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                                  UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                             ----------------------

                                   FORM 10-K/A

                                 Amendment No. 2

                             ----------------------

                ANNUAL REPORT PURSUANT TO SECTION 13 OF 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                     For the fiscal year ended June 30, 2002

                         Commission file number 0-11580

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                        PHARMAKINETICS LABORATORIES, INC.

             (Exact Name of Registrant as Specified in its Charter)

                             ----------------------

                 Maryland                              52-1067519
         (State of Incorporation)                   (I.R.S. Employer
                                                   Identification No.)

                             302 West Fayette Street
                            Baltimore, Maryland 21201
                    (Address of Principal Executive Offices)

        Registrant's Telephone Number, Including Area Code (410) 385-4500

          Securities registered pursuant to Section 12 (b) of the Act:

                                      None
                              (Title of each class)

           Securities registered pursuant to Section 12(g) of the Act:

                          Common Stock, $.005 par value
                                (Title of Class)

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

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

As of June 30, 2002, 2,496,129 shares of Common Stock of PharmaKinetics
Laboratories, Inc. were outstanding, and the aggregate market value of Common
Stock (based upon the average bid and asked prices as reported on the OTC
Bulletin Board on that date) held by non-affiliates was $842,226.

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                                     PART I

Explanatory Note

As more fully discussed in Note 14 to the consolidated financial statements as
of June 30, 2002 and 2001 and for each of the three years in the period ended
June 30, 2002, the Company has restated its consolidated financial statements to
reflect the classification of its Class A Convertible Preferred Stock outside of
stockholders' equity (deficit).

ITEM 1. Business

PharmaKinetics Laboratories, Inc. (the "Company") is a contract research
organization ("CRO") providing a range of clinical research and development
services to the worldwide pharmaceutical and biotechnology industries in the
development of prescription and non-prescription drug products. These services
include Phase I clinical research, bioanalytical laboratory testing, and the
management and monitoring of multi-center clinical trials. The Company offers
ancillary services in these areas such as protocol development, case report form
design, data management, biostatistics and regulatory consulting. The Company
has focused its business development efforts on both Generic and innovator
pharmaceutical and biotechnology companies in the United States ("U.S.") and
Canada. As a result of the increasingly competitive market for its services, the
Company has elected to focus its business development efforts in North America.

The Company pursues various business opportunities in the CRO industry: (1)
providing services to innovator and generic drug companies - primarily in the
area of bioequivalence/bioavailability studies which may include both clinical
and bioanalytical laboratory services; (2) providing Phase I clinical trials -
primarily safety studies on new drugs - to the innovator pharmaceutical industry
and to biotechnology firms; (3) providing bioanalytical laboratory services
primarily to the innovator drug companies - this involves the analysis of
biological samples, typically blood samples, both from animals and humans, which
are the result of trials conducted at sites and sent to the Company's laboratory
for analysis; and (4) providing project management and monitoring services to
both generic and innovator pharmaceutical firms by overseeing the conduct of
multi-center clinical trials typically on patients. The Company's project
management expertise is in the management of smaller trials conducted at fifteen
to twenty sites with 200 - 400 patients rather than the very large trials
typically conducted by the large global CROs.

SERVICES

Phase I Services

The Company offers complete services for the testing of pharmaceutical products
to determine bioavailability and bioequivalence.

Bioavailability testing determines the rate and extent to which an active drug
ingredient is absorbed from a drug product and becomes available at the site of
drug action in the human body. Typically, the determination of bioavailability
is performed through the collection and laboratory analysis of blood, urine or
other specimens. However, for certain drug products which are not absorbed or
are minimally absorbed, for example ointments and creams, the determination of
bioavailability must be performed using special procedures and equipment. Drug
manufacturers are required to include information obtained from human testing in
detailed laboratory and clinical studies as part of applications for approval to
market certain new drug products, submitted to regulatory authorities, such as
the United States Food and Drug Administration ("FDA"). Bioavailability data is
also used to evaluate the adequacy of proposed labeling recommendations
regarding dosage and administration of a drug product, to define its profile in
order to evaluate product reformulations or changes in recommended dosage
strength or dosage regimens, and to evaluate and substantiate controlled release
claims.

Bioequivalence testing can be used to compare the bioavailability of similar
generic and brand name drugs. The FDA has established bioequivalence
requirements for certain drug products or classes of drug products that are
intended to be interchangeable. As a result, bioequivalence data is required in
the case of new formulations of certain drug products developed by generic
pharmaceutical manufacturers for marketing

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upon expiration of patents on brand name drugs previously found to be safe and
effective. Bioequivalence testing is also required for certain drug products in
the case of new formulations or new dosage forms intended to be used by the
manufacturer that obtained the original approval.

The Company also conducts Phase I clinical trials - primarily safety studies on
new drugs - for the innovator pharmaceutical industry and for biotechnology
firms. The clinical portions of studies are conducted pursuant to testing plans,
called protocols, which are designed to reflect the specific characteristics of
the active drug ingredients being tested. The Company employs experts in
medicine, pharmacology, analytical chemistry, statistical analysis and data
processing to design, evaluate and execute protocols according to current
scientific standards and governmental regulatory requirements.

Protocols for the Company's clinical studies are either written by the Company's
staff or provided by the sponsor. Once developed, a protocol is submitted for
approval to the Company's Institutional Review Board ("IRB"), which
independently evaluates and, if necessary, requests revisions to the protocol in
order to safeguard the rights and welfare of the human subjects. The IRB
consists of one affiliated (non-voting) individual and ten non-affiliated
(voting) individuals, four of whom are medical doctors (one of these serving as
chairman), one pharmacologist, one clergy, and four representatives of the
community.

For each clinical study, the Company uses volunteer study participants. The
availability of sufficient numbers of qualified and willing study participants
has at times been, and could in the future be, a limitation on the Company's
business.

Each prospective participant is screened at the Company's facility and examined
by a physician employed by the Company. Prior to the commencement of a study,
the Company's Medical Director or another qualified individual meets with the
study participants to explain the purpose of the study and the fact that
research is involved, the procedures to be followed and the expected duration of
the testing, and to provide them with other information, including a description
of any foreseeable risks or discomforts deemed relevant, to enable them to make
an informed decision as to whether or not they want to participate in the study.
A written consent form approved by the Company's IRB for each study,
acknowledging such disclosures, is signed by each participant prior to
initiation of the study.

Study participants usually arrive at the Company's controlled environment
facility the night before testing is to begin. To maximize reliability of the
test data, all study participants are immediately placed on a strictly
supervised schedule in which all of their activities, including eating,
drinking, sleeping, recreation and type of clothing, are tightly regulated.
Testing includes physical observation by medical personnel and a strict schedule
of collecting blood, urine and other specimens which are subjected to analysis
in the Company's analytical chemistry laboratory or by other arrangements of the
sponsor.

Bioanalytical Laboratory Services

Laboratory analysis determines the amount of drug present in each of the
hundreds of biological specimens generated by a given study conducted in humans
or animals. Drug and metabolites (compounds into which a drug is broken down
inside the body) are extracted from a specimen using a mixture of solvents or a
specific extraction column. Extracted samples are then processed by the
Company's analytical instrumentation, including high performance liquid
chromatography, and gas chromatography interfaced with various methods of
detection, including mass spectrometry. These instruments, HPLC, HPLC/MS/MS, GC
and GC/MS, separate the drug and metabolites from any other remaining substances
and have the ability to detect and quantify as little as billionths of a gram of
material. This process of extraction and detection is called an assay method.
Each drug requires the development of a unique assay method, the accuracy and
precision of which must be documented according to current scientific standards
to meet FDA requirements. The Company's research and development group develops
and validates these unique assay methods.

The results of these assays are entered into computers maintained by the Company
to show changes in the concentration of drug in the blood over time and to
determine statistically whether the product being evaluated is equivalent to the
already marketed product or other reference material. A detailed report on the

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results of the analysis is prepared by Company scientists and submitted to the
client requesting the test. Following the system used by the FDA for granting
approval to market new drug products, the pharmaceutical manufacturer may use
the report to support either a New Drug Application ("NDA") or, in the case of
generic drugs, an Abbreviated New Drug Application ("ANDA"). In the event that
the study results show the product is not bioequivalent, they may provide the
basis for additional development work and further bioequivalence studies or the
manufacturer may withdraw its NDA or ANDA application.

The Company also provides bioanalytical laboratory services to innovator drug
companies conducting clinical trials around the country. Samples from these
trials are sent to the Company's laboratory for analysis.

Clinical Trial Management and Monitoring

The Company provides project management and monitoring of Phase II, III and IV
multi-center clinical trials. In the course of such projects, the Company's
personnel may be involved in document development, investigator recruitment and
selection, site evaluation, investigator meeting coordination, on-site study
monitoring, data management and statistical services.

In studies where the Company is providing project management and/or monitoring
services, the drug is administered to patients by physicians, referred to as
investigators, at hospitals, clinics, or other locations, referred to as sites.
Potential investigators may be identified by the drug sponsor or by the Company.
The Company generally solicits investigators' participation in the study. The
trial's success depends on the successful identification and recruitment of
investigators with an adequate base of patients who satisfy the requirements of
the study protocol.

The investigators find and enroll patients suitable for the study. The speed
with which trials can be completed is significantly affected by the rate at
which patients are enrolled. The Company's personnel closely track the rate of
patient enrollment and provide input necessary to ensure that the planned
schedule of enrollment is maintained. Prospective patients are required to
review information about the drug and its possible side effects, and sign an
Informed Consent form to record their knowledge and acceptance of potential side
effects. Patients also undergo a medical examination to determine whether they
meet the requirements of the study protocol. Patients then receive the drug and
are examined by the investigator as specified by the study protocol.

As patients are examined and tests are conducted in accordance with the study
protocol, data are recorded on Case Report Forms ("CRFs") and laboratory
reports. The data are collected from study sites by specially trained persons
known as monitors. The Company's monitors visit sites regularly to ensure study
protocol adherence, that the CRFs are completed correctly, and that all data
specified in the protocol are collected. The monitors use completed CRFs, once
they have been reviewed for consistency and accuracy, to enter data into an
electronic database.
Consulting Services

The Company provides comprehensive consulting services to pharmaceutical and
biotechnology companies including: representation with state formularies,
pre-audit facility inspections, NDA and ANDA report writing, data assessment,
report and literature review, protocol design and development, full statistical
data analysis, and liaison with the FDA.

LIABILITY EXPOSURE

The Company's Phase I service tests innovator and generic (already marketed)
drugs on human volunteers pursuant to a study protocol. Such testing involves a
risk of liability for personal injury or death to participants due, among other
reasons, to possible unforeseen adverse side effects or improper administration
of the drug.

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The Company believes that the risk of liability to participants in Phase I
testing is mitigated by various regulatory requirements, including the role of
the IRB and the need to obtain each participant's informed consent. The FDA
requires that each human clinical trial be reviewed and approved by the IRB at
each study site. The Company has its own independent IRB that reviews and
approves protocols conducted at the Company's Phase I center. This is an
independent committee that includes both medical and non-medical personnel whose
major purpose is to protect the interests and well being of individuals enrolled
in the trial. After the trial begins, the IRB monitors compliance with the
protocol and measures designed to protect participants, such as the requirement
to obtain the informed consent.

To reduce its potential liability, the Company seeks to obtain indemnity
provisions in its contracts with clients and with investigators hired by the
Company on behalf of its clients. These indemnities generally do not, however,
protect the Company against certain of its own actions such as those involving
negligence. Moreover, these indemnities are contractual arrangements that are
subject to negotiation with individual clients and the terms and scope of such
indemnities can vary from client to client and from study to study. Finally, the
financial performance of these indemnities is not secured, so the Company bears
the risk that an indemnifying party may not have the financial ability to
fulfill its indemnification obligations. The Company could be materially and
adversely affected if it were required to pay damages or incur defense costs in
connection with a claim that is outside the scope of indemnity or where the
indemnity, although applicable, is not performed in accordance with its terms.

The Company itself does not maintain professional malpractice insurance related
to its testing procedures as its medical personnel are required to carry such
insurance, and the Company is not a provider of medical care and related
services. The Company maintains a professional and general liability policy
which provides coverage with an aggregate limit of $3,000,000, a workmen's
compensation liability policy which provides coverage of $1,000,000, and an
umbrella liability policy which has a limit of $10,000,000 for each occurrence
in excess of primary. In addition, the Company also carries a Directors and
Officers liability policy with a general aggregate limit of $2,000,000. There
can be no assurance that this insurance coverage will be adequate, or that
insurance coverage will continue to be available on terms acceptable to the
Company.

GOVERNMENT REGULATIONS

The Company's services are conducted for pharmaceutical and biotechnology
companies to support their applications for approval to market new "branded" or
bioequivalent generic drug products. These companies, and therefore the Company,
are subject to extensive regulation by government authorities. Regulatory
proceedings that adversely affect the Company's clients could adversely affect
the Company's business. The repeal or significant alteration of some or all of
the laws or regulations requiring testing of the type performed by the Company
could have a material adverse effect on the Company's business. However,
regulatory changes that require additional or more complex testing to be
performed in support of the drug approval process could significantly enhance
the Company's business. Management believes that legislation and regulation, on
balance, have a favorable impact on the demand for its services by providing
sponsors and manufacturers of new drugs with additional requirements that
increase the need for outsourcing.

The services provided by the Company and the activities of its clients are
ultimately subject to FDA regulation in the U.S. and comparable agencies in
other countries. The Company is obligated to comply with FDA requirements
governing the conduct of clinical trials as stated in the Code of Federal
Regulations. These regulations are commonly referred to as Good Clinical
Practices (GCPs) and Good Laboratory Practices (GLPs) and cover activities such
as obtaining informed consent, verifying qualifications of investigators,
complying with Standard Operating Procedures ("SOPs"), reporting adverse
reactions to drugs, and maintaining thorough and accurate records. The Company
must maintain source documents for each study for specified periods. Such
documents are frequently reviewed by the study sponsor during visits to the
Company's facility and may be reviewed by the FDA during audits. Non-compliance
with FDA regulations can result in the disqualification of data collected during
a study.

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<PAGE>

At the end of July 1999, the Company received a Warning Letter from the United
States Food and Drug Administration ("FDA") regarding noncompliance with certain
protocol requirements in bioequivalence studies conducted prior to fiscal 1999.
In the Warning Letter, the FDA advised the Company to take immediate corrective
action and that the failure to do so may result in regulatory action. The
Company responded immediately and addressed the issues raised in the Warning
Letter and subsequently met with the FDA to discuss corrective steps taken by
the Company to comply with regulatory requirements. FDA representatives have
inspected the Company twice since the Warning Letter was issued. As of the
latest inspection, in December 2000, the FDA made no adverse findings.

The Company is subject to regulation and inspection by the Baltimore City Health
Department (for the Maryland State Department of Health and Mental Hygiene), the
Center for Disease Control of the United States Department of Health and Human
Services and other state and local agencies where the Company's facility is
located. The Company has not experienced any significant problems to date in
complying with the applicable requirements of such agencies and does not believe
that any existing or proposed regulations will require material capital
expenditures or changes in its method of operation. Management believes that the
Company is acting in accordance with all applicable federal, state and local
laws.

COMPETITION

The Company competes primarily against other CROs and pharmaceutical companies'
in-house research departments. The CRO industry is highly fragmented, with
several large CROs and many small specialty providers. Many of the large full
service CROs have substantially greater capital and other resources than the
Company. The continuing trend towards industry consolidation has resulted in
heightened competition among the larger CROs. The Company competes in a
specialty niche segment of the overall market where total size is a less
important competitive factor than in the overall CRO industry. Clients choose to
use the Company, or a direct competitor, on the basis of prior experience with
the Company, its reputation for quality of the service provided, the ability to
schedule the work in a timeframe, which meets the client's needs, scientific and
technical capability and the price of the services performed. The Company
believes it can compete effectively in these areas.

CLIENTS

The Company has served most of the leading U.S. and Canadian generic drug firms
and several of the leading U.S. and European pharmaceutical companies. The
Company's clients also include companies which utilize biotechnology and other
emerging technologies to develop new drugs.

The Company has in the past derived, and may in the future derive, a significant
portion of its revenue from a relatively limited number of major clients.
Concentrations of business in the CRO industry are not uncommon and the Company
is likely to experience such concentration in future years. A single client
contributed in excess of 10% of contract revenue, accounting for approximately
43%, 16% and 13% of contract revenue, for the fiscal years ended June 30, 2002,
2001 and 2000, respectively. In addition, another client contributed in excess
of 16% for the fiscal year ended June 30, 2000.

While an individual client may represent a significant percent of revenues,
these revenues are the result of the sum of a number of different contracts
during the year. While the complete loss of a significant client could have a
material adverse effect on the Company, the termination or loss of any one
contract would typically not have a material adverse effect on the Company's
results of operations.

EXPORT SALES

The Company conducts studies for a number of companies outside of the U.S.,
primarily in Canada and Europe, in addition to many domestic companies. This
work is billed and paid in U.S. dollars, therefore eliminating currency exchange
risk to the Company. The following table approximates revenue recognized by the
Company from its clients outside of the United States.

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                                       Fiscal Years Ended June 30,
                                             (in thousands)
                                   ------------------------------------
                                      2002         2001         2000
                                   ----------   ----------   ----------
Canada                             $      176   $      944   $      964
Europe & Other                            124          616          402
                                   ----------   ----------   ----------
Total                              $      300   $    1,560   $    1,366

BACKLOG

The Company maintains a backlog of its business, representing studies underway
in-house for which revenue has not yet been recognized, and studies that have
been awarded to the Company by its various clients, but have yet to begin. At
June 30, 2002, the backlog was approximately $2.4 million. The Company expects
to recognize revenue from this backlog during fiscal 2003 and future fiscal
years.

We believe that backlog may not be a consistent indication of future results.
Studies that have been contracted may be delayed, terminated or the scope of
work may change during the course of a study.

EMPLOYEES

At June 30, 2002, the Company had 89 employees (26 of whom were part-time
employees), of which 6 hold Ph.D. or M.D. degrees and 6 others hold advanced
degrees. The Company does not have collective bargaining agreements with any of
its employees and considers its employee relations to be satisfactory.

ITEM 2. Properties

The Company's principal executive offices are located in Baltimore, Maryland,
where it owns a building containing approximately 142,000 square feet of space,
of which approximately 117,000 square feet are utilized in the Company's
operations and 25,000 square feet could be made available for the expansion of
the Company's operations when necessary. The building contains a consolidated
analytical chemistry laboratory, a controlled live-in clinical facility with a
120 bed capacity, and corporate-wide information and data management systems.

ITEM 3. Legal Proceedings

From time to time, the Company is involved in disputes and/or litigation
encountered in the ordinary course of its business. The Company does not believe
that the ultimate impact of the resolution of such outstanding matters will have
a material effect on the Company's financial position, results of operations or
cash flows.

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

No matters were submitted to security holders for a vote during the fourth
quarter of the fiscal year ended June 30, 2002.

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                                    PART II

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

The Company's common stock is currently traded in the over-the-counter market
and is quoted on the OTC Bulletin Board (OTCBB: PKLB). The following table sets
forth the high and low bid prices of the common stock for the fiscal periods
indicated and as reported through the OTC Bulletin Board.

                             Year Ended              Year Ended
                           June 30, 2002            June 30, 2001
                     --------------------------------------------------
Quarter                  High         Low          High         Low
                     -----------  -----------  -----------  -----------
First                $      0.75  $      0.58  $      0.75  $      0.63
Second                      0.67         0.53         0.72         0.28
Third                       0.90         0.42         0.63         0.38
Fourth                      0.61         0.37         0.70         0.52

Such quotations reflect inter-dealer prices, without retail mark-up, markdown or
commission and may not represent actual transactions. The approximate number of
shareholders of record at July 19, 2002 was 909.

The Company has not declared a dividend on its common stock since its inception
and has no intention of doing so in the foreseeable future.

ITEM 6. Selected Consolidated Financial Data

The following selected consolidated financial data for each of the years in the
five-year period ended June 30, 2002 have been derived from our consolidated
financial statements and related notes thereto as of June 30, 1998 through 2002,
and for the years then ended. The selected information set forth below should be
read in conjunction with our consolidated financial statements and the related
footnotes, as well as "Management's Discussion and Analysis of Financial
Condition and Results of Operations," of this Form 10-K report.

<TABLE>
<CAPTION>
                                                                           Fiscal Year Ended June 30
                                                                        (in thousands, except share data)
                                                           -------------------------------------------------------------
                                                              2002         2001         2000         1999         1998
                                                           ---------    ---------    ---------    ---------    ---------
<S>                                                        <C>          <C>          <C>          <C>          <C>
Statement of Operations Data:
Total revenues                                             $   6,798    $   8,913    $   8,024    $   9,828    $  12,326
Costs and expenses:
   Cost of contracts                                           6,464        7,469        8,514        8,112        8,931
   Selling, general and administrative expenses                1,742        1,880        2,462        2,569        2,210
   Research and development expenses                              80          113          158          512          568
                                                           ---------    ---------    ---------    ---------    ---------

     Total costs and expenses                                  8,286        9,462       11,134       11,193       11,709
                                                           ---------    ---------    ---------    ---------    ---------

Operating (loss) income                                       (1,488)        (549)      (3,110)      (1,365)         617
Other income and expenses, net                                     5           36          152           37           14
Provision for income taxes                                        --           --           --           --           (8)
                                                           ---------    ---------    ---------    ---------    ---------

Net (loss) income before deemed preferred stock dividend      (1,483)        (513)      (2,958)      (1,328)         623
Deemed preferred stock dividend                                   --           --           --           --       (1,021)
                                                           ---------    ---------    ---------    ---------    ---------

Net loss applicable to common stockholders                 $  (1,483)   $    (513)   $  (2,958)   $  (1,328)   $    (398)
                                                           ---------    ---------    ---------    ---------    ---------

Basic and diluted loss per common share                    $   (0.59)   $   (0.21)   $   (1.19)   $   (0.53)   $   (0.16)
                                                           ---------    ---------    ---------    ---------    ---------

Basic and diluted weighted-average shares outstanding          2,496        2,496        2,496        2,493        2,440
                                                           ---------    ---------    ---------    ---------    ---------
</TABLE>

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                                              June 30,
                     ----------------------------------------------------------
                        2002        2001        2000        1999        1998
                     (restated)* (restated)* (restated)* (restated)* (restated)*
                     ----------- ----------- ----------- ----------- -----------
Balance Sheet
Data:
Cash and cash
equivalents           $     46    $    414    $    347    $  2,233    $  3,359
Total Assets          $  4,079    $  5,702    $  6,550    $  9,285    $ 10,107
Long-term debt        $     --    $     --    $     62    $    143    $    235
Mandatorily
Redeemable Class
A Convertible
Preferred Stock       $  4,938    $  4,938    $  4,938    $  4,938    $  4,938
Total
Stockholders'
(deficit) equity      $ (3,032)   $ (1,549)   $ (1,036)   $  1,649    $  2,936

* As more fully discussed in Note 14 to the consolidated financial statements,
  the consolidated financial statements have been restated to reflect the
  classification of the Company's Class A Convertible Preferred Stock outside of
  stockholders' equity (deficit).

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

CAUTIONARY NOTE

From time to time in this annual report on Form 10-K/A, we may make statements
that reflect our current expectations regarding our future results of
operations, economic performance, and financial condition, as well as other
matters that may affect our business.

While these statements reflect our current plans and expectations, and we base
the statements on information currently available to us, we cannot be sure that
we will be able to implement these plans successfully. We may not realize our
expectations in whole or in part, in the future.

Any of these statements we make in this annual report on Form 10-K/A that are
forward-looking are made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. We wish to caution you that our actual
results may differ significantly from the results we discuss in the
forward-looking statements.

We discuss factors that could cause or contribute to such differences elsewhere
in this annual report on Form 10-K under the caption "Risk Factors and Certain
Forward-Looking Information". In addition, any forward-looking statements we

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make in this document speak only as of the date of this document, and we do not
intend to update any such forward-looking statements to reflect events or
circumstances that occur after that date.

INTRODUCTION

In the following sections of this Management's Discussion and Analysis of
Financial Condition and Results of Operation ("MD&A"), we explain the general
financial condition and the results of operations for PharmaKinetics, including:

      o     what our revenues were in 2002, 2001, and 2000;

      o     why revenues and expenses changed from the year before;

      o     where our revenues came from;

      o     how all of the foregoing affect our overall financial condition; and

      o     what our expenditures for capital projects were in 2002, 2001 and
            2000 and a description of our capital requirements.

As you read this MD&A, you may find it helpful to refer to our consolidated
financial statements beginning on page 15 of this annual report. These
consolidated financial statements present the results of our operations for
2002, 2001, and 2000, as well as our financial position at June 30, 2002 and
2001. We analyze and explain the annual changes in the specific line items set
forth in the section of our consolidated financial statements titled
"Consolidated Statements of Operations".

GENERAL

PharmaKinetics Laboratories, Inc. is a contract research organization providing
services to the worldwide pharmaceutical and biotechnology industry in the
development of prescription and non-prescription drug products. The services
offered are primarily in the following areas:

      o     Phase I services;

      o     bioanalytical laboratory services;

      o     clinical trial management and monitoring; and

      o     consulting services.

The nature of the Company's services and recurring business result in the
Company having individual clients whose business could account for 10% or more
in any fiscal year. Since the Company's inception in 1976, the Company has
assisted pharmaceutical clients with over 900 Abbreviated New Drug ("ANDA") and
New Drug ("NDA") approvals that were received as a result of the conduct of over
2,500 studies. The Company's services are provided in accordance with
regulations, promulgated by FDA, as well as submissions to the Canadian Health
Protection Branch ("HPB"), which govern clinical trials and the drug approval
process.

On June 20, 2002, the Company ("PKLB") entered into a Merger Agreement with
Bioanalytical Systems, Inc ("BAS"). Shares of PKLB common stock outstanding at
the effective time of the merger will be converted into shares of BAS common
stock at a rate of one BAS share for each 12 PKLB shares; shares of PKLB Series
A Convertible Preferred Stock will be converted into 6% subordinated convertible
promissory notes issued by BAS in an aggregate principal amount of $5 million;
and shares of PKLB Series B Convertible Preferred Stock will be converted into
shares of BAS common stock at a rate of one BAS share for every 12 PKLB common
shares into which the shares of PKLB series B Convertible Preferred Stock are

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<PAGE>

convertible. The convertible promissory notes issued to holders of PKLB Class A
Convertible Preferred Stock in the merger will mature on January 1, 2008, will
not bear interest for the first year following the effective time of the merger,
and will be convertible at the option of the holder into BAS common stock at a
conversion price of $16 per share, after the expiration of one year following
the date of the merger. The proposed transaction is subject to the satisfaction
of certain closing conditions, including, among others, shareholder approval.
The integration of the Company will bring to Bioanalytical Systems, Inc. a
successful management team and expanded bioanalytical and Phase I service
capabilities, as well as a strong customer and revenue base.

RESULTS OF OPERATIONS

REVENUES

In 2002, 2001 and 2000 our revenues consisted of the following:

                                             Fiscal Years Ended June 30,
                                                   (in thousands)
                                         ------------------------------------
                                           2002          2001          2000
                                         --------      --------      --------
Phase I Services                         $  2,293      $  5,458      $  5,974
Bioanalytical Laboratory Service            1,210         1,522           445
Clinical Trial Management and
Monitoring                                  3,053         1,490         1,388
Licensing                                      39            32            67
Consulting Services                           203           411           150
                                         --------      --------      --------
   Total                                 $  6,798      $  8,913      $  8,024
                                         ========      ========      ========

Total revenues were $6.8 million, $8.9 million and $8.0 million for the fiscal
years ended June 30, 2002, 2001 and 2000, respectively. The decrease in revenue
in 2002 compared to 2001 is due to a decline in client demand for Phase I
services, principally Phase I clinical trials during the first half of the
fiscal year 2002, partially offset by higher clinical trial management and
monitoring revenue as studies neared completion. The increase in revenue in 2001
compared to 2000 is primarily in the areas of bioanalytical laboratory services
and consulting services.

The Company continues to strategically focus its sales and marketing efforts on
maintaining the core Phase I services, while expanding other key revenue
sources, primarily in the areas of clinical trials management and monitoring and
bioanalytical laboratory services.

COST OF CONTRACTS

Cost of contracts were $6.5 million, $7.5 million and $8.5 million for the
fiscal years ended June 30, 2002, 2001 and 2000, respectively. As a percentage
of revenue, cost of contracts increased to 95% compared to 84% for the
twelve-month period ended June 30, 2002 and 2001, respectively. This increase as
a percentage of revenue is due primarily to the mix in service contracts and the
lower sales level in fiscal 2002. Certain costs are variable in nature and vary
according to the type of study, the number of participants, samples processed,
method development and validation, technical and material requirements and
duration of the study. As a percentage of revenue, cost of contracts decreased
to 84% compared to 106% for the twelve-month period ended June 30, 2001 and
2000, respectively. The decrease in cost of

                                       10
<PAGE>

contracts in 2001 compared to 2000 is primarily attributable to the Company's
effort to contain and/or reduce certain fixed costs.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative ("SG&A") expenses were $1.7 million, $1.9
million and $2.5 million for the fiscal years ended June 30, 2002, 2001 and
2000, respectively. The decrease in SG&A expenses in 2002 compared to 2001 is
primarily due to a reduction in certain SG&A expenses such as consulting,
utilities, service contracts and routine operating expenses. The decrease in
SG&A expenses in 2001 compared to 2000 is primarily attributable to a reduction
in personnel costs of $0.2 million, a reduction in certain business development
costs of $0.1 million and the recognition of $0.3 million in expenses related to
the settlement with Altana, Inc. in fiscal year 2000.

RESEARCH AND DEVELOPMENT EXPENSES

Research and development ("R&D") expenses were $0.1 million, $0.1 million and
$0.2 million for the fiscal years ended June 30, 2002, 2001 and 2000,
respectively. R&D expenses remained approximately the same for the twelve-month
periods ended June 30, 2002 and 2001, respectively. The decrease in R&D expenses
in 2001 compared to 2000 is primarily attributable to the utilization of certain
of the Company's R&D personnel for activities necessary to meet project
deadlines for clients, including contracted development work. R&D expenses will
fluctuate from time to time as the Company re-allocates existing scientific
personnel whenever practical to focus on developing methods for utilization in
current and future studies related primarily to its LC/MS/MS instrumentation.

INCOME TAXES

No benefit for income taxes was recorded for the fiscal years ended June 30,
2002, 2001 and 2000 due to the uncertainty of utilizing such benefits.

OTHER INCOME AND EXPENSES

Other income and expenses of the Company consist primarily of interest income
earned on overnight investments and interest expense related to notes payable
and capital lease obligations. Interest income was $14,209, $50,306 and $51,989
for the fiscal years ended June 30, 2002, 2001 and 2000, respectively. The
decrease in interest income in 2002 compared to 2001, and 2001 compared to 2000,
is primarily related to a reduction in the average invested cash balances.
Interest expense was $8,829, $14,091 and $19,813 for the fiscal years ended June
30, 2002, 2001 and 2000, respectively. The decrease in interest expense in 2002
compared to 2001 is primarily due to the expiration of a capital lease in fiscal
year 2001.

LIQUIDITY AND CAPITAL RESOURCES

The Company had cash and cash equivalents of $46,371 at June 30, 2002. The
Company's primary source of funds is cash flow from operations although,
beginning in the quarter ended March 31, 2002, the Company from time to time has
borrowed funds from a director and BAS to cover short-term operating
requirements . During the twelve-month period ended June 30, 2002, cash and cash
equivalents decreased by $368,000. The decrease is due to the acquisition of key
laboratory equipment in the amount of $265,000 and cash used in operations in
the amount of $688,000 partly offset by the issuance of notes payable of
$550,000 (net of repayments) to a director and BAS.

The operating environment confronting the Company raises substantial doubt about
the Company's ability to continue as a going concern. The Company's near term
and long-term operating strategies focus on its sales and marketing efforts to
gain new as well as previous customers. In addition, the Company has and is
pursuing cost cutting measures and is taking other appropriate steps to manage
the Company's cash balances.

                                       11
<PAGE>

On June 20, 2002, The Company entered into a Merger Agreement with BAS. Shares
of PKLB common stock outstanding at the effective time of the merger will be
converted into shares of BAS common stock at a rate of one BAS share for each 12
PKLB shares; shares of PKLB Series A Convertible Preferred Stock will be
converted into 6% subordinated convertible promissory notes issued by BAS in an
aggregate principal amount of $5 million; and shares of PKLB Series B
Convertible Preferred Stock will be converted into shares of BAS common stock at
a rate of one BAS share for every 12 PKLB common shares into which the shares of
PKLB series B Convertible Preferred Stock are convertible. The convertible
promissory notes issued to holders of PKLB Class A Convertible Preferred Stock
in the merger will mature on January 1, 2008, will not bear interest for the
first year following the effective time of the merger, and will be convertible
at the option of the holder into BAS common stock at a conversion price of $16
per share, after the expiration of one year following the date of the merger.
The proposed transaction is subject to the satisfaction of certain closing
conditions, including, among others, shareholder approval.

The Company cannot guarantee that the results from operations will be sufficient
to support the Company's liquidity requirements through June 30, 2003 and
beyond. There can be no assurance that the proposed transaction with BAS will be
completed or the strategies will be accomplished or whether they will be
adequate to allow the Company to meet its cash needs.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of consolidated financial statements requires us to make
estimates and judgments with respect to the selection and application of
accounting policies that affect the reported amounts of assets, liabilities,
revenues and expenses, and the disclosures of contingent assets and liabilities.
We base our estimates on historical experience and on various other assumptions
that are believed to be reasonable under the circumstances, the results of which
form the basis for making judgments about the carrying values of assets and
liabilities. Actual results may differ from these estimates under different
assumptions or conditions.

Our significant accounting policies are described in Note 2 to the consolidated
financial statements included in Item 8 of this Form 10-K. We believe the
following critical accounting policies and significant judgments and estimates
have the greatest impact on the preparation of our consolidated financial
statements:

Contract Revenues - The Company enters into contracts with its customers to
provide the following services: (i) Bioanalytical; (ii) Phase I testing and
clinical trials, (iii) clinical trial management and monitoring; and (iv)
consulting.

Under Bioanalytical services contracts, the Company is engaged to perform and
deliver a specified number of completed assays. The duration of these contracts
is generally three to twelve months. The Company is paid for these services on a
per-assay basis and recognizes revenue for these contracts when the assays are
delivered.

The Company is engaged, under Phase I, clinical trials and clinical trial
management and monitoring of clinical trials to perform specified tasks ranging
from safety studies and project management services to the collection and
analysis of specimens and gathering data from tests performed. The duration of
these contracts range from three months to over twelve months. These contracts
are usually fixed-price arrangements and in the event of termination by the
customer, the contracts provide for the Company to be reimbursed for certain
contract costs incurred through that date, plus a percentage (as negotiated in
the contract) of the total contract project price. The Company recognizes
revenue for these services under the percentage-of-completion method, using the
ratio of total contract costs incurred to date to total estimated contract
costs.

Consulting services generally last one to two months. For those consulting
services for which the Company can reasonably estimate the contract revenue and
costs, the Company recognizes revenue as the work is completed. The Company
recognizes revenue using completed contract accounting for those consulting

                                       12
<PAGE>

contracts for which reasonably dependable estimates cannot be made and the
contracts are short-term in duration (generally one to two months).

Recognized revenues are subject to revisions as the contracts progress and
estimated costs to complete are revised. Revisions in revenue estimates are
recorded to income in the period in which the facts that give rise to the
revision become known. Projected losses on contracts are provided for in their
entirety when known.

License fee income is recognized as a percentage of licensed product sales as
reported to the Company from the licensee under the license agreement.

Trade Receivable Bad Debt Reserves - We maintain an allowance for doubtful
accounts for estimated losses resulting from the inability of our customers to
make required payments. If the financial condition of our customers were to
deteriorate, resulting in an impairment of their ability to make payments,
additional allowances may be required.

Income Taxes - We record a valuation allowance to reduce our deferred tax assets
to the amount that is more likely than not to be realized. While we have
considered future taxable income and ongoing tax planning strategies in
assessing the need for the valuation allowance, in the event we were to
determine that we would be able to realize deferred tax assets in the future in
excess of their net recorded amount, an adjustment to the deferred tax asset
would increase income in the period such determination was made. Likewise,
should we determine that we would not be able to realize all or part of the net
deferred tax asset in the future, an adjustment to the deferred tax asset would
be charged to income in the period such determination was made.

RISK FACTORS AND CERTAIN FORWARD-LOOKING INFORMATION

As discussed in the Cautionary Note at the beginning of this MD&A, certain
statements in this MD&A and elsewhere in this annual report on Form 10-K are
forward-looking statements based on current expectations, and entail various
risks and uncertainties that could cause actual results to differ materially
from those expressed in such forward-looking statements. Such risks and
uncertainties include those set forth under the following captions. Other more
general factors that could cause or contribute to such differences include, but
are not limited to, general economic conditions, conditions affecting the
pharmaceutical industry, and consolidation resulting in increased competition
within the Company's market.

Warning Letter

At the end of July 1999, the Company received a Warning Letter from the FDA
regarding the Company's noncompliance with certain protocol requirements in
bioequivalence studies that were conducted prior to fiscal 1999. In the Warning
Letter, the FDA advised the Company to take immediate corrective action and that
the failure to do so may result in regulatory action. The Company has responded
to the FDA and has taken the corrective actions it believes necessary to address
the issues and concerns raised in the Warning Letter. FDA representatives have
inspected the Company twice since the Warning Letter was issued. As of the
latest inspection, in December 2000, the FDA made no adverse findings. The
receipt of this letter has had, and any further regulatory action could have, a
material adverse effect on the Company's ability to market its services and
obtain new business. The resulting downturn in business has negatively affected,
and could continue to negatively affect, the Company's financial condition and
results of operations.

Dependence of the Company on the Product Development Cycles of its Clients

Most of the Company's contracts are short-term in duration. As a result, the
Company must continually replace its contracts with new contracts to sustain its
revenue. A client's product development cycle is the driving force in the
Company's ability to initiate new contracts. In addition, a client has the
ability to cancel or delay existing contracts if their product is not ready for
testing or if the testing results are not

                                       13
<PAGE>

satisfactory. The Company's inability to generate new contracts on a timely
basis would have a material adverse effect on the Company's business, financial
condition, and results of operations. Since a large portion of the Company's
operating costs are relatively fixed, variations in the timing and progress of
contracts can affect results materially.

Dependence of the Company on Certain Clients

The Company has in the past derived, and may in the future derive, a significant
portion of its revenue from a relatively limited number of major clients.
Concentrations of business in the CRO industry are not uncommon and the Company
is likely to experience such concentration in future years. A single client
contributed in excess of 10% of contract revenue, accounting for approximately
43%, 16% and 13% of contract revenue, for the fiscal years ended June 30, 2002,
2001 and 2000, respectively. In addition, another client contributed in excess
of 16% of contract revenue for the fiscal year ended June 30, 2000.

While an individual client may represent a significant percent of revenues,
these revenues are the result of the sum of a number of different contracts
during the year. While the complete loss of a significant client could have a
material adverse effect on the Company, the termination or loss of any one
contract would typically not have a material adverse effect on the Company's
business, financial condition, or results of operations.

Dependence of the Company on Key Personnel

The Company depends on a number of key individuals, the loss of any one of which
could have a material adverse effect on the Company's operations. The Company
also depends on its ability to attract and retain qualified scientific, medical
and technical employees. The Company has experienced difficulty in recruiting
individuals for such positions due to intense competition in the marketplace.
There can be no assurance that the Company will be able to retain its existing
scientific, medical and technical personnel, or to attract and retain qualified
employees. The Company's inability to attract and retain qualified individuals
would have a material adverse effect on the Company's business, financial
condition, and results of operations.

Ability to Continuously Develop New Methodologies for Clinical and Analytical
Applications

The Company must continuously develop analytical methodology for drug products
in order to obtain the business of its clients. Clients typically request
evidence of suitable validated analytical methods before placing work with the
Company. In addition, the Company must continue to be able to provide solutions
and advice for its clients for whom both traditional and non-traditional drug
delivery systems are used. This requires staying abreast of current regulatory
requirements and identifying applications that will assist clients in obtaining
approval for their products. The Company's inability to provide these services
on demand could have a material adverse effect on the Company's business,
financial condition, and results of operations.

Dependence of the Company on the Availability of Volunteer Study Participants

The Company uses volunteer study participants for each Phase I clinical study.
The availability of sufficient numbers of qualified and willing study
participants has at times been, and could in the future be, a limitation on the
Company's business. The Company's inability to attract qualified individuals for
its studies would have a material adverse effect on the Company's business,
financial condition, and results of operations.

Competition and Consolidation within the Company's Market

The Company competes primarily against other CROs and pharmaceutical companies'
in-house research departments. The CRO industry is highly fragmented, with
several large CROs and many small specialty providers. Many of the large
full-service CROs have substantially greater capital and other resources than

                                       14
<PAGE>

the Company. The continuing trend towards industry consolidation has resulted in
heightened competition among the larger CROs. The consolidation has generated
increased competition for clients and placed pressures on small specialty
providers. The Company competes in a specialty niche segment of the overall
market where total size is a less important competitive factor than in the
overall CRO industry. Clients choose to use the Company, or a direct competitor,
on the basis of prior experience with the Company, its reputation for the
quality of service provided, the ability to schedule the work in a time frame
that meets the client's needs, scientific and technical capability and the price
of the services performed. This may lead to price and other forms of competition
that may have a material adverse effect on the Company and its results of
operations.

Financial Results and Liquidity

The Company had cash and cash equivalents of $46,371 at June 30, 2002. The
Company's primary source of funds is cash flow from operations although,
beginning in the quarter ended March 31, 2002, the Company from time to time has
borrowed funds from a director and BAS to cover short-term operating
requirements . During the twelve-month period ended June 30, 2002, cash and cash
equivalents decreased by $368,000. The decrease is due to the acquisition of key
laboratory equipment in the amount of $265,000 and cash used in operations in
the amount of $688,000 partly offset by the issuance of notes payable of
$550,000 (net of repayments) to a director and BAS.

The operating environment confronting the Company raises substantial doubt about
the Company's ability to continue as a going concern. The Company's near term
and long-term operating strategies focus on its sales and marketing efforts to
gain new as well as previous customers. In addition, the Company has and is
pursuing cost cutting measures and is taking other appropriate steps to manage
the Company's cash balances.

On June 20, 2002, the Company entered into a Merger Agreement with BAS. Shares
of PKLB common stock outstanding at the effective time of the merger will be
converted into shares of BAS common stock at a rate of one BAS share for each 12
PKLB shares; shares of PKLB Series A Convertible Preferred Stock will be
converted into 6% subordinated convertible promissory notes issued by BAS in an
aggregate principal amount of $5 million; and shares of PKLB Series B
Convertible Preferred Stock will be converted into shares of BAS common stock at
a rate of one BAS share for every 12 PKLB common shares into which the shares of
PKLB series B Convertible Preferred Stock are convertible. The convertible
promissory notes issued to holders of PKLB Class A Convertible Preferred Stock
in the merger will mature on January 1, 2008, will not bear interest for the
first year following the effective time of the merger, and will be convertible
at the option of the holder into BAS common stock at a conversion price of $16
per share, after the expiration of one year following the date of the merger.
The proposed transaction is subject to the satisfaction of certain closing
conditions, including, among others, shareholder approval.

The Company cannot guarantee that the results from operations will be sufficient
to support the Company's liquidity requirements through June 30, 2003 and
beyond. There can be no assurance that the proposed transaction with BAS will be
completed or the strategies will be accomplished or whether they will be
adequate to allow the Company to meet its cash needs.

ITEM 7A.  Quantitative and Qualitative Disclosure about Market Risk

Interest Rate Risks

The exposure to market risk for changes in interest rates relates primarily to
the Company's short-term investments, which generally have maturities of three
months or less. The Company does not use derivative financial instruments for
speculative or trading purposes. The Company invests its excess cash in
short-term fixed income financial instruments with an investment strategy to buy
and hold to maturity.

                                       15
<PAGE>

Foreign Currency Risk

The Company does not have exposure to foreign currency exchange rate
fluctuations since the Company's contracts require payment to the Company in
U.S. dollars.

                                       16
<PAGE>

                        REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of
PharmaKinetics Laboratories, Inc.

In our opinion, the consolidated financial statements listed in the index
appearing under Item 14(a)(1) on page 40 present fairly, in all material
respects, the financial position of PharmaKinetics Laboratories, Inc. and its
subsidiary at June 30, 2002 and 2001, and the results of their operations and
their cash flows for each of the three years in the period ended June 30, 2002
in conformity with accounting principles generally accepted in the United States
of America. In addition, in our opinion, the financial statement schedule listed
in the index appearing under Item 14(a)(2) on page 40 presents fairly, in all
material respects, the information set forth therein when read in conjunction
with the related consolidated financial statements. These financial statements
and financial statement schedule are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements and financial statement schedule based on our audits. We conducted
our audits of these statements in accordance with auditing standards generally
accepted in the United States of America, which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has suffered recurring losses from operations
and has negative working capital. These conditions raise substantial doubt about
its ability to continue as a going concern. Management's plans in regard to
these matters are also described in Note 1. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.

As more fully discussed in Note 14, the 2002, 2001 and 2000 consolidated
financial statements have been restated to classify the Class A Convertible
Preferred Stock outside of Shareholders' deficit.

/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP

Baltimore, Maryland
July 26, 2002, except for Note 14,
as to which the date is November 13, 2002

                                       17
<PAGE>

ITEM 8. Financial Statements and Supplementary Data

                        PHARMAKINETICS LABORATORIES, INC.
                           CONSOLIDATED BALANCE SHEETS
                        (In thousands, except share data)

<TABLE>
<CAPTION>
                                                                              June 30,
                                                                       ----------------------
                                                                          2002        2001
                                                                       (restated)  (restated)
                                                                       ----------  ----------
<S>                                                                     <C>         <C>
                                   ASSETS
Current assets
   Cash and cash equivalents                                            $     46    $    414
   Accounts receivable, net                                                  676       1,443
   Contracts in process                                                       50         130
   Prepaid expenses and other current assets                                 143         204
                                                                        --------    --------

     Total current assets                                                    915       2,191
   Property, plant and equipment, net                                      3,164       3,445
   Other assets                                                               --          66
                                                                        --------    --------

                                                                        $  4,079    $  5,702
                                                                        ========    ========

                  LIABILITIES, MANDATORILY REDEEMABLE
               PREFERRED STOCK AND STOCKHOLDERS' DEFICIT
Current liabilities
   Accounts payable and accrued expenses                                $  1,310    $    756
   Notes payable                                                             550          --
   Deposits on contracts in process                                          313       1,557
                                                                        --------    --------

     Total current liabilities                                             2,173       2,313
                                                                        --------    --------

Mandatorily Redeemable Class A convertible preferred stock, no par
   value; issued and outstanding, 833,300 shares at June 20, 2002 and
   2001, respectively                                                      4,938       4,938
                                                                        --------    --------

Commitments and Contingent Liabilities
Stockholders' Deficit
Convertible preferred stock, no par value; authorized, 1,500,000:
Class B convertible preferred stock, no par value; issued
   and outstanding, 250,000 shares at June 30, 2002 and
   2001, respectively                                                        273         273
Common stock, $.005 par value; authorized, 10,000,000
   shares; issued and outstanding, 2,496,129 shares at
   June 30, 2002 and 2001, respectively                                       12          12
Additional paid-in capital                                                11,930      11,930
Accumulated deficit                                                      (15,247)    (13,764)
                                                                        --------    --------

Total stockholders' deficit                                               (3,032)     (1,549)
                                                                        --------    --------

                                                                        $  4,079    $  5,702
                                                                        ========    ========
</TABLE>

          See accompanying notes to consolidated financial statements.


                                       18
<PAGE>

                        PHARMAKINETICS LABORATORIES, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                      (In thousands, except per share data)

<TABLE>
<CAPTION>
                                                       Fiscal Years Ended June 30,
                                                    --------------------------------
                                                      2002        2001        2000
                                                    --------    --------    --------
<S>                                                 <C>         <C>         <C>
Revenues                                            $  6,798    $  8,913    $  8,024
Cost and expenses:
   Cost of contracts                                   6,464       7,469       8,514
   Selling, general and administrative expenses        1,742       1,880       2,462
   Research and development expenses                      80         113         158
                                                    --------    --------    --------
     Total costs and expenses                          8,286       9,462      11,134
                                                    --------    --------    --------
Loss from operations                                  (1,488)       (549)     (3,110)
Other income and expenses
   Interest income                                        14          50          52
   Interest expense                                       (9)        (14)        (20)
   Other expenses                                         --          --         (34)
   Gain on sale of investment                             --          --         154
                                                    --------    --------    --------
                                                           5          36         152
                                                    --------    --------    --------
Net loss applicable to common stockholders          $ (1,483)   $   (513)   $ (2,958)
                                                    ========    ========    ========
Basic and diluted loss per common share             $  (0.59)   $  (0.21)   $  (1.19)
                                                    ========    ========    ========
Weighted-average shares used to compute basic and
   diluted loss per common share                       2,496       2,496       2,496
                                                    ========    ========    ========
</TABLE>

          See accompanying notes to consolidated financial statements.


                                       19
<PAGE>

                        PHARMAKINETICS LABORATORIES, INC.
       CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
                        (In thousands, except share data)

<TABLE>
<CAPTION>
                                    Preferred Stock
                                         Class B                   Common Stock                                          Total
                                  ----------------------      -----------------------                                Stockholders'
                                  Number                       Number                    Additional                     Equity
                                    of                           of                        Paid-in     Accumulated     (Deficit)
                                  Shares         Amount        Shares         Amount       Capital       Deficit       (restated)
                                  -------      ---------      ---------     ---------     ---------     ---------      ---------
<S>                               <C>          <C>            <C>           <C>           <C>           <C>            <C>
Balance, July 1, 1999                  --      $      --      2,496,129     $      12     $  11,930     $ (10,293)     $   1,649
Comprehensive loss:
   Net loss                                                                                                (2,958)        (2,958)
   Other comprehensive loss                                                                                                   --
                                                                                                                       ---------
Total comprehensive loss                                                                                                  (2,958)
                                                                                                                       ---------
Issuance of preferred
stock in settlement of
   lawsuit                        250,000            273                                                                     273
                                  -------      ---------      ---------     ---------     ---------     ---------      ---------
Balance, June 30, 2000            250,000      $     273      2,496,129     $      12     $  11,930     $ (13,251)        (1,036)
Comprehensive loss:
   Net loss                                                                                                  (513)          (513)
   Other comprehensive loss
                                                                                                                       ---------
Total comprehensive loss                                                                                                    (513)
                                                                                                                       ---------

                                  -------      ---------      ---------     ---------     ---------     ---------      ---------
Balance, June 30, 2001            250,000      $     273      2,496,129     $      12     $  11,930     $ (13,764)        (1,549)
Comprehensive loss:
   Net loss                                                                                                (1,483)        (1,483)
   Other comprehensive loss
                                                                                                                       ---------
Total comprehensive loss                                                                                                  (1,483)
                                                                                                                       ---------

                                  -------      ---------      ---------     ---------     ---------     ---------      ---------
Balance, June 30, 2002            250,000      $     273      2,496,129     $      12     $  11,930     $ (15,247)     $  (3,032)
                                  =======      =========      =========     =========     =========     =========      =========
</TABLE>

          See accompanying notes to consolidated financial statements.


                                       20
<PAGE>

                        PHARMAKINETICS LABORATORIES, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)

<TABLE>
<CAPTION>
                                                               Fiscal Years Ended June 30,
                                                         ---------------------------------------
                                                           2002           2001           2000
                                                         ---------      ---------      ---------
<S>                                                      <C>            <C>            <C>
Cash flows from operating activities:
   Net Loss                                              $  (1,483)     $    (513)     $  (2,958)
   Adjustments to reconcile net loss to net cash
provided by (used in)
      operating activities:
       Depreciation                                            546            574            653
       Issuance of preferred stock in settlement
of lawsuit                                                      --             --            273
       (Gain) loss on disposal of equipment                    (35)            --             34
       Gain on sale of investment                               --             --           (154)
       Bad debt expense                                         15             37             --
Changes in operating assets and liabilities:
   Accounts receivable, net                                    752           (319)           357
   Contracts in process                                         80            608            112
   Prepaid expenses and other assets                           127             43             24
   Accounts payable and accrued expenses                       554           (489)           183
   Deposits on contracts in process                         (1,244)           216           (141)
                                                         ---------      ---------      ---------
Net cash provided by (used in) operating
activities                                                    (688)           157         (1,617)
                                                         ---------      ---------      ---------
Cash flows from investing activities:
   Purchases of property and equipment                        (265)           (28)          (355)
   Proceeds from disposal of equipment                          35             --             --
   Proceeds from sale of investment                             --             --            178
                                                         ---------      ---------      ---------
Net cash used in investing activities                         (230)           (28)          (177)
                                                         ---------      ---------      ---------
Cash flows from financing activities:
   Proceeds from issuance of notes payable                     700             --             --
   Payments on notes payable                                  (150)            --             --
   Payments on capital lease obligations                        --            (62)           (92)
                                                         ---------      ---------      ---------
Net cash provided by (used in) financing
activities                                                     550            (62)           (92)
                                                         ---------      ---------      ---------

Net increase (decrease) in cash and cash
equivalents                                                   (368)            67         (1,886)
Cash and cash equivalents at the beginning of
year                                                           414            347          2,233
                                                         ---------      ---------      ---------
Cash and cash equivalents at the end of year             $      46      $     414      $     347
                                                         =========      =========      =========

Supplemental disclosures of cash flow
information:
Interest paid                                            $       3      $      12      $      19
                                                         =========      =========      =========
</TABLE>

          See accompanying notes to consolidated financial statements.


                                       21
<PAGE>

                        PHARMAKINETICS LABORATORIES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and Description of Business and Going Concern Matters

Description of Business

PharmaKinetics Laboratories, Inc. (the "Company") is a contract research
organization ("CRO"), located in Baltimore, Maryland, providing a range of
clinical research and development services to the worldwide pharmaceutical and
biotechnology industries in the development of prescription and non-prescription
drug products. These services include Phase I clinical research, bioanalytical
laboratory testing, and the management and monitoring of multi-center clinical
trials. The Company offers ancillary services in these areas such as protocol
development, case report form design, data management, biostatistics and
regulatory consulting.

Financial Results and Liquidity

The Company had cash and cash equivalents of $46,371 at June 30, 2002. The
Company's primary source of funds is cash flow from operations although,
beginning in the quarter ended March 31, 2002, the Company from time to time has
borrowed funds from a director and BAS to cover short-term operating
requirements . During the twelve-month period ended June 30, 2002, cash and cash
equivalents decreased by $368,000. The decrease is due to the acquisition of key
laboratory equipment in the amount of $265,000 and cash used in operations in
the amount of $688,000 partly offset by the issuance of notes payable of
$550,000 (net of repayments) to a director and BAS.

The operating environment confronting the Company raises substantial doubt about
the Company's ability to continue as a going concern. The Company's near term
and long-term operating strategies focus on its sales and marketing efforts to
gain new as well as previous customers. In addition, the Company has and is
pursuing cost cutting measures and is taking other appropriate steps to manage
the Company's cash balances.

On June 20, 2002, the Company entered into a Merger Agreement with BAS. Shares
of PKLB common stock outstanding at the effective time of the merger will be
converted into shares of BAS common stock at a rate of one BAS share for each 12
PKLB shares; shares of PKLB Series A Convertible Preferred Stock will be
converted into 6% subordinated convertible promissory notes issued by BAS in an
aggregate principal amount of $5 million; and shares of PKLB Series B
Convertible Preferred Stock will be converted into shares of BAS common stock at
a rate of one BAS share for every 12 PKLB common shares into which the shares of
PKLB series B Convertible Preferred Stock are convertible. The convertible
promissory notes issued to holders of PKLB Class A Convertible Preferred Stock
in the merger will mature on January 1, 2008, will not bear interest for the
first year following the effective time of the merger, and will be convertible
at the option of the holder into BAS common stock at a conversion price of $16
per share, after the expiration of one year following the date of the merger.
The proposed transaction is subject to the satisfaction of certain closing
conditions, including, among others, shareholder approval.

The Company cannot guarantee that the results from operations will be sufficient
to support the Company's liquidity requirements through June 30, 2003 and
beyond. There can be no assurance that the proposed transaction with BAS will be
completed or the strategies will be accomplished or whether they will be
adequate to allow the Company to meet its cash needs.


                                       22
<PAGE>

                        PHARMAKINETICS LABORATORIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

2. Summary of Significant Accounting Policies and Practices

Principles of Consolidation

The accompanying consolidated financial statements include the results of the
Company and the PKLB Limited Partnership, a wholly owned subsidiary, which owns
the building the Company occupies. The Company includes 100% of the building
operations in its financial statements.

Segment Information

The Company operates in one industry segment, the testing and related research
of pharmaceutical products. The Company is managed and operated as one business.
A single management team that reports to the Chief Executive Officer
comprehensively manages the entire business. The Company does not operate
separate lines of business or separate business entities. In addition, the
Company operates from its corporate headquarters located within the United
States. The Company does not have separately reportable segments as defined by
Standard of Financial Accounting Standards ("SFAS") SFAS No. 131, Disclosure
about Segments of an Enterprise and Related Information.

Cash Equivalents

The Company classifies all highly liquid investments with an original maturity
of three months or less at the time of purchase as cash equivalents.

Accounts Receivable

The Company grants unsecured credit to its customers. At June 30, 2002, and
2001, accounts receivable is shown net of the allowance for doubtful accounts of
$100,150 and $85,000, respectively.

Investments

The Company classifies investments at the time of purchase as either
available-for-sale or held-to-maturity. Investments in securities that are
classified as available-for-sale are carried at their fair values. Unrealized
holding gains and losses on available-for-sale securities are excluded from
current earnings (loss) and are reported as a separate component of
stockholders' equity as "Accumulated other comprehensive income (loss)".
Realized gains and losses on available-for-sale securities are determined on a
specific identification basis.

A decline in the market value of any available-for-sale or held-to-maturity
security below cost that is deemed to be other than temporary is an impairment
that would result in a reduction in the carrying amount to fair value. Such
impairment, if any, is charged to current earnings, and an adjusted cost basis
for the security is established.

Fair Value of Financial Instruments

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 carrying values of the Company's
notes payable approximates their fair values based on borrowing rates available
at the reporting date for indebtedness with similar terms and maturities.

Property, Plant and Equipment

Property, plant and equipment are stated at cost. Depreciation and amortization
are calculated on the straight-line method over the estimated useful lives of
the assets, generally five years for furniture and


                                       23
<PAGE>

                        PHARMAKINETICS LABORATORIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

equipment and fifteen to thirty-six years for building and improvements. Upon
the disposition of assets, the cost and related accumulated depreciation are
removed from the accounts and any resulting gain or loss is included in the
Consolidated Statements of Operations. Expenditures for repairs and maintenance
are expensed as incurred.

Contracts in Process and Deposits on Contracts in Process

Contracts in process include direct and indirect costs related to contract
performance. Deposits on contracts represent interim payments. Upon completion
of the contract, the customer is billed for the total contract amount less any
deposits or interim payments.

Revenue Recognition

The Company enters into contracts with its customers to provide the following
services: (i) Bioanalytical; (ii) Phase I testing and clinical trials, (iii)
clinical trial management and monitoring; and (iv) consulting.

Under Bioanalytical services contracts, the Company is engaged to perform and
deliver a specified number of completed assays. The duration of these contracts
is generally three to twelve months. The Company is paid for these services on a
per-assay basis and recognizes revenue for these contracts when the assays are
delivered.

The Company is engaged, under Phase I, clinical trials and clinical trial
management and monitoring of clinical trials to perform specified tasks ranging
from safety studies and project management services to the collection and
analysis of specimens and gathering data from tests performed. The duration of
these contracts range from three months to over twelve months. These contracts
are usually fixed-price arrangements and in the event of termination by the
customer, the contracts provide for the Company to be reimbursed for certain
contract costs incurred through that date, plus a percentage (as negotiated in
the contract) of the total contract project price. The Company recognizes
revenue for these services under the percentage-of-completion method, using the
ratio of total contract costs incurred to date to total estimated contract
costs.

Consulting services generally last one to two months. For those consulting
services for which the Company can reasonably estimate the contract revenue and
costs, the Company recognizes revenue as the work is completed. The Company
recognizes revenue using completed contract accounting for those consulting
contracts for which reasonably dependable estimates cannot be made and the
contracts are short-term in duration (generally one to two months).

Recognized revenues are subject to revisions as the contracts progress and
estimated costs to complete are revised. Revisions in revenue estimates are
recorded to income in the period in which the facts that give rise to the
revision become known. Projected losses on contracts are provided for in their
entirety when known.

License fee income is recognized as a percentage of licensed product sales as
reported to the Company from the licensee under a license agreement, which
expires in fiscal year 2004. The Company recognized license fee income of
$38,988, $32,452, and $67,579 during fiscal years ended June 30, 2002, 2001, and
2000, respectively.

The Company conducts studies for a number of companies outside of the United
States (U.S.), primarily in Canada and Europe, in addition to many domestic
companies. This work is billed and paid in U.S. dollars, so there is no currency
exchange risk to the Company. The following table approximates revenue
recognized by the Company from its clients outside of the United States (in
thousands).


                                       24
<PAGE>

                        PHARMAKINETICS LABORATORIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                                            Year ended June 30,
                                     ----------------------------------
                                       2002         2001         2000
                                     --------     --------     --------
Canada                               $    176     $    944     $    964
Europe & other                            124          616          402
                                     --------     --------     --------
Total                                $    300     $  1,560     $  1,366
                                     ========     ========     ========

Significant Clients

A single client contributed in excess of 10% of contract revenue, accounting for
approximately 43%, 16% and 13% of contract revenue, for the fiscal years ended
June 30, 2002, 2001 and 2000, respectively. In addition, another client
contributed in excess of 16% of contract revenue for the fiscal year ended June
30, 2000.

Accounting for Income Taxes

Deferred tax assets and liabilities are determined based on differences between
the financial reporting and tax basis of assets and liabilities and are measured
using the enacted tax rates and laws that will be in effect when the differences
are expected to reverse. The measurement of deferred tax assets is reduced, if
necessary, by a valuation allowance if it is more likely than not that some
portion of or all of the deferred tax asset will not be realized. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that such tax rate changes are enacted.

Research and Development Expenses

The nature of the Company's bioanalytical laboratory services requires the
Company to develop new assay methods for use in testing pharmaceutical products
in order to determine the amount of drug present in each of the biological
specimens tested. Each drug being tested requires the development of a unique
assay method, the accuracy and precision of which must be documented according
to current scientific standards to meet requirements established by the United
States Food and Drug Administration ("FDA"). The Company's research and
development group develops and validates these unique assay methods. These
research and development costs are expenses as incurred.

Stock-Based Compensation

The Company discloses information relating to stock-based compensation awards in
accordance with SFAS No. 123, Accounting for Stock-Based Compensation. ("SFAS
123"), and has elected to apply the provisions of Accounting Principles Board
Opinion No. 25, Accounting for Stock Issued to Employees ("APB 25"), to such
compensation awards. Under the Company's employee stock option plans, the
Company grants employee stock options at an exercise price equal to the fair
market value at the date of grant. No compensation expense is recorded with
respect to such stock option grants. Compensation expense for options granted to
non-employees is determined in accordance with SFAS 123 as the fair value of the
consideration received or the fair value of the equity instruments issued
whichever is more reliably measured.


                                       25
<PAGE>

                        PHARMAKINETICS LABORATORIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Earnings (Loss) per Share

Basic earnings (loss) per share ("EPS") is computed by dividing earnings (loss)
by the weighted-average number of shares outstanding for the period. The
computation of Diluted EPS is similar to Basic EPS except that the
weighted-average number of shares outstanding for the period is increased to
include the number of additional shares that would have been outstanding if the
dilutive potential common shares had been used. Potential common shares are
excluded if the effect on earnings (loss) per share is antidilutive.

The following table presents the computations of basic and diluted EPS (in
thousands, except per share data):

                                          2002          2001          2000
                                        --------      --------      --------
Net loss                                $ (1,483)     $   (513)     $ (2,958)
                                        ========      ========      ========
Weighted-average shares
outstanding                                2,496         2,496         2,496
                                        ========      ========      ========
Basic and diluted EPS
applicable to common
stockholders                            $  (0.59)     $  (0.21)     $  (1.19)
                                        ========      ========      ========

There were common stock equivalents of 2,058,261, 2,058,261 and 1,750,962 at
June 30, 2002, 2001, and 2000, respectively, that were considered antidilutive
and accordingly excluded in the above calculation.

Concentration of Credit Risk

The Company is subject to credit risk related to cash balances with financial
institutions in excess of insured amounts. The risk is mitigated by the fact
that, at the close of each business day, excess funds in the Company's operating
accounts are placed in an overnight investment account collateralized by
government securities held by the financial institution.

One client accounted for 41% and three clients accounted for 54% of the
outstanding accounts receivable balance at June 30, 2002 and 2001, respectively.
Clients outside the U.S. comprise 0.14% and 24.8% of the outstanding accounts
receivable balance at June 30, 2002, and 2001, respectively.

Reclassifications

Certain prior year amounts have been reclassified to conform to the current year
presentation.

Use of Estimates

The preparation of the Company's financial statements in conformity with
generally accepted accounting principles in the United States of America,
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, revenues and expenses, and disclosure of
contingent assets and liabilities at the date of the financial statements.
Actual amounts may differ from these estimates.

Uncertainties

The Company is subject to various risks common to many contracted research
organizations. These include, but are not limited to, dependence on product
development cycles of its clients; dependence on key personnel; the ability to
continuously develop new methodologies for clinical and analytical applications;


                                       26
<PAGE>

                        PHARMAKINETICS LABORATORIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

competition and consolidation within the market place and compliance with
government regulations and agencies, including the U.S. Food and Drug
Administration.

3. Property, Plant and Equipment

Property, plant and equipment consists of the following (in thousands):

                                                               June 30,
                                                       ------------------------
                                                          2002           2001
                                                       ---------      ---------
Land                                                   $     200      $     200
Building and improvements                                  3,118          3,118
Furniture and equipment                                    4,017          3,918
                                                       ---------      ---------
                                                       $   7,335      $   7,236
                                                       ---------      ---------
Accumulated depreciation                                  (4,171)        (3,791)
                                                       ---------      ---------
                                                       $   3,164      $   3,445
                                                       =========      =========

Certain assets classified as a capital lease expired at the end of the lease
term in fiscal year 2002. At June 30, 2001, assets classified as a capital lease
were $340,165 with accumulated depreciation of $238,115.

4. Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses consists of the following (in thousands):

                                                               June 30,
                                                       ------------------------
                                                          2002           2001
                                                       ---------      ---------
Trade accounts payable                                 $   1,044      $     510
Accrued payroll and related expenses                          98            116
Other accrued expenses                                       168            130
                                                       ---------      ---------
                                                       $   1,310      $     756
                                                       =========      =========

5 Investment in Hybridon, Inc.

At June 30, 1999, the Company held 44,642 shares of common stock and warrants to
acquire 11,161 shares of common stock, at an exercise price of $2.40 per share,
of Hybridon, Inc. (OTCBB:HYBN) with a carrying value of $23,716 as determined by
the average of the bid and ask prices of the stock reported by the National
Quotation Bureau on June 30, 1999, which was $0.53 per share. The Company
received the stock and warrants in fiscal 1998 in exchange for an accounts
receivable in the amount of $89,284. The warrants expire on May 4, 2003, and are
not subject to a call provision.


                                       27
<PAGE>

                        PHARMAKINETICS LABORATORIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

At June 30, 1999, the market value of the Hybridon Stock was less than the
adjusted cost basis of $89,284. The difference of $65,568 was recorded as a
write-down of the investment and was reflected in the Consolidated Statements of
Operations, as the impairment of such investment was considered to be other than
temporary.

During fiscal year 2000, the Company liquidated its common stock holdings in
Hybridon, Inc. generating cash proceeds of $177,874 and a gain on the sale of
$154,158.

6. Income Taxes

Significant components of the Company's deferred tax assets and liabilities are
shown below (in thousands):

                                                               June 30,
                                                       ------------------------
                                                          2002           2001
                                                       ---------      ---------
Deferred tax assets:
   Accounts receivable                                 $      39      $      33
   Accrued liabilities                                        39             23
   Net operating loss carryforwards                        4,890          4,308
   Alternative minimum tax credits                             4              4
   General business credits                                1,431          1,558
   Valuation allowance                                    (6,157)        (5,738)
                                                       ---------      ---------
Total deferred tax assets                                    246            187
Deferred tax liabilities:
   Property, plant and equipment                            (246)          (187)
                                                       ---------      ---------
                                                            (246)          (187)
                                                       ---------      ---------
Net deferred income taxes                              $      --      $      --
                                                       =========      =========

Based on the weight of evidence available at June 30, 2002 and 2001, in
management's opinion, a full valuation allowance is required and recorded
against the Company's deferred income tax assets.

At June 30, 2002, the Company had tax loss carryforwards of approximately $13.0
million, which begin expiring in 2006 through 2022, and general business credits
of approximately $1.4 million that begin expiring in 2003 through 2015.
Approximately $6.4 million of net operating loss carryforwards and general
business credits are currently subject to limitations under Section 382 of the
Internal Revenue Code. In the event of a change in ownership (see Note 12),
utilization of the Company's net operating loss carryforwards generated prior to
the ownership change would be subject to an annual limitation under Section 382
of the Internal Revenue Code, which could substantially reduce or defer the
utilization of these losses.

The principal differences between the actual effective tax rate and the
statutory federal tax rate are as follows:


                                       28
<PAGE>

                        PHARMAKINETICS LABORATORIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                                               Fiscal year ended June 30,
                                           ---------------------------------
                                            2002          2001          2000
                                           -----         -----         -----
Statutory rate                             (34.0)%       (34.0)%       (34.0)%
State income taxes -
net of federal benefit                      (4.9)         (4.9)         (4.9)
Valuation Allowance                         38.9          38.9          38.9
                                           -----         -----         -----
Effective tax rate                            --%           --%           --%
                                           =====         =====         =====

7. Leases

Lease expense for all operating leases, including leases with terms of less than
one year, amounted to $92,700, $85,551 and $84,100, for the years ended June 30,
2002, 2001 and 2000, respectively. The future expected payout of operating
leases with terms in excess of one year is as follows:

Fiscal Year ending June 30,

2003                                                                     $27,420
2004                                                                      16,530
2005                                                                       1,488
2006 and thereafter                                                           --
                                                                         -------
                                                                         $45,438
                                                                         =======

8. Capital Transactions

Class A Preferred Stock and Warrants

In December 1997, the Company issued 833,300 shares of a newly created Class A
Convertible Preferred Stock and warrants to purchase 1,250,000 shares of the
Company's common stock, and entered into a Registration Rights Agreement and
Technology Sharing Agreement in connection therewith, to investors including
certain affiliates of Aster S.A. and CAI Advisors & Co. (collectively, the
"Purchasers"). The securities were issued pursuant to a Preferred Share and
Warrant Purchase Agreement (the "Agreement").

The Agreement provided for the sale to the Purchasers of a total of 833,300
shares of Class A Convertible Preferred Stock for $4,937,500 or $5.925 per
share. The preferred stock is convertible at any time into shares of common
stock at a conversion ratio of one (1) share of preferred stock for two point
one seven (2.17) shares of the Company's common stock. The conversion ratio is
subject to adjustment under certain circumstances to prevent dilution. In the
event of liquidation of the Company, the holders of the shares of preferred
stock who do not convert their shares into common stock are entitled to receive
$5.925 per share, prior to any distributions being made to the holders of any
other class or series of the Company's capital


                                       29
<PAGE>

                        PHARMAKINETICS LABORATORIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

stock. The Class A Preferred Stock contains certain redemption provisions and,
therefore, is classified outside of permanent equity. The Company has authorized
1,500,000 shares of total preferred stock.

In addition, the Agreement provided for the sale to the Purchasers, for $62,500,
warrants to purchase 1,250,000 shares of the Company's common stock, exercisable
at $6.00 per share. These warrants expired on December 23, 2000.

Class B Preferred Stock and Warrants

In April 2000, the Company issued 250,000 shares of a newly created Class B
Convertible Preferred Stock and warrants to purchase 100,000 shares of the
Company's common stock to Altana, Inc. in settlement of a civil action. The fair
value of the Class B Convertible Preferred Stock was based on the underlying
value of the Company's common stock on the date of issuance of the Class B
Convertible Preferred Stock. The fair value of the stock warrants issued in
connection with this settlement, as determined using an option-pricing model,
was determined to be immaterial. The preferred stock is convertible at any time
into shares of common stock at a conversion ratio of one (1) share of preferred
stock for one (1) share of common stock. The conversion ratio is subject to
adjustment under certain circumstances to prevent dilution. There are no
liquidation preferences.

The warrants are fully exercisable at $6.00 per share and expire in April 2003.
Altana can elect to exchange shares of the preferred stock for future studies
performed by the Company. No shares have been exchanged for future studies
through June 30, 2002.

9. Stock Option Plan

Employee Stock Option Plans

The Company has stock option plans under which incentive and non-qualified stock
options may be granted to key employees. As of June 30, 2002, there were 336,340
options outstanding, 220,907 of which were exercisable, but not exercised, and
186,370 available for future issuance. To date, 42,130 options have been
exercised. A total of 564,840 options have been authorized for issuance under
the plans, at no less than the fair market value of the shares on the date of
grant. Options may be granted for terms up to but not exceeding ten years and
are generally fully vested after four years from the date granted.

Non-Employee Directors' Stock Option Plan

In November 1996, the Board of Directors elected to discontinue cash
compensation for its non-employee directors and to adopt a Non-Employee
Directors Stock Option Plan (the "1996 Plan") effective November 25, 1996. The
1996 Plan was amended by resolution of the Board of Directors (the "Board) on
January 20, 1998 in order to increase the number of shares of the Company's
common stock subject to options available for grant under the 1996 Plan. Each
non-employee director shall be granted options to purchase 24,000 shares of the
Company's common stock, at the fair market value of the stock on the effective
date of the grant, which shall vest in four equal installments over four years.
The first year's grant will be pro-rated for directors joining the Board after
the effective date. The first installment shall vest on the effective date of
the grant. Thereafter, on the date of each of the next three annual meetings of
stockholders at which elections to the Board are conducted, an installment of
6,000 shares shall vest in each serving director who is re-elected to the Board.
The 1996 Plan, as amended, shall be administered by the Board or the
Compensation Committee established by the Board and provides that the number of
shares of stock that may be issued pursuant to options granted under the 1996
Plan shall not exceed in the aggregate 200,000 shares. As of June 30, 2002,
there were 78,500 options outstanding, 72,500 of which were exercisable, but not
exercised, and 109,500 options were available for future issuance. To date,
12,000 options have been exercised.


                                       30
<PAGE>

                        PHARMAKINETICS LABORATORIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Non-Employee Grants

The Company granted non-qualified options to purchase 211,420 shares of the
Company's common stock to non-employee directors for their services as
directors. As of June 30, 2002, there were 80,000 options outstanding, all were
exercisable, but not exercised. Options were granted at fair market value on the
effective date of the grant (and therefore, no compensation charge was
recorded), vesting over a four- year period with a life of ten years from the
date of grant.

The following is a summary of the Company's share option activity and balances
as of and for the fiscal years ended June 30, 2002, 2001 and 2000:

                                                 Number     Weighted-Average
                                                of Shares   Exercise Price
                                                ---------   --------------
Balance, July 1, 1999                            453,660      $    4.40
Granted                                          368,600           1.54
Exercised                                             --             --
Forfeited                                       (233,910)          4.27
                                                --------      ---------

Balance, June 30, 2000                           588,350           2.66
Granted                                          133,000           0.73
Exercised                                             --             --
Forfeited                                        (48,490)          3.24
                                                --------      ---------

Balance, June 30, 2001                           672,860           2.23
Granted                                           25,000           0.63
Exercised                                             --             --
Forfeited                                       (203,020)          2.59
                                                --------      ---------

Balance, June 30, 2002                           494,840      $    2.01
                                                ========      =========

Share options outstanding and exercisable by price range are as follows:

<TABLE>
<CAPTION>
                                  Options Outstanding                                    Options Exercisable
            ------------------------------------------------------------       -------------------------------------
 Range                            Weighted-Average
   of                                Remaining                                                           Weighted-
Exercise    Outstanding as of       Contractual         Weighted-Average       Exercisable as of          Average
 Prices       June 30, 2002            Life              Exercise Price         June 30, 2002         Exercise Price
------       -------------             ----              --------------         -------------         --------------
<S>         <C>                   <C>                   <C>                    <C>                    <C>
$0.63
to $5.00        418,540                7.6                  $1.14                  282,107                 $1.22
$5.01
to $7.50         76,300                5.7                   6.78                   76,300                  6.78
                -------                ---                  -----                  -------                 -----
                494,840                7.3                  $2.01                  358,407                 $2.40
                =======                ===                  =====                  =======                 =====
</TABLE>


                                       31
<PAGE>

                        PHARMAKINETICS LABORATORIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Using the Black-Scholes option pricing model, the per share weighted-average
fair value of all share options granted at market value on the date of grant
during fiscal years 2002, 2001 and 2000 were $0.63, $0.49 and $0.81,
respectively, and $0.16 during fiscal year 2000 for those options granted with
an exercise price greater than market value on the date of grant, with the
following weighted-average assumptions.

                                          2002          2001            2000
                                          ----          ----            ----
Expected dividend yield                        0%            0%              0%
Weighted average risk-free interest rate    4.66%         5.86%           6.44%
Volatility                                  80.0%         80.0%           80.8%
Expected life in years                   5 years       5 years    2 to 5 years

The Company applies APB 25 in accounting for share options granted to employees
and, accordingly, no compensation expense has been recognized related to such
share options to the extent that such share options were granted at an exercise
price that equaled the fair market value at the grant date. Had the Company
determined compensation cost based on the fair value at the grant date for its
share options under SFAS 123, (using the Black-Scholes pricing model), the
Company's net loss would have been adjusted to the pro forma amounts indicated
below (in thousands, except per share data):

                                              Fiscal year ended June 30,
                                        ------------------------------------
                                          2002          2001          2000
                                        --------      --------      --------
Net loss applicable to common
stockholders -- as reported             $ (1,483)     $   (513)     $ (2,958)
Net loss applicable to common
stockholders -- pro forma               $ (1,549)     $   (726)     $ (2,956)
Basic and diluted loss per share
-- as reported                          $  (0.59)     $  (0.21)     $  (1.19)
Basic and diluted loss per share
-- pro forma                            $  (0.62)     $  (0.29)     $  (1.18)

10. 401(k) Profit Sharing Plan

The Company's 401(k) Profit Sharing Plan (the "401(k) Plan") is available to all
employees meeting certain eligibility criteria and permits participants to
contribute up to certain limits as established by the Internal Revenue Code. The
Company may make cash contributions equal to a percentage of a participant's
contribution or may contribute a discretionary amount to the 401(k) Plan.

The Company matches employee contributions equal to 1% contributed to such
employee's 401(k) Plan account subject to certain limitations as established by
the Internal Revenue Service. Such amounts vest 25% per year after the first two
years and are fully vested after six years of service with the Company. The
Company has made contributions of approximately $21,400, $23,800 and $25,400 for
the fiscal years ended June 30, 2002, 2001, and 2000, respectively.


                                       32
<PAGE>

                        PHARMAKINETICS LABORATORIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

11. Quarterly Financial Data (in thousands, except per share data) (Unaudited)

<TABLE>
<CAPTION>
Fiscal Year 2002        September 30,      December 31,       March 31,          June 30,
----------------        -------------      ------------       ---------          --------
<S>                     <C>                <C>                <C>                <C>
Revenue                    $ 2,182           $ 1,726           $ 1,921           $   969
Gross profit               $   (98)          $   341           $   363           $  (272)
Net loss                   $  (581)          $  (112)          $   (56)          $  (734)
Basic loss per share       $ (0.23)          $ (0.04)          $ (0.02)          $ (0.29)
Diluted loss per share     $ (0.23)          $ (0.04)          $ (0.02)          $ (0.29)
</TABLE>

<TABLE>
<CAPTION>
Fiscal Year 2001        September 30,      December 31,       March 31,          June 30,
----------------        -------------      ------------       ---------          --------
<S>                     <C>                <C>                <C>                <C>
Revenue                    $  2,642          $  2,694          $  1,423          $  2,154
Gross profit               $    632          $    567          $    134          $    110
Net earnings (loss)        $     80          $     86          $   (309)         $   (370)
Basic earnings (loss)
per share                  $   0.03          $   0.03          $  (0.12)         $  (0.15)
Diluted earnings (loss)
per share                  $   0.02          $   0.02          $  (0.12)         $  (0.15)
</TABLE>

12. Merger with Bioanalytical Systems, Inc.

On June 20, 2002, the Company ("PKLB") entered into a Merger Agreement with
Bioanalytical Systems, Inc ("BAS"). Shares of PKLB common stock outstanding at
the effective time of the merger will be converted into shares of BAS common
stock at a rate of one BAS share for each 12 PKLB shares; shares of PKLB Series
A Convertible Preferred Stock will be converted into 6% subordinated convertible
promissory notes issued by BAS in an aggregate principal amount of $5 million;
and shares of PKLB Series B Convertible Preferred Stock will be converted into
shares of BAS common stock at a rate of one BAS share for every 12 PKLB common
shares into which the shares of PKLB series B Convertible Preferred Stock are
convertible. The convertible promissory notes issued to holders of PKLB Class A
Convertible Preferred Stock in the merger will mature on January 1, 2008, will
not bear interest for the first year following the effective time of the merger,
and will be convertible at the option of the holder into BAS common stock at a
conversion price of $16 per share, after the expiration of one year following
the date of the merger.

The closing of the transaction is subject to the approval of the board of
directors of BAS and customary closing conditions, including registration of the
BAS securities to be issued in the merger and the approval of PKLB's
shareholders.

13. Related Party Transactions

During the last half of fiscal year 2002, the Company issued notes payable of
$500,000 in the aggregate to Mr. Leslie Daniels, a director, to cover short-term
operating requirements. These notes carry an annual interest rate of 8% and are
payable upon demand. At June 30, 2002, the Company had $350,000 in outstanding
notes payable to Mr. Daniels, which are included in the accompanying
Consolidated Balance Sheets as "Notes payable". The Company recorded $5,344 as
interest expense for the twelve months ended June 30, 2002.

In June 2002, the Company issued notes payable of $200,000 in the aggregate to
BAS to cover short-term operating requirements. These notes carry an annual
interest rate of 8% and are due December 2002. At June 30, 2002, the Company had
$200,000 in outstanding notes payable to BAS, which are included in the
accompanying Consolidated Balance Sheets as "Notes payable". The Company
recorded $467 as interest expense during the twelve months ended June 30, 2002.


                                       33
<PAGE>

                        PHARMAKINETICS LABORATORIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

14. Restatement

During 2002, the Company determined that its Class A Convertible Preferred Stock
is mandatorily redeemable and accordingly, should have been classified outside
of stockholders' deficit. The 2002, 2001 and 2000 financial statements have been
restated to reflect this change, which had the effect of reducing stockholders'
equity by $4,938,000 at June 30, 2002, 2001 and 2000 and July 1, 1999.

ITEM 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure

None


                                       34
<PAGE>

                                    PART III

ITEM 10. Directors and Executive Officers of the Registrant

The directors and executive officers of the Company as of June 30, 2002 are as
follows:

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
          Name             Age        Position                      Business Experience
-----------------------------------------------------------------------------------------------------------
<S>                      <C>      <C>              <C>
Thomas F. Kearns, Jr.    66       Director         Retired from Bear, Stearns & Co., Inc. in 1987;
                                  (since 1995)     Director of Biomet, Inc.; Trustee of the University of
                                                   North Carolina Foundation and Endowment Fund.
-----------------------------------------------------------------------------------------------------------
Leslie B. Daniels        55       Director         Principal of CAI Advisors & Co., an investment company
                                  since 1998)      with offices in New York and Montreal, since 1988;
                                                   Director of IVAX Corporation from December 1994 to
                                                   December 1995; Chairman of the Board of Directors of
                                                   Zenith Laboratories, Inc., a major generic drug
                                                   manufacturer from April 1990 to December 1994, and a
                                                   Director from December 1989 to December 1994. Director
                                                   of NBS Technologies, Inc., MIST, Inc., and Safeguard
                                                   Health Enterprises, Inc.
-----------------------------------------------------------------------------------------------------------
Jerome A. Halperin       65       Director         Retired, April 2000. Executive Vice President and
                                  (since 2000)     Chief Executive Officer, Chairman, Committee of
                                                   Revision, and Secretary, Board of Trustees and U.S.
                                                   Pharmacopeial Convention from March 1995 to April
                                                   2000; Executive Director, Chairman, Committee of
                                                   Revision, and Secretary, Board of Trustees and U.S.
                                                   Pharmacopeial Convention from March 1990 to March 1995.
-----------------------------------------------------------------------------------------------------------
Kamal K. Midha, C.M.,    61       Director         Director of Drug Metabolism, Drug Disposition Group,
   Ph.D., D.Sc.                   (since 1998)     University of Saskatchewan, Canada since 1979, and
                                                   Chief Scientific Officer of PharmaQuest Limited,
                                                   Bermuda, a newly established Pharmaceutical Research
                                                   Corporation. He serves on the Editorial Boards of
                                                   Journal of Pharmaceutical Sciences and Xenobiotica. He
                                                   is Vice President of the International Pharmaceutical
                                                   Federation and he is an Adjunct Professor of Pharmacy
                                                   and Associate Member of Psychiatry, University of
                                                   Saskatchewan, Canada and Co-Chief of the
                                                   Psychopharmacology Unit, Clinical Research Center for
                                                   Study of Schizophrenia & Rehabilitation, University of
                                                   California, Los Angeles.
-----------------------------------------------------------------------------------------------------------
James M. Wilkinson, II,  50       Director (since  President and Chief Executive Officer of
   Ph.D.                          2000) and        PharmaKinetics Laboratories, Inc. since January 2000;
                                  President and    Vice President Analytical Laboratory Services from
                                  Chief Executive  July 1996 to Executive Officer January 2000; Associate
                                  Officer          Director, Pharmaco International, Inc., Analytical
                                                   Laboratory Division from December 1992 to June 1995.
-----------------------------------------------------------------------------------------------------------
Jeffrey A. Scheidt       43       Vice President   Vice President and Chief Financial Officer since July
                                  and Chief        2001; Controller, Guilford Pharmaceuticals Inc. from
                                  Financial        August 1994 to March 2001 and Director of Financial
                                  Officer          Planning and Analysis from March 2001 to July 2001.
                                                   Education - B.S., Accounting, Loyola College,
                                                   Baltimore, Maryland 1986. Certified Public Accountant.
-----------------------------------------------------------------------------------------------------------
</TABLE>


                                       35
<PAGE>

<TABLE>
<S>                      <C>      <C>              <C>
-----------------------------------------------------------------------------------------------------------
Cynthia A. Schurick      46       Vice President   Vice President of Business Development since January
                                  Business         2000; Senior Director, Sales Support, from July 1998
                                  Development and  to January 2000; Director, Sales Support from January
                                  Secretary        1993 to July 1998; various other positions from May
                                                   1982 to January 1993. Education - B.S., Speech
                                                   Pathology and Audiology, (Magna Cum Laude) West
                                                   Virginia University, 1978.
-----------------------------------------------------------------------------------------------------------
</TABLE>

Section 16(a) Beneficial Ownership Reporting Compliance

Based on our review of copies of reporting forms we received or written
representation from a reporting person that no Form 5 was required, we believe
that our reporting officers and directors filed all the reports required by
Section 16 of the Securities Exchange Act for fiscal year 2002.

ITEM 11. Executive Compensation

The following table sets forth, for the Company's last three fiscal years, the
cash compensation paid or accrued by the Company, as well as certain other
compensation paid or accrued for those years, to its Chief Executive Officer and
other most highly compensated executive officers whose total annual salary and
bonus exceeded $100,000 for the fiscal year ended June 30, 2002.

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                        Annual Compensation                      Long-Term Compensation
                               ---------------------------------------    ----------------------------------------
                                                                          Other Annual  Securities      All Other
Name and Principal                             Salary                       ($)Comp.    Underlying    Compensation
Position                       Fiscal           Year         Bonus ($)      ($) (1)     Options(#)       ($) (2)
--------                       ------           ----         ---------      -------     ----------       -------
<S>                            <C>            <C>            <C>          <C>           <C>           <C>
James M. Wilkinson II, Ph.D.    2002           144,000           --          6,000            --             --
President, Chief Executive      2001           137,902           --          6,000        50,000             --
Officer and Director            2000           115,200           --          6,000        71,000         17,500

Jeffrey A. Scheidt              2002           103,654           --             --            --             --
Vice President,
Chief Financial Officer

Cynthia A. Schurick             2002           120,994           --          6,000        12,000             --
Vice President,                 2001           118,666           --          6,000        30,000          3,126
Business Development            2000            89,739        3,000          3,000        53,000         11,300
</TABLE>

----------
(1)   Other Annual Compensation includes personal benefits provided by the
      Company.
(2)   Other compensation includes forgiveness of Dr. Wilkinson's note payable to
      the Company, and commissions paid to Ms. Schurick.


                                       36
<PAGE>

Stock Option Grants

The following table sets forth information concerning the grant of stock options
under the Company's 1996 Incentive Stock Option Plan during fiscal 2002 to the
executive officers named in the Summary Compensation Table.

                        OPTION GRANTS IN LAST FISCAL YEAR
                                INDIVIDUAL GRANTS

<TABLE>
<CAPTION>
                                                                            Potential Realizable Value
                                                                               Assumed Annual Rates
                                                                                     of Stock
                                                                                Price Appreciation
                                                                               for Option Term (3)
                                                                            --------------------------
              Number of        Percentage
               Options          of Total
             Securities      Options Granted    Exercise
             Underlying        Employees in        or         Expiration
  Name     Granted (#) (1)   Fiscal Year (%)  Base Price (2)      Date         5%                10%
--------   --------------    ---------------  --------------  -----------    ------            -------
<S>        <C>               <C>              <C>             <C>            <C>               <C>
Cynthia A.
Schurick        12,000             48.0           $0.625          9/11       $4,717            $11,953
</TABLE>

----------
(1)   Options granted under the 1996 Incentive Stock Option Plan. These options
      vest 50% upon the date of the grant with the remaining share options
      vesting equally over the next two years.
(2)   The exercise prices are equal to the fair market value of the common stock
      on the date of grant.
(3)   Amounts represent hypothetical gains that could be achieved for the
      respective options at the end of the ten-year option term. The assumed 5%
      and 10% rates of stock appreciation are mandated by the rules of the
      Securities and Exchange Commission and may not accurately reflect the
      appreciation of the price of our common stock from the date of growth
      until the end of the option term. These assumptions are not intended to
      forecast future price appreciation of our common stock.

Stock Option Exercises and Holdings

The following table sets forth information related to the number and value of
options held by three of the Company's executive officers. There were no options
exercised by the following individuals during the fiscal year ended June 30,
2002.

                 AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
                        AND FISCAL YEAR END OPTION VALUES

<TABLE>
<CAPTION>
                                                                                             Value of Unexercised
                                                         Number of Unexercised                    In-the-Money
                                                         Options at FY-End (#)             Options at FY-End ($) (1)
                                                     -----------------------------       -----------------------------
                      Shares            ($)
                   Acquired in         Value
Name                Exercise          Realized       Exercisable     Unexercisable       Exercisable     Unexercisable
----                --------          --------       -----------     -------------       -----------     -------------
<S>               <C>                 <C>            <C>             <C>                 <C>             <C>
James M
Wilkinson,
II, Ph.D             113,833            36,167                --                --
Jeffrey A
Scheidt                   --                --             5,000            15,000                --                --
Cynthia A
Schurick                  --                --            67,833            37,167                --                --
</TABLE>

----------
(1)   None of the options granted and outstanding were in-the-money at June 30,
      2002 based on the closing price of $0.39 on June 28, 2002.


                                       37
<PAGE>

Severance Agreements

The Company has severance agreements with Dr. Wilkinson, Mr. Scheidt and Ms.
Schurick. Each agreement provides for the continuance of the officer's annual
base salary for a period of six to twelve months from the date of termination of
employment if such termination occurs at any time during a two (2) year period
after a "Significant Transaction" or a "Change of Board Composition" and is for
reasons other than "Just Cause", such terms as defined within the agreement.
Upon termination of employment, the agreement provides for accelerated vesting
of all stock options and the option to extend the exercise period of such
options. As of June 30, 2002 benefits payable would be approximately $144,000
for Dr. Wilkinson, $55,000 for Mr. Scheidt and $121,000 for Ms. Schurick.

ITEM 12. Security Ownership of Certain Beneficial Owners and Management

The following table sets forth information as of June 30, 2002, regarding stock
ownership of management and owners of 5% or more of each class of the Company's
voting securities:

<TABLE>
<CAPTION>
                                             Beneficial Ownership of                   Beneficial Ownership of
                                                   Common Stock                      Convertible Preferred Stock
                                        ---------------------------------    --------------------------------------------
                                          Number of            Percent of     Number of                       Percent of
                                        Shares Owned            Ownership    Shares Owned         Class      Shares Owned
                                        ------------            ---------    ------------         -----      ------------
<S>                                     <C>                    <C>           <C>                  <C>        <C>
Altana, Inc.
   60 Baylis Road
   Melville, NY 11747                   350,155(4)                 12.3%        250,000              B          100.0%
Dennis Chase
   P.O. Box 248
   North Lake, WI 53064                 220,000                     8.8%             --             --             --
Leslie B. Daniels
   CAI Advisors & Co.
   767 Fifth Ave. 5th Floor
   New York, NY 10153                   246,430(1)(2)(3)            9.0%        103,885              A           12.5%
Peter M. Gottsegen
   CAI Advisors & Co.
   767 Fifth Ave. 5th Floor
   New York, NY 10153                   225,430(2)(3)               8.3%        103,885              A           12.5%
GES Investments, S.A
   Avenue Delleur, 18
   Brussels, Belgium 1170                36,165(2)(3)               1.4%         16,666              A            2.0%
Initiative & Finance
Investissement
   16 rue Chauveau Lagarde
   Paris, France 75008                  144,661(2)                  5.5%         66,664              A            8.0%
R.A. Mackie and Co., LP.
   18 North Astor Street
   Irvington, NY 10533                  307,763(7)(8)              12.3%             --             --             --
</TABLE>


                                       38
<PAGE>

<TABLE>
<S>                                     <C>                    <C>           <C>                  <C>        <C>
Michael F. Price
   1180 Larger Cross Road
   P.O. Box 434
   Far Hills, NJ 07931                  415,900(2)                 14.3%        191,659              A           23.0%
Peter G. Restler
   CAI Advisors & Co.
   767 Fifth Ave. 5th Floor
   New York, NY 10153                    54,248(2)(3)               2.1%         24,999              A            3.0%
Richard J. Schmeelk
   CAI Advisors & Co.
   767 Fifth Ave. 5th Floor
   New York, NY 10153                   225,430(2)(3)               8.3%        103,885              A           12.5%
David von Kauffmann
   European Equity Partners
   1 rue Vernier
   75017 Paris, France                   36,165(2)(3)(6)                          6,666              A            2.0%
Manfred Yu
   CAI Advisors & Co.
   767 Fifth Ave. 5th Floor
   New York, NY 10153                    10,848(2)(3)(6)                          4,999              A            0.6%
Richard L. Scott Revocable Trust
   100 1st Stanford Place
   Stanford, CT 86902                   180,826                     6.8%         83,330              A           10.0%
Joseph Riccardo
   245 Park Ave
   New York, NY 10167                   204,937(3)                  7.6%         94,441              A           11.3%
Jerome A. Halperin                       35,000(1)                  1.4%             --             --             --
Thomas F. Kearns, Jr                     82,924(1)(2)               3.2%         11,110              A            1.3%
Kamal K. Midha, C.M., Ph.D., D.Sc        51,400(1)(5)               2.0%             --             --             --
James M. Wilkinson II, Ph.D             126,333(1)                  4.8%             --             --             --
Jeffrey A. Scheidt                        5,000(1)(6)                                --             --             --
Cynthia A. Schurick                      82,194(1)                  3.2%             --             --             --
All directors and officers
   as a group (8 persons)               629,282(1)(2)              20.4%        114,995              A           13.8%
</TABLE>

----------
(1)   Includes shares of stock which directors and officers have exercisable
      rights to acquire as of or within 60 days of June 30, 2002, through the
      exercise of options, in the amount of 21,000 shares for Mr. Daniels;
      35,000 shares for Mr. Halperin; 39,000 shares for Mr. Kearns; 5,000 shares
      for Mr. Scheidt; 39,000 shares for Dr. Midha; 78,333 shares for Ms.
      Schurick; 126,333 shares for Dr. Wilkinson; and 343,667 shares for all
      directors and officers as a group.
(2)   Includes shares for which investors have rights to acquire upon conversion
      of Class A Convertible Preferred Stock, in the amount of 225,430 shares
      for Mr. Daniels; 225,430 shares for Mr. Gottsegen; 36,165 shares for GES
      Investments, S.A.; 144,661 shares for initiative and Finance
      Investissement;


                                       39
<PAGE>

      415,900 shares for Mr. Price; 54,248 shares for Mr. Restler; 225,430
      shares for Mr. Schmeelk; 36,165 shares for Mr. Kauffmann; 10,848 for Mr.
      Yu; 24,109 shares for Mr. Kearns; and 249,539 shares for all directors and
      officers as a group.
(3)   Each of these individuals has reported membership in a "group" based upon
      Amendment No. 2 to Schedule 13D filed with the Securities and Exchange
      Commission on January 12, 1998.
(4)   Includes shares of stock, which Altana, Inc. has a right to acquire upon
      conversion of Class B Convertible Preferred Stock and warrants to purchase
      100,000 shares of common stock, exercisable at $6.00 per share.
(5)   Includes 12,400 shares held by Dr. Midha's son.
(6)   Less than 1%
(7)   These are members of a "group" based upon Schedule 13D filed with the
      Securities and Exchange Commission on February 2, 1998.
(8)   Includes 38,476 shares of common stock owned by Robert A. Mackie, Jr.

ITEM 13. Certain Relationships and Related Transactions

During the last half of fiscal year 2002, the Company issued notes payable of
$500,000 in the aggregate to Mr. Leslie Daniels, a director, to cover short-term
operating requirements. These notes carry an annual interest rate of 8% and are
payable upon demand. At June 30, 2002, the Company had $350,000 in outstanding
notes payable to Mr. Daniels, which are included in the accompanying
Consolidated Balance Sheets as "Notes payable". The Company recorded $5,344 as
interest expense for the twelve months ended June 30, 2002.

In June 2002, the Company issued notes payable of $200,000 in the aggregate to
BAS to cover short-term operating requirements. These notes carry an annual
interest rate of 8% and are due December 2002. At June 30, 2002, the Company had
$200,000 in outstanding notes payable to BAS, which are included in the
accompanying Consolidated Balance Sheets as "Notes payable". The Company
recorded $467 as interest expense during the twelve months ended June 30, 2002.

                                    PART IV

ITEM 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K

                                                                         Page(s)
                                                                         -------
(a) 1.      Financial Statements

            Report of Independent Accountants                                 14

            Consolidated Balance Sheets at June 30, 2002 and 2001             15

            Consolidated Statements of Operations for each of the
            three years ended June 30, 2002                                   16

            Consolidated Statement of Changes in Stockholders' Equity
            (Deficit) for each of the three years ended June 30, 2002         17

            Consolidated Statements of Cash Flows for each of the
            three years ended June 30, 2002                                   18

            Notes to Consolidated Financial Statements                        19

2.          Financial Statement Schedule

            Report of Independent Accountants                                 14

            Schedule II - Valuation and Qualifying Accounts                   37

3.          Exhibits

            See Exhibit Index                                                 39

            (b) Reports on Form 8-K

(1) On July 9, 2002 the Company filed a Current Report on Form 8-K, the purpose
of which was to file the Agreement and Plan of Merger dated as of June 20, 2002,
with Bioanalytical Systems, Inc. and PI Acquisition Corp.


                                       40
<PAGE>

                                   SCHEDULE II

                        PHARMAKINETICS LABORATORIES, INC.
                        VALUATION AND QUALIFYING ACCOUNTS

                For the Years Ended June 30, 2002, 2001 and 2000

                                 (In thousands)

<TABLE>
<CAPTION>
                             Balance at     Charged to     Charged to                         Balance
                             Beginning      Costs and        Other                            at end
Description                  of Period       Expenses       Accounts        Deductions       of Period
-----------                  ---------       --------       --------        ----------       ---------
<S>                         <C>             <C>            <C>              <C>             <C>
Valuation
Allowances:
Allowance for
doubtful accounts
2002                          $   85          $   15              --              --           $  100
2001                          $   48          $   37              --              --           $   85
2000                          $  150          $   --              --          $ (102)          $   48

Deferred tax
assets (a)
2002                          $5,738              --          $  419              --           $6,157
2001                          $5,522              --          $  216              --           $5,738
2000                          $4,455              --          $1,067              --           $5,522
</TABLE>

----------
Notes:

(a)   Represents charges to deferred tax asset account


                                       41
<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 Amendment No. 2 on Form 10-K/A
to be signed on its behalf by the undersigned, thereunto duly authorized.

                                     PHARMAKINETICS LABORATORIES, INC.

Date: June 29, 2003                  By:  /s/ James M. Wilkinson, II, Ph.D.
                                          -------------------------------------
                                          James M. Wilkinson, II, Ph.D.
                                          President and Chief Executive Officer


                                       42
<PAGE>

                                  EXHIBIT INDEX

  Exhibit
   Number   Description
  -------   -----------

      2.    Disclosure Statement (incorporated by reference to Exhibit 2 of the
            Company's 8-K filing on April 6, 1993).

      3.    (a) Amended and Restated Articles of Incorporation, dated April 6,
            1998 (incorporated by reference to Exhibit 3(a) to the Company's
            Annual Report on Form 10-K for the fiscal year ended June 30, 1998).

      (b)   Articles Supplementary relating to Class B Convertible Preferred
            Stock of the Company (incorporated by reference to Exhibit 4.1 to
            the Company's 8-K filing on April 21, 2000).

      (c)   Bylaws, as amended and restated (incorporated by reference to
            Exhibit 3(b) to the Company's Quarterly Report on Form 10-Q for the
            quarter ended December 31, 1997).

      4.    Registration Rights Agreement dated as of December 23, 1997
            (incorporated by reference to Exhibit 4.4 to the Company's January
            7, 1998 filing on Form 8-K).

      10.   Material Contracts

      (a)   PharmaKinetics Laboratories, Inc. Incentive Stock Option Plan
            (incorporated by reference to Registration Statement on Form S-8,
            No. 33-51840).

      (b)   PharmaKinetics Laboratories, Inc. 1996 Incentive Stock Option Plan
            (incorporated by reference to Registration Statements on Form S-8,
            Nos. 333-19865 and 333-31062).

      (d)   PharmaKinetics Laboratories, Inc. Amended and Restated 1996
            Non-Employee Director's Stock Option Plan (incorporated by reference
            to Registration Statement on Form S-8, No. 333-59647).

      (f)   Technology Sharing Agreement dated as of December 23, 1997
            (incorporated by reference to Exhibit 99.2 to the Company's January
            7, 1998 filing on Form 8-K).

      (g)   Severance Agreement dated November 28, 2000, between the Company and
            Cynthia A. Schurick (incorporated by reference to Exhibit 10 (g) to
            the Company's quarterly report on Form 10-Q on December 31, 2000).

      (h)   Severance Agreement dated November 28, 2000, between the Company and
            James M. Wilkinson, II (incorporated by reference to Exhibit 10 (h)
            to the Company's quarterly report on Form 10-Q on December 31,
            2000).

      (i)   Severance Agreement dated February 7, 2002, between the Company and
            Jeffrey A. Scheidt (incorporated by reference to Exhibit 10 (i) to
            the Company's quarterly report on Form 10-Q on March 31, 2002).

      21.   List of subsidiaries of registrant (incorporated by reference to
            Exhibit 10 (g) to the Company's Annual Report on Form 10-K for the
            fiscal year ended June 30, 1995).


                                       43
<PAGE>

      23.   Consent of Independent Accountants (filed herewith).

     99.(a) Court Order approving Debtor's Amended Plan of reorganization
            (incorporated by reference to the Company's 8-K filing on April 6,
            1993).

      (b)   Court Order approving Application for Final Decree (incorporated by
            reference to Exhibit 99 (b) to the Company's Annual Report on Form
            10-K for the fiscal year ended June 30, 1996).

      (1)   Certification of President and Chief Executive Officer, Chief
            Financial Officer and Secretary pursuant to Section 906 of the
            SARBANES - OXLEY Act of 2002 (filed herewith).


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