2006 ANNUAL REPORT

December 28, 2006

Dear BASi Shareholders,

Fiscal 2006 was one of the more difficult years in the history of our company.
We experienced record losses with only a modest increase in revenue, but
importantly, we took definitive actions and developed tactics that we believe
increase the probability of a successful future for BASi. The losses, in part,
reflect our problems in properly sizing our operations for our volume of
business, resulting in underutilized capacity. The difficulty of integrating new
service capabilities from recent acquisitions into our business development
activities has also slowed our revenue growth. During the past fiscal year, the
problems in our Baltimore clinical unit, including the loss of a major customer
due to its acquisition, resulted in a sizeable impairment charge in the third
quarter. During fiscal 2006 we addressed staffing issues through reductions in
our Baltimore, United Kingdom, and West Lafayette operations, adding additional
short-term costs for severance. This rightsizing positions us for profitable
operations in fiscal 2007. Increased sales efforts and development of new, more
profitable market segments have positioned us for revenue growth in our
Baltimore operation. We expect to build strong customer relationships for all
our service businesses to assure more consistent revenue growth. During this
time, our markets and development opportunities have remained strong, offering a
promising future for the Company.

I was
recruited by the Company as President and CEO to address the issues of revenue
and profitability. We have implemented aggressive new programs from which we
expect to see improved future results. Working with a newly invigorated team of
experienced managers within the Company, dedicated to revenue growth and cost
control, we have developed a tactical plan for fiscal 2007 with a sharp focus on
obtaining budgeted revenues based on attainable growth plans using current
capacity. We have identified specific targets for profitability from each of our
business units and created an adaptive organization responsive to changing
business conditions to maintain our focus on achieving our
objectives.

The Company now has a full strength Business Development team deployed in the US
and in the UK/Europe intent on increasing revenues. Since the beginning of our
new fiscal year, we have increased productivity in our three Bioanalytical
laboratories in West Lafayette, Indiana, McMinnville, Oregon and the United
Kingdom, and are keeping our Evansville, Indiana Pre-Clinical operations near
capacity. We now have new management and clinic personnel in Baltimore who are
dedicated to success. We are installing a number of Culex® instruments around
the world, introducing new in-vivo products and growing our
Pharmacokinetics/Pharmacodynamics Services business in West Lafayette. We are
rebuilding our Information Technology Department from the ground up to meet the
needs of our scientific operations and our evolving financial information
system. We have set defined financial goals for our management at all levels,
and have improved the timeliness of financial reporting in order to give them
the information they need to respond to changing results.

Building on the positive steps taken in fiscal 2006, we begin fiscal 2007 with a
great deal of optimism and purpose. We continue to evaluate all facets of our
businesses with the objective of achieving strong financial returns for our
shareholders, and providing a stable environment for our many excellent
employees. The BASi team is committed to our plan for profitability, and
dedicated to building shareholder value.

Sincerely,
/s/  Richard M. Shepperd
Richard M. Shepperd
President and CEO

|Board of Directors

Peter T. Kissinger, Ph.D.
Chairman and Chief Scientific 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

* Audit Committee Member |  | Annual Meeting of Shareholders
February 15, 2007
BASi Corporate Center
West Lafayette, IndianaAuditors
Crowe Chizek and Company LLC
Indianapolis, IndianaTransfer Agent
Corporate Trust Department
National City Bank
1900 East 9th Street
Cleveland, Ohio  44114Common Shares
Bioanalytical Systems, Inc. common shares are traded on the NASDAQ
National Market System 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.
|------ | -------- | -------- | -------- | --------
|2006   |          |          |          |         
|High   | 6.40     | 7.21     | 7.80     | 7.64    
|Low    | 4.75     | 5.68     | 5.86     | 4.75    
|      
|2005   |         
|High   | 6.69     | 10.37    | 10.35    | 6.84    
|Low    | 4.56     | 4.70     | 5.19     | 5.25    

| |  | 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 2006 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
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Selected Consolidated Financial Data

|                                           | Year Ended September 30, |  |   |        |  
|------------------------------------------ | ------------------------ |  | - | ------ | -
|
|(in thousands, except per share data)     
|Statement of Operations Data:              |                          |  |   |        |  
|                                          
|Service revenue                            |                          |  | $ | 34,318 |  
|Product revenue                            |                          |  |   | 8,730  |  
|                                           |                          | 
|Total revenue                              |                          |  |   | 43,048 |  
|                                          
|Cost of service revenue                    |                          |  |   | 25,961 |  
|Cost of product revenue                    |                          |  |   | 3,547  |  
|                                           |                          | 
|Total cost of revenue                      |                          |  |   | 29,238 |  
|                                           |                          | 
|                                          
|Gross profit                               |                          |  |   | 13,810 |  
|                                           |                          | 
|Operating expenses:                        |                          | 
|Selling                                    |                          |  |   | 2,750  |  
|Research and development                   |                          |  |   | 1,444  |  
|General and administrative                 |                          |  |   | 11,938 |  
|Impairment loss                            |                          |  |   | 1,100  |  
|                                           |                          | 
|Total operating expenses                   |                          |  |   | 17,232 |  
|                                           |                          | 
|                                          
|Operating income (loss)                    |                          |  |   | (3,422 | )
|Other (expense), net                       |                          |  |   | (1,013 | )
|                                           |                          | 
|Income (loss) before income taxes          |                          |  |   | (4,435 | )
|Income tax provision (benefit)             |                          |  |   | (1,825 | )
|                                           |                          | 
|Net income (loss)                          |                          |  | $ | (2,610 | )
|                                           |                          | 
|Net income (loss) per share                |                          | 
|Basic                                      |                          |  | $ | (0.53  | )
|Diluted                                    |                          |  | $ | (0.53  | )
|                                          
|Weighted average common shares outstanding |                          | 
|Basic                                      |                          |  |   | 4,882  |  
|Diluted                                    |                          |  |   | 4,882  |  
|                                          
|
|
|(in thousands)(unaudited)                 
|Balance Sheet Data:                        |                          | 
|Working capital (deficit)                  |                          |  | $ | 3,552  |  
|Property and equipment, net                |                          |  |   | 25,765 |  
|Goodwill and other intangible assets, net  |                          |  |   | 2,372  |  
|Total assets                               |                          |  |   | 42,314 |  
|Long-term debt, less current portion       |                          |  |   | 8,186  |  
|Subordinated debt, less current portion    |                          |  |   | 4,477  |  
|Shareholders equity                       |                          |  |   | 17,354 |  

---

|The above is selected unaudited consolidated financial data of the Company for
the five years ended September 30, 2006. This annual report has been produced in
two separate segments. One segment is a reprint of the BASi 10-K for fiscal year
2006 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.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Quarterly Financial Data
Unaudited (amounts in thousands, except for per share data)
|------------------------------------------------------------------------------------

|                                                          |  |  |  
|--------------------------------------------------------- |  |  | -
|
|Total revenue                                             |  |  | $
|Gross profit                                              |  |  |  
|Impairment loss                                           |  |  |  
|Net income (loss)                                         |  |  |  
|Basic net income (loss) per common share outstanding(1)   |  |  |  
|Diluted net income (loss) per common share outstanding(1) |  |  |  
|                                                         
|For the Quarter Ended in Fiscal 2005                     
|
|Total revenue                                             |  |  | $
|Gross profit                                              |  |  |  
|Net income (loss)                                         |  |  |  
|Basic net income (loss) per common share outstanding(1)   |  |  |  
|Diluted net income (loss) per common share outstanding(1) |  |  |  

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