equipment

We record property and equipment at cost, including interest capitalized during the period of construction of major facilities. We compute depreciation, including amortization on capital leases, using the straight-line method over the estimated useful lives of the assets, which we estimate to be: buildings and improvements, 34 to 40 years; machinery and equipment, 5 to 10 years, and office furniture and fixtures, 10 years. Our depreciation expense was $3,047,000 in fiscal 2005, $3,053,000 in fiscal 2004 and $1,543,000 in fiscal 2003. Expenditures for maintenance and repairs are expensed as incurred.

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(i)                 Goodwill and Intangible Assets

We carry goodwill at cost. Other intangible assets are stated at cost and are amortized on a straight-line basis over five years. All intangible assets acquired that are obtained through contractual or legal right, or are capable of being separately sold, transferred, licensed, rented, or exchanged, are recognized as an asset apart from goodwill. Goodwill and intangibles with indefinite lives are not amortized, but are subject to an annual assessment for impairment by applying a fair value based test.

We complete a fair value-based impairment test on our goodwill and intangible assets not subject to amortization at the close of each fiscal year, in addition to other times if events indicate there is a likely decline in value. The carrying amount of goodwill at September 30, 2005 and 2004 was $1,444,652.

The components of intangible assets subject to amortization are as follows:

			September 30, 2005
	Weighted average life (years)		Gross carrying amount		Accumulated amortization
Methodologies		5	$	754,561	$	340,755
Volunteer database		5		561,993		248,382
Customer relationships		5		359,000		197,450
			$	1,675,554	$	786,587
			September 30, 2004
	Weighted average life (years)		Gross carrying amount		Accumulated amortization
Methodologies		5	$	754,561	$	189,835
Volunteer database		5		561,993		135,978
Customer relationships		5		359,000		125,658
			$	1,675,554	$	451,471

The Company has indefinite-lived intangible assets of $1,266,711 assigned to the acquired regulated facilities/Food and Drug Administration (FDA) compliant research sites as of both September 30, 2005 and 2004.

Amortization expense for intangible assets for fiscal years ended September 30, 2005, 2004 and 2003 was $335,116, $335,116 and $116,253 respectively. The following table provides information regarding estimated amortization expense for each of the following years ended September 30:

37

2006		335,116
2007		335,116
2008		218,735
	$	888,967

(j)                 Advertising Expense

We expense advertising costs as incurred. Advertising expense was $111,800, $270,780, and $237,337 for the years ended September 30, 2005, 2004, and 2003, respectively.

(k)                 Stock-Based Compensation

We use the intrinsic value method to account for stock options. Our option grants to employees and directors are always at or above the market price at the date of grant; therefore, we do not have a charge against operations.

Below is pro forma information of the potential effect on net income/(loss) and earnings/(loss) per share had we expensed stock options using the fair value method. We estimated the fair value for options we granted using a binomial option pricing model with the following weighted average assumptions:

	2005		2004		2003
Risk-free interest rate	3	.00%	3	.50%	5	.50%
Dividend yield	0	.00%	0	.00%	0	.00%
Volatility factor of the expected market price of	0	.668	0	.724	0	.14
the Company's common stock
Expected life of the options (years)	7	.0	7	.0	7	.0
Weighted fair value of options at grant date	$ 3	.38	$ 2	.92	$ 1	.81

For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the related vesting period. The Company’s pro forma information giving effect to the estimated compensation expense related to stock options is as follows:

	2005			2004			2003
Net income (loss) as reported	$	(100,998	)	$	(203,354	)	$	87,306
Deduct: Total stock-based employee compensation
expense determined under the fair value-based
method for all awards, net of tax effects		(177,125	)		(43,911	)		(22,596	)
Pro forma net income (loss)	$	(278,123	)	$	(247,265	)	$	64,710
Pro forma net income (loss) per share		(0.06	)		(0.05	)		0.01

(l)                 Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

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(m)                 New Accounting Pronouncements

In November 2004 the FASB issued Statement of Financial Accounting Standards (“SFAS”) Number 151 dealing with inventory costs. The statement clarifies what costs can be included in inventory, requiring that absorption factors be based on normal capacities of manufacturing facilities and excess capacity be expensed as incurred. Our current costing methodology substantially conforms with the new standard; therefore, we do not expect a material change in our costing methods from adoption of this statement.

In December 2004 SFAS 123 (Revised) was issued dealing with Share-Based Payments. In general, this statement requires that companies compute the fair value of options and other stock-based employee incentives, and charge this value to operations over the period earned, generally the vesting period. The only instruments we use that are governed by this statement are stock options for Directors and employees. The impact on reported results of adoption of this statement, which we will be required to utilize for periods beginning October 1, 2005 is presented in (k) above. The impact on operations in future periods will be determined by amortizing the remaining value of our currently outstanding options, plus the value imputed to future option grants using the above described methods. There is no impact on cash flow.

Other recent pronouncements are not relevant to our business.

(n)                 Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Our actual results could differ from those estimates.

(2)                 Earnings per Share

We compute basic earnings per share on the basis of the weighted average number of common shares outstanding. We compute diluted earnings per share on the basis of the weighted average number of common and potential common shares outstanding. Potential common shares include the dilutive effect of employee and director options to purchase common shares and convertible subordinated debt, which is assumed to be converted. The convertible subordinated debt was not dilutive in any period presented.

The following table reconciles the basic earnings per share computation to the diluted earnings per share computation from operations as of September 30:

39

	2005			2004			2003
Shares:
Basic shares		4,870,370			4,860,095			4,654,595
Effect of dilutive securities:
Options		—			—			18,853
Convertible subordinated debt		—			—			—
Diluted shares		4,870,370			4,860,095			4,673,448
Basic and diluted net income (loss)	$	(100,998	)	$	(203,354	)	$	87,306
Basic EPS	$	(0.02	)	$	(0.04	)	$	0.02
Diluted EPS	$	(0.02	)	$	(0.04	)	$	0.02

At September 30, 2005 we had 250,000 shares issuable upon the conversion of our subordinated debt and 480,253 issuable upon exercise of stock options that are not included in our outstanding share calculation as they are antidilutive.

(3)                 Acquisitions

We acquired two laboratory services companies during the year ended September 30, 2003. We used the purchase method of accounting for each of these acquisitions. The purchase price has been allocated to the estimated fair values of net assets acquired.

(a)                 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 $1,999,000. The purchase price consisted of cash payments of $199,000 and issuance of $1,800,000 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	$	638,527
Property and equipment		347,217
Intangible assets		1,251,000
Goodwill		561,024
Total assets acquired		2,797,768
Liabilities assumed		(798,921	)
Net assets acquired	$	1,998,847

The intangible assets arising from this transaction include $180,000 assigned to methodologies, $359,000 assigned to customer relationships and $712,000 assigned to the regulated facility/FDA compliant research 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. Based on current laws, the recorded goodwill is not deductible for tax purposes.

(b)                 PharmaKinetics Laboratories, Inc.

On May 26, 2003, we converted our $791,000 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 $1,178,614 and the issuance of $3,999,840 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.

40

The Company paid cash aggregating $1,646,501 representing cash advances and acquisition costs made to PKLB from June 2002 through May 2003. PKLB was a publicly traded company based in Baltimore, Maryland, that provided 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 allocated as follows:

Current assets	$	625,581
Property and equipment		6,280,435
Intangible assets		1,691,365
Total assets acquired		8,597,381
Liabilities assumed		(1,772,266	)
Net assets acquired	$	6,825,115

Of the $1,691,365 in value of the acquired intangible assets, $574,561 was assigned to methodologies, $561,993 was assigned to volunteer database and $554,811 has been assigned to the regulated facility/FDA compliant research site. We estimated the economic useful lives of the acquired methodologies and volunteer database to be 5 years, using straight-line amortization, and determined that the acquired regulated facility/FDA research laboratory site is an indefinite-lived intangible asset not subject to amortization.

We have included the results of LCR’s and PKLB’s operations in the consolidated financial statements since the acquisition dates of December 13, 2002, and May 26, 2003, respectively.

(4)                 Sale of Building

In connection with the purchase of PKLB, we acquired land and a building valued at approximately $6.2 million, which approximated fair value. On January 5, 2005 we sold the building for a $6.5 million cash selling price, with a three year leaseback of approximately 85% of the space in the building for $800,000 annually, plus operating expenses, which approximates market rental. We have accounted for the transaction as a sale/leaseback transaction. We recorded a deferred gain on the building of $218,000 which is being amortized over the life of the lease which expires December 31, 2007. The net proceeds of the sale were used to pay off our revolving credit facility and for working capital.

(5)                 Inventories

Inventories at September 30 consisted of the following:

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	2005			2004
Raw materials	$	1,425,610		$	1,391,688
Work in progress		375,219			196,100
Finished goods		423,910			129,048
		2,224,739			1,716,836
Less LIFO reserve		(183,404	)		(147,309	)
	$	2,041,335		$	1,569,527

(6)                 Lease Arrangements

We acquired equipment totaling $1,112,000 through capital lease arrangements during the year ended September 30, 2005. Future minimum lease payments on capital leases at September 30, 2005 are as follows:

	Principal		Interest		Total
2006	$	278,398	$	69,358	$	347,756
2007		212,879		50,678		263,557
2008		228,559		34,998		263,557
2009		245,394		18,163		263,557
2010		120,524		2,461		122,985
	$	1,085,754	$	175,658	$	1,261,412

The total amount of equipment capitalized under capital lease obligations as of September 30, 2005 and 2004 was $1,112,000 and $1,917,625, respectively. Accumulated amortization on capital leases at September 30, 2005 and 2004 was $54,000 and $1,413,842, respectively. Amortization of assets acquired through capital leases is included in depreciation expense.

We lease office space and equipment under noncancelable operating leases that terminate at various dates through 2007. Certain of these leases contain renewal options. Total rental expense under these leases was $913,514, $488,294, and $591,580 in fiscal 2005, 2004, and 2003, respectively.

Future minimum lease payments for the following fiscal years under operating leases at September 30, 2005 are as follows:

2006	$	2,109,301
2007		1,846,019
2008		630,708
2009		10,350
	$	4,596,378

(7)                 Debt Arrangements

Long-term debt consisted of the following at September 30:

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2005 2004

Mortgage note payable to a bank, payable in monthly principal and interest installments of $36,500 until June 1, 2007 when they adjust under the terms of the note. Interest is fixed at 5.69% to June 1, 2007, when it adjusts based on market rates $     4,791,016 $     4,934,731

Mortgage note payable to a bank, payable in monthly principal and interest installments of $18,241 until May 17, 2007 when they adjust under the terms of the note. Interest is fixed at 5.69% to June 1, 2007, when it adjusts based on market rates 1,963,224 2,058,696

Note payable to former director of PKLB and current director of the Company refinanced in December 2003 (note 12). Payment of interest only at 8% per annum until maturity in June 2005. Payable in a combination of common shares and cash at payee election — 100,000

6% convertible subordinated notes payable due January 1, 2008. Interest payable in arrears on the 15th of January and July after June 1, 2005 (4.67% effective rate) 3,999,840 3,999,840

10% subordinated notes payable due October 1, 2007. Holders can require the Company to repay 20% of the original outstanding balance each October 1. Interest payable upon demand each October 1 through maturity 1,188,671 1,548,270

Mortgage note payable to a bank, payable in monthly principal and interest installments of $15,755 until June 1, 2007, when they adjust under the terms of the note. Interest is fixed at 5.69% to June 1, 2007, when it adjusts based on market rates (a) 2,165,235 2,222,257

14,107,986 14,863,794

Less current portion 700,352 782,748

$   13,407,634 $   14,081,046

(a)       Was a construction loan at September 30, 2003, with no principal payments, which converted under its term into a mortgage in June, 2004.

The following table summarizes our principal payment obligations for the years ending September 30:

2006	$	700,352
2007		722,224
2008		4,851,793
2009		406,412
2010		430,488
Thereafter		6,996,717
	$	14,107,986

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Cash interest payments of $1,112,000, $522,838, and $599,317 were made in 2005, 2004, and 2003, respectively. Cash interest payments for 2004 included interest of $33,834 which was capitalized.

(a)                 Revolving Credit Facility

We have a revolving line of credit with our commercial bank which we use for working capital and other purposes. Borrowings under the agreement are collateralized by substantially all assets related to the Company’s operations and all common stock of the Company’s United States subsidiaries and 65% of the common stock of its non-United States subsidiaries, and the assignment of a life insurance policy on the Company’s Chairman and CEO. Under the terms of the agreement, the Company has agreed to restrict advances to subsidiaries, limit additional indebtedness and capital expenditures as well as to comply with certain financial covenants outlined in the borrowing agreement. The credit agreement contains cross-default provisions with our mortgages or other borrowings.

Our revolving line of credit limits outstanding borrowings to the borrowing base as defined in the agreement, to a maximum available amount of $6,000,000. As of September 30, 2005, the outstanding balance on this line of credit was $920,000. We also have an outstanding letter of credit to secure our lease in Baltimore, Maryland for $2.8 million (reducing to $2 million in January, 2006), which is counted against our allowable borrowings. Under the computation of the borrowing base, we had $2,280,000 of available additional borrowing capacity at September 30, 2005. Interest accrues monthly on the outstanding balance at the bank’s prime rate to prime rate plus zero to 25 basis points or at the Eurodollar rate plus 250 to 300 basis points, as elected by the Company, depending upon certain financial ratios. As of September 30, 2005, interest was 6.75% based on prime of 6.75%. The Company pays a fee equal to 25 basis points on the unused portion of the line of credit.

The loan agreement contain covenants which require maintenance of certain financial ratios, restrict the amount of unfunded capital additions, and place restrictions on the payment of principal and interest on subordinated debt, among other things. Our mortgages also contain similar covenants. We were in compliance with our loan covenants at September 30, 2005.

(b)                 Subordinated Debt

In connection with the acquisition of LCR (note 3), we issued 10% subordinated notes of $1,800,000. The remaining outstanding principal on these notes was $1,188,671 at September 30, 2005. We made principal payments of $360,000, which was included in current portion of long-term debt at September 30, 2005 and interest payments of $197,435 on October 1, 2005. These notes are subordinated to the Company’s senior debt.

In connection with the acquisition of PKLB (note 3), we issued $3,999,840 of 6% convertible notes payable, including $500,000 payable to a current director of the Company, due January 1, 2008. These notes were non-interest bearing until June 1, 2005. We are accruing interest expense over the term of these notes using the effective interest rate method. After June 1, 2005 the holders of these notes may convert all or part of the outstanding notes and accrued interest into our common stock at a conversion rate of $16 per common share. These notes are convertible into 249,990 shares of the Company’s common stock. The Company, at its option, may prepay all or any portion of the outstanding notes plus accrued interest, with prior written notice to the holders. As of September 30, 2005, we have not made any prepayment elections. These notes are subordinated to the Company’s senior debt.

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(8)                 Income Taxes

Significant components of our deferred tax liabilities and assets as of September 30 are as follows:

	2005			2004
Deferred tax liabilities:
Tax over book depreciation	$	1,124,871		$	1,746,783
Lower tax basis on assets of acquired company		525,986			615,572
Total deferred liabilities		1,650,857			2,362,355
Deferred tax assets:
Inventory pricing		85,374			82,339
Accrued vacation		229,881			229,898
Accrued expenses and other - net		65,510			156,796
Foreign net operating loss		501,447			253,836
Total deferred tax assets		882,212			722,869
Valuation allowance for deferred tax assets		(501,447	)		(253,836	)
Net deferred tax assets		380,765			469,033
Net deferred tax liabilities	$	1,270,092		$	1,893,322

Significant components of the provision (benefit) for income taxes are as follows:

	2005			2004			2003
Current:
Federal	$	802,058		$	(394,167	)	$	163,820
State		213,562			(28,747	)		117,400
Foreign		—			6,679			(3,820	)
Total Current	$	1,015,620		$	(416,235	)	$	277,400
Deferred:
Federal	$	(489,489	)	$	(46,129	)	$	163,288
State		(133,741	)		59,056			42,583
Total deferred		(623,230	)		12,927			205,871
	$	392,390		$	(403,308	)	$	483,271

45

The effective income tax rate varied from the statutory federal income tax rate as follows:

	2005		2004		2003
Statutory federal income tax rate	34	.0%	(34	.0)%	34	.0%
Increases (decreases):
Amortization of intangibles and other nondeductible expenses	6	.8	3	.9	3	.3
Tax benefit of foreign sales	(14	.6)	(2	.8)	(4	.5)
State income taxes, net of federal tax benefit	18	.1	3	.3	17	.7
Nontaxable foreign (gains) losses	90	.2	(29	.6)	24	.8
Other	0	.0	(7	.3)	9	.4
	134	.5%	(66	.5)%	84	.7%

In fiscal 2005, 2004, and 2003, our foreign operations generated income (loss) before income taxes of $(773,784), $528,556, and $(415,977), respectively.

Payments made in 2005, 2004, and 2003 for income taxes amounted to $407,073, $113,000, and $351,589, respectively.

The Company has foreign net operating loss carryforwards of $1,567,022 that have an indefinite life under current UK tax law.

(9)                 Stock Option Plans

The Company established an Employee Stock Option Plan whereby options to purchase the Company’s common shares at fair market value can be granted to our employees. Options granted become exercisable in four equal annual installments beginning two years after the date of grant. The plan terminates in fiscal 2008.

The Company established an Outside Director Stock Option Plan whereby options to purchase the Company’s common shares at fair market value can be granted to outside directors. Options granted become exercisable in four equal annual installments beginning two years after the date of grant. The plan terminates in fiscal 2008.

Options in both plans expire the earlier of ten years from grant date or termination of employment.

A summary of our stock option activity and related information for the years ended September 30 is as follows:

	2005						2004						2003
	Options			Weighted average exercise price			Options			Weighted average exercise price			Options			Weighted average exercise price
Outstanding - beginning of year		342,500		$	4	.66		106,527		$	4	.70		113,114		$	4	.59
Exercised		(1,625	)		4	.25		—				—		(24,087	)		1	.61
Granted		173,378			5	.39		254,000			4	.53		27,000			2	.80
Terminated		(34,000	)		4	.63		(18,027	)		2	.49		(9,500	)		5	.83
Outstanding - end of year		480,253		$	4	.95		342,500		$	4	.66		106,527		$	4	.70

46

In 2004, the Company granted 5,000 shares under the Outside Director Stock Option Plan at an exercise price of $4.57 per share. These options become exercisable in two equal installments at six months and one year from the grant date. At September 30, 2005, there are 245,000 shares available for grants under the two plans.

The following applies to options outstanding at September 30, 2005:

Range of exercise prices		Number outstanding at September 30, 2005		Weighted average remaining contractual life (years)			Weighted average exercise price			Number exercisable at September 30, 2005		Weighted average exercise price
$	2.80 - 4.58		255,875		7	.48		4	.25		151,995		4	.12
$	4.96 - 5.74		195,378		9	.40		5	.34		10,000		5	.00
$	7.18 - 8.00		29,000		3	.11		7	.86		29,000		7	.86

(10)                 Retirement Plan

The Company has an Internal Revenue Code Section 401(k) Retirement Plan (the Plan) covering all employees over twenty-one years of age with at least one year of service. Under the terms of the Plan, the Company contributes 2% of each participant’s total wages to the Plan and matches 44% of the first 10% of the employee contribution. The Plan also includes provisions for various contributions which may be instituted at the discretion of the Board of Directors. The contribution made by the participant may not exceed 30% of the participant’s annual wages. The Company made no discretionary contributions under the plan in 2005, 2004, and 2003. Contribution expense was $554,624, $432,283, and $402,148 in fiscal 2005, 2004, and 2003, respectively.

(11)                 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 analytical products segment provides liquid chromatography, electrochemical and physiological monitoring products to pharmaceutical companies, universities, government research centers, and medical research institutions. We evaluate performance and allocate resources based on these segments. Certain of our assets are not directly attributable to the service or product segments. These assets are grouped into the Corporate segment and include cash and cash equivalents, deferred income taxes, refundable income taxes, debt issue costs and certain other assets. We do not allocate such items to the principal segments because they are not used to evaluate their financial position. The accounting policies of these segments are the same as those described in the summary of significant accounting policies.

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(a)                 Operating Segments

	Year ended September 30
	2005			2004			2003
				(In thousands)
Revenue:
Service	$	32,951		$	24,928		$	19,987
Product		9,444			12,224			9,852
Total	$	42,395		$	37,152		$	29,839
Operating income:
Service	$	148		$	(4,850	)	$	(205	)
Product		1,112			5,104			1,005
Total operating income		1,260			254			800
Corporate expenses		(969	)		(861	)		(229	)
Income before income taxes	$	291		$	(607	)	$	571
	Year ended September 30
	2005			2004			2003
				(In thousands)
Identifiable assets:
Service	$	31,739		$	31,071		$	36,387
Product		10,211			9,940			6,267
Corporate		5,888			5,784			2,331
Total	$	47,838		$	46,795		$	44,985
Goodwill, net:
Service	$	1,071		$	1,071		$	610
Product		374			374			374
Total	$	1,445		$	1,445		$	984
Intangible assets, net:
Service	$	2,156		$	2,491		$	2,778
Product		--			--			--
Total	$	2,156		$	2,491		$	2,778
Depreciation and amortization:
Service	$	3,125		$	3,175		$	2,416
Product		316			266			266
Total	$	3,441		$	3,441		$	2,682
Capital expenditures:
Service	$	2,596		$	3,534		$	5,291
Product		818			34			38
Total	$	3,414		$	3,568		$	5,329

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(b)                 Geographic Information

	Year ended September 30
	2005		2004		2003
			(In thousands)
Sales to external customers:
North America	$	34,046	$	29,664	$	23,887
Pacific Rim		1,052		924		988
Europe		4,899		4,871		3,073
Other		2,398		1,693		1,891
Total	$	42,395	$	37,152	$	29,839
Long-lived assets:
North America	$	29,499	$	34,888	$	33,630
Europe		1,204		1,550		2,031
Total	$	30,703	$	36,438	$	35,661

(c)                 Major Customers

In 2005, 2004 and 2003, Pfizer (and its predecessor companies) accounted for approximately 10.1%, 12.5%, and 16.0%, respectively, of the Company’s total revenues and 6.0% and 11.0% of total trade accounts receivable at September 30, 2005 and 2004, respectively.

(12)                 Related Party Transactions

As of September 30, 2005, we have a 6% subordinated convertible note payable for $500,000 to one of our directors (a former director of PKLB). During fiscal 2004, we repaid $350,000 of debt to this director through a series of transactions which resulted in our paying $200,000 of principal in cash (plus accrued interest to the date of repayment) and exchanging 38,042 shares of common stock for $150,000 face amount of debt.

Item 9.        Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 9A.        Controls and Procedures.

Based on their most recent evaluation, which was completed as of September 30, 2005, the Company’s Chief Executive Officer and Chief Financial Officer believe that, because of the situation described below, the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) were not effective as of September 30, 2005 to ensure that information required to be disclosed by the Company in this Form 10-K was recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange Commission’s rules and forms. In the second and third quarters of fiscal 2005, the Company implemented a new ERP system at its five locations. Previously, the Company operated on accounting systems that were different at its various locations, and which were decentralized and obsolete. As a result, financial transactions in the current year were recorded in both the old and new systems. The Company decided, in order to expedite transition to the new system, not to load transactional data from the old systems into the new system, which resulted in additional work to organize and audit the Company’s financial statements. The Chief Executive Officer and Chief Financial Officer have concluded that the Company’s current accounting systems have prevented the Company from completing and having audited the accounting information necessary to complete this Form 10-K on a timely basis. As the Company completes steps to standardize and capture all of fiscal 2006 data in one system, the Chief Executive Officer and Chief Financial Officer believe that the new accounting systems will allow the Company to record, process, summarize and report accounting information to timely file its Exchange Act reports.

49

Except as noted above, 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, which was completed as of September 30, 2005.

Item 9B.        Other Information.

None.

PART III

Item 10.        Directors and Executive Officers of the Registrant.

The following information concerns the persons who served as the directors of the Company as of September 30, 2005. Except as indicated in the following paragraphs, the principal occupations of these persons has not changed in the past five years. Information concerning the executive officers of the Company may be found in “Executive Officers of the Registrant” under Item 1 of this report, which is incorporated herein by reference.

Name	Age		Position
Peter T. Kissinger, Ph.D		61	Chairman of the Board; President; Chief Executive Officer
Candice B. Kissinger		54	Senior Vice President, Marketing; Secretary and Director
William E. Baitinger		72	Director
David W. Crabb		52	Director
Leslie B. Daniels		58	Director
Gayl W. Doster		67	Director

Information concerning Peter T. Kissinger, Ph.D. is incorporated by reference to the discussion under Item 1 "Executive Officers of the Registrant" in this report.

Information concerning Candice B. Kissinger is incorporated by reference to the discussion under Item 1 “Executive Officers of the Registrant” in this report.

William E. Baitinger has served as a director of the Company since 1979. Mr. Baitinger was Director of Technology Transfer for the Purdue Research Foundation from 1988 until 2000. In this capacity he was responsible for all licensing and commercialization activities from Purdue University. He currently serves as Special Assistant to the Vice President for Research at Purdue University. Mr. Baitinger has a Bachelor of Science degree in Chemistry and Physics from Marietta College and a Master of Science degree in Chemistry from Purdue University.

David W. Crabb, M.D. has served as a director of the Company since February, 2004. He has been Chairman of the Indiana University Department of Medicine since 2001. Previously he had served as Chief Resident of Internal Medicine and on the Medicine and Biochemistry faculty of Indiana University. He was appointed Vice Chairman for Research for the department and later Assistant Dean for Research. Dr. Crabb serves on several editorial boards and on the Board of Indiana Alcohol Research Center. He was a recipient of a NIH Merit award and numerous other research and teaching awards.

50

Leslie B. Daniels has served as a director of the Company since June 2003. Mr. Daniels is a founding partner of CAI, a private equity fund in New York City. He previously was President of Burdge, Daniels & Co., Inc., a principal in venture capital and buyout investments as well as trading of private placement securities, and before that, a Senior Vice President of Blyth, Eastman, Dillon & Co. where he had responsibility for the corporate fixed income sales and trading departments. Mr. Daniels is a former Director of Aster-Cephac SA, IVAX Corporation, MIM Corporation, Mylan Laboratories, Inc., NBS Technologies Inc. and MIST Inc. He was also Chairman of Zenith Laboratories, Inc. and currently serves as a Director of SafeGuard Health Enterprises, Inc.

Gayl W. Doster has served as a Director and member of the Audit Committee of the Company since August, 2004. He is a CPA and was the President and Chief Operating Officer of Sigma Micro Corporation, a computer software company, from January 1997 until his retirement in December 2003. Previously, he served as Professor of Community Pharmacy Management, College of Pharmacy, University of Rhode Island from October 1995 to January 1997. Mr. Doster received a BS in Accounting from the Indiana University Kelley School of Business and earned his CPA in 1965 while working for Ernst & Young.

The Board of Directors has established an Audit Committee. The Audit Committee is responsible for recommending independent auditors, reviewing, in connection with the independent auditors, the audit plan, the adequacy of internal controls, the audit report and management letter and undertaking such other incidental functions as the board may authorize. Gayl, W. Doster, William E. Baitinger and Leslie B. Daniels are the members of the Audit Committee. The Board of Directors has determined that Mr. Doster is an audit committee financial expert (as defined by Item 401(h) of Regulation S-K). All of the members of the Audit Committee are “independent” (as defined by Item 7(d)(3)(iv) of Schedule 14A).

The Board of Directors has adopted a Code of Ethics (as defined by Item 406 of Regulation S-K) that applies to the Company’s Officers and Directors.

The information contained under he caption “Section 16(a) Beneficial Ownership Reporting Compliance” in the Proxy Statement is incorporated herein by reference.

Item 11.        Executive Compensation.

The information included under the captions “Election of Directors – Compensation of Directors,” “Executive Compensation” and “Compensation Committee Interlocks and Insider Participation” in the Proxy Statement is incorporated herein by reference in response to this item.

Item 12.        Security Ownership of Certain Beneficial Owners and Management.

The information contained under the captions “Share Ownership of Certain Beneficial Owners and Management” and “Equity Compensation Plan Information” in the Proxy Statement is incorporated herein by reference in response to this item.

For additional information regarding the Company’s stock option plans, please see Note 9 in the Notes to Consolidated Financial Statements in this report.

51

Item 13.        Certain Relationships and Related Transactions.

The information included under the caption “Certain Relationships and Related Transactions” in the Proxy Statement is incorporated herein by reference in response to this item.

Item 14.        Principal Accounting Fees and Services.

The information included under the caption “Selection of Independent Accountants” in the Proxy Statement is incorporated herein by reference.

[Remainder of page intentionally left blank.]

52

PART IV

Item 15.        Exhibits, Financial Statement Schedules and Reports on Form 8-K.

(a) Documents filed as part of this Report.

1. Financial Statements:

Included in Item 8 of Part II of this report as follows:

Report of Independent Auditors.

Consolidated Balance Sheets as of September 30, 2005 and 2004.

Consolidated Statements of Operations for the Years Ended September 30, 2005, 2004 and 2003.

Consolidated Statements of Shareholders’ Equity and Comprehensive Income (Loss) for the Years Ended September 30, 2005, 2004 and 2003.

Consolidated Statements of Cash Flows for the Years Ended September 30, 2005, 2004 and 2003.

Notes to Consolidated Financial Statements.

2. Financial Statement Schedules:

Schedules are not required, are not applicable or the information is shown in the Notes to the Consolidated Financial Statements.

(b) Exhibits. See Index to Exhibits.

53

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

Date:  January 12, 2006




Date:  January 12, 2006 BIOANALYTICAL SYSTEMS, INC.
(Registrant)


By:  /s/  Peter T. Kissinger Peter T. Kissinger
President, Chairman and Chief Executive Officer


By:  /s/  Michael R. Cox Michael R. Cox
Vice President, Finance, Chief Financial Officer and Treasurer

54

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signature Capacity Date

/s/  Peter T. Kissinger Peter T. Kissinger President, Chairman and Chief Executive Officer and Director (Principal Executive Officer) January 12, 2006

/s/  Michael R. Cox Michael R. Cox Vice President, Finance, Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer) January 12, 2006

/s/  William E. Baitinger William E. Baitinger Director January 12, 2006

David W. Crabb Director January __, 2006

/s/  Gayl W. Doster Gayl W. Doster Director January 12, 2006

/s/  Candice B. Kissinger Candice B. Kissinger Director January 12, 2006

Leslie B. Daniels Director January __, 2006

55

INDEX TO 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 Amended and Restated Bylaws of Bioanalytical Systems, Inc. (incorporated by reference to Exhibit 3.1 to Form 8-K filed August 18, 2005).

(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).

4.2 See Exhibits 3.1 and 3.2 to this Form 10-K.

4.3 Form of 6% Subordinated Convertible Note due 2008 (incorporated by reference to Form 8-K filed November 21, 2003).

4.4 Form of 10% Subordinated Note due 2007 (incorporated by reference to Exhibit 4.3 of Form 10-Q for the quarter ended June 30, 2004).

(10) 10.1 Bioanalytical Systems, Inc. 1990 Employee Incentive Stock Option Plan (incorporated by reference to Exhibit 10.4 to Registration Statement on Form S-1, Registration No. 333-36429).

10.2 Form of Bioanalytical Systems, Inc. 1990 Employee Incentive Stock Option Agreement (incorporated by reference to Exhibit 10.5 to Registration Statement on Form S-1, Registration No. 333-36429).

10.3 Bioanalytical Systems, Inc. 1997 Employee Incentive Stock Option Plan, as amended January 24, 2004 (incorporated by reference to Appendix A to definitive Proxy Statement filed January 28, 2004 SEC File No. 000-23357).

10.4 Form of Bioanalytical Systems, Inc. 1997 Employee Incentive Stock Option Agreement (incorporated by reference to Exhibit 10.27 to Registration Statement on Form S-1, Registration No. 333-36429).

56

Number Assigned In
Regulation S-K
Item 601 Description of Exhibits

10.5 1997 Bioanalytical Systems, Inc. Outside Director Stock Option Plan, as amended January 24, 2004 (incorporated by reference to Appendix B to definitive Proxy Statement SEC File No. 000-23357).

10.6 Form of Bioanalytical Systems, Inc. 1997 Outside Director Stock Option Agreement (incorporated by reference to Exhibit 10.29 to Registration Statement on Form S-1, Registration No. 333-36429).

10.7 Master Equipment Lease Agreement by and between Bioanalytical Systems, Inc. and Keycorp Leasing, dated December 5, 1997 (incorporated by reference to Exhibit 10.9 of Form 10-K for the fiscal year ended September 30, 2003).

10.8 Amended and Restated Credit Agreement by and between Bioanalytical Systems, Inc., and National City Bank, executed January 4, 2005 (incorporated by reference to Exhibit 10.5 of Form 8-K filed January 10, 2005).

10.9 Amended and Restated General Security Agreement by and between Bioanalytical Systems, Inc. and National City Bank executed January 4, 2005 (incorporated by reference to Exhibit 10.7 of Form 8-K filed January 10, 2005).

10.10 Trademark Security Agreement by and between Bioanalytical Systems and The Provident Bank, dated October 29, 2003 (incorporated by reference to Exhibit 10.12 of Form 10-K for the fiscal year ended September 30, 2003).

10.11 Patent Security Agreement by and between Bioanalytical Systems and The Provident Bank, dated October 29, 2003 (incorporated by reference to Exhibit 10.13 of Form 10-K for the fiscal year ended September 30, 2003).

10.12 Replacement Promissory Note by and between Bioanalytical Systems, Inc. and National City Bank, executed January 4, 2005 (incorporated by reference to Exhibit 10.6 of Form 8-K filed January 10, 2005).

10.13 Loan Agreement between Bioanalytical Systems, Inc. and Union Planters Bank, dated October 29, 2003 (incorporated by reference to Exhibit 10.15 of Form 10-K for the fiscal year ended September 30, 2003).

57

Number Assigned In
Regulation S-K
Item 601 Description of Exhibits

10.14 Real Estate Mortgage and Security Agreement between Bioanalytical Systems, Inc. and Union Planters Bank, dated October 29, 2003 (incorporated by reference to Exhibit 10.16 of Form 10-K for the fiscal year ended September 30, 2003).

10.15 Real Estate Mortgage and Security Agreement between Bioanalytical Systems, Inc. and Union Planters Bank, dated October 29, 2003 (incorporated by reference to Exhibit 10.17 of Form 10-K for the fiscal year ended September 30, 2003).

10.16 Term Loan Promissory Note made by Bioanalytical Systems, Inc. in favor of Union Planters Bank, dated October 29, 2003 (incorporated by reference to Exhibit 10.18 of Form 10-K for the fiscal year ended September 30, 2003).

10.17 Promissory Note made by Bioanalytical Systems, Inc. in favor of Union Planters Bank, dated October 29, 2003 (incorporated by reference to Exhibit 10.19 of Form 10-K for the fiscal year ended September 30, 2003).

10.18 Employment Agreement by and between Bioanalytical Systems, Inc. and Michael R. Cox dated April 1, 2004 (incorporated by reference to Exhibit 10.2 to Form 10-Q for the fiscal quarter ended March 31, 2004).

10.19 Purchase and Sale Agreement between BASi Maryland, Inc. and 300 W. Fayette, LLC, closed January 5, 2005 (incorporated by reference to Exhibit 10.1 of Form 8-K filed January 10, 2005).

10.20 First Amendment to the Purchase and Sale Agreement dated September 7, 2004 (incorporated by reference to Exhibit 10.20 to Form 10-K for the fiscal year ended September 30, 2004).

10.21 Second Amendment to the Purchase and Sale Agreement dated on or about November 11, 2004 (incorporated by reference to Exhibit 10.21 to Form 10-K for the fiscal year ended September 30, 2004).

10.22 Office Lease by and between BASi Maryland, Inc. and 300 W. Fayette Street, LLC, dated on or about January 5, 2004 (incorporated by reference to Exhibit 10.22 to Form 10-K for the fiscal year ended September 30, 2004).

58

Number Assigned In
Regulation S-K
Item 601 Description of Exhibits

10.23 Employment Agreement by and between Bioanalytical Systems, Inc. and Edward M. Chait dated August 1, 2005 (incorporated by reference to Exhibit 10.1 to Form 8-K filed August 5, 2005).

10.24 Form of Grant of non-qualified stock options dated August 1, 2005 to Edward M. Chait.

10.25 Form of Grant of non-qualified stock options dated April 1, 2004 to Michael R. Cox (incorporated by reference to Exhibit 10.3 to Form 10-Q for the fiscal quarter ended March 31, 2004).

(13) 13.1 2005 Annual Report. This report, except for those portions which are expressly incorporated by reference in this Form 10-K, is furnished for the information of the Commission and is not to be deemed "filed" as part of this Form 10-K.

(21) 21.1 Subsidiaries of the Registrant.

(23) 23.1 Consent of Independent Public Accountants KPMG LLP.

23.2 Consent of Independent Registered Public Accounting Firm Ernst & Young LLP.

(31) 31.1 Certification of Chief Executive Officer.

31.2 Certification of Chief Financial Officer.

(32) 32.1 Section 1350 Certifications.

(99) 99 Risk Factors (incorporated by reference to Exhibit 99 to Form 10-K for the fiscal year ended September 30, 2004).

59

EX-10

Exhibit 10.24

August 1, 2005

Dr. Edward Chait

507 Archwood Trl

Houston, TX 77007

Dear Ed:

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 July 29, 2005 (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 isnot an “incentive” 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 $5.69 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 shall be exercisable in two equal installments. Options 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,

/s/ Peter T. Kissinger

Peter T. Kissinger

President

Accepted and agreed to: __________________________

Date: __________________

EX-13

CULTIVATING
NEW GROWTH

TABLE OF CONTENTS

Financial Highlights	3
President's Letter	4
BASi Now and in the Future	6
Management Team	8
Consolidated Financial Data	10
Quarterly Financial Data	11
Board of Directors and Corporate Information	12

FINANCIAL HIGHLIGHTS

(In thousands, except per share data)	2005			2004			2003
Net revenue	$	42,395		$	37,152		$	29,839
Net income (loss)		(101	)		(203	)		87
Net income (loss) per diluted share		(.02	)		(0.04	)		0.02
Working capital		4,670			(495	)		(295	)
Total assets		47,838			46,795			44,985
Shareholders' equity		19,598			19,420			19,726

BASi Corporate Center 2701 Kent Avenue West Lafayette, IN 47906
765-463-4527 fax 765-497-1102 basi@bioanalytical.com

3

FROM THE PRESIDENT'S DESK

Dear fellow shareholders,

In our 2004 report I discussed the perceived and real difficulties of the pharmaceutical industry as they affect BASi. Those challenges remain, but we are hard at work, staying on task, focused on growth. We've sharpened our business orientation for the scientific excellence that has been a hallmark along the journey to building shareholder value. What we do is vital to the industry and to the process of bringing safe, effective pharmaceuticals to the marketplace. Our partners, the biopharmaceutical companies who sponsor studies in our laboratories and who purchase our instrument products, are the innovators for better health.

BASi had a better year in terms of management, planning, and focus on improvement of all business units in fiscal 2005, although this is not yet reflected quarter by quarter in our financial performance. In 2005 we initiated a major reorganization of our Business Development effort with the goal of increasing sales and net income. We continue to improve capacity utilization and efficiency while enhancing training for the new technologies required to carry out our jobs. We also continue to add significant talent to our team, in both the science- and business-related skills we require. When Ed Chait joined us as Executive Vice President and Chief Scientific Officer (CSO) in 2005, we captured great talent in both respects.

BASi continues to make physical improvements to all of our facilities. Our corporate investment in information technology is one of the largest we have ever made, and now for the first time we are fully networked across all business and laboratory functions. I am happy that the biggest steps have been taken, and the revolutionary changes of the past few years are settling in to become evolutionary improvements. Our financial reporting will become more timely, but investors should keep in mind that consistent and fast year-over-year comparisons require information systems to be in place for two years.

We rely on our 10-K report as the single authoritative source to provide you with a comprehensive picture of our financial results, procedures, risks and opportunities. I will not take data out of context here, but rather suggest you look at pages 10 and 11 of this document and then at the 10-K itself.

4

We are now well into fiscal 2006 and are seeing a continuing trend changing our client mix. The small discovery companies are holding on to their creativity much longer than before and thus moving into the pharmaceutical development space that is our focus. This trend creates significant excitement as we partner with young, innovative life science companies who need our expertise and services to assure their success. These companies will join with large pharma to become primary innovators for our industry. The BASi mouse-to-man strategy for products and services provides real value to such clients, many of whom do not invest in the people and facilities to support regulated laboratory data acquisition in pharmacokinetics, pharmacodynamics and toxicology.

I make special note of the passing of one of our best friends and creative minds. Dr. W. Leigh Thompson, MD, Ph.D. made contributions to medicine and to BASi that have left an indelible and sustaining impact on the pharmaceutical industry, patients and those he mentored. He served on our Board of Directors and was a valued scientific advisor. Although Leigh had been in declining health for several years, his passing last February was nevertheless a great shock and loss to us. We were in contact several times a week throughout his engagement with BASi, and his impact on our thinking was second to none. In his memory we have dedicated our newest facility as the W. Leigh Thompson Preclinical Pharmacology Laboratory. He inspired the research for which the laboratory was designed and, like Leigh, it is one of a kind.

This report can only touch upon what we do in our business. We are proud to provide detailed information on our activities via our printed literature, scientific publications, various newsletters for our customers and on our web site. Please don't hesitate to approach any of us with your questions. We thoroughly enjoy interacting with our shareholders and appreciate your continuing support.

/s/ Pete Kissinger
Peter T. Kissinger
President, Chairman and CEO

5

BASi NOW

We are a drug development firm providing contract research services and unique products for the pharmaceutical, biotechnology and medical device industries. We are also a leading manufacturer of specialized instrumentation and accessories for in vivo sampling, liquid chromatography, veterinary medicine and electrochemistry. BASi services and products are used in drug metabolism research, pharmacokinetic studies, pharmacology, toxicology, pharmaceutical product analysis, stability program support and veterinary health. The company has laboratories in the USA and UK and a partner laboratory in France. Bioanalytical chemistry using the latest mass spectrometry and robotics is one specialty across the corporation.

We have contributed substantially to the development of drugs and solutions for central nervous system disorders such as depression, bipolar disorders, schizophrenia, and Alzheimer's and Parkinson's diseases. Our research laboratories and instruments have played a significant role in finding new antibiotics and therapies for HIV, sleep disorders, cardiovascular irregularities, osteoporosis, erectile dysfunction, diabetes, influenza, cancer, pain management and controlling cholesterol.

We serve a large proportion of the world's top pharmaceutical and biotechnology companies, along with many smaller entities and the academic community. With over 300,000 square feet of research laboratory space, contract services now represent 78% of BASi revenues.

6

BASi IN THE FUTURE

Our focus is on the years to come. BASi is involved in new biomedical ventures that mankind has never attempted before. In 2002 there were more than 2000 experimental drugs in clinical trials and over 3000 new molecules had moved from discovery into preclinical development, but only 17 distinctly new drugs were approved by the FDA. The Pharmaceutical Manufacturers Association tells us that it takes 12 years on average for an experimental drug to travel from lab to medicine chest. At best, only five in 5000 compounds that enter preclinical testing will get as far as human testing, and only one of those five will be approved.

BASi focuses on developing services and designing products that facilitate carrying out research studies more precisely, more accurately and more quickly.

The total market for BASi products and services is currently estimated to be over $2 billion annually. Potential major new clients have said they are looking for outsourcing partners physically closer to their own R&D facilities to reduce travel costs and liabilities. BASi is now very well positioned, both geographically and scientifically.

What does all this mean to BASi? It means that opportunities for the company's products and services are greater than ever. It means that pharmaceutical and biotech companies have more and stronger reasons to outsource work to CROs such as BASi, and to buy and use the company's epsilon™, Empis® and Culex® products for research and development.

7

MANAGEMENT TEAM

Peter T. Kissinger, Ph.D., Chairman and CEO, founded BASi in 1974 as an outgrowth of his basic research monitoring neurotransmitters and metabolites in living systems. Dr. Kissinger is driven by the idea that better science will result in better health and, ultimately, in better earnings for our shareholders. Earnings fuel the cycle.


Michael R. Cox, Vice President-Finance, CFO and Treasurer Since joining BASi in 2004, he has significantly upgraded the company's financial infrastructure and accounting systems.




Ronald E. Shoup, Ph.D., Chief Operating Officer–Contract Research Services, directs contract research operations at all five of the company's sites.




Edward M. Chait, Ph.D., Executive Vice President and Chief Scientific Officer joined BASi in 2005. Along with his many other responsibilities, Dr. Chait currently oversees the BASi Sales and Marketing Departments.

8

Candice Kissinger, Senior Vice President and Director of Research, currently devotes her time to product R/D and managing in vivo products and preclinical ADME services, principally the Culex® Automated Pharmacology System.


Michael P. Silvon, Ph.D., Vice President-Planning and Development has responsibility for mergers, acquisitions and investor relations, as well as overseeing the Vetronics Division.


Craig S. Bruntlett, Ph.D., Senior Vice President-Sales Development has been the company's Director of Development of Electrochemical Instruments, then Vice President-Electrochemical Products, and Senior Vice President-International Sales.

Lina Reeves-Kerner, Vice President-Human Resources is responsible for all the administrative functions of the company, including human resources and community relations, along with overseeing facilities management, manufacturing, security and safety.

9

SELECTED CONSOLIDATED FINANCIAL DATA

	YEAR ENDED SEPTEMBER 30,
	2005			2004			2003			2002			2001
	(in thousands, except per share data)
STATEMENT OF OPERATIONS DATA:
Service revenue	$	32,951		$	24,928		$	19,987		$	16,140		$	15,202
Product revenue		9,444			12,224			9,852			10,373			10,073
Total revenue		42,395			37,152			29,839			26,513			25,275
Cost of service revenue		23,589			21,348			15,625			11,556			9,660
Cost of product revenue		3,462			4,270			3,804			4,393			3,495
Total cost of revenue		27,051			25,618			19,429			15,949			13,155
Gross profit		15,344			11,534			10,410			10,564			12,120
Operating expenses:
Selling		2,592			2,703			2,853			2,940			3,204
Research and development		1,326			1,100			1,327			1,521			1,611
General and administrative		10,166			7,505			5,067			4,476			3,815
Total operating expenses		14,084			11,308			9,247			8,937			8,630
Operating income (loss)		1,260			226			1,163			1,627			3,490
Other (expense), net		(969	)		(833	)		(592	)		(80	)		(383	)
Income (loss) before income taxes		291			(607	)		571			1,547			3,107
Income taxes (benefit)		392			(404	)		484			481			1,340
Net income (loss)	$	(101	)	$	(203	)	$	87		$	1,066		$	1,767
Net income (loss) per share:
Basic	$	(0.02	)	$	(0.04	)	$	.02		$	.23		$	.39
Diluted	$	(0.02	)	$	(0.04	)	$	.02		$	.23		$	.38
Weighted average common
shares outstanding:
Basic		4,870			4,860			4,655			4,576			4,565
Diluted		4,870			4,860			4,673			4,625			4,600
	SEPTEMBER 30,
	2005			2004			2003			2002			2001
	(in thousands) (unaudited)
BALANCE SHEET DATA:
Working capital (deficit)	$	4,671		$	(495	)	$	(295	)	$	(911	)	$	2,535
Property and equipment, net		26,565			31,901			31,172			22,824			18,922
Goodwill and other		3,600			3,936			3,762			884			963
intangible assets, net
Total assets		47,838			46,795			44,985			33,463			27,977
Long-term debt, less		8,579			8,893			6,949			3,247			3,144
current portion
Subordinated debt, less		4,829			5,188			5,188			—			—
current portion
Shareholder's equity		19,598			19,420			19,726			18,898			17,830

The above is selected unaudited consolidated financial data of the Company for the five years ended September 30, 2005. This annual report has been produced in two separate segments. One segment is a reprint of the BASi 10-K for fiscal year 2005 which is enclosed. In the event the 10-K information has been separated, it can be obtained from the SEC or BASI web sites, or we would be pleased to mail or email a copy at your request.

10

QUARTERLY FINANCIAL DATA

UNAUDITED (AMOUNTS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)

FOR THE QUARTER ENDED IN FISCAL 2005

	DECEMBER 31			MARCH 31			JUNE 30		SEPTEMBER 30
Total revenue	$	9,694		$	9,139		$	11,304	$	12,259
Gross profit		3,627			2,426			5,026		4,265
Net income (loss)		404			(896	)		356		36
Basic net income (loss) per common share outstanding(1)		.08			(.18	)		.07		.01
Diluted net income (loss) per common share outstanding(1)		.08			(.18	)		.07		.01
FOR THE QUARTER ENDED IN FISCAL 2004
	DECEMBER 31			MARCH 31			JUNE 30		SEPTEMBER 30
Total revenue	$	8,777		$	8,650		$	10,632	$	9,094
Gross profit		2,635			2,204			4,224		2,472
Net income (loss)		(130	)		(503	)		635		(205	)
Basic net income (loss) per common share outstanding(1)		(.03	)		(.10	)		.13		(.04	)
Diluted net income (loss) per common share outstanding(1)		(.03	)		(.10	)		.13		(.04	)

⁽¹⁾    The sum of the net income per common share may not equal the annual net income per share due to interim quarter rounding.

11

BOARD OF DIRECTORS

Peter T. Kissinger, Ph.D.
Chairman and Chief Executive Officer

Candice B. Kissinger
Senior Vice President and
Research Director
Corporate Secretary

William E. Baitinger*
Special Assistant to the
Vice President for Research
Purdue University

Leslie B. Daniels*
Principal
CAI Advisors & Co., LLP

David W. Crabb, M.D.
Chairman
Indiana University Department
of Medicine

Gayl W. Doster*
Chair, Joint Task Force on Regulation
Indiana CPA Society

* Audit Committee Member ANNUAL MEETING OF SHAREHOLDERS February 16, 2006
BASi Corporate Center
West Lafayette, Indiana


AUDITORS KPMG LLP
Indianapolis, Indiana


TRANSFER AGENT Corporate Trust Department
National City Bank
1900 East 9th Street
Cleveland, Ohio 44114


COMMON SHARES Bioanalytical Systems, Inc. common shares are traded on the NASDAQ National Market under the symbol BASI.

The following table sets forth by calendar quarter the high and low sales prices of the common shares on the NASDAQ National Market System. The approximate number of holders of common shares is 2,700.

         Fiscal           1st Qtr.           2nd Qtr.           3rd Qtr.           4th Qtr.

         2005
         High                6.69                10.37                10.35                6.84          
         Low                 4.56                  4.70                  5.19                5.25


         2004
         High                4.71                  5.05                  4.75                5.99          
         Low                 3.75                  3.80                  3.79                3.90

The Company has not paid any cash dividends on its common shares for the three most recent fiscal years. The Company has no intention to pay cash dividends in the foreseeable future.


INQUIRIES A copy of the Company's 2005 Form 10-K Annual Report filed with the Securities and Exchange Commission is available without charge upon written request, and by visiting www.bioanalytical.com/invest/annual.html. Media inquiries and requests for the 10-K and investor's kits should be directed to:

    Corporate Communications Director, Corporate Center
    2701 Kent Avenue, West Lafayette, IN 47906 USA

Inquiries from shareholders, security analysts, portfolio managers, registered representatives and other interested parties should be directed to:

    BASi Investor Relations, NASDAQ: BASI
    phone 765-463-4527, fax 765-497-1102,
    basi@bioanalytical.com, www.bioanalytical.com

EX-21

EXHIBIT 21.1

SUBSIDIARIES OF THE REGISTRANT

List of Subsidiaries

Name	Jurisdiction of Organization
Bioanalytical Systems, Ltd.	United Kingdom
BAS Instruments, Ltd.	United Kingdom
BAS Analytics, Ltd.	United Kingdom
BAS Evansville, Inc.	Indiana
BASi Northwest Laboratory, Inc.	California
BASi Maryland, Inc.	Maryland

EX-23

EXHIBIT 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors

Bioanalytical Systems, Inc.:

We consent to the incorporation by reference in the registration statements (Nos. 333-56123 and 333-56127) on Form S-8 of Bioanalytical Systems, Inc. of our report dated January 7, 2006, with respect to the consolidated balance sheets of Bioanalytical Systems, Inc. as of September 30, 2005 and 2004, and the related consolidated statements of operations, stockholders' equity and comprehensive income (loss) and cash flows for the years then ended which report appears in the September 30, 2005, annual report on Form 10-K of Bioanalytical Systems, Inc.

/s/ KPMG LLP

Indianapolis, Indiana

January 18, 2006

EX-23

EXHIBIT 23.2

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the Registration Statement (Form S-8 No. 333-56123) pertaining to the Bioanalytical Systems, Inc. 1997 Employee Incentive Stock Option Plan and in the Registration Statement (Form S-8 No. 333-56127) pertaining to the 1997 Bioanalytical Systems, Inc. Outside Director Stock Option Plan of our report dated November 28, 2003, with respect to the consolidated financial statements of Bioanalytical Systems, Inc. included in this Annual Report (Form 10-K) for the year ended September 30, 2005.

/s/  Ernst & Young, LLP Indianapolis, Indiana
January 5, 2006

EX-31

EXHIBIT 31.1

CERTIFICATIONS

I, Peter T. Kissinger, Chairman of the Board; President; and Chief Executive Officer, certify that:

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

2.            Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statement 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 annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the period 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.

January 12, 2006

/s/  Peter T. Kissinger

Peter T. Kissinger
Chairman of the Board; President; and Chief
Executive Officer

EX-31

EXHIBIT 31.2

I, Michael R. Cox, Vice President, Finance, Chief Financial Officer and Treasurer, certify that:

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

2.            Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statement 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 annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the period 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.

January 12, 2006

/s/  Michael R. Cox

Michael R. Cox
Vice President, Finance, Chief Financial
Officer and Treasurer

EX-32

EXHIBIT 32

I, Peter T. Kissinger, the Chairman of the Board; President; and Chief Executive Officer of Bioanalytical Systems, Inc., certify that (i) the Annual Report on Form 10-K for the year ended September 30, 2005, (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 Bioanalytical Systems, Inc. as of the dates and for the periods set forth therein.

/s/  Peter T. Kissinger Peter T. Kissinger
Chairman of the Board
President and Chief Executive Officer
January 12, 2006

I, Michael R. Cox, Vice President, Finance, Chief Financial Officer and Treasurer of Bioanalytical Systems, Inc., certify that (i) the Annual Report on Form 10-K for the year ended September 30, 2005, (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 Bioanalytical Systems, Inc. as of the dates and for the periods set forth therein.

/s/  Michael R. Cox Michael R. Cox
Vice President, Finance, Chief Financial
Officer and Treasurer
January 12, 2006