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

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, 1999.

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 333-36429

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

INDIANA                                                  35-1345024
(State or other jurisdiction of                          (I.R.S. Employer
incorporation or organization)                           Identification No.)

2701 KENT AVENUE
WEST LAFAYETTE, IN                                       47906
(Address of principal executive offices)                 (Zip code)

(765) 463-4527
(Registrant's telephone number, including area code)

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 (ss.  229.045 of this chapter) 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. [ ]

The aggregate  market value of the voting and  non-voting  common equity held by
non-affiliates  of the  registrant  is  $5,916,747.  As of  November  30,  1999,
4,514,349  shares of registrant's  Common Stock were  outstanding.  No shares of
registrant's Preferred Stock were outstanding as of November 30, 1999.

Documents  Incorporated  by  Reference:  Certain  portions  of the  Registrant's
definitive  Proxy Statement to be filed pursuant to Regulation 14A in connection
with its 2000 Annual Meeting of  Shareholders  is  incorporated  by reference to
those items listed in Part III of this Form 10-K.


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<PAGE>

<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S>       <C>                                                                               <C>
Part I                                                                                      Page

Item 1.   Business                                                                             3

Item 2.   Properties                                                                          14

Item 3.   Legal Proceedings                                                                   14

Item 4.   Submission of Matters to a Vote of Security Holders                                 14


Part II

Item 5.   Market for Registrant's Common Equity and Related Stockholder Matters               15

Item 6.   Selected Consolidated Financial Data                                                16

Item 7.   Management's Discussion and Analysis of Financial Condition and Results of          17
          Operations

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk                          21

Item 8.   Financial Statements and Supplementary Data                                         22

Item 9.   Changes in and Disagreements with Accountants on Accounting and Financial           40
          Disclosure


Part III

Item 10.  Directors and Executive Officers of the Registrant                                  41

Item 11.  Executive Compensation                                                              41

Item 12.  Security Ownership of Certain Beneficial Owners and Management                      41

Item 13.  Certain Relationships and Related Transactions                                      41


Part IV

Item 14.  Exhibits, Financial Statement Schedules and Reports on Form 8-K                     42
</TABLE>



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<PAGE>

Part I

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

Item 1.  Business

General

     The Company is a contract research  organization  (CRO) providing  research
and development resources to many of the leading pharmaceutical,  medical device
and  biotechnology  companies  in the world.  The Company  offers an  efficient,
variable-cost   alternative  to  its  clients'  internal  product   development,
compliance and quality control programs.  Founded in 1974, the Company initially
focused  primarily on providing new products and  procedures  which  facilitated
research  progress at client sites. As a consequence of increasing  pressures to
bring products to market on a cost-effective and accelerated basis, many clients
have  requested the Company to carry out  proprietary  projects at the Company's
facilities. As a result, the Company now derives its revenues from both the sale
of its analytical  instruments  and other products as well as research  services
provided  to  customers.  The  Company  provides  a broad  array of  value-added
services  and  products  focused on chemical  analysis,  allowing its clients to
perform their research and  development  functions  either  "in-house" or at the
Company.  The  Company  believes  that  among  CROs  that  provide  statistical,
clinical,  and medical  services,  the Company is the only one that  designs and
sells analytical  instrumentation.  Within the analytical  instruments business,
the  Company  believes  that it is one of very few firms to  maintain a separate
business  unit  devoted to contract  analytical  services  under the  regulatory
framework of good laboratory  practices (GLPs) and good manufacturing  practices
(GMPs).

     The Company's  services and products combine basic research with diagnostic
and  therapeutic  experience.  One  consequence  of  the  restructuring  of  the
healthcare industry is the greater reliance on outsourcing research services for
both  clinical  trials and  formulation  development.  The Company is capable of
supporting  the  analytical  needs of  researchers  and  clinicians,  from small
molecule drugs and hormones  through large  biomolecules  such as proteins.  The
Company's  scientists  have the skills  necessary in  instrumentation,  chemical
reagents  and  computer  software to make the  products and services it provides
increasingly  valuable  to the  worldwide  pharmaceutical,  medical  device  and
biotechnology industries.

     Over the past five years,  the Company  regularly has provided its services
and/or products to all of the top 25  pharmaceutical  companies in the world, as
ranked by 1998 research and  development  spending.  In fiscal 1999, the Company
estimates  that more than  one-third of its total revenue was derived from these
companies. As a result of its (i) client focus, (ii) reputation for high-quality
services and products, (iii) capital investment in cutting-edge  instrumentation
and  facilities,  (iv)  skilled  and  experienced  professional  staff,  and (v)
expertise in performing critical  development and support services,  the Company
believes  that it is a  value-added  partner in  solving  its  clients'  complex
product development problems.

     The  Company  provides  a  wide  variety  of  services  to   pharmaceutical
companies,  medical device  manufacturers,  medical research  centers,  academic
institutions  and  others.  These  analytical  services  support  screening  and
pharmacological  testing,  toxicology/safety  testing,  formulation development,
laboratory  testing,  regulatory and compliance  consulting and quality  control
testing.  The Company  began  offering  its  services  primarily  in response to
requests from  customers who had used or were using the Company's  products.  To
reduce  overhead  and speed drug  approval  requests  through  the Food and Drug
Administration  ("FDA"),  pharmaceutical  companies are  contracting  increasing
amounts of their  analytical  work to outside  firms  such as the  Company.  The
Pharmaceutical  Research and Manufacturing  Association  estimates that in 1999,
pharmaceutical  and  biotechnology  companies  spent  approximately


                                       3
<PAGE>

$24 billion worldwide on research and development,  of which  approximately 25%,
or $6.0 billion, was outsourced to independent  contract service providers.  The
Company believes that this  outsourcing  trend will continue as a result of drug
development  pressures,  the emphasis on cost containment,  patent  expirations,
consolidation  in  the  pharmaceutical   industry,   virtual  drug  company  and
biotechnology  industry  growth,  the need  for  technical  and data  management
expertise and the globalization of the pharmaceutical marketplace.

     The Company designs, manufactures and markets a broad range of products and
related scientific procedures that detect and quantify the presence of chemicals
in certain substances. With respect to its products, the Company competes in the
$11  billion per year  analytical  instrument  industry.  The  Company's  focus,
however,  is not on marketing  hardware and  software,  but rather on developing
solutions to challenging analytical problems which permit the Company to utilize
its talented  personnel in providing a total  solution not generally  offered by
hardware-focused  competitors.  The Company's products utilize  state-of-the-art
scientific technology, including liquid chromatography,  electrochemistry and in
vivo sampling  instrumentation.  The Company's  analytical  instruments are sold
primarily to pharmaceutical firms and research organizations.  Principal clients
of the Company include  scientists  engaged in drug metabolism studies and basic
neuroscience research.

     Changing Nature of Pharmaceutical Industry

     The  Company  provides  services  and  products  on a world  wide  basis to
pharmaceutical,   medical   device   and   biotechnology   companies,   academic
institutions  and the United States  government  to facilitate  the research and
development of drugs and medical devices.  The Company's  services are generally
marketed to  pharmaceutical  and other  biotechnical  companies engaged in later
stages of drug testing,  while the Company's  products are generally marketed to
both public and private  research  organizations  engaged in the early stages of
drug  development.  The research  services  industry is a highly  fragmented one
consisting of several hundred service providers operating in various segments of
the market and a small number of larger companies focusing primarily on managing
clinical  trials,  whereas the Company  competes against several large equipment
manufacturers with respect to its products.  While the markets for the Company's
services and products have distinct  customers  (often  separate  divisions in a
large pharmaceutical  company) and requirements,  the Company believes that both
markets are facing  increased  pressure  to  outsource  certain  facets of their
research  and  development  activities.  The Company  believes  that the factors
identified  below  will  contribute  to a  continuing  increase  in  outsourcing
activities by its customers.

     Drug Development Pressure

     The pharmaceutical  industry is under pressure to rapidly develop new drugs
to treat chronic  illnesses  and life  threatening  conditions  such as AIDS and
Alzheimer's   disease  as  consumers,   doctors,   health  care   providers  and
pharmaceutical   company  shareholders  continue  to  demand  quicker  and  more
efficient  drug  development.   Responding  to  this  pressure,   pharmaceutical
companies are attempting to accelerate the drug development  process,  including
relying  to  an  increasing  extent  on  external   providers  of  research  and
development  services  to  perform  testing  and  analysis  in all phases of the
process.



                                       4
<PAGE>

     Emphasis on Cost Containment

     Pharmaceutical  companies  are facing  increasing  pressure to develop more
efficient  operating  strategies  as a result of  margin  pressure  from  market
forces,  including  (i) a shift toward  managed care,  (ii) patent  expirations,
(iii)  generic  substitution,  (iv)  increased  purchasing  power of large buyer
groups and (v)  governmental  initiatives  designed to reduce drug  prices.  The
Company  believes that the  pharmaceutical  and medical  device  industries  are
responding to these  pressures by downsizing  internal  research and development
programs, thereby favoring outsourcing as a variable-cost alternative.  Further,
the  need  for  additional  capacity  to  increase  the  speed  of  new  product
development,  to maximize  the period of marketing  exclusivity  and to increase
economic returns, has driven the need for outsourced services.

     Patent Expirations

     Patents on all major pharmaceuticals  continue to age and expire. According
to  the   Pharmaceutical   Research  and  Marketing   Association,   since  1984
prescriptions  for generic drugs have risen from 20% to 47% of all prescriptions
written.  Moving  generic  drugs onto the market  more  rapidly can result in an
estimated 2 to 5 year  reduction in effective  patent  protection for brand name
drugs.  Patent expirations are forcing drug companies to develop new products or
modify  existing  products to maintain  market  share  against  generic  product
competition.  The Company believes that the pressure to develop new products and
modify  or  reformulate  existing  products,  combined  with  internal  capacity
constraints, is leading companies to outsource these activities.

     Consolidation in the Pharmaceutical Industry

     The   pharmaceutical   industry  is  increasingly   consolidating  as  drug
development  companies  continue  to  pursue  new  avenues  of  growth  and more
efficient  ways of  conducting  business.  As companies  seek to combine  varied
personnel,  resources  and  activities,  the  Company  believes  that  they will
increasingly  focus on ways to reduce  costs  and  streamline  operations,  thus
leading to the greater use of companies providing contract research services.

     Biotechnology Industry and "Virtual" Drug Company Growth

     The biotechnology industry has grown rapidly over the last 10 years and has
introduced a significant  number of new compounds for development.  As a result,
many  biotechnology  companies do not have the necessary  in-house  resources to
conduct  required  development  and  testing.  Furthermore,  there  has  been an
increase in the number of  pharmaceutical  and medical  device  companies  whose
business  strategy is to develop a product  sufficiently  to attract a strategic
partner that will  manufacture and market the drug. Many of these "virtual" drug
development  companies,  having  little or no  internal  development  or support
resources, must outsource a substantial portion of drug development and testing.

     Need for Technical Expertise

     The increasing  complexity of new drugs requires high quality,  innovative,
solution-driven  contract  work through all phases of the  development  process,
ranging from preclinical  toxicology and pharmacokinetics  through reformulation
pharmacokinetic  studies and post-market  clinical drug monitoring.  The Company
believes that this need for specialized  technical  expertise will  increasingly
lead to outsourcing of research activities.

     Need for Data Management Expertise

     Regulatory  agencies  are  increasing  the  volume  of  data  required  for
regulatory  filings,  as well  as  requesting  increased  access  to such  data.
Furthermore,  the FDA is encouraging the use of computer-assisted  filings in an
effort to expedite  the  approval  process.  Consequently,  drug  companies  are
increasingly  outsourcing to firms with automated data management  capabilities.
Moreover,  in response to clients'  demands for access to data as it is acquired
in the laboratory,  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.



                                       5
<PAGE>

     Globalization of the Marketplace

     Foreign pharmaceutical  companies,  particularly those of Japan and Europe,
are  increasingly  seeking to obtain  approval to market  their  products in the
United  States.  Due to a lack of  familiarity  with the complex  United  States
regulatory system and the difficulty in bringing their operating facilities into
FDA-required   GMP   compliance,   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
regulatory   submissions.   The  Company   believes  that  domestic  firms  with
established  regulatory  expertise and a broad range of  integrated  development
services will benefit from this trend.

The Company's Role in the Drug Development Process

     Overview of Process

     The Company has 25 years of experience in developing methodology to support
the analytical chemistry  requirements of the drug discovery process.  Under the
United States regulatory system, the development  process for new pharmaceutical
products  can be divided  into three  distinct  phases.  The  preclinical  phase
involves the discovery, characterization, product formulation and animal testing
necessary  to  prepare  an  Investigational   New  Drug  ("IND")  exemption  for
submission  to the FDA.  The IND must be accepted by the FDA before the drug can
be tested in humans.  The second,  or clinical  phase of  development  follows a
successful IND  submission and involves the activities  necessary to demonstrate
the safety,  tolerability,  efficacy and dosage of the  substance in humans,  as
well as the ability to produce the  substance in  accordance  with the FDA's GMP
regulations.  Data from these  activities are compiled in a New Drug Application
("NDA"), or for biotechnology  products,  a Product License Application ("PLA"),
for  submission  to the FDA  requesting  approval to market the drug.  The third
phase  follows FDA approval of the NDA or PLA and involves  the  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.

     Process Specifics and the Company's Role

     The Preclinical Phase. The development of a new pharmaceutical agent begins
with the discovery or synthesis of an array of new molecules which may influence
a specific target such as a membrane bound receptor or an enzyme involved in the
disease   under  study.   These   libraries   of  molecules   are  screened  for
pharmacological  activity  using  various  in  vivo  models,  with  the  goal of
selecting   relatively   few   "leads"  for   further   development.   Once  the
pharmacologically active molecule is fully characterized,  the agent is analyzed
to confirm the integrity and quality of material  produced.  Development  of the
initial dosage forms to be used in clinical  trials is completed,  together with
analytical  chemistry  protocols to determine their  stability.  Upon successful
completion  of  preclinical  safety  and  efficacy  studies in  animals,  an IND
submission  is  prepared  and  provided  to the  FDA  for  review  prior  to the
implementation of human clinical trials.

     Most of the  Company's  products are  designed  for use in the  preclinical
phase of drug development.  The Company also provides its bioanalytical services
in this  phase.  A good  example of the role of the  Company's  products  in the
preclinical phase is the utilization of Company technology in the development of
drug  substances   impacting  the  central  nervous  system   neurotransmitters,
including serotonin, dopamine,  norepinephrine,  and acetylcholine.  These drugs
are used in the treatment of such conditions as depression, Parkinson's disease,
schizophrenia and Alzheimer's  disease.  The Company's  chromatography  products
were used extensively to study the influence of reuptake inhibitors on serotonin
uptake and release in the central  nervous system (CNS) programs at universities
and a major  pharmaceutical  company.  The  Company  believes  that the  synergy
between the Company's services and instrumentation products has been a factor in
the Company being  selected by major  pharmaceutical  companies to determine new
drug candidates in thousands of Phase I-III clinical specimens.

     The Clinical Phase.  Following successful submission of an IND application,
the sponsor is permitted to conduct Phase I human  clinical  trials in a limited
number of healthy  individuals to determine the drug's safety and  tolerability.
This work  requires  bioanalytical  assays to  determine  the  availability  and
metabolism  of the active  ingredient  following  administration.  Expertise  in
method development and validation is essential for this phase, particularly with
respect to new chemical entities. Phase II clinical trials involve administering
the drug to  individuals  who suffer  from the target  disease or  condition  to
determine the drug's potential effectiveness and ideal dose. When


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<PAGE>

further  safety  (toxicology),   tolerability  and  dosing  regimens  have  been
established,  Phase III clinical trials  involving large numbers of patients are
conducted to verify  efficacy and safety.  After the  successful  completion  of
Phase III clinical trials,  the sponsor of the new drug submits an NDA or PLA to
the FDA requesting that the product be approved for marketing.

     The Company's  bioanalytical work is most individually intensive in Phase I
studies where  relatively  few  individuals  are dosed.  In Phase II and III the
number of  individuals  treated  accelerates  rapidly,  but the  number of blood
samples  drawn per  patient  declines.  Phase II and III studies are carried out
over several years with what has become a well established  analytical protocol.
To maintain  consistency in the analytical  data, it is unusual for a sponsor to
change  laboratories unless there are problems in the quality or timely delivery
of results.

     An area of particular interest to the Company is drug interaction  studies.
With  increasing  numbers of patients  receiving  multiple drug  therapy,  it is
critical  that the impact of each drug be assessed with respect to its influence
on the  effectiveness and toxicology of other drugs dosed  simultaneously.  This
process  complicates  and often  extends  clinical  trials.  Because  drugs from
different  manufacturers  frequently  will be used  together,  a CRO such as the
Company can provide  services to several firms  simultaneously  in cases where a
potential  synergy exists in another area (e.g.  the "cocktail"  approach to HIV
therapy). In such instances,  a given assay technology might well be of interest
to a number  of  clients,  thus  spreading  the  assay  development  cost.  More
importantly,  drug interaction studies often develop new clients for the Company
in a much more cost effective manner than advertising or an outside sales force.

     The Post-approval  Phase.  Following  approval,  the drug manufacturer must
comply with  quality  assurance  and  quality  control  requirements  throughout
production and must continue  chemical  analytical and stability  studies of the
drug during  commercial  production in order to continue to validate  production
processes and confirm product shelf life. The drug  manufacturer's raw materials
must be analyzed prior to use in production,  and samples from each manufactured
batch  must be tested  prior to  release  of the batch for  distribution  to the
public. The Company also provides its bioanalytical services in all areas during
the  post-approval  phase,   concentrating  on  bioequivalence  studies  of  new
formulations,  line  extensions,  new disease  indications and drug  interaction
studies.

Company Services and Products

     Overview

     The Company provides a broad array of bioanalytical  services in all phases
of the drug development  process,  and also provides products and procedures for
the $11  billion  per  year  analytical  instrument  industry.  Over its 25 year
history,  the Company has  developed  expertise  in a number of core  scientific
technologies  which it has utilized in  developing  state-of-the-art  procedures
designed to determine amounts of chemical substances in complex materials. These
technologies  include:  liquid  chromatography,  electrochemistry,  solid  phase
extraction,  mass  spectrometry,  enzymology and fluorescence.  The Company also
uses  its  expertise  in  analytical  chemistry  to  provide  a  wide  range  of
bioanalytical  services to pharmaceutical  companies,  academic institutions and
others involved in pharmaceutical research and development.

     Services

     The  Company  provides  a  wide  variety  of  services  to   pharmaceutical
companies, medical device manufacturers,  medical and research centers, academic
institutions and others.  The Company's services unit has grown rapidly over the
last several years. The Company began providing  services  primarily in response
to requests from customers who had used or were using the Company's products. As
the Company's  reputation has grown, the Company's  customers  increasingly have
drawn on the  Company's  expertise  in  analytical  chemistry  to solve  complex
problems  which  arise in the  course  of drug  research  and  development.  The
Company's  range of services now include:  method  development  and  validation,
product characterization,  stability testing,  bioanalytical testing, diagnostic
testing and in vivo sampling.  The Company is poised to utilize its expertise to
provide a greater volume and broader array of services.  These services  involve
the application of the Company's analytical chemistry expertise to a broad range
of challenging and complex issues, such as the services described below.

     o    Method Development and Validation.  The Company develops and validates
          methods  used in a broad  range of  laboratory  testing  necessary  to
          determine  physical  or  chemical  characteristics  of  compounds  and
          finished dosage forms. Analytical methods are developed to demonstrate
          potency, purity,  stability or physical attributes.  These methods are
          validated to ensure that the data  generated  are  accurate,  precise,
          reproducible and reliable and are used throughout the drug development
          process and



                                       7
<PAGE>

          in product  support  testing.  Of the  Company's  202  employees as of
          September  30, 1999,  more than 30 are Company  scientists  (including
          nine  who  hold  Ph.D.   degrees)  who  are  experienced  with  method
          development and validation.

     o    Product   Characterization.   The  Company  has  the   expertise   and
          instruments  required to identify  and  characterize  a broad range of
          chemical entities.  Characterization  analysis identifies the chemical
          composition,  structure  and physical  properties  of a compound,  and
          characterization  data forms a  significant  portion  of a  regulatory
          application.  The Company uses numerous techniques to characterize the
          compound, including chromatography, spectroscopy, electrochemistry and
          other physical chemistry techniques. Once appropriate test methods are
          developed and validated,  and appropriate  reference standards (highly
          pure samples) are characterized and certified,  the Company can assist
          clients by routinely  testing  compounds  for clinical and  commercial
          use.

     o    Stability  Testing.  The Company provides stability testing and secure
          storage facilities  necessary to establish and confirm product purity,
          potency and other  shelf-life  characteristics.  Stability  testing is
          required  at all  phases of  product  development  in order to confirm
          shelf  life  of each  manufactured  batch.  The  Company  maintains  a
          four-chamber,   ICH   (International   Conference  on   Harmonization)
          validated  controlled  climate GMP facility.  FDA regulations  require
          that samples of clinical and commercial  products  placed in stability
          chambers be analyzed in a timely fashion after scheduled "pull points"
          occur, based on the date of manufacture.

     o    Bioanalytical   Testing.  The  Company  offers  bioanalytical  testing
          services to support  clinical  trials by analyzing  plasma  samples to
          characterize  the  drug's  concentration  and  determine  the  rate of
          absorption and elimination.  Bioanalytical  studies of new drugs often
          present   challenging   and  complex   issues,   with  products  being
          metabolized into multiple active and inactive forms. The Company works
          with its clients to develop and validate  analytical methods to permit
          detection and  measurement of the various  components to trace levels.
          In some cases clients expect the Company to develop methodology, while
          in other cases  methodology is transferred from the client and refined
          and  validated by the Company  personnel.  The most common  technology
          used in such  studies is liquid  chromatography  coupled  with various
          detectors,   including  mass  spectrometry  as  well  as  optical  and
          electrochemical devices.

     o    Diagnostic  Testing.   The  Company  has  manufactured   bioanalytical
          chemistry products since its start in 1974. The Company produces fully
          automated,  networkable  state-of-the-art  liquid  chromatographs  and
          electrochemical  analyzers based on Windows(R)  software.  The Company
          has  recently  developed  and now produces a line of  diagnostic  kits
          designed  to  fit  its   instrumentation.   These  kits  help  measure
          neurotransmitters   and  their   metabolites  and   homocysteine,   an
          experimental  cardiovascular  disease  indicator  in plasma and urine.
          These  measurement  processes are often performed by Company personnel
          utilizing Company products.

     o    In  Vivo  Sampling.  The  Company  pioneered  and  has  commercialized
          miniaturized  in  vivo  sampling   methodology,   which  involves  the
          continuous  monitoring  of  chemical  changes  in live  animals.  This
          technology  is sold  as both a  service  and a line of  products.  The
          Company is  aggressively  adding new components to this line, with the
          goal of selling complete,  automated sampling systems.  Target markets
          include   veterinary  and  animal  research  centers,   pharmaceutical
          companies and medical research  centers.  The Company has received two
          significant Phase II SBIR (Small Business Innovation  Research) grants
          that involve subcontracts with Purdue University and the University of
          Kansas for the purpose of exploiting this emerging technology.

     o    Formulation  Development Services. In the future, the Company plans to
          provide  integrated  formulation  development  services,  enabling the
          Company  to take a  client's  compound  and  develop a safe and stable
          product with desired characteristics.  The Company believes its strong
          academic   connections   to  Purdue   University  and  other  academic
          institutions,   formulation   expertise   and   extensive   analytical
          capabilities   position   the   Company  to   provide  a   significant
          contribution to this area.

     Products

     The Company designs, manufactures and markets a broad range of products and
related scientific procedures that detect and quantify the presence of chemicals
in  certain   substances.   The  Company's  products  utilize   state-of-the-art
scientific technology including liquid  chromatography,  electrochemistry and in
vivo sampling instrumentation.  Presently, the Company's products and procedures
include:



                                       8
<PAGE>

     o    Bioanalytical   separation   instrumentation   that  utilizes   liquid
          chromatography and Windows(R) software to detect low concentrations of
          substances in biological fluids and tissues.

     o    A  wide-range   of  chemical   analyzers   that   utilize   scientific
          technologies  including  electrochemistry,  liquid  chromatography and
          enzymology  to  analyze  levels of  chemicals  such as  acetylcholine,
          choline,   serotonin  and  dopamine  in  biological  materials.  These
          instruments  assist  scientists  in the study of, among other  things,
          Alzheimer's  disease,  cocaine  addiction  and the effects of chemical
          warfare agents and strokes.

     o    Diagnostic  kits and  procedures,  designed to utilize  the  Company's
          instrumentation,  that 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.  These kits and  procedures  assist  researchers  in
          developing  new drugs  for  diseases  such as AIDS and  cardiovascular
          disease.

     o    A  line  of  miniaturized  in  vivo  sampling  devices,   marketed  to
          veterinary and animal research centers,  pharmaceutical  companies and
          medical  research  centers,  which  assist in the study of a number of
          medical conditions, including stroke, depression, Parkinson's disease,
          diabetes and osteoporosis.



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                                       9
<PAGE>
The chart below sets forth the  Company's  product  categories,  the  technology
supporting each category and the applications of each category.
<TABLE>
<CAPTION>
<S>                                      <C>                                      <C>
    Product/Procedure                        Enabling Technology                        Application(s)
    -----------------                        -------------------                        --------------

Bioanalytical Separation                 o      Liquid chromatography             Determining low concentrations of
Instrumentation                          o      High pressure digitally           substances in biological fluids and
                                                controlled metering pumps         tissues
                                         o      Electrochemistry and optics
                                                detectors
                                         o      Customized Windows(R) software
                                         o      Customized Internet
                                                applications

Electrochemical Analyzers and            o      Electrochemistry                  Development of biosensors for
Accessories                              o      Real time control and data        substances, such as glucose,
                                                acquisition software              lactate, glutamate; development of
                                         o      Customized Windows(R) software    batteries for electronics such as
                                         o      Customized Internet               pacemakers; study of corrosion of
                                                applications                            implants

Acetylcholine/Choline Analyzer           o      Liquid chromatography             Studies of Alzheimer's disease;
                                         o      Enzymology                        chemical warfare agents; and infant
                                         o      Electrochemistry                  formula

Serotonin and Dopamine Analyzer          o      Liquid chromatography             Developing serotonin reuptake
                                         o      Electrochemistry                  inhibitors; studies of the
                                                                                  mechanism of cocaine addiction

Amino Acid Analyzer                      o      Derivatization chemistry          Studies of aspartate, glutamate,
                                         o      Liquid chromatography             and GABA in the brain; research to
                                         o      Electrochemistry and/or           minimize the impact of stroke and
                                         o      Fluorescence                      other ischemic events in the brain

In vivo sampling devices ("artificial    o      Hydrophilic membrane fibers       Following pharmacokinetics in vivo;
blood vessels") and auxiliary            o      Digitally controlled pumping      monitoring glucose;
instrumentation                                 systems, miniature fraction       neurotransmitters, peptides, and
                                                collectors, and valves            amino acids; studies of stroke,
                                                                                  depression, Parkinson's Disease,
                                                                                  diabetes and calcium loss related
                                                                                  to osteoporosis and weightlessness;
                                                                                  reducing the use of animals in
                                                                                  research

Kits for clinical measurement of         o      Robotics                          Evaluating cardiovascular disease,
neurotransmitters and homocysteine in    o      Liquid chromatography             inborn errors of metabolism, and
human blood and urine                    o      Electrochemistry                  cancers of neurological origin
                                         o      Customized Windows(R) software

Simultaneous determination of multiple   o      Robotics                          "Cocktail" therapy for AIDS; drug
drugs in blood plasma                    o      Solid phase extraction            interaction studies during clinical
                                         o      Liquid chromatography             trials
                                         o      Mass spectrometry

Vital signs monitoring                   o      Electrocardiology (ECG)           ECG, respiration, blood pressure,
                                         o      Temperature transducers           and temperature monitoring in
                                         o      Real time software                veterinary clinics and toxicology
                                                                                  departments in pharmaceutical
                                                                                  companies
</TABLE>


                                       10
<PAGE>

Clients

     Over the past five years, the Company  regularly has provided  services and
products to all of the top 25  pharmaceutical  companies in the world, as ranked
by 1998 research and development spending. In fiscal 1999, the Company estimates
that more than one-third of its total revenue was derived from these  companies.
In  addition,  the  Company's  products are  purchased  by the vast  majority of
medical  schools in North America,  Europe and Asia. In fiscal 1999, the Company
provided products and services to approximately 300 institutions, including some
of  the  largest   United   States,   European  and  Japanese  drug   companies.
Approximately 34% of the Company's revenues are generated from customers located
outside the United States.

     The Company  believes that a concentration  of business among certain large
clients is not uncommon in the CRO industry.  The Company has  experienced  such
concentration  in the past and may do so again in the future.  During 1997, four
operating groups (Quality Control, Analytical Research and Development, Clinical
Pharmacokinetics,  and Drug  Metabolism)  of Pfizer,  Inc.  ("Pfizer"),  a major
United  States   pharmaceutical   company,   in  the  aggregate   accounted  for
approximately 21% of the Company's total revenues. These sales were derived from
both the products and the services  units of the Company.  During 1999 and 1998,
Pfizer accounted for approximately 22% and 20%,  respectively,  of the Company's
total revenues.  Most of these sales fell under  approximately 120 contracts the
Company  has or had with  Pfizer,  the  largest of which  totaled  approximately
$750,000.  Although  the  Company  strives to reduce its  reliance  on a limited
number of major clients,  there can be no assurance that the Company's  business
will not be dependent upon certain major clients, the loss of which could have a
material adverse effect on the Company. In addition, due to the project-oriented
nature of the Company's  business,  there can be no assurance  that  significant
clients in any one  period  will  continue  to be  significant  clients in other
periods.

Sales and Marketing

     Marketing and sales  initiatives  have been created to address market needs
and economic  reality.  These  services  have grown  primarily  through  direct,
internal recommendations among major pharmaceutical  manufacturers.  Frequently,
these  customers  have had  prior  relationships  with the  Company's  staff and
positive  experiences  with the  Company's  products and  services.  The Company
recognizes  that its growth and continued  customer  satisfaction  are dependent
upon its ability to continually improve its sales and marketing functions.

     In North America, the Company's products are sold directly to the end user.
The Company has  approximately  20 personnel  selling a range of products and an
equal number providing technical and development  support. All staff members are
technically  trained and  function  in both  capacities.  The  Company  also has
established a highly professional collection of catalogs, training and technical
support literature, video tapes, CD-Rom presentations, web sites, workshops, and
academic publications. The Company's peer-reviewed journal, Current Separations,
describes  independent  research in  technologies  of interest to the  Company's
customers,  and is  distributed to 18,500  readers  worldwide,  many of whom are
current or potential customers.

     Product  sales,  marketing and technical  support is based in the Company's
main office located in West  Lafayette,  Indiana.  The Company also maintains an
office in New Jersey with a small sales and technical  staff,  thus enabling the
Company to  demonstrate  its products and present  technical  workshops in close
proximity  of its largest  concentration  of key  customers.  The  Company  also
maintains sales and technical support  capabilities in Massachusetts,  New York,
Ohio, Texas, Pennsylvania and Kansas.

     The  Company's  marketing  plan  provides for new sales  representation  in
California and the Midwest,  stronger  promotion of all product lines,  enhanced
workshops, improved training and implementation of demonstration capabilities in
the Company's new facilities. The Company's primary marketing and sales strategy
is to be more  aggressive,  focus  on  customer  needs  and  further  strengthen
communications with its markets. In so doing, the Company will build on its long
history of innovation and technical excellence.



                                       11
<PAGE>
     BAS  Analytics,  Ltd., a wholly-owned  subsidiary of the Company,  provides
direct liaison with research service clients in the United Kingdom and maintains
a laboratory  to provide such  services.  Bioanalytical  Systems,  Ltd.,  also a
wholly-owned subsidiary of the Company, 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.  Revenue generated from one of the Company's Japanese
distributors,  BAS  Japan,  accounted  for  approximately  3%, 6% and 12% of the
Company's total revenue for fiscal 1999, 1998 and 1997,  respectively.  Although
the Company believes it has identified a suitable  replacement in the event that
BAS Japan discontinues as the Company's distributor, such an event could have an
adverse effect on the Company's  business,  operations and financial  condition.
(See  Note  10 of  Notes  to  Consolidated  Financial  Statements.)  All  of the
Company's distributor  relationships are managed from the Company's headquarters
in West Lafayette,  Indiana.  International  growth is planned through  stronger
local promotion and significant  expansion of the Company's distributor network,
and potentially through acquisitions.

Contractual Arrangements

     The Company's  service contracts  typically  establish an estimated fee for
identified services.  While the Company is performing a contract,  clients often
adjust the scope of  services  to be provided by the Company in light of interim
project  results,  at which  time the  amount of fees is  adjusted  accordingly.
Generally, the Company's  fee-for-service contracts are terminable by the client
upon  written  notice  of 30 days or less.  Contracts  may be  terminated  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. The loss of a large contract
or the loss of multiple  contracts could adversely  affect the Company's  future
revenue and profitability.

Backlog

     Because  the  arrangements  pursuant  to which  the  Company  provides  its
services are terminable upon written notice of 30 days or less, the Company does
not  calculate  backlog for the  services it provides  and does not believe that
determining  such amount  would  provide a  meaningful  indicator  of the future
performance of its services unit. Backlog for the Company's products consists of
booked  purchase  orders for products  which have not been shipped.  The Company
rarely  has a backlog  for its  products  of more than one month of sales.  Many
products are shipped within 24 hours of receipt of order.

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,  as well as  university  research
laboratories   and  teaching   hospitals.   In  addition,   there  are  numerous
full-service  CRO's that compete in this industry.  The largest CRO  competitors
offering similar research services include Covance, Inc., Pharmaceutical Product
Development,  Inc., Applied Analytical  Industries,  Inc., Phoenix International
Life Sciences 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  Hewlett  Packard,  Waters  Corporation and
Perkin  Elmer   Corporation.   Competitive   factors  include  product  quality,
reliability  and price.  The  Company  believes  it  competes  favorably  in its
targeted  markets  because  of its  ability  to combine  quality  products  with
technical assistance and services to meet customer needs.

     Many of the Company's  competitors  are much larger and have  significantly
greater financial resources than the Company.

Government Regulation

     The  services  performed  by the Company are subject to various  regulatory
requirements  designed to ensure the quality and integrity of pharmaceutical and
diagnostic products.  These regulations are governed primarily under the

                                       12
<PAGE>

Federal  Food,  Drug  and  Cosmetic  Act,  as  well  as  Associated  GLP and GMP
regulations  which  are  administered  by the  FDA in  accordance  with  current
industry  standards.   The  regulatory  requirements  apply  to  all  phases  of
manufacturing,  testing and record  keeping,  including  personnel,  facilities,
equipment, control of materials, processes and laboratories, packaging, labeling
and distribution. Noncompliance by the Company with GLPs and GMPs by the Company
could  result  in  disqualification  of  data  collected  by  the  Company  in a
particular  project.  Material violation of GLP or GMP requirements could result
in additional  regulatory sanctions and, in severe cases, could also result in a
discontinuance of selected Company operations.  Such discontinuance would have a
material  adverse  effect on the  Company's  business,  financial  condition and
results of operations.

     To help assure  compliance  with  applicable  regulations,  the Company has
established  quality  assurance  controls at its facilities that monitor ongoing
compliance by auditing test data and regularly inspecting facilities, procedures
and other GMP compliance parameters. In addition, FDA regulations and guidelines
serve  as a  basis  for  the  Company's  standard  operating  procedures,  where
applicable.  Certain 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 to FDA regulations,
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 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.  The risk of accidental  contamination  or
injury from these  materials  cannot be completely  eliminated.  In the event of
such an accident,  the Company could be held liable for any damages that result.
Such damages could have a material adverse effect on the Company's  business and
results of operations.

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 based upon client and project.
Although most of the Company's  clients are large,  well-capitalized  companies,
the financial  performance of these indemnities is not secured.  Therefore,  the
Company  bears the risk that the  indemnifying  party may not have the financial
ability to fulfill  its  indemnification  obligations  or that  liability  would
exceed the amount of  applicable  insurance.  Furthermore,  the Company could be
held  liable  for  errors and  omissions  in  connection  with the  services  it
performs.  There can be no assurance that the Company's  insurance coverage will
be adequate or that  insurance  coverage  will continue to be available on terms
acceptable  to the  Company,  or that the  Company  can  obtain  indemnification
arrangements or otherwise be able to limit its liability risk.

Employees

     At September  30, 1999,  the Company had 202  full-time  employees,  125 of
which hold  college  degrees,  including  30 Ph.D.s.  All  employees  enter into
confidentiality   agreements  intended  to  protect  the  Company's  proprietary
information.  The Company  believes  that its  relations  with its employees are
good. None of the Company's  employees are represented by a union. The Company's
performance depends on its ability to attract and retain qualified professional,
scientific and technical  staff.  The level of competition  among  employers for
skilled  personnel is high. The Company believes that its employee benefit plans
enhance  employee  morale,  professional  commitment and work  productivity  and
provide an incentive for employees to remain with the Company. While the Company
has  not  experienced  any  significant  problems  in  attracting  or  retaining
qualified personnel,  there can be no assurance that the Company will be able to
avoid these problems in the future.


                                       13
<PAGE>

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.  The Company also maintains  offices
which provide sales and technical  support services in New Jersey,  Pennsylvania
and the  United  Kingdom,  and  employs  sales  and  technical  support  service
representatives  in North  Carolina  and Texas.  The Company  believes  that its
facilities  are  adequate  for  the  Company's   operations  and  that  suitable
additional space will be available when needed.

Item 3.  Legal Proceedings

     The Company  from time to time may be involved in various  claims and legal
proceedings  arising in the ordinary  course of  business.  The Company does not
believe  that  any  pending  claims  or  proceedings,  individually  or  in  the
aggregate,  would  have a material  adverse  effect on the  Company's  financial
condition or results of operations.  In April,  1997, CMA Microdialysis  Holding
A.B.  ("CMA") filed an action against the Company in the United States  District
Court for the  District  of New Jersey in which CMA alleged  that the  Company's
microdialysis  probes infringe U.S. Patent No. 4,694,832.  The Company has filed
an answer  in which it denied  infringement  and in which it  asserted  that the
patent  on which  CMA  relies  is  invalid.  Sales of the  product  in  question
accounted for less than $150,000 of the Company's  revenues in fiscal 1999.  The
matter is now awaiting a trial date.  Management  intends to continue a vigorous
defense of CMA's claims,  and believes that the ultimate  outcome of this matter
will not have a material adverse effect on the Company's  financial condition or
result of operations.  However,  legal expenses  associated  with the defense of
this suit have had and will continue to have an adverse effect on earnings.

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

     Not applicable.








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                                       14
<PAGE>

Part II

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

     The following  table shows the quarterly range of high and low sales prices
for the  Company's  Common Shares as reported by the Nasdaq Stock Market for the
fiscal  years ended  September  30,  1999 and 1998.  The  approximate  number of
recordholders  of  outstanding  Common Shares as of September 30, 1999 was 1700.
The Common Shares were not publicly traded prior to November 24, 1997.

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

      1999
      ----
      High        5.750         4.250         4.250         4.000
      Low         3.625         3.000         3.500         2.875

      1998
      ----
      High        8.875        10.250         9.000         7.375
      Low         7.625         6.750         6.750         4.625

     On November 24, 1997, the SEC declared effective the Company's Registration
Statement on Form S-1, File Number 333-36429. Item 2 of Part II of the Company's
Form 10-Q for the period ended December 31, 1997 set forth information regarding
the net  proceeds  received by the Company  from the  offering  pursuant to such
registration  statement and the Company's use of such proceeds.  The information
below reflects changes since such disclosure.





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                                       15
<PAGE>

Item 6.  Selected Consolidated Financial Data

SELECTED CONSOLIDATED FINANCIAL DATA
(In thousands)

     The following is selected  consolidated  financial  data of the Company for
the five years ended  September 30, 1999. The data should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the consolidated  financial statements of Bionalytical  Systems,
Inc. and notes thereto contained elsewhere in this Form 10-K.
<TABLE>
<CAPTION>
<S>                                         <C>           <C>             <C>           <C>              <C>
                                                                   Year Ended September 30,
                                            --------------------------------------------------------------------
                                              1999          1998            1997          1996            1995
                                            --------      --------        --------      --------         -------
                                                          (in thousands, except per share data)
Statement of Income Data:

Services revenue....................        $ 9,993       $ 7,609         $ 4,991       $ 3,681          $ 2,725
Product revenue.....................          9,858        10,616           9,932         9,113            9,627
                                            --------      --------        --------      --------         -------
       Total revenue................         19,851        18,225          14,923        12,794           12,352
Cost of services revenue............          6,499         4,598           2,986         2,141            1,834
Cost of product revenue.............          3,943         3,911           3,334         3,227            3,448
                                            --------      --------        --------      --------         -------
       Total cost of revenue........         10,442         8,509           6,320         5,368            5,282
                                            --------      --------        --------      --------         -------
Gross profit........................          9,409         9,716           8,603         7,426            7,070
Operating expenses:
Selling.............................          3,943         4,524           4,225         3,937            3,940
Research and development............          1,955         2,165           1,568         1,424            1,124
General and administrative..........          2,550         2,336           1,638         1,364            1,222
                                            --------      --------        --------      --------         -------
       Total operating expenses.....          8,448         9,025           7,431         6,725            6,286
                                            --------      --------        --------      --------         -------
Operating income....................            961           691           1,172           701              784
Other income (expense), net.........           (114)          (25)            (75)          (18)             111
                                            --------      --------        --------      --------         -------
Income before income taxes..........            847           666           1,097           683              895
Income taxes........................            277           254             413           283              344
                                            --------      --------        --------      --------         -------
Net income..........................        $   570       $   412         $   684       $   400          $   551
                                            ========      ========        ========      ========         =======
Net income available to common
   shareholders.....................        $   570       $   412         $   657       $   347          $   497

Net income per Common Share.........
       Basic........................        $   .13       $   .10         $   .30       $   .16          $   .23
       Diluted......................        $   .12       $   .09         $   .21       $   .11          $   .16

Weighted average Common Shares
       outstanding..................
       Basic........................          4,506         4,117           2,221         2,185            2,185
       Diluted......................          4,676         4,403           3,101         3,089            3,066

                                                                       September 30,
                                            --------------------------------------------------------------------
                                              1999          1998            1997          1996            1995
                                            --------      --------        --------      --------         -------
                                                                      (in thousands)
Balance Sheet Data:
Working capital.....................        $ 4,275       $ 3,286         $ 2,493       $ 3,059          $ 4,080
Property and equipment, net.........         17,355        14,551          10,035         6,526            3,707
Total assets........................         26,321        22,280          15,931        11,374            9,428
Long-term debt, less current portion          4,112         1,124           5,045         2,512              416
Convertible preferred shares........              -             -           1,231         1,530            2,100
Shareholders' equity................         17,421        16,844           5,651         4,956            4,609
</TABLE>


                                       16
<PAGE>
Item 7. 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 the Company'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.  The
Company's actual results could differ materially from those discussed herein.

Overview

     The Company  provides a broad range of services  and  value-added  products
focused on chemical analysis to the worldwide pharmaceutical, medical device and
biotechnology  industries.  The  Company's  customer-focused  approach  and high
quality  products and services  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, the Company has experienced growth
primarily through internal expansion, supplemented by strategic acquisitions. As
part of its  internal  growth  strategy,  the  Company has  developed  technical
specialties in such areas as chromatography,  electrochemistry, in vivo sampling
and mass spectrometry.  The Company'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.  During this  phase,  the
Company has been continuously profitable since 1987.

     Throughout its history, the Company has taken steps to position itself as a
global leader in the analytical  chemistry  field.  Development of the Company's
infrastructure  began in 1975 when it  established  relationships  with  several
customers  and  multiple  international  distributors.   In  1981,  the  Company
increased  its sphere of  influence  to include  Japan with the  creation of BAS
Japan, an independent  distributor.  In 1988, the Company  enhanced its computer
software expertise by acquiring  Interactive  Microware,  Inc. in State College,
Pennsylvania. In 1990, the Company began offering contract services to customers
that  lacked  the time or  expertise  to  perform  certain  analyses  using  the
Company's analytical products. In 1995, the Company acquired a distributor,  BAS
Instruments  Ltd., to further  solidify its presence in the United  Kingdom.  In
1998,  the  Company  acquired  a  manufacturer  of  veterinary   monitoring  and
diagnostic equipment,  BAS Vetronics, to provide additional preclinical support.
In 1998, the Company also acquired a contract services firm, BAS Analytics Ltd.,
to offer local service in the United Kingdom.

     Revenues are derived  principally from (i) analytical  services provided to
customers and (ii) the sale of the Company's  analytical  instruments  and other
products.  Both methods of generating  revenue utilize the Company's  ability to
identify,  isolate and resolve  client  problems  relating to the separation and
quantification  of  individual  substances  in  complex  mixtures.  The  Company
supports the  pharmaceutical  industry by focusing on  analytical  chemistry for
biomedical research, diagnostics,  electrochemistry and separations science. The
Company'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. The
Company  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.

     The Company's pharmaceutical service contracts generally have terms ranging
from several months to several years. A portion of the contract fee is generally
payable  upon  receipt  of the  initial  samples  with the  balance  payable  in
installments  over the life of the  contract,  and the contracts are broken down
into discrete  units of  deliverable  services for which a fixed fee per unit is
established.  Revenue  and  related  direct  costs are  recognized  as  specific
contract terms are fulfilled under the percentage of completion method utilizing
units  of  delivery.  The  termination  of a  contract  results  in no  material
adjustments to revenue or direct costs previously recognized, and the Company is
entitled  to  payment  for all work  performed  through  the date of  notice  of
termination  and all costs  associated with  termination of a contract.  Revenue
from the sale of the  Company's  products and the related  costs are  recognized
upon shipment of the products to customers.

     The  Company's  management  believes  that  fluctuations  in the  Company's
quarterly  results are caused by a number of factors,  including  the  Company'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 on-going  contracts,  the timing of  acquisitions  and
other factors,  many of which are beyond the Company's control.  In fiscal 1999,
approximately  34% of the  Company'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,

                                       17
<PAGE>
political,  economic and cultural issues or changes could  adversely  affect the
growth or profitability of the Company's business activities in any such market.

Results of Operations

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

                                               Percentage of Revenue
                                        -------------------------------------
                                             Year Ended September 30,
                                        -------------------------------------
                                        1999            1998             1997
                                        ----            ----             ----

Services revenue....................    50.3%           41.8%            33.4%
Product revenue.....................    49.7            58.2             66.6
                                       ------          ------           ------
     Total revenue..................   100.0           100.0            100.0
Cost of services revenue............    32.7            25.2             20.0
Cost of product revenue.............    19.9            21.5             22.3
                                       ------          ------           ------
     Total cost of revenue..........    52.6            46.7             42.3
                                       ------          ------           ------
Gross profit........................    47.4            53.3             57.7
Operating expenses:.................
Selling.............................    19.9            24.8             28.3
Research and development............     9.8            11.9             10.5
General and administrative..........    12.8            12.8             11.0
                                       ------          ------           ------
     Total operating expenses.......    42.5            49.5             49.8
                                       ------          ------           ------
Operating income....................     4.9             3.8              7.9
Other income (expense), net.........    (0.6)           (0.1)            (0.5)
                                       ------          ------           ------
Income before income taxes..........     4.3             3.7              7.4
Income taxes........................     1.4             1.4              2.8
                                       ------          ------           ------
Net income..........................     2.9%            2.3%             4.6%
                                       ======          ======           ======


     Year ended September 30, 1999 compared with Year ended September 30, 1998

     Total revenue for the year ended September 30, 1999 increased 8.9% to $19.9
million  from $18.2  million  in the year  ended  September  30,  1998.  The net
increase of $1.7 million related  primarily to increased  revenue from services,
which  increased to $10.0 million in the year ended September 30, 1999 from $7.6
million in the year ended September 30, 1998 as a result of the expansion of the
types and volume of services  provided by the Company.  During this same period,
product revenue  decreased to $9.9 million for the year ended September 30, 1999
from $10.6 million for the year ended  September 30, 1998  primarily as a result
of decreased sales in the Asian electrochemistry markets.

     Costs  of  revenue  increased  22.7% to $10.4  million  for the year  ended
September 30, 1999 from $8.5 million for the year ended September 30, 1998. This
increase  of $1.9  million  was  largely  due to the  addition  of a UK services
facility.  Costs of revenue for the Company's  services  increased to 65.0% as a
percentage of services  revenue for the year ended September 30, 1999 from 60.4%
of services  revenue for the year ended September 30, 1998 due to an increase in
services support staff. Costs of revenue for the Company's products increased to
40.0% as a percentage of product  revenue for the year ended  September 30, 1999
from 36.8% of  product  revenue  for the year  ended  September  30,  1998,  due
primarily to a change in product mix.

     Selling  expenses for the year ended  September 30, 1999 decreased 12.8% to
$3.9 million from $4.5 million  during the year ended  September 30, 1998 due to
decreased foreign commission expense.  Research and development expenses for the
year ended  September 30, 1999  decreased 9.7% to $2.0 million from $2.2 million
for the year ended  September  30, 1998 due to the  decrease  in research  grant
activity.  General and administrative  expenses for the year ended September 30,
1999  increased  9.2% to $2.6  million  from  $2.3  million  for the year  ended
September 30, 1998, primarily as a result of an increase in administrative staff
expense and an increase in health care costs.



                                       18
<PAGE>

     Other income (expense), net, was $(114,000) in the year ended September 30,
1999 as compared to $(25,000) in the year ended  September  30, 1998 as a result
of the increase in interest expense due to an increase in long term debt.

     The  Company's  effective  tax rate for 1999 was 32.8% as compared to 38.2%
for fiscal 1998. This decrease was primarily due to a decrease in  nondeductible
foreign losses incurred in fiscal 1999.

     Year ended September 30, 1998 compared with Year ended September 30, 1997

     Total  revenue for the year ended  September  30, 1998  increased  22.1% to
$18.2 million from $14.9 million in the year ended  September 30, 1997.  The net
increase of $3.3 million related  primarily to increased  revenue from services,
which  increased to $7.6 million in the year ended  September 30, 1998 from $5.0
million in the year ended September 30, 1997 as a result of the expansion of the
types and volume of services  provided by the Company.  During this same period,
product revenue increased to $10.6 million for the year ended September 30, 1998
from $9.9 million for the year ended September 30, 1997 primarily as a result of
increased penetration in the physiology and the liquid chromatography markets.

     Costs of  revenue  increased  34.6%  to $8.5  million  for the  year  ended
September 30, 1998 from $6.3 million for the year ended September 30, 1997. This
increase of $2.2  million was largely due to the hiring of support  staff in the
services unit. Costs of revenue for the Company's services increased to 60.4% as
a  percentage  of services  revenue for the year ended  September  30, 1998 from
59.8% of  services  revenue  for the year  ended  September  30,  1997 due to an
increase in services support staff.  Costs of revenue for the Company's products
increased  to  36.8% as a  percentage  of  product  revenue  for the year  ended
September  30, 1998 from 33.6% of product  revenue for the year ended  September
30, 1997, due primarily to a change in product mix.

     Selling  expenses for the year ended  September 30, 1998  increased 7.1% to
$4.5 million from $4.2 million  during the year ended  September 30, 1997 due to
increased salary expense.  Research and development  expenses for the year ended
September  30, 1998  increased  38.1% to $2.2  million from $1.6 million for the
year ended  September 30, 1997 due to the increase in research  grant  activity.
General  and  administrative  expenses  for the year ended  September  30,  1998
increased  42.6% to $2.3 million from $1.6 million for the year ended  September
30, 1997,  primarily as a result of increased legal expenses associated with the
patent infringement suit. (See Item 3 - Legal Proceedings)

     Other income (expense),  net, was $(25,000) in the year ended September 30,
1998 as compared to $(75,000) in the year ended  September  30, 1997 as a result
of the  increase  in  interest  income  due to an  increase  in  cash  and  cash
equivalents resulting from the initial public offering.

     The  Company's  effective  tax rate for 1998 was 38.2% as compared to 37.7%
for fiscal 1997. This increase was primarily due to nondeductible foreign losses
incurred in fiscal 1998.

Liquidity and Capital Resources

     Since its inception, the Company's principal sources of cash have been cash
flow generated from operations and funds received from bank borrowings and other
financings including the Company's initial public offering completed in November
1997. At September 30, 1999,  the Company had cash and cash  equivalents of $1.9
million,  compared to cash and cash equivalents of $1.2 million at September 30,
1998.  The increase in cash resulted  primarily  from the increase in debt which
partially  funded  the  increase  in  capital  expenditures  made to expand  the
Company's facilities and operations.

     The Company's net cash  provided by operating  activities  was $1.6 million
for the year ended  September 30, 1999.  Cash provided by operations  during the
year ended September 30, 1999 consisted of net income of $570,000, plus non-cash
charges of $1,321,000,  less a net increase of $304,000 in operating  assets and
liabilities.  The most significant increase in operating assets related to trade
accounts receivable, which increased $638,000 at September 30, 1999.

     Cash used by  investing  activities  decreased to $4.0 million for the year
ended  September  30, 1999 from $5.0  million for the year ended  September  30,
1998,  primarily  as  a  result  of  the  Company's  completed  construction  of
additional facilities. Cash provided by financing activities for fiscal 1999 was
$3.2 million due to the increase in debt.

     The Company's net cash  provided by operating  activities  was $2.4 million
for the year ended  September 30, 1998.  Cash provided by operations  during the
year ended September 30, 1998 consisted of net income of $412,000,


                                       19
<PAGE>

plus non-cash charges of $989,000,  plus a net decrease of $969,000 in operating
assets and  liabilities.  The most  significant  decrease  in  operating  assets
related to trade accounts receivable,  which decreased $431,000 at September 30,
1998.

     Cash used by  investing  activities  increased to $5.0 million for the year
ended  September  30, 1998 from $4.0  million for the year ended  September  30,
1997,  primarily  as a result of the  Company's  purchase  and  construction  of
additional  facilities,  as well as the acquisition of Clinical Innovations (BAS
Analytics,  Ltd). Cash provided by financing activities for fiscal 1998 was $3.7
million due to the initial public offering  partially offset by the reduction of
debt.

     Total  expenditures  by the Company for  property and  equipment  were $4.1
million,  $4.9  million  and  $4.1  million  in  fiscal  1999,  1998  and  1997,
respectively.  Expenditures  made  in  connection  with  the  expansion  of  the
Company's operating facilities and purchases of laboratory equipment account for
the largest portions of these  expenditures.  The increased capital  investments
relate to the  completion  of the  renovation  and  construction  of  additional
facilities and the purchase of additional laboratory equipment  corresponding to
anticipated  increases in research  services to be provided by the Company.  The
Company  expects to make other  investments  to expand  its  operations  through
internal growth, strategic acquisitions,  alliances and joint ventures. However,
the Company currently has no firm commitments for capital expenditures.

     Based on its current  business  activities,  the Company believes that cash
generated from its operations,  amounts  available under its existing bank lines
of credit and credit  facility and the  remaining  net proceeds from its initial
public  offering will be sufficient  to fund the Company's  working  capital and
capital expenditure requirements for the foreseeable future.

     The Company has a working  capital line of credit,  which  expires April 1,
2000 and allows borrowings of up to $3,500,000.  Interest accrues monthly on the
outstanding  balance at the bank's  prime rate minus 25 basis  points  (8.0 % at
September 30, 1999) or at the London  Interbank  Offered Rate (LIBOR) plus 2% as
elected by the Company.  The line is  collateralized by inventories and accounts
receivable and requires the Company to maintain certain financial ratios.  There
was no balance outstanding on this line of credit at September 30, 1999.

     The Company has an  acquisition  line of credit  agreement,  which  expires
April 1,  2000 and  allows  borrowings  of up to  $4,000,000.  Interest  accrues
monthly on the outstanding balance at the bank's prime rate (8.25 % at September
30, 1999). There was no balance  outstanding on this line of credit at September
30, 1999.

     On June 24, 1999 the Company obtained a $3,500,000 commercial mortgage with
a bank. The mortgage note requires 59 monthly principal payments of $19,444 plus
interest  followed  by a  final  payment  for the  unpaid  principal  amount  of
$2,352,804  due June 24, 2004.  Interest is charged at the one-month  LIBOR rate
plus 200 basis points (7.40% at September 30, 1999).

Inflation

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

Year 2000

     The Company undertook in fiscal 1998 to identify information technology and
other systems which may not be Year 2000 compliant. The Company has modified its
computer  hardware and software  systems to recognize the Year 2000.  Management
has contacted  significant  suppliers,  customers and financial  institutions to
ensure that those parties have  appropriate  plans to remediate Year 2000 issues
where  their  systems  interface  with  the  Company's  systems  or  impact  its
operations.  The Company is also assessing the effect on its  operations  should
those organizations fail to properly remediate their computer systems.  The cost
of the Year 2000  initiatives  is not  expected to be material to the  Company's
results of operations or financial position.



                                       20
<PAGE>

New Accounting Pronouncements

     Effective  October 1, 1998, the Company adopted the provisions of Statement
of Financial  Accounting  Standards No. 131 (SFAS No. 131),  "Disclosures  about
Segments of an Enterprise  and Related  Information."  SFAS No. 131  establishes
standards for the way that public enterprises report information about operating
segments in annual  financial  statements  and requires  that those  enterprises
report  selective  information  about  operating  segments in interim  financial
reports.  SFAS No. 131 also  establishes  standards about products and services,
geographic  areas and major  customers.  The  adoption  of SFAS No.  131 did not
affect  results  of  operations  or  financial  position,  but  did  affect  the
disclosure of segment information.

     Effective  October 1, 1998, the Company adopted the provisions of Statement
of  Financial   Accounting   Standards  No.  130  (SFAS  No.  130),   "Reporting
Comprehensive Income," which requires entities to report comprehensive income in
their  financial  statements.  Comprehensive  income  refers to the change in an
entity's equity during a period resulting from all transactions and events other
than capital  contributed by and  distributions to the entity's owners.  For the
Company,  comprehensive income is equal to net income adjusted for the change in
currency translation.  The Company has elected to report comprehensive income in
the consolidated  statements of shareholders' equity. The Company's prior years'
financial statements have been reclassified for comparative  reporting purposes,
however,  there was no change in the net  income or total  shareholders'  equity
previously reported for the years ended September 30, 1998 and 1997.


Item 7A. Quantitative and Qualitative Disclosures About Market Risk

     Not Applicable.



                                       21
<PAGE>
Item 8.  Financial Statements and Supplementary Data







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, 1999 and 1998,  and the related  consolidated
statements of income,  preferred shares and shareholders'  equity and cash flows
for each of the three  years in the  period  ended  September  30,  1999.  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  generally   accepted  auditing
standards.  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, 1999 and 1998, and the  consolidated  results of
its  operations  and its cash  flows for each of the three  years in the  period
ended  September  30, 1999 in  conformity  with  generally  accepted  accounting
principles.



                                                Ernst & Young LLP


Indianapolis, Indiana
November 5, 1999



                                       22
<PAGE>


<TABLE>
<CAPTION>
Bioanalytical Systems, Inc.

Consolidated Balance Sheets
<S>                                                           <C>                 <C>
                                                                          September 30,
                                                                     1999              1998
                                                                ------------        ------------
Assets
Current assets:
     Cash and cash equivalents                                  $ 1,924,409         $ 1,208,157
     Accounts receivable:
         Trade                                                    3,564,795           2,774,714
         Grants                                                      46,752             209,164
         Other                                                       71,715              61,603
     Inventories                                                  1,790,733           1,880,680
     Deferred income taxes                                          242,260             168,649
     Prepaid expenses                                                80,600              59,694
                                                                ------------        ------------
Total current assets                                              7,721,264           6,362,661

Property and equipment:
     Land and improvements                                          171,014             171,014
     Buildings and improvements                                  11,638,468           8,355,058
     Machinery and equipment                                      9,144,104           7,463,099
     Office furniture and fixtures                                1,318,662           1,073,572
     Construction in process                                        106,798           1,464,092
                                                                ------------        ------------
                                                                 22,379,046          18,526,835
     Less accumulated depreciation and amortization              (5,023,942)         (3,975,912)
                                                                ------------        ------------
                                                                 17,355,104          14,550,923
Goodwill, less accumulated amortization of
     $143,328 in 1999 and, $62,120 in 1998                        1,053,057           1,134,265
Other assets                                                        191,429             231,865
                                                                ------------        ------------
Total assets                                                    $26,320,854         $22,279,714
                                                                ============        ============

Liabilities and Shareholders' Equity
Current liabilities:
     Accounts payable                                         $   2,019,989       $   1,940,615
     Income taxes payable                                             2,260             155,480
     Accrued expenses                                               815,770             352,403
     Customer advances                                              154,521             319,420
     Current portion of capital lease obligation                    220,432             308,447
     Current portion of long-term debt                              233,328                   -
                                                                ------------        ------------
Total current liabilities                                         3,446,300           3,076,365

Capital lease obligation, less current portion                      903,315           1,123,747
Long-term debt, less current portion                              3,208,340                   -
Deferred income taxes                                             1,341,605           1,236,093

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 - 4,514,349 in 1999,
              and 4,495,319 in 1998                                 999,992             995,778
     Additional paid-in capital                                  10,481,978          10,467,957
     Retained earnings                                            5,959,919           5,390,342
     Accumulated other comprehensive income (loss)                  (20,595)            (10,568)
                                                                ------------        ------------
                                                                 17,421,294          16,843,509
                                                                ------------        ------------
Total liabilities and shareholders' equity                    $  26,320,854       $  22,279,714
                                                                ============        ============

<FN>
See accompanying notes.
</FN>
</TABLE>



                                       23
<PAGE>

<TABLE>
<CAPTION>
Bioanalytical Systems, Inc.

Consolidated Statements of Income
<S>                                                     <C>                   <C>                   <C>
                                                                       Year ended September 30,
                                                            1999                  1998                  1997
                                                        ------------          ------------          ------------

Services revenue                                        $ 9,992,670           $ 7,608,792           $ 4,991,348
Product revenue                                           9,858,271            10,616,363             9,932,022
                                                        ------------          ------------          ------------
     Total revenue                                       19,850,941            18,225,155            14,923,370

Cost of services revenue                                  6,498,817             4,598,266             2,985,858
Cost of product revenue                                   3,943,437             3,910,740             3,334,413
                                                        ------------          ------------          ------------
     Total cost of revenue                               10,442,254             8,509,006             6,320,271
                                                        ------------          ------------          ------------

Gross profit                                              9,408,687             9,716,149             8,603,099

Operating expenses:
     Selling                                              3,942,681             4,524,664             4,224,523
     Research and development                             1,955,673             2,164,951             1,568,417
     General and administrative                           2,549,806             2,335,564             1,638,465
                                                        ------------          ------------          ------------
         Total operating expenses                         8,448,160             9,025,179             7,431,405
                                                        ------------          ------------          ------------

Operating income                                            960,527               690,970             1,171,694

Interest income                                              30,842                86,521                 4,835
Interest expense                                           (226,518)              (92,855)             (100,177)
Other income (expense)                                       93,520               (26,587)               12,306
Gain (loss) on sale of property and equipment               (11,293)                8,486                 8,831
                                                        ------------          ------------          ------------
Income before income taxes                                  847,078               666,535             1,097,489
Income taxes                                                277,501               254,342               413,395
                                                        ------------          ------------          ------------

Net income                                              $   569,577           $   412,193           $   684,094
                                                        ============          ============          ============


Net income available to common shareholders             $   569,577           $   412,193           $   657,046

Net income per share:
     Basic                                              $      0.13           $      0.10           $      0.30
     Diluted                                            $      0.12           $      0.09           $      0.21

Weighted average common shares outstanding:
     Basic                                                4,505,819             4,117,088             2,221,146
     Diluted                                              4,675,850             4,402,755             3,101,429

<FN>
See accompanying notes.
</FN>
</TABLE>



                                       24
<PAGE>


<TABLE>
<CAPTION>
Bioanalytical Systems, Inc.

Consolidated Statements of Preferred Shares and Shareholders' Equity
<S>                                <C>           <C>           <C>       <C>               <C>         <C>            <C>

                                                                                                        Accumulated
                                   Redeemable    Convertible                                              Other          Total
                                    Preferred     Preferred    Common      Additional      Retained    Comprehensive  Shareholders'
                                     Shares        Shares      Shares    Paid-in Capital   Earnings       Income        Equity
                                   ----------    ------------  --------  ---------------   ----------- -------------  -------------
Balance at September 30, 1996      $ 298,302     $ 1,231,242   $484,375   $   151,233      $4,321,103     $ (1,043)    $ 6,485,212
Comprehensive income
  Net income                               -               -          -             -         684,094            -         684,094
  Other comprehensive income:
  Foreign currency translation
  adjustments                              -               -          -             -               -       (1,901)         (1,901)
                                                                                                                            -------
Total comprehensive income                                                                                                 682,193

Accrual of cumulative dividends
  on preferred shares                 27,048               -          -             -         (27,048)           -               -

Exercise of stock options                  -               -     13,500        27,000               -            -          40,500

Redemption of preferred shares      (325,350)              -          -             -               -            -        (325,350)
                                   ----------    ------------  --------   -----------      -----------    ---------    ------------
Balance at September 30, 1997              -       1,231,242    497,875       178,233       4,978,149       (2,944)      6,882,555
Comprehensive income
  Net income                               -               -          -             -         412,193            -         412,193
  Other comprehensive income:
  Foreign currency translation
  adjustments                              -               -          -             -               -       (7,624)         (7,624)
                                                                                                                            -------

Total comprehensive income                                                                                                 404,569

Conversion of preferred shares
  at IPO                                   -      (1,231,242)   166,667     1,064,575               -            -               -

Exercise of stock options                  -               -     32,192       165,454               -            -         197,646

Issuance of common stock at IPO            -               -    299,044     9,059,695               -            -       9,358,739
                                   ----------    ------------  --------   -----------      -----------    ---------    ------------
Balance at September 30, 1998              -               -    995,778    10,467,957       5,390,342      (10,568)     16,843,509
Comprehensive income
  Net income                               -               -          -             -         569,577            -         569,577
  Other comprehensive income:
  Foreign currency translation
  adjustments                              -               -          -             -               -      (10,027)        (10,027)
                                                                                                                           --------

Total comprehensive income                                                                                                 559,550

Exercise of stock options                  -               -      4,214        14,021               -            -          18,235
                                   ----------    ------------  --------   -----------      -----------    ---------    ------------
Balance at September 30, 1999      $       -     $         -   $999,992   $10,481,978      $5,959,919     $(20,595)    $17,421,294
                                   ==========    ============  ========   ===========      ===========    =========    ============

<FN>
See accompanying notes.
</FN>
</TABLE>



                                       25
<PAGE>


<TABLE>
<CAPTION>
Bioanalytical Systems, Inc.

Consolidated Statements of Cash Flows
<S>                                                    <C>                   <C>                   <C>
                                                                        Year ended September 30,
                                                           1999                 1998                   1997
                                                       ------------          ------------          ------------

Operating activities
Net income                                             $   569,577           $   412,193           $   684,094
Adjustments to reconcile net income to net
    cash provided by operating activities:
       Depreciation                                      1,196,353               841,854               524,389
       Amortization                                         81,208                32,118                12,000
       Loss (gain) on sale of property and equipment        11,293                (8,486)               (8,831)
       Deferred income taxes                                31,901               122,973                56,080
       Changes in operating assets and liabilities:
          Accounts receivable                             (637,781)              431,159            (1,361,559)
          Inventories                                       89,947               113,507                20,619
          Prepaid expenses and other assets                 19,530               159,274              (107,656)
          Accounts payable                                  79,374               369,983               611,071
          Income taxes payable                            (153,220)             (212,652)              216,591
          Accrued expenses                                 463,367               (16,990)              112,767
          Customer advances                               (164,899)              124,551                82,115
                                                       ------------          ------------          ------------
Net cash provided by operating activities                1,586,650             2,369,484               841,680

Investing activities
Capital expenditures                                    (4,054,319)           (3,508,342)           (4,095,651)
Proceeds from sale of property and
    equipment                                               42,492                77,359                70,778
Payments for purchase of net assets from
    Vetronics, net of cash acquired                              -              (327,740)                    -
Payments for purchase of net assets from
    Clinical Innovations, net of cash acquired                   -            (1,265,230)                    -
                                                       ------------          ------------          ------------
Net cash used by investing activities                   (4,011,827)           (5,023,953)           (4,024,873)

Financing activities
Borrowings on lines of credit                            2,850,000               860,093               615,377
Payments on lines of credit                             (2,850,000)           (1,375,470)             (100,000)
Payments on capital lease obligations                     (308,447)             (187,894)              (83,321)
Borrowings of long-term debt                             3,500,000                43,365             2,722,995
Payments of long-term debt                                 (58,332)           (5,187,567)             (119,108)
Net proceeds from Initial Public Offering                        -             9,358,739                     -
Net proceeds from the exercise of stock options             18,235               197,646                40,500
Redemption of preferred shares                                   -               -                    (325,350)
                                                       ------------          ------------          ------------
Net cash provided by financing activities                3,151,456             3,708,912             2,751,093
Effect of exchange rate changes                            (10,027)               (7,624)               (1,901)
                                                       ------------          ------------          ------------

Net increase (decrease) in cash and cash equivalents       716,252             1,046,819              (434,001)
Cash and cash equivalents at beginning of year           1,208,157               161,338               595,339
                                                       ------------          ------------          ------------
Cash and cash equivalents at end of year               $ 1,924,409           $ 1,208,157           $   161,338
                                                       ============          ============          ============


<FN>
See accompanying notes.
</FN>
</TABLE>



                                       26
<PAGE>

Bioanalytical Systems, Inc.

Notes to Consolidated Financial Statements

September 30, 1999

1. Significant Accounting Policies

Nature of Business

Bioanalytical  Systems,  Inc. and its  subsidiaries  (the "Company")  engages in
laboratory services, consulting and research related to analytical chemistry and
chemical  instrumentation.  The Company also manufactures scientific instruments
for  use  in  the  determination  of  trace  amounts  of  organic  compounds  in
biological,  environmental  and  industrial  materials.  The  Company  sells its
equipment  and  software  for  use  in  industrial,  governmental  and  academic
laboratories.  The  Company's  customers  are  located in the United  States and
throughout the world.

Principles of Consolidation

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

Cash Equivalents

The Company 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  the  Company  to  credit  risk  consist
principally of trade accounts  receivable.  The Company performs periodic credit
evaluations of its customers' financial condition and generally does not require
collateral on trade accounts receivable.

The Company'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. The Company'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.

Goodwill

Goodwill  represents the excess of cost of  acquisitions  over the fair value of
net assets  acquired and is amortized by the  straight-line  method over periods
ranging from 15-20 years.




                                       27
<PAGE>

1.  Significant Accounting Policies (continued)

Property and Equipment

Property and equipment is 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 4 through 40 years.  Expenditures for maintenance
and repairs are charged to expense as incurred.

Revenue Recognition

The Company's pharmaceutical service contracts generally have terms ranging from
several  months to several years.  The typical  contract is one year in duration
and  includes a  one-year  renewal  option.  A portion  of the  contract  fee is
generally  payable upon receipt of the initial  samples with the balance payable
in  installments  over the life of the  contract.  A majority  of the  Company's
contracts are broken down into discrete units of deliverable  services for which
a fixed fee for each unit is  established  and revenue and related  direct costs
are  recognized as units of deliverable  services are  fulfilled.  For all other
service contracts, the Company allocates a ratable portion of the total contract
fee to the units of deliverable  services and recognizes revenue and the related
direct costs as the units of deliverable  services are  fulfilled.  Revenue from
the sale of the  Company's  products and the related costs are  recognized  upon
shipment of the products to customers.

Advertising Expense

The Company  expenses  advertising  costs as incurred.  Advertising  expense was
$308,831, $551,848 and $275,850 for 1999, 1998 and 1997, respectively.

Use of Estimates

The preparation of financial  statements in conformity  with generally  accepted
accounting principles 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 Statement of Financial Accounting Standards No. 123 (SFAS No.
123), "Accounting for Stock-Based  Compensation," the Company uses the intrinsic
value method to account for stock  options,  consistent  with the existing rules
established by Accounting  Principles Board No. 25, "Accounting for Stock Issued
to Employees."

Segment Reporting

Effective  October 1, 1998,  the Company  adopted the provisions of Statement of
Financial  Accounting  Standards  No.  131 (SFAS No.  131),  "Disclosures  about
Segments of an Enterprise  and Related  Information."  SFAS No. 131  establishes
standards for the way that public enterprises report information about operating
segments in annual  financial  statements  and requires  that those  enterprises
report  selective  information  about  operating  segments in interim  financial
reports.  SFAS No. 131 also  establishes  standards about products and services,
geographic  areas and major  customers.  The  adoption  of SFAS No.  131 did not
affect  results  of  operations  or  financial  position,  but  did  affect  the
disclosure of segment information.



                                       28
<PAGE>

1.  Significant Accounting Policies (continued)

Comprehensive Income

Effective  October 1, 1998,  the Company  adopted the provisions of Statement of
Financial Accounting Standards No. 130 (SFAS No. 130), "Reporting  Comprehensive
Income,"  which  requires  entities  to  report  comprehensive  income  in their
financial  statements.  Comprehensive income refers to the change in an entity's
equity during a period  resulting  from all  transactions  and events other than
capital  contributed  by and  distributions  to the  entity's  owners.  For  the
Company,  comprehensive income is equal to net income adjusted for the change in
currency translation.  The Company has elected to report comprehensive income in
the consolidated  statements of shareholders' equity. The Company's prior years'
financial statements have been reclassified for comparative  reporting purposes,
however,  there was no change in the net  income or total  shareholders'  equity
previously reported for the years ended September 30, 1998 and 1997.

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 170,031,  172,382, and 127,884 shares in 1999, 1998
and 1997, respectively.  The dilutive effect of convertible preferred shares was
to increase the weighted average number of common shares  outstanding by 113,285
and 752,399 shares in 1998 and 1997, respectively.

3. Acquisitions

Effective  October 31, 1997,  the Company  acquired all of the capital  stock of
Vetronics Inc. for cash approximating  $200,000 and a $150,000 note payable. The
acquired  business was involved in the distribution of veterinary  equipment and
supplies in the United States.

Effective  July 1,  1998,  the  Company  acquired  all of the  capital  stock of
Clinical  Innovations  Ltd.  for cash  approximating  $1,500,000.  The  acquired
business  was  involved  in  the   processing  of   bioanalytical   samples  for
pharmaceutical firms in the United Kingdom.

Both acquisitions were accounted for using the purchase method of accounting and
the  results of  operations  have been  included in the  consolidated  financial
statements  since  the  dates of  their  acquisition.  The  purchase  price  was
allocated to the net assets acquired, including $956,000 to goodwill, based upon
the fair market value at the date of acquisition.

On an unaudited pro forma basis,  revenue,  net income and net income per common
share (diluted) for the years ended September 30, 1998 and 1997 was $19,413,000,
$718,000, $0.16 and $16,840,000, $1,154,000, $0.37, respectively. This pro forma
data presents the consolidated  results of operations as if the acquisitions had
occurred  on October  1,  1996,  after  giving  effect to  certain  adjustments,
including  amortization  of  goodwill,  increased  interest  expense and related
income tax effects.

The pro forma  results have been prepared for  comparative  purposes only and do
not purport to indicate  the results of  operations  which would  actually  have
occurred had the acquisition been in effect on the date indicated,  or which may
occur in the future.

                                       29
<PAGE>


3.  Acquisitions (continued)

Pro forma  amounts for the years ended  September  30, 1998 and 1997 include the
acquired  entities'  financial data for the years ended December 31 and February
28,  respectively,  as it was not practicable to determine the September 30 year
end results.

4.  Inventories

Inventories at September 30 consisted of the following:

                                     1999                 1998
                                     ----                 ----


Raw materials                   $  1,049,682          $  966,314
Work in progress                     253,329             316,648
Finished goods                       594,549             677,522
                                 -----------         -----------
                                   1,897,560           1,960,484
LIFO reserve                       (106,827)            (79,804)
                               -------------        ------------
                                  $1,790,733          $1,880,680
                                  ==========          ==========

5.  Debt Arrangements

The Company has a working  capital line of credit,  which  expires April 1, 2000
and allows  borrowings  of up to  $3,500,000.  Interest  accrues  monthly on the
outstanding  balance at the bank's  prime rate minus 25 basis  points  (8.0 % at
September 30, 1999) or at the London  Interbank  Offered Rate (LIBOR) plus 2% as
elected by the Company.  The line is  collateralized by inventories and accounts
receivable and requires the Company to maintain certain financial ratios.  There
was no balance outstanding on this line of credit at September 30, 1999.

The Company has an acquisition line of credit agreement,  which expires April 1,
2000 and allows borrowings of up to $4,000,000.  Interest accrues monthly on the
outstanding  balance at the bank's  prime rate (8.25 % at September  30,  1999).
There was no balance outstanding on this line of credit at September 30, 1999.

On June 24, 1999 the Company  obtained a $3,500,000  commercial  mortgage with a
bank. The mortgage note requires 59 monthly  principal  payments of $19,444 plus
interest  followed  by a  final  payment  for the  unpaid  principal  amount  of
$2,352,804  due June 24, 2004.  Interest is charged at the one-month  LIBOR rate
plus 200 basis points (7.40% at September 30, 1999).

Cash  interest  payments of $287,058,  $260,249 and $345,018  were made in 1999,
1998 and 1997,  respectively.  Cash  interest  payments for 1999,  1998 and 1997
included  interest of $64,833,  $127,077 and $266,200,  respectively,  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.


                                       30
<PAGE>

6.  Lease Arrangements

The  Company 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, 1999, are as follows:

     2000                                          $  307,494
     2001                                             307,494
     2002                                             307,494
     2003                                             302,215
     2004                                             126,932
                                                   -----------
     Total minimum lease payments                   1,351,629
     Amounts representing interest                   (227,882)
                                                   -----------
     Present value of minimum lease payments        1,123,747
     Less current portion                            (220,432)
                                                   -----------
                                                   $  903,315
                                                   ===========

The total amount of property  and  equipment  capitalized  under  capital  lease
obligations  as of  September  30,  1999 and 1998  was  $1,917,625.  Accumulated
amortization  at  September  30,  1999  and  1998  was  $482,604  and  $290,841,
respectively.

The Company  leases  office  space  under  noncancelable  operating  leases that
terminate in 2004.  These leases  contain  renewal  options  ranging from 1 to 5
years. Total rental expense was $33,849,  $27,498 and $26,058 in 1999, 1998, and
1997,  respectively.  Future minimum lease payments at September 30, 1999 are as
follows:

       2000                $24,975
       2001                 19,890
       2002                 19,890
       2003                 19,890
       2004                  3,315
                           =======
                           $87,960
                           =======


                                       31
<PAGE>



7.  Income Taxes

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

                                                        1999            1998
                                                        ----            ----
Deferred tax liabilities:
     Tax over book depreciation                      $1,114,510      $  952,224
     Deferred DISC income                               227,095         283,869
                                                     -----------     -----------
Total deferred liabilities                            1,341,605       1,236,093
Deferred tax assets:
     Inventory pricing                                   64,380          69,559
     Accrued vacation                                   125,199          73,743
     Other-net                                           52,681          25,347
     Foreign net operating loss                         200,698         207,116
                                                     -----------     -----------
Total deferred tax assets                               442,958         375,765
Valuation allowance for deferred tax assets            (200,698)       (207,116)
                                                     -----------     -----------
Net deferred tax assets                                 242,260         168,649
                                                     ----------      -----------
Net deferred tax liabilities                         $1,099,345      $1,067,444
                                                     ----------      -----------


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

                             1999                 1998                  1997
                             ----                 ----                  ----
Current:
       Federal             $146,471             $ 80,911              $265,776
       State                 99,129               50,458                91,539
                           --------             --------              --------
Total current               245,600              131,369               357,315
Deferred:
       Federal               25,581               99,504                54,849
       State                  6,320               23,469                 1,231
                           --------             --------              --------
Total deferred               31,901              122,973                56,080
                           --------             --------              --------
                           $277,501             $254,342              $413,395
                           ========             ========              ========


                                       32
<PAGE>

7.  Income Taxes (continued)

The effective income tax rate varied from the statutory  federal income tax rate
as follows:
                                                  1999         1998        1997
                                                  ----         ----        ----
Statutory federal income tax rate                34.0%         34.0%       34.0%
Increases (decreases):
Amortization of goodwill and other                2.9           3.3         1.2
    Nondeductible expenses
Benefit of foreign sales corporation, net        (5.7)         (6.2)       (5.8)
State income taxes, net of federal tax            8.2           7.4         5.6
    benefit
Research and development credit                  (7.2)        (13.4)       (5.0)
Nondeductible foreign losses                      1.1          10.3         7.6
Other                                            (0.5)          2.8         0.1

                                                 32.8%         38.2%       37.7%


In fiscal 1999, 1998 and 1997, the Company's foreign operations generated a loss
before income taxes of $26,771, $201,294 and $245,800, respectively.

Payments  made in 1999,  1998,  and 1997 for  federal  and  state  income  taxes
amounted to $212,400, $78,000 and $140,000, respectively.

8.  Shareholders' Equity

Initial Public Offering

On September 24, 1997, the Company's  Board of Directors  approved a 4.514 for 1
share split of Common Shares  effective  November 21, 1997. All Common Share and
per share  amounts  and  information  concerning  stock  option  plans have been
adjusted retroactively to give effect to this share split.

On November  26,  1997,  the Company  completed  an initial  public  offering of
1,250,000 Common Shares at an offering price of $8.00 per share. On December 19,
1997,  the  underwriters  exercised an option to purchase an additional  100,000
Common Shares.  The net proceeds to the Company from the public offering and the
exercise of the over-allotment  option by the underwriters,  after deducting the
underwriting  discounts and  commissions  and offering  expenses  payable by the
Company, were approximately $9.4 million. Upon the closing of the offering,  all
of the Company's  outstanding  Convertible  Preferred Shares were converted into
752,399 Common Shares.

Stock Option Plans

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

During fiscal 1989,  the Company  established  an Outside  Director Stock Option
Plan whereby options to purchase  shares of the Company'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 terminated on January 1, 1999.




                                       33
<PAGE>

8.  Shareholders' Equity (continued)

The Company has adopted new stock  option plans 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,  the Company  established  an Employee  Stock  Option Plan
whereby options to purchase shares of the Company's  Common Stock at fair market
value can be  granted  to  employees  of the  Company.  Options  granted  become
exercisable  in four equal  installments  beginning  two years after the date of
grant. The plan terminates in fiscal 2008.

During  fiscal year 1998,  the Company  established  an Outside  Director  Stock
Option Plan whereby options to purchase shares of the Company's  Common Stock 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 the Company's stock option activity and related information for the
years ended September 30 is as follows:
<TABLE>
<CAPTION>
<S>                            <C>           <C>            <C>           <C>             <C>            <C>
                                         1999                         1998                          1997
                               -----------------------      ----------------------        -----------------------
                                              Weighted                    Weighted                       Weighted
                                              Average                      Average                       Average
                                             Exercise                     Exercise                       Exercise
                                Options       Price          Options        Price         Options         Price
                               --------      ---------      ---------     --------        --------       --------
Outstanding beginning
  of year                      164,343        $2.70          272,671        $1.27         338,129         $1.16
Exercised                      (19,030)         .96         (145,328)        1.36         (60,944)          .66
Granted                         73,000         4.25           39,000         8.00               -             -
Terminated                     (12,014)        3.73           (2,000)        8.00          (4,514)         1.32
                               --------                     ---------                     --------
Outstanding end of year        206,299        $3.35          164,343        $2.70         272,671         $1.27
                               ========                     =========                     ========
</TABLE>



                                       34
<PAGE>

8.  Shareholders' Equity (continued)
<TABLE>
<CAPTION>
<S>                 <C>                <C>                <C>          <C>                 <C>
                                          Weighted
                       Number              Average         Weighted        Number           Weighted
                    Outstanding at        Remaining        Average     Exercisable at       Average
    Range of        September 30,        Contractual      Exercise      September 30,       Exercise
Exercise Prices         1999                Life            Price           1999             Price
---------------     --------------     ----------------   ----------   -----------------   ----------
  $0.66 - $1.00         50,050              .27            $0.66          50,050            $0.66
  $1.01 - $1.50          8,292             2.28            $1.33           8,292            $1.33
  $1.51 - $2.10         45,457             3.53            $1.73          45,457            $1.73
  $2.11 - $8.00        102,500             8.84            $5.55               -                -
                       -------                                           -------
                       206,299                                           103,799
                       =======                                           =======
</TABLE>

Disclosure of pro forma information  regarding net income and earnings per share
is required by SFAS No. 123 as if the Company  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 the
Company 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
   the Company's common stock                           .43 (.52 in 1998)
   Expected life of the options (years)                           7

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 the
Company'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.




                                       35
<PAGE>



8.  Shareholders' Equity (continued)

For purposes of pro forma  disclosures,  the estimated fair value of the options
are amortized to expense over the related vesting period.  Because  compensation
expense is recognized over the vesting  period,  the initial impact on pro forma
net income may not be  representative  of compensation  expense in future years,
when the effect of  amortization  of multiple  awards  would be reflected in the
consolidated  statements of income.  The Company's pro forma information  giving
effect to the  estimated  compensation  expense  related to stock  options is as
follows:

                                                      1999               1998
                                                      ----               ----
Pro forma net income                               $ 504,268          $ 367,190
Pro forma net income per share (diluted)              $ 0.11               $.08

The weighted  average fair value of options granted during the year was $2.29 in
1999 and $4.77 in 1998.

9. Retirement Plan

Effective July 1, 1984, the Company established an Internal Revenue Code Section
401(k)  Retirement Plan covering all employees over twenty-one years of age with
at  least  one  year of  service.  Under  the  terms of the  Plan,  the  Company
contributes  2% of each  participant's  total  wages to the Plan.  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 10% of the  participant's  annual  wages.  The  Company  made no
discretionary contributions under the Plan in 1999, 1998, and 1997. Contribution
expense  was   $227,022,   $187,896  and  $158,924  in  1999,   1998  and  1997,
respectively.

10. Segment Information

The  Company  operates  in two  principal  segments -  analytical  services  and
analytical products.  The Company's analytical services unit provides analytical
chemistry support on a contract basis directly to pharmaceutical  companies. The
Company's    analytical   products   unit   provides   liquid    chromatography,
electrochemical,   and  physiological   monitoring  products  to  pharmaceutical
companies,  universities,  government  research  centers  and  medical  research
institutions. The Company 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.


                                       36
<PAGE>
10.  Segment Information (continued)

<TABLE>
<CAPTION>
<S>                                         <C>                <C>                  <C>
Operating Segments:
                                                      Year Ended September 30,
                                            ------------------------------------------------
                                              1999               1998                 1997
                                            --------           --------             --------
                                                            (in thousands)
Revenue
Services                                    $ 9,993            $ 7,609              $ 4,991
Products                                      9,858             10,616                9,932
                                            --------           --------             --------
Total revenue                               $19,851            $18,225              $14,923
                                            ========           ========             ========

Operating Income (Loss)
Services                                    $ 2,075            $ 1,753              $ 1,279
Products                                     (1,114)            (1,062)                (107)
                                            --------           --------             --------
Total operating income                          961                691                1,172
Corporate income (expenses)                    (114)               (24)                 (75)
                                            --------           --------             --------
Income before income taxes                  $   847            $   667              $ 1,097
                                            ========           ========             ========

Identifiable Assets
Services                                    $16,523            $12,819              $ 9,710
Product                                       9,798              9,461                6,221
                                            --------           --------             --------
Total assets                                $26,321            $22,280              $15,931
                                            ========           ========             ========

Depreciation and Amortization
Services                                    $   912            $   560              $   292
Products                                        366                314                  244
                                            --------           --------             --------
Total depreciation and amortization         $ 1,278            $   874              $   536
                                            ========           ========             ========

Capital expenditures
Services                                    $ 3,285            $ 4,571              $ 3,943
Products                                        769                369                  153
                                            --------           --------             --------
Total capital expenditures                  $ 4,054            $ 4,940              $ 4,096
                                            ========           ========             ========
</TABLE>




                                       37
<PAGE>
10.  Segment Information (continued)

Geographic Information:

                                                 Year Ended September 30
                                           ----------------------------------
                                             1999        1998           1997
                                           -------      -------       -------
                                                     (in thousands)
Sales to external customers by
geographic region
North America                              $13,012      $12,715       $ 9,826
Pacific Rim:
  Japan                                        716        1,053         1,740
  Other                                        695          771         1,215
Europe                                       2,776        1,126         1,105
Other                                        2,652        2,560         1,037
                                           -------      -------       -------
                                           $19,851      $18,225       $14,923
                                           =======      =======       =======

Long-lived assets by geographic
region
North America                              $16,991      $14,632       $10,397
Europe                                       1,609        1,285           191
                                           -------      -------       -------
                                           $18,600      $15,917       $10,588
                                           =======      =======       =======
Major Customers:

During 1999, 1998 and 1997, a major United States-based  pharmaceutical  company
accounted  for  approximately  22.2%,  19.6%  and  20.9%,  respectively,  of the
Company's total revenues and 23.9% and 27.3% of total trade accounts  receivable
at September 30, 1999 and 1998, respectively.

The Company sells its products through international distributors,  one of which
represents 6%, 10% and 17% of 1999,  1998 and 1997 product sales,  respectively.
Accounts  receivable from this foreign  distributor were $39,522 and $107,034 at
September 30, 1999 and 1998, respectively.

11.  Litigation

In April 1997, CMA  Microdialysis  Holding A.B.  ("CMA") filed an action against
the Company in the United States  District  Court for the District of New Jersey
in which CMA alleged  that the  Company's  microdialysis  probes  infringe  U.S.
Patent  No.  4,693,832.  The  Company  has  filed an  answer  in which it denied
infringement  and in which it  asserted  that the  patent on which CMA relies is
invalid.  The matter is now  awaiting a trial date.  Although an estimate of the
possible  loss has not been  made,  management  intends  to  continue a vigorous
defense of CMA's claims,  and believes that the ultimate  outcome of this matter
will not have a material adverse effect on the Company's  financial condition or
its results of operations.




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                                       38
<PAGE>



Bioanalytical Systems, Inc.

Quarterly Financial Data


<TABLE>
<CAPTION>
Bioanalytical Systems, Inc.

Unaudited (Amounts in thousands, except for per share data)

<S>                                                  <C>                <C>               <C>           <C>
For the Quarter Ended in Fiscal 1999                 December 31        March 31          June 30       September 30
                                                     -----------        --------          -------       ------------
Total revenue                                            $4,598           $5,057           $4,973            $5,223

Gross profit                                              2,096            2,537            2,277             2,499

Net income (loss) available to common                        (6)             200               67               309
shareholders
Basic net income (loss) per common share(1)                 .00              .04              .01               .07

Diluted net income (loss) per common and
common equivalent share(1)                                  .00              .04              .01               .07

For the Quarter Ended in Fiscal 1998                 December 31        March 31          June 30       September 30
                                                     -----------        --------          -------       ------------
Total revenue                                            $4,330           $4,450           $4,521            $4,924

Gross profit                                              2,483            2,550            2,511             2,172

Net income available to common shareholders                 196              231              130              (145)

Basic net income per common share(1)                        .06              .05              .03              (.03)

Diluted net income per common and common
equivalent share(1)                                         .05              .05              .03              (.03)



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




                                       39
<PAGE>

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

         None.








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                                       40
<PAGE>

Part III

Item 10.  Directors and Executive Officers of the Registrant.

     The  information  included  under  the  caption  "Directors  and  Executive
Officers" in the Company's  definitive  Proxy  Statement to be filed pursuant to
Regulation 14A in connection with its 1999 Annual Meeting of  Shareholders  (the
"Proxy Statement") is incorporated herein by reference in response to this item.


Item 11.  Executive Compensation.

     The  information  included  under the  captions  "Election  of  Directors -
Compensation of Directors" and "Executive  Compensation"  in the Proxy Statement
is incorporated herein by reference in response to this item.


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

     The information  contained  under the captions "Share  Ownership of Certain
Beneficial Owners and Management" in the Proxy Statement is incorporated  herein
by reference in response to this item.


Item 13.  Certain Relationships and Related Transactions.

     The information  contained under the caption "Certain  Transactions" in the
Proxy Statement is incorporated herein by reference in response to this item.






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                                       41
<PAGE>


Part IV

Item 14.  Exhibits, Financial Statement Schedules and Reports on Form 8-K

          (a)     Documents filed as part of this Report.

                  1.       Financial Statements:

                           Included  as  outlined  in  Item 8 of Part II of this
                           report.

                           Report of Independent Auditors.

                           Consolidated  Balance Sheets as of September 30, 1999
                           and September 30, 1998.

                           Consolidated Statements of Income for the Years Ended
                           September 30, 1999, 1998 and 1997.

                           Consolidated   Statements  of  Preferred  Shares  and
                           Shareholders'  Equity for the Years  Ended  September
                           30, 1999, 1998 and 1997.

                           Consolidated  Statements  of Cash Flows for the Years
                           Ended September 30, 1999, 1998 and 1997.

                           Notes to Consolidated Financial Statements.


                  2.       Financial Statement Schedules:

                           No schedules are required to be filed as part of this
                           report.

                           Schedules  other than those  listed above are omitted
                           as they are not required, are not applicable,  or the
                           information is shown in the Notes to the Consolidated
                           Financial Statements.


          (b)     Reports on Form 8-K.  None.


          (c)     Exhibits.  See Index to Exhibits.




                                       42
<PAGE>

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 and Chief Executive Officer
                            By:/s/  Douglas P. Wieten
                               -------------------------------------------------
                               Douglas P. Wieten
                               Chief Financial Officer, Treasurer and Controller
                               (Principal Financial and Accounting Officer)

Date:  December 28, 1999

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.

<TABLE>
<CAPTION>
<S>                                         <C>                                 <C>
Signature                                   Capacity                            Date
---------                                   --------                            ----
/s/  Peter T. Kissinger                     President, Chief Executive          December 28, 1999
------------------------------------        Officer and Director
Peter T. Kissinger

/s/  Douglas P. Wieten                      Chief Financial Officer,            December 28, 1999
------------------------------------        and Treasurer
Douglas P. Wieten

/s/  William E. Baitinger                   Director                            December 28, 1999
------------------------------------
William E. Baitinger

/s/  Michael K. Campbell                    Director                            December 28, 1999
------------------------------------
Michael K. Campbell

/s/  Candice B. Kissinger                   Director                            December 28, 1999
------------------------------------
Candice B. Kissinger

/s/  Jack A. Kraeutler                      Director                            December 28, 1999
------------------------------------
Jack A. Kraeutler

/s/  Ronald E. Shoup                        Director                            December 28, 1999
------------------------------------
Ronald E. Shoup

/s/  W. Leigh Thompson                      Director                            December 28, 1999
------------------------------------
W. Leigh Thompson
</TABLE>


                                       43
<PAGE>



<TABLE>
<CAPTION>
INDEX TO EXHIBITS
<S>                             <C>                                                                  <C>
                                                                                                      Sequential
       Number                                                                                         Numbering
    Assigned In                                                                                      System Page
   Regulation S-K                                                                                     Number of
      Item 601                                       Description of Exhibits                           Exhibit
   --------------                                    -----------------------                         -----------
        (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
        (9)                     No Exhibit
        (10)          10.1      Form of Employee Confidentiality Agreement (Incorporated by
                                reference to Exhibit 10.1 to Registration Statement on Form S-1,
                                Registration No. 333-36429).
                      10.2      Bioanalytical Systems, Inc. Outside Director Stock Option Plan
                                (Incorporated by reference to Exhibit 10.2 to Registration
                                Statement on Form S-1, Registration No. 333-36429).
                      10.3      Form of Bioanalytical Systems, Inc. Outside Director Stock
                                Option Agreement (Incorporated by reference to Exhibit 10.3 to
                                Registration Statement on Form S-1, Registration No. 333-6429).
                      10.4      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. 333-6429).
                      10.5      Form of Bioanalytical Systems, Inc. 1990 Employee Stock Option
                                Agreement (Incorporated by reference to Exhibit 10.5 to
                                Registration Statement on Form S-1, Registration No. 333-6429).
                      10.6      Security Agreement by and between Bioanalytical Systems, Inc.
                                and Bank One, Lafayette, N.A., dated August 22, 1996
                                (Incorporated by reference to Exhibit 10.17 to Registration
                                Statement on Form S-1, Registration No. 333-36429).


                                       44
<PAGE>


                      10.7      Master Lease Agreement by and between Bioanalytical Systems,
                                Inc. and Bank One Leasing Corporation dated November 9, 1994
                                (Incorporated by reference to Exhibit 10.18 to Registration
                                Statement on Form S-1, Registration No. 333-36429).
                      10.8      Financing Lease by and between Bioanalytical Systems, Inc. and
                                Bank One Leasing Corporation, dated November 9, 1994
                                (Incorporated by reference to Exhibit 10.19 to Registration
                                Statement on Form S-1, Registration No. 333-36429).
                      10.9      Credit Agreement by and between Bioanalytical Systems, Inc. and
                                Bank One, Indiana, N.A., dated August 30, 1996 (Incorporated by
                                reference to Exhibit 10.24 to Registration Statement on Form
                                S-1, Registration No. 333-36429).
                      10.10     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. 333-6429).
                      10.11     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).
                      10.12     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).
                      10.13     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. 333-6429).
                      10.14     Business Loan Agreement by and between Bioanalytical Systems,
                                Inc., and Bank One, Indiana, N.A. dated March 1, 1998
                                (Incorporated  by reference to Exhibit  10.14 to
                                Form 10-Q for the quarter ended March 31, 1998).
                      10.15     Commercial Security Agreement by and between Bioanalytical
                                Systems, Inc. and Bank One, Indiana, N.A., dated March 1, 1998
                                (Incorporated  by reference to Exhibit  10.15 to
                                Form 10-Q for the quarter ended March 31, 1998).


                                       45
<PAGE>
                      10.16     Negative Pledge Agreement by and between Bioanalytical Systems,
                                Inc. and Bank One, Indiana, N.A., dated March 1, 1998
                                (Incorporated  by reference to Exhibit  10.16 to
                                Form 10-Q for the quarter ended March 31, 1998).
                      10.17     Promissory Note for $7,500,000 executed by Bioanalytical
                                Systems, Inc. in favor of Bank One, N.A., dated March 1, 1998
                                (Incorporated  by reference to Exhibit  10.17 to
                                Form 10-Q for the quarter ended March 31, 1998).
                      10.18     Business Loan Agreement by and between Bioanalytical Systems,
                                Inc. and Bank One, Indianapolis, NA, dated June 24, 1999
                                related to loan in the amount of $3,500,000 (Incorporated
                                by reference to Exhibit 10.18 to Form 10-Q for the
                                quarter ended June 30, 1999).
        (11)          11.1      Statement Regarding Computation of Per Share Earnings.
        (12)                    No Exhibit
        (13)                    No Exhibit
        (16)                    No Exhibit
        (18)                    No Exhibit
        (21)          21.1      Subsidiaries of the Registrant
        (22)                    No Exhibit
        (23)          23.1      Consent of Independent Auditors
        (24)                    No Exhibit
        (27)          27.1      Financial Data Schedule
        (99)                    No Exhibit
</TABLE>


                                       46