10-K/A

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

AMENDMENT NO. 1
TO
FORM 10-K

(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, 2002.

OR

[    ]    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
            for the transition period from                                              to                                            .

Commission File Number 000-23357
BIOANALYTICAL SYSTEMS, INC.
(Exact name of the registrant as specified in its charter)

INDIANA	35-1345024
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
2701 KENT AVENUE WEST LAFAYETTE, INDIANA	47906
(Address of principle executive offices)	(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 check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   YES      X         NO        

Indicate by check mark 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).    YES              NO     X   

Based on the closing price on the NASDAQ stock market on December 31, 2002, the aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant is $12,530,823. As of December 31, 2002, 4,590,045 shares of registrant’s common shares were outstanding. No shares of registrant’s Preferred Stock were outstanding as of December 31, 2002.

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, 2002	Parts I, II and IV
Proxy Statement	Part III

The purpose of this amendment is to include Exhibit 10.21 and to correct certain typographical errors and minor inaccuracies in Items 1, 2, 7, 8, and 10 and Exhibit 13, and those Items and Exhibit 13 are replaced in their entirety with the following:

Item 1.   Business

General

The Company provides contract development services and research equipment to many of the leading global pharmaceutical, medical device and biotechnology companies. 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 1975, when it was formed as a corporation in Indiana.

The Company offers an efficient, variable cost alternative to its clients’ internal product development programs. Outsourcing development work to reduce overhead and speed drug approvals through the Food and Drug Administration (“FDA”) is a growing trend among pharmaceutical developers. As a result, the Company now derives its revenues from sales of its research services and drug development tools, both focused on determining the safety and efficacy of drugs developed by its clients.

The Company supports the preclinical (pharmacokinetics, toxicology, pathology) and clinical development (formulations, bioanalysis for clinical trials) needs of researchers and clinicians for small molecules through large biomolecules. The Company believes its scientists have the skills necessary in analytical instrumentation development, chemistry, computer software development, physiology and toxicology, and the global presence, to make the services and products it provides increasingly valuable to the worldwide pharmaceutical, medical device and biotechnology industries.

Scientists engaged in drug metabolism studies, pharmacokinetics and basic neuroscience research at drug development organizations, many of the largest global pharmaceutical companies, are the Company’s principal clients.

Acquisitions

                 PharmaKinetics Laboratories, Inc.

On June 20, 2002, the Company, PI Acquisition Corp., a Maryland corporation and a wholly owned subsidiary of the Company (“Acquisition”), and PharmaKinetics Laboratories, Inc., a Maryland corporation (“PKLB”) entered into an Agreement and Plan of Merger (the “Merger Agreement”) which provides for, subject to the terms and conditions set forth therein, the Merger of PKLB and Acquisition (the “Merger”).

On July 24, 2002, the Company, Acquisition and PKLB executed an amendment to the Merger Agreement. The amendment revised the exchange terms for the Class A Preferred shares of PKLB to a set amount of $6.00 per share for clarity, provided for the conversion of an outstanding warrant to a warrant for the purchase of common shares of the Company which had not been addressed, and added as a condition to the Merger that shareholders holding 10% or more of the outstanding PKLB common shares not exercise dissenters’ appraisal rights.

Between June and August 2002, the Company loaned PKLB a total of $350,000 for working capital purposes. On November 14, 2002, PKLB executed a Secured Convertible Revolving Note in the principal amount of up to $925,000 payable to the Company to replace the existing notes payable to the Company and to allow PKLB to borrow additional amounts to cover short-term operating requirements (the “Note”). The Note issued to the Company carries an annual interest rate of 8%, and all principal and accrued interest is due and payable on May 1, 2003. The outstanding principal amount of the Note is convertible by the Company at any time into PKLB common stock at a price of $0.1585 per common share, which price represents the average of the closing prices for PKLB’s common shares as reported by Nasdaq for the twenty (20) trading days ended November 8, 2002. The Note to the Company is secured by a security interest in favor of the Company in all of the assets of PKLB pursuant to a Security Agreement between PKLB, as debtor, and the Company as secured party. PKLB Limited Partnership, a subsidiary of PKLB, guaranteed the repayment of the Note to the Company, pursuant to the terms of an Unconditional Guaranty dated as of November 15, 2002, and pledged the real property located at 302 West Fayette Street, Baltimore, Maryland to the Company as security for its guaranty pursuant to the terms of an Indemnity Deed of Trust.

Page 2

On November 21, 2002, the Company, Acquisition and PKLB executed a second amendment to the Merger Agreement. The second amendment revised the Merger Agreement to provide that all PKLB common shares held by the Company will be canceled automatically as of the effective time of the Merger. The second amendment further amended the Merger Agreement to provide that the Company will have the right to terminate the Merger Agreement in the event that any holder of PKLB’s Class A Preferred shares exercises its conversion rights prior to the effective time of the Merger. The second amendment also extended the date upon which the parties will have the right to terminate the Merger Agreement if the Merger has not been consummated from December 31, 2002 to March 31, 2003. Finally, the second amendment modified the merger consideration payable to the holders of Class A Preferred shares by reducing the principal amount of the 6% Subordinated Convertible Note due 2008 from $6.00 per Class A Preferred share to $4.80 per share and modified the form of the 6% Subordinated Convertible Note due 2008 to insert certain subordination provisions required by the Company’s lender.

The board of directors of PKLB has unanimously approved the Merger Agreement. Each holder of PKLB common shares (other than the Company) will be entitled to receive one-twelfth (1/12) of one common share of the Company for each of their PKLB common shares. Each holder of PKLB Class A Preferred shares will be entitled to receive a 6% Subordinated Convertible Note due 2009 issued by the Company with a principal amount equal to $4.80 per Class A Preferred share. The notes are convertible into common shares of the Company at any time after one year after the date of issuance at a price of $16.00 per share. The sole holder of PKLB Class B Preferred shares will be entitled to receive one-twelfth (1/12) of one common share of the Company for each PKLB common share into which its Class B Preferred shares are convertible. Each Class B Preferred share is convertible into 1.00062 PKLB common shares. In addition, the warrant held by the holder of the Class B Preferred shares to purchase 100,000 PKLB common shares at a price of $6.00 per share will be exchanged for a warrant to purchase 8,333 BAS common shares at a price of $72.00 per share. As of the effective time of the Merger, all PKLB common shares held by the Company will be cancelled. The transaction is subject to approval by the Company’s board and customary closing conditions, including registration of the Company’s securities to be issued in the Merger and the approval of PKLB’s shareholders. The Merger is currently expected to close prior to March 31, 2003.

Holders of more than 85% of the Class A Preferred shares have agreed to vote those shares in favor of the approval of the Merger and the Merger Agreement. The sole holder of the Class B Preferred shares has advised the Company that it intends to vote its shares in favor of the approval of the Merger and the Merger Agreement. Prior to the record date of the special meeting of the shareholders of PKLB, the Company intends to convert the outstanding balance under the Note into common shares of PKLB. Assuming that the entire balance of $925,000 is outstanding as of the record date (without accounting for any interest that may also be outstanding), BAS will own 5,835,962 common shares of PKLB. The Company intends to vote all of these shares in favor of approval of the Merger and the Merger Agreement. The votes described in this paragraph are sufficient to approve the Merger and the Merger Agreement under Maryland law.

                 LC Resources, Inc.

On December 13, 2002, the Company acquired LC Resources, Inc. (“LCR”) through the purchase by the Company of all of the outstanding shares of LCR for $2.5 million, subject to adjustment as described below. The Company paid cash of $125,000 at closing. In addition, the Company also delivered $2,250,000 of the purchase price at the closing in the form of promissory notes maturing on October 1, 2007 and bearing interest at a rate of 10% per annum. The holders of the notes will 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, 2003. The amount of the purchase price may be adjusted as a result of certain changes in the net tangible assets of LCR as of the closing date. The Company has 90 days from the closing date to determine the amount of the adjustment. Finally, the Company will pay an additional $125,000 either in cash or by increasing the principal amount of the promissory notes, to be determined by the mutual agreement of the parties when the net tangible assets of LCR are determined.

Certain assets comprising separate lines of business of LCR were sold to an unrelated third party prior to the closing of the purchase by the Company of the outstanding shares of LCR, and the proceeds of that sale were distributed to the LCR shareholders.

Page 3

Changing Nature of the Pharmaceutical Industry

The Company provides research services and products globally. The Company’s services and products are marketed to pharmaceutical, medical device and biotech companies engaged in drug development. The research services industry is highly fragmented among hundreds of niche vendors and 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. It 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
End users 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 to optimize profitability as development costs escalate, generic competition challenges previously secure profit generators, and political and social pressures mount to reduce health care costs.

                 Patent Expiration
As exclusivity ends with patent expiry, drug companies defend their proprietary positions against generic competition with various patent extension strategies (reformulation, drug combinations, chiral forms). Both the parent creating these line extensions and the generic competitors will outsource development.

                 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 add shareholder value by further developing new products through outsourcing, reducing risk for potential allies.

                 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 will 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 pipelines.

                 Biotechnology Industry and Virtual Drug Company Growth
The biotech industry continues to grow and has introduced many new developmental drugs. Developers do not have in-house resources to conduct development. Strategically, many new companies choose only to develop a product sufficiently to attract a partner who will manufacture and market the drug. Many of these virtual development companies will outsource drug development.

                 Unique Technical Expertise
The increasing complexity of new drugs requires highly specialized quality and 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
The FDA is requiring more regulatory data and greater access to that data and is encouraging use of computer-assisted filings in an effort to expedite approval. The Company is able to provide clients with remote access to Company computer systems while at the same time protecting client data from unauthorized access. The Company has also developed proprietary validated online data entry software enabling direct publication of data in unique client formats.

Page 4

                 Globalization of the Marketplace
Foreign firms are relying on independent development companies with experience in the United States 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 domestic skills in foreign operations.

The Company’s Role in the Drug Development Process

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

1)   The preclinical phase includes safety testing to prepare an Investigational New Drug (“IND”) exemption for submission to the FDA (Food and Drug Administration). 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 of the formulation is also determined.

Clients work with the Company’s preclinical services group to establish pharmacokinetics 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^® ABS, a robotic automated blood sampler, 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 used the Company’s electrochemistry and chromatography products to develop a single, quick, proprietary method to screen drugs in biological samples.

2)   The second clinical phase further 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 essential, particularly for new chemical entities.

More exhaustive safety, tolerability and dosing regimens have been established in sick humans in Phase II trials. Phase III clinical trials are conducted to verify efficacy and safety. After successful completion of Phase III clinical 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 the FDA’s Good Manufacturing Practices guidelines. Data from these activities 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 patient 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, practicing well-proven analytical protocols. It is unusual for a sponsor to change laboratories unless there are problems in the quality or timely delivery of results.

3)   Post-approval, the third phase, 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 involves the development and regulatory approval of product modifications and line extensions, including improved dosage forms. Following approval, 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 in order 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. The Company also provides services in all areas during the post-approval phase, concentrating on bio-equivalence studies of new formulations, line extensions, new disease indications and drug interaction studies.

Page 5

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 principal segments – analytical services and analytical products, both of which are aimed at addressing the bioanalytical and preclinical research needs of drug developers. Both segments arose out of the Company’s expertise in a number of core technologies, out of which state-of-the-art equipment and procedures designed to quantify trace chemicals in complex materials were developed. The Company evaluates performance and allocates resources based on these segments.

The Pharmaceutical Research and Manufacturing Association (“PhRMA”) states that pharmaceutical and biotechnology companies spent $30.3 billion worldwide on research and development in 2001. Analysts estimate that outsourced research and development services will grow from $5 billion in 2000 to more than $9 billion by 2004. The Company believes this growing trend toward outsourcing will continue.

                 Services
The Company’s analytical services unit provides screening and pharmacological testing, preclinical/safety testing, formulation development, regulatory compliance and quality control testing. Revenues from the Company’s services unit were $16,140,000 for fiscal year 2002. For additional financial information regarding the services unit, please see Note 10 in the Notes to Consolidated Financial Statements included in the Company’s Annual Report which is incorporated herein by reference. The following is a description of the services provided by the Company’s analytical services unit:

• Method Development and Validation:   The Company develops analytical methods to demonstrate potency, purity, stability or physical attributes. 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.

• Product Characterization:   The Company identifies the chemical composition, structure and physical properties of a compound. Characterization data is a significant portion of a regulatory application.

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

• Bioanalytical Testing:   The Company analyzes biological samples to measure drug and metabolite concentrations in complex biological matrixes.

• 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. Depending on protocol, multiple tissues may be collected to monitor pathological changes.

• In Vivo Sampling:   The Company develops and sells miniaturized in vivo sampling products and services for the continuous monitoring of chemical changes in life.

                 Products
The Company also competes in niches of the $20 billion (2001) analytical instrument industry. It leverages its talented personnel in these instrument businesses to provide solutions to highly challenging problems. The Company designs, develops, manufactures and markets state-of-the-art robotic blood sampling and in vivo microdialysis collection systems and physiology monitoring tools. Complementing these, the Company’s liquid chromatography and electrochemistry instrument platform, epsilon™, is used to separate and quantify drugs, xenobiotics, metabolites and other chemicals in blood, cerebrospinal fluid and other biological media. These tools are used to track complex chemical, physiological and behavioral effects in humans and laboratory animal models. The Company is focusing its products business on expediting preclinical screening of developmental drugs. Revenues for the Company’s products unit were $10,373,000 for fiscal year 2002. For additional financial information regarding the products unit, please see note 10 in the Notes to Consolidated Financial Statements included in the Company’s Annual Report which is incorporated herein by reference. The following is a description of the products offered by the Company:

Page 6

• The Culex^® ABS robotic automated rodent blood sampling system is used by pharmaceutical researchers to monitor drug concentrations as a function of time (pharmacokinetics). Compared to current manual methods, the Culex offers greater than 80% reduction in test model use and comparable reduction in labor, coupled with computer-controlled blood sampling protocol, providing exceptional cost savings, significant reduction in model stress and more expeditious data delivery.

• Bioanalytical separation instrumentation (liquid chromatography) used in connection with Windows^® software, detect and quantify low concentrations of substances in biological fluids and tissues.

• A wide range of chemical analyzers monitor trace levels of organic chemicals such as neurotransmitters in biological samples using core electrochemistry, liquid chromatography and enzymology technologies.

• Diagnostic kits and methods are designed to add value to the Company’s instrumentation and enable clinical laboratories and pharmaceutical researchers to determine the presence of multiple drugs in blood plasma and to measure neurotransmitters and their metabolites in plasma and urine.

• 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.

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 2001 research and development spending. The Company has been recognized as a preferred vendor, or a tactical partner, to four of these firms. Since 2000, the Company has been concentrating its business development effort on the next tier of smaller drug development companies. The Company believes that companies of this size are less likely to have resources comparable to the Company’s and will consequently be more inclined to establish a consistent, long-term, strategic relationship with the Company. The Company also recognizes that increasing its dependence on a larger pool of smaller companies demands a broader, more active and more fragmented business development effort, and the Company has adapted accordingly.

Approximately 24% of the Company’s products and services revenues are generated from customers outside the United States. During 2002, 2001 and 2000, Pfizer accounted for approximately 19.0%, 18.9% and 21.0%, respectively, of the Company’s total revenue and 15.7% and 23.6% of total trade accounts receivable at September 30, 2002 and 2001, respectively. During 2002, 2001 and 2000, Pharmacia accounted for approximately 9.3%, 11.7% and 12.2%, respectively, of the Company’s total revenues, and 6.3% and 10.7% of total trade accounts receivable at September 30, 2002 and 2001, respectively. During 2002, Pfizer and Pharmacia announced their intention to merge, but to date, this proposed merger has not affected the Company’s relationship with these customers. There can be no assurance that the Company’s business will not continue to be dependent on continued relationships with the proposed combined Pfizer/Pharmacia or other clients or, that annual results will not be dependent on the performance of 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. Furthermore, 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 focuses on key account development among the top 200 global pharmaceutical companies. The Company recognizes that its growth and customer satisfaction depend upon its ability to continually improve client relationships.

In North America, the Company’s products are sold directly to the end user. The Company has nine employees on its business development staff and an equal number providing technical and development support to those end users. The Company also has created a collection of catalogs, training and technical support literature, media presentations, web sites, 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 Evansville, Indiana; New Jersey; Oregon; and Warwickshire and Congleton, UK. These locations enable the Company to present the Company close to its largest concentration of key customers. For additional financial information relating to geographic segments, please see Note 10 in the Notes to Consolidated Financial Statements in the Company’s Annual Report which is incorporated herein by reference.

Page 7

BAS Analytics, Ltd., a wholly owned subsidiary, provides a direct liaison with research service clients in the United Kingdom and maintains a laboratory to provide those services. BAS Instruments, Ltd., also a wholly owned subsidiary, manages most product sales in Europe. In addition, the Company has a network of more than 20 established 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 acquisitions, stronger local promotion and expansion of the Company’s distributor network.

Although the Company’s revenues tend to be lower in its first fiscal quarter, the Company does not believe that this reflects any seasonal changes in the Company’s business.

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.

Backlog

Considering that the arrangements pursuant to which the Company provides its services are terminable upon written notice of 30 days or less, the Company does not disclose backlog for the services it provides. The Company does maintain projections based on bids and contracts to optimize asset utilization.

Competition

With respect to its 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 similar research services include Covance, Inc., Pharmaceutical Product Development, Inc., AAIpharma, Inc. and MDS Health Group Ltd. CROs generally compete on the basis of previous experience, medical and scientific expertise in specific therapeutic areas, quality of contract research, ability to organize and manage large-scale trials on a global basis, medical database management capabilities, ability to provide statistical and regulatory services, ability to recruit investigators, ability to integrate information technology with systems to improve the efficiency of contract research, existence of an international presence with strategically located facilities, financial viability and price.

With respect to its products, 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.

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”) and Good Manufacturing Practice (“GMP”) guidelines administered by the FDA. The standards of GLP and GMP 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 or GMP guidelines could result in additional regulatory sanctions and, in severe cases, could also result in a discontinuance of selected Company operations.

Page 8

Laboratories such as ours that provide information that is 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

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 clinical trial.

The Company’s animal research facilities are also subject to a variety of federal and state laws and regulations, including The Animal Welfare Act and the rules and regulations promulgated thereunder by the United States Department of Agriculture (“USDA”). 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 and has registered assurance with the United States National Institutes of Health Office of Laboratory Animal Welfare.

To help 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 standard operating procedures where applicable.

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.

The Company’s activities also involve the controlled use of hazardous materials and chemicals. The Company is subject to foreign, federal, state and local laws and regulations governing the use, storage, handling and disposal of such materials and certain waste products, as well as the safety and health of laboratory employees.

Our United States 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 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.

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.

Page 9

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.

The Department of Health and Human Services recently promulgated final regulations under the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) that will govern the disclosure of confidential medical information in the United States. The Privacy Rule, which governs disclosure of confidential information, was effective beginning April 14, 2001, and all companies subject to the Privacy Rule must comply with its provisions on or before April 14, 2003. We have 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 will 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 year 2002, the Company spent $1,521,000 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. 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 2002 generated multiple Culex®-related products (Bambino System, Raturn upgrade, Vertical Sensor, Metabolic Cage for Mice, Empis Automated Infusion System) and new techniques which can be offered as contract services (lung microdialysis, rodent electrocardiography). 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 roughly 80% of all research and development dollars in 2002. The Company also makes small expenditures in novel research and development, some under partial grants, such as its membership in the National Institutes of Health (“NIH”) supported Botanicals Center with Purdue University, Indiana University, and the University of Alabama. The Center is focused on applying strict FDA safety and efficacy guidelines to plant-derived chemicals that are claimed to have therapeutic properties. Seven NIH SBIR research grant applications were filed in 2002 to support development of other products under consideration.

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 seven registered trademarks and one pending trademark, as well as one copyright. 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 pending in the European Union, Japan and with the World Intellectual Property Organization. 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.

Page 10

In addition, 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.

Item 2.   Properties

The Company’s principal executive offices are located at 2701 Kent Avenue, West Lafayette, Indiana 47906, and constitute approximately 100,000 square feet of operational and administrative space. Both the services unit and the products unit conduct operations at the West Lafayette facility. The BAS Evansville facility consists of 10 buildings with roughly 80,000 square feet of operational and administrative space on 52 acres. The Company also maintains offices which provide sales and technical support services in the United Kingdom. As of December 13, 2002, the Company leases 8,560 square feet of laboratory and administrative space in McMinnville, Oregon. The Company believes that its facilities are adequate for the Company’s operations and that suitable additional space will be available when needed.

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

You can find Management’s Discussion and Analysis of Financial Condition and Results of Operations on pages 7-13 of our 2002 Annual Report. That information is incorporated herein by reference.

Item 8.   Financial Statements and Supplementary Data

You can find the consolidated financial statements of the Company and its subsidiaries in our 2002 Annual Report at pages 14-17 (Consolidated Balance Sheets, Consolidated Statements of Operations, Consolidated Statements of Shareholders’ Equity and Consolidated Statements of Cash Flows) and pages 18-27 (Notes to Consolidated Financial Statements). You can find the Report of Independent Auditors at page 28 of our 2002 Annual Report. All of the above information is incorporated herein by reference.

Also incorporated by reference herein is information on quarterly results of operations, which can be found in our 2002 Annual Report under “Quarterly Financial Data (unaudited)” at page 6.

Page 11

Item 10.   Directors and Executive Officers of the Registrant.

The following information concerns the persons who served as the directors and executive officers of the Company as of September 30, 2002. 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 58 Chairman of the Board;
President; Chief Executive Officer

Ronald E. Shoup, Ph.D 51 Chief Operating Officer, BAS Contract
Research Services; Director

Douglas P. Wieten 41 Vice President, Finance; Chief Financial
Officer; Treasurer

Candice B. Kissinger 51 Senior Vice President, Marketing;
Secretary and Director

Craig S. Bruntlett, Ph.D 53 Senior Vice President, International Sales

Donnie A. Evans 56 Vice President, Engineering

Stephen Geary, Ph.D 61 Vice President, United States Sales

Lina L. Reeves-Kerner 52 Vice President, Human Resources

Michael P. Silvon 55 Vice President, Planning and Development

Michelle L. Troyer 31 Corporate Controller

William E. Baitinger 69 Director

John A. Kraeutler 54 Director

W. Leigh Thompson 64 Director

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 Doctorate in Analytical Chemistry from the University of North Carolina.

Ronald E. Shoup, Ph.D. serves as Chief Operating Officer of the Company’s BAS Contract Research Services and is Managing Director of BAS Analytics, Ltd. in the UK. He joined BAS in 1980 as an applications chemist, became Research Director in 1983 and initiated the laboratory services group within BAS 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. He has served on the Company’s board of directors since 1991 and is a member of the external advisory board to the Purdue University Department of Chemistry.

Douglas P. Wieten has been Vice President, Finance since February 1999, Chief Financial Officer since September 1997 and Treasurer since March 1997. He served as Corporate Controller from 1992 to February 1999. Prior to that time, Mr. Wieten worked at Ernst & Young LLP, where he had been employed since 1984. Mr. Wieten is a certified public accountant and has a Bachelor of Science degree in Accounting from Butler University.

Candice B. Kissinger is currently serving as the Interim Director of Research. She has been Senior Vice President, Marketing since January 2000. She served as Vice President, International Sales and Marketing since July 1981. Mrs. 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. Mrs. Kissinger is the wife of Dr. Peter Kissinger. She has served as a director 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.

Page 12

Donnie A. Evans he has been Vice President, Engineering Services since January of 1988. Mr. Evans was the Company's first full-time employee, beginning as an electronics engineer in 1978.

Stephen Geary, Ph.D has been Vice President, United States Sales since January 1992. Dr. Geary is also responsible for the sales efforts of the Company's clinical products. Dr. Geary has a Bachelor of Science degree in Biology and Chemistry from Tufts University, a Master of Science degree in Biology from the University of New Hampshire and a Ph.D. in Biochemistry from Syracuse 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 since March 1997. Dr. Silvon has been general manager, BAS Evansville and Vetronics since January 2000. 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 for Zeneca Fine Chemicals. He has a Bachelor of Science in Chemistry from Loyola University of Chicago, a Master of Business Administration from Sacred Heart University and a Doctorate in Chemistry from the University of Vermont.

Michelle L. Troyer has been the Corporate Controller since February 1999. Ms. Troyer joined the Company in 1994 as a Staff Accountant and became Assistant Controller in October 1996. Ms. Troyer has a Bachelor of Science degree in Accounting from Purdue University and is a certified public accountant.

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.

John A. Kraeutler has served as a director of the Company since January 1997. Mr. Kraeutler has been President and Chief Operating Officer of Meridian Bioscience, Inc., a life sciences manufacturer, since August 1992 and is also a director. Prior to joining Meridian Bioscience, Inc., Mr. Kraeutler held a progression of technical, marketing and general management positions with a number of healthcare companies, including Carter-Wallace, Becton Dickinson and Organon (Akzo Nobel). Mr. Kraeutler has Bachelor of Science degree in Biology from Fairleigh Dickinson University and a Master of Business Administration in Marketing and a Master of Science degree in Biology from Seton Hall University.

W. Leigh Thompson, Ph.D., M.D. has served as a director of the Company since January 1997. Since 1995, Dr. Thompson has been Chief Executive Officer of Profound Quality Resources, Inc., a scientific consulting firm. Prior to 1995, Dr. Thompson was Professor of Medicine at Case Western Reserve and Indiana Universities, President of the society of Critical Care Medicine and Chief Scientific Officer at Eli Lilly and Company. He earned a Bachelor of Science degree in Biology from the College of Charleston, a Master of Science and a Doctorate in Pharmacology from the Medical University of South Carolina, a Medical Doctor degree from The Johns Hopkins University and was awarded a Doctorate of Science from the Medical University of South Carolina. Dr. Thompson is also a director of La Jolla Pharmaceutical Company, Diabetogen Biosciences, Inc., Medarex, Inc., Guilford Pharmaceuticals, Inc., Inspire Pharmaceuticals, Inc., Sontra Medical Corp., and DepoMed, Inc.

Page 13

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.

	BIOANALYTICAL SYSTEMS, INC. (Registrant) By:  /s/ Peter T. Kissinger Peter T. Kissinger President, Chairman and Chief Executive Officer By:  /s/ Douglas P. Wieten Douglas P. Wieten Chief Financial Officer, Treasurer, VP Finance (Principal Financial and Accounting Officer)
Date:  January 28, 2003

CERTIFICATIONS

I, Peter T. Kissinger, 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 statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
3.	Based upon 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 periods presented in this annual report;
4.	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a)	designed such disclosure controls and procedures 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 annual report is being prepared;
b)	evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and
c)	presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

Page 14

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

a)	all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

6. The registrant’s other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date:  January 28, 2003

/s/  Peter T. Kissinger Peter T. Kissinger
Chief Executive Officer

I, Douglas P. Wieten, Chief Financial 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 statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
3.	Based upon 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 periods presented in this annual report;
4.	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

Page 15

a)	designed such disclosure controls and procedures 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 annual report is being prepared;
b)	evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and
c)	presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

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

a)	all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

6. The registrant’s other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date:  January 28, 2003

/s/  Douglas P. Wieten Douglas P. Wieten
Chief Financial Officer

Page 16

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 Chief Executive Officer and Director	January 28, 2003
/s/  Douglas P. Wieten Douglas P. Wieten	Chief Financial Officer, and Treasurer	January 28, 2003
/s/  William E. Baitinger William E. Baitinger	Director	January 28, 2003
/s/  Candice B. Kissinger Candice B. Kissinger	Director	January 28, 2003
/s/  John A. Kraeutler John A. Kraeutler	Director	January 28, 2003
/s/  Ronald E. Shoup Ronald E. Shoup	Director	January 28, 2003
W. Leigh Thompson	Director	January 28, 2003

Page 17

INDEX TO EXHIBITS

Number
Assigned In
Regulation S-K
Item 601 Description of Exhibits Sequential
Numbering
System Page
Number of
Exhibits

(2) No Exhibit

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

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

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

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

(9) No Exhibit.

(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 (incorporated by reference to Exhibit 10.26 to Registration Statement on Form S-1, Registration No. 333-36429).

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).

Page 18

Number
Assigned In
Regulation S-K
Item 601 Description of Exhibits Sequential
Numbering
System Page
Number of
Exhibits

10.5 1997 Bioanalytical Systems, Inc. Outside Director Stock Option Plan (incorporated by reference to Exhibit 10.28 to Registration Statement on Form S-1, Registration No. 333-36429).

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 Agreement and Plan of Merger, dated June 20, 2002, among Bioanalytical Systems, Inc., PI Acquisition Corp. and PharmaKinetics Laboratories, Inc., amended and restated to give effect to Amendment No. 1 to Agreement and Plan of Merger, dated July 24, 2002 (incorporated by reference to Exhibit 2.1 to Registration Statement on Form S-4, Registration No. 333-99593).

10.8 Second Amendment, dated November 21, 2002, to the Agreement and Plan of Merger by and among PharmaKinetics Laboratories, Inc., Bioanalytical Systems, Inc. and PI Acquisition Corp., dated as of June 20, 2002, as amended by a First Amendment, dated as of July 24, 2002 (incorporated by reference to Exhibit 10.1 to Form 8-K filed November 21, 2002).

10.9 Master Equipment Lease Agreement by and between Bioanalytical Systems, Inc. and Keycorp Leasing, dated December 5, 1997.

10.10 Credit Agreement by and between Bioanalytical Systems, Inc., and The Provident Bank, dated October 29, 2002.

10.11 General Security Agreement by and between Bioanalytical Systems, Inc. and The Provident Bank, dated October 29, 2002.

10.12 Trademark Security Agreement by and between Bioanalytical Systems and The Provident Bank, dated October 29, 2002.

10.13 Patent Security Agreement by and between Bioanalytical Systems and The Provident Bank, dated October 29, 2002.

10.14 Promissory Note by and between Bioanalytical Systems, Inc. and The Provident Bank, dated October 29, 2002 related to loan in the amount of $6,000,000.

Page 19

Number
Assigned In
Regulation S-K
Item 601 Description of Exhibits Sequential
Numbering
System Page
Number of
Exhibits

10.15 Loan Agreement between Bioanalytical Systems, Inc. and Union Planters Bank, dated October 29, 2002.

10.16 Real Estate Mortgage and Security Agreement between Bioanalytical Systems, Inc. and Union Planters Bank, dated October 29, 2002.

10.17 Real Estate Mortgage and Security Agreement between Bioanalytical Systems, Inc. and Union Planters Bank, dated October 29, 2002.

10.18 Term Loan Promissory Note made by Bionanalytical Systems, Inc. in favor of Union Planters Bank, dated October 29, 2002.

10.19 Promissory Note made by Bioanalytical Systems, Inc. in favor of Union Planters Bank, dated October 29, 2002.

10.20 Secured Convertible Revolving Note, dated November 14, 2002, payable by PharmaKinetics Laboratories, Inc. to Bioanalytical Systems, Inc. in the original principal amount of up to $925,000 (incorporated by reference to Exhibit 10.3 to Form 8-K filed November 21, 2002).

10.21+ Master Equipment Lease by and between Fifth Third Bank, Indiana (Central) and Bioanalytical Systems, Inc., dated November 15, 2002.

(12) No Exhibit

(13)+ 2002 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.

(16) No Exhibit

(18) No Exhibit

(21) 21.1 Subsidiaries of the Registrant

(23) 23.1+ Consent of Independent Auditors

+  Filed with this Amendment No. 1 to Form 10-K.

Page 20

Number
Assigned In
Regulation S-K
Item 601 Description of Exhibits Sequential
Numbering
System Page
Number of
Exhibits

(24) No Exhibit

(27) No Exhibit

(99) 99.1 Risk Factors

99.2+ Certification of Chief Executive Officer

99.3+ Certification of Chief Financial Officer

+  Filed with this Amendment No. 1 to Form 10-K.

Page 21

EX-10.21

Exhibit 10.21

MASTER EQUIPMENT LEASE

This Master Equipment Lease dated as of NOVEMBER 15, 2002 (“Master Lease”) between FIFTH THIRD BANK, INDIANA (CENTRAL), a (an) INDIANA corporation (hereinafter called together with its successors and assigns, if any, “Lessor”), 251 N. ILLINOIS ST., STE 1000, INDIANAPOLIS, IN 46204 and BIOANALYTICAL SYSTEMS, INC. a (an) INDIANA CORPORATION (hereinafter called “Lessee”), 2701 KENT AVENUE, WEST LAFAYETTE, IN 47906-1382.

TERMS AND CONDITIONS OF LEASE

In consideration of the premises and of the rentals and the covenants hereinafter mentioned to be kept and performed by Lessee, Lessor hereby leases the equipment (including all replacement parts, repairs, additions and accessories thereto) listed on Equipment Schedule A attached hereto on the date hereof or as attached hereto at any time in the future or listed or described in any other document which refers to and incorporates the terms of this Master Lease (collectively “Equipment”), upon the following terms and conditions:

Section 1.    Acquisition and Lease of Equipment.

(a) Lessor will, subject to the terms of this Master Lease, purchase the Equipment set forth in Equipment Schedule A and simultaneously lease such Equipment to Lessee. The approximate purchase price for each unit of Equipment is as set forth in Equipment Schedule A. Lessee acknowledges either:

(i) that Lessee has approved any written Supply Contract (as defined by the uniform version of the Uniform Commercial Code (UCC) Section 2A-103 (y) as adopted in the state of Lessor’s principle place of business) covering the Equipment purchased from the “Supplier” (as defined by UCC Section 2A-103(x)) thereof for lease to Lessee; or

(ii) that Lessor has informed or advised Lessee, in writing, either previously or by this Master Lease of the following:

(1) the identity of the Supplier;

(2) that the Lessee may have rights under the Supply Contract; and

(3) that the Lessee may contact the Supplier for a description of any such rights Lessee may have under the Supply Contract.

(b) Lessor hereby authorizes Lessee to accept delivery of the Equipment from the manufacturer or the Supplier. Upon delivery and installation of each item of Equipment, if such Equipment is in good working order, and complies with the specifications of the purchase order, Lessee shall execute and deliver to Lessor a Certificate of Acceptance in form acceptable to Lessor. Lessor shall be under no obligation to purchase the Equipment until it has received the Acceptance Certificate executed by Lessee.

(c) Lessor shall be under no obligation to purchase any item of Equipment if there shall exist an Event of Default or any condition, event or act which, with notice or lapse of time or both, would became an Event of Default.

Section 2.    Term and Rent.

(a) This Master Lease shall commence on the date set forth above and shall continue in effect thereafter so long as any Equipment Schedule A entered into pursuant to this Master Lease remains in effect. The term of each Equipment Schedule A shall commence upon the Effective Date specified in each Schedule and shall continue for the term specified unless earlier terminated pursuant to the terms hereof. Unless otherwise stated in Equipment Schedule A, each Equipment Schedule A term shall be automatically extended for successive monthly periods until terminated by either party giving to the other not less than ninety (90) days prior written notice of termination. Any such termination shall be effective only on the last day of the term specified in Equipment Schedule A or any successive period.

(b) As rent for the Equipment, Lessee agrees to pay to Lessor the rent specified in Equipment Schedule A. All payments provided for in this Master Lease shall be made to the Lessor at the address of the Lessor set forth above, or at such other place as the Lessor, or its assigns, shall specify in writing. The rent specified in Equipment Schedule A shall be adjusted for any errors, increase or decrease in the purchase price of the Equipment. The payment of the rent specified in Equipment Schedule A also shall be secured by any presently existing or hereafter acquired property pledged to Lessor or any affiliate of Fifth Third Bancorp for any indebtedness of Lessee owed to Lessor and all affiliates of Fifth Third Bancorp, whether direct or contingent, due or to become due; provided, however, that this provision shall not apply to a “consumer credit transaction” as defined in Title I, Consumer Credit Protection Act 15 U.S. C.A. Sections 1601 et. seq., as amended or any applicable state statute containing similar provisions.

(c) This Master Lease is a net lease and Lessee acknowledges and agrees that Lessee’s obligation to make all payments hereunder, and the rights of Lessor in and to all such payments, shall be absolute and unconditional and shall not be subject to any abatement of rent or reduction thereof, including but not limited to, abatements or reductions due to any present or future claims of Lessee against Lessor, the manufacturer of the Equipment, the Supplier, or any party under common ownership or affiliated with Lessor, by reason of any defect in the Equipment, the condition, design, operation or fitness for use thereof, or by reason of any failure of Lessor to perform any of its obligations hereunder, or by reason of any other cause. It is the intention of the parties hereto that the rent payable by Lessee hereunder shall continue to be payable in all events and in the manner and at the times herein provided unless the obligation to pay shall be terminated pursuant to the provisions of this Lease.

Section 3.    Tax Indemnification.

(a) The terms of this Master Lease, including payment amounts, have been made in reliance on the fact that Lessor, its successors and assigns, shall be entitled to such deductions, credits and other benefits (the “Tax Benefits”) as are provided to an owner of property, to the extent permitted under applicable law and provisions of the Internal Revenue Code of 1986 (the “Code”), as amended, including but not limited to depreciation and amortization deductions allowable under Sections 167, 168 and 169 of the Code and any amendments or additions thereto relating to the leased property (the “Deductions”).

- - 2 -

(b) If the Lessor or its successor or assigns shall lose, during the term of this Master Lease, its right to claim all or any part of such Tax Benefits or Deductions or any part of such Tax Benefits or Deductions is disallowed, the rental set forth in Equipment Schedule A shall be increased by an amount which, in the reasonable opinion of Lessor, will cause Lessor’s total net return (after all taxes) to be equal to the net return which Lessor would have received had such Tax Benefits or Deductions not been disallowed.

(c) In the event Lessor’s claim of all or any part of such Tax Benefits or Deductions with respect to the Equipment is disallowed or lost after the term of the Lease, Lessee shall pay Lessor a lump sum which, in the reasonable opinion of Lessor will cause Lessor’s total net return (after all taxes) to be equal to the net return Lessor would have received had such Tax Benefits or Deductions not been disallowed.

(d) In the event that this Master Lease is, for any reason, canceled or prepaid prior to the expiration of its term the Lessee agrees to pay to Lessor, in addition to all other amounts payable under this Master Lease, a lump sum amount which, in the reasonable opinion of Lessor, will cause Lessor’s net return (when combined with all other payments hereunder but excluding any prepayment penalties and after all taxes) to be equal to the net return Lessor would have received had this Master Lease not been terminated prior to the expiration of its term.

(e) The rent shall not be so increased (or the lump sum payment shall not be due) if and to the extent that the Lessor shall have lost the right to claim such a Tax Benefit or Deduction as a direct result of any one of the following events:

(i) a casualty occurrence with respect to the Equipment if Lessee shall have paid the Lessor pursuant to the provisions of Section 13 hereof;

(ii) the failure of Lessor to claim the Tax Benefit or Deduction on its income tax return for the appropriate year; or

(iii) the failure of Lessor to have sufficient tax liability to fully use such Tax Benefits or Deductions.

(f) Lessee agrees that neither it nor any corporation controlled by it, in control of it, or under common control with it, directly or indirectly, will at any time take any action or file any returns or other documents inconsistent with the foregoing and that each of such corporations will file such returns, take such action and execute such documents as may be reasonable and necessary to facilitate accomplishment of the intent thereof. Lessee agrees to copy and make available for inspection and copying by Lessor such records as will enable Lessor to determine whether it is entitled to the benefit of any amortization or depreciation deduction or tax credit which may be available from time to time with respect to the Equipment.

(g) If, under any circumstances or for any reason whatsoever, except for acts of the Lessor,

(i) Lessor shall become liable for additional tax as a result of Lessee having added an attachment or made an alteration to the Equipment which would increase the productivity or capability of the Equipment so as to violate the provisions of Rev. Proc. 75-21, 1975-1 C.B. 715, as modified by Rev. Proc. 79-48, 1979-2 C.B. 529 (and as either or both may hereafter be modified or superseded);

- - 3 -

(ii) the statutory full-year marginal federal tax rate for corporations with a December 31 tax year-end is different than the statutory tax rate in effect on the date of this Master Lease; or

(iii) Lessor shall not have or shall lose the right to claim, or there shall be disallowed or recaptured all or any portion of the Federal tax depreciation deductions with respect to any item of Equipment based on depreciation of the Lessor’s full cost of such item of Equipment and computed on the basis of a method of depreciation provided by the Code as Lessor in its complete discretion may select; then Lessee agrees to pay Lessor upon demand an amount which, after deduction of all taxes required to be paid by Lessor in respect of the receipt thereof under the laws of any federal, state or local government or taxing authority of the United States or of any taxing authority or government subsidiary of any foreign country, shall be equal to the sum of:

(1) an amount equal to the additional income taxes which would be paid or payable by Lessor in consequence of the failure to obtain the benefit of a depreciation deduction calculated under the assumption that Lessor’s income is taxed at the highest applicable rate (without regard to the actual taxes paid by Lessor), and

(2) any interest and/or penalty which may be assessed in connection with any of the foregoing.

(h) The provisions of this Section 3 shall survive the expiration or earlier termination of this Master Lease.

Section 4.    Acceptance, Use and Maintenance of Equipment.

(a) Lessor hereby authorizes Lessee to accept delivery of the Equipment from the manufacturer or Supplier. Upon delivery and installation of each item of Equipment, if such Equipment is in good working order, Lessee shall execute and deliver to Lessor a Certificate of Acceptance in a form acceptable to Lessor.

(b) Lessor shall have no obligation and assumes no liability for any matter relating to the ordering, manufacture, shipment, installation, erection, testing, adjusting or servicing of any item of Equipment, or for any failure or delay in obtaining or delivering any item of Equipment. Lessee shall provide and maintain a suitable installation environment for each item of Equipment with all appropriate utilities, wiring and other facilities prescribed or recommended by the appropriate manufacturer’s installation and operating manuals.

(c) Lessee shall cause the Equipment to be operated by competent employees and in accordance with the manufacturer’s operating manuals and shall pay all expenses of operating the Equipment. The Equipment shall be maintained at the location(s) specified in Equipment Schedule A and shall not be removed from such location(s) without the written consent of the Lessor. Lessor will have the right, from time to time during reasonable business hours, to enter upon the Lessee’s premises or any other premises where the Equipment may be located, for the purpose of confirming the existence, location, condition or proper maintenance of the Equipment.

- - 4 -

(d) Lessee, at its own cost and expense, shall keep all Equipment in good repair, condition and working order and shall furnish all parts, mechanisms, devices and servicing required therefor. All such parts, mechanisms, and devices shall immediately become the property of Lessor and part of the Equipment for all purposes.

(e) Lessee shall comply with and conform to all laws, ordinances and regulations, present or future, in any way relating to the possession, use or maintenance of the Equipment throughout the term of this Master Lease.

(f) Lessee shall pay or satisfy and discharge any and all claims against, through or under Lessee and its successors and assigns, which, if unpaid, might constitute or become a lien or a charge upon any of the Equipment, and any liens or charges which may be levied against or imposed upon the Equipment as a result of the failure of Lessee to perform or observe any of its covenants or agreements under this Master Lease and any other liens or charges which arise by virtue of claims against, through or under any other party other than Lessor, but Lessee shall not be required to pay or discharge any such claims so long as it shall, in good faith and by appropriate legal proceedings contest the validity thereof in any reasonable manner which will not, in the reasonable opinion of Lessor, affect or endanger the interest of Lessor or other rights of any assignee under this Master Lease hereof in and to the Equipment or diminish the value thereof. Lessee’s obligations under this Section shall survive the termination of this Master Lease.

Section 5.    No Agency.     Lessee acknowledges and agrees that neither the manufacturer, the Supplier, nor any salesman, representative, nor other agent of the manufacturer or Supplier, is an agent of Lessor. No salesman, representative or agent of the manufacturer or Supplier is authorized to waive or alter any term or condition of this Master Lease and no representation as to the Equipment or any other matter by the manufacturer or Supplier shall in any way affect Lessee’s duty to pay rent and perform its obligations as set forth in this Master Lease.

Section 6.    Disclaimer of Warranties.     LESSEE ACKNOWLEDGES THAT: LESSOR IS NOT THE MANUFACTURER OF THE EQUIPMENT NOR THE MANUFACTURER’S AGENT NOR A DEALER THEREIN; THE EQUIPMENT IS OF A SIZE, DESIGN, CAPACITY, DESCRIPTION AND MANUFACTURE SELECTED BY LESSEE; LESSEE IS SATISFIED THAT THE EQUIPMENT IS SUITABLE AND FIT FOR ITS PURPOSES; AND LESSOR MAKES NO WARRANTY OR REPRESENTATION, EITHER EXPRESS OR IMPLIED AS TO THE DESIGN, OPERATION OR CONDITION, OR AS TO THE QUALITY OF THE MATERIAL, EQUIPMENT OR WORKMANSHIP IN THE EQUIPMENT LEASED HEREUNDER, AND LESSOR MAKES NO WARRANTY OF MERCHANTABILITY OR FITNESS OF THE EQUIPMENT FOR ANY PARTICULAR PURPOSE OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, IT BEING AGREED THAT ALL SUCH RISKS AS BETWEEN LESSOR AND LESSEE, ARE TO BE BORNE BY LESSEE AND THE BENEFITS OF ANY AND ALL IMPLIED WARRANTIES OF LESSOR ARE HEREBY WAIVED BY LESSEE. LESSOR SHALL NOT BE RESPONSIBLE FOR ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES. Lessor agrees that Lessee shall be entitled to the benefit of any manufacturer’s warranties on the Equipment to the extent permitted by applicable law.

- - 5 -

Section 7.    Identification; Personal Property.     No right, title or interest in the Equipment shall pass to Lessee other than the right to maintain possession and use of the Equipment for the full lease term. Lessor may require plates or markings to be conspicuously affixed to or placed on the Equipment indicating Lessor is the owner. However, if any item of Equipment leased hereunder is to be operated by the public, such plates or markings need not be placed in a conspicuous part of the Equipment. The Equipment is, and shall at all times be and remain, personal property even though the Equipment or any part thereof may hereafter become affixed or attached to real property.

Section 8.    Quiet Enjoyment.     So long as Lessee is in compliance with the terms of this Master Lease: Lessee's right of quiet enjoyment of the Equipment shall not be impaired by the Lessor or anyone claiming through the Lessor

Section 9.    Assignment.

(a) LESSEE AGREES NOT TO SELL, ASSIGN, SUBLET, PLEDGE, HYPOTHECATE, OR OTHERWISE ENCUMBER, SUFFER A LIEN UPON OR AGAINST ANY INTEREST IN THIS MASTER LEASE OR THE EQUIPMENT LEASED HEREUNDER.

(b) Lessor may assign, pledge, or in any other way transfer this Master Lease either in whole or in part, without notice to Lessee. Should this Master Lease or any interest therein be assigned or should the rentals hereunder be assigned no breach or default of this Master Lease by Lessor to its assignee shall excuse performance by Lessee of any provision hereof. Upon receipt of notice of assignment of this Master Lease or the rentals due hereunder, if so directed by Lessor, Lessee shall pay the rentals hereunder as they become due to any assignee without any set-off, counterclaims or defense thereto.

Section 10.    Fees - Taxes.     Lessee agrees to pay and to indemnify and hold Lessor harmless from all license and registration fees and all assessments, taxes and impositions of whatever nature including income, franchise, sales, use, property, excise and other taxes now or hereinafter imposed by any governmental body or agency upon the Equipment, or the use thereof, including all interest and penalties, but excluding any income taxes payable by Lessor on the receipt of income under this Master Lease.

Section 11.    Limitation of Liability; Indemnification.

(a) Lessee agrees that Lessor shall not be responsible for any loss or damage to Lessee, its customers or anyone else, caused by any failure or defect of the Equipment, or otherwise.

(b) Lessee hereby assumes liability for, and hereby agrees to indemnify, defend, protect, save and keep harmless Lessor, its successors and assigns, from and against any and all claims, liabilities, judgments, suits, obligations, losses, damages, expenses, penalties, and disbursements (including reasonable attorneys’ fees and expenses) of any kind and nature arising from or pertaining to the use, possession, operation, manufacture, purchase, financing, ownership, delivery, rejection, non-delivery, transportation, storage maintenance, repair return or other disposition of the Equipment including but not limited to liabilities resulting from strict liability in tort or a breach of any law, regulation or ordinance of any federal, state or local government agency.

- - 6 -

Section 12.    Return of Equipment.     Upon the expiration of the term of this Master Lease, unless the Equipment is sold to the Lessee, Lessee will at its own cost and expense deliver possession of the Equipment to Lessor at a location designated by the Lessor free and clear of all liens, charges, encumbrances, and rights of others, in good working order and repair (except for ordinary wear and tear resulting from proper use) and in the condition required hereby.

Section 13.    Casualty Loss.     Lessee hereby assumes and shall bear the risk of loss; damage to or theft of the Equipment from any and every causes whatsoever, whether or not insured. No loss or damage to the Equipment or any part thereof shall impair any obligation of Lessee under this Master Lease, which shall continue in full force and effect. In the event that any item of Equipment shall become damaged, worn out, destroyed, lost or stolen, or if any item of the Equipment is requisitioned or taken by any governmental authority under the power of eminent domain or otherwise, Lessee shall promptly notify Lessor thereof and at the option of Lessor, Lessee shall:

(a) Place the same in good repair, condition and working order; or

(b) Replace the same with like property in good repair, condition and working order which property shall be thereupon conveyed to Lessor free, clear and unencumbered and thereupon be subject to this Master Lease; or

(c) On the Rental Payment date next following the date the Equipment becomes damaged, worn out, destroyed, lost or stolen, pay Lessor in cash all of the following:

(i) all amounts then owed by Lessee to Lessor under this Master Lease;

(ii) an amount equal to the greater of the estimated fair market value of the equipment at the end of lease term or 10% of the actual cost of said Equipment; and

(iii) the unpaid balance of the total rent for the initial term of this Master Lease attributable to such Equipment.

Upon Lessor’s receipt of such payment, Lessee shall be entitled to whatever interest Lessor may have in such Equipment, in its then condition and location “AS IS” and “WHERE IS”, without warranty express or implied.

Section 14.    Insurance.

(a) Lessee at its expense will provide and maintain fire and extended coverage insurance against loss, theft, damage or destruction of the Equipment in an amount not less than 100% of the insurable value of the Equipment on a replacement cost basis as determined by Lessor. Each policy will provide expressly that such insurance, as to Lessor and its assigns, will not be invalidated by any act, omission or neglect of Lessee and will provide expressly for at least thirty (30) days prior written notice to Lessor of alteration or cancellation. The proceeds of such insurance will be applied first to any unpaid obligations of Lessee under this Master Lease arising prior to the receipt of the proceeds and then toward the restoration or repair of the Equipment or if Lessor determines that any item of Equipment is lost, stolen, destroyed, or damaged beyond repair toward payment of the amounts required by Section 13 above. Any excess proceeds remaining thereafter will be paid to Lessee, provided Lessee is not then in default under this Master Lease.

- - 7 -

(b) Lessee at its expense will carry public liability, property damage and, if required by Lessor, collision insurance with respect to the Equipment and the use thereof in amounts satisfactory to Lessor. Each such policy of insurance will name Lessor as an additional insured thereon.

(c) All policies relating to the insurance referred to in Subsections 14(a) and (b) above, will be in such form and with such companies as are satisfactory to Lessor and will name Lessor as an additional insured and as an additional loss payee. Lessee will furnish Lessor proof of such insurance. Lessee hereby appoints Lessor as Lessee’s attorney-in-fact to make claim for, adjust, settle, receive payment of and execute and endorse all documents, checks or drafts for loss or damage under any such insurance policy.

(d) If Lessee fails to procure, maintain and pay for such fire and extended coverage insurance or any such public liability, property damage or collision insurance required by Lessor, Lessor will have the right, but not the duty, to obtain such insurance on behalf of and at the expense of Lessee. In the event Lessor does obtain and pay for such insurance, Lessee will reimburse Lessor for the costs thereof no later than the date of the next scheduled rental payment under this Master Lease.

Section 15.    Right of Lessor to Perform.     If the Lessee shall fail to comply with any of its covenants herein contained, the Lessor (or, in the case of an assignment by the Lessor pursuant to Section 9(b) hereof, as assignee), may, but shall not be obligated to, make advances to perform the same and to take all such action as may be necessary to obtain such performance. Any payment so made by any such party and all costs and expenses (including, without limitation, reasonable attorneys’ fees and expenses) incurred in connection therewith shall be immediately due and payable by the Lessee to the party making the same, as additional rent hereunder.

Section 16.    Events of Defaults.     Any of the following events shall constitute an Event of Default:

(a) The nonpayment by Lessee for ten (10) days of any rent or other amount provided for herein after the same is due and payable;

(b) The failure of Lessee to observe, keep or perform any other provisions of this Master Lease required to be observed, kept or performed by Lessee, which failure is not cured ten (10) days after notice thereof by Lessor;

(c) The failure of Lessee to make any payment when due, or to observe or perform any covenant or agreement contained in, or the occurrence of a default or Event of Default under any agreement evidencing, guarantying or securing any other indebtedness or obligation of Lessee to Lessor, The Fifth Third Bank, or any affiliate of Fifth Third Bancorp of any kind or nature;

(d) The making of any representation or warranty by Lessee herein or in any agreement, document or certificate delivered to Lessor in connection herewith, or any financial statement furnished by Lessee to Lessor which, at any time, proves to be incorrect in any material respect;

(e) Lessee or any guarantor makes an assignment for the benefit of creditors or commits any other affirmative act of insolvency or bankruptcy, files a petition in bankruptcy or for arrangement or reorganization or having such a petition filed against it if such petition is not dismissed or withdrawn within thirty (30) days;

- - 8 -

(f) The attachment of a substantial part of the property of Lessee or appointment of a receiver for Lessee or any substantial part of Lessee's property;

(g) Lessee ceases to do business as a going concern, or if there is a change in the ownership of Lessee which changes the identity of any person or persons having, directly or indirectly, more than 10% of either the legal or beneficial ownership of Lessee;

(h) There shall occur, in Lessor’s reasonable opinion, a deterioration in the financial strength of the Lessee or any guarantor or any event occurs which might, in Lessor’s opinion, have an adverse effect on the Equipment or on Lessee’s or guarantor’s financial condition, operations or prospects;

(i) The death or dissolution of Lessee or any guarantor, or any guarantor of Lessee’s obligations hereunder denies his or its obligations to guarantee any obligations then existing or attempts to limit or terminate his or its obligations to guaranty the Lessee’s obligations hereunder.

(j) Lessee also agrees, upon any responsible officer of Lessee becoming aware of any condition which constituted or constitutes an Event of Default under this Master Lease or which, after notice or lapse of time, or both, would constitute such an Event of Default, to promptly furnish to Lessor written notice specifying such condition and the nature and status thereof. For purposes of this Section, a “responsible officer” shall mean, with respect to the subject matter of any covenant, agreement or obligation of Lessee contained in this Master Lease, any corporate officer of Lessee who, in the normal performance of his operational responsibilities, would or should have knowledge of such matter and the requirements of this Master Lease with respect thereto.

Section 17.    Remedies.     Upon the occurrence of any Event of Default, Lessor shall have the right to declare this Master Lease in default without notice to Lessee. Such declaration shall apply to all schedules then in effect hereunder. Upon the making of any such declaration, Lessor shall have the right to exercise any one or more of the following remedies;

(a) To take possession of any and all items of Equipment without further demand or notice wherever they may be located without any court order or process of law (but if Lessor applies for a court order or the issuance of legal process, Lessee waives any prior notice of the making of this application or the issuance of such order of legal process) and Lessee hereby waives any and all damages occasioned by such taking of possession; any such taking of possession shall not constitute termination of this Master Lease as to any or all of Equipment unless Lessor expressly so notified Lessee in writing;

(b) To terminate this Master Lease as to any or all items of Equipment without prejudice to Lessor’s rights in respect to obligations then accrued and remaining unsatisfied;

(c) To recover from Lessee (and Lessee agrees to pay in cash the following):

(i) all amounts then owed by Lessee to Lessor under this Master Lease;

(ii) the unpaid balance of the total rent for the initial term of this Master Lease attributable to said Equipment.

(iii) an amount equal to the greater of the estimated fair market value of the equipment at lease termination or 10% of the actual cost of said Equipment; and

- - 9 -

(iv) an amount equal to 10% of the original cost of the Equipment as liquidated damages and not as a penalty.

(d) To sell any or all of the Equipment in public or private sale, in bulk or in parcels, for cash or on credit without having the Equipment present at the place of sale and to recover from Lessee all costs of taking possession, storing, repairing, and selling the Equipment (and Lessor may use Lessee’s premises for any or all of the foregoing without liability for rent, costs, or damages or otherwise) or to otherwise dispose, hold, use, operate, lease to others or keep idle such Equipment all as Lessor in its sole discretion may determine and to apply the proceeds of any such action:

(i) to all costs, charges and expenses incurred in taking, removing, holding, operating, repairing, and selling, leasing or otherwise disposing of the Equipment; then

(ii) to the amounts set forth in Section (c) (i), (ii), (iii) and (iv) above provided that Lessee shall pay any deficiency due Lessor;

(iii) and any surplus shall be retained by Lessor;

(e) To pursue any other remedy provided for by statute or otherwise available at law or in equity.

Notwithstanding any repossession, or other action which Lessor may take, the Lessee shall be and remain liable for the full performance of all obligations on the part of Lessee to be performed under this Master Lease to the extent not paid or performed by Lessee. All such remedies are cumulative and may be exercised concurrently or separately. In addition to the foregoing, Lessee shall pay Lessor all costs and expenses, including reasonable attorneys’ fees and fees of collection agencies incurred by Lessor in exercising any of its rights and remedies hereunder.

Section 18.    Repayment of Other Amounts.     In addition to any other right granted to Lessor hereunder to terminate this Master Lease, Lessor shall have the right to terminate this Master Lease and collect all amounts due hereunder (including any lump sum or other tax payments provided in Section 3 hereof) if Lessee, whether at the direction or request of the Lessor or any affiliate of Lessor, The Fifth Third Bank, or The Fifth Third Bancorp, repays all or substantially all other amounts and obligations owed by Lessee to the Lessor or any affiliate of the Lessor, The Fifth Third Bank or The Fifth Third Bancorp.

Section 19.    Further Assurances.     Lessee will, upon request of Lessor, at Lessee’s sole cost and expense, do and perform any other act and will execute, acknowledge, deliver, file, record and deposit (and will re-file, re-register, re-record, and re-deposit whenever required) any and all further instruments required by law or Lessor including, without limitation, financing statements or other documents needed for the protection of Lessor’s interest.

Section 20.    Notices.     Any notices and demands required to be given hereunder shall be in writing and may be delivered personally or mailed by certified mail, return receipt requested, to the respective addresses of the parties above set forth, or to such other address as either party may hereinafter indicate by written notice, as provided in this section.

Section 21.    Financial Statements.     Within sixty (60) days after the end of each fiscal quarter and within ninety (90) days after the end of each fiscal year of Lessee during the term of this Master Lease, Lessee shall deliver to Lessor yearly Balance Sheets, Profit and Loss Statements and Source and Application of Funds of Lessee certified by the independent public accountants of Lessee or if unaudited, certified to be true and correct by the chief financial officer of Lessee.

- - 10 -

Section 22.    Filings; Power of Attorney.     Lessee will execute and deliver to Lessor at Lessor’s request all financing statements, continuation statements, and other documents that Lessor may reasonably request, in form satisfactory to Lessor, to perfect and maintain Lessor’s interest in the Equipment and to fully consummate all transactions contemplated under this Master Lease. Lessee hereby irrevocably makes, constitutes and appoints Lessor (or any of Lessor’s officers, employees or agents designated by Lessor) as Lessee’s true and lawful attorney with power to sign the name of Lessee on any such documents. This power, being coupled with an interest, is irrevocable until all obligations of Lessee to Lessor have been fully satisfied.

Section 23.    Late Payments.     Interest at the rate of 1½% per month or the maximum rate permitted by law, whichever is less, shall accrue on the amount of any payment not made when due hereunder from the date thereof until payment is made, and Lessee shall pay such interest to Lessor, on demand.

Section 24.    Entire Agreement.     THE MASTER LEASE AND ASSOCIATED SCHEDULES CONSTITUTES THE ENTIRE AGREEMENT BETWEEN LESSOR AND LESSEE AND EXCLUSIVELY AND COMPLETELY STATES THE RIGHTS OF LESSOR AND LESSEE WITH RESPECT TO THE LEASING OF THE EQUIPMENT AND SUPERSEDES ALL PRIOR AGREEMENTS, ORAL OR WRITTEN, WITH RESPECT THERETO AND ANY COURSE OF DEALING OF THE PARTIES HERETO. The terms and conditions of all Schedules, Addenda, and Exhibits, which refer to this Master Lease, are hereby incorporated herein.

Section 25.    Finance Lease.     The Lessor and Lessee hereby agree that this Master Lease is a “finance lease” as that term is defined in Section 2A-103 of the Uniform Commercial Code as adopted in the state of Lessor's principle place of business and that Lessor shall be treated as a finance lessor entitled to the benefits and releases from liability accorded to a finance lessor under the Uniform Commercial Code.

Section 26.    Miscellaneous.

(a) This Master Lease shall inure to the benefit of and be binding upon the successors and assigns of the respective parties hereto provided, however, that nothing contained in this section shall impair any of the provisions prohibiting assignment without the consent of Lessor;

(b) Any provision of this Master Lease, which is unenforceable in any jurisdiction, shall not render unenforceable such provision in any other jurisdiction and shall not invalidate the remaining provision of this Master Lease.

(c) This Master Lease shall he governed by and construed under the laws of the state of the Lessor’s principal place of business without regard to its conflicts of laws provisions,

(d) All covenants of Lessee herein shall survive the expiration or termination of this Master Lease to the extent required for their full observance and performance.

- - 11 -

(e) No delay or omission to exercise any right, power or remedy accruing to Lessor upon any breach or default of Lessee hereunder shall impair any such right, power or remedy nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein or of any similar breach or default thereafter occurring, nor shall any waiver of any single breach of default be deemed a waiver of any other breach or default theretofore or thereafter occurring. Any waiver, permit, consent or approval of any kind or character on the part of Lessor of any breach or default under this Master Lease must be in writing specifically set forth.

(f) Lessee agree that the state and federal courts in the county of Lessor’s principal place of business, or any other court in which Lessor initiates proceedings have exclusive jurisdiction over all matters arising out of this Master Lease and that service of process in any such proceeding shall be effective if mailed to Lessee at its address described in the first paragraph of this Master Lease. LESSOR AND LESSEE HEREBY WAIVE THE RIGHT TO TRIAL BY JURY OF ANY MATTERS ARISING OUT OF THIS MASTER LEASE OR THE TRANSACTIONS CONTEMPLATED THEREBY.

(g) No variation or modification or amendment of this Master Lease and no waiver of any of its provisions or conditions shall be valid unless in writing.

Lessor and Lessee have each caused this Master Lease to be duly executed as of the date set forth on the first page hereof.

BIOANALYTICAL SYSTEMS, INC.



By:  /s/ Doug Wieten
Title:  CFO Lessee FIFTH THIRD BANK, INDIANA (CENTRAL)



By:  /s/ Richard Moorlach
Title:  V.P. Lessor

- - 12 -

EQUIPMENT SCHEDULE A

EFFECTIVE DATE NOVEMBER 15,2002

This Schedule forming a part of the MASTER LEASE between FIFTH THIRD BANK, INDIANA (CENTRAL), Lessor, and BIOANALYTICAL SYSTEMS, INC., Lessee, dated NOVEMBER 15, 2002 (“Master Lease”),

Description	Location Street, City, State, Zip, County	Serial Number or VIN#	Cost
NEW MASS SPECTROMETER EQUIPMENT MORE FULLY DESCRIBED ON EXHIBIT A	2701 KENT AVENUE WEST LAFAYETTE, IN 47906 TIPPECANOE	EXHIBIT A	$1,089,376.00
See attached Exhibit A for a complete description of equipment		Total Cost:	$1,089,376.00

Section 1.    Equipment.     Pursuant to the terms of the Master Lease, Lessor agrees to acquire and lease to Lessee the equipment listed above ("Equipment").

Section 2.    Billing Name and Address.     BIOANALYTICAL SYSTEMS, INC. 2701 KENT AVENUE, WEST LAFAYETTE, IN 47906-1382

Section 3.    Term in Months:     60                                                        Payment Frequency:    Monthly

Section 4.    Rent:

(a) Rent shall be payable IN ADVANCE                                          First Payment Date:  NOVEMBER 15, 2002

Number of Payments	Rent
60	$17,820.00

(b) Monthly Payments shall include the above Rent plus sales/use tax if applicable.

(c) For this Schedule there shall be added to the first installment of Rent a further sum (Interim Rent) equal to the product resulting from multiplying (i) that part of the cost of the Equipment paid by Lessor prior to the Effective Date of this Schedule by (ii) an amount equal to N/A% per annum in each case computed from the respective dates of any such payment by Lessor to the Effective Date of this Schedule.

Section 5.    Tax-Benefits.     (a)  Depreciable Life:  Lessor has assumed a depreciable life of 5 years in computing the Rent listed above.

Section 6.    End of Term FMV Options.     At the end of the initial Term of this Lease Schedule, so long as no Event of Default has occurred, Lessee shall exercise one of the following options.

- - 13 -

(a) So long as no Event of Default has occurred and this Schedule has not been earlier terminated, the expiration of the initial Term, provided written notice has been given to Lessor at least ninety (90) days but not more than one hundred eighty (180) days prior to the end of Term, purchase all, but not less than all, of the Equipment in this Schedule on an “AS IS, WHERE IS, BASIS” to be paid in cash in an amount equal to the fair market value of the Equipment (plus all applicable taxes), which value shall not exceed 20.0% of Equipment Cost nor be less than 15.0% of Equipment Cost; or

(b) Lessee may return the Equipment in accordance with Section of the Master Lease entitled “Return of Equipment”, and in accordance with High Technology Equipment Lease Rider Return Provisions; or

(c) Lessee may renew the Master Lease at a term and rate to be negotiated by the parties based on the fair market value of the Equipment.

Section 7.    Amendments to Master Lease.     For purposes of this Schedule, the terms of the Master Lease are hereby amended and supplemented as follows: Subsection (c)(ii) of Section 13 of the Master Lease entitled Casualty Loss and Subsection (c)(iii) of Section 17 of the Master Lease entitled Remedies are each deleted in the entirety and each replaced with the following:

"an amount equal to 20.0% of said Equipment cost; and"

EARLY BUYOUT OPTION:    Lessee shall have the option to purchase after the payment of the 36TH rental of this Lease, all but not less than all, of the Equipment for an amount equal to 52.5% of the Equipment Cost, or after the payment of the 48TH rental of this Lease, all but not less than all, of the Equipment for an amount equal to 34.0% of the Equipment Cost, or after the payment of the 54TH rental of this Lease, all but not less than all, of the Equipment for an amount equal to 24.5% of the Equipment Cost; 0 together with all taxes and charges payable in full upon sale. Lessor and Lessee agree that the Buyout Price is a reasonable prediction of the fair Market Value of the Equipment.

BIOANALYTICAL SYSTEMS, INC.



By:  /s/ Doug Wieten
Title:  CFO Lessee FIFTH THIRD BANK, INDIANA (CENTRAL)



By:  /s/ Richard Moorlach
Title:  VP Lessor

- - 14 -

EXHIBIT A

This Exhibit A pertains to an Equipment Schedule A dated NOVEMBER I5, 2002 to a certain Master Lease dated NOVEMBER 15, 2002 between FIFTH THIRD BANK, INDIANA (CENTRAL), Lessor, and BIOANALYTICAL SYSTEMS, INC., Lessee,

Description	Location Street, City, State, Zip & County	Serial Number or VIN#	Cost
Two (2) New API 4000# MS/MS System Package with accessories as described on Applied Biosystems Invoice #91625472 dated 4/30/02	2701 KENT AVENUE WEST LAFAYETTE, IN 47906 TIPPECANOE COUNTY	Produce # WC026992 - package only	$691,971.00
One (1) Refurbished API3000 Mass Spectrometer with accessories as described on Applied Biosystems Invoice #91687662 dated 6/14/02	Same	Product #API3000	$198,352.50
One (1) Refurbished API3000 Mass Spectrometer with accessories as described on Applied Biosystems Invoice #91689457 dated 6/15/02	Same	Product #API3000	$199,052.50
		TOTAL COST	$1,089,376.00

BIOANALYTICAL SYSTEMS, INC.



By:  /s/ Doug Wieten
Title:  CFO Lessee

- - 15 -

HIGH TECHNOLOGY EQUIPMENT LEASE RIDER
RETURN PROVISIONS

This Equipment Lease Rider shall be attached to and the provisions herein shall be incorporated in the terms and provisions of the MASTER EQUIPMENT LEASE between, Bioanalytical Systems, Inc. located at 2701 Kent Avenue, W. Lafayette, IN 47906 (hereinafter referred to as “Lessee”) and, FIFTH THIRD BANK, INDIANA (CENTRAL), a (an) Indiana corporation (“Lessor”), 251 N. Illinois St., Ste 1000, Indianapolis, IN 46204 (hereinafter referred to as “Lessor”), dated 11-15-02, and Equipment Schedule A, Dated 11-15-02 attached thereto, Lessee and Lessor hereby agree as follows:

1. Maintenance.     During the term of the Lease, the Equipment must be operated and maintained in accordance with the manufacturer's specifications and in a manner which would not limit any manufacturer's warranty thereon. All components, fuels and fluids installed on or used in connection with the Equipment must meet the manufacturer's minimum standards.

2. Notification.    Upon expiration or earlier termination of the Lease Term with respect to any Equipment, and provided that Lessee has no validly exercised any Purchase Option with respect to thereto, Lessee shall provide Lessor with at least 365 days prior/advance written notice of its intent to return the Equipment (“Notice of Return”) at lease expiration or any extended term thereof.

3. Inspection. At any time after receipt of the Notice of Return, Lessor shall have the right during normal business hours to inspect the Equipment. Lessee shall cooperate with Lessor in scheduling such inspection and in making the Equipment available for inspection by Lessor or its agents.

4. Location. Return the Equipment to a location and in the manner designated by Lessor, including as reasonably required by Lessor, securing arrangements for the disassembly and packing for shipment by an authorized representative of the manufacturer of the Equipment, shipment with all parts and pieces on a carrier designated or approved by Lessor, and then reassembly by such representative at the return location in the condition the Equipment is required to be maintained by the Lease and in such condition as will make the Equipment immediately available to perform all functions for which the Equipment was originally designed and immediately qualified for the manufacturer’s then-available Service Contract and Warranty. Lessee shall obtain a warranty for the benefit of the subsequent buyer to cover costs associated with any defects, operational problems or problems caused by installation that are encountered during the 90-day period immediately following re-installation.

5. Records. Upon delivery, the Equipment shall be complete with current set of manuals, blue prints, process flow diagrams, Equipment configuration diagrams, all maintenance records and other data reasonably requested by Lessor concerning the configuration and operation of the Equipment.

6. Transportation. The Equipment will be transported in accordance with Section 4 hereof and the manufacturer's recommendations and applicable governing laws, rules, and regulations.

- - 16 -

7. Packing. The Equipment shall be deinstalled, packed, and reinstalled by or under the supervision of the manufacturer or such other person(s) designated by Lessor, all in accordance with the manufacturer's recommendations.

8. Report. At least sixty (60) days prior to the scheduled date of return and redelivery, Lessee shall, at its own cost and expense, provide Lessor with the report of a certified dealer or manufacturer of the Equipment, or such other qualified party reasonably acceptable to Lessor, stating that such person has performed inspection and testing of the Equipment and that such Equipment is in the condition required by Section 9 of this rider.

9. Software/Hardware. Acknowledge that the Equipment may include certain operating, application and/or other software (“Software”) in which Lessor and Lessee have no ownership or other proprietary rights. Where required by the Software owner or manufacturer, Lessee shall enter into a license or other Agreement for the use of the Software. Any Software Agreement shall be separate and distinct from the Lease, and Lessor shall not have any obligations thereunder unless otherwise agreed. Lessee shall be responsible for the payment of, and shall indemnify Lessor against, any Software license or transfer fees and any certification or similar fees or charges imposed by the Supplier of the Equipment, Software or any Third Party upon Lessor and Lessor’s subsequent end-user of any item of Equipment following the return of any such item to Lessor.

At the time of return hereunder, all Equipment shall include all: (i) Software, upgrades and related documentation, which shall be the then current version available from the manufacturer or supplier; (ii) cards; (iii) holograms; (iv) codes; (v) licenses; (vi) memory; (vii) hard drives; (viii) connecting cables; (ix) mice; (x) keyboards and (xi) any other hardware necessary for proper operation of the equipment.

10. Miscellaneous. Cooperate with Lessor in attempting to remarket the equipment, including display and demonstration of the Equipment to prospective purchasers or lessees, allowing the Lessor to conduct any private or public sale, with reasonable notice, of the Equipment on Lessee’s premises. Be fully responsible for any and all costs associated with the return, demonstration and remarketing of the Equipment to a location designated by Lessor anywhere with North America.

11. Condition of Equipment. Upon delivery of each item of Equipment, the Equipment shall be:

(a) cleaned and/or steam-cleaned as applicable and treated with respect to rust, corrosion and appearance in accordance with manufacturer’s recommendations and consistent with the best practices of dealers in used equipment similar to the Equipment; and shall be free of all advertising and insignia placed thereon by Lessee;

- - 17 -

(b) mechanically and structurally sound, capable of performing the functions for which it was originally designed and able to operate, lift, transport, or otherwise move in all directions as designed within original specifications and tolerances with no loss in effectiveness or operability.

(c) accompanied by a detailed inventory of the Equipment (including the model and serial number of each major component thereof), including, without limitation, all internal circuit boards, and original and updated software features;

LESSEE:    BIOANALYTICAL SYSTEMS, INC.



By:  /s/ Doug Wieten
Its:  C.F.O.

LESSOR:    FIFTH THIRD BANK, INDIANA (CENTRAL)



By:  /s/ Richard Moorlach
Its:  V.P.

- - 18 -

EX-13

Exhibit 13

vir-tu•o-so: a brilliant, skillful performer

BASi: a company of virtuosos

TABLE OF CONTENTS

Financial Data	1
President's Podium	2
Prelude	3
Quarterly Financial Data	6
Analysis of Financial Condition, Results of Operations	7
Balance Sheets	14
Statements of Operations	15
Statements of Shareholders' Equity	16
Statements of Cash Flows	17
Notes to Financial Statements	18
Report of Independent Auditors	28
Corporation Information	30

"Music is the universal language of mankind."
- Henry Wadsworth Longfellow (1807-1882)

photo on preceding page:  Long Center for The Performing Arts, Lafayette, Indiana

SELECTED CONSOLIDATED FINANCIAL DATA

                                                       Year Ended September 30,
                                      --------------------------------------------------------
                                        2002        2001        2000         1999        1998
                                      --------------------------------------------------------
                                               (in thousands, except per share data)

STATEMENT OF OPERATIONS DATA:
  Service revenue                     $ 16,140    $ 15,202    $ 10,999    $  9,993    $  7,609
  Product revenue                       10,373      10,073       8,224       9,858      10,616
                                      --------    --------    --------    --------    --------
     Total revenue                      26,513      25,275      19,223      19,851      18,225
  Cost of service revenue               11,556       9,660       9,245       6,499       4,598
  Cost of product revenue                4,393       3,495       2,974       3,943       3,911
                                      --------    --------    --------    --------    --------
     Total cost of revenue              15,949      13,155      12,219      10,442       8,509
                                      --------    --------    --------    --------    --------
  Gross profit                          10,564      12,120       7,004       9,409       9,716
                                      --------    --------    --------    --------    --------
  Operating expenses:
  Selling                                2,940       3,204       3,400       3,943       4,524
  Research and development               1,521       1,611       1,806       1,955       2,165
  General and administrative             4,476       3,815       2,990       2,550       2,336
                                      --------    --------    --------    --------    --------
     Total operating expenses            8,937       8,630       8,196       8,448       9,025
                                      --------    --------    --------    --------    --------
  Operating income (loss)                1,627       3,490      (1,192)        961         691
  Other income (expense), net              (80)       (383)       (621)       (114)        (25)
                                      --------    --------    --------    --------    --------
  Income (loss) before income taxes      1,547       3,107      (1,813)        847         666
  Income taxes (benefit)                   481       1,340        (431)        277         254
                                      --------    --------    --------    --------    --------
  Net income (loss)                   $  1,066    $  1,767    $ (1,382)   $    570    $    412
                                      ========    ========    ========    ========    ========
   Net income (loss) per share
     Basic                            $    .23    $    .39    $   (.30)   $    .13    $    .10
     Diluted                          $    .23    $    .38    $   (.30)   $    .12    $    .09
  Weighted average common
  Shares outstanding
     Basic                               4,576       4,565       4,550       4,506       4,117
     Diluted                             4,625       4,600       4,550       4,676       4,403


                                                           September 30,
                                      --------------------------------------------------------
                                        2002        2001        2000         1999        1998
                                      --------------------------------------------------------
                                                          (in thousands)

BALANCE SHEET DATA:
  Working capital (deficit)           $   (911)   $  2,535    $    931    $  4,275    $  3,286
  Property and equipment, net           22,824      18,922      18,913      17,355      14,551
  Total assets                          33,463      27,977      26,897      26,321      22,280
  Long-term debt, less
     Current portion                     3,247       3,144       3,638       4,112       1,124
  Convertible preferred shares             ---         ---         ---         ---         ---
  Shareholders' equity                  18,898      17,830      16,062      17,421      16,844

The above is selected audited consolidated financial data of the Company for the five years ended September 30, 2002. The data should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” found on page ten and the consolidated financial statements of Bioanalytical Systems, Inc. and notes contained in this report.

– 1 –

My band is my instrument." - Duke Ellington (1899-1974)

FROM THE PRESIDENT’S PODIUM

This is the spot in the annual report where the conductor is asked to toot his horn. However, I believe the preponderance of evidence is that CEOs are overrated. Great companies result primarily from great products and services coming together with great customers at the right time. This takes people who are engaged, and who anticipate change and make it happen. They then start over because complacency is the worst enemy of a technology business in a free market. We can never get comfortable and put down our spyglass to the future.

I like the current environment. When there is discomfort, there is opportunity. We are expanding aggressively but with focus and cost controls to allow for some setbacks. FY’02 brought surprises from terrorist threats, creative accounting and disappointments in the pharmaceutical/biotech sectors. These environmental factors required us to make adjustments along the way. We missed our sales and earnings targets, but we stay the course. The allegro movement is yet to come.

Developing drugs that are safe and effective is an arduous process, made more complicated by the reality that nothing is entirely safe or effective and we must make some choices and manage risk. It is clear that many disagree about these choices and their relationships to healthcare costs. Nevertheless, we need to charge ahead and do our best, because doing nothing is the worst choice. While many life science companies have been adversely affected in the recent slow-down of equity markets, I believe the basic concept remains the same. Greater understanding of the causes of disease will result from the new tools to study genetics and proteins, and this greater understanding will result in more potent, safer and more effective pharmaceuticals. Coupled to this trend are the increasing collaborations between companies of all sizes, as knowledge surpasses things in the definition of value. Outsourcing and licensing (both inward and outward) replace vertical integration. While it has been an unsettling time for many, these fundamentals seem irreversible over the next five years and beyond.

Our services and products are designed to participate in the life science revolution and take it across the bridge from theory to clinical practice while maintaining the highest level of regulatory compliance. What we do at BASi is not highly speculative. It must be done in order to move a new drug substance toward approval as weak candidates are discarded. We are fortunate to be paid for such a significant cause that impacts millions of lives.

As I have been reporting to shareholders all year, our repertoire of services has been prudently expanded both by internal investments and by acquisitions. We are ready to be a much larger company in the years ahead. As you will note from the embellishment of our logo, we transition from BAS to the new BASi, denoting our growth and evolution into a mid-size provider of tools and services to the pharmaceutical industry.

Peter T Kissinger

President, Chairman and CEO

Dr. Peter T. Kissinger, trumpeter, scientist and CEO

Our Mission
We will advance health care through innovative science. Alliances, research
services and unique products define our role in the worldwide effort to
understand disease and develop therapeutic solutions.

– 2 –

"To play great music, you must keep your eyes on a distant star."
- - Yehudi Menuhin (1916-1999)

PRELUDE

The Garage Band

In musical terms, BASi started out as a garage band, has developed into a harmonious chamber ensemble and is now well on its way to becoming a full-fledged symphony orchestra. The company began with Pete Kissinger’s winning high school science project, an analytical tool to monitor trace chemicals. That evolved into a career and a corporation and earned Pete a worldwide reputation as a virtuoso scientist. As a young professor, Pete combined a few novel discoveries into an invention that revolutionized neuroscience, the electrochemical detector, which enabled researchers to monitor chemicals in the brain at barely discernable levels. It is still widely used today to monitor patients for adrenal cancers and hypertension and to aid researchers in understanding the underlying causes of central nervous system disorders.

Originally working in his garage, Pete and a very small staff designed and built a striking array of chemical separation tools, electrochemical analyzers, membrane sampling probes and animal research tools. From that small beginning, BASi grew into a respected manufacturer of equipment used largely for research and development in the pharmaceutical industry.

In the mid-80s, we coined the trade name BAS Analytics to denote a small group within our instrument applications department who provided fee-based analytical services. Later, in 1988, several major pharmaceutical companies encouraged BASi to create a contract research business, building on our instrument manufacturing legacy. That business has grown rapidly, fueled by strategic acquisitions, until, in 2002, it represents 60 percent of our total business. BASi focuses on pharmaceutical development. We carry drugs from discovery, when a new molecule is first thought to have potential as a drug, through clinical trials, when a new drug is introduced to humans and where safety and effectiveness are established. We have targeted early, technically challenging steps in the drug development process and are paid for our work whether a drug ultimately reaches the market or not.

In 2000, BASi introduced the Culex® robotic containment system for animal models of disease that streamlines some outmoded early screening systems and methods. The process of developing a new drug is long and can easily cost more than $500 million. The pharmaceutical industry is under pressure to deliver more new drugs faster and at lower cost while meeting stringent FDA requirements. Culex simplifies and accelerates the first-in-life step of the process and reduces cost significantly, operating 24/7 with minimal human input. It improves the quality and efficiency of early animal research and reduces use of, and stress to, laboratory animals. It helps a pharmaceutical company learn much earlier in the development process whether a drug will ever be viable in the marketplace, potentially saving tens of millions of research dollars. The BASi approach is to obtain more information in parallel rather than in a series of studies that are often poorly coordinated.

Culex® is a registered trademark of Bioanalytical Systems, Inc.

The Chamber Ensemble

BASi has a staff of dedicated virtuoso scientists, engineers and other professionals, all working in harmony, and we have strategic alliances with other life science companies and universities in the U. S. and Europe. We are recognized worldwide for our contributions to drug development. BASi has provided technologies and services to most of the top 25 pharmaceutical companies who relied upon us in their development of drugs. BASi has contributed to the realization of treatments for psychiatric and neurological disorders such as depression, schizophrenia, Parkinson’s and Alzheimer’s diseases, as well as for diabetes, HIV and infectious diseases. These drugs offer relief to more than 40 million people in the U.S. alone who are afflicted with these conditions.

BASi is unique in that we are both a manufacturer and a contract research organization (“CRO”). This duet makes us stronger in both areas. We supply many of the core analytical instruments used in contract research. Much of what we learn in our contract research is applied to develop and improve the products we manufacture, and vice versa. The Culex is the most recent example of this synergy. Sales of Culex disposables have grown by over 50 percent, and new variations of the Culex have just been introduced to the market.

– 3 –

"If only the whole world could feel the power of harmony. "
- - Wolfgang Amadeus Mozart (1756-1791)

The Symphony Orchestra

Our business model is simple. We believe the new discovery tools of the last decade, combined with patent challenges for many leading drugs, are the prelude to many new opportunities and a robust future for BASi. Our unique role is our focus on developing innovative services and products that increase efficiency and reduce costs associated with taking new drugs to market. We have a strong acquisition program to supplement sustained growth and will continue our associations with other life sciences companies through the Pharmaceutical Industry Contract Research Alliance and new strategic alliances in the U.S. and Europe. In 2002 we expanded capacity in two of our locations, and another purpose-built expansion is under way in West Lafayette. In 2003 BASi will offer greater capacity and a broader range of services and products, quickly moving closer and closer toward establishing the company as a mid-size provider of tools and services for drug development.

A Duet Pushing the Limits of Science

Two of BASi’s talented scientists conducted a study in 2002 that absolutely pushed the limits of science and analytical techniques, using the newest and most sensitive equipment currently available. Senior Scientist Dr. Mark Gehrke developed the method, and Project Director Brian Engel managed a study that analyzed nearly 10,000 melatonin specimens from more than 200 subjects over a period of three months. The study required measurements as small as 0.5 parts per trillion. Such a concentration is hard to imagine, but putting it in another perspective, that is the equivalent of locating 1 apple out of 4 billion barrels, or moving 1 inch in a journey of 32 million miles!

This study required tremendous imagination and knowledge in its development, and hard work, skill and very careful management in its execution. Such work builds on our past experience and creates greater expectations, requirements and challenges for the future. BASi is indeed among those leading the way in moving the pharmaceutical industry ahead further and faster.

Mark Gehrke and Brian Engel are always striving
to get the greatest results from their instruments.

The Culex Crescendo

The Culex® Automated Blood Sampler was developed using input from BASi customers and from our own in-house research teams. Through ongoing research, we continue to broaden Culex capabilities, using it in combination with other equipment, such as the BASi Vetronics ECG monitor, and by exploring previously untried techniques which take us to higher and higher notes. Every day we are learning ways to get more and better data from fewer animals. Our research scientists are working with our design engineers to translate what we learn into refining and improving the product. Along with growing sales of Culex® units and support equipment and supplies, there is a dramatic increase in the number of clients who have asked BASi to conduct their Culex-related pharmacokinetic research projects for them in our laboratories. The demand for such work has pushed us well beyond current capacity, and so in 2002 we began building new laboratories at our West Lafayette Corporate Center. The facility is dedicated to Culex contract work and internal exploratory research. This is another example of the synergy between instrument and contract research business groups, complementing one another for a stronger BASi.

Clarinetist, horsewoman, lover of animals and outdoor activities, and in vivo research technician, Rita Hilt is a woman of varied talents and interests. At BASi, she is one of our Culex virtuosos, conducting and managing research projects, installing new units in customers’ labs and training new users.

An Upbeat Tempo in Evansville

Currently there are no completely satisfactory alternatives to animal models that simulate the overwhelming complexity of living systems in the development of new drugs. Experts say it will be many years before new drugs can be introduced to humans without first monitoring their effectiveness and safety in animals. BASi excels in animal science and analytical science, and our focus is always on reducing the number of animals used, increasing the quality of the data obtained and using alternative methods whenever possible. At the same time, humane treatment, health and welfare are primary concerns of all BASi animal care staff. A tremendous number of new potential drugs, plus a growing trend among pharmaceutical companies to outsource research work, and increasingly stringent regulatory requirements have combined to push BASi’s Evansville laboratories to their limits, resulting in a construction program in 2002 that doubled capacity to meet growing demand.

– 4 –

"...hot or cool man, jazz is jazz."
- Louis Armstrong (1900-1971)

BASi is committed to both human and animal health. Our Vetronics Division develops and sells instruments used in veterinary clinics and pharmaceutical research facilities to ensure the health of companion animals and to monitor the safety and effectiveness of new drugs for both animals and humans. The Vetronics ventilator, for instance, is used in surgery for a wide variety of animals, including exotics such as sea turtles and boa constrictors.

Guitarist, marathon runner, attending veterinarian and study director at BASi-Evansville, Dr. Robert Rose worked 16 years in clinical veterinary practice where he gained a strong understanding of peoples’ commitment to, and concern about, animals.

Reaching for the High Notes in Pharmaceutical Research

Contract service providers such as BASi who support the pharmaceutical industry face enormous challenges in satisfying clients while meeting all relevant regulatory requirements and accreditation standards. Analytical science needed to create and develop new drugs is evolving quickly, becoming ever more complex. BASi and the service providers like us have the foresight, knowledge and ability to lead the way.

Housed in what was once a U.S. World War II military hospital in Warwickshire, England is BASi’s new state-of-the-art biomarker laboratory, developed in 2002 under the direction of John Allinson. Biomarkers are naturally-occurring substances in humans that signal the body’s response to a drug, or drugs. The number of possible biomarkers in our bodies is virtually limitless. Measuring biomarkers is critical to pharmaceutical research and development because biomarkers indicate whether disease is present, how effective a drug is in controlling a disease and whether a drug has any toxic effects on the body. One example of a biomarker is glucose, which shows the effects of insulin.

Specific biomarkers are related to specific diseases. One biomarker in particular may be a better indicator than other biomarkers for each disease. Glucose is the preferred biomarker for diabetes, and monitoring glucose communicates how well that disease is being controlled. The BASi biomarker laboratory identifies the one biomarker that best indicates success of a specific drug. That means researchers will quickly learn how effective the drug is in controlling the targeted disease. Some other biomarkers can also indicate any toxic effects at a very early stage. This information gives the pharmaceutical company the opportunity to make a decision earlier in the development process about whether a drug will become viable in the market, potentially saving tens of millions of research dollars. Unlike glucose, most biomarkers are complex proteins determined by sophisticated immunoassay methods. Thus, BASi adds a new instrument to our ensemble.

A maestro of more than one area, John Allinson used his 30 years of experience in analytical and clinical pathology to get the BASi biomarkers lab up and running. He has used those same skills to develop the first genetic screening service for German Shepherds which he runs from his home. John also judges dog shows and appears on British “telly” as a pet rescue consultant.

– 5 –

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

FOR THE QUARTER ENDED IN FISCAL 2002
- ------------------------------------
                                             December 31          March 31           June 30          September 30
                                             -----------          --------           -------          ------------
Total revenue                                 $ 6,023             $ 7,385           $ 6,576             $ 6,529
Gross profit                                    2,556               3,147             2,492               2,369
Net income                                        247                 519               281                  19
Basic net income per common share                 .05                 .11               .06                 0.0
outstanding(1)
Diluted net income per common share               .05                 .11               .06                 0.0
outstanding(1)


FOR THE QUARTER ENDED IN FISCAL 2001
- ------------------------------------
                                             December 31          March 31           June 30          September 30
                                             -----------          --------           -------          ------------
Total revenue                                 $ 5,426             $ 6,842           $ 6,400             $ 6,607
Gross profit                                    2,422               3,472             3,100               3,126
Net income                                        195                 582               515                 475
Basic net income per common share                 .04                 .13               .11                 .10
outstanding(1)
Diluted net income per common share               .04                 .13               .11                 .10
outstanding(1)

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

"People who make music together cannot be enemies, at least not while the music lasts."
- Paul Hindemith (1895-1963)

– 6 –

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with Selected Consolidated Financial Data and BASi’s Consolidated Financial Statements and notes thereto included 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 BASi’s Form 10-K filed with the Securities Exchange Commission. BASi’s actual results could differ materially from those discussed herein.

Overview

BASi provides a broad range of value-added services and products focused on chemical analysis to the worldwide pharmaceutical, medical device and biotechnology industries. BASi’s customer-focused approach and its high-quality services and products enable it to serve as a value-added partner in solving complex scientific problems by providing cost-effective results to its customers on an accelerated basis. Founded in 1974 in Lansing, Michigan and relocated to West Lafayette, Indiana in 1975, BASi has experienced growth primarily through internal expansion supplemented by strategic acquisitions. As part of its internal growth strategy, BASi has developed technical specialties in such areas as chromatography, electrochemistry, in vivo sampling and mass spectrometry. BASi’s growth has strategically positioned it to take advantage of globalization in the marketplace and to provide new services and areas of technical expertise to its customers.

Throughout its history, BASi has taken steps to position itself as a global leader in the analytical chemistry field. Development of BASi’s infrastructure began in 1975 when it established relationships with several customers and multiple international distributors. In 1981, BASi increased its sphere of influence to include Japan with the creation of BAS Japan, an independent distributor. In 1988, BASi enhanced its computer software expertise by acquiring Interactive Microware, Inc. in State College, Pennsylvania. In 1988, BASi began offering contract services to customers that lacked the time or expertise to perform certain analyses using BASi’s analytical products. In 1995, BASi acquired a distributor, BAS Instruments Ltd., to further solidify its presence in the United Kingdom. In 1998, BASi acquired a manufacturer of veterinary monitoring and diagnostic equipment, BAS Vetronics, to provide additional preclinical support. In 1998, BASi acquired a contract services firm, BAS Analytics Ltd., to offer local service in the United Kingdom. In 2000, BASi also acquired a contract services firm, BAS Evansville, to offer preclinical services. In December 2002, BASi acquired a contract services firm, BASi Northwest Laboratories. In June 2002, BASi entered into a merger agreement with PharmaKinetics Laboratories, Inc.

Revenues are derived principally from (i) analytical services provided to customers, and (ii) the sale of BASi’s analytical instruments and other products. Both methods of generating revenue utilize BASi’s ability to identify, isolate and resolve client problems relating to the separation and quantification of individual substances in complex mixtures. BASi supports the pharmaceutical industry by focusing on analytical chemistry for biomedical research, diagnostics, electrochemistry and separations science. BASi’s analytical products are sold primarily to pharmaceutical firms and research organizations. Principal customers include scientists engaged in drug metabolism studies, as well as those engaged in basic neuroscience research. BASi was the first to commercialize the liquid chromatograph and electrochemistry technology which is now the worldwide standard for the determination of neurotransmitter substances. Research products include in vivo sampling devices, reagent chemicals, electrochemical apparatus and sensors.

BASi’s management believes that fluctuations in BASi’s quarterly results are caused by a number of factors, including BASi’s success in attracting new business, the size and duration of service contracts, the timing of its clients’ decisions to enter into new contracts, the cancellation or delays of ongoing contracts, the timing of acquisitions and other factors, many of which are beyond BASi’s control. In fiscal 2002, 24% of BASi’s total revenue was derived from customers located outside the United States. These markets tend to be much more volatile than the United States market. Significant governmental, regulatory, political, economic and cultural issues or changes could adversely affect the growth or profitability of BASi's business activities in any such market.

– 7 –

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 BASi, 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 BASi. BASi has identified the following areas as critical accounting policies.

Revenue Recognition

The majority of BASi’s service contracts involve 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. BASi’s other service contracts generally consist of pre-clinical trial studies for pharmaceutical companies. Service revenue is recognized based on the ratio of 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 BASi 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.

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.

BASi product revenue is derived primarily from sales of equipment utilized for analytical testing. Revenue from equipment not requiring installation, testing and training, is recognized upon shipment to customers. One BASi 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

The carrying value of long-lived assets, including goodwill, is periodically reviewed by management. If management’s review indicates that the carrying value may be impaired, then the impairment amount will be written off. Impairment accounting is governed by Statement of Financial Accounting Standards (“SFAS”) No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed of.” Significant subjective estimates are required to calculate expected future cash flows and the fair market values to which asset net book values are compared. SFAS No. 121 requires that whenever events or circumstances indicate that BASi may not be able to recover the net book value of its long-lived assets through future cash flows, an assessment must be performed of expected future cash flows, and undiscounted estimated future cash flows must be compared to the net book value of these assets to determine if impairment is indicated. Application of SFAS No. 121 requires the use of significant judgment and preparation of numerous significant estimates. Although BASi believes that its estimates of cash flows in the application of SFAS No. 121 were reasonable and were based upon all available information, including extensive historical cash flow data about the prior use of its assets, such estimates nevertheless required substantial judgments and were based upon material assumptions about future events.

In June 2001, the FASB issued SFAS No. 141, “Business Combinations” and No. 142, “Goodwill and Other Intangible Assets.” Under the new rules, goodwill and indefinite-lived intangible assets are no longer amortized, but are reviewed annually for impairment. Separable intangible assets that are not deemed to have an indefinite life will continue to be amortized over their useful lives. BASi will apply the new accounting rules beginning October 1, 2002, and will perform the first of the required impairment tests of goodwill and indefinite-lived intangible assets as of October 1, 2002, and has not yet determined what the effect of these tests will be on the earnings and financial position of BASi.

– 8 –

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 in effect at the balance sheet date.

BASi 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 carryforwards and the expiration dates of tax loss carryforwards. 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.

Undistributed earnings in BASi’s foreign subsidiaries are considered by management to be permanently reinvested in such subsidiaries. Consequently, United States deferred tax liabilities on such earnings have not been recorded. Management believes that such United States taxes would be largely offset by foreign net operating loss carryforwards in applicable foreign jurisdictions.

Results of Operations

The following table sets forth, for the periods indicated, certain statement of operations data as a percentage of total revenue.

                  Percentage of Revenue Year Ended September 30,
                  ----------------------------------------------

                                        2002             2001              2000
                                       -----------------------------------------
Service revenue                         60.9%            60.1%             57.2%
Product revenue                         39.1             39.9              42.8
                                       -----------------------------------------
     Total revenue                     100.0            100.0             100.0
Cost of service revenue                 43.6             38.2              48.1
Cost of product revenue                 16.6             13.8              15.5
                                       -----------------------------------------
     Total cost of revenue              60.2             52.0              63.6
                                       -----------------------------------------
Gross profit                            39.8             48.0              36.4
Operating expenses:
Selling                                 11.1             12.7              17.7
Research and development                 5.7              6.4               9.4
General and administrative              16.9             15.1              15.6
                                       -----------------------------------------
     Total operating expenses           33.7             34.2              42.7
Operating income (loss)                  6.1             13.8              (6.3)
Other income (expense), net             (0.3)            (1.5)             (3.2)
                                       -----------------------------------------
Income (loss) before
     Income taxes                        5.8             12.3              (9.5)
Income taxes (benefit)                   1.8              5.3              (2.2)
                                       -----------------------------------------
Net income (loss)                        4.0%             7.0%             (7.3)%
                                       =========================================

– 9 –

Year Ended September 30, 2002, Compared with Year Ended September 30, 2001

Total revenue for the year ended September 30, 2002 increased 4.9% to $26.5 million from $25.3 million for the year ended September 30, 2001. Service revenue increased to $16.1 million for the year ended September 30, 2002 from $15.2 million for the year ended September 30, 2001, primarily as a result of additional bioanalytical service contracts. Product revenue increased to $10.4 million for the year ended September 30, 2002 from $10.1 million for the year ended September 30, 2001, primarily due to European product sales of the Culex® Automated Blood Sampling System.

Costs of revenue increased 21.3% to $15.9 million for the year ended September 30, 2002 from $13.2 million for the year ended September 30, 2001. This increase of $2.7 million was largely due to an increase in both staffing costs and the number of employees on staff in the services segment. Costs of revenue for BASi’s services segment increased to 71.6% as a percentage of services revenue for the year ended September 30, 2002 from 63.5% of services revenue for the year ended September 30, 2001, due, again, to an increase in both staffing costs and the number of employees on staff in the segment. Costs of revenue for BASi’s products segment increased to 42.3% as a percentage of product revenue for the year ended September 30, 2002 from 34.7% of product revenue for the year ended September 30, 2001, due primarily to a change in product mix.

Selling expenses for the year ended September 30, 2002 decreased by 8.2% to $2.9 million from $3.2 million during the year ended September 30, 2001, due to decreased foreign commission expense. Research and development expenses, which are net of grant reimbursements, for the year ended September 30, 2002 decreased 5.6% to $1.5 million from $1.6 million for the year ended September 30, 2001. The decrease of $90,000 is primarily due to an increase in grant reimbursements of $540,000 from $240,000 for the years ended September 30, 2002 and 2001, respectively. General and administrative expenses, for the year ended September 30, 2002 increased 17.3% to $4.5 million from $3.8 million for the year ended September 30, 2001, primarily as a result of an increase on both staffing costs and the number of employees on staff.

Other income (expense), net, was $(80,000) in the year ended September 30, 2002 as compared to $(384,000) in the year ended September 30, 2001, as a result of the decrease in interest expense due primarily to a decrease in interest rates.

BASi’s effective tax rate for 2002 was 30.9%, compared to 43.1% for fiscal 2001. This decrease was primarily due to the utilization of foreign net operating losses.

Year Ended September 30, 2001, Compared with Year Ended September 30, 2000

Total revenue for the year ended September 30, 2001 increased 31.5% to $25.3 million from $19.2 million for the year ended September 30, 2000. Service revenue increased to $15.2 million for the year ended September 30, 2001 from $11.0 million for the year ended September 30, 2000, primarily due to an increased number of bioanalytical, preclinical and pharmaceutical analysis contract services. Product revenue increased to $10.1 million for the year ended September 30, 2001 from $8.2 million for the year ended September 30, 2000, primarily due to the Culex® Automated Blood Sampling System, epsilon™ and related products.

Costs of revenue increased 7.7% to $13.2 million for the year ended September 30, 2001 from $12.2 million for the year ended September 30, 2000. This increase of $1.0 million was due to the increase in corresponding revenue. Costs of revenue for BASi’s services decreased to 63.5% as a percentage of services revenue for the year ended September 30, 2001 from 84.1% of services revenue for the year ended September 30, 2000, due to additional bioanalytical, preclinical and pharmaceutical analysis service revenue without a comparable increase in corresponding labor costs. Costs of revenue for BASi’s products decreased to 34.7% as a percentage of product revenue for the year ended September 30, 2001 from 36.2% of product revenue for the year ended September 30, 2000, primarily due to a change in product mix.

Selling expenses for the year ended September 30, 2001 decreased 5.8% to $3.2 million from $3.4 million during the year ended September 30, 2000, due to decreased foreign commission expense. Research and development expenses, which are net of grant reimbursements, for the year ended September 30, 2001 decreased 10.8% to $1.6 million from $1.8 million for the year ended September 30, 2000, due to the increase in grant reimbursements of $240,000 from $125,000 for the years ended September 30, 2001 and 2000, respectively. General and administrative expenses for the year ended September 30, 2001 increased 27.6% to $3.8 million from $3.0 million for the year ended September 30, 2000, primarily due to organizational restructuring of our preclinical operation, increased health care costs and the increase in utilities.

Other income (expense), net, was $(384,000) in the year ended September 30, 2001 as compared to $(621,000) in the year ended September 30, 2000, as a result of the decrease in interest expense due to decreased use of the line of credit.

BASi’s effective tax rate for 2001 was 43.1%, compared to 23.8% for fiscal 2000. This increase was primarily due to the increase in earnings and the impact of nondeductible foreign losses incurred in fiscal 2001.

– 10 –

Liquidity and Capital Resources

Comparative Cash Flow Analysis

Since its inception, BASi’s principal sources of cash have been cash flow generated from operations and funds received from bank borrowings and other financings. At September 30, 2002, BASi had cash and cash equivalents of $826,000, compared to cash and cash equivalents of $374,000 at September 30, 2001. The increase in cash resulted primarily from increased borrowings.

BASi’s net cash provided by operating activities was $2,032,000 for the year ended September 30, 2002. Cash provided by operations during the year ended September 30, 2002 consisted of net income of $1,066,000, non-cash charges of $1,987,000 and a net decrease of $1,021,000 in operating assets and liabilities. The most significant item affecting the change in operating assets and liabilities was an increase in prepaid expenses and other assets of $438,000 at September 30, 2002 from $232,000 at September 30, 2001.

Cash used by investing activities increased to $5,262,000 for the year ended September 30, 2002 from $1,628,000 for the year ended September 30, 2001, primarily due to capital expenditures for construction projects in Evansville and West Lafayette, Indiana. Cash provided by financing activities for the year ended September 30, 2002 was $3,697,000, due to additional borrowings on the line of credit and increased long-term debt.

BASi’s net cash provided by operating activities was $4,028,000 for the year ended September 30, 2001. Cash provided by operations during the year ended September 30, 2001 consisted of net income of $1,767,000, non-cash charges of $2,143,000, and a net decrease of $118,000 in operating assets and liabilities. The most significant item affecting the change in operating assets and liabilities was an increase in accounts payable of $1,220,000 at September 30, 2001.

Cash used by investing activities decreased to $1.6 million for the year ended September 30, 2001 from $2.0 million for the year ended September 30, 2000, primarily due to payments relating to the acquisition of T.P.S., Inc. in the year ended September 30, 2000. Cash used by financing activities for the year ended September 30, 2001 was $2.5 million, due to payments on the line of credit, partially off-set by increased long-term debt.

Capital Resources

Total expenditures by BASi for property and equipment were $4.7 million, $1.7 million and $1.6 million in fiscal 2002, 2001 and 2000, respectively. Expenditures made in connection with the expansion of BASi’s operating facilities in West Lafayette and Evansville, Indiana and in the United Kingdom and purchases of laboratory equipment account for the largest portions of these expenditures in each year. The capital investments relate to the purchase of additional laboratory equipment corresponding to anticipated increases in research services to be provided by BASi. BASi expects to make other investments to expand its operations through internal growth and strategic acquisitions, alliances and joint ventures.

During 2001, BASi commenced construction to expand facilities at its preclinical site in Evansville, Indiana. Construction of these preclinical facilities is expected to be completed in February 2003 at a total cost of $3.5 million. During 2002, BASi began expanding facilities at its site in West Lafayette, Indiana. Construction on the West Lafayette facilities is expected to have a total cost of $4.0 million. BASi obtained financing for these construction projects with a bank (discussed below).

On December 13, 2002, BASi acquired LC Resources, Inc. (“LCR”), a privately-held company based in Walnut Creek, California. BASi purchased all of the outstanding shares of LCR for $2.5 million, subject to adjustment for certain changes in net tangible assets of LCR. BASi paid cash of $125,000 at closing with the remainder of the purchase price to be paid through promissory notes, bearing interest at 10% per annum, and maturing on October 1, 2007. The holders of the notes will have the option to require BASi to repay up to 20% of the outstanding principal balance of the notes on each October 1 prior to maturity, commencing October 1, 2003. These notes are subordinated to senior bank debt (discussed below).

On June 20, 2002, BASi and PharmaKinetics Laboratories, Inc. (“PKLB”) entered into a merger agreement that will result in PKLB becoming a wholly-owned subsidiary of BASi. In connection with the merger, BASi will issue 6% Subordinated Convertible Notes in an aggregate principal amount of approximately $4.0 million to the holders of PKLB Class A Preferred shares. No principal payments will be due on these notes until 2008. No interest will be paid on the notes for one year after the date of issuance. The notes are convertible into BASi common shares at the option of the holder at any time after the first anniversary of the date of issuance at a price of $16.00 per share.

– 11 –

Between June and September 2002, BASi loaned PKLB a total of $408,000 for working capital purposes. On November 14, 2002, PKLB executed a Secured Convertible Revolving Note in the principal amount of up to $925,000 payable to BASi to replace the existing notes payable to BASi and to allow PKLB to borrow additional amounts to cover short-term operating requirements. The note issued to BASi carries an annual interest rate of 8%, and all principal and accrued interest is due and payable on May 1, 2003. The outstanding principal amount of the note to BASi is convertible by BASi at any time into PKLB common stock at a price of $0.1585 per common share, which price represents the average of the closing prices for PKLB’s common shares as reported by NASDAQ for the twenty (20) trading days ended November 8, 2002. All PKLB common shares held by BASi as of the effective time of the merger will be cancelled. The note to BASi is secured by a security interest in favor of BASi in all of the assets of PKLB pursuant to a Security Agreement between PKLB, as debtor, and BASi, as secured party. PKLB Limited Partnership, a subsidiary of PKLB, guaranteed repayment of the note to BASi, pursuant to the terms of an Unconditional Guaranty dated as of November 14, 2002, and pledged certain real property located in Baltimore, Maryland to BASi as security for its guaranty pursuant to the terms of an Indemnity Deed of Trust.

BASi’s credit agreement (discussed below) limits the amount that can be loaned to PKLB prior to the closing of the merger to the amount of the Secured Convertible Revolving Note. If the merger is consummated, BASi expects to expend additional amounts to pay trade payables and other obligations of PKLB and to fund PKLB’s continuing operations. BASi intends to fund these expenses using cash from operations and borrowings under the line of credit. BASi’s credit agreement also requires BASi to sell the Baltimore, Maryland real property within 180 days following its acquisition of PKLB. BASi intends to use the net proceeds from the sale to pay down the line of credit. BASi management believes that sale of the building will enable it to fund PKLB operations until such time as the cash flow generated from those operations becomes adequate to support the operations.

On October 29, 2002, BASi obtained new credit agreements with two different banks that completely refinanced and replaced all outstanding bank debt arrangements that were in place at September 30, 2002. These new credit agreements provide for a $6.0 million revolving line of credit with a bank and a mortgage note and two construction term loans payable with another bank aggregating $10.0 million. Borrowings under these new credit agreements are collateralized by substantially all assets related to BASi’s operations, all common stock of BASi’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 BASi’s Chairman and CEO. Under the terms of these credit agreements, BASi has agreed to restrict advances to foreign subsidiaries, limit additional indebtedness and capital expenditures as well as to comply with certain financial covenants outlined in the borrowing agreements. These financial covenants include: maintenance of a certain ratio of interest bearing indebtedness (not including subordinated debt) to earnings before income taxes, depreciation, amortization, and interest expense (“EBITDA”); maintenance of a certain ratio of total indebtedness to tangible net worth and subordinated debt; maintenance of a certain ratio of EBITDA to certain identified fixed charges; maintenance of a certain ratio of current assets to current liabilities; limits on the amount of capital expenditures that can be made using funds other than long-term indebtedness in a single fiscal year; and maintenance of a certain ratio of net cash flow to debt servicing requirements. These new credit agreements contain cross-default provisions. Details of each debt issue are discussed below.

BASi’s revolving line of credit expires September 30, 2005. The maximum amount available under the terms of the agreement is $6.0 million with outstanding borrowings limited to the borrowing base as defined in the agreement. Interest accrues monthly on the outstanding balance at the bank’s prime rate to prime rate plus 125 basis points, or at the Eurodollar rate plus 200 to 350 basis points, as elected by BASi, depending upon the ratio of BASi’s interest bearing indebtedness (less subordinated debt) to EBITDA. BASi pays a fee equal to 25 to 50 basis points, depending upon the same financial ratios, on the unused portion of the line of credit.

BASi has a $5,410,000 commercial mortgage with a bank. The mortgage note requires 119 monthly principal payments of $22,542 plus interest, followed by a final payment for the unpaid principal amount of $2,727,502 due November 1, 2012. Interest is charged at the prime rate. On November 15, 2002, BASi obtained a $1,500,000 lease line for equipment with a bank. At November 30, 2002, $1,090,000 was utilized, including $859,020 under a sale-leaseback arrangement. The lease requires 60 payments of $17,820.

BASi has a $2,250,000 construction loan with a bank which expires November 1, 2012. The loan requires interest payments only until completion of the project in West Lafayette, Indiana. Interest is charged at the prime rate.

BASi has a $2,340,000 construction loan with a bank which expires May 1, 2008. The loan requires interest payments only until completion of the project in Evansville, Indiana. Interest is charged at the prime rate.

– 12 –

To obtain the foregoing new credit agreements, BASi entered into an agreement with Periculum Capital Company, LLC (“Periculum”). Under the terms of the agreement, BASi paid $300,000 in fees to Periculum upon closing of the refinancing.

BASi is required to make cash payments in the future on debt and lease obligations. The following table summarizes the BASi’s contractual term debt and lease obligations at December 31, 2002 (reflective of the refinancing of debt that occurred on October 29, 2002 and the issuance of notes payable to acquire LCR) and the effect such obligations are expected to have on its liquidity and cash flows in future periods (amounts in thousands).

                                       Payments due for fiscal years ending September 30:

                                   2003     2004-2005     2006-2007     After 2007       Total
                                   ----     ---------     ---------     ----------       -----
Mortgage note payable              $253      $  552          $552        $ 4,053        $ 5,410
Subordinated debt                   ---         ---           ---          2,375          2,375*
Capital lease obligations           302         127           ---            ---            429
Operating leases                    200         435           432             36          1,103
                                   ----      ------          ----        -------        -------
                                   $755      $1,114          $984        $ 6,464        $ 9,317

*    This amount reflects the subordinated notes issued to the shareholders of LCR in connection
     with the  acquisition of LCR by BASi in December 2002. The principal  amount of these notes
     will be reduced to reflect  certain changes in the net tangible asset value of LCR prior to
     the closing of the  acquisition.  The holders of these notes have the right to require BASi
     to prepay 20% of the principal amount of the notes each year prior to maturity.

BASi's borrowings under its revolving line of credit for working capital needs, borrowings to fund capital expenditures using construction loans and the 6% subordinated notes payable that may be issued in connection with the merger with PKLB will each affect BASi's liquidity and cash flows in future periods. These obligations are not reflected in the above schedule. The covenants in BASi'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 BASi can borrow to fund future operations, acquisitions and capital expenditures.

After September 30, 2002, BASi borrowed additional funds to continue construction on its West Lafayette expansion project. In order to better assure compliance with the covenants in the credit agreement, construction on this project has been delayed and management does not expect to make significant borrowings in connection with this project until cash flow improves. BASi has formulated and begun to implement a plan to reduce debt and improve its cash flow to better enable it to satisfy the credit agreement covenants in the future. The plan includes, but is not limited to, headcount reductions and other cost-saving measures at its West Lafayette and McMinville, Oregon facilities, the sale of real estate assets in West Lafayette, and the delay of construction of its West Lafayette expansion project. Further, BASi believes compliance with loan covenants will be achieved and will take necessary action, including deferral of the PKLB acquisition, if deemed necessary, to remain compliant.

BASi intends to issue additional subordinated debt of approximately $4.0 million in connection with the contemplated acquisition of PKLB. This indebtedness will not require any payments of principal or interest by BASi during the first year after it is issued, and will not affect BASi's compliance with the leverage covenant in its credit agreement. However, as discussed above, BASi will use cash from operations and amounts available under its credit agreement to pay trade payables and other obligations of PKLB and to fund PKLB's future operations. To offset these requirements, BASi intends to sell a building owned by PKLB, located in Baltimore, Maryland and to apply the net proceeds from the sale to reduce amounts outstanding under the credit agreement.

Based on its current business activities, BASi believes cash generated from its operations, amounts available under its existing bank line of credit and credit facility, and the proposed action plan will be sufficient to fund BASi's working capital and capital expenditure requirements for the foreseeable future and through September 30, 2003.

Inflation

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

New Accounting Pronouncements

Please refer to the Notes to Consolidated Financial Statements for a discussion of recently issued accounting standards.

[Page left blank intentionally]

– 13 –

CONSOLIDATED BALANCE SHEETS

                                                                             SEPTEMBER 30,
                                                             -----------------------------------------
                                                                  2002                         2001
                                                             -------------                ------------
ASSETS
Current assets:
  Cash and cash equivalents                                  $     825,964                $    373,738
  Accounts receivable
     Trade                                                       3,699,554                   3,634,143
     Grants                                                        115,592                     116,719
     Unbilled revenues and other                                   739,008                     514,997
  Inventories                                                    2,624,050                   2,391,081
  Deferred income taxes                                            455,033                     442,903
  Refundable income taxes                                           51,952                     325,001
  Prepaid expenses                                                 282,906                      71,062
                                                             -------------                ------------
Total current assets                                             8,794,059                   7,869,644
Property and equipment
  Land and improvements                                            495,624                     495,624
  Buildings and improvements                                    14,475,933                  13,507,731
  Machinery and equipment                                       13,363,055                  10,795,295
  Office furniture and fixtures                                  1,114,157                   1,092,452
  Construction in process                                        2,359,211                     112,790
                                                             -------------                ------------
                                                                31,807,980                  26,003,892
  Less accumulated depreciation and amortization                (8,983,937)                 (7,082,300)
                                                             -------------                ------------
                                                                22,824,043                  18,921,592
                                                             -------------                ------------
Goodwill, less accumulated amortization of
  $360,167 in 2002 and $280,871 in 2001                            883,628                     962,924
Other assets                                                       960,881                     222,494
                                                             -------------                ------------
Total assets                                                 $  33,462,611                $ 27,976,654
                                                             =============                ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
  Accounts payable                                           $   2,459,325                $  2,618,788
  Income taxes payable                                              41,488                     176,000
  Accrued expenses                                                 752,934                     746,741
  Customer advances                                              1,285,311                   1,063,467
  Revolving line of credit                                       3,749,373                     235,687
  Current portion of capital lease obligations                   1,137,925                     261,123
  Current portion of long-term debt                                278,928                     233,328
                                                             -------------                ------------
Total current liabilities                                        9,705,284                   5,335,134
Capital lease obligations, less current portion                    123,371                     402,276
Long-term debt, less current portion                             3,123,756                   2,741,684
Deferred income taxes                                            1,611,836                   1,667,231
Shareholders' equity
  Preferred Shares
     Authorized shares- 1,000,000
     Issued and outstanding shares - none                              ---                         ---
  Common shares, no par value
     Authorized shares - 19,000,000
     Issued and outstanding shares -
        4,578,516 in 2002 and 4,569,416 in 2001                  1,014,206                   1,012,190
  Additional paid-in capital                                    10,520,839                  10,506,200
  Retained earnings                                              7,411,111                   6,344,666
  Accumulated other comprehensive loss                             (47,792)                    (32,727)
                                                             -------------                ------------
Total shareholders' equity                                      18,898,364                  17,830,329
                                                             -------------                ------------
Total liabilities and shareholders' equity                   $  33,462,611                $ 27,976,654
                                                             =============                ============

See accompanying notes.

– 14 –

CONSOLIDATED STATEMENTS OF OPERATIONS

                                                           YEAR ENDED SEPTEMBER 30,
                                                ------------------------------------------------
                                                    2002              2001              2000
                                                ------------      ------------      ------------
Service revenue                                 $ 16,139,602      $ 15,202,066      $ 10,999,609
Product revenue                                   10,373,444        10,072,582         8,223,692
                                                ------------      ------------      ------------
     Total revenue                                26,513,046        25,274,648        19,223,301
Cost of service revenue                           11,556,269         9,660,288         9,245,380
Cost of product revenue                            4,393,009         3,494,258         2,973,787
                                                ------------      ------------      ------------
     Total cost of revenue                        15,949,278        13,154,546        12,219,167
                                                ------------      ------------      ------------
Gross profit                                      10,563,768        12,120,102         7,004,134
Operating expenses:
  Selling                                          2,939,929         3,204,056         3,400,273
  Research and development                         1,521,001         1,611,045         1,805,933
  General and administrative                       4,476,105         3,814,601         2,990,234
                                                ------------      ------------      ------------
     Total operating expenses                      8,937,035         8,629,702         8,196,440
                                                ------------      ------------      ------------
Operating income (loss)                            1,626,733         3,490,400        (1,192,306)
Interest income                                        3,492             5,910            15,483
Interest expense                                    (205,002)         (417,211)         (553,715)
Other income (expense)                               135,099            46,479           (34,067)
Loss on sale of property and equipment               (12,883)          (18,671)          (48,708)
                                                ------------      ------------      ------------
Income (loss) before income taxes                  1,547,439         3,106,907        (1,813,313)
Income taxes (benefit)                               480,994         1,340,150          (431,303)
                                                ------------      ------------      ------------
Net income (loss)                               $  1,066,445      $  1,766,757      $ (1,382,010)
                                                ============      ============      ============
Net income (loss) per share:
  Basic                                         $       0.23      $       0.39      $      (0.30)
  Diluted                                       $       0.23      $       0.38      $      (0.30)
Weighted average common shares outstanding:
  Basic                                            4,575,995         4,564,620         4,550,336
  Diluted                                          4,625,381         4,600,498         4,550,336

See accompanying notes.

– 15 –

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

                                                                                           ACCUMULATED
                                                                                             OTHER
                                                              ADDITIONAL                  COMPREHENSIVE       TOTAL
                                      PREFERRED   COMMON       PAID-IN       RETAINED        INCOME       SHAREHOLDERS'
                                        SHARES    SHARES       CAPITAL       EARNINGS        (LOSS)           EQUITY
                                      --------- -----------   -----------   -----------   ------------    -------------

BALANCE AT SEPTEMBER 30, 1999           $---    $   999,992   $10,481,978   $ 5,959,919   $    (20,595)   $17,421,294
 Comprehensive income (loss)
  Net loss                               ---            ---           ---    (1,382,010)           ---     (1,382,010)
  Other comprehensive loss:
    Foreign currency translation
     adjustments                         ---            ---           ---           ---         (2,851)        (2,851)
                                                                                                          -----------
 Total comprehensive loss                                                                                  (1,384,861)
 Exercise of stock options               ---         10,698        14,527           ---            ---         25,225
                                      --------- -----------   -----------   -----------   ------------    -----------
    BALANCE AT SEPTEMBER 30, 2000        ---    $ 1,010,690    10,496,505     4,577,909        (23,446)    16,061,658
 Comprehensive income (loss)
  Net income                             ---            ---           ---     1,766,757            ---      1,766,757
  Other comprehensive loss:
    Foreign currency translation
     adjustments                         ---            ---           ---           ---         (9,281)        (9,281)
                                                                                                          -----------
 Total comprehensive income                                                                                 1,757,476
 Exercise of stock options               ---          1,500         9,695           ---            ---         11,195
                                      --------- -----------   -----------   -----------   ------------    -----------
    BALANCE AT SEPTEMBER 30, 2001        ---      1,012,190    10,506,200     6,344,666        (32,727)    17,830,329
 Comprehensive income (loss)
  Net income                             ---            ---           ---     1,066,445            ---      1,066,445
  Other comprehensive loss:
    Foreign currency translation
     Adjustments                         ---            ---           ---           ---        (15,065)       (15,065)
                                                                                                          -----------
 Total comprehensive income                                                                                 1,051,380
 Exercise of stock options               ---          2,016        14,639           ---            ---         16,655
                                      --------- -----------   -----------   -----------   ------------    -----------
    BALANCE AT SEPTEMBER 30, 2002       $---    $ 1,014,206   $10,520,839   $ 7,411,111   $    (47,792)   $18,898,364

See accompanying notes.

– 16 –

CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                        YEAR ENDED SEPTEMBER 30,
                                                            -------------------------------------------------
                                                                 2002              2001              2000
                                                            -------------      ------------      -------------
OPERATING ACTIVITIES
Net income (loss)                                           $   1,066,445      $   1,766,757     $ (1,382,010)
Adjustments to reconcile net income (loss) to
net cash provided (used) by operating activities:
  Depreciation and amortization                                 2,042,004          1,761,709        1,636,413
  Loss on sale of property and equipment                           12,883             18,671           48,708
  Deferred income taxes                                           (67,525)           362,313         (237,330)
  Changes in operating assets and liabilities:
     Accounts receivable                                         (288,295)          (903,212)         534,160
     Inventories                                                 (232,969)          (156,437)        (440,878)
     Prepaid expenses and other assets                           (438,227)          (232,425)         108,828
     Accounts payable                                            (428,391)         1,220,462         (787,123)
     Income taxes payable                                         138,537            162,086         (313,347)
     Accrued expenses                                               6,193            127,743         (337,834)
     Customer advances                                            221,844            (99,885)         631,253
                                                            -------------      -------------     ------------
Net cash provided (used) by operating activities                2,032,499          4,027,782         (539,160)

INVESTING ACTIVITIES
Capital expenditures                                           (4,684,278)        (1,673,411)      (1,572,627)
Proceeds from sale of property and equipment                       16,663             45,425           13,972
Loans to PharmaKinetics Laboratories, Inc.                       (407,858)               ---              ---
Payments for purchase of net assets from
  TPS., Inc. net of cash acquired                                     ---                ---         (446,469)
Deferred acquisition costs
  for PharmaKinetics Laboratories, Inc.                          (186,625)               ---              ---
                                                            -------------      -------------     ------------
Net cash used by investing activities                          (5,262,098)        (1,627,986)      (2,005,124)

FINANCING ACTIVITIES
Borrowings on line of credit                                    4,635,321          1,003,428        2,784,572
Payments on line of credit                                     (1,121,635)        (3,035,022)        (781,199)
Payments on capital lease obligations                            (261,123)          (239,916)        (220,432)
Borrowings of long-term debt                                      680,000                ---              ---
Payments of long-term debt                                       (252,328)          (234,097)        (707,841)
Net proceeds from the exercise of stock options                    16,655             11,195           25,225
                                                            -------------      -------------     ------------
Net cash provided (used) by financing activities                3,696,890         (2,494,412)       1,100,325
Effect of exchange rate changes                                   (15,065)            (9,281)          (2,815)
                                                            -------------      -------------     ------------
Net increase (decrease) in cash and cash equivalents              452,226           (103,897)      (1,446,774)
Cash and cash equivalents at beginning of year                    373,738            477,635        1,924,409
                                                            -------------      -------------     ------------
Cash and cash equivalents at end of year                    $     825,964      $     373,738     $    477,635
                                                            =============      =============     ============

See accompanying notes.

– 17 –

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.        Significant Accounting Policies

Nature of Business

Bioanalytical Systems, Inc. and its subsidiaries (“BASi”) engage in laboratory services, consulting and research related to analytical chemistry and chemical instrumentation. BASi also manufactures scientific instruments for use in the determination of trace amounts of organic compounds in biological, environmental and industrial materials. BASi also sells its equipment and software for use in industrial, government and academic laboratories. BASi’s customers are located throughout the world.

Principles of Consolidation

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

Cash Equivalents

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

Financial Instruments

Financial instruments that subject BASi to credit risk consist principally of trade accounts receivable. BASi performs periodic credit evaluations of its customers’ financial conditions and generally does not require collateral on trade accounts receivable.

BASi’s 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. BASi’s bank debt has primarily variable interest rates, thus their carrying amounts approximate fair value.

Inventories

Inventories are stated at the lower of cost or market. Cost is determined using the last-in, first-out (“LIFO”) method.

Long-Lived Assets, Including Goodwill

The carrying value of long-lived assets, including goodwill, is periodically reviewed by management in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of.” Under the provisions of the statement, BASi evaluates its long-lived assets in light of events and circumstances that may indicate that the remaining estimated useful life may warrant revision or that the remaining value may not be recoverable. When factors indicate that long-lived assets should be evaluated for possible impairment, BASi uses an estimate of the related cash flows over the remaining life of the asset in measuring whether that asset is recoverable. To the extent an impairment has occurred, the excess of the carrying value of the long-lived assets over their estimated fair value will be charged to operations. BASi evaluates long-lived assets and goodwill for impairment under this methodology. As of September 30, 2002, an impairment of the carrying value of long-lived assets, including goodwill, has not occurred.

Property And Equipment

Property and equipment are recorded at cost, including interest capitalized in connection with the construction of major facilities. Depreciation, including amortization on capital leases, is computed using the straight-line method over the estimated useful lives of 3 through 40 years. Expenditures for maintenance and repairs are charged to expense as incurred.

– 18 –

Revenue Recognition

The majority of BASi’s service contracts involve 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. BASi’s other service contracts generally consist of pre-clinical trial studies for pharmaceutical companies. Service revenue is recognized based on the ratio of 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.

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.

BASi product revenue is derived primarily from sales of equipment utilized for analytical testing. Revenue from equipment not requiring installation, testing or training is recognized upon shipment to customers. One BASi 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.

Advertising Expense

BASi expenses advertising costs as incurred. Advertising expense was $266,225, $195,833 and $306,737 for 2002, 2001 and 2000, respectively.

New Accounting Pronouncements

In June 2001, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 141, “Business Combinations” and No. 142, “Goodwill and Other Intangible Assets.” Under the new rules, goodwill and indefinite-lived intangible assets are no longer amortized, but are reviewed annually for impairment. Separable intangible assets that are not deemed to have an indefinite life will continue to be amortized over their useful lives. The amortization provisions of SFAS No. 142 apply to goodwill and intangible assets acquired after June 30, 2001. With respect to goodwill and intangible assets acquired prior to July 1, 2001, BASi will apply the new accounting rules beginning October 1, 2002. Application of the nonamortization provisions of the Statement is expected to result in an increase in net income of $77,000 ($.02 per share) per year. BASi will perform the first of the required impairment tests of goodwill and indefinite-lived intangible assets as of October 1, 2002, and has not yet determined what the effect of these tests will be on the earnings and financial position of BASi.

In October 2001, the FASB issued SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” SFAS No. 144 supercedes FASB Statement No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of” and also supercedes the accounting and reporting provisions of Accounting Principals Board (“APB”) Opinion No. 30, “Reporting the Results of Operations-Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions,” for segments of a business to be disposed of. Among its many provisions, SFAS No. 144 retains the fundamental requirements of both previous standards; however, it resolves significant implementation issues related to FASB Statement No. 121 and broadens the separate presentation of discontinued operations in the income statement required by APB Opinion No. 30 to include a component of an entity (rather than a segment of a business). The provisions of SFAS No. 144 are effective for financial statements issued for fiscal years beginning after December 15, 2001, with early application encouraged. BASi does not believe, based on current circumstances, the effect of adoption of SFAS No. 144 will be material.

In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13 and Technical Corrections." SFAS No. 145 rescinds both SFAS No. 4, "Reporting Gains and Losses from Extinguishment of Debt," and an amendment to that Statement, SFAS No.64, "Extinguishments of Debt Made to Satisfy Sinking Fund Requirements." SFAS No. 4 required that all gains and losses from the extinguishment of debt be aggregated and, if material, be classified as an extraordinary item, net of the related income tax effect. Upon the adoption of SFAS No. 145, all gains and losses on the extinguishment of debt for periods presented in the financial statements will be classified as extraordinary items only if they meet the criteria in APB No. 30. The provisions of SFAS No. 145 related to the rescission of SFAS No. 4 and SFAS No. 64 shall be applied for fiscal years beginning after May 15, 2002. BASi does not believe, based on current circumstances, the effect of adoption of SFAS No. 145 will be material.

– 19 –

In June 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.” SFAS No. 146 nullifies Emerging Issues Task Force (“EITF”) Issue No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring).” SFAS No. 146 generally requires companies to recognize costs associated with exit activities when they are incurred rather than at the date of a commitment to an exit or disposal plan and is to be applied prospectively to exit or disposal activities initiated after December 31, 2002. BASi is currently evaluating the effects, if any, that this standard will have on its results of operations and financial position.

On December 31, 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosure.” SFAS No. 148 amends SFAS No. 123, “Accounting for Stock-Based Compensation,” to provide alternative methods of transition to SFAS No. 123’s fair value method of accounting for stock-based employee compensation. SFAS No. 148 also amends the disclosure provisions of SFAS No. 123 and APB Opinion No. 28, “Interim Financial Reporting,” to require disclosure in the summary of significant accounting policies of the effects of an entity’s accounting policy with respect to stock-based employee compensation on reported net income and earnings per share in annual and interim financial statements. While SFAS No. 148 does not amend SFAS No. 123 to require companies to account for employee stock options using the fair value method, the disclosure provisions of SFAS No. 148 are applicable to all companies with stock-based employee compensation, regardless of whether they account for that compensation using the fair value method of SFAS No. 123 or the intrinsic value method of APB Opinion No. 25, “Accounting for Stock Issued to Employees.” SFAS No. 148’s amendment of the transition and annual disclosure requirements of SFAS No. 123 are effective for fiscal years ending after December 15, 2002. SFAS No. 148’s amendment of the disclosure requirements of APB Opinion No. 28 is effective for financial reports containing consolidated financial statements for interim periods beginning after December 15, 2002.

Use Of Estimates

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

Stock Options

In accordance with SFAS No. 123, “Accounting for Stock-Based Compensation,” BASi uses the intrinsic value method to account for stock options, consistent with the existing rules established by APB Opinion No. 25, “Accounting for Stock Issued to Employees.”

2.        Earnings per Share

Basic earnings per share is computed on the basis of the weighted average number of common shares outstanding. Diluted earnings per share is computed on the basis of the weighted average number of common and common equivalent shares outstanding. Common equivalent shares include the dilutive effect of employee and director options to purchase common shares and convertible preferred shares, which are assumed to be converted. The dilutive effect of employee and director options to purchase common shares was to increase the weighted average number of common shares outstanding by 49,386 and 35,878 shares in 2002 and 2001, respectively. There was no dilutive effect of employee and director options to purchase common shares for 2000.

3.        Commitments

On June 20, 2002, BASi and PharmaKinetics Laboratories, Inc., a Maryland corporation (“PKLB”) entered into an Agreement and Plan of Merger (the “Merger Agreement”) which provides for, subject to the terms and conditions set forth therein, the merger of PKLB and a wholly-owned subsidiary of BASi (the “Merger”). As of the effective date of the Merger, shares of PKLB common stock outstanding will be converted into shares of BASi common stock at a rate of one BASi share for each 12 PKLB shares; shares of PKLB Series A convertible preferred stock will be converted into 6% subordinated convertible promissory notes issued by BASi in an aggregate principal amount of $4,000,000; and shares of PKLB Series B convertible preferred stock will be converted into shares of BASi common stock at the same ratios as shares of PKLB common stock. The promissory notes issued in the merger mature on January 1, 2008, will not bear interest for the first year following the effective date of the merger, and will be convertible at the option of the holder into BASi common stock at a conversion price of $16.00 per share. The transaction is subject to approval by the BASi board of directors and customary closing conditions, including registration of the BASi securities to be issued in the merger and the approval of PKLB’s shareholders. The merger is currently expected to close prior to March 31, 2003. Holders of more than 85% of PKLB’s Class A convertible preferred stock have agreed to vote those shares in favor of the merger. During the year ended September 30, 2002, BASi made unsecured loans to PKLB aggregating $408,000. The terms of these loans were modified in November 2002 (see Note 11). The outstanding balances on these loans is included in other assets at September 30, 2002.

– 20 –

4.        Inventories

Inventories at September 30 consisted of the following:

                                                      2002            2001
                                                  ----------      ----------
                        Raw materials             $1,347,184      $1,322,182
                        Work in progress             338,996         302,706
                        Finished goods             1,090,914         876,646
                                                  ----------      ----------
                                                   2,777,094       2,501,534
                        LIFO reserve                (153,044)       (110,453)
                                                  ----------      ----------
                                                  $2,624,050      $2,391,081
                                                  ==========      ==========

5.        Debt Arrangements

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

                                                               2002              2001
                                                            ----------        ----------
     Mortgage  note  payable  to bank,  payable in
     monthly  principal  installments  of  $19,444
     plus  interest  at the  one-month  LIBOR rate
     plus 200 basis points (3.28% at September 30,
     2002).  Repaid  with  new  borrowings  from a
     different bank on October 29, 2002.                    $2,741,684        $2,975,012

     Mortgage  note  payable  to bank,  payable in
     monthly principal installments of $3,800 plus
     interest at the one-month LIBOR rate plus 200
     basis points  (3.28% at September  30, 2002).
     Repaid with new  borrowings  from a different
     bank on October 29, 2002.                                 661,000               ---
                                                            ----------        ----------
                                                             3,402,684         2,975,012
     Less current portion                                      278,928           233,328
                                                            ----------        ----------
                                                            $3,123,756        $2,741,684
                                                            ==========        ==========

BASi had a revolving line of credit that allowed for borrowings of up to $3,500,000. Interest accrued monthly on the outstanding balance at the bank’s prime rate minus 25 to plus 75 basis points or at the London Interbank Offered Rate (LIBOR) plus 200 to 300 basis points, as elected by BASi, depending upon certain financial ratios. As of September 30, 2002 and 2001, interest on the entire outstanding balance was based on the prime rate minus 25 basis points (4.50% and 5.25%, respectively). The balance outstanding on this line of credit at September 30, 2002 was $3,749,373, including $249,373 of cash overdrafts. This line of credit was repaid with new borrowings from a different bank on October 29, 2002.

Cash interest payments of $250,615, $329,544 and $498,513 were made in 2002, 2001 and 2000, respectively. Cash interest payments for 2002 included interest of $39,644, which was capitalized. These amounts included interest required to be paid on a portion of the undistributed earnings of a subsidiary, which qualifies as a domestic international sales corporation.

Subsequent Event-Debt Arrangements

On October 29, 2002, BASi obtained new credit agreements with two different banks that completely refinanced and replaced all outstanding bank debt arrangements that were in place at September 30, 2002. These new credit agreements provide for a $6 million revolving line of credit with a bank and a mortgage note payable and two construction term loans payable with another bank aggregating $10 million. Borrowings under these new credit agreements are collateralized by substantially all assets related to BASi’s operations and all common stock of BASi’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 BASi’s Chairman and CEO. Under the terms of these credit agreements, BASi 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 new credit agreements contain cross-default provisions. Details of each debt issue are discussed below.

– 21 –

On October 29, 2002 BASi obtained a revolving line of credit which expires September 30, 2005. The maximum amount available under the terms of the agreement is $6 million with outstanding borrowings limited to the borrowing base as defined in the agreement. Interest accrues monthly on the outstanding balance at the bank’s prime rate to prime rate plus 125 basis points or at the Eurodollar rate plus 200 to 350 basis points, as elected by BASi, depending upon certain financial ratios. BASi pays a fee equal to 25 to 50 basis points, depending on certain financial ratios, on the unused portion of the line of credit.

On October 29, 2002 BASi obtained a $5,410,000 commercial mortgage with a bank. The mortgage note requires 119 monthly principal payments of $22,542 plus interest, followed by a final payment for the unpaid principal amount of $2,727,502 due November 1, 2012. Interest is charged at the prime rate.

On October 29, 2002 BASi obtained a $2,250,000 construction loan with a bank which expires November 1, 2012. Proceeds from this loan will be used to fund the expansion of BASi’s facilities in West Lafayette, Indiana. The loan requires interest payments only until completion of the project in West Lafayette, Indiana. Interest is charged at the prime rate.

On October 29, 2002 BASi obtained a $2,340,000 construction loan with a bank which expires May 1, 2008. Proceeds from this loan will be used to fund the expansion of BASi’s facilities in Evansville, Indiana. The loan requires interest payments only until completion of the project in Evansville, Indiana. Interest is charged at the prime rate.

To obtain the foregoing new credit agreements, BASi entered into an agreement with Periculum Capital Company, LLC (“Periculum”). Under the terms of the agreement, BASi paid $300,000 in fees to Periculum upon closing of the refinancing.

6.        Lease Arrangements

BASi has capital lease arrangements to finance the acquisition of equipment. Future minimum lease payments, based upon scheduled payments under the lease arrangements as of September 30, 2002 are as follows:

             2003                                           1,161,235
             2004                                             126,932
                                                          -----------
             Total minimum lease payments                   1,288,167
             Amounts representing interest                    (26,870)
                                                          -----------
             Present value of minimum lease payments        1,261,297
             Less current portion                          (1,137,925)
                                                          -----------
                                                          $   123,372
                                                          ===========

The total amount of property and equipment capitalized under capital lease obligations as of September 30, 2002 and 2001 was $2,776,645 and $1,917,625, respectively, including $859,020 capitalized under a capital lease line (discussed below). Accumulated amortization on capital leases at September 30, 2002 and 2001 was $1,041,348 and $855,100, respectively.

BASi had a $1,500,000 lease line for equipment with a bank. On November 15, 2002 BASi sold the equipment to a bank and is leasing the equipment back under an operating lease (see Note 11).

BASi leases office space under a noncancelable operating lease that terminates in 2004. This lease contains renewal options ranging from one to five years. Total rental expense was $20,080, $22,903 and $32,499 in 2002, 2001 and 2000, respectively.

Future minimum lease payments at September 30, 2002 are as follows:

             2003              $ 19,890
             2004                 3,315
                               --------
                               $ 23,205
                               ========

– 22 –

7.        Income Taxes

Significant components of BASi's deferred tax liabilities and assets as of September 30 are as follows:

                                                          2002           2001
                                                          ----           ----
        Deferred tax liabilities:
           Tax over book depreciation                  $1,498,289     $1,383,003
           Deferred DISC income                           113,547        170,321
                                                       ----------     ----------
        Total deferred liabilities                      1,611,836      1,553,324
        Deferred tax assets:
           Inventory pricing                              129,745        123,008
           Accrued vacation                               169,985        155,935
           Tax credit carry forward                           ---         32,587
           Accrued expense and other--net                 155,303         17,466
           Foreign net operating loss                     289,861        484,314
                                                       ----------     ----------
        Total deferred tax assets                         744,894        813,310
        Valuation allowance for
           Deferred tax assets                           (289,861)      (484,314)
                                                       ----------     ----------
        Net deferred tax assets                           455,033        328,996
                                                       ----------     ----------
        Net deferred tax liabilities                   $1,156,803     $1,224,328
                                                       ==========     ==========

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

                                    2002            2001          2000
                                    ----            ----          ----
        Current:
            Federal               $223,761      $  680,469     $(245,378)
            State                  310,724         297,368        51,405
            Foreign                 14,034             ---           ---
                                  --------      ----------     ---------
        Total current              548,519         977,837      (193,973)
        Deferred:
            Federal                (60,603)        337,601      (230,925)
            State                   (6,922)         24,712        (6,405)
                                  --------      ----------     ---------
        Total deferred             (67,525)        362,313      (237,330)
                                  --------      ----------     ---------
                                  $480,994      $1,340,150     $(431,303)
                                  ========      ==========     =========
 

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

                                                               2002      2001      2000
                                                               ----      ----      ----
      Statutory federal income tax rate                        34.0%     34.0%     34.0%
      Increases (decreases):
          Amortization of goodwill and
             other nondeductible expenses                       2.2       0.9      (0.6)
          Benefit of foreign sales corporation, net            (2.4)     (0.9)      1.5
          State income taxes, net of federal tax benefit        9.3       5.8      (1.6)
          Research and development credit                      (0.8)     (1.0)      ---
          Nondeductible (deductible) foreign losses           (12.5)      3.4     (11.5)
          Other                                                 1.1       0.9       2.0
                                                              -----      ----      ----
                                                               30.9%     43.1%     23.8%
                                                              =====      ====      ====

In fiscal 2002, 2001 and 2000, BASi's foreign operations generated an income (loss) before income taxes of $621,699, $(359,297) and $(612,496), respectively.

Payments made in 2002, 2001 and 2000 for income taxes amounted to $270,300, $1,095,000 and $67,000, respectively.

BASi has foreign net operating loss carryforwards aggregating $906,000 that begin to expire in fiscal 2021.

– 23 –

8.        Stock Option Plans

During fiscal 1990, BASi established an Employee Incentive Stock Option Plan whereby options to purchase shares of BASi's common shares at fair market value can be granted to employees of BASi. Options granted become exercisable in four equal installments beginning two years after the date of the grant. The plan terminated in 2000.

BASi adopted new stock option plans, discussed below, in connection with its initial public offering and accordingly does not plan to grant any more options pursuant to the plans discussed above.

During fiscal 1998, BASi established an Employee Stock Option Plan whereby options to purchase shares of BASi's common shares at fair market value can be granted to employees of BASi. Options granted become exercisable in four equal installments beginning two years after the date of grant. The plan terminates in fiscal 2008.

During fiscal 1998, BASi established an Outside Director Stock Option Plan whereby options to purchase shares of BASi's common shares at fair market value can be granted to outside directors. Options granted become exercisable in four equal installments beginning two years after the date of grant. The plan terminates in fiscal 2008.

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

                                     2002                    2001                      2000
                            --------------------      -------------------       -------------------
                                        Weighted                 Weighted                  Weighted
                                         Average                  Average                   Average
                                        Exercise                 Exercise                  Exercise
                             Options      Price       Options      Price        Options     Price
                            --------------------      -------------------       -------------------
Outstanding--
  beginning of year          124,964      $ 4.39      134,235      $ 4.27       206,299     $ 3.35
Exercised                     (9,100)       1.83       (6,771)       1.65       (48,296)      0.52
Granted                          ---         ---          ---         ---         5,000       2.88
Terminated                    (2,750)       4.93       (2,500)       5.00       (28,768)      3.75
                            --------                  -------                   -------
Outstanding--
  end of year                113,114      $ 4.59      124,964      $ 4.39       134,235     $ 4.27
                            ========                  =======                   =======



                                   Weighted
                    Number          Average      Weighted       Number         Weighted
  Range of       Outstanding       Remaining      Average    Exercisable        Average
  Exercise       September 30,    Contractual    Exercise    September 30,     Exercise
   Prices            2002            Life          Price         2002            Price
- ------------     -------------    -----------    --------    -------------    -----------

$1.51 - 2.10        31,114            .50          $1.72        31,114           $1.72
$2.11 - 8.00        82,000           5.84          $5.68        51,250           $5.93
                   -------                                      ------
                   113,114                                      82,364
                   =======                                      ======

– 24 –

Disclosure of pro forma information regarding net income and earnings per share is required by SFAS No. 123 as if BASi has accounted for its employee stock options granted subsequent to December 31, 1994, under the fair value method as defined by that Statement. The fair value for options granted by BASi was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions:

     Risk-free interest rate                           5.50%
     Dividend yield                                    0.00%
     Volatility factor of the expected market
       Price of BASi's common stock                    0.53 (0.53 in 2001 and 2000)
     Expected life of the options (years)              7.0

The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including expected stock price volatility. Because BASi’s employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options.

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

                                                   2002          2001           2000
                                                ----------    ----------   -----------
    Pro forma net income (loss)                 $1,046,189    $1,746,501   $(1,415,284)
    Pro forma net income (loss) per share            $0.23          0.38        $(0.31)

The weighted average fair value of options granted was $1.64 in 2000. No options were granted in 2002 or 2001.

9.        Retirement Plan

Effective July 1, 1984, BASi established 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, BASi contributes 2% of each participant's total wages to the Plan. 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 20% of the participant's annual wages. BASi made no discretionary contributions under the plan in 2002, 2001 and 2000. Contribution expense was $369,023, $324,674 and $256,107 in 2002, 2001 and 2000, respectively.

10.        Segment Information

BASi operates in two principal segments - analytical services and analytical products. BASi's analytical services unit provides analytical chemistry support on a contract basis directly to pharmaceutical companies. BASi's analytical products unit provides liquid chromatography, electrochemical and physiological monitoring products to pharmaceutical companies, universities, government research centers and medical research institutions. BASi evaluates performance and allocates resources based on these segments. The accounting policies of these segments are the same as those described in the summary of significant accounting policies.

– 25 –

                                                     Year Ended September 30,
                                         -----------------------------------------------
                                            2002                 2001               2000
                                         -----------------------------------------------
OPERATING SEGMENTS                                         (in thousands)
REVENUE
Service                                  $ 16,140             $ 15,202          $ 10,999
Product                                    10,373               10,073             8,224
                                         --------             --------          --------
Total revenue                            $ 26,513             $ 25,275          $ 19,223

OPERATING INCOME (LOSS)
Service                                  $  1,142             $  2,629          $   (409)
Product                                       485                  861              (783)
                                         --------             --------          --------
Total operating income (loss)               1,627                3,490            (1,192)
Corporate expenses                            (80)                (383)             (621)
                                         --------             --------          --------
Income (loss) before income taxes        $  1,547             $  3,107          $ (1,813)
                                         ========             ========          ========

IDENTIFIABLE ASSETS
Service                                  $ 22,255             $ 18,396          $ 17,772
Product                                    11,208                9,581             9,125
                                         --------             --------          --------
Total assets                             $ 33,463             $ 27,977          $ 26,897
                                         ========             ========          ========

                                                     Year Ended September 30,
                                         -----------------------------------------------
                                            2002                 2001               2000
                                         -----------------------------------------------
DEPRECIATION AND AMORTIZATION                              (in thousands)
Service                                  $  1,518             $  1,242          $  1,218
Product                                       524                  520               418
                                         --------             --------          --------
Total depreciation
  and amortization                       $  2,042             $  1,762          $  1,636
                                         ========             ========          ========

CAPITAL EXPENDITURES
Service                                  $  3,843             $  1,584          $  1,269
Product                                       841                   89               304
                                         --------             --------          --------
Total capital expenditures               $  4,684             $  1,673          $  1,573
                                         ========             ========          ========

                                                     Year Ended September 30,
                                         -----------------------------------------------
                                            2002                 2001               2000
                                         -----------------------------------------------
GEOGRAPHIC INFORMATION                                     (in thousands)
Sales to external customers:
North America                            $ 20,238             $ 20,536          $ 13,891
Pacific Rim:
     Japan                                    273                  242               580
     Other                                    640                  660               232
Europe                                      4,401                2,337             2,317
Other                                         961                1,500             2,203
                                         --------             --------          --------
                                         $ 26,513             $ 25,275          $ 19,223
                                         ========             ========          ========
Long-lived assets:
North America                            $ 22,700             $ 18,691          $ 18,467
Europe                                      1,969                1,416             1,575
                                         --------             --------          --------
                                         $ 24,669             $ 20,107          $ 20,042
                                         ========             ========          ========

– 26 –

Major Customers

During 2002, 2001 and 2000, a major United States-based pharmaceutical company accounted for approximately 19.0%, 18.9% and 21.0%, respectively, of BASi’s total revenues and 15.7% and 23.6% of total trade accounts receivable at September 30, 2002 and 2001, respectively.

During 2002, 2001 and 2000, another major United States-based pharmaceutical company accounted for approximately 9.3%, 11.7% and 12.2%, respectively, of BASi’s total revenues and 6.3% and 10.7% of total trade accounts receivable at September 30, 2002 and 2001, respectively.

11.        Subsequent Events—Unaudited

On November 15, 2002 BASi obtained a $1,500,000 lease line for equipment with a bank. At November 30, 2002, $1,090,000 was utilized, including $859,020 under a sale-leaseback arrangement (see Note 6). The lease requires 60 payments of $17,820.

Between June and September 2002, BASi loaned PKLB a total of $408,000 for working capital purposes (see Note 3). On November 14, 2002, PKLB executed a Secured Convertible Revolving Note in the principal amount of up to $925,000 payable to BASi to replace the existing notes payable to BASi and to allow PKLB to borrow additional amounts to cover short-term operating requirements. The note, secured by real estate, carries an annual interest rate of 8%, and all principal and accrued interest is due and payable on May 1, 2003. The outstanding principal amount of the note to BASi is convertible by BASi at any time into PKLB common stock at a price of $0.1585 per common share, which price represents the average of the closing prices for PKLB’s common shares as reported by NASDAQ for the twenty (20) trading days ended November 8, 2002.

On December 13, 2002 BASi acquired LC Resources, Inc., a privately-held company based in Walnut Creek, California. Under the agreement, BASi purchased all of the outstanding shares of LC Resources, Inc. (“LCR”) for $2.5 million, subject to adjustment for certain changes in net tangible assets of LCR. BASi paid cash of $125,000 at closing with the remainder of the purchase price to be paid through promissory notes bearing interest at 10% per annum, maturing on October 1, 2007. The notes are subordinate to BASi’s senior bank debt (see Note 5). The holders of the notes will have the option to require BASi to repay up to 20% of the outstanding principal balance of the notes on each October 1 prior to maturity, commencing October 1, 2003.

– 27 –

REPORT OF INDEPENDENT AUDITORS

Board Of Directors And Shareholders
Bioanalytical Systems, Inc.

We have audited the accompanying consolidated balance sheets of Bioanalytical Systems, Inc. as of September 30, 2002 and 2001, and the related consolidated statements of operations, shareholders’ equity and cash flows for each of the three years in the period ended September 30, 2002. 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 audits.

We conducted our audits in accordance with auditing standards generally accepted in the 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 financial statements referred to above present fairly, in all material respects, the consolidated financial position of Bioanalytical Systems, Inc. at September 30, 2002 and 2001, and the consolidated results of its operations and its cash flows for each of the three years in the period ended September 30, 2002 in conformity with accounting principles generally accepted in the United States.

/s/ Ernst & Young LLP                     

Indianapolis, Indiana
November 1, 2002

– 28 –

Board Of Directors

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

Ronald E. Shoup, Ph.D.
Chief Operating Officer, BASi Contract Research Services

Candice B. Kissinger
Senior Vice President, Marketing

William E. Baitinger
Special Assistant to the Vice President For Research,
Purdue University

John A. Kraeutler
President and Chief Operating Officer,
Meridian Bioscience, Inc.

W Leigh Thompson, Ph.D., M.D.
Chief Executive Officer
Profound Quality Resources, Inc.


Executive Management

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

Ronald E. Shoup, Ph.D.
Chief Operating Officer, BASi Contract Research Services

Douglas P Wieten
Chief Financial Officer and Treasurer
Vice President, Finance

Candice B. Kissinger
Senior Vice President, Marketing

Craig S. Bruntlett, Ph.D.
Senior Vice President, International Sales

Donnie A. Evans
Vice President, Engineering

Stephen Geary, Ph.D.
Vice President, U.S. Sales and Marketing

Lina L. Reeves-Kerner
Vice President, Human Resources

Michael P. Silvon, Ph.D.
Vice President, Planning; and Development

Michelle L. Troyer
Corporate Controller


Scientific Advisory Board

Daniel Armstrong, Ph.D.
R. Graham Cooks, Ph.D.
William R. Heineman, Ph.D.
Jean-Michel Kauffman, Ph.D.
Susan Lunte, Ph.D.
Mark Meyerhoff, Ph.D.
W. Leigh Thompson, Ph.D., M.D.
Patrick Murphy, Ph. D.

– 29 –

CORPORATE INFORMATION

Annual Meeting Of Shareholders

February 20, 2003
West Lafayette, Indiana


Auditors

Ernst & Young 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 1,700.

      Fiscal         1st Quarter      2nd Quarter      3rd Quarter      4th Quarter
      ------         -----------      -----------      -----------      -----------

      2002
      High             9.400             7.710             6.970           4.850
      Low              5.170             6.500             5.100           3.000

      2001
      High             2.781             3.875             9.040          13.900
      Low              2.125             2.313             3.000           5.000

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

Inquiries

A copy of the Company’s 2002 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/investlannual.html. Media inquiries and requests for the 10-K and investor’s kits should be directed to:

Corporate Communications Director
Bioanalytical Systems, Inc.
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
765-463-4527
www.bioanalytical.com

– 30 –

EX-23.1

Exhibit 23.1

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 1, 2002, with respect to the consolidated financial statements of Bioanalytical Systems, Inc. incorporated by reference in its 2002 Annual Report (Amendment No. 1 to Form 10-K) for the year ended September 30, 2002 filed with the Securities and Exchange Commission.

/s/ Ernst & Young LLP

Indianapolis, Indiana
January 24, 2003

EX-99.2

Exhibit 99.2

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, 2002, (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 Chairman of the Board;
President and
Chief Executive Officer
January 28, 2003

EX-99.3

Exhibit 99.3

I, Douglas P. Wieten, the 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, 2002, (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/ Douglas P. Wieten Vice President, Finance;
Chief Financial Officer and Treasurer
January 28, 2003