| |  | CULTIVATINGNEW GROWTH
| |  | ---------------------







TABLE OF CONTENTS





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











FINANCIAL HIGHLIGHTS

|2005                                | 2004 | 2003
|----------------------------------- | ---- | ----
|                                   
|Net revenue                         |      |     
|                                   
|Net income (loss)                   |      |     
|                                   
|Net income (loss) per diluted share |      |     
|                                   
|Working capital                     |      |     
|                                   
|Total assets                        |      |     
|                                   
|Shareholders' equity                |      |     

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

3





FROM THE PRESIDENT'S DESK



Dear fellow shareholders,

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

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

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

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

4

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

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

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

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

|5
|-





BASi NOW



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

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

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





| | 6
| | -









BASi IN THE FUTURE



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

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

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

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





| | 7
| | -









MANAGEMENT TEAM

| | Peter T. Kissinger, Ph.D., Chairman and CEO, founded
BASi in 1974 as an outgrowth of his basic research monitoring neurotransmitters
and metabolites in living systems. Dr. Kissinger is driven by the idea that
better science will result in better health and, ultimately, in better earnings
for our shareholders. Earnings fuel the cycle.Michael R. Cox, Vice President-Finance, CFO and Treasurer Since joining BASi in 2004, he has significantly upgraded the company's
financial infrastructure and accounting systems.Ronald E. Shoup, Ph.D., Chief Operating OfficerContract Research
Services, directs contract research operations at all
five of the company's sites.Edward M. Chait, Ph.D., Executive Vice President and Chief Scientific
Officer joined BASi in 2005. Along with his many other
responsibilities, Dr. Chait currently oversees the BASi Sales and Marketing
Departments. |  | 
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | 





| | 8
| | -









| | Candice Kissinger, Senior Vice President and Director of
Research, currently devotes her time to product R/D and
managing in vivo products and preclinical ADME services, principally the
Culex® Automated Pharmacology System.Michael P. Silvon, Ph.D., Vice President-Planning and
Development has responsibility for mergers, acquisitions
and investor relations, as well as overseeing the Vetronics Division.Craig S. Bruntlett, Ph.D., Senior Vice President-Sales
Development has been the company's Director of
Development of Electrochemical Instruments, then Vice President-Electrochemical
Products, and Senior Vice President-International Sales.Lina Reeves-Kerner, Vice President-Human Resources is
responsible for all the administrative functions of the company, including human
resources and community relations, along with overseeing facilities management,
manufacturing, security and safety. |  | 
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | 

9





SELECTED CONSOLIDATED FINANCIAL DATA

|                                      | YEAR ENDED SEPTEMBER 30,
|------------------------------------- | ------------------------
|
|(in thousands, except per share data)
|STATEMENT OF OPERATIONS DATA:         |                         
|                                     
|Service revenue                       |                         
|Product revenue                       |                         
|                                      |                         
|                                     
|Total revenue                         |                         
|                                      |                         
|                                     
|Cost of service revenue               |                         
|Cost of product revenue               |                         
|                                      |                         
|                                     
|Total cost of revenue                 |                         
|                                      |                         
|                                     
|Gross profit                          |                         
|                                      |                         
|                                     
|Operating expenses:                   |                         
|Selling                               |                         
|Research and development              |                         
|General and administrative            |                         
|                                      |                         
|                                     
|Total operating expenses              |                         
|                                      |                         
|                                     
|Operating income (loss)               |                         
|Other (expense), net                  |                         
|                                      |                         
|Income (loss) before income taxes     |                         
|Income taxes (benefit)                |                         
|                                      |                         
|                                     
|Net income (loss)                     |                         
|                                      |                         
|                                     
|Net income (loss) per share:          |                         
|Basic                                 |                         
|Diluted                               |                         
|Weighted average common               |                         
|shares outstanding:                   |                         
|Basic                                 |                         
|Diluted                               |                         
|                                     
|                                     
|
|
|(in thousands)(unaudited)            
|BALANCE SHEET DATA:                   |                         
|                                     
|Working capital (deficit)             |                         
|Property and equipment, net           |                         
|Goodwill and other                    |                         
|intangible assets, net                |                         
|Total assets                          |                         
|Long-term debt, less                  |                         
|current portion                       |                         
|Subordinated debt, less               |                         
|current portion                       |                         
|Shareholder's equity                  |                         



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



| | 10
| | --







QUARTERLY FINANCIAL DATA

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

FOR THE QUARTER ENDED IN FISCAL 2005

|                                                          | DECEMBER 31 | MARCH 31 | JUNE 30 | SEPTEMBER 30
|--------------------------------------------------------- | ----------- | -------- | ------- | ------------
|                                                         
|Total revenue                                             |             |          | $       | 9,694       
|                                                         
|Gross profit                                              |             |          |         | 3,627       
|                                                         
|Net income (loss)                                         |             |          |         | 404         
|                                                         
|Basic net income (loss) per common share outstanding(1)   |             |          |         | .08         
|                                                         
|Diluted net income (loss) per common share outstanding(1) |             |          |         | .08         
|                                                         
|                                                         
|FOR THE QUARTER ENDED IN FISCAL 2004                     
|                                                         
|
|                                                         
|Total revenue                                             |             |          | $       | 8,777       
|                                                         
|Gross profit                                              |             |          |         | 2,635       
|                                                         
|Net income (loss)                                         |             |          |         | (130        
|                                                         
|Basic net income (loss) per common share outstanding(1)   |             |          |         | (.03        
|                                                         
|Diluted net income (loss) per common share outstanding(1) |             |          |         | (.03        

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

11

|BOARD OF DIRECTORS
Peter T. Kissinger, Ph.D.
Chairman and Chief Executive Officer
Candice B. Kissinger
Senior Vice President and
Research Director
Corporate Secretary
William E. Baitinger*
Special Assistant to the
Vice President for Research
Purdue University
Leslie B. Daniels*
Principal
CAI Advisors & Co., LLP
David W. Crabb, M.D.
Chairman
Indiana University Department
of Medicine
Gayl W. Doster*
Chair, Joint Task Force on Regulation
Indiana CPA Society* Audit Committee Member |  | ANNUAL MEETING OF SHAREHOLDERS

February 16, 2006
BASi Corporate Center
West Lafayette, Indiana
AUDITORS

KPMG LLP
Indianapolis, Indiana

TRANSFER AGENT

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

COMMON SHARES

Bioanalytical Systems, Inc. common shares are traded on the NASDAQ National
Market under the symbol BASI.
The following table sets forth by calendar quarter the high and low sales prices
of the common shares on the NASDAQ National Market System. The approximate
number of holders of common shares is 2,700.

        
Fiscal          
1st Qtr.          
2nd Qtr.          
3rd Qtr.          
4th Qtr.
        
2005
        
High               
6.69               
10.37               
10.35               
6.84          
        
Low                
4.56                 
4.70                 
5.19               
5.25

        
2004
        
High               
4.71                 
5.05                 
4.75               
5.99          
        
Low                
3.75                 
3.80                 
3.79               
3.90

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

A copy of the Company's 2005 Form 10-K Annual Report filed with the Securities
and Exchange Commission is available without charge upon written request, and by
visiting www.bioanalytical.com/invest/annual.html. Media inquiries and requests
for the 10-K and investor's kits should be directed to:
    Corporate Communications Director, Corporate Center
    2701 Kent Avenue, West Lafayette, IN 47906 USA
Inquiries from shareholders, security analysts, portfolio managers, registered
representatives and other interested parties should be directed to:
    BASi Investor Relations, NASDAQ: BASI
    phone 765-463-4527, fax 765-497-1102,
    basi@bioanalytical.com, www.bioanalytical.com
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------