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<SEC-DOCUMENT>0000927946-06-000172.txt : 20061229
<SEC-HEADER>0000927946-06-000172.hdr.sgml : 20061229
<ACCEPTANCE-DATETIME>20061229120039
ACCESSION NUMBER:		0000927946-06-000172
CONFORMED SUBMISSION TYPE:	10-K
PUBLIC DOCUMENT COUNT:		13
CONFORMED PERIOD OF REPORT:	20060930
FILED AS OF DATE:		20061229
DATE AS OF CHANGE:		20061229

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			BIOANALYTICAL SYSTEMS INC
		CENTRAL INDEX KEY:			0000720154
		STANDARD INDUSTRIAL CLASSIFICATION:	SERVICES-COMMERCIAL PHYSICAL & BIOLOGICAL RESEARCH [8731]
		IRS NUMBER:				351345024
		STATE OF INCORPORATION:			IN
		FISCAL YEAR END:			0930

	FILING VALUES:
		FORM TYPE:		10-K
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-23357
		FILM NUMBER:		061304653

	BUSINESS ADDRESS:	
		STREET 1:		2701 KENT AVE
		CITY:			WEST LAFAYETT
		STATE:			IN
		ZIP:			47906-1382
		BUSINESS PHONE:		3174634527

	MAIL ADDRESS:	
		STREET 1:		2701 KENT AVENUE
		CITY:			WEST LAFAYETTE
		STATE:			IN
		ZIP:			47906-1382
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<FILENAME>bodyof10k.htm
<DESCRIPTION>BIOANALYTICAL SYSTEMS, INC. - FORM 10K
<TEXT>
<HTML>
<HEAD>
<TITLE>Bioanalytical Systems, Inc. 10K</TITLE>
</HEAD>
<BODY>



<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><B><font SIZE=2>UNITED STATES</font></B></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><B><font SIZE=2>SECURITIES AND EXCHANGE COMMISSION</font></B></p>

<p style=' margin-bottom:12pt; margin-top:0pt;text-align:center;'><B><font SIZE=2>WASHINGTON, D.C. 20549</font></B></p>

<p style=' margin-bottom:12pt; margin-top:0pt;text-align:center;'><B><font SIZE=2>FORM 10K</font></B></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>


<div align=left>

<table border="0" cellspacing=0 cellpadding=0 width="686" style='border-collapse:collapse'>
    <tr >
        <td width="82" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p align=center style='margin:0in;margin-bottom:.0001pt;text-align:center'><font size=2>(Mark One)</font></p> </td>
        <td width="604" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin:0in;margin-bottom:.0001pt'><font size=1>&nbsp;</font></p> </td> </tr>
    <tr >
        <td width="82" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p align=center style='margin:0in;margin-bottom:.0001pt;text-align:center'><font face=Wingdings>x</font></p> </td>
        <td width="604" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin:0in;margin-bottom:.0001pt'><font size=2>ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the fiscal year ended September 30, 2006.</font></p> </td> </tr>
    <tr style='height:15.75pt'>
        <td  colspan="2" valign=top style='padding:0in 5.4pt 0in 5.4pt; height:15.75pt'>
            <p style='margin:0in;margin-bottom:.0001pt;text-indent:11.25pt'><font size=2>OR&nbsp;</font></p> </td> </tr>
    <tr >
        <td width="82" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p align=center style='margin:0in;margin-bottom:.0001pt;text-align:center'><font face=Wingdings>o</font></p> </td>
        <td width="604" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin:0in;margin-bottom:.0001pt'><font size=2>TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the transition period from ___________ to _____________.</font></p> </td> </tr></table>
</div>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>Commission File Number 000-23357</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><B><font SIZE=2>BIOANALYTICAL SYSTEMS, INC.</font></B></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>(Exact name of the registrant as specified in its charter)</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>


<div align=left>

<table border="0" cellspacing=0 cellpadding=0 width="590" style='margin-left:41.4pt;border-collapse:collapse'>
    <tr >
        <td width="297" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p align=center style='margin:0in;margin-bottom:.0001pt;text-align:center'><U><font SIZE=1>INDIANA</font></U></p>
<p align=center style='margin:0in;margin-bottom:.0001pt;text-align:center'><font size=1>(State or other jurisdiction of incorporation or organization)</font></p> </td>
        <td width="20" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p align=center style='margin:0in;margin-bottom:.0001pt;text-align:center'><font size=1>&nbsp;</font></p> </td>
        <td width="273" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p align=center style='margin:0in;margin-bottom:.0001pt;text-align:center'><u><font size=1>35-1345024</font></u></p>
<p align=center style='margin:0in;margin-bottom:.0001pt;text-align:center'><font size=1>(I.R.S. Employer Identification No.)</font></p> </td> </tr>
    <tr >
        <td width="297" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p align=center style='margin:0in;margin-bottom:.0001pt;text-align:center'><font size=1>&nbsp;</font></p> </td>
        <td width="20" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p align=center style='margin:0in;margin-bottom:.0001pt;text-align:center'><font size=1>&nbsp;</font></p> </td>
        <td width="273" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p align=center style='margin:0in;margin-bottom:.0001pt;text-align:center'><font size=1>&nbsp;</font></p> </td> </tr>
    <tr >
        <td width="297" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p align=center style='margin:0in;margin-bottom:.0001pt;text-align:center'><font size=1>2701 KENT AVENUE</font></p>
<p align=center style='margin:0in;margin-bottom:.0001pt;text-align:center'><U><font SIZE=1>WEST LAFAYETTE, INDIANA</font></U></p>
<p align=center style='margin:0in;margin-bottom:.0001pt;text-align:center'><font size=1>(Address of principal executive offices)</font></p> </td>
        <td width="20" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p align=center style='margin:0in;margin-bottom:.0001pt;text-align:center'><font size=1>&nbsp;</font></p> </td>
        <td width="273" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p align=center style='margin:0in;margin-bottom:.0001pt;text-align:center'><u><font size=1>47906</font></u></p>
<p align=center style='margin:0in;margin-bottom:.0001pt;text-align:center'><font size=1>(Zip code)</font></p> </td> </tr>
    <tr >
        <td  colspan="3" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p align=center style='margin:0in;margin-bottom:.0001pt;text-align:center'><font size=1>&nbsp;</font></p> </td> </tr>
    <tr >
        <td  colspan="3" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p align=center style='margin:0in;margin-bottom:.0001pt;text-align:center'><u><font size=1>(765) 463-4527</font></u></p>
<p align=center style='margin:0in;margin-bottom:.0001pt;text-align:center'><font size=1>(Registrant&#146;s telephone number, including area code)</font></p> </td> </tr></table>
</div>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>Securities registered pursuant to Section 12(b) of the Act: None</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>Securities registered pursuant to section 12(g) of the Act: Common Shares</font></p>


<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Indicate by checkmark if the registrant is a well-known seasoned issuer, as
defined  by  Rule  405 of the  Securities  Act.&nbsp;&nbsp;&nbsp;&nbsp; YES&nbsp;&nbsp;<img src="ballot.jpg">&nbsp;&nbsp;&nbsp;&nbsp;NO&nbsp;&nbsp;<img src="ballotx.jpg">
</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Indicate by checkmark
if the registrant is not required to file reports pursuant to Section 13 or Section 15(d)
of the Act. &nbsp;&nbsp;&nbsp;&nbsp;YES <img src="ballot.jpg">&nbsp;&nbsp;&nbsp;&nbsp;NO
<img src="ballotx.jpg"></FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>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.&nbsp;&nbsp;&nbsp;&nbsp;YES
<img src="ballotx.jpg">&nbsp;&nbsp;&nbsp;&nbsp;NO <img src="ballot.jpg"></FONT></P>


<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>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&#146;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.&nbsp;&nbsp;&nbsp;&nbsp;<img src="ballot.jpg"></FONT></P>


<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Indicate by check mark
whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).&nbsp;&nbsp;&nbsp;&nbsp;YES
<img src="ballot.jpg">&nbsp;&nbsp;&nbsp;&nbsp;NO <img src="ballotx.jpg"></FONT></P>


<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Indicate by check mark
whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).&nbsp;&nbsp;&nbsp;&nbsp;YES
<img src="ballot.jpg">&nbsp;&nbsp;&nbsp;&nbsp;NO <img src="ballotx.jpg"></FONT></P>


<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Based on the closing
price on the NASDAQ stock market on March&nbsp;31, 2006, the aggregate market value of
the voting and non-voting common equity held by non-affiliates of the registrant is
$22,390,000. As of December 20, 2006, 4,892,127 shares of registrant&#146;s common shares
were outstanding. No shares of registrant&#146;s Preferred Stock were outstanding as of
December 20, 2006.</FONT></P>


<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Portions of the
following documents have been incorporated by reference into this report:</FONT></P>



<table border="0" cellspacing=0 cellpadding=0 width="543" style='border-collapse:collapse'>
    <tr style='page-break-inside:avoid'>
        <td width="257" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p align=center style='margin:0in;margin-bottom:.0001pt;text-align:center'><u><font size=2>Registrant&#146;s Document</font></u></p> </td>
        <td width="37" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin:0in;margin-bottom:.0001pt;text-align:justify'><font size=2>&nbsp;</font></p> </td>
        <td width="249" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p align=center style='margin:0in;margin-bottom:.0001pt;text-align:center'><u><font size=2>Parts Into Which Incorporated</font></u></p> </td> </tr>
    <tr style='page-break-inside:avoid'>
        <td width="257" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin:0in;margin-bottom:.0001pt;text-align:justify'><font size=2>&nbsp;</font></p> </td>
        <td width="37" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin:0in;margin-bottom:.0001pt;text-align:justify'><font size=2>&nbsp;</font></p> </td>
        <td width="249" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p align=center style='margin:0in;margin-bottom:.0001pt;text-align:center'><font size=2>&nbsp;</font></p> </td> </tr>
    <tr style='page-break-inside:avoid'>
        <td width="257" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin:0in;margin-bottom:.0001pt'><font size=2>Annual Report to security holders for the fiscal year ended September 30, 2006</font></p> </td>
        <td width="37" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin:0in;margin-bottom:.0001pt;text-align:justify'><font size=2>&nbsp;</font></p> </td>
        <td width="249" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p align=center style='margin:0in;margin-bottom:.0001pt;text-align:center'><font size=2>Part II</font></p> </td> </tr>
    <tr style='page-break-inside:avoid'>
        <td width="257" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin:0in;margin-bottom:.0001pt;text-align:justify'><font size=2>&nbsp;</font></p> </td>
        <td width="37" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin:0in;margin-bottom:.0001pt;text-align:justify'><font size=2>&nbsp;</font></p> </td>
        <td width="249" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p align=center style='margin:0in;margin-bottom:.0001pt;text-align:center'><font size=2>&nbsp;</font></p> </td> </tr>
    <tr style='page-break-inside:avoid'>
        <td width="257" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin:0in;margin-bottom:.0001pt'><font size=2>Proxy Statement for Annual Meeting of Shareholders to be held February 15, 2007</font></p> </td>
        <td width="37" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin:0in;margin-bottom:.0001pt;text-align:justify'><font size=2>&nbsp;</font></p> </td>
        <td width="249" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p align=center style='margin:0in;margin-bottom:.0001pt;text-align:center'><font size=2>Part III</font></p> </td> </tr></table>

<PAGE>






<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'>
<U><B><font SIZE=2>TABLE OF CONTENTS</font></B></U></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>


<div align=center>

<table border="0" cellspacing=0 cellpadding=0 width="684" >
    <tr >
        <td width="86" valign=bottom style='padding:4.5pt 4.5pt 4.5pt 4.5pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></p> </td>
        <td width="558" valign=bottom style='padding:4.5pt 4.5pt 4.5pt 4.5pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></p> </td>
        <td width="39" valign=bottom style='padding:4.5pt 4.5pt 4.5pt 4.5pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><u><b><font size=2>Page</font></b></u></p> </td> </tr>
    <tr >
        <td width="86" valign=bottom style='padding:4.5pt 4.5pt 4.5pt 4.5pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font SIZE=2>PART I</font></p> </td>
        <td width="558" valign=bottom style='padding:4.5pt 4.5pt 4.5pt 4.5pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>&nbsp;</font></p> </td>
        <td width="39" valign=bottom style='padding:4.5pt 4.5pt 4.5pt 4.5pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:right;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></p> </td> </tr>
    <tr >
        <td width="86" valign=bottom style='padding:4.5pt 4.5pt 4.5pt 4.5pt'>
            <p style='margin-left:0pt;text-indent:9.75pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Item 1.</font></p> </td>
        <td width="558" valign=bottom style='padding:4.5pt 4.5pt 4.5pt 4.5pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Business</font></p> </td>
        <td width="39" valign=bottom style='padding:4.5pt 4.5pt 4.5pt 4.5pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:right;margin-top:0pt;margin-bottom:0pt'><font size=2>1&nbsp;</font></p> </td> </tr>
    <tr >
        <td width="86" valign=bottom style='padding:4.5pt 4.5pt 4.5pt 4.5pt'>
            <p style='margin-left:0pt;text-indent:9.75pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Item 1A.</font></p> </td>
        <td width="558" valign=bottom style='padding:4.5pt 4.5pt 4.5pt 4.5pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Risk Factors</font></p> </td>
        <td width="39" valign=bottom style='padding:4.5pt 4.5pt 4.5pt 4.5pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:right;margin-top:0pt;margin-bottom:0pt'><font size=2>13&nbsp;</font></p> </td> </tr>
    <tr >
        <td width="86" valign=bottom style='padding:4.5pt 4.5pt 4.5pt 4.5pt'>
            <p style='margin-left:0pt;text-indent:9.75pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Item 1B.</font></p> </td>
        <td width="558" valign=bottom style='padding:4.5pt 4.5pt 4.5pt 4.5pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Unresolved Staff Comments</font></p> </td>
        <td width="39" valign=bottom style='padding:4.5pt 4.5pt 4.5pt 4.5pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:right;margin-top:0pt;margin-bottom:0pt'><font size=2>17&nbsp;</font></p> </td> </tr>
    <tr >
        <td width="86" valign=bottom style='padding:4.5pt 4.5pt 4.5pt 4.5pt'>
            <p style='margin-left:0pt;text-indent:9.75pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Item 2.</font></p> </td>
        <td width="558" valign=bottom style='padding:4.5pt 4.5pt 4.5pt 4.5pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Properties</font></p> </td>
        <td width="39" valign=bottom style='padding:4.5pt 4.5pt 4.5pt 4.5pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:right;margin-top:0pt;margin-bottom:0pt'><font size=2>17&nbsp;</font></p> </td> </tr>
    <tr >
        <td width="86" valign=bottom style='padding:4.5pt 4.5pt 4.5pt 4.5pt'>
            <p style='margin-left:0pt;text-indent:9.75pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Item 3.</font></p> </td>
        <td width="558" valign=bottom style='padding:4.5pt 4.5pt 4.5pt 4.5pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Legal Proceedings</font></p> </td>
        <td width="39" valign=bottom style='padding:4.5pt 4.5pt 4.5pt 4.5pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:right;margin-top:0pt;margin-bottom:0pt'><font size=2>17&nbsp;</font></p> </td> </tr>
    <tr >
        <td width="86" valign=bottom style='padding:4.5pt 4.5pt 4.5pt 4.5pt'>
            <p style='margin-left:0pt;text-indent:9.75pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Item 4.</font></p> </td>
        <td width="558" valign=bottom style='padding:4.5pt 4.5pt 4.5pt 4.5pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Submission of Matters to a Vote of Security Holders</font></p> </td>
        <td width="39" valign=bottom style='padding:4.5pt 4.5pt 4.5pt 4.5pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:right;margin-top:0pt;margin-bottom:0pt'><font size=2>17&nbsp;</font></p> </td> </tr>
    <tr >
        <td width="86" valign=bottom style='padding:4.5pt 4.5pt 4.5pt 4.5pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font SIZE=2>PART II</font></p> </td>
        <td width="558" valign=bottom style='padding:4.5pt 4.5pt 4.5pt 4.5pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>&nbsp;</font></p> </td>
        <td width="39" valign=bottom style='padding:4.5pt 4.5pt 4.5pt 4.5pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:right;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></p> </td> </tr>
    <tr >
        <td width="86" valign=bottom style='padding:4.5pt 4.5pt 4.5pt 4.5pt'>
            <p style='margin-left:0pt;text-indent:9.75pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Item 5.</font></p> </td>
        <td width="558" valign=bottom style='padding:4.5pt 4.5pt 4.5pt 4.5pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Market for Registrant&#146;s Common Equity and Related Stockholder Matters</font></p> </td>
        <td width="39" valign=bottom style='padding:4.5pt 4.5pt 4.5pt 4.5pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:right;margin-top:0pt;margin-bottom:0pt'><font size=2>17&nbsp;</font></p> </td> </tr>
    <tr >
        <td width="86" valign=bottom style='padding:4.5pt 4.5pt 4.5pt 4.5pt'>
            <p style='margin-left:0pt;text-indent:9.75pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Item 6.</font></p> </td>
        <td width="558" valign=bottom style='padding:4.5pt 4.5pt 4.5pt 4.5pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Selected Financial Data</font></p> </td>
        <td width="39" valign=bottom style='padding:4.5pt 4.5pt 4.5pt 4.5pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:right;margin-top:0pt;margin-bottom:0pt'><font size=2>18&nbsp;</font></p> </td> </tr>
    <tr >
        <td width="86" valign=bottom style='padding:4.5pt 4.5pt 4.5pt 4.5pt'>
            <p style='margin-left:0pt;text-indent:9.75pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Item 7.</font></p> </td>
        <td width="558" valign=bottom style='padding:4.5pt 4.5pt 4.5pt 4.5pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations</font></p> </td>
        <td width="39" valign=bottom style='padding:4.5pt 4.5pt 4.5pt 4.5pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:right;margin-top:0pt;margin-bottom:0pt'><font size=2>18&nbsp;</font></p> </td> </tr>
    <tr >
        <td width="86" valign=bottom style='padding:4.5pt 4.5pt 4.5pt 4.5pt'>
            <p style='margin-left:0pt;text-indent:9.75pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Item 7A.</font></p> </td>
        <td width="558" valign=bottom style='padding:4.5pt 4.5pt 4.5pt 4.5pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Quantitative and Qualitative Disclosures about Market Risk</font></p> </td>
        <td width="39" valign=bottom style='padding:4.5pt 4.5pt 4.5pt 4.5pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:right;margin-top:0pt;margin-bottom:0pt'><font size=2>26&nbsp;</font></p> </td> </tr>
    <tr >
        <td width="86" valign=bottom style='padding:4.5pt 4.5pt 4.5pt 4.5pt'>
            <p style='margin-left:0pt;text-indent:9.75pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Item 8.</font></p> </td>
        <td width="558" valign=bottom style='padding:4.5pt 4.5pt 4.5pt 4.5pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Financial Statements</font></p> </td>
        <td width="39" valign=bottom style='padding:4.5pt 4.5pt 4.5pt 4.5pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:right;margin-top:0pt;margin-bottom:0pt'><font size=2>26&nbsp;</font></p> </td> </tr>
    <tr >
        <td width="86" valign=bottom style='padding:4.5pt 4.5pt 4.5pt 4.5pt'>
            <p style='margin-left:0pt;text-indent:9.75pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Item 9.</font></p> </td>
        <td width="558" valign=bottom style='padding:4.5pt 4.5pt 4.5pt 4.5pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Changes in and Disagreements with Accountants on Accounting and Financial Disclosure</font></p> </td>
        <td width="39" valign=bottom style='padding:4.5pt 4.5pt 4.5pt 4.5pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:right;margin-top:0pt;margin-bottom:0pt'><font size=2>49&nbsp;</font></p> </td> </tr>
    <tr >
        <td width="86" valign=bottom style='padding:4.5pt 4.5pt 4.5pt 4.5pt'>
            <p style='margin-left:0pt;text-indent:9.75pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Item 9A.</font></p> </td>
        <td width="558" valign=bottom style='padding:4.5pt 4.5pt 4.5pt 4.5pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Controls and Procedures</font></p> </td>
        <td width="39" valign=bottom style='padding:4.5pt 4.5pt 4.5pt 4.5pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:right;margin-top:0pt;margin-bottom:0pt'><font size=2>49&nbsp;</font></p> </td> </tr>
    <tr >
        <td width="86" valign=bottom style='padding:4.5pt 4.5pt 4.5pt 4.5pt'>
            <p style='margin-left:0pt;text-indent:9.75pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Item 9B.</font></p> </td>
        <td width="558" valign=bottom style='padding:4.5pt 4.5pt 4.5pt 4.5pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Other Information</font></p> </td>
        <td width="39" valign=bottom style='padding:4.5pt 4.5pt 4.5pt 4.5pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:right;margin-top:0pt;margin-bottom:0pt'><font size=2>49&nbsp;</font></p> </td> </tr>
    <tr >
        <td width="86" valign=bottom style='padding:4.5pt 4.5pt 4.5pt 4.5pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font SIZE=2>PART III</font></p> </td>
        <td width="558" valign=bottom style='padding:4.5pt 4.5pt 4.5pt 4.5pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>&nbsp;</font></p> </td>
        <td width="39" valign=bottom style='padding:4.5pt 4.5pt 4.5pt 4.5pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:right;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></p> </td> </tr>
    <tr >
        <td width="86" valign=bottom style='padding:4.5pt 4.5pt 4.5pt 4.5pt'>
            <p style='margin-left:0pt;text-indent:9.75pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Item 10.</font></p> </td>
        <td width="558" valign=bottom style='padding:4.5pt 4.5pt 4.5pt 4.5pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Directors and Executive Officers of the Registrant</font></p> </td>
        <td width="39" valign=bottom style='padding:4.5pt 4.5pt 4.5pt 4.5pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:right;margin-top:0pt;margin-bottom:0pt'><font size=2>50&nbsp;</font></p> </td> </tr>
    <tr >
        <td width="86" valign=bottom style='padding:4.5pt 4.5pt 4.5pt 4.5pt'>
            <p style='margin-left:0pt;text-indent:9.75pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Item 11.</font></p> </td>
        <td width="558" valign=bottom style='padding:4.5pt 4.5pt 4.5pt 4.5pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Executive Compensation</font></p> </td>
        <td width="39" valign=bottom style='padding:4.5pt 4.5pt 4.5pt 4.5pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:right;margin-top:0pt;margin-bottom:0pt'><font size=2>51&nbsp;</font></p> </td> </tr>
    <tr >
        <td width="86" valign=bottom style='padding:4.5pt 4.5pt 4.5pt 4.5pt'>
            <p style='margin-left:0pt;text-indent:9.75pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Item 12.</font></p> </td>
        <td width="558" valign=bottom style='padding:4.5pt 4.5pt 4.5pt 4.5pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Security Ownership of Certain Beneficial Owners and Management</font></p> </td>
        <td width="39" valign=bottom style='padding:4.5pt 4.5pt 4.5pt 4.5pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:right;margin-top:0pt;margin-bottom:0pt'><font size=2>51&nbsp;</font></p> </td> </tr>
    <tr >
        <td width="86" valign=bottom style='padding:4.5pt 4.5pt 4.5pt 4.5pt'>
            <p style='margin-left:0pt;text-indent:9.75pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Item 13.</font></p> </td>
        <td width="558" valign=bottom style='padding:4.5pt 4.5pt 4.5pt 4.5pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Certain Relationships and Related Transactions</font></p> </td>
        <td width="39" valign=bottom style='padding:4.5pt 4.5pt 4.5pt 4.5pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:right;margin-top:0pt;margin-bottom:0pt'><font size=2>51&nbsp;</font></p> </td> </tr>
    <tr >
        <td width="86" valign=bottom style='padding:4.5pt 4.5pt 4.5pt 4.5pt'>
            <p style='margin-left:0pt;text-indent:9.75pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Item 14.</font></p> </td>
        <td width="558" valign=bottom style='padding:4.5pt 4.5pt 4.5pt 4.5pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Principal Accounting Fees and Services</font></p> </td>
        <td width="39" valign=bottom style='padding:4.5pt 4.5pt 4.5pt 4.5pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:right;margin-top:0pt;margin-bottom:0pt'><font size=2>51&nbsp;</font></p> </td> </tr>
    <tr >
        <td width="86" valign=bottom style='padding:4.5pt 4.5pt 4.5pt 4.5pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font SIZE=2>PART IV</font></p> </td>
        <td width="558" valign=bottom style='padding:4.5pt 4.5pt 4.5pt 4.5pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>&nbsp;</font></p> </td>
        <td width="39" valign=bottom style='padding:4.5pt 4.5pt 4.5pt 4.5pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:right;margin-top:0pt;margin-bottom:0pt'><font size=2>&nbsp;</font></p> </td> </tr>
    <tr >
        <td width="86" valign=bottom style='padding:4.5pt 4.5pt 4.5pt 4.5pt'>
            <p style='margin-left:0pt;text-indent:9.75pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Item 15.</font></p> </td>
        <td width="558" valign=bottom style='padding:4.5pt 4.5pt 4.5pt 4.5pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Exhibits and Financial Statement Schedules</font></p> </td>
        <td width="39" valign=bottom style='padding:4.5pt 4.5pt 4.5pt 4.5pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:right;margin-top:0pt;margin-bottom:0pt'><font size=2>52&nbsp;</font></p> </td> </tr></table>
</div>



<PAGE>





<!-- MARKER FORMAT-SHEET="HEADING CENTER BOLD" FSL="Workstation" -->
<A NAME=A001></A>
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>PART I </FONT></H1>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>This Report contains
certain statements that are &#147;forward-looking statements&#148; within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. Readers of this Report are cautioned that reliance on
any forward-looking statement involves risks and uncertainties. Although Bioanalytical
Systems, Inc. (the &#147;Company&#148;) believes that the assumptions on which the
forward-looking statements contained herein are based are reasonable, any of those
assumptions could prove to be inaccurate given the inherent uncertainties as to the
occurrence or nonoccurrence of future events. There can be no assurance that the
forward-looking statements contained in this Report will prove to be accurate. The
inclusion of a forward-looking statement herein should not be regarded as a representation
by the Company that the Company&#146;s objectives will be achieved.</I></FONT></P>

<!-- MARKER FORMAT-SHEET="HEAD LEFT BOLD" FSL="Workstation" -->
<A NAME=A002></A>
<H1 ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Item 1. Business.</FONT></H1>

<!-- MARKER FORMAT-SHEET="HEAD LEFT BOLD" FSL="Workstation" -->
<A NAME=A003></A>
<H1 ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>General</FONT></H1>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company, which is a
corporation organized in Indiana, provides contract development services and research
equipment to many leading global pharmaceutical, medical research and biotechnology
companies and institutions. It has played a significant role in understanding the
underlying causes of central nervous system disorders, diabetes, osteoporosis and other
diseases since its start in 1974.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We offer an efficient,
variable cost alternative to our clients&#146; internal product development programs.
Outsourcing development work to reduce overhead and speed drug approvals through the Food
and Drug Administration (&#147;FDA&#148;) is an established alternative to in-house
development among pharmaceutical companies. We derive our revenues from sales of our
research services and drug development tools, both focused on determining drug safety and
efficacy.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We support preclinical
and clinical development needs of researchers and clinicians for small molecule through
large biomolecule drug candidates. The Company believes its scientists have the skills in
analytical instrumentation development, chemistry, computer software development,
physiology, medicine, and toxicology to make the services and products it provides
increasingly valuable to its current and potential clients. Scientists engaged in
analytical chemistry, clinical trials, drug metabolism studies, pharmacokinetics and basic
neuroscience research at many of the largest global pharmaceutical companies are our
principal clients.</FONT></P>

<!-- MARKER FORMAT-SHEET="HEAD LEFT BOLD" FSL="Workstation" -->
<A NAME=A004></A>
<H1 ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Acquisitions</FONT></H1>

<!-- MARKER FORMAT-SHEET="HEAD LEFT ITALICS" FSL="Workstation" -->
<A NAME=A005></A>
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>PharmaKinetics
Laboratories, Inc.</I></FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On May 26, 2003,
PharmaKinetics Laboratories, Inc., a Maryland corporation (&#147;PKLB&#148;), became a
majority owned subsidiary of the Company. Following the acquisition, PKLB was renamed BASi
Maryland, Inc. The Company acquired this site to broaden its service offering base through
the addition of Phase I and bioequivalence testing in human subjects. In addition, the
Company wanted to establish a meaningful operating presence physically near current and
potential clients on the East Coast of the United States (&#147;U.S.&#148;). This
site&#146;s operating performance prior to the acquisition had been poor. Since the
acquisition, the Company had made significant organizational, managerial, staff, and
physical plant changes to improve performance at the Baltimore clinic; however, the loss
of a major client as a result of its acquisition during the current year caused a
significant downturn in BASi Maryland's operating results.  This resulted in the Company adjusting the
carrying value of the assets of the operation in the third quarter of the current fiscal year.</FONT></P>

<!-- MARKER FORMAT-SHEET="HEAD LEFT ITALICS" FSL="Workstation" -->
<A NAME=A006></A>
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>LC Resources, Inc.</I></FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On December 13, 2002,
the Company acquired LC Resources, Inc. (&#147;LCR&#148;), a privately held company with
its operations in McMinnville, Oregon. The Company believes that, prior to the acquisition, LCR had a strong
reputation in liquid chromatography and bioanalysis, and provides a location that is
significantly closer to clients on the West Coast of the U.S.</FONT></P>

<!-- MARKER FORMAT-SHEET="HEAD LEFT BOLD" FSL="Workstation" -->
<A NAME=A007></A>
<H1 ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Changing Nature of
the Pharmaceutical Industry</FONT></H1>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company&#146;s
services and products are marketed globally to pharmaceutical, medical research and
biotech companies and institutions engaged in drug research and development. The research
services industry is highly fragmented among many niche vendors led by a small number of
larger companies; the latter offer an ever-growing portfolio of cradle-to-grave
pharmaceutical development services. The Company&#146;s products are also marketed to
academic and governmental institutions. The Company&#146;s services and products may have
distinctly different customers (often separate divisions in a single large pharmaceutical
company) and requirements. The Company believes that all clients are facing increased
pressure to outsource facets of their research and development activities and that the
following factors will increase client outsourcing:</FONT></P>


<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
1</FONT></P>
<PAGE>




<!-- MARKER FORMAT-SHEET="HEAD LEFT ITALICS" FSL="Workstation" -->
<A NAME=A008></A>
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Accelerated Drug
Development</I></FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Clients continue to
demand faster, more efficient, more selective development of a larger pool of drug
candidates. Clients demand fast, high quality service in order to make immediate,
well-informed decisions to quickly exclude poor candidates and speed development of
successful ones. The need for additional development capacity to exploit more
opportunities, accelerate development, extend market exclusivity and increase
profitability drives the demand for outsourced services.</FONT></P>

<!-- MARKER FORMAT-SHEET="HEAD LEFT ITALICS" FSL="Workstation" -->
<A NAME=A009></A>
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Cost Containment</I></FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Pharmaceutical
companies continue to push for more efficient operations through outsourcing to optimize
profitability as development costs climb, staff costs increase, generic competition
challenges previously secure profit generators, political and social pressures to reduce
health care costs escalate, and shareholder expectations mount.</FONT></P>

<!-- MARKER FORMAT-SHEET="HEAD LEFT ITALICS" FSL="Workstation" -->
<A NAME=A010></A>
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Patent Expiration</I></FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As exclusivity ends
with patent expiry, drug companies defend their proprietary positions against generic
competition with various patent extension strategies. Both the drug company creating these
extensions and the generic competitors should provide additional opportunities for the
Company.</FONT></P>

<!-- MARKER FORMAT-SHEET="HEAD LEFT ITALICS" FSL="Workstation" -->
<A NAME=A011></A>
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Alliances</I></FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Strategic alliances
allow pharmaceutical companies to share research know-how and to develop and market new
drugs faster in more diverse, global markets. The Company believes that alliances will
lead to a greater number of potential drugs in testing, many under study by small
companies lacking broad technical resources. Those small companies can add shareholder
value by further developing new products through outsourcing, reducing risk for potential
allies.&nbsp;</FONT></P>

<!-- MARKER FORMAT-SHEET="HEAD LEFT ITALICS" FSL="Workstation" -->
<A NAME=A012></A>
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Mergers and
Acquisitions</I></FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Consolidation in the
pharmaceutical industry is commonplace. As firms blend personnel, resources and business
activities, the Company believes they will continue to streamline operations, minimizing
staffing which should lead to more outsourcing. This consolidation may result in short-term disruption
in placement of, or progress on, drug development programs as merging companies
rationalize their respective drug development pipelines. In the current fiscal year, an
acquisition of a significant client of our Baltimore clinic resulted in the client
cancelling its scheduled work in our clinic, resulting in losses from their operations, As
a result, we determined that the assets of that operation had been impaired, and recorded
an adjustment to their value in our third fiscal quarter. See Management&#146;s Discussion
and Analysis of Financial Condition and Results of Operations, Impairment of Long-lived
Assets including Goodwill, and Note 1(i) to the Consolidated Financial Statements included
herein.</FONT></P>

<!-- MARKER FORMAT-SHEET="HEAD LEFT ITALICS" FSL="Workstation" -->
<A NAME=A013></A>
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Biotechnology
Industry and Virtual Drug Company Growth</I></FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The biotech industry
continues to grow and has introduced many new developmental drugs. Many biotech drug
developers do not have in-house resources to conduct development. Many new companies
choose only to carry a product to a developed stage sufficient to attract a partner who
will manufacture and market the drug. Efficient use of limited funds motivates smaller
firms to seek outside service providers like the Company rather than build expensive
infrastructure.</FONT></P>

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<A NAME=A014></A>
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Unique Technical
Expertise</I></FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The increasing
complexity of new drugs requires highly specialized, innovative, solution-driven research
not available in all client labs. The Company believes that this need for unique technical
expertise will increasingly lead to outsourcing of research activity.</FONT></P>

<BR>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
2</FONT></P>
<PAGE>




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<A NAME=A015></A>
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Data Management
Expertise</I></FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our clients and the FDA
require more data, greater access to that data, consistent and auditable management of
that data, and greater security and control of that data. The Company has made significant
investments in software throughout its contract services groups to optimize efficiency and
ensure it complies with FDA regulations and client expectations.</FONT></P>

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<A NAME=A016></A>
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Globalization of
the Marketplace</I></FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Foreign firms are
relying on independent development companies with experience in the U.S. to provide
integrated services through all phases of product development and to assist in preparing
complex regulatory submissions. Domestic drug firms are broadening product availability
globally, demanding local regulatory approval. The Company believes that domestic service
providers with global reach, established regulatory expertise, and a broad range of
integrated development services will benefit from this trend. The Company has a
significant European presence and experience in managing foreign operations from its West
Lafayette offices.</FONT></P>

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<A NAME=A017></A>
<H1 ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company&#146;s
Role in the Drug Development Process</FONT></H1>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Default" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>After a new drug
candidate is identified and carried through preliminary screening, the development process
for new drugs has three distinct phases.</FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Flush" FSL="Workstation" -->
     <P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1)&nbsp;&nbsp;&nbsp;&nbsp;
          The <B><I>preclinical phase</I></B><I> </I>includes safety testing to prepare an
          Investigational New Drug (&#147;IND&#148;) exemption for submission to the FDA.
          The IND must be accepted by the FDA before the drug can be tested in humans.
          Once a pharmacologically active molecule is fully analyzed to confirm its
          integrity, the initial dosage form for clinical trials is created. An analytical
          chemistry method is developed to enable reliable quantification. Stability and
          purity of the formulation is also determined.&nbsp; </FONT></P>

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<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Clients work with the
Company&#146;s preclinical services group to establish pharmacokinetics, pharmacodynamics
and safety testing of the new drug. These safety studies range from acute safety
monitoring on drugs and medical devices to chronic, multi-year oncogenicity studies.
Bioanalyses of blood sampled under these protocols by the Company&#146;s bioanalytical
services group provide kinetic, metabolism and dose-ranging data. Upon successful
completion of preclinical safety studies, an IND submission is prepared and provided to
the FDA for review prior to human clinical trials.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Default" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Many of the
Company&#146;s products are designed for use in preclinical development. The Culex&reg;
APS, a robotic automated pharmacology system, enables researchers to develop
pharmacokinetic profiles of drugs during early screening in rodents quickly and cost
effectively. Several variations of this technology are in development. Clients and the
Company&#146;s bioanalytical services group sometimes use the Company&#146;s
electrochemistry and chromatography products to develop a single, quick, proprietary
method to screen drugs in biological samples. Liquid chromatography coupled to mass
spectrometry is now a mainstay of the Company&#146;s bioanalytical laboratories. The
Company has invested heavily in robotics and mass spectrometry systems over the last ten
years.</FONT></P>

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     <P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2)&nbsp;&nbsp;&nbsp;&nbsp;
          The <B><I>clinical phase</I></B><I> </I>further explores the safety and efficacy
          of the substance in humans. The sponsor conducts Phase I human clinical trials
          in a limited number of healthy individuals to determine safety and tolerability.
          Bioanalytical assays determine the availability and metabolism of the active
          ingredient following administration. Expertise in method development and
          validation is critical, particularly for new chemical entities. </FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Exhaustive safety,
tolerability and dosing regimens are established in sick humans in Phase II trials. Phase
III clinical trials verify efficacy and safety. After successful completion of Phase III
trials, the sponsor of the new drug submits a New Drug Application (&#147;NDA&#148;) or
Product License Application (&#147;PLA&#148;) to the FDA requesting that the product be
approved for marketing. Early manufacturing demonstrates production of the substance in
accordance with FDA Good Manufacturing Practices (&#147;GMP&#148;) guidelines. Data are
compiled in an NDA, or for biotechnology products a PLA, for submission to the FDA
requesting approval to market the drug or product. The Company&#146;s bioanalytical work
per study grows rapidly from Phase I through III. The number of samples per patient
declines as the number of patients grows in later studies. Phase II and III studies take
several years, supported by well-proven, consistently applied analytical methods. It is
unusual for a sponsor to change laboratories unless there are problems in the quality or
timely delivery of results.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Default" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company
performs Phase I studies at its clinic in Baltimore. Phase I services include
bioavailability testing to monitor the rate and extent to which a drug becomes
available in the blood. Bioavailability can also be used to compare the
bioequivalence of similar generic and brand name drugs.</FONT></P>

<BR>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
3</FONT></P>
<PAGE>





<!-- MARKER FORMAT-SHEET="Para (List) Flush" FSL="Workstation" -->
     <P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3)&nbsp;&nbsp;&nbsp;&nbsp;
          <B><I>Post-approval </I></B><I></I>follows FDA approval of the NDA or PLA. This
          includes production and continued analytical and clinical monitoring of the
          drug. The post-approval phase also tracks development and regulatory approval of
          product modifications and line extensions, including improved dosage forms. The
          drug manufacturer must comply with quality assurance and quality control
          requirements throughout production and must continue analytical and stability
          studies of the drug during commercial production to continue to validate
          production processes and confirm product shelf life. Samples from each
          manufactured batch must be tested prior to release of the batch for distribution
          to the public.&nbsp; </FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company also
provides services in all areas during the post-approval phase, concentrating on
bioequivalence studies of new formulations, line extensions, new disease indications and
drug interaction studies.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company&#146;s
ability to solve client problems combining its knowledge base, services and products has
been a factor in the Company&#146;s selection by major pharmaceutical companies to assist
in several preclinical and Phase I, II and III clinical trials, as well as in the
post-approval phase.</FONT></P>

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<A NAME=A018></A>
<H1 ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Company Services and
Products</FONT></H1>

<!-- MARKER FORMAT-SHEET="HEAD LEFT ITALICS" FSL="Workstation" -->
<A NAME=A019></A>
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Overview</I></FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company operates in
two business segments &#150; contract research services and research products, both of
which address the bioanalytical, preclinical, and clinical research needs of drug
developers. Both segments arose out of the Company&#146;s expertise in a number of core
technologies designed to quantify trace chemicals in complex matrices. The Company
evaluates performance and allocates resources based on these segments.</FONT></P>

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<A NAME=A020></A>
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Services</I></FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company&#146;s
contract research services segment provides screening and pharmacological testing,
preclinical safety testing, formulation development, clinical trials, regulatory
compliance and quality control testing. Revenues from the Company&#146;s services segment
were $34.3 million for fiscal 2006. For additional financial information regarding the
services segment, please see Note 10 to the Notes to Consolidated Financial Statements
included in Item 8 of this report. The following is a description of the services provided
by the Company&#146;s contract research services segment:</FONT></P>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>o</FONT></TD>
<TD WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>Product
Characterization, Method Development and Validation</I></B><I>: </I>Analytical methods
determine potency, purity, chemical composition, structure and physical properties of a
compound. Methods are validated to ensure that data generated are accurate, precise,
reproducible and reliable and are used consistently throughout the drug development
process and in later product support.</FONT></DIV></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>o</FONT></TD>
<TD WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>Bioanalytical
Testing</I></B><I>: </I>The Company analyzes specimens from preclinical and clinical
trials to measure drug and metabolite concentrations in complex biological matrices.
Bioanalysis is performed at Company facilities in Indiana, Oregon and the United Kingdom (&#147;UK&#148;).</FONT></DIV></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>o</FONT></TD>
<TD WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>Stability
Testing</I></B><I>: </I>The Company tests stability of drug substances and formulated
drug products and maintains secure storage facilities necessary to establish and confirm
product purity, potency and shelf life in West Lafayette, Indiana. The Company has
multiple ICH (International Conference on Harmonization) validated controlled climate GMP
(Good Manufacturing Practices) systems.</FONT></DIV></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>o</FONT></TD>
<TD WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>In
Vivo Pharmacology</I></B><I>: </I>The Company provides preclinical <I>in vivo </I>sampling
services for the continuous monitoring of chemical changes in life, in particular, how a
drug enters, travels through, and is metabolized in living systems. Most services are
performed in customized facilities in West Lafayette, Indiana using the Company&#146;s
robotic Culex&reg; APS (Automated Pharmacology System) system and in Evansville, Indiana.</FONT></DIV></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>o</FONT></TD>
<TD WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>Preclinical
and Pathology Services</I></B><I>: </I>The Company provides pharmacokinetic and safety
testing in studies ranging from acute safety monitoring of drugs and medical devices to
chronic, multi-year oncogenicity studies in its newly expanded Evansville, Indiana site.
Depending on protocol, multiple tissues may be collected to monitor pathological changes.&nbsp;</FONT></DIV></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>o</FONT></TD>
<TD WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>Phase
I &amp; II(a) Clinical Trials</I></B><I>: </I>The Company performs Phase I human
clinical trials in its 110-bed clinic in Baltimore. These are principally bioavailability
and bioequivalence studies, both for generic drug and innovator pharmaceutical firms.</FONT></DIV></TD>
</TR>
</TABLE>

<BR>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
4</FONT></P>
<PAGE>







<!-- MARKER FORMAT-SHEET="HEAD LEFT ITALICS" FSL="Workstation" -->
<A NAME=A021></A>
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Research Products</I></FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Default" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company is focusing
its products business on expediting preclinical screening of developmental drugs. The
Company competes in very small niches of the multibillion dollar analytical instrument
industry. The Company&#146;s products business targets, and in some cases dominates,
unique niches in life science research. The Company designs, develops, manufactures and
markets state-of-the-art:</FONT></P>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>     o </FONT></TD>
<TD WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Robotic
sampling systems and accessories (disposables, training, systems qualification)</FONT></DIV></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>     o </FONT></TD>
<TD WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In
vivo microdialysis collection systems</FONT></DIV></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>     o </FONT></TD>
<TD WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Physiology
monitoring tools</FONT></DIV></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="PARAGRAPH LEVEL 2" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>     o </FONT></TD>
<TD WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Liquid
chromatography and electrochemistry instruments platform</FONT></DIV></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Revenues for the
Company&#146;s products segment were $8.7 million for fiscal 2006. For additional
financial information regarding the products segment, please see Note 10 to the Notes to
Consolidated Financial Statements included in Item 8 of this report. The following is a
description of the products offered by the Company:</FONT></P>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>o</FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The <B><I>Culex&reg; APS</I></B><I></I> robotic automated pharmacology system is used by
pharmaceutical researchers to monitor drug concentrations and response as a function of
time. Compared to current manual methods, the Culex&reg; offers greater than 80% reduction
in test model use and comparable reduction in labor. The Culex&reg; also offers
computer-controlled blood sampling protocol, behavioral monitoring, flexibility to collect
other biological samples, exceptional cost savings, significant reduction in model stress
and expeditious data delivery.</FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>o</FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B><I>Bioanalytical separation systems</I></B><I></I> (liquid chromatography) used in
connection with Windows&reg; software, detect and quantify low concentrations of
substances tracking complex chemical, physiological and behavioral effects in biological
fluids and tissues from humans and laboratory animal models.</FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>o</FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B><I>Specialized chemical analyzers</I></B><I></I> monitor trace levels of organic
chemicals such as neurotransmitters in biological samples using core electrochemistry,
liquid chromatography and enzymology technologies to separate and quantify drugs,
xenobiotics, metabolites and other chemicals in blood, cerebrospinal fluid and other
biological media.</FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="PARAGRAPH LEVEL 2" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>o</FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B><I>epsilon</I>&#153;</B> is a single liquid chromatography and electrochemistry
instrument control platform for the separation systems and chemical analyzers noted above.</FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>o</FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
A line of miniaturized <I>in vivo <B>sampling devices</B></I> sold to drug developers and
medical research centers, assist in the study of a number of medical conditions including
stroke, depression, Alzheimer&#146;s and Parkinson&#146;s diseases, diabetes and
osteoporosis.</FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="PARAGRAPH LEVEL 2" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>o</FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B><I>Vetronics</I></B><I></I> small animal diagnostic electro-cardiogram and vital signs
monitors are used primarily in veterinary clinics with growing applications in preclinical
research.</FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="HEAD LEFT BOLD" FSL="Workstation" -->
<A NAME=A022></A>
<H1 ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Clients</FONT></H1>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Over the past five
years, the Company has regularly provided its services and/or products to most of the top
25 pharmaceutical companies in the world, as ranked by 2006 research and development
spending. Approximately 13% of the Company&#146;s revenues are
generated from customers outside of North America.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company has been
balancing its business development effort between large pharmaceutical developers and the
next tier of smaller drug development companies. The Company believes that smaller
companies are more inclined to establish a consistent, long-term, strategic relationship
with the Company but realizes that they may be poorly funded. The Company has adapted by
increasing its focus on a larger number of specialist service buyers at large and small
clients and by engaging in a more active and more diversified business development effort
staffed with specialists.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Pfizer (including its
predecessor companies) is the Company&#146;s largest client. Pfizer accounted for
approximately 7.3%, 10.1% and 12.5% of the Company&#146;s total revenues in fiscal 2006,
2005 and 2004, respectively. Pfizer accounted for 12.8% and 6.0% of total trade accounts
receivable at September 30, 2006 and 2005, respectively.</FONT></P>

<BR>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
5</FONT></P>
<PAGE>







<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>There can be no
assurance that the Company&#146;s business will not continue to be dependent on continued
relationships with Pfizer or other clients, or that annual results will not be dependent
on a few large projects. In addition, there can be no assurance that significant clients
in any one period will continue to be significant clients in other periods. In any given
year, there is a possibility that a single pharmaceutical company may account for 5% or
more of the Company&#146;s total revenue. Since the Company does not have long-term
contracts with its clients, the importance of a single client may vary dramatically from
year to year.</FONT></P>

<!-- MARKER FORMAT-SHEET="HEAD LEFT BOLD" FSL="Workstation" -->
<A NAME=A023></A>
<H1 ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Sales and Marketing</FONT></H1>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Capitalizing on its
long history of innovation and technical excellence, the current sales and marketing plan
of the Company targets key accounts among the top 200 global pharmaceutical companies and
approaches smaller companies opportunistically. The Company recognizes that its growth and
customer satisfaction depend upon its ability to continually improve client relationships.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company&#146;s
products and services are sold directly to the client. The Company has seventeen employees
on its business development staff. In late fiscal 2005, this team was reorganized under a
new executive vice president, with more clearly defined sales objectives, territories and
incentives. The Company also attends multiple trade shows in many disciplines and has
created a collection of web sites, catalogs, training and technical support literature,
media presentations, branding, workshops and academic publications.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Sales, marketing and
technical support are based in the Company&#146;s corporate headquarters located in West
Lafayette, Indiana. The Company also maintains offices in Baltimore, Maryland; Evansville,
Indiana; McMinnville, Oregon; and Warwickshire, UK. For additional financial information
relating to geographic segments, please see Note 10 to the Notes to Consolidated Financial
Statements included in Item 8 of this report.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Bioanalytical Systems,
Ltd., a wholly owned, UK-based subsidiary, provides a direct liaison with research service
clients in Europe and maintains a laboratory to provide those services, as well as a
distribution center for the Company&#146;s European sales of products. In addition, the
Company has a network of 18 established distributors covering Japan, the Pacific Basin,
South America, the Middle East, India, South Africa and Eastern Europe. All of the
Company&#146;s distributor relationships are managed from the Company&#146;s headquarters
in West Lafayette, Indiana. International growth is planned through stronger local
promotion to support the Company&#146;s distributor network.</FONT></P>

<!-- MARKER FORMAT-SHEET="HEAD LEFT BOLD" FSL="Workstation" -->
<A NAME=A024></A>
<H1 ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Contractual
Arrangements</FONT></H1>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company&#146;s
service contracts typically establish an estimated fee to be paid for identified services.
In most cases, some percentage of the contract costs is paid in advance. While the Company
is performing a contract, clients often adjust the scope of services to be provided by the
Company based on interim project results. Fees are adjusted accordingly. Generally, the
Company&#146;s fee-for-service contracts are terminable by the client upon written notice
of 30 days or less for a variety of reasons, including the client&#146;s decision to
forego a particular study, the failure of product prototypes to satisfy safety
requirements, and unexpected or undesired results of product testing. Cancellation or
delay of ongoing contracts may result in fluctuations in the Company&#146;s quarterly and
annual results. The Company is generally able to recover at least its invested costs when
contracts are terminated.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company&#146;s
products business offers annual service agreements on most product lines.</FONT></P>

<!-- MARKER FORMAT-SHEET="HEAD LEFT BOLD" FSL="Workstation" -->
<A NAME=A025></A>
<H1 ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Backlog</FONT></H1>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Default" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The contracts pursuant to
which the Company provides its services are terminable upon written notice of 30 days or
less. The Company maintains projections based on bids and contracts to optimize asset
utilization. Similarly, virtually all of the Company&#146;s products are made to order.
Backlog may not be a good indicator of future sales trends. Management does not believe
that backlog is material to an understanding of the Company&#146;s business taken as a
whole.</FONT></P>

<BR>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
6</FONT></P>
<PAGE>






<!-- MARKER FORMAT-SHEET="HEAD LEFT BOLD" FSL="Workstation" -->
<A NAME=A026></A>
<H1 ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Competition</FONT></H1>

<!-- MARKER FORMAT-SHEET="HEAD LEFT ITALICS" FSL="Workstation" -->
<A NAME=A027></A>
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Services</I></FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Default" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company competes
primarily with in-house research, development, quality control and other support service
departments of pharmaceutical and biotechnology companies. There are also full-service
Contract Research Organizations (&#147;CROs&#148;) that compete in this industry. The
largest CRO competitors offering research services similar to the Company&#146;s include:</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH LEVEL 2" FSL="Workstation" -->
<A NAME=A028></A>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>o </FONT></TD>
<TD WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Covance, Inc.</FONT></DIV></TD>
</TR>
</TABLE>


<!-- MARKER FORMAT-SHEET="PARAGRAPH LEVEL 2" FSL="Workstation" -->
<A NAME=A029></A>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>o </FONT></TD>
<TD WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Pharmaceutical
Product Development, Inc.</FONT></DIV></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="PARAGRAPH LEVEL 2" FSL="Workstation" -->
<A NAME=A030></A>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>o </FONT></TD>
<TD WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Charles
River Laboratories, Inc.</FONT></DIV></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="PARAGRAPH LEVEL 2" FSL="Workstation" -->
<A NAME=A031></A>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>o </FONT></TD>
<TD WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>MDS
Health Group Ltd.</FONT></DIV></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Default" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CROs generally compete
on:</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH LEVEL 2" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>     o </FONT></TD>
<TD WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>regulatory
compliance record and quality system</FONT></DIV></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="PARAGRAPH LEVEL 2" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>     o </FONT></TD>
<TD WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>previous
experience</FONT></DIV></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="PARAGRAPH LEVEL 2" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>     o </FONT></TD>
<TD WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>medical
and scientific expertise in specific therapeutic areas</FONT></DIV></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="PARAGRAPH LEVEL 2" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>     o </FONT></TD>
<TD WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>scientist-to-scientist
relationships</FONT></DIV></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="PARAGRAPH LEVEL 2" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>     o </FONT></TD>
<TD WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>quality
of contract research</FONT></DIV></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="PARAGRAPH LEVEL 2" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>     o </FONT></TD>
<TD WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>financial
viability</FONT></DIV></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="PARAGRAPH LEVEL 2" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>     o </FONT></TD>
<TD WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>database
management</FONT></DIV></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="PARAGRAPH LEVEL 2" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>     o </FONT></TD>
<TD WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>statistical
and regulatory services</FONT></DIV></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="PARAGRAPH LEVEL 2" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>     o </FONT></TD>
<TD WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>recruiting
investigators</FONT></DIV></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="PARAGRAPH LEVEL 2" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>     o </FONT></TD>
<TD WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>integrating
information technology with systems to optimize research efficiency</FONT></DIV></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="PARAGRAPH LEVEL 2" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>     o </FONT></TD>
<TD WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>an
international presence with strategically located facilities</FONT></DIV></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="PARAGRAPH LEVEL 2" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>     o </FONT></TD>
<TD WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>price</FONT></DIV></TD>
</TR>
</TABLE>


<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Several of the
Company&#146;s competitors have significantly greater financial resources than the
Company.</FONT></P>

<!-- MARKER FORMAT-SHEET="HEAD LEFT ITALICS" FSL="Workstation" -->
<A NAME=A032></A>
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Products</I></FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company was founded
as a provider of instrumentation and products utilized in life sciences research
laboratories, the product niche it serves today. The Company targets underserved markets
not addressed by larger capital equipment manufacturers. While the Company must sometimes
compete on price with its products, the Company mainly competes on its overall value
proposition, providing equipment that enables its customers to attain premium scientific
laboratory information, on a reasonable operating investment. The Company continually
invests in refinement of its products, and in new product opportunities that meet its
operating objectives.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Culex&reg; APS</B>:
Two small vendors have offered simple, semi-automated blood sampling systems. However, the
Company does not believe that either vendor presents significant competition for
Culex&reg;. In addition, the Company has established strong relationships with the largest
vendors of animal models who now provide catheterized &#147;Culex&reg; ready&#148; models
to the Company&#146;s customers on a just-in-time basis, further increasing convenience
and lowering cost to the customer.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Chemical Analysis</B>:
The Company competes with several large equipment manufacturers, including Agilent, Waters
Corporation and Perkin Elmer Corporation. Competitive factors include market presence,
product quality, reliability and price. The Company believes it competes well in its niche
markets because of its reputation and the quality of its products, together with the
technical assistance and service it offers. Many of the Company&#146;s competitors are
much larger and have greater resources than the Company, which makes it difficult for the
Company to capture business from clients other than those who need the Company&#146;s
unique capabilities.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Default" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Vetronics/<I>in vivo
</I>sampling devices</B>: There are few competitors in this area of the Company&#146;s
business. The Company is the largest vendor in these very small, technically demanding
niches.</FONT></P>



<BR>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
7</FONT></P>
<PAGE>






<!-- MARKER FORMAT-SHEET="HEAD LEFT BOLD" FSL="Workstation" -->
<A NAME=A033></A>
<H1 ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Government Regulation</FONT></H1>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company is subject
to various regulatory requirements designed to ensure the quality and integrity
of its data and products. These regulations are governed primarily under the
Federal Food, Drug and Cosmetic Act, as well as by associated Good Laboratory
Practice (&#147;GLP&#148;), Good Manufacturing Practice (&#147;GMP&#148;), and
Good Clinical Practice (&#147;GCP&#148;) guidelines administered by the FDA. The
standards of GLP, GMP, and GCP are required by the FDA and by similar regulatory
authorities around the world. These guidelines demand rigorous attention to
employee training; detailed, authorized documentation; equipment validation;
careful tracking of changes and routine auditing of compliance. Noncompliance
with these standards could result in disqualification of project data collected
by the Company. Material violation of GLP, GMP, or GCP guidelines could result
in additional regulatory sanctions and, in severe cases, could also result in a
discontinuance of selected Company operations. Since October 2004, the company
has been audited, on a routine basis, by the FDA and UK&#146;s MHRA five times;
twice in West Lafayette, and once each in the UK, Evansville, and Baltimore
locations. Of the four FDA audits, three were without findings; the audit&#146;s
findings in Baltimore were addressed and the UK facility was found to be
compliant with GLP and GCP. There were no material, adverse findings in any of
these audits.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company has not
experienced any significant problems to date in complying with the regulations 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.</FONT></P>

<!-- MARKER FORMAT-SHEET="HEAD LEFT ITALICS" FSL="Workstation" -->
<A NAME=A034></A>
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Analytical Services</I></FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Default" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Laboratories that
provide information included in INDs, NDAs and PLAs must conform to regulatory
requirements that are designed to ensure the quality and integrity of the testing process.
Most of the Company&#146;s contract research services are subject to government standards
for laboratory practices that are embodied in guidelines for GLP. The FDA and other
regulatory authorities require that test results submitted to such authorities be based on
studies conducted in accordance with GLP. These guidelines are set out to help the
researcher perform work in compliance with a pre-established plan and standardized
procedures. These guidelines include but are not restricted to:</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH LEVEL 2" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>     o </FONT></TD>
<TD WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Resources
- - organization, personnel, facilities and equipment</FONT></DIV></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="PARAGRAPH LEVEL 2" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>     o </FONT></TD>
<TD WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Rules
- - protocols and written procedures</FONT></DIV></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="PARAGRAPH LEVEL 2" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>     o </FONT></TD>
<TD WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Characterization
- - test items and test systems</FONT></DIV></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="PARAGRAPH LEVEL 2" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>     o </FONT></TD>
<TD WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Documentation
- - raw data, final report and archives</FONT></DIV></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="PARAGRAPH LEVEL 2" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>     o </FONT></TD>
<TD WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Quality
assurance unit - formalized internal audit function</FONT></DIV></TD>
</TR>
</TABLE>
<BR>


<!-- MARKER FORMAT-SHEET="HEAD LEFT ITALICS" FSL="Workstation" -->
<A NAME=A035></A>
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Preclinical Services</I></FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company must also
maintain reports for each study for specified periods for auditing by the study sponsor
and by the FDA or similar regulatory authorities in other parts of the world.
Noncompliance with GLP can result in the disqualification of data collection during the
preclinical trial.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company&#146;s
animal research facilities are subject to a variety of federal and state laws and
regulations, including The Animal Welfare Act and the rules and regulations enforced by
the United States Department of Agriculture (&#147;USDA&#148;) and the National Institutes
of Health (&#147;NIH&#148;). These regulations establish the standards for the humane
treatment, care and handling of animals by dealers and research facilities. The
Company&#146;s animal research facilities maintain detailed standard operating procedures
and the documentation necessary to comply with applicable regulations for the humane
treatment of the animals in its custody. Besides being licensed by the USDA as a research
facility, this business is also accredited by the Association for Assessment and
Accreditation of Laboratory Animal Care International (&#147;AAALAC&#148;) and has
registered assurance with the NIH.</FONT></P>

<!-- MARKER FORMAT-SHEET="HEAD LEFT ITALICS" FSL="Workstation" -->
<A NAME=A036></A>
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Clinical Services</I></FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company&#146;s
Clinical Research Unit in Baltimore is principally subject to GCP guidelines that cover
activities such as obtaining informed consent, verifying qualifications of investigators,
complying with Standard Operating Procedures (&#147;SOP&#148;), 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&#146;s facility and
may be reviewed by the FDA during audits. In the fall of 2005, the facility was audited by
the FDA. The FDA cited areas for needed improvement, which we have addressed and responded
to the FDA concerns.</FONT></P>



<BR>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
8</FONT></P>
<PAGE>





<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company is subject
to regulation and inspection by local, state, federal and foreign agencies where the
Company&#146;s facilities are located. The Company has not experienced any significant
problems to date in complying with the regulations 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.</FONT></P>

<!-- MARKER FORMAT-SHEET="HEAD LEFT ITALICS" FSL="Workstation" -->
<A NAME=A037></A>
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Quality Assurance
and Information Technology</I></FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>To assure compliance
with applicable regulations, the Company has established quality assurance programs at its
facilities that audit test data, train personnel and review procedures and regularly
inspect facilities. In addition, FDA regulations and guidelines serve as a basis for the
Company&#146;s SOPs where applicable. On an ongoing basis, the Company endeavors to
standardize SOPs across all relevant operations. In addition, the Company has both
developed and purchased software to ensure compliant documentation, handling and reporting
of all laboratory generated study data. In fiscal 2004, the Company purchased similar 21
CFR Part 11 compliant software for its preclinical research group. At the end of fiscal
2006, the Company&#146;s laboratory operations were fully in compliance with 21 CFR Part
11, in its analytical, bioanalytical, toxicology, lab information management, and document
management systems, and all of these systems were formally validated and released for use
in regulated studies.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Also in fiscal 2004,
the Company initiated implementation of a new Enterprise Resource Planning
(&#147;ERP&#148;) system, which was launched at all the Company&#146;s locations in the
third quarter of fiscal 2005. The implementation of this system is ongoing, with various
additional phases planned for fiscal 2007. The introduction of a new ERP system is part of
the Company&#146;s response to the Sarbanes-Oxley Act (the &#147;Act&#148;). The Company
determined that it was not practical to comply with the control, documentation and
testing requirements of Section 404 of the Act while operating on different,
decentralized, obsolete systems at its various locations. As part of the implementation of
the new system, documentation has been and will continue to be developed, and testing
procedures initiated, in preparing for management&#146;s assessment and report on internal
controls over financial reporting required by the Act for fiscal 2008. Although the
Company is working diligently to ensure that the ERP system and related procedures will be
adequately installed and successfully tested by September 30, 2008, there can be no
assurance that all necessary procedures required by the Act will be completed by that
date.</FONT></P>

<!-- MARKER FORMAT-SHEET="HEAD LEFT ITALICS" FSL="Workstation" -->
<A NAME=A038></A>
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Controlled,
Hazardous, and Environmentally Threatening Substances</I></FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Some of the
Company&#146;s development and testing activities are subject to the Controlled Substances
Act administered by the Drug Enforcement Agency (&#147;DEA&#148;), which strictly
regulates all narcotic and habit-forming substances. The Company maintains
restricted-access facilities and heightened control procedures for projects involving such
substances due to the level of security and other controls required by the DEA. In
addition, the Company is subject to other federal and state regulations concerning such
matters as occupational safety and health and protection of the environment.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our U.S. laboratories
are subject to licensing and regulation under federal, state and local laws relating to
hazard communication and employee right-to-know regulations, the handling and disposal of
medical specimens and hazardous waste, as well as the safety and health of laboratory
employees. All of our laboratories are subject to applicable federal and state laws and
regulations relating to the storage and disposal of all laboratory specimens including the
regulations of the Environmental Protection Agency, the Department of Transportation, the
National Fire Protection Agency and the Resource Conservation and Recovery Act. Although
we believe that the Company is currently in compliance in all material respects with such
federal, state and local laws, failure to comply could subject the Company to denial of
the right to conduct business, fines, criminal penalties and other enforcement actions.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The regulations of the
U.S. Department of Transportation, the U.S. Public Health Service and the U.S. Postal
Service apply to the surface and air transportation of laboratory specimens. The
Company&#146;s laboratories also comply with the International Air Transport Association
regulations which govern international shipments of laboratory specimens. Furthermore,
when materials are sent to a foreign country, the transportation of such materials becomes
subject to the laws, rules and regulations of such foreign country.</FONT></P>

<!-- MARKER FORMAT-SHEET="HEAD LEFT ITALICS" FSL="Workstation" -->
<A NAME=A039></A>
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Safety</I></FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In addition to its
comprehensive regulation of safety in the workplace, the Occupational Safety and Health
Administration has established extensive requirements relating to workplace safety for
health care employers whose workers may be exposed to blood-borne pathogens such as HIV
and the hepatitis B virus. These regulations, among other things, require work practice
controls, protective clothing and equipment, training, medical follow-up, vaccinations and
other measures designed to minimize exposure to chemicals, and transmission of blood-borne
and airborne pathogens. Furthermore, relevant employees of the Company receive initial and
periodic training focusing on compliance with applicable hazardous materials regulations
and health and safety guidelines.</FONT></P>


<BR>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
9</FONT></P>
<PAGE>




<!-- MARKER FORMAT-SHEET="HEAD LEFT ITALICS" FSL="Workstation" -->
<A NAME=A040></A>
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>HIPAA</I></FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Department of
Health and Human Services has promulgated final regulations under the Health Insurance
Portability and Accountability Act of 1996 (&#147;HIPAA&#148;) that govern the disclosure
of confidential medical information in the United States. The Company has had a global
privacy policy in place since January 2001, which includes a designated privacy officer,
and believes that we are in compliance with the current EU (European Union) and HIPAA
requirements. Nevertheless, we will continue to monitor our compliance with these new
regulations and we intend to take appropriate steps to ensure compliance as these and
other privacy regulations come into effect.</FONT></P>

<!-- MARKER FORMAT-SHEET="HEAD LEFT BOLD" FSL="Workstation" -->
<A NAME=A041></A>
<H1 ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Product Liability and
Insurance</FONT></H1>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company maintains
product liability and professional errors and omissions liability insurance, providing
approximately $6.0 million in coverage on a claims-made basis. Additionally, in certain
circumstances the Company seeks to manage its liability risk through contractual
provisions with clients requiring the Company to be indemnified by the client or covered
by clients&#146; product liability insurance policies. Also, in certain types of
engagements the Company seeks to limit its contractual liability to clients to the amount
of fees received by the Company. The contractual arrangements are subject to negotiation
with clients, and the terms and scope of such indemnification, liability limitation and
insurance coverage vary by client and project.</FONT></P>

<!-- MARKER FORMAT-SHEET="HEAD LEFT BOLD" FSL="Workstation" -->
<A NAME=A042></A>
<H1 ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Research and
Development</FONT></H1>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In fiscal 2006, 2005
and 2004 the Company spent $1.4 million, $1.3 million, and $1.1 million, respectively, on
research and development. Separate from the Company&#146;s contract research services
business, the Company maintains applications research and development to enhance its
products business.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Expenditures cover
hardware and software engineering costs, laboratory supplies, animals, drugs and reagents,
labor, prototype development and laboratory demonstrations of new products and
applications for those products.</FONT></P>

<!-- MARKER FORMAT-SHEET="HEAD LEFT BOLD" FSL="Workstation" -->
<A NAME=A043></A>
<H1 ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Intellectual Property</FONT></H1>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company believes
that its patents, trademarks, copyrights and other proprietary rights are important to its
business and, accordingly, it actively seeks protection for those rights both in the
United States and abroad. Where the Company deems it to be an appropriate course of
action, it will vigorously prosecute patent infringements. The Company does not believe,
however, that the loss of any one of its patents, trademarks, copyrights or other
proprietary rights would be material to its consolidated revenues or earnings.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company currently
holds nine federally registered trademarks, as well as one copyright registration for
software. The Company also maintains a small pool of issued and pending patents. Most of
these patents are related to the Company&#146;s Culex&reg; or <I>in vivo </I>product line.
Of these patents, most are either issued or pending in the United States, although there
are also patents issued and pending in the European Union and Japan. Although the Company
believes that at least two of these patents are important to the Culex&reg; product line,
the success of the Culex&reg; business is not dependent on the Company&#146;s intellectual
property rights because the Company also generates client value through continuing client
support, hardware and software upgrades, system reliability and accuracy. In addition to
these formal intellectual property rights, the Company relies on trade secrets, unpatented
know-how and continuing applications research which it seeks to protect through means of
reasonable business procedures, such as confidentiality agreements. The Company believes
that the greatest value that it generates for its clients comes from these trade secrets,
know-how and applications research.</FONT></P>

<!-- MARKER FORMAT-SHEET="HEAD LEFT BOLD" FSL="Workstation" -->
<A NAME=A044></A>
<H1 ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Raw Materials</FONT></H1>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>There are no
specialized raw materials that are particularly essential to the Company&#146;s business,
and the Company has a variety of alternative suppliers for its essential components.</FONT></P>


<BR>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
10</FONT></P>
<PAGE>






<!-- MARKER FORMAT-SHEET="HEAD LEFT BOLD" FSL="Workstation" -->
<A NAME=A045></A>
<H1 ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Employees</FONT></H1>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>At September 30, 2006,
the Company had 330 full-time employees. All employees enter into confidentiality
agreements intended to protect the Company&#146;s proprietary information. The Company
believes that its relations with its employees are good. None of the employees of the
Company are represented by a labor union. The Company&#146;s performance depends on its
ability to attract and retain qualified professional, scientific and technical staff. The
level of competition among employers for skilled personnel is high. The Company believes
that its employee benefit plans enhance employee morale, professional commitment and work
productivity and provide an incentive for employees to remain with the Company.</FONT></P>

<!-- MARKER FORMAT-SHEET="HEAD LEFT BOLD" FSL="Workstation" -->
<A NAME=A046></A>
<H1 ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Executive Officers of
the Registrant</FONT></H1>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Default" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The following
information concerns the persons who served as the executive officers of the Company as of
September 30, 2006. Except as indicated in the following paragraphs, the principal
occupations of these persons has not changed in the past five years. Officers are elected
annually at the annual meeting of the board of directors.</FONT></P>


<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=80%>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Name</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Age</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Position</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>

<TR>
<TD>&nbsp;</TD></TR>

<TR VALIGN=Bottom>
     <TD WIDTH=26% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Peter T. Kissinger, Ph.D</FONT></TD>
     <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>61</FONT></TD>
        <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=64% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Chairman of the Board; Chief Scientific Officer; Director</FONT></TD>
     <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Richard M. Shepperd</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>66</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>President and Chief Executive Officer</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Ronald E. Shoup, Ph.D</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>54</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Chief Operating Officer, BASi Contract Research Services</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Michael R. Cox</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>59</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Vice President, Finance; Chief Financial Officer; Treasurer</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Edward M. Chait, Ph.D</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>64</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Executive Vice President</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Candice B. Kissinger</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>54</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Senior Vice President, R&amp;D; Secretary; Director</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Craig S. Bruntlett, Ph.D</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>57</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Senior Vice President, Sales Development</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Lina L. Reeves-Kerner</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>55</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Vice President, Human Resources</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Peter T. Kissinger,
Ph.D.</B> founded the Company in 1974 and had served as its Chairman, President and Chief
Executive Officer from 1974 until September, 2006, when he resigned the position of
President and Chief Executive Office to assume the role of Chief Scientific Officer. He is
also a part-time Professor of Chemistry at Purdue University, where he has been teaching
since 1975. Dr.&nbsp;Kissinger has a Bachelor of Science degree in Analytical Chemistry
from Union College and a Ph.D. in Analytical Chemistry from the University of North
Carolina.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Dr.&nbsp;Kissinger is a
highly recognized pioneer in hydrodynamic electroanalytical techniques for the
neurosciences, modern liquid chromatography and in vivo methodology for drug metabolism.
Dr.&nbsp;Kissinger has published over 220 scientific papers and has presented more than
400 invited lectures. He is a Fellow of the AAPS and the AAAS and was a finalist for Ernst
&amp; Young Entrepreneur of the Year Award &reg; in the Indiana Heartland region for 2001
and 2003. Dr.&nbsp;Kissinger is the husband of Candice B. Kissinger.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Richard M.
Shepperd</B> was elected President and Chief Executive Officer of the Company in September
2006, on an interim basis, and is expected to serve for one year or less.
Mr.&nbsp;Shepperd, 66, served for the past two years with Able Laboratories, Inc., of
Cranbury, New Jersey (&#147;Able&#148;) as its Chief Restructuring Officer and Director of
Restructuring. Able was formerly a generic pharmaceutical manufacturing company which
filed a voluntary petition for bankruptcy on July 18, 2005 following the loss of FDA
approval for its product line. Mr.&nbsp;Shepperd&#146;s duties for Able included
exercising executive authority over all operational and restructuring activities of Able,
which included advising its Board, creditors committee and courts regarding strategies to
maintain and realize the most value from the company&#146;s assets. Able was not
affiliated with the Company. For the three years prior to serving with Able,
Mr.&nbsp;Shepperd served as an independent management consultant for various businesses.
In that capacity, he advised these businesses on developing strategies to improve their
financial health and maximize the assets of those organizations.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Ronald E. Shoup,
Ph.D. </B>serves as Chief Operating Officer of the Company&#146;s Contract Research
Services and is Managing Director of BAS Analytics, Ltd. in the UK. His current
responsibilities include directing operations at the Company&#146;s Contract Research
Services sites. He joined the Company in 1980 as an applications chemist, became Research
Director in 1983 and launched the Contract Research Services group within the Company in
1988. Dr.&nbsp;Shoup has a Bachelor of Science degree in Mathematics and Chemistry from
Purdue University and then attended Michigan State and Purdue University for his Ph.D. in
Analytical Chemistry.</FONT></P>

<BR>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
11</FONT></P>
<PAGE>






<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Dr.&nbsp;Shoup has
served on the editorial board of the Journal of Chromatography, participated in NIH
Special study sections, and is a member of the external advisory board to the Purdue
University Department of Chemistry. He has published over 40 scientific papers.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Michael R. Cox</B>
has been Vice President, Finance, Chief Financial Officer and Treasurer since April 2004.
He was Vice President, Finance and CFO of Integrity Pharmaceutical Corporation, a private
specialty pharmaceutical company, from October, 2003 until its acquisition and merger in
March, 2004. Prior to that he was Senior Vice President, Finance of Intergen Company, a
private biotech manufacturing and research products company, from 1997 until its
acquisition in 2001, and continued with the acquirer, Serologicals Corporation, on special
projects until joining Integrity. Prior to that, Mr.&nbsp;Cox held various executive
positions in two environmental services firms and an investment firm. He was a partner in
Touche Ross &amp; Co., where he began his career after obtaining a BS in business
administration from the University of North Carolina.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Edward M. Chait,
Ph.D. </B>has been Executive Vice President, Chief Scientific Officer since August, 2005.
Prior to that, from August 2003, Dr.&nbsp;Chait served as the Chief Executive Officer of
Spectral Genomics, Inc., a developer of products and services related to molecular
genetics and diagnostics enabling the identification of the causal factors of disease at
the genetic level. From 2001 to 2003, Dr.&nbsp;Chait served as the Chief Executive Officer
of PharmaCore, Inc., a small-molecule drug discovery company providing molecular building
blocks, custom organic synthesis and GMP services to biotechnology and pharmaceutical
companies. From 1991 to 2001, Dr.&nbsp;Chait was Senior Vice President in charge of
Business Development for Intergen Company, a manufacturer of cell culture, diagnostic and
research products. Since 2002, Dr.&nbsp;Chait has also served as an advisor to the Purdue
Cancer Center, a National Cancer Center designated basic-research cancer center. From 1968
to 1991, Dr.&nbsp;Chait held positions of increasing responsibility in marketing and
business development at DuPont in instrument and life science products. Dr.&nbsp;Chait has
a Ph.D. in chemistry from Purdue.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Candice B.
Kissinger</B> currently devotes all of her time to branding, client relationship
management, sales, product development, and managing installation and service for in vivo
products and services, principally the Culex&reg; APS. She was named Senior Vice
President, Marketing in January 2000 and is currently Director of Research. From 1981 to
2000 she served as Vice President, International Sales and Marketing. Ms.&nbsp;Kissinger
has a Bachelor of Science degree in Microbiology from Ohio Wesleyan University and a
Master of Science degree in Food Science from the University of Massachusetts.
Dr.&nbsp;Peter Kissinger is the husband of Ms.&nbsp;Kissinger. She has served as a
director and Secretary of the Company since 1978.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Craig S. Bruntlett,
Ph.D.</B> has been Senior Vice President of Sales Development since September
2005. Prior to that, he was Senior Vice President of International Sales from
1999. From 1992 to 1999 he was Vice President, Electrochemical Products. From
1980 to 1990, Dr.&nbsp;Bruntlett was Director of New Products Development for
the Company. Dr.&nbsp;Bruntlett has a Bachelor of Arts degree in Chemistry and
Mathematics from St. Cloud State University in Minnesota and a Ph.D. in
Chemistry from Purdue University.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Default" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Lina L.
Reeves-Kerner</B> has been Vice President, Human Resources since 1995 and is responsible
for the administrative support functions of the Company, including shareholder relations,
human resources and community relations. From 1980 to 1990, Ms.&nbsp;Reeves-Kerner served
as an Administrative Assistant with the Company. Ms.&nbsp;Reeves-Kerner has a Bachelor of
Science degree in Business Administration from Indiana Wesleyan University.</FONT></P>

<BR>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
12</FONT></P>
<PAGE>







<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Item 1A.</B>&nbsp;&nbsp;&nbsp;&nbsp;<B>Risk Factors.</B></FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>While it is impossible
to identify all such factors, the risks and uncertainties that may affect the operations,
performance and results of the Company&#146;s business include the following:</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Default" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>A reduction in
research and development budgets at pharmaceutical and biotechnology companies may
adversely affect our business.</B></FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our customers include
researchers at pharmaceutical and biotechnology companies. Our ability to continue to
grow and win new business is dependent in large part upon the ability and willingness of
the pharmaceutical and biotechnology industries to continue to spend on research and
development and to outsource the products and services we provide. Fluctuations in the
research and development budgets of these researchers and their organizations could have
a significant effect on the demand for our products and services. Research and
development budgets fluctuate due to changes in available resources, mergers of
pharmaceutical and biotechnology companies, spending priorities and institutional
budgetary policies. Our business could be adversely affected by any significant decrease
in life sciences research and development expenditures by pharmaceutical and
biotechnology companies. Similarly, economic factors and industry trends that affect our
clients in these industries also affect our business. </FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Default" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Our future success
depends on our ability to keep pace with rapid technological changes that could make our
services and products less competitive or obsolete.</B></FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The biotechnology,
pharmaceutical and medical device industries generally and Contract Research ("CRO") services
more specifically are subject to increasingly rapid technological changes. Our
competitors or others might develop technologies, services or products that are more
effective or commercially attractive than our current or future technologies, services or
products, or that render our technologies, services or products less competitive or
obsolete. If competitors introduce superior technologies, services or products and we
cannot make enhancements to ours to remain competitive, our competitive position, and in
turn our business, revenues and financial condition, would be materially and adversely
affected. </FONT></P>

<!-- MARKER FORMAT-SHEET="HEAD LEFT BOLD" FSL="Default" -->
<A NAME=A047></A>
<H1 ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The CRO services industry is highly competitive.</FONT></H1>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The CRO services industry is highly competitive. We often compete for business not
only with other CRO companies, but also with internal
discovery and development departments within our clients, some of which are large
pharmaceutical and biotechnology companies with greater resources than we have. If we do
not compete successfully, our business will suffer. The industry is highly fragmented,
with numerous smaller specialized companies and a handful of full-service companies with
global capabilities much larger than ours. Increased competition might lead to price and
other forms of competition that might adversely affect our operating results. As a result
of competitive pressures, our industry experienced consolidation in recent years. This
trend is likely to produce more competition among the larger companies for both clients
and acquisition candidates. In addition, there are few barriers to entry for smaller
specialized companies considering entering the industry. Because of their size and focus,
these companies might compete effectively against larger companies such as us, which
could have a material adverse impact on our business. </FONT></P>

<!-- MARKER FORMAT-SHEET="HEAD LEFT BOLD" FSL="Workstation" -->
<A NAME=A048></A>
<H1 ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The loss of our key
personnel could adversely affect our business.</FONT></H1>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Default" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our success
depends to a significant extent upon the efforts of our senior management team
and other key personnel. The loss of the services of such personnel could
adversely affect our business. Also, because of the nature of our business, our
success is dependent upon our ability to attract, manage and retain
technologically qualified personnel. There is substantial competition for
qualified personnel, and an inability to recruit, manage or retain qualified
personnel may impact our ability to grow our business and compete effectively in
our industry.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Default" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Any failure by us to
comply with existing regulations could harm our reputation and operating results.</B></FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Any failure on our
part to comply with existing regulations could result in the termination of ongoing
research or the disqualification of data for submission to regulatory authorities. This
would harm our reputation, our prospects for future work and our operating results.
Furthermore, the issuance of a notice from the FDA based on a finding of a material
violation by us of good clinical practice, good laboratory practice or good manufacturing
practice requirements could materially and adversely affect us. </FONT></P>


<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Proposed and
future legislation or regulations might increase the cost of our business or limit our
service or product offerings.</B><BR>
<BR>
Federal  or  state  authorities  might  adopt  healthcare   legislation  or
regulations      that      are      more      burdensome      than      existing
regulations.&nbsp;&nbsp;&nbsp;&nbsp;  Changes in regulation  could  increase our
expenses or limit our ability to offer some of our services or products.
</FONT></P>




<BR>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
13</FONT></P>
<PAGE>








<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Default" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Our business uses
biological and hazardous materials, which could injure people or violate laws, resulting
in liability that could hurt our financial condition and business.</B></FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our activities involve
the controlled use of potentially harmful biological materials, as well as hazardous
materials, chemicals and various radioactive compounds. We cannot completely eliminate
the risk of accidental contamination or injury from the use, storage, handling or
disposal of these materials. In the event of contamination or injury, we could be held
liable for damages that result, and any liability could exceed our ability to pay. Any
contamination or injury could also damage our reputation, which is critical to getting
new business. In addition, we are subject to federal, state and local laws and
regulations governing the use, storage, handling and disposal of these materials and
specified waste products. The cost of compliance with these laws and regulations is
significant and if changes are made to impose additional requirements, these costs could
increase and have an adverse impact on our financial condition and results of operations. </FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>The majority of our
customers&#146; contracts can be terminated upon short notice.</B></FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Most of our contracts
for CRO services are terminable by the client upon 30 to 90 days&#146; notice.
Clients terminate or delay their contracts for a variety of reasons, including but not
limited to: &nbsp;</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH LEVEL 2" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>     o </FONT></TD>
<TD WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>products
being tested fail to satisfy safety requirements;</FONT></DIV></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="PARAGRAPH LEVEL 2" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>     o </FONT></TD>
<TD WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>products
have undesired clinical results;</FONT></DIV></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="PARAGRAPH LEVEL 2" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>     o </FONT></TD>
<TD WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>the
client decides to forego a particular study;</FONT></DIV></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="PARAGRAPH LEVEL 2" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>     o </FONT></TD>
<TD WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>inability
to enroll enough patients in the study;</FONT></DIV></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="PARAGRAPH LEVEL 2" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>     o </FONT></TD>
<TD WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>inability
to recruit enough investigators;</FONT></DIV></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="PARAGRAPH LEVEL 2" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>     o </FONT></TD>
<TD WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>production
problems cause shortages of the drug; and</FONT></DIV></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="PARAGRAPH LEVEL 2" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>     o </FONT></TD>
<TD WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>actions
by regulatory authorities. </FONT></DIV></TD>
</TR>
</TABLE>


<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The termination of one or more significant Contracts could have a material
adverse effect on our quarterly or annual financial results.</FONT></P>

<!-- MARKER FORMAT-SHEET="HEAD LEFT BOLD" FSL="Workstation" -->
<A NAME=A049></A>
<H1 ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our Products business
depends on our intellectual property.</FONT></H1>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our products business
is dependent, in part, on our ability to obtain patents in various jurisdictions on our
current and future technologies and products, to defend our patents and protect our trade
secrets and to operate without infringing on the proprietary rights of others. There can
be no assurance that the our patents will not be challenged by third parties or that, if
challenged, those patents will be held valid. In addition, there can be no assurance that
any technologies or products developed by us will not be challenged by third parties
owning patent rights and, if challenged, will be held not to infringe on those patent
rights. The expense involved in any patent litigation can be significant. We also rely on
unpatented proprietary technology, and there can be no assurance that others will not
independently develop or obtain similar products or technologies.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Default" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>We might incur
substantial expense to develop products that are never successfully developed and
commercialized.</B></FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We have incurred and
expect to continue to incur substantial research and development and other expenses in
connection with our products business. The potential products to which we devote
resources might never be successfully developed or commercialized by us for numerous
reasons, including: </FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH LEVEL 2" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>     o </FONT></TD>
<TD WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>inability
to develop products that address our customers' needs;</FONT></DIV></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="PARAGRAPH LEVEL 2" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>     o </FONT></TD>
<TD WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>competitive
products with superior performance;</FONT></DIV></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="PARAGRAPH LEVEL 2" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>     o </FONT></TD>
<TD WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>patent
conflicts or unenforceable intellectual property rights;</FONT></DIV></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="PARAGRAPH LEVEL 2" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>     o </FONT></TD>
<TD WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>demand
for the particular product; and</FONT></DIV></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="PARAGRAPH LEVEL 2" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>     o </FONT></TD>
<TD WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>other
factors that could make the product uneconomical.</FONT></DIV></TD>
</TR>
</TABLE>



<BR>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
14</FONT></P>
<PAGE>














<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Incurring significant
expenses for a potential product that is not successfully developed and/or commercialized
could have a material adverse effect on our business, financial condition, prospects and
stock price.</FONT></P>

<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B>We dose human volunteers with new drug candidates in our clinical operations.</B>
</FONT></P>

<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Our clinical research services involes the introduction of experimental
pharmaceutical compounds into consenting human volunteers during the studies of
such compounds. This activity may expose us to liability as a result of adverse
reactions of these volunteers to the compounds being tested. We seek to limit
our risk through "hold harmless" provisions with the volunteers, obtaining
indemnity from the sponsors, and by maintaining insurance. We bear the risk that
these agreements may not protect us from liabilities, that our insurance may not
be sufficient to cover our losses, and that such insurance may not continue to
be available on terms acceptable to us.</FONT></P>

<!-- MARKER FORMAT-SHEET="HEAD LEFT BOLD" FSL="Default" -->
<A NAME=A050></A>
<H1 ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Contract research
services create a risk of liability.</FONT></H1>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In certain
circumstances, we seek to manage our liability risk through contractual provisions with
clients requiring the Company to be indemnified by the client or covered by the clients&#146; product
liability insurance policies. Although most of the Company&#146;s clients are large,
well-capitalized companies, the financial performance of these indemnities is not
secured. Therefore, the Company bears the risk that the indemnifying party may not have
the financial ability to fulfill its indemnification obligations or the liability would
exceed the amount of applicable insurance. Furthermore, we could be held liable for
errors and omissions in connection with the services we perform. There can be no
assurance that our insurance coverage will be adequate, or that insurance coverage will
continue to be available on acceptable terms or that we can obtain indemnification
arrangements or otherwise be able to limit its liability risk. </FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>If we are
unable to attract suitable willing volunteers for our clinical trials, our clinical business might suffer.</B><BR>
<BR>
The clinical research studies we run in our Baltimore
laboratory rely upon the ready accessibility and willing participation of volunteer subjects.
Volunteer subjects generally include people from the communities in which the studies are
conducted, including our Phase I clinic in Baltimore, Maryland, which to date has provided
a substantial pool of potential subjects for research studies. Our clinical research
development business could be adversely affected if we were unable to attract suitable and
willing volunteers on a consistent basis.</FONT></P>

<!-- MARKER FORMAT-SHEET="HEAD LEFT BOLD" FSL="Workstation" -->
<A NAME=A051></A>
<H1 ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We may expand our
business through acquisitions.</FONT></H1>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Default" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We review many
acquisition candidates and, in addition to acquisitions which we have already made, we are
continually evaluating new acquisition opportunities. Factors which may affect our ability
to grow successfully through acquisitions include:</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH LEVEL 2" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>o </FONT></TD>
<TD WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>difficulties
and expenses in connection with integrating the acquired companies and achieving the
expected benefits;</FONT></DIV></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="PARAGRAPH LEVEL 2" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>o </FONT></TD>
<TD WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>diversion
of management's attention from current operations;</FONT></DIV></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="PARAGRAPH LEVEL 2" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>o </FONT></TD>
<TD WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>the
possibility that we may be adversely affected by risk factors facing the acquired
companies;</FONT></DIV></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="PARAGRAPH LEVEL 2" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>o </FONT></TD>
<TD WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>acquisitions
could be dilutive to earnings, or in the event of acquisitions made through the issuance
of our common stock to the shareholders of the acquired company, dilutive to the
percentage of ownership of our existing stockholders;</FONT></DIV></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="PARAGRAPH LEVEL 2" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>o </FONT></TD>
<TD WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>potential
losses resulting from undiscovered liabilities of acquired companies not covered by the
indemnification we may obtain from the seller;</FONT></DIV></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="PARAGRAPH LEVEL 2" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>o </FONT></TD>
<TD WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>loss
of key employees of the acquired companies.</FONT></DIV></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Changes in
government regulation or in practices relating to the pharmaceutical industry could change
the need for the services we provide.</B></FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Governmental agencies
throughout the world, but particularly in the United States, strictly regulate the drug
development process. Our business involves helping pharmaceutical and biotechnology
companies comply with the regulatory drug approval process. Changes in regulation, such as
a relaxation in regulatory requirements or the introduction of simplified drug approval
procedures, or an increase in regulatory requirements that we have difficulty satisfying,
or that make our services less competitive, could substantially change the demand for our
services. Also, if the government increases efforts to contain drug costs and
pharmaceutical and biotechnology company profits from new drugs, our customers may spend
less, or reduce their growth in spending on research and development.</FONT></P>



<BR>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
15</FONT></P>
<PAGE>








<!-- MARKER FORMAT-SHEET="HEAD LEFT BOLD" FSL="Default" -->
<A NAME=A053></A>
<H1 ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Privacy regulations
could increase our costs or limit our services.</FONT></H1>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The US Department of
Health and Human Services has issued regulations under the Health Insurance Portability
and Accountability Act of 1996 (&#147;HIPAA&#148;). These regulations demand greater
patient privacy and confidentiality. Some state governments are considering more
stringent regulations. These regulations might require us to increase our investment in
security or limit the services we offer. We could be found legally liable if we fail to
meet existing or proposed regulation on privacy and security of health information. </FONT></P>

<!-- MARKER FORMAT-SHEET="HEAD LEFT BOLD" FSL="Default" -->
<A NAME=A054></A>
<H1 ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We might lose
business opportunities as a result of healthcare reform.</FONT></H1>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Numerous governments
have undertaken efforts to control growing healthcare costs through legislation,
regulation and voluntary agreements with healthcare providers and drug companies.
Healthcare reform could reduce demand for our services and products, and, as a result,
our revenue. In the last several years, the U.S. Congress has reviewed several
comprehensive health care reform proposals. The proposals are intended to expand
healthcare coverage for the uninsured and reduce the growth of total healthcare
expenditures. The U.S. Congress has also considered and may adopt legislation that could
have the effect of putting downward pressure on the prices that pharmaceutical and
biotechnology companies can charge for prescription drugs. Any such legislation could
cause our customers to spend less on research and development. If this were to occur, we
would have fewer business opportunities for our business, which could reduce our
earnings. Similarly, pending or future healthcare reform proposals outside the United
States could negatively impact our revenues from our international operations. </FONT></P>

<!-- MARKER FORMAT-SHEET="HEAD LEFT BOLD" FSL="Workstation" -->
<A NAME=A055></A>
<H1 ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Reliance on air
transportation.</FONT></H1>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our laboratories and
certain of our other businesses are heavily reliant on air travel for transport of samples
and other material, products and people, and a significant disruption to the air travel
system, or our access to it, could have a material adverse effect on our business.</FONT></P>

<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B>We have experienced periods of losses on our operating activities.</B></FONT></P>

<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our overall
strategy includes increasing revenue and reducing/controlling operating
expenses. We have concentrated our efforts in ongoing, Company-wide efficiency
activities intended to increase productivity and reduce costs including
personnel reductions, reduction or elimination of non-personnel expenses and
realigning and streamlining operations. We cannot assure that our efforts will
result in increased profitability for any meaningful period of time.</FONT></P>

<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B>The outsourcing trend in the biotechnology and pharmaceutical industries may
decrease, which could slow our growth.</B></FONT></P>

<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Over the
past several years, some areas of our businesses have grown significantly as a
result of the increase in pharmaceutical and biotechnology companies outsourcing
their preclinical and clinical research support activities. We believe that due
to the significant investment in facilities and personnel required to support
drug development, pharmaceutical and biotechnology companies look to outsource
some or all of those services. By doing so, they can focus their resources on
their core competency of drug discovery, while obtaining the outsourced services
from a full-service provider like the Company. While industry analysts expect
the outsourcing trend to continue for the next several years, a decrease in
preclinical and/or clinical outsourcing activity could result in a diminished
growth rate in the sales of one or more of our expected higher-growth areas and
adversely affect our financial condition and results of operations. Furthermore,
our customer contracts are generally terminable on little or no notice.
Termination of a large contract or multiple contracts could adversely affect our
sales and profitability.</FONT></P>

<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our
operations and financial results could be significantly affected by the
above-mentioned risks.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Our previous
independent registered public accounting firm advised management and our audit committee
that they identified material weaknesses in our internal controls and we have concluded
that we had material weaknesses as of June 30,
2006. Our business and stock price may be adversely affected by these identified material
weaknesses if we do not remediate them or if we have other material weaknesses in our
internal controls.</B></FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As we
disclose in Part II, Item 9, &#147;Controls and Procedures&#148; of this Form
10-K, our management and previous independent accountants concluded that a
material weakness existed in our internal controls as of June 30, 2006. The
Company has instituted measures to address these risks. We believe these actions
have addressed the weaknesses cited by our previous independent accountants.
However, any failure to implement and maintain the improvements in the controls
over our financial reporting, or difficulties encountered in the implementation
of these improvements in our controls, could cause us to fail to meet our
reporting obligations. Any failure to improve our internal controls to address
the identified material weaknesses could also cause investors to lose confidence
in our reported financial information, which could harm our operations or
results or cause us to fail to meet our reporting obligations, and could have a
negative impact on the trading price of our stock. We cannot be certain that any
steps we may take to improve our internal controls to address the identified
material weaknesses will ensure that we implement and maintain adequate controls
over our financial processes and reporting in the future.</FONT></P>



<BR>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
16</FONT></P>
<PAGE>





<!-- MARKER FORMAT-SHEET="HEAD LEFT BOLD" FSL="Workstation" -->
<A NAME=A056></A>
<H1 ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Item 1B.&nbsp;&nbsp;&nbsp;&nbsp;Unresolved Staff Comments.</FONT></H1>

<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Not applicable.</FONT></P>

<H1 ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Item 2.&nbsp;&nbsp;&nbsp;&nbsp;Properties.</FONT></H1>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company operates in
the following locations all of which are owned by the Company, except as otherwise
indicated:</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#149;&nbsp;&nbsp;&nbsp;&nbsp;<B>West
Lafayette, IN</B>: principal executive offices are located at 2701 Kent Avenue, West
Lafayette, Indiana 47906, and constitutes multiple buildings with approximately 135,000
square feet of operations, manufacturing, and administrative space. Both the services
segment and the products segment conduct operations at this facility. A new 20,000 square
foot ADME preclinical research facility became fully functional in April, 2005. It is
custom-designed to provide contract pharmacokinetic and ADME research services based on
its Culex&reg; Automated Pharmacology system. Both the new facility and the prior portion
of the building have been financed by mortgages.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#149;&nbsp;&nbsp;&nbsp;&nbsp;<B>BAS
Evansville </B>occupies 10 buildings with roughly 100,000 square feet of operating and
administrative space on 52 acres. Most of this site is engaged in preclinical toxicology
testing of developmental drugs in animal models. A recent addition was financed by a
mortgage.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#149;&nbsp;&nbsp;&nbsp;&nbsp;<B>BASi Clinical
Research Unit </B>(BASi Maryland) in Baltimore, Maryland occupies a seven story, 126,000
square foot historic building in downtown Baltimore. On January 5, 2005, this building was
sold to a developer and the Company and the developer entered into a three-year lease back
for approximately 85% of the space in the building. This site contains a 110 bed, three
ward, Phase I Clinical Trials facility along with administrative offices committed to
recruitment and enrollment of study participants, medical and clinical trials staff, data
management, and later phase Clinical Trials Management. The Company intends to use the
lease back period to develop its long-term space alternatives.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#149;&nbsp;&nbsp;&nbsp;&nbsp;<B>Bioanalytical
Systems, Ltd.,</B> Warwickshire, UK contains the Company&#146;s contract services and
instruments operations in roughly 12,000 square feet of leased space for laboratories,
sales and technical support services in the U.K.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#149;&nbsp;&nbsp;&nbsp;&nbsp;<B>BASi
Northwest Laboratory </B>is in McMinnville, Oregon, approximately 40 miles from Portland.
The Company leases roughly 8,600 square feet of laboratory and administrative space,
principally used for bioanalytical services.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company believes
that its facilities are adequate for the Company&#146;s operations and that suitable
additional space will be available if and when needed. The terms of any mortgages and
leases for the above properties are detailed in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, and Notes 3, 5 and 6 to the Notes
to Consolidated Financial Statements.</FONT></P>

<!-- MARKER FORMAT-SHEET="HEAD LEFT BOLD" FSL="Workstation" -->
<A NAME=A057></A>
<H1 ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Item 3.&nbsp;&nbsp;&nbsp;&nbsp;Legal
Proceedings.</FONT></H1>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Default" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company does not
have any current pending legal proceedings.</FONT></P>

<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Item 4.&nbsp;&nbsp;&nbsp;&nbsp;Submission of
Matters to a Vote of Security Holders.</B>
</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<A NAME=A058></A>
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Not applicable.</FONT></P>

<!-- MARKER FORMAT-SHEET="HEADING CENTER BOLD" FSL="Workstation" -->
<A NAME=A059></A>
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>PART II </FONT></H1>

<!-- MARKER FORMAT-SHEET="HEAD LEFT BOLD" FSL="Workstation" -->
<A NAME=A060></A>
<H1 ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Item 5.&nbsp;&nbsp;&nbsp;&nbsp;Market for
Registrant&#146;s Common Equity and Related Stockholder Matters</FONT></H1>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>You can find
information regarding the market for the Company&#146;s common shares and related
stockholder matters under the heading &#147;Common Shares&#148; in our 2006 Annual Report.
That information is incorporated herein by reference.</FONT></P>

<BR>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
17</FONT></P>
<PAGE>








<!-- MARKER FORMAT-SHEET="HEAD LEFT ITALICS" FSL="Workstation" -->
<A NAME=A061></A>
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Equity Compensation
Plan Information</I></FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Default" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company maintains
stock option plans that allow for the granting of options to certain key employees and
directors of the Company. The following table gives information about equity awards under
the stock option plans of the Company:</FONT></P>

<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=100%>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Plan Category</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Number of Securities to be<BR>
Issued upon Exercise of<BR>
Outstanding Options</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Weighted Average<BR>
Exercise Price of<BR>
Outstanding Options</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Number of Securities Remaining<BR>
Available for Future Issuance<BR>
under the Equity Compensation Plan<BR>
(Excluding Securities Reflected<BR>
in First Column)</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=25% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Equity compensation plans approved</FONT></TD>
     <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>

     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD WIDTH=11% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
        <TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD WIDTH=9% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
        <TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=18% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
        <TD WIDTH=7% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>by security holders</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>353,870</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$&nbsp;&nbsp;4.96</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>300,375</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
<TD>&nbsp;</TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Equity compensation plans not</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>approved by security holders<SUP>(1)</SUP></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>50,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$&nbsp;&nbsp;5.14</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
<TD>&nbsp;</TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Total</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>403,870</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$&nbsp;&nbsp;4.98</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>300,375</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
</TABLE>




<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><SUP>(1)</SUP>&nbsp;&nbsp;&nbsp;&nbsp;
Includes option to purchase 25,000 shares at $4.57 granted April&nbsp;1, 2004, and 25,000 shares at $5.69 granted
August&nbsp;1, 2005. Each of these grants is fully vested expire after 10 years.
</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>For additional
information regarding the Company&#146;s stock option plans approved by security holders,
please see Note 8, to the Consolidated Financial Statements included in Item 8 of
this report.</FONT></P>

<!-- MARKER FORMAT-SHEET="HEAD LEFT BOLD" FSL="Workstation" -->
<A NAME=A062></A>
<H1 ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Item 6.&nbsp;&nbsp;&nbsp;&nbsp;Selected
Financial Data.</FONT></H1>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Default" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>You can find Selected
Financial Data for each of our five most recent fiscal years in our 2006 Annual Report
under &#147;Selected Consolidated Financial Data&#148;. That information is incorporated
herein by reference.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Item 7.&nbsp;&nbsp;&nbsp;&nbsp;Management's
Discussion and Analysis of Financial Condition and Results of Operations.</B></FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>This report contains
statements that constitute forward looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Those statements appear in a number of places in
this Report and may include statements regarding the intent, belief or current
expectations of the Company or its management with respect to, but are not limited to (i)
the Company&#146;s strategic plans; (ii) trends in the demand for the Company&#146;s
products; (iii) trends in the industries that consume the Company&#146;s products; (iv)
the Company&#146;s ability to refinance its debt; (v) the ability of the Company to
develop new products; and (vi) the ability of the Company to make capital expenditures and
finance operations. Readers are cautioned that any such forward looking statements are not
guarantees of future performance and involve risks and uncertainties. Actual results may
differ materially from those in the forward looking statements as a result of various
factors, many of which are beyond the control of the company.</I></FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>In addition, the
Company has based these forward-looking statements on its current expectations and
projections about future events. Although the Company believes that the assumptions on
which the forward-looking statements contained herein are based are reasonable, any of
those assumptions could prove to be inaccurate, and as a result, the forward-looking
statements based upon those assumptions also could be incorrect. The following discussion
and analysis should be read in conjunction with Selected Consolidated Financial Data and
the Company&#146;s Consolidated Financial Statements and notes thereto included or
incorporated by reference elsewhere in this Report. In addition to the historical
information contained herein, the discussions in this Report may contain forward-looking
statements that involve risks and uncertainties which are discussed in Item 1A, Risk
Factors. The Company&#146;s actual results could differ materially from those discussed in
the forward-looking statements.</I></FONT></P>




<BR>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
18</FONT></P>
<PAGE>




<!-- MARKER FORMAT-SHEET="HEAD LEFT BOLD" FSL="Workstation" -->
<A NAME=A063></A>
<H1 ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Overview</FONT></H1>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The business of
Bioanalytical Systems, Inc. is dependent on the level of pharmaceutical and biotech
companies&#146; efforts in new drug discovery and approval. Our services segment is the
direct beneficiary of these efforts, through outsourcing by these companies of research
work, and our products segment is the indirect beneficiary, as increased drug development
leads to capital expansion providing opportunities to sell the equipment we produce and
the consumable supplies we provide that support our products.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Developments within the
industries we serve have a direct, and sometimes material, impact on our operations.
Currently, many large pharmaceutical companies have major &#147;block-buster&#148; drugs
that are nearing the end of their patent protections. This puts significant pressure on
these companies both to develop new drugs with large market appeal, and to re-evaluate
their cost structures and the time-to- market of their products. Contract research
organizations (&#147;CRO&#146;s&#148;) have benefited from these developments, as the
pharmaceutical industry has turned to out-sourcing to both reduce fixed costs, and to
increase the speed of research and data development necessary for new drug applications.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The number of
significant drugs that have reached or are nearing the end of their patent protection has
also benefited the generic drug industry. That sector of the drug industry has seen
significant growth in the past decade, and, we believe, will continue to experience strong
growth in the foreseeable future. Generic drug companies provide a significant source of
new business for CRO&#146;s as they develop, test and manufacture their generic compounds.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>A significant portion
of innovation in the pharmaceutical industry is now being driven by biotech and small,
venture capital funded, drug development companies. Many of these companies are
&#147;single-molecule&#148; entities, whose success depends on one innovative compound.
While several of the biotech companies have reached the status of major pharmaceuticals,
the industry is still characterized by smaller entities. These developmental companies
generally do not have the resources to perform much of the clinical research within their
organizations, and are therefore dependent on the CRO industry for both their research and
for guidance in preparing their FDA submissions. These companies have provided significant
new opportunities for the CRO industry, including BASi. They do, however, provide
challenges in selling, as they frequently have only one product in development, which
causes CRO&#146;s to be unable to develop a flow of projects from a single company. These
companies may expend all their available funds and cease operations prior to fully
developing a product. Additionally, the funding of these companies is subject to
investment market fluctuations, which change the risk profile and appetite of investors.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Although the past year
has not seen large mergers in either the pharmaceutical or CRO industries, consolidation
continues at a smaller pace in the CRO sector. We believe that consolidation of the CRO
sector will continue to be a factor in our markets.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Default" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Research services are
capital intensive. The investment in equipment and facilities to serve our markets is
substantial and continuing. While our physical facilities are excellent to meet market
needs for the near term, rapid changes in automation, precision, speed and technologies
necessitate a constant investment in equipment and software to meet market demands. We are
also impacted by the heightened regulatory environment and the need to improve our
business infrastructure to support our increasingly diverse operations, which will
necessitate additional capital investment. Our ability to generate capital to reinvest in
our capabilities, both through operations and financial transactions, is critical to our
success. While we are currently committed to fully utilizing recent additions to our
capacity, sustained growth will require additional investment in future periods.</FONT></P>


<BR>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
19</FONT></P>
<PAGE>






<!-- MARKER FORMAT-SHEET="HEAD LEFT BOLD" FSL="Workstation" -->
<A NAME=A064></A>
<H1 ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Results of Operations</FONT></H1>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Default" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The following table
summarizes the consolidated statement of operations as a percentage of total revenues:</FONT></P>


<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=100%>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=9><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Year Ended September 30,</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH>
</TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2006</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2005</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2004</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>

<TR>
<TD>&nbsp;</TD></TR>

<TR VALIGN=Bottom>
     <TD WIDTH=58% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Service revenue</FONT></TD>
     <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=7% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>79</FONT></TD>
        <TD WIDTH=6% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.7%</FONT></TD>
     <TD WIDTH=7% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>77</FONT></TD>
        <TD WIDTH=6% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.7%</FONT></TD>
     <TD WIDTH=7% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>67</FONT></TD>
        <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.1%</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Product revenue</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>20</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.3</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>22</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.3</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>32</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.9</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=3 ALIGN=RIGHT><HR width=80% NOSHADE COLOR=#000000 SIZE=1></TD>
     <TD COLSPAN=3 ALIGN=RIGHT><HR width=80% NOSHADE COLOR=#000000 SIZE=1></TD>
     <TD COLSPAN=3 ALIGN=RIGHT><HR width=80% NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Total revenue</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>100</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.0%</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>100</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.0%</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>100</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.0%</FONT></TD></TR>

<TR>
<TD>&nbsp;</TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Cost of service revenue <I>(a)</I></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>74</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.9</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>71</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.6</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>85</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.6</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Cost of product revenue <I>(a)</I></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>40</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.6</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>36</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.7</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>34</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.9</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=3 ALIGN=RIGHT><HR width=80% NOSHADE COLOR=#000000 SIZE=1></TD>
     <TD COLSPAN=3 ALIGN=RIGHT><HR width=80% NOSHADE COLOR=#000000 SIZE=1></TD>
     <TD COLSPAN=3 ALIGN=RIGHT><HR width=80% NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Total cost of revenue</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>67</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.9</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>63</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.8</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>69</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.0</FONT></TD></TR>

<TR>
<TD>&nbsp;</TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Gross profit</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>32</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.1</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>36</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.2</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>31</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.0</FONT></TD></TR>

<TR>
<TD>&nbsp;</TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Total operating expenses</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>40</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.0</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>33</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.2</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>30</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.3</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=3 ALIGN=RIGHT><HR width=80% NOSHADE COLOR=#000000 SIZE=1></TD>
     <TD COLSPAN=3 ALIGN=RIGHT><HR width=80% NOSHADE COLOR=#000000 SIZE=1></TD>
     <TD COLSPAN=3 ALIGN=RIGHT><HR width=80% NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=3></TD></TR>

<TR>
<TD>&nbsp;</TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Operating income (loss)</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(7</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.9)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.0</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.7</FONT></TD></TR>

<TR>
<TD>&nbsp;</TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Other (expense)</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(2</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.4)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(2</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.3)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(2</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.3)</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=3 ALIGN=RIGHT><HR width=80% NOSHADE COLOR=#000000 SIZE=1></TD>
     <TD COLSPAN=3 ALIGN=RIGHT><HR width=80% NOSHADE COLOR=#000000 SIZE=1></TD>
     <TD COLSPAN=3 ALIGN=RIGHT><HR width=80% NOSHADE COLOR=#000000 SIZE=1></TD></TR>

<TR>
<TD>&nbsp;</TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Income (loss) before income taxes</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(10</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.3)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.7</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.6)</FONT></TD></TR>

<TR>
<TD>&nbsp;</TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Income tax expense (benefit)</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(4</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.2)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.9</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.0)</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=3 ALIGN=RIGHT><HR width=80% NOSHADE COLOR=#000000 SIZE=1></TD>
     <TD COLSPAN=3 ALIGN=RIGHT><HR width=80% NOSHADE COLOR=#000000 SIZE=1></TD>
     <TD COLSPAN=3 ALIGN=RIGHT><HR width=80% NOSHADE COLOR=#000000 SIZE=1></TD></TR>

<TR>
<TD>&nbsp;</TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net (loss)</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(6</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.1)%</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(0</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.2)%</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(0</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.6)%</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=3 ALIGN=RIGHT><HR width=80% NOSHADE COLOR=#000000 SIZE=3></TD>
     <TD COLSPAN=3 ALIGN=RIGHT><HR width=80% NOSHADE COLOR=#000000 SIZE=3></TD>
     <TD COLSPAN=3 ALIGN=RIGHT><HR width=80% NOSHADE COLOR=#000000 SIZE=3></TD></TR>
</TABLE>
<BR>


<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>(a)&nbsp;&nbsp;&nbsp;&nbsp;Percentage
of service and product revenues, respectively.</I></FONT></P>

<!-- MARKER FORMAT-SHEET="HEAD LEFT BOLD" FSL="Workstation" -->
<A NAME=A068></A>
<H1 ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Year Ended September
30, 2006, Compared with Year Ended September 30, 2005</FONT></H1>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Total revenue for the
year ended September 30, 2006 increased 1% to $43.0 million from $42.4 million for the
year ended September 30, 2005. Service revenue increased to $34.3 million for the year
ended September 30, 2006 from $33.0 million for the year ended September 30, 2005, an
increase of 4%. This increase was the result of 36% growth in our toxicology business,
offset by a 25% decline in revenues of our clinical research unit. Revenues in our
bioanalytical laboratories were essentially flat compared to the prior year. The revenue decline in
our clinical research unit was the result of the acquisition of its largest client,
resulting in the cessation of research by them in our facility. As a consequence, we
revalued the assets of that unit, recording an impairment charge in the third quarter of our 2006
fiscal year (discussed below). Revenues in our bioanalytical laboratories were negatively
impacted by delays in critical projects by our clients. Our revenues from products
declined in the current year to $8.7 million, an 8% decline from last year&#146;s product
revenues of $9.4 million. This decline was across our product line. In the fiscal year
ended September 30, 2006, we did not have any major new adopters of our Culex&reg; system,
which resulted in flat year-to-year sales. Our mature analytical instruments line
continued prior trends of declining sales. Inflation in prices did not have a material
impact on revenue increases.</FONT></P>




<BR>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
20</FONT></P>
<PAGE>





<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Costs of revenue
increased 8% to $29.2 million for the year ended September 30, 2006 from $27.1 million for
the year ended September 30, 2005. This increase of $2.2 million was due to:&nbsp;&nbsp;a)&nbsp;increases in
the cost of service revenue as a result of the capacity added in our bioanalytical
laboratories in fiscal 2005 which was not fully utilized in the current fiscal year as a
result of the lack of revenue growth in the current year, b)&nbsp;increased staffing in our <I>in
vivo</I> pharmacology unit as we increased our commercial offerings, and c)&nbsp;additional
costs in our toxicology business as a result of its growth. Cost of revenue as a
percentage of revenues increased in both service and product segments due to the lower
utilization of capacity. A significant portion of our production costs are relatively
fixed, which results in decreased margins as we decrease our utilization of facilities.
Costs of revenue for the Company&#146;s products segment increased to 40.6% as a
percentage of product revenue for the year ended September 30, 2006 from 36.7% of product
revenue for the year ended September 30, 2005.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Selling expenses for
the year ended September 30, 2006 increased by 6% to $2.7 million from $2.6 million during
the year ended September 30, 2005, as we filled positions in our expanded sales group
during the year. Research and development expenses for the year ended September 30, 2006
increased 9% to $1.4 million from $1.3 million for the year ended September 30, 2005. This
increase is primarily due to additional research activities around our Culex&reg; product
line.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>General and
administrative expenses for the year ended September 30, 2006 increased 18% to
$12.0 million from $10.2 million for the year ended September 30, 2005. In
September of 2006, in order to address our lack of profitability, we reduced our
headcount by approximately 12%, which resulted in severance costs of $600,000.
In fiscal 2006, we began expensing employee stock options, increasing
expenses by $319,000. Our provision for bad debts increased by $480,000,
principally the result of one contract that we were not able to collect.
Increases in our costs of health insurance, property taxes, outside audit, and
additional administrative support of our growth in toxicology were major
contributors to the remainder of the increase.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In our third
fiscal quarter of the current year, we determined that, due to the loss of a
significant customer in our clinical research unit, there had been a permanent
impairment of the value of its assets. We determined that the carrying value of
the unit's assets exceeded their fair value, requiring adjustment. The
adjustment of $1.1 million is shown as a separate line item in our 2006
Consolidated Statement of Operations.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Other income (expense),
net, was $(1,013,000) for the year ended September 30, 2006 as compared to $(969,000) in
the year ended September 30, 2005, as a result of increased interest expense. We reduced
our average outstanding borrowings on both our revolving line of credit and our mortgage
financing, while adding $1.5 million of lease financing to acquire laboratory equipment.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Default" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company&#146;s
effective tax rate was 41.2% for the benefits of our loss for fiscal 2006.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As a result of the
above, the Company lost $0.53 per share in fiscal 2006, both basic and diluted, compared
to a net loss in fiscal 2005 of $0.02 per share, both basic and diluted. </FONT></P>

<!-- MARKER FORMAT-SHEET="HEAD LEFT BOLD" FSL="Workstation" -->
<A NAME=A069></A>
<H1 ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Year Ended September
30, 2005, Compared with Year Ended September 30, 2004</FONT></H1>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Total revenue for the
year ended September 30, 2005 increased 14% to $42.4 million from $37.2 million for the
year ended September 30, 2004. Service revenue increased to $33.0 million for the year
ended September 30, 2005 from $24.9 million for the year ended September 30, 2004, an
increase of 33%. This increase came from all domestic locations, as we had strong growth
in our bioanalytical laboratories, our toxicology facility, and our clinical research
unit. Our laboratory in the UK had a decline in revenues. Our revenues from products
declined in fiscal 2005 to $9.4 million, a 23% decline from prior fiscal year&#146;s
product revenues of $12.2 million. This decline was across our product line, following a
particularly strong year in product sales in fiscal 2004. In the fiscal year ended
September 30, 2005, we did not have any major new adopters of our Culex&reg; system,
whereas the prior fiscal year&#146;s sales had been strongly influenced by some major
buying programs by our customers. Our sales of Culex&reg; supplies, on the other hand,
increased due to the larger installed base of Culex&reg; users. Inflation in prices did
not have a material impact on revenue increases.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Costs of revenue
increased 6% to $27.1 million for the year ended September 30, 2005 from $25.6 million for
the year ended September 30, 2004. This increase of $1.5 million was due to increases in
the cost of service revenue as a result of the significant increase in the volume of our
services business in fiscal 2005, partially offset by a reduction in the cost of product
revenue resulting from the decrease in the number of products sold and a change in product
mix. Cost of service revenue as a percentage of service revenues decreased due to the
higher utilization of capacity in our Services segment. A significant portion of our costs
in our Services segment are relatively fixed, which results in increasing margins as we
increase our utilization of facilities. Costs of revenue for the Company&#146;s products
segment increased to 36.7% as a percentage of product revenue for the year ended September
30, 2005 from 34.9% of product revenue for the year ended September 30, 2004. This small
change was the result of lower utilization of manufacturing capacity.</FONT></P>


<BR>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
21</FONT></P>
<PAGE>


<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Selling expenses for
the year ended September 30, 2005 decreased by 4% to $2.6 million from $2.7 million during
the year ended September 30, 2004, due to decreased headcount in sales. Research and
development expenses for the year ended September 30, 2005 increased 18% to $1.3 million
from $1.1 million for the year ended September 30, 2004. This increase is primarily due to
additional research activities around our Culex&reg; product line.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>General and
administrative expenses for the year ended September 30, 2005 increased 36% to $10.2
million from $7.5 million for the year ended September 30, 2004. Approximately $1.7
million of the increase was in our Baltimore clinical unit, where we had approximately
$700,000 of additional personnel expense as a result of increased business, more expensive
new hires and compensation increases, and $800,000 of occupancy cost relating to the sale
and leaseback of our building. In our West Lafayette facility, we commissioned
approximately 19,000 square feet of new research and laboratory space, causing
approximately $500,000 of additional depreciation and other space related costs. The
remainder of the increase was related to compensation increases, increases in liability,
property and health care coverages, and higher energy costs.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Other income (expense),
net, was $(969,000) in the year ended September 30, 2005 as compared to $(832,000) in the
year ended September 30, 2004, as a result of increased interest expense. We reduced our
average outstanding borrowings from the second fiscal quarter due to the sale of our
Baltimore building, but added $1.1 million of capital leases to finance new laboratory
equipment and had higher interest rates on our floating rate revolving credit facility.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company&#146;s
effective tax rate was 135% for fiscal 2005 as a result of foreign taxable losses which
reduced our pre-tax income by approximately $800,000, without corresponding tax benefit.
The prior year&#146;s tax benefit was the result of a U.S. loss which we could carry back
against prior year&#146;s income, and foreign income for which foreign tax loss
carryforwards were available.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As a result of the
above, the Company lost $0.02 per share in fiscal 2005, both basic and diluted, compared
to a net loss fiscal 2004 of $0.04 per share, both basic and diluted.</FONT></P>

<!-- MARKER FORMAT-SHEET="HEAD LEFT BOLD" FSL="Workstation" -->
<A NAME=A070></A>
<H1 ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Liquidity and Capital Resources</FONT></H1>

<!-- MARKER FORMAT-SHEET="HEAD LEFT ITALICS" FSL="Workstation" -->
<A NAME=A071></A>
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Comparative Cash Flow
Analysis</I></FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Since its inception,
the Company&#146;s principal sources of cash have been cash flow generated from operations
and funds received from bank borrowings and other financings. At September 30, 2006, the
Company had cash and cash equivalents of $1.6 million compared to $1.3 million at
September 30, 2005.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Default" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company&#146;s net
cash generated by operating activities was $3.9 million for the year ended September 30,
2006, compared to cash used of $0.5 million in fiscal 2005 and cash generated of $2.8
million in fiscal 2004. Cash generated was primarily from improved collection of
receivables, generating $4.5 million, offset by a reduction in customer advances of $1.7
million. Non-cash charges to operations of $3.9 million for depreciation and amortization,
and $1.1 million for the impairment of long-term assets in our clinical research unit
increased our loss, but did not consume cash. Our receivables vary depending on where we
stand in our mix of contracts, however, we believe that new procedures instituted during
the year in billings and collections contributed to the improved cash flow.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Cash used by investing
activities was $1.5 million for the year ended September 30, 2006 compared to cash
provided of $3.6 million and cash used of $3.5 million for the years ended September 30,
2005 and 2004, respectively. During fiscal 2005, the Company sold and leased back its
building in Baltimore, MD. This transaction resulted in net cash to the Company of $5.9
million, which helped finance the $2.3 million investment in capital assets in fiscal
2005. In fiscal 2006, our investments were in recurring capital asset additions and
replacements. </FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Cash used by financing
activities was $2.0 million for the year ended September 30, 2006, compared to cash used
of $2.8 and cash provided of $0.3 million, respectively for fiscal 2005 and 2004. Cash utilized in fiscal 2006 was
used for payment of debt and lease obligations.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In January, 2005 the
Company sold and leased back its facility in Baltimore, Maryland. The sales price was $6.5
million, and the Company leased back the majority of the space through December, 2007.
After transaction expenses, the Company generated $5.9 million in cash from this
transaction, which was used to reduce outstanding debt and increase working capital.</FONT></P>



<BR>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
22</FONT></P>
<PAGE>



<!-- MARKER FORMAT-SHEET="HEAD LEFT ITALICS" FSL="Workstation" -->
<A NAME=A072></A>
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Capital Resources</I></FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Total expenditures by
the Company for property and equipment were $1.7 million, $2.3 million (funded by proceeds
from the sale of the Baltimore building), and $3.6 million (funded by funds generated from
operations, long-term debt and revolving credit), in fiscal 2006, 2005 and 2004,
respectively. Expenditures in fiscal 2006 and 2005 were primarily for the purchase of
laboratory equipment. In fiscal 2004, expenditures were for completion of facilities
expansion in West Lafayette and Evansville, Indiana, and improvements in the Baltimore
clinical facility. The decline in capital expenditures in fiscal 2006 is the result of the
completion of expansion programs. Capital investments for the purchase of additional
laboratory equipment are driven by anticipated increases in research services to be
provided by the Company, and by the replacement or upgrading of the Company&#146;s
equipment. Additionally, the Company funded $1.5 million of laboratory equipment in fiscal
2006 through capital leases. Although the Company may consider strategic acquisition
opportunities it does not intend to aggressively pursue additional acquisitions until the
Company is fully utilizing existing capacity.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company has a
revolving credit facility of $6 million with a commercial bank and three mortgage notes
payable to another bank aggregating $8.5 million. Borrowings under these credit agreements
are collateralized by substantially all assets related to the Company&#146;s operations
and all common stock of the Company&#146;s U.S. subsidiaries and 65% of the common stock
of its non-United States subsidiaries, and the assignment of a life insurance policy on
the Company&#146;s Chairman. Under the terms of these credit agreements, the Company has
agreed to restrict advances to subsidiaries, limit additional indebtedness and capital
expenditures as well as to comply with certain financial covenants outlined in the
borrowing agreements. These credit agreements contain cross-default provisions. Details of
each debt issue are discussed below. We were not in compliance with our loan covenants at
September 30, 2006, and have received a waiver from our bank of the non-compliance. In
connection with the waiver, our bank raised our rate from LIBOR plus 250-300 basis points
to LIBOR plus 325 basis points, or from prime plus 25 basis points to prime plus 50 basis
points, increased our fee on the unused portion of the line from 25 basis points to 37.5
basis points, and limited capital additions for fiscal 2007 to $1.2 million. None of the
other provisions of the Company&#146;s debt agreement are expected to have an impact on
operations.  The Company expects to be in compliance with the loan covenants throughout fiscal 2007.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The maximum amount
available under the terms of the Company&#146;s revolving line of credit is $6 million
with outstanding borrowings limited to the borrowing base as defined in the agreement. As
of September 30, 2006 there were no outstanding balances on this line of credit. Interest
accrues monthly on the outstanding balance at the bank&#146;s prime rate to prime rate
plus 50 basis points or at LIBOR plus 325 basis points, as elected by the Company. As of
September 30, 2006 the prime rate was 8.25%. The Company paid a fee equal to 37.5 basis
points on the unused portion of the line of credit. Borrowings under the facility are
based on a lending formula utilizing the Company&#146;s accounts receivable and inventory.
At September 30, 2006 the Company had $1.8 million available under the facility after
offsetting a $2 million outstanding letter of credit which secures the Baltimore lease
(this letter of credit reduces to $1.0 million in January 2007). The Company&#146;s line
of credit is a revolver against which the Company applies cash receipts, and draws cash as
needed. The line of credit is committed until January, 2008.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company has three
outstanding mortgages with a commercial bank on its facilities in West Lafayette and
Evansville, Indiana, with essentially the same terms, which total $8.5 million. The
mortgages have a fixed interest rate of 5.69% through June, 2007 and mature in November 2012. See Note 6 to the
Consolidated Financial Statements.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Default" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The following table
summarizes the cash payments under the Company&#146;s contractual term debt and lease
obligations at September 30, 2006 and the effect such obligations are expected to have on
its liquidity and cash flows in future periods (amounts in thousands). The table does not
include the Company&#146;s revolving credit facility.</FONT></P>

<BR>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
23</FONT></P>
<PAGE>


<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=100%>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2007</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2008</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2009</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2010</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2011</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>After 2011</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Total</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>

<TR>
<TD>&nbsp;</TD></TR>


<TR VALIGN=Bottom>
     <TD WIDTH=28% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Mortgage notes payable</FONT></TD>
     <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=6% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>    361</FONT></TD>
        <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=6% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>    384</FONT></TD>
        <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=6% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>    407</FONT></TD>
        <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=6% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>    431</FONT></TD>
        <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=6% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>    456</FONT></TD>
        <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=6% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  6,507</FONT></TD>
        <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=6% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  8,546</FONT></TD>
        <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Subordinated debt*</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>360</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,477</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,837</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Capital lease obligations</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>472</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>510</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>582</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>424</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>132</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,120</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Operating leases</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,139</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>491</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>69</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,707</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
        <TD COLSPAN=3>&nbsp;</TD>
        <TD COLSPAN=2><HR NOSHADE width=95% COLOR=#000000 SIZE=1></TD><TD COLSPAN=1>&nbsp;</TD>
        <TD COLSPAN=2><HR NOSHADE width=95% COLOR=#000000 SIZE=1></TD><TD COLSPAN=1>&nbsp;</TD>
        <TD COLSPAN=2><HR NOSHADE width=95% COLOR=#000000 SIZE=1></TD><TD COLSPAN=1>&nbsp;</TD>
        <TD COLSPAN=2><HR NOSHADE width=95% COLOR=#000000 SIZE=1></TD><TD COLSPAN=1>&nbsp;</TD>
        <TD COLSPAN=2><HR NOSHADE width=95% COLOR=#000000 SIZE=1></TD><TD COLSPAN=1>&nbsp;</TD>
        <TD COLSPAN=2><HR NOSHADE width=95% COLOR=#000000 SIZE=1></TD><TD COLSPAN=1>&nbsp;</TD>
        <TD COLSPAN=2><HR NOSHADE width=95% COLOR=#000000 SIZE=1></TD><TD COLSPAN=1>&nbsp;</TD>
</TR>

<TR>
<TD>&nbsp;</TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  3,332</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  5,862</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,058</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>863</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>    588</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  6,507</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 18,210</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
        <TD COLSPAN=3>&nbsp;</TD>
        <TD COLSPAN=2><HR NOSHADE width=95% COLOR=#000000 SIZE=3></TD><TD COLSPAN=1>&nbsp;</TD>
        <TD COLSPAN=2><HR NOSHADE width=95% COLOR=#000000 SIZE=3></TD><TD COLSPAN=1>&nbsp;</TD>
        <TD COLSPAN=2><HR NOSHADE width=95% COLOR=#000000 SIZE=3></TD><TD COLSPAN=1>&nbsp;</TD>
        <TD COLSPAN=2><HR NOSHADE width=95% COLOR=#000000 SIZE=3></TD><TD COLSPAN=1>&nbsp;</TD>
        <TD COLSPAN=2><HR NOSHADE width=95% COLOR=#000000 SIZE=3></TD><TD COLSPAN=1>&nbsp;</TD>
        <TD COLSPAN=2><HR NOSHADE width=95% COLOR=#000000 SIZE=3></TD><TD COLSPAN=1>&nbsp;</TD>
        <TD COLSPAN=2><HR NOSHADE width=95% COLOR=#000000 SIZE=3></TD><TD COLSPAN=1>&nbsp;</TD>
</TR>
</TABLE>



<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>* &nbsp;<I>Subordinated
debt includes notes to related parties.</I></FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company expects to
spend approximately $1.2 million in fiscal 2007 on capital assets, primarily laboratory
equipment. As of September 30, 2006, no firm commitments had been made to purchase capital
assets.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The covenants in the
Company&#146;s credit agreement requiring the maintenance of certain ratios of
interest-bearing indebtedness (not including subordinated debt) to EBITDA and net cash
flow to debt servicing requirements may restrict the amount the Company can borrow to fund
future operations, acquisitions and capital expenditures.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Based on its current
business activities, the Company believes cash generated from its operations and amounts
available under its existing credit facilities will be sufficient to fund the
Company&#146;s working capital and capital expenditure requirements for the foreseeable
future and through September 30, 2007. The Company has $4.0 million of subordinated
convertible notes maturing in January, 2008 which will require the Company to develop
sources to fund the payment.</FONT></P>

<!-- MARKER FORMAT-SHEET="HEAD LEFT BOLD" FSL="Workstation" -->
<A NAME=A073></A>
<H1 ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Inflation</FONT></H1>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company believes
that inflation has not had a material adverse effect on its business, operations or
financial condition.</FONT></P>

<!-- MARKER FORMAT-SHEET="HEAD LEFT BOLD" FSL="Workstation" -->
<A NAME=A074></A>
<H1 ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Critical Accounting
Policies</FONT></H1>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#147;Management&#146;s
Discussion and Analysis of Financial Condition and Results of Operations&#148; and
&#147;Liquidity and Capital Resources&#148; discusses the consolidated financial
statements of the Company, which have been prepared in accordance with accounting
principles generally accepted in the United States. Preparation of these financial
statements requires management to make judgments and estimates that affect the reported
amounts of assets, liabilities, revenues and expenses, and the disclosures of contingent
assets and liabilities. Certain significant accounting policies applied in the preparation
of the financial statements require management to make difficult, subjective or complex
judgments, and are considered critical accounting policies by the Company. The Company has
identified the following areas as critical accounting policies.</FONT></P>

<!-- MARKER FORMAT-SHEET="HEAD LEFT ITALICS" FSL="Workstation" -->
<A NAME=A075></A>
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Revenue Recognition</I></FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The majority of the
Company&#146;s service contracts involve the processing of bioanalytical samples for
pharmaceutical companies. These contracts generally provide for a fixed fee for each assay
method developed or sample processed and revenue is recognized under the specific
performance method of accounting. Under the specific performance method, revenue and
related direct costs are recognized when services are performed. The Company&#146;s other
service contracts generally consist of preclinical and clinical trial studies for
pharmaceutical companies. Service revenue is recognized based on the ratio of direct costs
incurred to total estimated direct costs under the proportional performance method of
accounting. Losses on contracts are provided in the period in which the loss becomes
determinable. Revisions in profit estimates are reflected on a cumulative basis in the
period in which such revisions become known. The establishment of contract prices and
total contract costs involves estimates made by the Company at the inception of the
contract period. These estimates could change during the term of the contract which could
impact the revenue and costs reported in the consolidated financial statements. Projected
losses on contracts are provided for in their entirety when known. Revisions to estimates
have not been material to the Company. Service contract fees received upon acceptance are
deferred and classified within customer advances, until earned. Unbilled revenues
represent revenues earned under contracts in advance of billings.</FONT></P>


<BR>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
24</FONT></P>
<PAGE>



<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
Company&#146;s product revenue is derived primarily from sales of equipment
utilized for scientific research. Revenue from equipment not requiring
installation, testing or training is recognized upon shipment to customers. One
Company product includes internally developed software and requires
installation, testing and training, which occur concurrently. Revenue from this
product is recognized upon completion of the installation, testing and
training.</FONT></P>

<!-- MARKER FORMAT-SHEET="HEAD LEFT ITALICS" FSL="Workstation" -->
<A NAME=A076></A>
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Impairment
of Long-Lived Assets, Including Goodwill</I></FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Long-lived
assets, such as property and equipment, and purchased intangibles subject to
amortization, are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to estimated undiscounted future
cash flows expected to be generated by the asset. If the carrying amount of an
asset exceeds its estimated future cash flows, an impairment charge is
recognized by the amount by which the carrying amount of the asset exceeds the
fair value of the asset. Assets to be disposed of would be separately presented
in the balance sheet and reported at the lower of the carrying amount or fair
value less costs to sell, and are no longer depreciated. The assets and
liabilities of a disposal group classified as held for sale would be presented
separately in the appropriate asset and liability sections of the balance
sheet.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Goodwill and
other indefinite lived intangible assets, collectively referred to as
&#147;indefinite lived assets&#148;, are tested annually for impairment, and are
tested for impairment more frequently if events and circumstances indicate that
the asset might be impaired. An impairment loss is recognized to the extent that
the carrying amount exceeds the asset&#146;s fair value. This determination is
made at the reporting unit level and consists of two steps. First, the Company
determines the fair value of a reporting unit and compares it to its carrying
amount. Second, if the carrying amount of a reporting unit exceeds its fair
value, an impairment loss is recognized for any excess of the carrying amount of
the reporting unit&#146;s indefinite lived assets over the implied fair value of
those indefinite lived assets. The implied fair value of the indefinite lived
assets is determined by allocating the fair value of the reporting unit in a
manner similar to a purchase price allocation, in accordance with SFAS No. 141,
<I>Business Combinations</I>. The residual fair value after this allocation is
the implied fair value of the reporting unit&#146;s indefinite lived
assets.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our clinical research
unit was acquired in a business combination in fiscal 2003. It had experienced
losses since acquisition, including $2,952,000 in fiscal 2006 before impairment
charge. Although improvement had been achieved in operating results since
acquisition prior to fiscal 2006, the acquisition of one of its major customers
by a company that had other clinical study providers, and the subsequent
cancellation of previously scheduled studies seriously impacted operating
results in fiscal 2006. Establishing future profitable operations of the unit
will require additional sales effort to attract new customers. Consequently, in
the third quarter of fiscal 2006, we determined that there was a permanent
impairment of value of the assets acquired (net of accumulated amortization), and recorded an impairment loss of
$1,100,000 to write down the value of property and equipment by $330,000, other
intangible assets by $387,000 and reduce the value of goodwill by $383,000 to
adjust the values to our estimate of realizable values. We also recorded a
deferred tax benefit of $436,000 related to these charges. The clinical research
unit is included in the Services segment in the financial statements and
footnotes.</FONT></P>

<!-- MARKER FORMAT-SHEET="HEAD LEFT ITALICS" FSL="Workstation" -->
<A NAME=A077></A>
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Income Tax
Accounting</I></FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Income taxes
are accounted for in accordance with SFAS No. 109, <I>Accounting for Income
Taxes</I>. SFAS No. 109 requires recognition of deferred tax liabilities and
assets for the expected future tax consequences of events that have been
included in the financial statements or tax returns. Under this method, deferred
tax assets and liabilities are determined based on the difference between the
financial statement and tax bases of assets and liabilities. These deferred
taxes are measured by applying the provisions of tax laws expected to be in
effect at the time the differences reverse.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company
recognizes deferred tax assets in its balance sheet which typically represent
items deducted currently in the financial statements that will be deducted in
future periods in tax returns. In accordance with SFAS No. 109, a valuation
allowance is recorded against these deferred tax assets to reduce the total
deferred tax assets to an amount that will, more likely than not, be realized in
future periods. The valuation allowance is based, in part, on management&#146;s
estimate of future taxable income, the expected utilization of tax loss carry
forwards and the expiration dates of tax loss carry forwards. Significant
assumptions are used in developing the analysis of future taxable income for
purposes of determining the valuation allowance for deferred tax assets which,
in the opinion of management, are reasonable under the circumstances.</FONT></P>


<BR>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
25</FONT></P>
<PAGE>


<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Default" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company
has an accumulated net deficit in its UK subsidiaries, consequently, United
States deferred tax liabilities on such earnings have not been
recorded.</FONT></P>

<!-- MARKER FORMAT-SHEET="HEAD LEFT ITALICS" FSL="Workstation" -->
<A NAME=A078></A>
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>New Accounting
Pronouncements</I></FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The following two
pronouncements were adopted by the Company for periods beginning October 1, 2005.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In November, 2004, the
Financial Accounting Standards Board issued Statement of Financial Accounting Standards
(&#147;SFAS&#148;) No. 151 dealing with inventory costs. The statement clarifies what
costs can be included in inventory, requiring that absorption factors be based on normal
capacities of manufacturing facilities and excess capacity be expensed as incurred. The
Company&#146;s historical costing methodology substantially conformed with this standard;
therefore, the Company did not experience any change from this pronouncement.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In December,
2004, SFAS No. 123 (Revised) ("SFAS 123R") was issued dealing with Share-Based
Payments. In general, this statement requires that companies compute the fair
value of options and other stock based employee incentives, and charge this
value to operations over the period earned, generally the vesting period. The
Company incurred expenses, net of tax benefit, of $319,000 in fiscal 2006 (see
Note 1 to financial statements), relating to SFAS 123R.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The following
recent pronouncements may impact the Company&#146;s accounting
policies:</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In July 2006,
the FASB released Interpretation No. 48, <I>Accounting for Uncertainty in Income
Taxes</I>. This Interpretation revises the recognition tests for tax positions
taken in tax returns such that a tax benefit is recorded only when it is more
likely than not that the tax position will be allowed upon examination by taxing
authorities. The amount of such a tax benefit to record is the largest amount
that is more likely than not to be allowed. Any reduction in deferred tax assets
or increase in tax liabilities upon adoption will correspondingly reduce
retained earnings. The Company has not yet determined the effect of adopting
this Interpretation, which is effective for it in the fiscal year beginning
October 1, 2007.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In September
2006, the FASB issued SFAS No. 157, <I>Fair Value Measurements</I>, which
addresses how companies should measure fair value when they are required to use
a fair value measure for recognition or disclosure purposes under GAAP. As a
result of SFAS No. 157, there is now a common definition of fair value to be
used throughout GAAP. The Company is reviewing the impact that adopting SFAS No.
157 will have on its financial statements. SFAS No. 157 is effective for the
Company in the fiscal year beginning October 1, 2008.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Default" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On September
13, 2006, the SEC staff issued Staff Accounting Bulletin (SAB) Topic 1N,
<I>Financial Statements; Considering the Effects of Prior Year Misstatements
when Quantifying Misstatements in Current Year Financial Statements</I> (SAB
108). SAB 108 addresses how a registrant should evaluate whether an error in its
financial statements is material. The SEC staff concludes in SAB 108 that
materiality should be evaluated using both the &#147;rollover&#148; and
&#147;iron curtain&#148; methods. We will be required to comply with the
guidance in SAB 108 in our financial statements for our fiscal year ending
September 30, 2007.</FONT></P>

<!-- MARKER FORMAT-SHEET="Head Sub 1 Left" FSL="Workstation" -->
<A NAME=A079></A>
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>Item
7A.&nbsp;&nbsp;&nbsp;&nbsp;Quantitative and Qualitative Disclosures about Market
Risk.</b> </FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
Company&#146;s primary market risk exposure with regard to financial instruments
is the changes in interest rates. The Revolving Credit Agreement between the
Company and National City Bank bears interest at a rate of either the
bank&#146;s prime rate plus 50 basis points, or at LIBOR plus 325 basis points,
depending in each case upon the ratio of the Company&#146;s interest-bearing
indebtedness (less subordinated debt) to EBITDA, at the Company&#146;s option.
Historically, the Company has not used derivative financial instruments to
manage exposure to interest rate changes. The Company estimates that a
hypothetical 10% adverse change in interest rates would not materially affect
the consolidated operating results of the Company. While the interest on the
Company&#146;s revolving line of credit is at variable rates, the Company&#146;s
real estate mortgages are fixed at 5.69% interest until June 2007.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company
operates internationally and is, therefore, subject to potentially adverse
movements in foreign currency rates change. The effect of movements in the
exchange rates was not material to the consolidated operating results of the
Company in fiscal years 2006, 2005 and 2004. The Company estimates that a
hypothetical 10% adverse change in foreign currency exchange rates would not
materially affect the consolidated operating results of the Company.</FONT></P>

<!-- MARKER FORMAT-SHEET="HEAD LEFT BOLD" FSL="Default" -->
<A NAME=A080></A>
<H1 ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Item 8.&nbsp;&nbsp;&nbsp;&nbsp;Financial Statements.</FONT></H1>

<BR>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
26</FONT></P>
<PAGE>







<!-- MARKER FORMAT-SHEET="Head Major Center Bold 1" FSL="Workstation" -->
<A NAME=A081></A>
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM </FONT></H1>

<!-- MARKER FORMAT-SHEET="HEAD LEFT ITALICS" FSL="Workstation" -->
<A NAME=A082></A>
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
To the Board of Directors<BR>
Bioanalytical Systems, Inc.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We have
audited the accompanying consolidated balance sheet of Bioanalytical Systems,
Inc. and Subsidiaries as of September 30, 2006 and the related consolidated
statements of operations, shareholders' equity and comprehensive income (loss)
and cash flows for the year then ended. These consolidated financial statements are the
responsibility of the Company&#146;s management. Our responsibility is to
express an opinion on these consolidated financial statements based on our audit.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We conducted
our audit in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In our
opinion, the 2006 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Bioanalytical
Systems, Inc. and Subsidiaries as of September 30, 2006, and the results of
their operations and their cash flows for the year then ended in conformity with
U.S. generally accepted accounting principles.</FONT></P>

<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
/s/ Crowe Chizek and Company LLC<BR>
Indianapolis, Indiana<BR>
December 29, 2006
</FONT></P>

<BR>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
27</FONT></P>
<PAGE>









<!-- MARKER FORMAT-SHEET="HEADING CENTER BOLD" FSL="Workstation" -->
<A NAME=A085></A>
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM </FONT></H1>

<!-- MARKER FORMAT-SHEET="HEAD LEFT ITALICS" FSL="Workstation" -->
<A NAME=A086></A>
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Board of Directors and Shareholders<BR>
Bioanalytical Systems, Inc.:</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We have audited the
accompanying consolidated balance sheet of Bioanalytical Systems, Inc. and
subsidiaries as of September 30, 2005, and the related consolidated statements
of operations, shareholders&#146; equity and comprehensive income (loss), and
cash flows for each of the years in the two-year period ended September 30,
2005. These financial statements are the responsibility of the
Company&#146;s management. Our responsibility is to express an opinion on these
financial statements based on our audits.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We conducted
our audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Default" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In our
opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Bioanalytical Systems, Inc.
and subsidiaries as of September 30, 2005, and the consolidated results of their operations
and their cash flows for each of the years in the two-year period ended
September 30, 2005, in conformity with U.S. generally accepted accounting
principles.</FONT></P>

<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<BR>
/s/ KPMG LLP<BR>
<BR>
January 7, 2006
</FONT></P>



<BR>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
28</FONT></P>
<PAGE>





<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B>BIOANALYTICAL SYSTEMS, INC.</B><BR>
Consolidated Balance Sheets<BR>
At September 30,</FONT></P>
<BR>

<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=100%>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2006<HR WIDTH=95% color=black NOSHADE></FONT></TH>
<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2005<HR WIDTH=95% color=black NOSHADE></FONT></TH></TR>

<TR VALIGN=Bottom>
     <TD WIDTH=71% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Assets</B></FONT></TD>
     <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
        <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
        <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>

<TR>
<TD>&nbsp;</TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Current assets:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash and cash equivalents</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   1,647,066</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   1,254,269</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts receivable:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Trade, net of allowance for bad debts of $520,000 in 2006 and $40,000 in 2005</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6,492,375</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10,351,881</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unbilled revenues and other</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,545,297</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,677,130</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventories</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,887,093</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,041,335</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred income taxes</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>603,797</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>380,765</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Refundable income taxes</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>888,087</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prepaid expenses</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>599,043</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>429,690</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>

<TR>
<TD>&nbsp;</TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current assets</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>13,662,758</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>17,135,070</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>

<TR>
<TD>&nbsp;</TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;Property and equipment:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Land and improvements</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>449,479</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>431,110</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Buildings and improvements</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>21,584,083</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>22,333,119</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Machinery and equipment</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>20,662,670</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>19,104,934</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Office furniture and fixtures</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,425,136</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,457,130</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Construction in process</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>252,489</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>57,812</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>44,373,857</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>43,384,105</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>

<TR>
<TD>&nbsp;</TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Less accumulated depreciation and amortization</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(18,608,280</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(16,818,721</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>25,765,577</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>26,565,384</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>

<TR>
<TD>&nbsp;</TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Goodwill</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,854,652</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,444,652</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=3></TD></TR>

<TR>
<TD>&nbsp;</TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Intangible assets, net of accumulated amortization of $749,256</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;in 2006 and $786,587 in 2005</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>517,460</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,155,786</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Debt issue costs, net</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>245,880</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>279,858</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Other assets</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>267,552</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>257,679</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>

<TR>
<TD>&nbsp;</TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total assets</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  42,313,879</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  47,838,429</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD></TR>
</TABLE>

<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
See accompanying notes to consolidated financial statements.</FONT></P>


<BR>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
29</FONT></P>
<PAGE>





<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B>BIOANALYTICAL SYSTEMS, INC.</B><BR>
Consolidated Balance Sheets<BR>
At September 30,</FONT></P>
<BR>


<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=100%>

<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2006<HR WIDTH=95% color=black NOSHADE></FONT></TH>
<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2005<HR WIDTH=95% color=black NOSHADE></FONT></TH></TR>

<TR VALIGN=Bottom>
     <TD WIDTH=67% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Liabilities and Shareholders' Equity</B></FONT></TD>
     <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD WIDTH=11% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
        <TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD WIDTH=11% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
        <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>

<TR>
<TD>&nbsp;</TD></TR>


<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Current liabilities:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=3></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts payable</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   1,609,821</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   1,681,078</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accrued expenses</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,080,900</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,789,613</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Customer advances</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,226,285</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5,974,136</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income taxes payable</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>31,275</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Revolving line of credit</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>920,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Current portion of capital lease obligations</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>472,146</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>278,398</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Current portion of long-term debt</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>720,653</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>700,352</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=3></TD></TR>

<TR>
<TD>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current liabilities</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10,109,805</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>12,374,852</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=3></TD></TR>

<TR>
<TD>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Capital lease obligations, less current portion</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,648,243</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>807,356</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Long-term debt, less current portion</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8,186,311</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8,579,123</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Subordinated notes payable, including $498,648 in 2006 and</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$735,989 in 2005 to related parties, less current portion</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,477,348</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,828,511</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Deferred income taxes</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>538,633</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,650,857</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=3></TD></TR>

<TR>
<TD>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Shareholders' equity:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Preferred shares:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Authorized 1,000,000 shares; none issued and outstanding</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Common shares, no par value:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Authorized 19,000,000 shares; issued and</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;outstanding 4,892,127 shares in 2006 and</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4,871,127 shares in 2005</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,182,003</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,177,352</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Additional paid-in-capital</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>11,676,661</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>11,267,919</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Retained earnings</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,584,123</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7,194,065</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accumulated other comprehensive loss</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(89,248</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(41,606</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>

<TR>
<TD>&nbsp;</TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total shareholders' equity</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>17,353,539</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>19,597,730</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>

<TR>
<TD>&nbsp;</TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities and shareholders' equity</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  42,313,879</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  47,838,429</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD></TR>
</TABLE>



<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
See accompanying notes to consolidated financial statements.</FONT></P>

<BR>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
30</FONT></P>
<PAGE>





<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B>BIOANALYTICAL SYSTEMS, INC.</B><BR>
Consolidated Statements of Operations<BR>
Years ended September 30,
</FONT></P>
<BR>


<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=100%>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2006</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2005</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2004</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>

<TR>
<TD>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=51% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Service revenue</FONT></TD>
     <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=11% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  34,318,150</FONT></TD>
        <TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=11% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  32,951,218</FONT></TD>
        <TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=11% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  24,928,305</FONT></TD>
        <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Product revenue</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8,729,525</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9,443,828</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>12,224,155</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total revenue</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>43,047,675</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>42,395,046</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>37,152,460</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>

<TR>
<TD>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Cost of service revenue</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>25,690,825</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>23,588,654</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>21,347,731</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Cost of product revenue</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,546,893</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,462,361</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,270,720</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total cost of revenue</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>29,237,718</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>27,051,015</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>25,618,451</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>

<TR>
<TD>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Gross profit</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>13,809,957</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>15,344,031</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>11,534,009</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>

<TR>
<TD>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Operating expenses:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Selling</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,749,703</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,591,521</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,703,450</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Research and development</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,444,441</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,326,032</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,099,533</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;General and administrative</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>11,976,283</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10,187,904</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7,476,646</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(Gain) loss on sale of property and equipment</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(37,867</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(21,428</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>28,757</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Impairment loss</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,100,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total operating expenses</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>17,232,560</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>14,084,029</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>11,308,386</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>

<TR>
<TD>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Operating income (loss)</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(3,422,603</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,260,002</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>225,623</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>

<TR>
<TD>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Interest income</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10,808</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>18,548</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7,621</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Interest expense</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1,033,308</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(987,914</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(942,463</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Other income</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9,680</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>756</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>102,557</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>

<TR>
<TD>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Income (loss) before income taxes</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(4,435,423</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>291,392</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(606,662</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Income tax provision (benefit)</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1,825,481</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>392,390</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(403,308</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net loss</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  (2,609,942</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>    (100,998</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>    (203,354</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD></TR>

<TR>
<TD>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net loss per share:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Basic</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>       (0.53</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>       (0.02</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(0.04</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Diluted</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>       (0.53</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>       (0.02</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(0.04</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>

<TR>
<TD>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Weighted average common shares outstanding:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Basic</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,882,505</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,870,370</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,860,095</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Diluted</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,882,505</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,870,370</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,860,095</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
</TABLE>




<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
See accompanying notes to consolidated financial statements.</FONT></P>



<BR>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
31</FONT></P>
<PAGE>



<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>BIOANALYTICAL SYSTEMS, INC.</B><BR>
Consolidated Statements of Shareholders' Equity and Comprehensive Income (Loss)<BR>
Years ended September 30, 2006, 2005, and 2004</FONT></P>
<BR>


<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=100%>

<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=5><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Common Shares</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Additional<BR>paid in</FONT></TH>
<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Retained</FONT></TH>
<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Accumulated<BR>other<BR>comprehensive</FONT></TH>
<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Total<BR>Shareholders'</FONT></TH></TR>

<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Number</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Amount</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>capital</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>earnings</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>loss</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>equity</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>

<TR>
<TD>&nbsp;</TD></TR>

<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH></TR>

<TR>
<TD>&nbsp;</TD></TR>

<TR VALIGN=Bottom>
     <TD WIDTH=30% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Balance at September 30, 2003</FONT></TD>
     <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,831,460</FONT></TD>
        <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$&nbsp;</FONT></TD><TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,168,163</FONT></TD>
        <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$&nbsp;</FONT></TD><TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>11,121,795</FONT></TD>
        <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$&nbsp;</FONT></TD><TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7,498,417</FONT></TD>
        <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$&nbsp;</FONT></TD><TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(61,911</FONT></TD>
        <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$&nbsp;</FONT></TD><TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>19,726,464</FONT></TD>
        <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Comprehensive (loss):</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net loss</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(203,354</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(203,354</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other comprehensive loss:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Foreign currency translation</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;adjustments</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(252,927</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(252,927</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total comprehensive loss</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(456,281</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Conversion of note</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>38,042</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8,427</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>141,573</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>150,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>

<TR>
<TD>&nbsp;</TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Balance at September 30, 2004</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,869,502</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   1,176,590</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  11,263,368</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   7,295,063</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>    (314,838</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  19,420,183</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>

<TR>
<TD>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Comprehensive income:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net loss</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(100,998</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(100,998)</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other comprehensive income:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Foreign currency translation</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;adjustments</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>273,232</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>273,232</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total comprehensive income</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>172,234</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Exercise of stock options</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,625</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>762</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,551</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5,313</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>

<TR>
<TD>&nbsp;</TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Balance at September 30, 2005</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,871,127</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   1,177,352</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  11,267,919</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   7,194,065</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>     (41,606</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  19,597,730</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Comprehensive (loss):</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net loss</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(2,609,942</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(2,609,942</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other comprehensive loss:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Foreign  currency translation</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;adjustments</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(47,642</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(47,642</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total comprehensive loss</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(2,657,584</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Stock compensation</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>318,923</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>318,923</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Exercise of stock options</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>21,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,651</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>89,819</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>94,470</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>

<TR>
<TD>&nbsp;</TD></TR>


<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Balance at September 30, 2006</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,892,127</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   1,182,003</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  11,676,661</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   4,584,123</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>     (89,248</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  17,353,539</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD></TR>
</TABLE>
<BR>


<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
See accompanying notes to consolidated financial statements.</FONT></P>
<BR>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
32</FONT></P>
<PAGE>







<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B>BIOANALYTICAL SYSTEMS, INC.</B><BR>
Consolidated Statements of Cash Flows<BR>
Years ended September 30,</FONT></P>


<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=100%>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2006</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2005</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2004</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>

<TR VALIGN=Bottom>
     <TD WIDTH=60% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Operating activities:</FONT></TD>
     <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD WIDTH=9% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
        <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD WIDTH=9% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
        <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD WIDTH=9% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
        <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>

<TR>
<TD>&nbsp;</TD></TR>


<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Net loss</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  (2,609,942</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>    (100,998</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>    (203,354</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Adjustments to reconcile net loss to net cash provided by operating activities:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Depreciation and amortization</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,888,899</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,441,420</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,441,127</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Asset impairment loss</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,100,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Employee stock compensation expense</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>318,923</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Bad debt expense</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>473,357</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(Gain) loss on sale of property and equipment</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(37,867</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(21,428</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>28,757</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Deferred income taxes</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1,335,256</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(623,230</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>12,927</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Changes in operating assets and liabilities:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts receivable</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,517,982</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(6,590,646</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1,492,620</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventories</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>154,242</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(471,808</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>485,612</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Refundable and payable income taxes</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(919,362</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>633,914</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(518,763</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prepaid expenses and other assets</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(179,226</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(84,268</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(113,471</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts payable</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(71,257</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1,080,882</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(310,906</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accrued expenses</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>291,287</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,199,366</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>344,894</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Customer advances</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1,747,851</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,157,310</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,159,308</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>

<TR>
<TD>&nbsp;</TD></TR>


<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash provided (used) by operating activities</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,843,929</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(541,250</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,833,511</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>

<TR>
<TD>&nbsp;</TD></TR>


<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Investing activities:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Capital expenditures</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1,686,860</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(2,301,153</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(3,568,045</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Proceeds from sale of property and equipment</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>270,919</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5,887,428</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>79,010</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Payments for purchase of LC Resources, Inc.,</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;net of cash acquired</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(8,118</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>

<TR>
<TD>&nbsp;</TD></TR>


<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash provided (used) by investing activities</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1,415,941</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,586,275</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(3,497,153</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>

<TR>
<TD>&nbsp;</TD></TR>


<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Financing activities:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Payments of long-term debt</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(723,674</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(755,808</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(504,749</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Borrowings on line of credit</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>12,624,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7,888,423</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>13,465,370</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Payments on line of credit</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(13,544,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(9,794,084</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(13,027,555</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Borrowings on construction line of credit</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>574,247</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Payments on capital lease obligations</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(438,345</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(180,721</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(196,166</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Net proceeds from the exercise of stock options</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>94,470</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5,313</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>

<TR>
<TD>&nbsp;</TD></TR>


<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash provided (used) by financing activities</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1,987,549</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(2,836,877</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>311,147</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>

<TR>
<TD>&nbsp;</TD></TR>


<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Effect of exchange rate changes</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(47,642</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>273,232</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(252,927</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>

<TR>
<TD>&nbsp;</TD></TR>


<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net increase (decrease) in cash and cash equivalents</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>392,797</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>481,380</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(605,422</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>

<TR>
<TD>&nbsp;</TD></TR>


<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Cash and cash equivalents at beginning of year</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,254,269</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>772,889</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,378,311</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>

<TR>
<TD>&nbsp;</TD></TR>


<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Cash and cash equivalents at end of year</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   1,647,066</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   1,254,269</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>     772,889</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD></TR>
</TABLE>


<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
See accompanying notes to consolidated financial statements.</FONT></P>

<BR>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
33</FONT></P>
<PAGE>










<H1 ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1)&nbsp;&nbsp;&nbsp;&nbsp;Significant
Accounting Policies</FONT></H1>

<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>(a)&nbsp;&nbsp;&nbsp;&nbsp;Nature of
Business</I></B></FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Bioanalytical Systems,
Inc. and its subsidiaries (the &#147;Company&#148; or &#147;BASi&#148;) engage in research
services and other services related to pharmaceutical development. We also manufacture
scientific instruments for medical research, which we sell with related software for use
in industrial, governmental and academic laboratories. We conduct our businesses through
our research facilities in Indiana, Oregon, Maryland and the United Kingdom and our
manufacturing facility in Indiana. Our customers are located throughout the world.</FONT></P>

<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>(b)&nbsp;&nbsp;&nbsp;&nbsp;Principles
of Consolidation</I></B></FONT></P>

<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The consolidated
financial statements include the accounts of the Company and its wholly owned
subsidiaries. All significant inter-company accounts and transactions have been
eliminated.</FONT></P>

<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>(c)&nbsp;&nbsp;&nbsp;&nbsp;Revenue
Recognition</I></B></FONT></P>

<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The majority of our
service contracts involve the development of analytical methods and the processing of
bioanalytical samples for pharmaceutical companies. These contracts generally provide for
a fixed fee for each sample processed, and revenue is recognized under the specific
performance method of accounting. Under the specific performance method, revenue and
related direct costs are recognized when services are performed. Our other service
contracts generally consist of preclinical and clinical trial studies for pharmaceutical
companies. We recognize service revenue on these contracts based on the ratio of direct
costs incurred to total estimated direct costs under the proportional performance method
of accounting. When we revise profit estimates, we adjust on a cumulative basis in the
period in which the revisions become known. The establishment of contract prices and total
contract costs involves estimates made by us at the inception of the contract period.
These estimates could change during the term of the contract, which impacts the revenue
and costs we report in the consolidated financial statements. We provide for projected
losses on contracts in their entirety when the loss becomes determinable.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We generally bill a
portion of service contract fees upon acceptance by our customers. These billings are
classified as customer advances until earned. Unbilled revenues represent revenues earned
under contracts in advance of billings.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our product revenue is
derived primarily from sales of instruments utilized for scientific research. Revenue from
products not requiring installation, testing, or training is recognized upon shipment to
customers. One of our products includes internally developed software and sometimes
requires installation, testing, and training, which occur concurrently. Revenue from this product is
recognized upon completion of the installation, testing, and training.</FONT></P>


<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>(d)&nbsp;&nbsp;&nbsp;&nbsp;Cash
Equivalents</I></B></FONT></P>

<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We consider all highly
liquid investments with an original maturity of three months or less when purchased to be
cash equivalents.</FONT></P>

<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>(e)&nbsp;&nbsp;&nbsp;&nbsp;Financial
Instruments</I></B></FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our credit risk
consists principally of trade accounts receivable. We perform periodic credit evaluations
of our customers&#146; financial conditions and generally do not require collateral on
trade accounts receivable. The Company accounts for trade receivables based on the
amounts billed to customers. Past due receivables are determined based on contractual
terms. The Company does not accrue interest on any of its trade receivables. The allowance
for doubtful accounts is determined by management based on the Company&#146;s historical
losses, specific customer circumstances, and general economic conditions. Periodically,
management reviews accounts receivable and adjusts the allowance based on current
circumstances and charges off uncollectible receivables when all attempts to collect have
failed.  Our allowance for doubtful accounts was $520,000 and $40,000 at
September 30, 2006 and 2005, respectively.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our 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. We have
both variable rate borrowings, which adjust to the current market, and borrowings with
fixed rates for up to three years. The carrying value of our fixed rate debt also
approximates its fair value.  </FONT></P>

<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>(f)&nbsp;&nbsp;&nbsp;&nbsp;Inventories</I></B></FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Default" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We state our
inventories at the lower of cost or market, using the last-in, first-out (LIFO) method.</FONT></P>

<BR>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
34</FONT></P>
<PAGE>






<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>(g)&nbsp;&nbsp;&nbsp;&nbsp;Property and
Equipment</I></B></FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We record property and
equipment at cost, including interest capitalized during the period of construction of
major facilities. We compute depreciation, including amortization on capital leases, using
the straight-line method over the estimated useful lives of the assets, which we estimate
to be: buildings and improvements, 34 to 40 years; machinery and equipment, 5 to 10 years,
and office furniture and fixtures, 10 years. Our depreciation expense was $3,228,000 in
fiscal 2006, $3,047,000 in fiscal 2005 and $3,053,000 in fiscal 2004. Expenditures for
maintenance and repairs are expensed as incurred.</FONT></P>

<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>(h)&nbsp;&nbsp;&nbsp;&nbsp;Impairment
of Long-Lived Assets</I></B></FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Long-lived assets, such
as property and equipment, and purchased intangibles subject to amortization, are reviewed
for impairment whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. Recoverability of assets to be held and used is
measured by a comparison of the carrying amount of an asset to estimated undiscounted
future cash flows expected to be generated by the asset. If the carrying amount of an
asset exceeds its estimated future cash flows, an impairment charge is recognized by the
amount by which the carrying amount of the asset exceeds the fair value of the asset.
Assets to be disposed of would be separately presented in the balance sheet and reported
at the lower of the carrying amount or fair value less costs to sell, and are no longer
depreciated. The assets and liabilities of a disposed group classified as held for sale
would be presented separately in the appropriate asset and liability sections of the
balance sheet.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Goodwill and other
indefinite lived intangible assets, collectively referred to as &#147;indefinite lived
useful assets&#148;, are tested annually for impairment, and are tested for impairment
more frequently if events and circumstances indicate that the asset might be impaired. An
impairment loss is recognized to the extent that the carrying amount exceeds the
asset&#146;s fair value. This determination is made at the reporting unit level and
consists of two steps. First, the Company determines the fair value of a reporting unit
and compares it to its carrying amount. Second, if the carrying amount of a reporting unit
exceeds its fair value, an impairment loss is recognized for any excess of the carrying
amount of the reporting unit&#146;s indefinite lived useful assets over the implied fair
value of those indefinite lived useful assets. The implied fair value of the indefinite
lived useful assets is determined by allocating the fair value of the reporting unit in a
manner similar to a purchase price allocation, in accordance with Statement of Financial
Accounting Standards (&#147;SFAS&#148;) No. 141, <I>Business Combinations</I>.
The residual fair value after this allocation is the implied fair value of the reporting
unit&#146;s indefinite lived useful assets. In fiscal 2006 we determined that an
impairment existed, see <I>(i) </I>for additional information.</FONT></P>

<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>(i)&nbsp;&nbsp;&nbsp;&nbsp;Goodwill and
Intangible Assets</I></B></FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We carry goodwill at
cost. Other intangible assets with definite lives are stated at cost and are amortized on
a straight-line basis over their estimated useful lives. All intangible assets acquired
that are obtained through contractual or legal right, or are capable of being separately
sold, transferred, licensed, rented, or exchanged, are recognized as an asset apart from
goodwill. Goodwill and intangibles with indefinite lives are not amortized, but are
subject to an annual assessment for impairment by applying a fair value based test.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In fiscal 2003, we
completed acquisitions of a bioanalytical laboratory performing chemical analyses and a
clinical research unit performing clinical testing in humans to establish drug safety or
bioequivalence. In valuing the intangible assets acquired in these two acquisitions, we
determined that the replacement cost, in a start-up situation, of establishing these two
operations as FDA compliant research sites was $1,267,000 and recorded intangible assets
of that amount. We determined that these assets had an indefinite life, and accordingly
did not amortize the assets. During the fiscal year ended September 30, 2006, we
re-examined the make-up of these assets, and determined that of the total recorded,
$793,000 related to the hiring and training of the in-place workforce. SFAS No. 141
requires that such assets be included in goodwill, accordingly, we reclassified that
amount to goodwill. The remaining $474,000 of the intangible assets relates to the
replacement costs of creating and documenting the operating systems and procedure, their
validation and audit. The evolving nature of procedures in a regulated environment
requires that we constantly monitor and update those procedures. Accordingly, we have
revised our estimate of the useful life of that asset to a ten year life, and recorded the
amortization in Cost of Services.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We complete a
fair value-based impairment test on our goodwill and intangible assets not
subject to amortization at the close of each fiscal year, in addition to other
times if events indicate there is a likely decline in value. Our clinical
research unit acquired in fiscal 2003 had experienced losses since acquisition,
including $2,952,000 in fiscal 2006 before impairment charge. Although
improvement had been achieved in operating results since acquisition and prior
to fiscal 2006, the acquisition of one of our major customers by a company that
had other clinical study providers, and the subsequent cancellation of
previously scheduled studies seriously impacted operating results for this unit
in fiscal 2006. Establishing future profitable operations of the unit will
require additional sales effort to attract new customers. Consequently, in the
third quarter of fiscal 2006, we determined there was a permanent impairment of
the value of the assets acquired and recorded a charge of $1,100,000 to write
down the value of property and equipment by $330,000, other intangible assets by
$387,000 (net of accumulated amortization) and reduce the value of goodwill by
$383,000. The impairment charge was necessary to adjust the carrying values of
the respective assets to our estimate of fair value. We also recorded a deferred
tax benefit of $436,000 related to these charges. The clinical research unit is
included in the Services segment in these financial statements and
footnotes.</FONT></P>


<BR>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
35</FONT></P>
<PAGE>


<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Default" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The carrying amount of
goodwill at September 30, 2006 and 2005 was $ 1,854,652 and $1,444,652, respectively.</FONT></P>

<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The components of intangible assets subject to amortization are as follows:</FONT></P>


<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=100%>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=8><FONT FACE="Times New Roman, Times, Serif" SIZE=2>September 30, 2006</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH>
</TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Weighted<BR>
average<BR>
life (years)</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Gross carrying<BR>
amount</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>

<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>

     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Accumulated<BR>
amortization</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=41% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>FDA Compliant Facility</FONT></TD>
     <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=14% ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10</FONT></TD><TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
        <TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=15% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   401,760</FONT></TD>
        <TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=15% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   130,423</FONT></TD>
        <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Methodologies</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;5</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>180,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>135,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Volunteer database</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;5</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>325,956</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>214,588</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Customer relationships</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;5</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>359,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>269,245</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,266,716</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>749,256</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>





<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD></TR>
</TABLE>
<BR>
<BR>




<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=100%>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=8><FONT FACE="Times New Roman, Times, Serif" SIZE=2>September 30, 2005</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH>
</TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Weighted<BR>
average<BR>
life (years)</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Gross carrying<BR>
amount</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>

<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>

     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Accumulated<BR>
amortization</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>

<TR VALIGN=Bottom>
<TD WIDTH=41% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Methodologies</FONT></TD>
<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=13% ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5</FONT></TD>
<TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
<TD WIDTH=13% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 754,561</FONT></TD>
<TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
<TD WIDTH=13% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 340,755</FONT></TD>
<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Volunteer database</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>561,993</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>248,382</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Customer relationships</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>359,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>197,450</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,675,554</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>786,587</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD></TR>
</TABLE>






<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
At September 30, 2005, we also had indefinite lived intangible assets of
$1,266,711 related to FDA compliant facilites, of which $792,711 was
reclassified to goodwill in fiscal 2006. The remaining assets were assigned a ten
year life.
</FONT></P>

<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The following is a reconciliation of goodwill and other intangible assets from September 30,
2005 to September 30, 2006:</FONT></P>

<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=100%>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>September 30, 2005</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH>
<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Reclassification</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH>
<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Impairment Loss</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH>
<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Amortization</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH>
<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>September 30, 2006</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=25% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Asset:</FONT></TD>
     <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
        <TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
        <TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
        <TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
        <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
        <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>

<TR>
<TD>&nbsp;</TD></TR>


<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Goodwill</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  1,444,652</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>    792,711</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   (382,711</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>       &#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  1,854,652</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;FDA compliant facility</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  1,266,711</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   (792,711</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>    (72,240</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        &#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>    401,760</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Methodologies</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>754,561</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> &#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(574,561</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> &#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>180,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Volunteer database</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>561,993</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> &#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(236,037</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> &#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>325,956</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Customer relationships</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>359,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> &#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> &#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> &#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>359,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  2,942,265</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   (792,711</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (882,838</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        &#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  1,266,716</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD></TR>

<TR>
<TD>&nbsp;</TD></TR>


<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Accumulated amortization</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;FDA compliant facility</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        &#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        &#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>    (27,184</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>    157,607</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>    130,423</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Methodologies</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>340,755</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> &#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(327,561</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>121,806</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>135,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Volunteer database</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>248,382</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> &#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(141,378</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>107,584</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>214,588</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Customer relationships</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>197,450</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> &#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> &#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>71,795</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>269,245</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>    786,587</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        &#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   (496,123</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>    458,792</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>    749,256</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD></TR>
</TABLE>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
36</FONT></P>
<PAGE>






<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Amortization expense for intangible assets for fiscal years ended
September&nbsp;30, 2006, 2005 and 2004 was $458,792, $335,116 and $335,116
respectively. The following table provides information regarding estimated
amortization expense for the remaining intangible lives:</FONT></P>

<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=30%>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=46% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2007</FONT></TD>
     <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=13% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=37% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 212,987</FONT></TD>
        <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2008</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>113,135</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2009</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>40,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2010</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>40,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2011</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>40,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Thereafter</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>71,338</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 517,460</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD></TR>
</TABLE>

<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>(j)&nbsp;&nbsp;&nbsp;&nbsp;Advertising
Expense</I></B></FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We expense advertising
costs as incurred. Advertising expense was $284,000, $111,800, and $270,780 for the years
ended September 30, 2006, 2005, and 2004, respectively.</FONT></P>



<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>(k)&nbsp;&nbsp;&nbsp;&nbsp;Stock-Based
Compensation</I></B></FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company has an
Employee Stock Option Plan whereby options to purchase the Company&#146;s common shares at
fair market value at date of grant can be granted to our employees. Options granted vest
and become exercisable in four equal installments beginning two years after the date of
grant, and expire upon the earlier of the employee&#146;s termination of employment with
the Company, or ten years from the date of grant. This plan terminates in fiscal 2008.</FONT></P>



<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company established
an Outside Director Stock Option Plan whereby options to purchase the Company&#146;s
common shares at fair market value at date of grant can be granted to outside directors.
Options granted vest and become exercisable in four equal installments beginning two years
after the date of grant and expire upon the earlier of the director&#146;s termination of
board service with the Company, or ten years from the date of grant. This plan terminates
in fiscal 2008.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On October 1, 2005, we
adopted SFAS No. 123 (revised 2004), <I>Share-Based Payment (SFAS 123R)</I>, which requires
the measurement and recognition of compensation expense for all share-based payment awards
made to employees and directors under our stock option plans, based on fair values.
Previously, we had not recognized expense for employee stock options.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We adopted SFAS 123R
using the modified prospective transition method, which requires the application of the
accounting standard as of October 1, 2005, the first day of our fiscal year. In accordance
with the modified prospective transition method, our Consolidated Financial Statements for
prior years do not include the impact of SFAS 123R. Stock-based compensation expense for
employee stock options recognized under SFAS 123R for the year ended September 30, 2006 was
$356,000 with a related tax benefit of $37,000.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>SFAS 123R requires
companies to estimate the fair value of share-based payment awards on the date of grant
using an option-pricing model. The value of the portion of the award that is ultimately
expected to vest is recognized as expense over the requisite service periods in our
Statement of Operations. Prior to the adoption of SFAS 123R, the Company accounted for
stock-based awards to employees and directors using the intrinsic value method in
accordance with APB 25 as allowed under SFAS No. 123. Under the intrinsic value method, no stock-based compensation expense
was recognized in the Company&#146;s Consolidated Statement of Operations for fiscal 2005 and 2004.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Stock-based
compensation expense recognized during the period is based on the value of the portion of
share-based payment awards that is expected to vest during the period, reduced for
estimated forfeitures. Stock-based compensation expense recognized in our Consolidated
Statement of Operations for the year ended September 30, 2006 included compensation
expense for share-based payment awards granted prior to, but not yet vested as of October
1, 2005, based on the grant date fair value estimated in accordance with the provisions of
SFAS 123R. There were no awards granted during fiscal 2006. Compensation expense for all
share-based payment awards are recognized using the straight-line single option approach.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>With the adoption of
SFAS 123R, we continued to use a binomial option-pricing model as our method of valuation
for share-based awards.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Stock based
compensation expense recognized in fiscal 2006 is the result of grants in prior fiscal
years.</FONT></P>




<BR>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
37</FONT></P>
<PAGE>



<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Default" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The following table
presents the effect on earnings and earnings per share had we applied the same treatment
to stock-based employee compensation in the fiscal years ended September 30:</FONT></P>

<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=70%>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2005</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>

     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2004</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>

<TR>
<TD>&nbsp;</TD></TR>


<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=65% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net loss as reported</FONT></TD>
     <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=11% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (100,998</FONT></TD>
        <TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=11% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (203,354</FONT></TD>
        <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Deduct:&nbsp;&nbsp;Total stock-based employee</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;compensation expense determined under the</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;fair value based method for all awards,</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;net of related tax effects</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(177,125</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(43,911</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Pro forma net loss</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (278,123</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (247,265</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD></TR>

<TR>
<TD>&nbsp;</TD></TR>


<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Loss per share:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Basic and diluted&nbsp;-&nbsp;as reported</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>    (0.02</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>    (0.04</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Basic and diluted- pro forma</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>    (0.06</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>    (0.05</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
</TABLE>


<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Default" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The assumptions used in
computing our stock based compensation expense for the fiscal years ended September 30
were as follows:</FONT></P>

<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=50%>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2005</FONT><HR WIDTH=85% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2004</FONT><HR WIDTH=85% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>

<TR>
<TD>&nbsp;</TD></TR>


<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=51% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Risk-free interest rate</FONT></TD>
     <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3</FONT></TD>
        <TD WIDTH=9% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.00%</FONT></TD>
     <TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3</FONT></TD>
        <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.50%</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Dividend yield</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.00%</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.00%</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Volatility factor of the expected market</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;price of the Company's common stock</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.668</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.724</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Expected life of the options (years)</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.0</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.0</FONT></TD></TR>
</TABLE>

<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B><I>(l)&nbsp;&nbsp;&nbsp;&nbsp;Income Taxes</I></B></FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Income taxes are
accounted for under the asset and liability method. Deferred tax assets and liabilities
are recognized for the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets
and liabilities are measured using enacted tax rates expected to apply to taxable income
in the years in which those temporary differences are expected to be recovered or settled.
The effect on deferred tax assets and liabilities of a change in tax rates is recognized
in income in the period that includes the enactment date. We record valuation allowances
based on a determination of the expected realization of tax assets.</FONT></P>

<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>(m)&nbsp;&nbsp;&nbsp;&nbsp;New
Accounting Pronouncements</I></B></FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In July 2006, the FASB
released Interpretation No. 48, <I>Accounting for Uncertainty in Income Taxes</I>.  This Interpretation revises the recognition tests for tax positions taken in tax returns
such that a tax benefit is recorded only when it is more likely than not that the tax
position will be allowed upon examination by taxing authorities. The amount of such a tax
benefit to record is the largest amount that is more likely than not to be allowed. Any
reduction in deferred tax assets or increase in tax liabilities upon adoption will
correspondingly reduce retained earnings. The Company has not yet determined the effect of
adopting this Interpretation, which is effective for it in the fiscal year beginning
October 1, 2007.</FONT></P>



<BR>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
38</FONT></P>
<PAGE>


<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In September 2006, the
FASB issued SFAS No. 157, <I>Fair Value Measurements</I>, which addresses how
companies should measure fair value when they are required to use a fair value measure for
recognition or disclosure purposes under Generally Accepted Accounting Principles
(&#147;GAAP&#148;). As a result of SFAS No. 157, there is now a common definition of fair
value to be used throughout GAAP. The Company is reviewing the impact that adopting SFAS
No. 157 will have on its financial statements. SFAS No. 157 is effective for the Company
in the fiscal year beginning October 1, 2008.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On September 13, 2006,
the Securities and Exchange Commission (&#147;SEC&#148;) staff issued Staff Accounting
Bulletin (SAB) Topic 1N, <I>Financial Statements &#151; Considering the Effects of
Prior Year Misstatements when Quantifying Misstatements in Current Year Financial
Statements</I> (SAB 108). SAB 108 addresses how a registrant should evaluate whether an
error in its financial statements is material. The SEC staff concludes in SAB 108 that
materiality should be evaluated using both the &#147;rollover&#148; and &#147;iron
curtain&#148; methods. We will be required to comply with the guidance in SAB 108 in our
financial statements for our fiscal year ending September 30, 2007.</FONT></P>





<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>(n)&nbsp;&nbsp;&nbsp;&nbsp;Use of
Estimates</I></B></FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The preparation of
financial statements in conformity with accounting principles generally accepted in the
United States requires us to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes. Our actual results could
differ from those estimates.</FONT></P>


<H1 ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(2)&nbsp;&nbsp;&nbsp;&nbsp;Earnings (loss)
per Share</FONT></H1>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We compute basic
earnings or loss per share on the basis of the weighted average number of common shares
outstanding. We compute diluted earnings per share on the basis of the weighted average
number of common and potential common shares outstanding. Potential common shares include
the dilutive effect of employee and director options to purchase common shares and
convertible subordinated debt, which is assumed to be converted. The convertible
subordinated debt was not dilutive in any period presented.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Because of losses in
each year of the three year period ended September 30, 2006, outstanding potential
common shares were anti-dilutive in each year; therefore, basic and diluted loss per share
are the same.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>At September 30, 2006
we had 250,000 shares issuable upon the conversion of our subordinated debt and 403,878 shares
issuable upon exercise of stock options that are not included in our outstanding share
calculation as they are anti-dilutive.</FONT></P>


<H1 ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(3)&nbsp;&nbsp;&nbsp;&nbsp;Sale of Building</FONT></H1>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Default" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On January 5,
2005 we sold our building in Baltimore, MD, valued at approximately $6.2 million
for a $6.5 million cash selling price. Concurrently, we entered into a three
year leaseback of approximately 85% of the space in the building for $800,000
annually, plus operating expenses. Accordingly, we have accounted for the
transaction as a sale/leaseback transaction. We recorded a deferred gain on the
building of $218,000 which is being amortized over the life of the lease which
expires December 31, 2007. The net proceeds of the sale were used to pay off our
revolving credit facility and for working capital. The unamortized remaining
value of the deferred gain was $91,000 and $163,000 as of September 30, 2006 and
2005, respectively.</FONT></P>



<BR>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
39</FONT></P>
<PAGE>





<H1 ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(4) Inventories</FONT></H1>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Default" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Inventories at
September&nbsp;30 consisted of the following:</FONT></P>

<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=70%>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2006</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2005</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=38% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Raw materials</FONT></TD>
     <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=22% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  1,334,513</FONT></TD>
        <TD WIDTH=8% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=22% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  1,425,610</FONT></TD>
        <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Work in progress</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>277,879</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>375,219</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Finished goods</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>357,279</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>423,910</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,969,671</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,224,739</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Less LIFO reserve</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(82,578</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(183,404</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  1,887,093</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  2,041,335</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD></TR>
</TABLE>




<H1 ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(5) Lease Arrangements</FONT></H1>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The total amount of
equipment capitalized under capital lease obligations as of September 30, 2006 and 2005
was $2,739,454 and $1,112,000, respectively. Accumulated amortization on capital leases at
September 30, 2006 and 2005 was $343,026 and $54,000, respectively. Amortization of assets
acquired through capital leases is included in depreciation expense.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Default" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We acquired equipment
totaling $1,473,000 through capital lease arrangements during the year ended September 30,
2006. Future minimum lease payments on capital leases at September 30, 2006 are as
follows:</FONT></P>


<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=70%>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Principal</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Interest</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Total</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=11% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2007</FONT></TD>
     <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=22% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   472,146</FONT></TD>
        <TD WIDTH=6% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=22% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   154,578</FONT></TD>
        <TD WIDTH=6% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=22% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   626,724</FONT></TD>
        <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2008</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>509,993</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>116,532</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>626,525</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2009</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>581,711</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>73,586</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>655,297</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2010</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>424,237</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>30,271</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>454,508</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2011</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>132,302</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,307</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>135,609</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 2,120,389</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   378,274</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 2,498,663</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD></TR>
</TABLE>


<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We lease office space
and equipment under noncancelable operating leases that terminate at various dates through
2010. Certain of these leases contain renewal options. Total rental expense under these
leases was $1,808,083, $913,514, and $488,294 in fiscal 2006, 2005, and 2004,
respectively.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Default" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Future minimum lease
payments for the following fiscal years under operating leases at September 30, 2006 are
as follows:</FONT></P>

<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=30%>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=23% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2007</FONT></TD>
     <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=16% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=57% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 2,138,705</FONT></TD>
        <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2008</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>490,708</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2009</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>68,780</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2010</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8,545</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 2,706,738</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD></TR>
</TABLE>


<BR>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
40</FONT></P>
<PAGE>








<H1 ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(6)&nbsp;&nbsp;&nbsp;&nbsp;Debt Arrangements</FONT></H1>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Default" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Long-term debt
consisted of the following at September 30:</FONT></P>

<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=80%>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2006</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>

     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2005</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=68% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Mortgage note payable to a bank, payable in monthly</FONT></TD>
     <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD WIDTH=11% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
        <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD WIDTH=11% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
        <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>principal and interest installments of $36,500 until</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>June 1, 2007 when they adjust under the terms of the</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>note. Interest is fixed at 5.69% to June 1, 2007, when</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>it adjusts based on market rates.  Due November, 2012.</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  4,610,461</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  4,791,016</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>

<TR>
<TD>&nbsp;</TD></TR>


<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Mortgage note payable to a bank, payable in monthly</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>principal and interest installments of $18,241 until May</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>17, 2007 when they adjust under the terms of the note</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Interest is fixed at 5.69% to June 1, 2007, when it</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>adjusts based on market rates.  Due November, 2012.</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,842,976</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,963,224</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>

<TR>
<TD>&nbsp;</TD></TR>


<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6% convertible subordinated notes payable due January 1,</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2008. Interest payable in arrears on the 15th of January</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>and July after June 1, 2005 (4.67% effective rate).</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,999,840</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,999,840</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>

<TR>
<TD>&nbsp;</TD></TR>


<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10% subordinated notes payable due October 1, 2007</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Holders can require the Company to repay 20% of the</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>original outstanding balance each October 1. Interest</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>payable upon demand each October 1 through maturity.</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>837,508</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,188,671</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>

<TR>
<TD>&nbsp;</TD></TR>


<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Mortgage note payable to a bank, payable in monthly</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>principal and interest installments of $15,755 until June</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1, 2007, when they adjust under the terms of the note</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Interest is fixed at 5.69% to June 1, 2007, when it</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>adjusts based on market rates.  Due November, 2012.</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,093,527</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,165,235</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>13,384,312</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>14,107,986</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>720,653</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>700,352</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Less current portion</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 12,663,659</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 13,407,634</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD></TR>
</TABLE>



<BR>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
41</FONT></P>
<PAGE>






<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Default" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The following table
summarizes our principal payment obligations for the years ending September&nbsp;30:</FONT></P>

<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=30%>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=41% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2007</FONT></TD>
     <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=11% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=44% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>    720,653</FONT></TD>
        <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2008</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,861,178</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2009</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>406,568</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2010</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>430,653</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2011</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>456,165</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Thereafter</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6,509,095</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 13,384,312</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD></TR>
</TABLE>



<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Cash interest payments
of $1,169,093, $1,112,000, and $522,838 were made in 2006, 2005, and 2004, respectively.
Cash interest payments for 2004 included interest of $33,834 which was capitalized.</FONT></P>


<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>(a)&nbsp;&nbsp;&nbsp;&nbsp;Revolving
Credit Facility</I></B></FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We have a
revolving line of credit through December, 2007 with our commercial bank which
we use for working capital and other purposes. Borrowings under the agreement
are collateralized by substantially all assets related to the Company&#146;s
operations and all common stock of the Company&#146;s United States subsidiaries
and 65% of the common stock of its non-United States subsidiaries, and the
assignment of a life insurance policy on the Company&#146;s Chairman. Under the
terms of the agreement, the Company has agreed to restrict advances to
subsidiaries, limit additional indebtedness and capital expenditures as well as
to comply with certain financial covenants outlined in the borrowing agreement.
The credit agreement contains cross-default provisions with our mortgages or
other borrowings.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our revolving
line of credit limits outstanding borrowings to the borrowing base as defined in
the agreement, to a maximum available amount of $6 million. As of September 30,
2006, there were no borrowings on this line. We also have an outstanding letter
of credit to secure our lease in Baltimore, Maryland for $2.0 million (reducing
to $1 million in January, 2007), which is counted against our allowable
borrowings. Under the computation of the borrowing base, we had $1.8 million of
available additional borrowing capacity at September 30, 2006. We were not in
compliance with our loan covenants at September 30, 2006, and have received a
waiver from our bank of the non-compliance. In connection with the waiver, our
bank raised our rate on outstanding borrowings from LIBOR plus 250-300 basis
point to LIBOR plus 325 basis points, or from prime plus 25 basis points to
prime plus 50 basis points, increased our fee on the unused portion of the line
from 25 basis points to 37.5 basis points, and limited capital additions for
fiscal 2007 to $1.2 million. None of the other provisions of the Company&#146;s
debt agreements are expected to have an impact on operations.</FONT></P>


<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B><I>(b)&nbsp;&nbsp;&nbsp;&nbsp;Subordinated Debt</I></B></FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In connection
with an acquisition in fiscal 2003, we issued 10% subordinated notes of
$1,800,000. The remaining outstanding principal on these notes was $837,508 at
September 30, 2006. We made principal payments of $360,000, which was included
in current portion of long-term debt at September 30, 2006 and interest payments
of $84,718 in October, 2006. These notes are subordinated to the Company&#146;s
senior debt.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Default" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In connection with
another acquisition in fiscal 2003, we issued $3,999,840 of 6% convertible notes payable,
including $500,000 payable to a current director of the Company, due January 1, 2008.
These notes were non-interest bearing until June 1, 2005. We are accruing interest expense
over the term of these notes using the effective interest rate method. The holders of
these notes may convert all or part of the outstanding notes and accrued interest into our
common stock at a conversion rate of $16 per common share. These notes are convertible
into 249,990 shares of the Company&#146;s common stock. The Company, at its option, may
prepay all or any portion of the outstanding notes plus accrued interest, with prior
written notice to the holders. As of September 30, 2006, we have not made any prepayment
elections. These notes are subordinated to the Company&#146;s senior debt.</FONT></P>



<BR>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
42</FONT></P>
<PAGE>







<H1 ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(7)&nbsp;&nbsp;&nbsp;&nbsp;Income Taxes</FONT></H1>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Default" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Significant components
of our deferred tax liabilities and assets as of September&nbsp;30 are as follows:</FONT></P>

<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=100%>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2006</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2005</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=65% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Deferred tax liabilities:</FONT></TD>
     <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD WIDTH=12% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
        <TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD WIDTH=12% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
        <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Tax over book depreciation</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>    682,702</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  1,124,871</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Lower tax basis on assets of acquired company</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>291,641</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>525,986</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Asset impairment</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(435,710</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total deferred tax liabilities</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>538,633</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,650,857</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>

<TR>
<TD>&nbsp;</TD></TR>


<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Deferred tax assets:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventory pricing</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>111,428</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>85,374</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accrued vacation</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>229,880</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>229,881</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accrued expenses and other - net</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>106,734</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>65,510</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Foreign tax credit carryover</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>119,850</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred gain on sale/leaseback</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>35,905</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Foreign net operating loss</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>456,121</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>501,447</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total deferred tax assets</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,059,918</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>882,212</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>

<TR>
<TD>&nbsp;</TD></TR>


<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Valuation allowance for deferred tax assets</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(456,121</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(501,447</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>

<TR>
<TD>&nbsp;</TD></TR>


<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net deferred tax assets</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>603,797</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>380,765</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>

<TR>
<TD>&nbsp;</TD></TR>


<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net deferred tax (assets) liabilities</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>    (65,164</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  1,270,092</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
</TABLE>



<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Default" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Significant components of
the provision (benefit) for income taxes are as follows:</FONT></P>




<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=100%>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2006</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2005</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2004</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=43% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Current:</FONT></TD>
     <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD WIDTH=13% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
        <TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD WIDTH=13% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
        <TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD WIDTH=13% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
        <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Federal</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   (520,901</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>    802,058</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   (394,167</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;State</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(89,174</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>213,562</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(28,747</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Foreign</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>119,850</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6,679</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total Current</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   (490,225</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  1,015,620</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   (416,235</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=3></TD></TR>

<TR>
<TD>&nbsp;</TD></TR>


<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Deferred:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Federal</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   (1,074,438</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   (489,489</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>    (46,129</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;State</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(260,818</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(133,741</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>59,056</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total deferred</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1,335,256</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(623,230</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>12,927</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (1,825,481</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>    392,390</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   (403,308</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD></TR>
</TABLE>


<BR>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
43</FONT></P>
<PAGE>











<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Default" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The effective income
tax rate varied from the statutory federal income tax rate as follows:</FONT></P>


<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=70%>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2006</FONT><HR WIDTH=85% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2005</FONT><HR WIDTH=85% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2004</FONT><HR WIDTH=85% SIZE=1 COLOR=BLACK NOSHADE></TH>
</TR>
<TR VALIGN=Bottom>
<TD WIDTH=65% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Statutory federal income tax rate</FONT></TD>
<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>

<TD WIDTH=6% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(34</FONT></TD>
<TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.0)%</FONT></TD>

<TD WIDTH=6% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>34</FONT></TD>
<TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.0%</FONT></TD>

<TD WIDTH=5% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(34</FONT></TD>
<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.0)%</FONT></TD></TR>

<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Increases (decreases):</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Nondeductible expenses</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.5</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.8</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.9</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Tax benefit of foreign sales</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.5)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(14</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.6)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(2</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.8)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>State income taxes, net of federal tax benefit</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(5</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.1)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>18</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.1</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.3</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Nontaxable foreign (gains) losses</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.1</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>90</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.2</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(29</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.6)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Other</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(2</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.2)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.0</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(7</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.3)</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=9 ALIGN=center><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(41</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.2)%</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>134</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.5%</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(66</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.5)%</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=9 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD></TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In fiscal 2006, 2005,
and 2004, our foreign operations generated income (loss) before income taxes of $141,645,
$(773,784), and 528,556, respectively.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Payments made in 2006,
2005, and 2004 for income taxes amounted to $498,094, $407,073, and $113,000,
respectively.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company has foreign
net operating loss carryforwards of $1,425,377 that have an indefinite life under current
UK tax law.</FONT></P>


<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>(8)&nbsp;&nbsp;&nbsp;&nbsp;Stock Option
Plans</I></B></FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company established
an Employee Stock Option Plan whereby options to purchase the Company&#146;s common shares
at fair market value at date of grant can be granted to our employees. Options granted
become exercisable in four equal annual installments beginning two years after the date of
grant. This plan terminates in fiscal 2008.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company also established
an Outside Director Stock Option Plan whereby options to purchase the Company&#146;s
common shares at fair market value at date of grant can be granted to outside directors.
Options granted become exercisable in four equal annual installments beginning two years
after the date of grant. This plan terminates in fiscal 2008.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Options in both plans
expire the earlier of ten years from grant date or termination of employment.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Default" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>A summary of our stock
option activity and related information for the years ended September 30 is as follows:</FONT></P>

<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
<TH COLSPAN=5><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2006</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
<TH COLSPAN=5><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2005</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
<TH COLSPAN=5><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2004</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>

<TR VALIGN=Bottom>
<TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Options</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Weighted<BR>exercise<BR>price</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Options</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Weighted<BR>exercise<BR>price</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Options</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Weighted<BR>exercise<BR>
price</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>

<TR>
<TD>&nbsp;</TD></TR>


<TR VALIGN=Bottom>
<TD WIDTH=25% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Outstanding - beginning of year</FONT></TD>
<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>

<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=3% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>480,253</FONT></TD>
<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>

<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
<TD WIDTH=2% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 4.95</FONT></TD>
<TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>

<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=3% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>342,500</FONT></TD>
<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>

<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
<TD WIDTH=2% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 4.66</FONT></TD>
<TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>

<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=3% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>106,527</FONT></TD>
<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>

<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
<TD WIDTH=2% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 4.70</FONT></TD>
<TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Exercised</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(21,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.50</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1,625</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.25</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Granted</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>173,378</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.39</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>254,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.53</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Terminated</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(55,375</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.90</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(34,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.63</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(18,027</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.49</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Outstanding - end of year</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>403,878</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        4.98</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>480,253</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>    4.95</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>342,500</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        4.66</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Weighted grant date fair values</FONT></TD>
     <TD></TD>


<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
        <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.38</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
        <TD></TD><TD></TD><TD></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.92</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
</TR>




</TABLE>






<BR>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
44</FONT></P>
<PAGE>








<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Workstation" -->
<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The intrinsic values of options exercised in the years ended September 30, 2006
and 2005 were $37,000 and $4,000 respectively. We received $94,470 and $5,313
from the exercise of qualified employee stock options in fiscal 2006 and 2005,
respectively, for which no tax benefit was recognized. The options on the
403,878 shares outstanding at September 30, 2006 had an aggregate intrinsic
value of $204,783 and a weighted average contract term of 7.1 years. </FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Default" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>A summary of non-vested
options for the year ended September 30, 2006 is as follows:</FONT></P>

<TABLE ALIGN=CENTER CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=65%>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Number</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Weighted Average<BR>
Grant Date<BR>
Fair Value<BR>
</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH></TR>
<TR VALIGN=Bottom>
<TD WIDTH=44% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Non-vested options, beginning of year</FONT></TD>
<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>

<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=13% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>342,753</FONT></TD>
<TD WIDTH=7% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>

<TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
<TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 4</FONT></TD>
<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.94</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Granted</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Vested</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(37,500</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.57</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Forfeited</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(26,875</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.90</FONT></TD></TR>

<TR>
     <TD COLSPAN=4></TD>
     <TD COLSPAN=1 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
</TR>






<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Non-vested options, end of year</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>278,378</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>    3</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.75</FONT></TD></TR>
<TR>
     <TD COLSPAN=4></TD>
     <TD COLSPAN=1 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
</TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=3></TD></TR>
</TABLE>




<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>At September 30, 2006,
there were 125,500 shares vested, all of which were exercisable. The weighted average
exercise price for these shares was $5.31 per share; the aggregate intrinsic value of
these shares was $63,685 and the weighted average remaining term was 6.3 years. </FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>At September 30, 2006,
there are 300,375 shares available for grants under the two plans.</FONT></P>




<BR>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
45</FONT></P>
<PAGE>












<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Default" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The following applies
to options outstanding at September&nbsp;30, 2006:</FONT></P>

<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Range of exercise prices</FONT><hr width=90% noshade></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Number outstanding<BR>at September 30,<BR>2006</FONT><hr width=90% noshade></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Weighted<BR>average<BR>remaining<BR>contractual<BR>life (years)</FONT><hr width=90% noshade></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Weighted<BR>average<BR>exercise<BR>price</FONT><hr width=90% noshade></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Number<BR>exercisable at<BR>September<BR>30, 2006</FONT><hr width=90% noshade></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Weighted<BR>average<BR>exercise<BR>price</FONT><hr width=90% noshade></TH></TR>

<TR>
<TD>&nbsp;</TD></TR>


<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=31% align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$2.80 - 4.58</FONT></TD>
     <TD WIDTH=18% align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>204,000&nbsp;</FONT></TD>
     <TD WIDTH=13% align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6.64</FONT></TD>
     <TD WIDTH=13% align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.38</FONT></TD>
     <TD WIDTH=18% align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>68,500&nbsp;</FONT></TD>
     <TD WIDTH=7% align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.33</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$4.96 - 5.74</FONT></TD>
     <TD align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>180,378&nbsp;</FONT></TD>
     <TD align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8.34</FONT></TD>
     <TD align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.34</FONT></TD>
     <TD align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>37,500&nbsp;</FONT></TD>
     <TD align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.69</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$7.18 - 8.00</FONT></TD>
     <TD align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>19,500&nbsp;</FONT></TD>
     <TD align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.15</FONT></TD>
     <TD align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8.00</FONT></TD>
     <TD align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>19,500&nbsp;</FONT></TD>
     <TD align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8.00</FONT></TD></TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>At September 30, 2006,
we had $536,000 of compensation expense to be recognized for non-vested options with a
weighted average vesting period of 2.95 years.</FONT></P>


<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>(9)&nbsp;&nbsp;&nbsp;&nbsp;Retirement
Plan</I></B></FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company has an
Internal Revenue Code Section&nbsp;401(k) Retirement Plan (the &#147;Plan&#148;) covering
all employees over twenty-one years of age with at least one year of service. Under the
terms of the Plan, the Company contributes 2% of each participant&#146;s total wages to
the Plan and matches 44% of the first 10% of the employee contribution. The Plan also
includes provisions for various contributions which may be instituted at the discretion of
the Board of Directors. The contribution made by the participant may not exceed 30% of the
participant&#146;s annual wages. The Company made no discretionary contributions under the
plan in 2006, 2005, and 2004. Contribution expense was $638,398, $554,624, and $432,283 in
fiscal 2006, 2005, and 2004, respectively.</FONT></P>


<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>(10)&nbsp;&nbsp;&nbsp;&nbsp;Segment
Information</I></B></FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Default" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We operate in two
principal segments &#150; research services and research products. Our services segment
provides research and development support on a contract basis directly to pharmaceutical
companies. Our analytical products segment provides liquid chromatography, electrochemical
and physiological monitoring products to pharmaceutical companies, universities,
government research centers, and medical research institutions. We evaluate performance
and allocate resources based on these segments. Certain of our assets are not directly
attributable to the service or product segments. These assets are grouped into the
Corporate segment and include cash and cash equivalents, deferred income taxes, refundable
income taxes, debt issue costs and certain other assets. We do not allocate such items to
the principal segments because they are not used to evaluate their financial position. The
accounting policies of these segments are the same as those described in the summary of
significant accounting policies.</FONT></P>



<BR>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
46</FONT></P>
<PAGE>





<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B><I>(a)&nbsp;&nbsp;&nbsp;&nbsp;Operating Segments</I></B></FONT></P>


<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=90%>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=8><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Year ended September 30</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH>
</TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2006</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH>
<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2005</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH>
<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2004</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=8><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(In thousands)</FONT></TH>
 </TR>

<TR>
<TD>&nbsp;</TD></TR>


<TR VALIGN=Bottom>
     <TD WIDTH=60% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Revenue:</FONT></TD>
     <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
        <TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
        <TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
        <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Service</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  34,318</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  32,951</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  24,928</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Product</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8,730</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9,444</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>12,224</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  43,048</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  42,395</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  37,152</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD></TR>

<TR>
<TD>&nbsp;</TD></TR>


<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Operating income:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Service</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  (3,728</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>     148</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  (4,850</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Product</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>306</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,112</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5,104</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total operating income (loss)</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(3,422</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,260</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>254</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>

<TR>
<TD>&nbsp;</TD></TR>


<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Corporate expenses</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1,013</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(969</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(861</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income (loss) before income taxes</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  (4,435</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>     291</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>    (607</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD></TR>

<TR>
<TD>&nbsp;</TD></TR>



<TR>
<TD>&nbsp;</TD></TR>










<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=8><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As of and for the year ended<BR>September 30,</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH>
</TR>

<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2006</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH>
<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2005</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH>
<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2004</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=8><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(In thousands)</FONT></TH>
 </TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Identifiable assets:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Service</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  24,539</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  31,739</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  31,071</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Product</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9,897</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10,211</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9,940</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Corporate</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7,878</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5,888</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5,784</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  42,314</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  47,838</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  46,795</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD></TR>

<TR>
<TD>&nbsp;</TD></TR>


<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Goodwill, net:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Service</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   1,481</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   1,071</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   1,071</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Product</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>374</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>374</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>374</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   1,855</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   1,445</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   1,445</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD></TR>

<TR>
<TD>&nbsp;</TD></TR>


<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Intangible assets, net:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Service</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>     517</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   2,156</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   2,491</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Product</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>--</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>--</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>--</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>     517</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   2,156</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   2,491</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD></TR>

<TR>
<TD>&nbsp;</TD></TR>


<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Depreciation and amortization:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Service</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   2,753</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   3,125</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   3,175</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Product</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>475</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>316</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>266</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   3,228</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   3,441</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   3,441</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD></TR>

<TR>
<TD>&nbsp;</TD></TR>


<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Capital expenditures:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Service</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   1,518</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   2,596</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   3,534</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Product</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>169</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>818</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>34</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   1,687</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   3,414</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   3,568</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD></TR>
</table>

<BR>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
47</FONT></P>
<PAGE>











<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B><I>(b)&nbsp;&nbsp;&nbsp;&nbsp;Geographic Information</I></B></FONT></P>

<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=90%>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=8><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Year ended September 30</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH>
</TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2006</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH>
<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2005</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH>
<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2004</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=8><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(In thousands)</FONT></TH>
 </TR>


<TR VALIGN=Bottom>
     <TD WIDTH=60% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
     <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
        <TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
        <TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
        <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Sales to external customers:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;North America</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  37,614</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  34,046</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  29,664</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pacific Rim</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>693</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,052</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>924</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Europe</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,299</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,899</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,871</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>441</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,398</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,693</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  43,047</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  42,395</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  37,152</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Long-lived assets:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;North America</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  27,675</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  29,499</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  34,888</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Europe</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>976</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,204</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,550</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  28,651</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  30,703</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  36,438</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD></TR>
</TABLE>



<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>(c)&nbsp;&nbsp;&nbsp;&nbsp;Major
Customers</I></B></FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In 2006, 2005 and 2004,
Pfizer (and its predecessor companies) accounted for approximately 7.3%, 10.1%, and 12.5%,
respectively, of the Company&#146;s total revenues and 12.8% and 6.0% of total trade
accounts receivable at September 30, 2006 and 2005, respectively.</FONT></P>


<H1 ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(11)&nbsp;&nbsp;&nbsp;&nbsp;Related Party
Transactions</FONT></H1>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Default" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As of
September&nbsp;30, 2006, we have a 6% subordinated convertible note payable for $500,000
to one of our directors (a former director of PKLB). During fiscal 2004, we repaid
$350,000 of debt to this director through a series of transactions which resulted in our
paying $200,000 of principal in cash (plus accrued interest to the date of repayment) and
exchanging 38,042 shares of common stock for $150,000 face amount of debt.</FONT></P>



<BR>
<BR>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
48</FONT></P>
<PAGE>




<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Item 9.&nbsp;&nbsp;&nbsp;&nbsp;Changes in and Disagreements with
Accountants on Accounting and Financial Disclosure.</B>
</FONT></P>


<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Default" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Effective September 15,
2006 KPMG LLP (&#145;KPMG&#148;) resigned as the Company&#146;s independent accountant.
KPMG&#146;s reports on the Company&#146;s consolidated financial statements as of and for
the years ended September 30, 2005 and September 30, 2004 did not contain an adverse
opinion or disclaimer of opinion, nor were such reports qualified or modified as to
uncertainty, audit scope or accounting principle. During the years ended September 30,
2005 and 2004, and through September 15, 2006, there were (1) no disagreements with KPMG
on any matter of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure, which disagreements if not resolved to the satisfaction of
KPMG would have caused KPMG to make reference thereto in KPMG&#146;s reports on the
financial statements for such years; and (2) no other reportable events, as defined in
Item 304(a)(1)(v) of the Commission&#146;s Regulation S-K, except for the matters set
forth below.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In connection with KPMG&#146;s
review of the Report on Form 10-Q and the First Amendment to the Report on Form 10-Q for
the three and nine months ended June 30, 2006, KPMG presented a letter regarding the
following items to the Audit Committee of the Board of Directors, dated August 29, 2006
relating to its review of the unaudited interim financial statements for the Company as
of June 30, 2006, and for the three and nine months then ended (the &#147;Letter&#148;).
KPMG noted certain conditions involving the Company&#146;s internal control and its
operation that KPMG considered to be &#147;material weaknesses.&#148;  &#147;Material
weakness&#148; was defined in the Letter as &#147;a control deficiency, or combination of
control deficiencies, that results in more than a remote likelihood that a material
misstatement of the annual or interim financial statements will not be prevented or
detected by the entity&#146;s internal control.&#148; The material weaknesses noted by
KPMG consisted of a failure to set an appropriate &#147;tone at the top&#148; to instill
a company-wide attitude of control consciousness; failure to maintain adequate procedures
for anticipating and identifying financial reporting risks and for reacting to changes in
its operating environment that could have a material effect on financial reporting;
failure to maintain adequately trained personnel to perform effective review of
accounting procedures critical to financial reporting; and a lack of adequately trained
finance and accounting personnel with the ability to apply U.S. generally accepted
accounting principles associated with the impairment of certain long-lived assets in
accordance with Statement of Financial Accounting Standards No. 144, <I>Accounting for
the Impairment or Disposal of Long-Lived Assets</I>. Management concurred with the
assessment of KPMG. KPMG discussed the matters described in this paragraph with the Audit
Committee of the Company. The Company authorized KPMG to respond fully to the inquiries
of its successor accountant concerning these matters. </FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>KPMG also communicated
to the Audit Committee in the Letter that the Company had filed its Report on Form 10-Q
for the three and nine month periods ended June 30, 2006, prior to the completion of its
interim review. KPMG has subsequently completed its interim review and the Company filed
an amended report on Form 10-Q/A for the three and nine month periods ended June 30,
2006. </FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On October 30, 2006
the Audit Committee of the Company&#146;s Board of Directors engaged Crowe Chizek and
Company LLC (&#147;Crowe Chizek&#148;) to be the Company&#146;s independent registered
public accounting firm to audit and report on the Company&#146;s consolidated financial
statements for the year ended September 30, 2006. During the two most recent fiscal years
ended September 30, 2006 and 2005, and through October 30, 2006, the Company has not
consulted with Crowe Chizek regarding either:&nbsp; (i) the application of accounting
principles to a specified transaction, either completed or proposed; or the type of audit
opinion that might be rendered on the Company&#146;s financial statements; or (ii) any
matter that was either the subject of a disagreement (as that term is defined in Item
304(a)(1)(iv) of Regulation S-K and the related instructions to that Item) or a
reportable event (as that term is defined in Item 304(a)(1)(v) of Regulation S-K). </FONT></P>


<H1 ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Item 9A.&nbsp;&nbsp;&nbsp;&nbsp;Controls and Procedures.</FONT></H1>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Based on their most recent evaluation, which was completed as of September 30,
2006, the Company&#146;s Chief Executive Officer and Chief Financial Officer
believe that the Company&#146;s disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) were effective as of September
30, 2006. In response to the matters described in Item 9 above, and to ensure
that information required to be disclosed by the Company in this Form 10-K was
recorded, processed, summarized and reported within the time periods specified
by the Securities and Exchange Commission&#146;s rules and forms, as of
September 30, 2006, the Company had retained a new Chief Executive Officer with
a financial background to set a better &#147;tone at the top&#148; regarding the
Company&#146;s systems and regard for internal control. The Company has also
instituted additional procedures to more timely identify financial statement
risks. In order to maintain a capability to perform effective review of
accounting procedures critical to financial reporting, the Company decided to
retain an outside accounting firm, separate from its auditors, to consult on
accounting and reporting issues where the Company does not have sufficient
internal capabilities. The Chief Executive Officer and Chief Financial Officer
believe that implementing these new procedures resulted in effective disclosure
controls and procedures as of September 30, 2006.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Except as noted above,
there were no significant changes in the Company&#146;s internal controls or other factors
that could significantly affect those controls subsequent to the date of their evaluation,
which was completed as of September 30, 2006.</FONT></P>

<H1 ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Item 9B.&nbsp;&nbsp;&nbsp;&nbsp;Other
Information.</FONT></H1>

<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>None.</FONT></P>



<BR>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
49</FONT></P>
<PAGE>




<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>PART III </FONT></H1>

<H1 ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Item 10.&nbsp;&nbsp;&nbsp;&nbsp;Directors
and Executive Officers of the Registrant.</FONT></H1>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Default" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The following
information concerns the persons who served as the directors of the Company as of
September 30, 2006. Except as indicated in the following paragraphs, the principal
occupations of these persons has not changed in the past five years. Information
concerning the executive officers of the Company may be found in &#147;Executive Officers
of the Registrant&#148; under Item 1 of this report, which is incorporated herein by
reference.</FONT></P>

<TABLE align=center CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=85%>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Name</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Age</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Position</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=21% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Peter T. Kissinger, Ph.D.</FONT></TD>
     <TD WIDTH=15% ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>61&nbsp;</FONT></TD>
     <TD WIDTH=64% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Chairman of the Board; Chief Scientific Officer</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Candice B. Kissinger</FONT></TD>
     <TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>54&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Senior Vice President, Marketing; Secretary; Director</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>William E. Baitinger</FONT></TD>
     <TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>73&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Director</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>David W. Crabb</FONT></TD>
     <TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>53&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Director</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Leslie B. Daniels</FONT></TD>
     <TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>59&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Director</FONT></TD></TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Information
 concerning  <B>Peter T. Kissinger,  Ph.D.</B> is incorporated by reference to the discussion
 under Item 1 "Executive Officers of the Registrant" in this report.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Information concerning
<B>Candice B. Kissinger</B> is incorporated by reference to the discussion under Item 1
&#147;Executive Officers of the Registrant&#148; in this report.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>William E.
Baitinger</B> has served as a director of the Company since 1979. Mr.&nbsp;Baitinger was
Director of Technology Transfer for the Purdue Research Foundation from 1988 until 2000.
In this capacity he was responsible for all licensing and commercialization activities
from Purdue University. He currently serves as Special Assistant to the Vice President for
Research at Purdue University. Mr.&nbsp;Baitinger has a Bachelor of Science degree in
Chemistry and Physics from Marietta College and a Master of Science degree in Chemistry
from Purdue University.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>David W. Crabb,
M.D.</B> has served as a director of the Company since February, 2004. He has been
Chairman of the Indiana University Department of Medicine since 2001. Previously he had
served as Chief Resident of Internal Medicine and on the Medicine and Biochemistry faculty
of Indiana University. He was appointed Vice Chairman for Research for the department and
later Assistant Dean for Research. Dr.&nbsp;Crabb serves on several editorial boards and
on the Board of Indiana Alcohol Research Center. He was a recipient of a NIH Merit award
and numerous other research and teaching awards.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Leslie B.
Daniels</B> has served as a director of the Company since June 2003. Mr.&nbsp;Daniels is a
founding partner of CAI, a private equity fund in New York City. He previously was
President of Burdge, Daniels &amp; Co., Inc., a principal in venture capital and buyout
investments as well as trading of private placement securities, and before that, a Senior
Vice President of Blyth, Eastman, Dillon &amp; Co. where he had responsibility for the
corporate fixed income sales and trading departments. Mr.&nbsp;Daniels is a former
Director of Aster-Cephac SA, IVAX Corporation, MIM Corporation, Mylan Laboratories, Inc.,
NBS Technologies Inc. and MIST Inc. He was also Chairman of Zenith Laboratories, Inc. and
currently serves as a Director of SafeGuard Health Enterprises, Inc.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Board of Directors
has established an Audit Committee. The Audit Committee is responsible for recommending
independent auditors, reviewing, in connection with the independent auditors, the audit
plan, the adequacy of internal controls, the audit report and management letter and
undertaking such other incidental functions as the board may authorize. William E.
Baitinger, David W. Crabb and Leslie B. Daniels are the members of the Audit Committee.
The Board of Directors has determined that Mr.&nbsp;Daniels is an audit committee
financial expert (as defined by Item 401(h) of Regulation S-K). All of the members of the
Audit Committee are &#147;independent&#148; (as defined by Item 7(d)(3)(iv) of Schedule
14A).</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Board of Directors
has adopted a Code of Ethics (as defined by Item 406 of Regulation S-K) that applies to
the Company&#146;s Officers and Directors a copy of which is filed as an exhibit to this
Form 10-K.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The information
contained under the caption &#147;Section 16(a) Beneficial Ownership Reporting
Compliance&#148; in the Proxy Statement is incorporated herein by reference.</FONT></P>



<BR>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
50</FONT></P>
<PAGE>

<H1 ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Item 11.&nbsp;&nbsp;&nbsp;&nbsp;Executive
Compensation.</FONT></H1>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The information
included under the captions &#147;Election of Directors &#150; Compensation of
Directors,&#148; &#147;Executive Compensation&#148; and &#147;Compensation Committee
Interlocks and Insider Participation&#148; in the Proxy Statement is incorporated herein
by reference in response to this item.</FONT></P>




<H1 ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Item 12.&nbsp;&nbsp;&nbsp;&nbsp;Security
Ownership of Certain Beneficial Owners and Management.</FONT></H1>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The information
contained under the captions &#147;Share Ownership of Certain Beneficial Owners and
Management&#148; and &#147;Equity Compensation Plan Information&#148; in the Proxy
Statement is incorporated herein by reference in response to this item.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>For additional
information regarding the Company&#146;s stock option plans, please see Note 9 in the
Notes to Consolidated Financial Statements in this report.</FONT></P>

<H1 ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Item 13.&nbsp;&nbsp;&nbsp;&nbsp;Certain
Relationships and Related Transactions.</FONT></H1>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The information
included under the caption &#147;Certain Relationships and Related Transactions&#148; in
the Proxy Statement is incorporated herein by reference in response to this item.</FONT></P>

<H1 ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Item 14.&nbsp;&nbsp;&nbsp;&nbsp;Principal
Accounting Fees and Services.</FONT></H1>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Default" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The information
included under the caption &#147;Selection of Independent Accountants&#148; in the Proxy
Statement is incorporated herein by reference.</FONT></P>


<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>[Remainder of page
intentionally left blank.]</I> </FONT></P>



<BR>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
51</FONT></P>
<PAGE>





<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>PART IV </FONT></H1>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Item 15.&nbsp;&nbsp;&nbsp;&nbsp;Exhibits and Financial Statement Schedules.</B></FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(a)&nbsp;&nbsp;&nbsp;&nbsp;Documents
filed as part of this Report. </FONT></P>

<!-- MARKER FORMAT-SHEET="TABLE INDENT 10-90" FSL="Workstation" -->
<TABLE WIDTH=100% CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
1.</FONT></TD>
<TD WIDTH=90%><div align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<U>Financial Statements</U>:<BR>
<BR>
Included in Item 8 of Part II of this report as follows: <BR>
<BR>
Reports of Independent Registered Public Accounting Firms. <BR>
<BR>
Consolidated Balance Sheets as of September 30, 2006 and 2005. <BR>
<BR>
Consolidated Statements of Operations for the Years Ended September 30, 2006, 2005 and 2004.<BR>
<BR>
Consolidated &nbsp;Statements of Shareholders&#146; Equity and Comprehensive Income (Loss) for the Years Ended September 30, 2006, 2005 and 2004. <BR>
<BR>
Consolidated Statements of Cash Flows for the Years Ended September 30, 2006, 2005 and 2004. <BR>
<BR>
Notes to Consolidated Financial Statements.</FONT></div></TD>
</TR>
</TABLE>
<BR>

<TABLE WIDTH=100% CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
2.</FONT></TD>
<TD WIDTH=90%><div align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<U>Financial Statement Schedules</U>:<BR>
<BR>
Schedules &nbsp;are not required, are not applicable or the information is shown in the Notes to the Consolidated Financial Statements.</FONT></div></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(b)&nbsp;&nbsp;&nbsp;&nbsp;<U>Exhibits</U>.
See Index to Exhibits. </FONT></P>

<BR>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
52</FONT></P>
<PAGE>











<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
SIGNATURES </FONT></H1>
<BR>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Default" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Pursuant to
the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.</FONT></P>

<!-- MARKER FORMAT-SHEET="SIGNATURE BLOCK" FSL="Workstation" -->
<TABLE WIDTH=100% CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=60%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<BR>
<BR>
<BR>
<BR>
<BR>
Date:&nbsp;&nbsp;December 21, 2006<BR>
<BR>
<BR>
<BR>
<BR>
<BR>
<BR>
Date:&nbsp;&nbsp;December 21, 2006</FONT></TD>
<TD WIDTH=40%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
BIOANALYTICAL SYSTEMS, INC.<BR>
(Registrant)<BR>
<BR>
<BR>
<BR>
By:&nbsp;&nbsp;/s/&nbsp;Richard M. Shepperd<HR>
Richard M. Shepperd<BR>
President and Chief Executive Officer<BR>
<BR>
<BR>
<BR>
By:&nbsp;&nbsp;/s/&nbsp;Michael R. Cox<HR>
Michael R. Cox<BR>
Vice President, Finance, Chief Financial Officer<BR>
and Treasurer</font></td></TR>
</TABLE>
<BR>

<BR>
<BR>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Default" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Pursuant to
the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated.</FONT></P>

<TABLE WIDTH=100% CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<Th align=left WIDTH=35%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<U>Signature</U></FONT></Th>
<Th align=left WIDTH=35%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<U>Capacity</U></FONT></Th>
<TD align=left WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
</FONT></TD>
<Th align=left WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<U>Date</U></FONT></Th>
</TR>
</TABLE>
<BR>

<TABLE WIDTH=100% CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=35%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
/s/&nbsp;Peter T. Kissinger<HR width=85% noshade color=black align=left>Peter T. Kissinger</FONT></TD>
<TD WIDTH=35%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Chairman and Chief Scientific<BR>
Officer and Director</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
</FONT></TD>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
December 20, 2006</FONT></TD>
</TR>
</TABLE>
<BR>

<TABLE WIDTH=100% CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=35%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
/s/&nbsp;Richard M. Shepperd<HR width=85% noshade color=black align=left>
Richard M. Shepperd</FONT></TD>
<TD WIDTH=35%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
President and Chief Executive Officer<BR>
(Principal Executive Officer)</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
</FONT></TD>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
December 20, 2006</FONT></TD>
</TR>
</TABLE>
<BR>

<TABLE WIDTH=100% CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=35%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
/s/&nbsp;Michael R. Cox<HR width=85% noshade color=black align=left>Michael R. Cox</FONT></TD>
<TD WIDTH=35%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Vice President, Finance, Chief<BR>Financial Officer and Treasurer<BR>(Principal Financial and Accounting Officer)</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
</FONT></TD>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
December 20, 2006</FONT></TD>
</TR>
</TABLE>
<BR>

<TABLE WIDTH=100% CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=35%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
/s/&nbsp;William E. Baitinger<HR width=85% noshade color=black align=left>William E. Baitinger</FONT></TD>
<TD WIDTH=35%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Director</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
</FONT></TD>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
December 20, 2006</FONT></TD>
</TR>
</TABLE>
<BR>

<TABLE WIDTH=100% CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=35%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
/s/&nbsp;David W. Crabb<HR width=85% noshade color=black align=left>David W. Crabb</FONT></TD>
<TD WIDTH=35%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Director</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
</FONT></TD>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
December 21, 2006</FONT></TD>
</TR>
</TABLE>
<BR>

<TABLE WIDTH=100% CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=35%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
/s/&nbsp;Candice B. Kissinger<HR width=85% noshade color=black align=left>Candice B. Kissinger</FONT></TD>
<TD WIDTH=35%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Director</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
</FONT></TD>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
December 22, 2006</FONT></TD>
</TR>
</TABLE>
<BR>

<TABLE WIDTH=100% CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=35%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
/s/&nbsp;Leslie B. Daniels<HR width=85% noshade color=black align=left>Leslie B. Daniels</FONT></TD>
<TD WIDTH=35%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Director</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
</FONT></TD>
<TD WIDTH=25%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
December 20, 2006</FONT></TD>
</TR>
</TABLE>

<BR>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
53</FONT></P>
<PAGE>

<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
INDEX TO EXHIBITS </FONT></H1>
<BR>

<div align=left>

<table border="0" cellspacing=0 cellpadding=0 width="672" >
    <tr >
        <td width="67" valign=bottom >
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><b><font size=2>Number Assigned In</font></b><br> <b><font size=2>Regulation S-K</font></b><br> <u><b><font size=2>Item 601</font></b></u></p> </td>
        <td width="67" valign=bottom >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></p> </td>
        <td width="538" valign=bottom >
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><u><b><font size=2>Description of Exhibits</font></b></u></p> </td> </tr></table>
</div>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>


<div align=left>

<table border="0" cellspacing=0 cellpadding=0 width="672" >
    <tr >
        <td width="67" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=2>(3) </font></p> </td>
        <td width="67" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=2>3.1 </font></p> </td>
        <td width="538" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Second Amended and Restated Articles of Incorporation of Bioanalytical Systems, Inc. (incorporated by reference to Exhibit 3.1 to Form 10-Q for the quarter ended December 31, 1997).</font></p> </td> </tr></table>
</div>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>


<div align=left>

<table border="0" cellspacing=0 cellpadding=0 width="672" >
    <tr >
        <td width="67" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></p> </td>
        <td width="67" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=2>3.2</font></p>
<p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=2>&nbsp;</font></p>
<p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></p>
<p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=2></font></p> </td>
        <td width="538" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Amended and Restated Bylaws of Bioanalytical Systems, Inc. (including all amendments made through September 30, 2006).</font></p></td> </tr></table>
</div>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>


<div align=left>

<table border="0" cellspacing=0 cellpadding=0 width="672" >
    <tr >
        <td width="67" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=2>(4) </font></p> </td>
        <td width="67" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=2>4.1 </font></p> </td>
        <td width="538" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Specimen Certificate for Common Shares (incorporated by reference to Exhibit 4.1 to Registration Statement on Form S-1, Registration No. 333-36429). </font></p> </td> </tr></table>
</div>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>


<div align=left>

<table border="0" cellspacing=0 cellpadding=0 width="672" >
    <tr >
        <td width="67" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></p> </td>
        <td width="67" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=2>4.2 </font></p> </td>
        <td width="538" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>See Exhibits 3.1 and 3.2 to this Form 10-K. </font></p> </td> </tr></table>
</div>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>


<div align=left>

<table border="0" cellspacing=0 cellpadding=0 width="672" >
    <tr >
        <td width="67" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></p> </td>
        <td width="67" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=2>4.3 </font></p> </td>
        <td width="538" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Form of 6% Subordinated Convertible Note due 2008 (incorporated by reference to Form 8-K filed November 21, 2002). </font></p> </td> </tr></table>
</div>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>


<div align=left>

<table border="0" cellspacing=0 cellpadding=0 width="672" >
    <tr >
        <td width="67" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></p> </td>
        <td width="67" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=2>4.4 </font></p> </td>
        <td width="538" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Form of 10% Subordinated Note due 2007 (incorporated by reference to Exhibit 4.3 of Form 10-Q for the quarter ended June 30, 2003). </font></p> </td> </tr></table>
</div>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>


<div align=left>

<table border="0" cellspacing=0 cellpadding=0 width="672" >
    <tr >
        <td width="67" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=2>(10) </font></p> </td>
        <td width="67" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=2>10.1 </font></p> </td>
        <td width="538" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Bioanalytical Systems, Inc. 1990 Employee Incentive Stock Option Plan (incorporated by reference to Exhibit 10.4 to Registration Statement on Form S-1, Registration No. 333-36429). </font></p> </td> </tr></table>
</div>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>


<div align=left>

<table border="0" cellspacing=0 cellpadding=0 width="672" >
    <tr >
        <td width="67" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></p> </td>
        <td width="67" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=2>10.2 </font></p> </td>
        <td width="538" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Form of Bioanalytical Systems, Inc. 1990 Employee Incentive Stock Option Agreement (incorporated by reference to Exhibit 10.5 to Registration Statement on Form S-1, Registration No. 333-36429). </font></p> </td> </tr></table>
</div>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>


<div align=left>

<table border="0" cellspacing=0 cellpadding=0 width="672" >
    <tr >
        <td width="67" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></p> </td>
        <td width="67" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=2>10.3 </font></p> </td>
        <td width="538" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Bioanalytical Systems, Inc. 1997 Employee Incentive Stock Option Plan, as amended January 24, 2004 (incorporated by reference to Appendix A to definitive Proxy Statement filed January 28, 2003 SEC File No. 000-23357). </font></p> </td> </tr></table>
</div>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>


<div align=left>

<table border="0" cellspacing=0 cellpadding=0 width="672" >
    <tr >
        <td width="67" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></p> </td>
        <td width="67" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=2>10.4 </font></p> </td>
        <td width="538" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Form of Bioanalytical Systems, Inc. 1997 Employee Incentive Stock Option Agreement (incorporated by reference to Exhibit 10.27 to Registration Statement on Form S-1, Registration No. 333-36429). </font></p> </td> </tr></table>
</div>

<p style=' margin-bottom:0pt; margin-top:5pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=1>1</font></p>
<!-- EEDocs PBStart-->
<p style='page-break-before:always'></p><PAGE>
<!-- EEDocs PBEnd-->

<p style=' margin-bottom:5pt; margin-top:5pt;text-align:left;'>
</p>


<div align=left>

<table border="0" cellspacing=0 cellpadding=0 width="672" >
    <tr >
        <td width="67" valign=bottom >
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><b><font size=2>Number Assigned In</font></b><br> <b><font size=2>Regulation S-K</font></b><br> <u><b><font size=2>Item 601</font></b></u></p> </td>
        <td width="67" valign=bottom >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></p> </td>
        <td width="538" valign=bottom >
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><u><b><font size=2>Description of Exhibits</font></b></u></p> </td> </tr></table>
</div>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>


<div align=left>

<table border="0" cellspacing=0 cellpadding=0 width="672" >
    <tr >
        <td width="67" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></p> </td>
        <td width="67" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=2>10.5 </font></p> </td>
        <td width="538" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>1997 Bioanalytical Systems, Inc. Outside Director Stock Option Plan, as amended January 24, 2004 (incorporated by reference to Appendix B to definitive Proxy Statement SEC File No. 000-23357). </font></p> </td> </tr></table>
</div>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>


<div align=left>

<table border="0" cellspacing=0 cellpadding=0 width="672" >
    <tr >
        <td width="67" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></p> </td>
        <td width="67" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=2>10.6 </font></p> </td>
        <td width="538" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Form of Bioanalytical Systems, Inc. 1997 Outside Director Stock Option Agreement (incorporated by reference to Exhibit 10.29 to Registration Statement on Form S-1, Registration No. 333-36429). </font></p> </td> </tr></table>
</div>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>


<div align=left>

<table border="0" cellspacing=0 cellpadding=0 width="672" >
    <tr >
        <td width="67" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></p> </td>
        <td width="67" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=2>10.7 </font></p> </td>
        <td width="538" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Master Equipment Lease Agreement by and between Bioanalytical Systems, Inc. and Keycorp Leasing, dated December 5, 1997 (incorporated by reference to Exhibit 10.9 of Form 10-K for the fiscal year ended September 30, 2002). </font></p> </td> </tr></table>
</div>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>


<div align=left>

<table border="0" cellspacing=0 cellpadding=0 width="672" >
    <tr >
        <td width="67" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></p> </td>
        <td width="67" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=2>10.8 </font></p> </td>
        <td width="538" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Amended and Restated Credit Agreement by and between Bioanalytical Systems, Inc., and National City Bank, executed January 4, 2005 (incorporated by reference to Exhibit 10.5 of Form 8-K filed January 10, 2005). </font></p> </td> </tr></table>
</div>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>


<div align=left>

<table border="0" cellspacing=0 cellpadding=0 width="672" >
    <tr >
        <td width="67" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></p> </td>
        <td width="67" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=2>10.9 </font></p> </td>
        <td width="538" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Amended and Restated General Security Agreement by and between Bioanalytical Systems, Inc. and National City Bank executed January 4, 2005 (incorporated by reference to Exhibit 10.7 of Form 8-K filed January 10, 2005). </font></p> </td> </tr></table>
</div>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>


<div align=left>

<table border="0" cellspacing=0 cellpadding=0 width="672" >
    <tr >
        <td width="67" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></p> </td>
        <td width="67" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=2>10.10 </font></p> </td>
        <td width="538" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Trademark Security Agreement by and between Bioanalytical Systems and The Provident Bank, dated October 29, 2003 (incorporated by reference to Exhibit 10.12 of Form 10-K for the fiscal year ended September 30, 2002). </font></p> </td> </tr></table>
</div>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>


<div align=left>

<table border="0" cellspacing=0 cellpadding=0 width="672" >
    <tr >
        <td width="67" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></p> </td>
        <td width="67" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=2>10.11 </font></p> </td>
        <td width="538" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Patent Security Agreement by and between Bioanalytical Systems and The Provident Bank, dated October 29, 2003 (incorporated by reference to Exhibit 10.13 of Form 10-K for the fiscal year ended September 30, 2002). </font></p> </td> </tr></table>
</div>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>


<div align=left>

<table border="0" cellspacing=0 cellpadding=0 width="672" >
    <tr >
        <td width="67" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></p> </td>
        <td width="67" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=2>10.12 </font></p> </td>
        <td width="538" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Replacement Promissory Note by and between Bioanalytical Systems, Inc. and National City Bank, executed January 4, 2005 (incorporated by reference to Exhibit 10.6 of Form 8-K filed January 10, 2005). </font></p> </td> </tr></table>
</div>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>


<div align=left>

<table border="0" cellspacing=0 cellpadding=0 width="672" >
    <tr >
        <td width="67" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></p> </td>
        <td width="67" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=2>10.13 </font></p> </td>
        <td width="538" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Loan Agreement between Bioanalytical Systems, Inc. and Union Planters Bank, dated October 29, 2002 (incorporated by reference to Exhibit 10.15 of Form 10-K for the fiscal year ended September 30, 2002). </font></p> </td> </tr></table>
</div>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=1>2</font></p>
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<p style=' margin-bottom:12pt; margin-top:0pt;text-align:left;'>
</p>


<div align=left>

<table border="0" cellspacing=0 cellpadding=0 width="672" >
    <tr >
        <td width="67" valign=bottom >
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><b><font size=2>Number Assigned In</font></b><br> <b><font size=2>Regulation S-K</font></b><br> <u><b><font size=2>Item 601</font></b></u></p> </td>
        <td width="67" valign=bottom >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></p> </td>
        <td width="538" valign=bottom >
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><u><b><font size=2>Description of Exhibits</font></b></u></p> </td> </tr></table>
</div>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>


<div align=left>

<table border="0" cellspacing=0 cellpadding=0 width="672" >
    <tr >
        <td width="67" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></p> </td>
        <td width="67" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=2>10.14 </font></p> </td>
        <td width="538" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Real Estate Mortgage and Security Agreement between Bioanalytical Systems, Inc. and Union Planters Bank, dated October 29, 2002 (incorporated by reference to Exhibit 10.16 of Form 10-K for the fiscal year ended September 30, 2002). </font></p> </td> </tr></table>
</div>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>


<div align=left>

<table border="0" cellspacing=0 cellpadding=0 width="672" >
    <tr >
        <td width="67" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></p> </td>
        <td width="67" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=2>10.15 </font></p> </td>
        <td width="538" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Real Estate Mortgage and Security Agreement between Bioanalytical Systems, Inc. and Union Planters Bank, dated October 29, 2002 (incorporated by reference to Exhibit 10.17 of Form 10-K for the fiscal year ended September 30, 2002). </font></p> </td> </tr></table>
</div>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>


<div align=left>

<table border="0" cellspacing=0 cellpadding=0 width="672" >
    <tr >
        <td width="67" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></p> </td>
        <td width="67" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=2>10.16 </font></p> </td>
        <td width="538" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Term Loan Promissory Note made by Bioanalytical Systems, Inc. in favor of Union Planters Bank, dated October 29, 2002 (incorporated by reference to Exhibit 10.18 of Form 10-K for the fiscal year ended September 30, 2002). </font></p> </td> </tr></table>
</div>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>


<div align=left>

<table border="0" cellspacing=0 cellpadding=0 width="672" >
    <tr >
        <td width="67" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></p> </td>
        <td width="67" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=2>10.17 </font></p> </td>
        <td width="538" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Promissory Note made by Bioanalytical Systems, Inc. in favor of Union Planters Bank, dated October 29, 2002 (incorporated by reference to Exhibit 10.19 of Form 10-K for the fiscal year ended September 30, 2002). </font></p> </td> </tr></table>
</div>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>


<div align=left>

<table border="0" cellspacing=0 cellpadding=0 width="672" >
    <tr >
        <td width="67" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></p> </td>
        <td width="67" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=2>10.18 </font></p> </td>
        <td width="538" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Employment Agreement by and between Bioanalytical Systems, Inc. and Michael R. Cox dated April 1, 2004 (incorporated by reference to Exhibit 10.1 to Form 10-Q for the fiscal quarter ended March 31, 2004). </font></p> </td> </tr></table>
</div>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>


<div align=left>

<table border="0" cellspacing=0 cellpadding=0 width="672" >
    <tr >
        <td width="67" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></p> </td>
        <td width="67" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=2>10.19 </font></p> </td>
        <td width="538" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Purchase and Sale Agreement between BASi Maryland, Inc. and 300 W. Fayette, LLC, closed January 5, 2005 (incorporated by reference to Exhibit 10.1 of Form 8-K filed January 10, 2005). </font></p> </td> </tr></table>
</div>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>


<div align=left>

<table border="0" cellspacing=0 cellpadding=0 width="672" >
    <tr >
        <td width="67" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></p> </td>
        <td width="67" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=2>10.20 </font></p> </td>
        <td width="538" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>First Amendment to the Purchase and Sale Agreement dated September 7, 2004 (incorporated by reference to Exhibit 10.20 to Form 10-K for the fiscal year ended September 30, 2004). </font></p> </td> </tr></table>
</div>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>


<div align=left>

<table border="0" cellspacing=0 cellpadding=0 width="672" >
    <tr >
        <td width="67" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></p> </td>
        <td width="67" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=2>10.21 </font></p> </td>
        <td width="538" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Second Amendment to the Purchase and Sale Agreement dated on or about November 11, 2004 (incorporated by reference to Exhibit 10.21 to Form 10-K for the fiscal year ended September 30, 2004). </font></p> </td> </tr></table>
</div>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>


<div align=left>

<table border="0" cellspacing=0 cellpadding=0 width="672" >
    <tr >
        <td width="67" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></p> </td>
        <td width="67" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=2>10.22 </font></p> </td>
        <td width="538" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Office Lease by and between BASi Maryland, Inc. and 300 W. Fayette Street, LLC, dated on or about January 5, 2004 (incorporated by reference to Exhibit 10.22 to Form 10-K for the fiscal year ended September 30, 2004). </font></p> </td> </tr></table>
</div>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=1>3</font></p>
<!-- EEDocs PBStart-->
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<p style=' margin-bottom:12pt; margin-top:0pt;text-align:left;'>
</p>


<div align=left>

<table border="0" cellspacing=0 cellpadding=0 width="672" >
    <tr >
        <td width="67" valign=bottom >
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><b><font size=2>Number Assigned In</font></b><br> <b><font size=2>Regulation S-K</font></b><br> <u><b><font size=2>Item 601</font></b></u></p> </td>
        <td width="67" valign=bottom >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></p> </td>
        <td width="538" valign=bottom >
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><u><b><font size=2>Description of Exhibits</font></b></u></p> </td> </tr></table>
</div>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>


<div align=left>

<table border="0" cellspacing=0 cellpadding=0 width="672" >
    <tr >
        <td width="67" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></p> </td>
        <td width="67" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=2>10.23 </font></p> </td>
        <td width="538" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Employment Agreement by and between Bioanalytical Systems, Inc. and Edward M. Chait dated August 1, 2005 (incorporated by reference to Exhibit 10.1 to Form 8-K filed August 5, 2005). </font></p> </td> </tr></table>
</div>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>


<div align=left>

<table border="0" cellspacing=0 cellpadding=0 width="672" >
    <tr >
        <td width="67" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></p> </td>
        <td width="67" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=2>10.24 </font></p> </td>
        <td width="538" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Form of Grant of non-qualified stock options dated August 1, 2005 to Edward M. Chait (incorporated by reference to Exhibit 10.24 to Form 10-K for the fiscal year ended September 30, 2005). </font></p> </td> </tr></table>
</div>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>


<div align=left>

<table border="0" cellspacing=0 cellpadding=0 width="672" >
    <tr >
        <td width="67" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></p> </td>
        <td width="67" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=2>10.25</font></p>
<p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=2>&nbsp;</font></p>
<p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></p>
<p style='margin-left:0pt;text-indent:2.25pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=2>10.26</font></p> </td>
        <td width="538" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Form of Grant of non-qualified stock options dated April 1, 2004 to Michael R. Cox (incorporated by reference to Exhibit 10.3 to Form 10-Q for the fiscal quarter ended March 31, 2004). </font></p>
<p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>&nbsp;</font></p>
<p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Severance Agreement and Release of All Claims with Michael P. Silvon, dated July 17, 2006 (incorporated by reference to Exhibit 10.1 to Form 8-K filed July 31, 2006).</font></p> </td> </tr></table>
</div>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>





<div align=left>

<table border="0" cellspacing=0 cellpadding=0 width="672" >
    <tr >
        <td width="67" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></p> </td>
        <td width="67" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=2>10.27 </font></p> </td>
        <td width="538" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>
Summary of Executive Compensation of Officers and Directors.</font></p> </td> </tr></table>
</div>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>





















<div align=left>

<table border="0" cellspacing=0 cellpadding=0 width="672" >
    <tr >
        <td width="67" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=2>(13)</font></p>
<p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=2>&nbsp;</font></p>
<p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></p>
<p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=2>&nbsp;</font></p>
<p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=2>(14) </font></p> </td>
        <td width="67" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=2>13.1</font></p>
<p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=2>&nbsp;</font></p>
<p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></p>
<p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=2>&nbsp;</font></p>
<p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=2>14 </font></p> </td>
        <td width="538" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>2006 Annual Report. This report, except for those portions which are expressly incorporated by reference in this Form 10-K, is furnished for the information of the Commission and is not to be deemed &#147;filed&#148; as part of this Form 10-K. </font></p>
<p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>&nbsp;</font></p>
<p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Code of Ethics.</font></p> </td> </tr></table>
</div>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>


<div align=left>

<table border="0" cellspacing=0 cellpadding=0 width="672" >
    <tr >
        <td width="67" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=2>(21) </font></p> </td>
        <td width="67" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=2>21.1 </font></p> </td>
        <td width="538" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>
Subsidiaries of the Registrant (incorporated by reference to Exhibit 21.1 to Form 10-K for the fiscal year ended September 30, 2005). </font></p> </td> </tr></table>
</div>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>


<div align=left>

<table border="0" cellspacing=0 cellpadding=0 width="672" >
    <tr >
        <td width="67" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=2>(23) </font></p> </td>
        <td width="67" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=2>23.1 </font></p> </td>
        <td width="538" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>
Consent of Independent Registered Public Accounting Firm Crowe Chizek and Company LLC. </font></p> </td> </tr></table>
</div>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>


<div align=left>

<table border="0" cellspacing=0 cellpadding=0 width="672" >
    <tr >
        <td width="67" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></p> </td>
        <td width="67" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=2>23.2 </font></p> </td>
        <td width="538" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Consent of Independent Registered Public Accounting Firm KPMG LLP. </font></p> </td> </tr></table>
</div>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>


<div align=left>

<table border="0" cellspacing=0 cellpadding=0 width="672" >
    <tr >
        <td width="67" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=2>(31) </font></p> </td>
        <td width="67" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=2>31.1 </font></p> </td>
        <td width="538" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Certification of Chief Executive Officer. </font></p> </td> </tr></table>
</div>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>


<div align=left>

<table border="0" cellspacing=0 cellpadding=0 width="672" >
    <tr >
        <td width="67" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></p> </td>
        <td width="67" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=2>31.2 </font></p> </td>
        <td width="538" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Certification of Chief Financial Officer. </font></p> </td> </tr></table>
</div>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>


<div align=left>

<table border="0" cellspacing=0 cellpadding=0 width="672" >
    <tr >
        <td width="67" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=2>(32) </font></p> </td>
        <td width="67" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=2>32.1 </font></p> </td>
        <td width="538" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Section 1350 Certifications. </font></p> </td> </tr></table>
</div>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>



<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=1>4</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>
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<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>


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<TITLE>Amended and Restated Bylaws of Bioanalytical Systems, Inc. - Exhibit 3.2</TITLE>
</HEAD>
<BODY>


<P ALIGN=right><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Exhibit 3.2</FONT></P>
<BR>

<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>AMENDED AND RESTATED BYLAWS OF<BR>
<BR>
BIOANALYTICAL SYSTEMS, INC.</B><BR>
<BR>
<I>(Including Amendments through September 30, 2006)</I></FONT></P>
<BR>


<!-- MARKER FORMAT-SHEET="HEADING CENTER BOLD" FSL="Default" -->
<A NAME=A001></A>
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ARTICLE&nbsp;I. </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold 1" FSL="Default" -->
<A NAME=A002></A>
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>Records Pertaining to
Share Ownership </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;1.1.&nbsp;&nbsp;&nbsp;&nbsp;
<U>Recognition of Shareholders</U>.&nbsp;&nbsp;&nbsp;&nbsp;Bioanalytical Systems,&nbsp;Inc. (the
&#147;Corporation&#148;) is entitled to recognize a person registered on its
books as the owner of shares of the Corporation as having the exclusive right to
receive dividends and to vote those shares, notwithstanding any other
person&#146;s equitable or other claim to, or interest in, those shares.
</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;1.2.&nbsp;&nbsp;&nbsp;&nbsp;
<U>Transfer of Shares</U>.&nbsp;&nbsp;&nbsp;&nbsp;Shares are transferable only on the books of the
Corporation, subject to any transfer restrictions imposed by the Articles of
Incorporation, these Bylaws, or an agreement among shareholders and the
Corporation.&nbsp; Shares may be so transferred upon presentation of the
certificate representing the shares, endorsed by the appropriate person or
persons, and accompanied by (a)&nbsp;reasonable assurance that those
endorsements are genuine and effective, and (b)&nbsp;a request to register the
transfer.&nbsp; Transfers of shares are otherwise subject to the provisions of
the Indiana Business Corporation Law (the &#147;Act&#148;), Article&nbsp;8 of
the Indiana Uniform Commercial Code and federal securities laws. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;1.3.&nbsp;&nbsp;&nbsp;&nbsp;
<U>Certificates</U>.&nbsp;&nbsp;&nbsp;&nbsp;Each shareholder is entitled to a certificate signed
(manually or in facsimile) by the President or a Vice President and the
Secretary or an Assistant Secretary, setting forth (a)&nbsp;the name of the
Corporation and that it was organized under Indiana law, (b)&nbsp;the name of
the person to whom issued, (c)&nbsp;the number, class, and series of shares
represented, and (d)&nbsp;a conspicuous statement that the Corporation will
furnish to the holder of the certificate on request, in writing, and without
charge, a summary of the designations, relative rights, preferences, and
limitations applicable to each such class of shares, and the variations in
rights, preferences, and limitations determined for each series within a class
(and the authority of the Board of Directors to determine variations for future
series).&nbsp; The Board of Directors shall prescribe the form of the
certificate. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;1.4.&nbsp;&nbsp;&nbsp;&nbsp;
<U>Lost or Destroyed Certificates</U>.&nbsp;&nbsp;&nbsp;&nbsp;A new certificate may be issued to replace a
lost or destroyed certificate.&nbsp; Unless waived by the Board of Directors,
the shareholder in whose name the certificate was issued shall make an affidavit
or affirmation of the fact that the certificate is lost or destroyed, shall
advertise the loss or destruction in such manner as the Board of Directors may
require, and shall give the Corporation a bond of indemnity in the amount and
form which the Board of Directors may prescribe. </FONT></P>



<hr>
<PAGE>


<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B>ARTICLE II.<BR>
<BR>
Meetings of the Shareholders</B><BR>
</FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;2.1.&nbsp;&nbsp;&nbsp;&nbsp;
<U>Annual Meetings</U>.&nbsp;&nbsp;&nbsp;&nbsp;Annual meetings of the shareholders shall be held on the
second Monday in February&nbsp;of each year, or on such other date as may be designated by
the Board of Directors. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;2.2.&nbsp;&nbsp;&nbsp;&nbsp;
<U>Special Meetings</U>.&nbsp;&nbsp;&nbsp;&nbsp;Special meetings of the shareholders may be called by the
President or by the Board of Directors.&nbsp; Special meetings of the shareholders shall
be called upon delivery to the Secretary of the Corporation of one or more written demands
for a special meeting of the shareholders describing the purposes of that meeting and
signed and dated by the holders of at least 25% of all the votes entitled to be cast on
any issue proposed to be considered at that meeting. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;2.3.&nbsp;&nbsp;&nbsp;&nbsp;
<U>Notice of Meetings</U>.&nbsp;&nbsp;&nbsp;&nbsp;The Corporation shall deliver or mail written notice
stating the date, time, and place of any shareholders&#146; meeting and, in the case of a
special shareholders&#146; meeting or when otherwise required by law, a description of the
purposes for which the meeting is called, to each shareholder of record entitled to vote
at the meeting, at such address as appears in the records of the Corporation and at least
10, but no more than 60, days before the date of the meeting.&nbsp; A shareholders&#146;
meeting shall be held at such place, either in or out of the State of Indiana, as may be
specified by the Board of Directors in the respective notice for such meeting. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;2.4.&nbsp;&nbsp;&nbsp;&nbsp;
<U>Waiver of Notice</U>.&nbsp;&nbsp;&nbsp;&nbsp;A shareholder may waive notice of any meeting, before or
after the date and time of the meeting as stated in the notice, by delivering a signed
waiver to the Corporation for inclusion in the minutes.&nbsp; A shareholder&#146;s
attendance at any meeting, in person or by proxy (a)&nbsp;waives objection to lack of
notice or defective notice of the meeting, unless the shareholder at the beginning of the
meeting objects to holding the meeting or transacting business at the meeting, and
(b)&nbsp;waives objection to consideration of a particular matter at the meeting that is
not within the purposes described in the meeting notice, unless the shareholder objects to
considering the matter when it is presented. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;2.5.&nbsp;&nbsp;&nbsp;&nbsp;
<U>Record Date</U>.&nbsp;&nbsp;&nbsp;&nbsp;The Board of Directors may fix a record date, which may be a
future date, for the purpose of determining the shareholders entitled to notice of a
shareholders&#146; meeting, to demand a special meeting, to vote, or to take any other
action.&nbsp; A record date shall be at least 10, but not more than 70, days before the
meeting or action requiring a determination of shareholders.&nbsp; If the Board of
Directors does not fix a-record date, the record date shall be the 10th day prior to the
date of the meeting or other action. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;2.6.&nbsp;&nbsp;&nbsp;&nbsp;
<U>Voting by Proxy</U>.&nbsp;&nbsp;&nbsp;&nbsp;A shareholder may appoint a proxy to vote or otherwise act
for the shareholder pursuant to a written appointment form executed by the shareholder or
the shareholder&#146;s duly authorized attorney-in-fact.&nbsp; An appointment of a proxy
is effective when received by the Secretary or other officer or agent of the Corporation
authorized to tabulate votes.&nbsp; The general proxy of a fiduciary is given the same
effect as the general proxy of any other shareholder.&nbsp; A proxy appointment is valid
for 11 months unless otherwise expressly stated in the appointment form. </FONT></P>


<BR>
<BR>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
2</FONT></P>
<HR>
<PAGE>


<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;2.7.&nbsp;&nbsp;&nbsp;&nbsp;
<U>Voting Lists</U>.&nbsp;&nbsp;&nbsp;&nbsp;Following the record date for a shareholders&#146; meeting, the
Secretary shall prepare an alphabetical list of all shareholders entitled to notice of the
meeting, arranged by voting group and within each voting group by class and series, and
showing the address and number of shares held by each shareholder.&nbsp; The list shall be
kept on file at the principal office of the Corporation or at a place identified in the
meeting notice in the city where the meeting will be held.&nbsp; The list shall be
available for inspection and copying by any shareholder entitled to vote at the meeting,
or by the shareholder&#146;s agent or attorney authorized in writing, at any time during
regular business hours, beginning 5 business days before the date of the meeting through
the meeting.&nbsp; The list shall also be made available to any shareholder, or to the
shareholder&#146;s agent or attorney authorized in writing, at the meeting and any
adjournment thereof.&nbsp; Failure to prepare or make available a voting list with respect
to any shareholder&#146;s meeting shall not affect the validity of any action taken at
such meeting. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;2.8.&nbsp;&nbsp;&nbsp;&nbsp;
<U>Quorum; Approval</U>.&nbsp;&nbsp;&nbsp;&nbsp;At any meeting of shareholders, a majority of the votes
entitled to be cast on a matter by a voting group at the meeting constitutes a quorum of
that voting group.&nbsp; If a quorum of a voting group is present when a vote is taken,
action on a matter is approved by that voting group if the votes cast in favor of the
action exceed the votes cast in opposition to the action, unless a greater number is
required by law, the Articles of Incorporation, or these Bylaws.&nbsp; If more than one
voting group is entitled to vote on a matter, approval by each voting group is required
for the matter to be approved by the shareholders as a whole. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold 1" FSL="Default" -->
<A NAME=A007></A>
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ARTICLE III.<BR>
<BR>
Board of Directors</FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;3.1.&nbsp;&nbsp;&nbsp;&nbsp;
<U>Powers and Duties</U>.&nbsp;&nbsp;&nbsp;&nbsp;All corporate powers are exercised by or under the
authority of, and the business and affairs of the Corporation are managed under the
direction of, the Board of Directors, unless otherwise provided in the Articles of
Incorporation. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;3.2.&nbsp;&nbsp;&nbsp;&nbsp;
<U>Number and Terms of Office; Qualifications</U>.&nbsp;&nbsp;&nbsp;&nbsp;The Corporation shall have no
fewer than seven and no greater than nine directors.&nbsp; Subject to the limitations
contained in this <U>Section&nbsp;3.2</U>, the number of directors may be fixed or changed
from time to time by a majority vote of the Board of Directors.&nbsp; Directors are
elected at each annual shareholders&#146; meeting and serve for a term expiring at the
following annual shareholders&#146; meeting.&nbsp; A director who has been removed
pursuant to <U>Section&nbsp;3.3</U> ceases to serve immediately upon removal; otherwise, a
director whose term has expired continues to serve until a successor is elected and
qualifies or until there is a decrease in the number of directors.&nbsp; A person need not
be a shareholder or an Indiana resident to qualify to be a director. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;3.3.&nbsp;&nbsp;&nbsp;&nbsp;
<U>Removal</U>.&nbsp;&nbsp;&nbsp;&nbsp;Subject to any limitations on, and requirements for, removal of
directors contained in the Articles of Incorporation, any director may be removed with or
without cause by action of the shareholders taken at any meeting the notice of which
states that one of the purposes of the meeting is removal of the director. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;3.4.&nbsp;&nbsp;&nbsp;&nbsp;
<U>Vacancies</U>.&nbsp;&nbsp;&nbsp;&nbsp;Subject to any provisions concerning the filling of vacancies
contained in the Articles of Incorporation, if a vacancy occurs on the Board of
Directors, including a vacancy resulting from an increase in the number of
directors, the Board of Directors may fill the vacancy; and if the directors
remaining in office constitute fewer than a quorum of the Board, the directors
remaining in office may fill the vacancy by the affirmative vote of a majority
of those directors.&nbsp; Any director elected to fill a vacancy holds office
until the next annual meeting of the shareholders and/or until a successor is
elected and qualifies.</FONT></P>


<BR>
<BR>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
3</FONT></P>
<HR>
<PAGE>





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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;3.5.&nbsp;&nbsp;&nbsp;&nbsp;
<U>Annual Meetings</U>.&nbsp;&nbsp;&nbsp;&nbsp;Unless otherwise agreed by the Board of Directors, the
annual meeting of the Board of Directors shall be held immediately following the annual
meeting of the shareholders, at the place where the meeting of shareholders was held, for
the purpose of electing officers and considering any other business which may be
specifically set forth in the notice of the meeting. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;3.6.&nbsp;&nbsp;&nbsp;&nbsp;
<U>Regular and Special Meetings</U>.&nbsp;&nbsp;&nbsp;&nbsp;Regular meetings of the Board of Directors may
be held pursuant to a resolution of the Board of Directors establishing a method for
determining the date, time, and place of those meetings.&nbsp; Special meetings of the
Board of Directors may be held upon the call of the President or of any one director. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;3.7.&nbsp;&nbsp;&nbsp;&nbsp;
<U>Notice and Agenda</U>.&nbsp;&nbsp;&nbsp;&nbsp;Notice of a meeting may be waived in writing before or
after the time of the meeting.&nbsp; The waiver must be signed by the director entitled to
the notice and filed with the minutes of the meeting.&nbsp; A director&#146;s attendance
at or participation in a meeting waives any required notice of the meeting, unless at the
beginning of the meeting (or promptly upon the director&#146;s arrival) the director
objects to holding the meeting or transacting business at the meeting and does not
thereafter vote for or assent to action taken at the meeting.&nbsp; All notices of a
meeting of the Board of Directors shall include an agenda specifically setting forth in
reasonable detail any and all matters to be officially acted upon at such meeting. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;3.8.&nbsp;&nbsp;&nbsp;&nbsp;
<U>Quorum</U>.&nbsp;&nbsp;&nbsp;&nbsp;A quorum for the transaction of business at any meeting of the Board
of Directors consists of a majority of the number of directors then in office.&nbsp; In
all cases, except as otherwise expressly required by the Act or the Articles of
Incorporation, the approval or consent of a majority of the directors then in office shall
be required in order to authorize or approve actions or other matters presented to the
Board of Directors. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;3.9.&nbsp;&nbsp;&nbsp;&nbsp;
<U>Action by Consent</U>.&nbsp;&nbsp;&nbsp;&nbsp;Any action required or permitted to be taken at any
meeting of the Board of Directors may be taken without a meeting if the action is taken by
all directors then in office.&nbsp; The action must be evidenced by one or more written
consents describing the action taken, signed by each director, and included in the
minutes.&nbsp; Action of the Board of Directors taken by consent is effective when the
last director signs the consent, unless the consent specifies a prior or subsequent
effective date. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;3.10.&nbsp;&nbsp;&nbsp;&nbsp;
<U>Committees</U>.&nbsp;&nbsp;&nbsp;&nbsp;The Board of Directors may create one or more committees and
appoint members of the Board of Directors to serve on them.&nbsp; Each committee
may have one or more members, who serve at the pleasure of the Board of
Directors.&nbsp; All rules&nbsp;applicable to action by the Board of Directors
apply to committees and their members.&nbsp; The Board of Directors may specify
the authority that a committee may exercise; however, a committee may not
(a)&nbsp;authorize distributions, except a committee may authorize or approve a
reacquisition of shares if done according to a formula or method prescribed by
the Board of Directors, (b)&nbsp;approve or propose to shareholders action that
must be approved by shareholders, (c)&nbsp;fill &nbsp;vacancies on the Board of
Directors or on any of its committees, (d)&nbsp;amend the Articles of
Incorporation, (e)&nbsp;adopt, amend, or repeal these Bylaws, (f)&nbsp;approve a
plan of merger not requiring shareholder approval, or (g)&nbsp;authorize or
approve the issuance or sale or a contract for the sale of shares, or determine
the designation and relative rights, preferences, and limitations of a class or
series of shares.</FONT></P>


<BR>
<BR>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
4</FONT></P>
<HR>
<PAGE>



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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;3.11.&nbsp;&nbsp;&nbsp;&nbsp;
<U>Presence</U>.&nbsp;&nbsp;&nbsp;&nbsp;The Board of Directors may permit any or all directors to
participate in any annual, regular, or special meeting by any means of communication by
which all directors participating may simultaneously hear each other during the
meeting.&nbsp; A director so participating is deemed to be present in person at the
meeting. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section
3.12.&nbsp;&nbsp;&nbsp;&nbsp;<U>Compensation</U>.&nbsp;&nbsp;&nbsp;&nbsp;Each director
shall receive such compensation for service as a director as may be fixed by the
Board of Directors.</FONT></P>

<!-- MARKER FORMAT-SHEET="HEADING CENTER BOLD" FSL="Default" -->
<A NAME=A010></A>
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ARTICLE&nbsp;IV.<BR>
<BR>
Officers</FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 4.1.&nbsp;&nbsp;&nbsp;&nbsp;<U>Officers</U>.&nbsp;&nbsp;&nbsp;&nbsp;The
Corporation shall have a Chairman of the Board, a President, one or more Vice
Presidents, a Secretary, a Treasurer, and such other officers as the Board of
Directors or the President designates. The Board of Directors or the President
may designate one or more Vice Presidents to serve as Executive Vice Presidents
or Senior Vice Presidents. The same individual may simultaneously hold more than
one office. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;4.2.&nbsp;&nbsp;&nbsp;&nbsp;
<U>Terms of Office</U>.&nbsp;&nbsp;&nbsp;&nbsp;Officers are elected at each annual meeting of the Board of
Directors and serve for a term expiring at the following annual meeting of the Board of
Directors.&nbsp; An officer who has been removed pursuant to <U>Section&nbsp;4.4</U>
ceases to serve as an officer immediately upon removal; otherwise, an officer whose term
has expired continues to serve until a successor is elected and qualifies. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;4.3.&nbsp;&nbsp;&nbsp;&nbsp;
<U>Vacancies</U>.&nbsp;&nbsp;&nbsp;&nbsp;If a vacancy occurs among the officers, the Board of Directors may
fill the vacancy.&nbsp; Any officer elected to fill a vacancy holds office until the next
annual meeting of the Board of Directors and until a successor is elected and qualifies. </FONT></P>

<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 4.4.&nbsp;&nbsp;&nbsp;&nbsp;
<U>Removal</U>.&nbsp;&nbsp;&nbsp;&nbsp;Any officer may be removed by the Board of Directors at
any time with or without cause.</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;4.5.&nbsp;&nbsp;&nbsp;&nbsp;
<U>Compensation</U>.&nbsp;&nbsp;&nbsp;&nbsp;Each officer shall receive such compensation for service in
office as may be fixed by the Board of Directors. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section
4.6.&nbsp;&nbsp;&nbsp;&nbsp;<U>President</U>.&nbsp;&nbsp;&nbsp;&nbsp;The
President is the chief executive officer of the Corporation and is responsible
for managing and supervising the affairs and personnel of the Corporation,
subject to the general control of the Board of Directors. The President, or
proxies appointed by the President, may vote shares of other corporations owned
by the Corporation. The President has authority to execute, with the Secretary
(as required), powers of attorney appointing other corporations, partnerships,
entities or individuals as the agents of the Corporation, subject to law, the
Articles of Incorporation and these Bylaws. The President has such other powers
and duties as the Board of Directors may from time to time prescribe.  The President
has such other powers and duties as the Board of Directors may from time to time
prescribe.
</FONT></P>




<BR>
<BR>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
5</FONT></P>
<HR>
<PAGE>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;4.7.&nbsp;&nbsp;&nbsp;&nbsp;
<U>Vice Presidents</U>.&nbsp;&nbsp;&nbsp;&nbsp;The Vice Presidents shall have such powers and
perform such duties as the President and the Board of Directors may from time to
time prescribe.&nbsp; The Vice Presidents (in order of seniority) shall have all
the powers of, and perform all the duties incumbent upon, the President during
the President&#146;s absence or disability. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;4.8.&nbsp;&nbsp;&nbsp;&nbsp;
<U>Secretary</U>.&nbsp;&nbsp;&nbsp;&nbsp;The Secretary is responsible for (a)&nbsp;attending all meetings
of the shareholders and the Board of Directors, (b)&nbsp;preparing true and complete
minutes of the proceedings of all meetings of the shareholders, the Board of Directors,
and all committees of the Board of Directors, (c)&nbsp;maintaining and safeguarding the
books (except books of account) and records of the Corporation, and
(d)&nbsp;authenticating the records of the Corporation.&nbsp; If required, the Secretary
attests the execution of deeds, leases, agreements, powers of attorney, certificates
representing shares of the Corporation, and other official documents by the
Corporation.&nbsp; The Secretary serves all notices of the Corporation required by law,
the Board of Directors, or these Bylaws.&nbsp; The Secretary has such other duties as the
Board of Directors may from time to time prescribe. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;4.9.&nbsp;&nbsp;&nbsp;&nbsp;
<U>Treasurer</U>.&nbsp;&nbsp;&nbsp;&nbsp;The Treasurer is responsible for (a)&nbsp;keeping correct and
complete books of account which show accurately at all times the financial condition of
the Corporation, (b)&nbsp;safeguarding all funds, notes, securities, and other valuables
which may from time to time come into the possession of the Corporation, and
(c)&nbsp;depositing all funds of the Corporation with such depositories as the Board of
Directors shall designate.&nbsp; The Treasurer shall furnish at meetings of the Board of
Directors, or when otherwise requested, a statement of the financial condition of the
Corporation.&nbsp; The Treasurer has such other duties as the Board of Directors may from
time to time prescribe. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;4.10.&nbsp;&nbsp;&nbsp;&nbsp;
<U>Other Officers</U>.&nbsp;&nbsp;&nbsp;&nbsp;The Board of Directors or the President may from time to time
designate and elect other officers (including assistant officers) who shall have
such powers and duties as the President, the Board of Directors, or if assistant
officer, the officers whom they are elected to assist, specify and delegate to
them, and such other powers and duties as the Board of Directors or the
President may from time to time prescribe.&nbsp; An Assistant Secretary may,
during the absence or disability of the Secretary, discharge all
responsibilities imposed upon the Secretary of the Corporation, including,
without limitation, attest the execution of all documents by the Corporation.
</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;4.11.&nbsp;&nbsp;&nbsp;&nbsp;
<U>Chairman of the Board<I></I></U><I>.</I>&nbsp;&nbsp;&nbsp;&nbsp;The Chairman of the Board
shall preside at all meetings of the shareholders and of the Board of Directors
and shall have such other duties, powers and responsibilities as are assigned to
the Chairman of the Board by the Board of Directors from time to time.
</FONT></P>

<!-- MARKER FORMAT-SHEET="HEADING CENTER BOLD" FSL="Default" -->
<A NAME=A013></A>
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ARTICLE&nbsp;V.<BR>
<BR>
Miscellaneous </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;5.1.&nbsp;&nbsp;&nbsp;&nbsp;
<U>Records</U>.&nbsp;&nbsp;&nbsp;&nbsp;The Corporation shall keep as permanent records minutes of all
meetings of the shareholders, the Board of Directors, and all committees of the
Board of Directors, and a record of all actions taken without a meeting by the
shareholders, the Board of Directors, and all committees of the Board of
Directors.&nbsp; The Corporation or its agent shall maintain a record of the
shareholders in a form that permits preparation of a list of the names and
addresses of all shareholders, in alphabetical order by class of shares showing
the number and class of shares held by each.&nbsp;&nbsp;&nbsp;&nbsp;The
Corporation shall maintain its records in written form or in a form capable of
conversion into written form within a reasonable time.&nbsp; The Corporation
shall keep a copy of the following records at its principal office: (a)&nbsp;the
Articles of Incorporation then currently in effect, (b)&nbsp;the Bylaws then
currently in effect, (c)&nbsp;all resolutions adopted by the Board of Directors
with respect to one or more classes or series of shares and fixing their
relative rights, preferences, and limitations, if shares issued pursuant to
those resolutions are outstanding, (d)&nbsp;minutes of all shareholders&#146;
meetings, and records of all actions taken by shareholders without a meeting,
for the past 3 years, (e)&nbsp;all written communications to shareholders
generally during the past 3 years, including annual financial statements
furnished upon request of the shareholders, (f)&nbsp;a list of the names and
business addresses of the current directors and officers, and (g)&nbsp;the most
recent annual report filed with the Indiana Secretary of State.</FONT></P>





<BR>
<BR>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
6</FONT></P>
<HR>
<PAGE>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;5.2.&nbsp;&nbsp;&nbsp;&nbsp;
<U>Execution of Contracts and Other Documents</U>.&nbsp;&nbsp;&nbsp;&nbsp;Unless otherwise
authorized or directed by the Board of Directors, all written contracts and
other documents entered into by the Corporation shall be executed on behalf of
the Corporation by the President or a Vice President, and, if required, attested
by the Secretary or an Assistant Secretary. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;5.3.&nbsp;&nbsp;&nbsp;&nbsp;
<U>Accounting Year</U>.&nbsp;&nbsp;&nbsp;&nbsp;The accounting year of the Corporation begins on
October&nbsp;l of each year and ends on the September&nbsp;30 immediately
following. </FONT></P>

<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section
5.4.&nbsp;&nbsp;&nbsp;&nbsp;<U>Corporate Seal</U>.&nbsp;&nbsp;&nbsp;&nbsp;The Corporation has no
seal.</FONT></P>

<A NAME=A016></A>
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ARTICLE&nbsp;VI.<BR>
<BR>
Amendment </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These
Bylaws may be amended or repealed only by the Board of Directors. </FONT></P>




<BR>
<BR>
<BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
7</FONT></P>
<HR>


</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>5
<FILENAME>exhibit1027.htm
<DESCRIPTION>EXHIBIT 10.27
<TEXT>
<HTML>
<HEAD>
<TITLE>Exhibit 10.27</TITLE>
</HEAD>
<BODY>


<P ALIGN=right><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Exhibit 10.27</FONT></P>
<BR>

<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS<BR>
<BR>
OPTION GRANTS AND SALARIES OF EXECUTIVE OFFICERS:<BR>
<BR>
During the fiscal year ended September 30, 2006 the following salaries were paid and option grants were
approved:
</FONT></P>
<BR>

<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=80%>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2>POSITION</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2>SALARY</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2>OPTION SHARES</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>

<TR>
<TD>&nbsp;</TD></TR>


<TR VALIGN=Bottom>
<TD WIDTH=40% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Peter T. Kissinger, Ph.D</FONT></TD>
<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>

<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=6% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>

<TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=6% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>

<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Chairman of the Board and Chief Scientific Officer</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>

<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 108,368</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.88</FONT></TD>

<TD colspan=1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0</FONT></TD></TR>

<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Richard M. Shepperd<SUP>(1)</SUP></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;President and Chief Executive Officer</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>    420,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.00</FONT></TD>

<TD colspan=1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0</FONT></TD></TR>


<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Ronald E. Shoup, Ph.D</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Chief Operating Officer, BASi Contract Research Services</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>    143,468</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.18</FONT></TD>

<TD colspan=1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0</FONT></TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Michael R. Cox</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Vice President, Finance; Chief Financial Officer; Treasurer</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>    153,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.00</FONT></TD>

<TD colspan=1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0</FONT></TD></TR>


<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Edward M. Chait, Ph.D</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Executive Vice President &amp; Chief Scientific Officer</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>    150,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.00</FONT></TD>

<TD colspan=1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0</FONT></TD></TR>


<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Candice B. Kissinger</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Senior Vice President, R&amp;D; Secretary and Director</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>    118,283</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.58</FONT></TD>

<TD colspan=1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0</FONT></TD></TR>


<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Craig S. Bruntlett, Ph.D</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Senior Vice President, Sales Development</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>     89,460</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.00</FONT></TD>

<TD colspan=1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0</FONT></TD></TR>


<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Lina L. Reeves-Kerner</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Vice President, Human Resources</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>     96,171</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.80</FONT></TD>

<TD colspan=1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0</FONT></TD></TR>


</TABLE>

<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<SUP>(1)</SUP>&nbsp;Mr. Shepperd joined the Company October 1, 2006. He also has
a bonus arrangement<BR>
whereby he is paid 10% of EBITDA each quarter, to a maximum
of $150,000 per quarter.
</FONT></P>



<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
OPTION GRANTS AND FEES PAID TO DIRECTORS:</FONT></P>

<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The following compensation schedule for Directors was approved:</FONT></P>



<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=left WIDTH=60%>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH></TR>
<TR VALIGN=Bottom>
<TD WIDTH=50% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Annual Retainer:</FONT></TD>
<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>

<TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
<TD WIDTH=32% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 0&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Stock Options (three year vesting):</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>none granted</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Attendance Fee per Meeting:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 2,000&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Audit Committee Chairman (separate retainer):</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   500&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Chairman of the Board</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>

<TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>non additional compensation</FONT></TD>
</TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>All other Committee Chairmen:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   500&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
</TABLE>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-13
<SEQUENCE>6
<FILENAME>exhibit131.htm
<DESCRIPTION>EXHIBIT 13.1
<TEXT>
<HTML>
<HEAD>
<TITLE>Exhibit 13.1</TITLE>
</HEAD>
<BODY>



<BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><IMG SRC="basilogo.gif"></FONT></P>

<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=4>
2006 ANNUAL REPORT</FONT></P>
<BR>



<PAGE>


<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>December 28, 2006<BR>
<BR>

Dear BASi Shareholders,</FONT></P>

<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Fiscal 2006 was one of the more difficult years in the history of our company.
We experienced record losses with only a modest increase in revenue, but
importantly, we took definitive actions and developed tactics that we believe
increase the probability of a successful future for BASi. The losses, in part,
reflect our problems in properly sizing our operations for our volume of
business, resulting in underutilized capacity. The difficulty of integrating new
service capabilities from recent acquisitions into our business development
activities has also slowed our revenue growth. During the past fiscal year, the
problems in our Baltimore clinical unit, including the loss of a major customer
due to its acquisition, resulted in a sizeable impairment charge in the third
quarter. During fiscal 2006 we addressed staffing issues through reductions in
our Baltimore, United Kingdom, and West Lafayette operations, adding additional
short-term costs for severance. This rightsizing positions us for profitable
operations in fiscal 2007. Increased sales efforts and development of new, more
profitable market segments have positioned us for revenue growth in our
Baltimore operation. We expect to build strong customer relationships for all
our service businesses to assure more consistent revenue growth. During this
time, our markets and development opportunities have remained strong, offering a
promising future for the Company.</FONT></P>

<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>I was
recruited by the Company as President and CEO to address the issues of revenue
and profitability. We have implemented aggressive new programs from which we
expect to see improved future results. Working with a newly invigorated team of
experienced managers within the Company, dedicated to revenue growth and cost
control, we have developed a tactical plan for fiscal 2007 with a sharp focus on
obtaining budgeted revenues based on attainable growth plans using current
capacity. We have identified specific targets for profitability from each of our
business units and created an adaptive organization responsive to changing
business conditions to maintain our focus on achieving our
objectives.</FONT></P>

<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The Company now has a full strength Business Development team deployed in the US
and in the UK/Europe intent on increasing revenues. Since the beginning of our
new fiscal year, we have increased productivity in our three Bioanalytical
laboratories in West Lafayette, Indiana, McMinnville, Oregon and the United
Kingdom, and are keeping our Evansville, Indiana Pre-Clinical operations near
capacity. We now have new management and clinic personnel in Baltimore who are
dedicated to success. We are installing a number of Culex&reg; instruments around
the world, introducing new in-vivo products and growing our
Pharmacokinetics/Pharmacodynamics Services business in West Lafayette. We are
rebuilding our Information Technology Department from the ground up to meet the
needs of our scientific operations and our evolving financial information
system. We have set defined financial goals for our management at all levels,
and have improved the timeliness of financial reporting in order to give them
the information they need to respond to changing results.</FONT></P>


<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Building on the positive steps taken in fiscal 2006, we begin fiscal 2007 with a
great deal of optimism and purpose. We continue to evaluate all facets of our
businesses with the objective of achieving strong financial returns for our
shareholders, and providing a stable environment for our many excellent
employees. The BASi team is committed to our plan for profitability, and
dedicated to building shareholder value.</FONT></P>

<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Sincerely,<BR>
<BR>
/s/&nbsp;&nbsp;Richard M. Shepperd<BR>
<BR>
Richard M. Shepperd<BR>
President and CEO</FONT></P>


<PAGE>








<!-- MARKER FORMAT-SHEET="SIGNATURE BLOCK" FSL="Workstation" -->
<TABLE WIDTH=100% CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=40%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B>Board of Directors</B><hr align=left noshade width=100%>

Peter T. Kissinger, Ph.D.<BR>
Chairman and Chief Scientific Officer<BR>
<BR>
Candice B. Kissinger<BR>
Senior Vice President and Research Director<BR>
Corporate Secretary<BR>
<BR>
William E. Baitinger*<BR>
Special Assistant to the Vice President for Research<BR>
Purdue University<BR>
<BR>
Leslie B. Daniels*<BR>
Principal<BR>
CAI Advisors &amp; Co., LLP<BR>
<BR>
David W. Crabb, M.D.*<BR>
Chairman<BR>
Indiana University Department of Medicine<BR>
<BR>
<BR>

* <I>Audit Committee Member</I></FONT></TD>





<TD width=5%>&nbsp;</TD>





<TD WIDTH=50%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B>Annual Meeting of Shareholders</B><hr align=left noshade width=100%>
February 15, 2007<BR>
BASi Corporate Center<BR>
West Lafayette, Indiana<BR>
<BR>
<BR>

<B>Auditors</B><hr align=left noshade width=100%>
Crowe Chizek and Company LLC<BR>
Indianapolis, Indiana<BR>
<BR>
<BR>

<B>Transfer Agent</B><hr align=left noshade width=100%>
Corporate Trust Department<BR>
National City Bank<BR>
1900 East 9th Street<BR>
Cleveland, Ohio  44114<BR>
<BR>
<BR>

<B>Common Shares</B><hr align=left noshade width=100%>
Bioanalytical Systems, Inc. common shares are traded on the NASDAQ
National Market System under the symbol BASI.<BR>
<BR>
The following table sets forth by calendar quarter the high and low<BR>
sales prices of the common shares on the NASDAQ National Market<BR>
System. The approximate number of holders of common shares is 2,700.</FONT><BR>
</TD></TR></table>



<BR>

<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=right WIDTH=50%>
<TR VALIGN=Bottom>
     <TH align=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Fiscal</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1st Qtr.</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2nd Qtr.</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3rd Qtr.</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4th Qtr.</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=19% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>2006</B></FONT></TD>
     <TD WIDTH=22% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
     <TD WIDTH=22% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=22% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=15% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>High</FONT></TD>
     <TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6.40</FONT></TD>
     <TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7.21</FONT></TD>
     <TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7.80</FONT></TD>
     <TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7.64</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Low</FONT></TD>
     <TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.75</FONT></TD>
     <TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.68</FONT></TD>
     <TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.86</FONT></TD>
     <TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.75</FONT></TD></TR>

<TR>
<TD>&nbsp;</TD></TR>


<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>2005</B></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>High</FONT></TD>
     <TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6.69</FONT></TD>
     <TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.37</FONT></TD>
     <TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.35</FONT></TD>
     <TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6.84</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Low</FONT></TD>
     <TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.56</FONT></TD>
     <TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.70</FONT></TD>
     <TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.19</FONT></TD>
     <TD ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.25</FONT></TD></TR>
</TABLE>

















<TABLE WIDTH=100% CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=40%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
&nbsp;</FONT></TD>





<TD width=5%>&nbsp;</TD>

<BR><BR><BR><BR><BR><BR><BR><BR>




<TD WIDTH=50%><P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The Company has not paid any cash dividends on its common shares for
the three most recent fiscal years. The Company has no intention to
pay cash dividends in the foreseeable future.</FONT></P>
<BR>

<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B>Inquiries</B><hr align=left noshade width=100%><BR>
A copy of the Company&#146;s 2006 Form 10-K Annual Report filed with the Securities
and Exchange Commission is available without charge upon written request, and by
visiting www.bioanalytical.com/invest/annual.html. Media inquiries and requests
for the 10-K and investor&#146;s kits should be directed to:<BR>
<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Corporate Communications Director, Corporate Center<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2701 Kent Avenue,  West Lafayette, IN  47906  USA<BR>
<BR>
Inquiries from shareholders, security analysts, portfolio managers,
registered representatives and other interested parties should be
directed to:<BR>
<BR>

BASi Investor Relations, NASDAQ:&nbsp;&nbsp;BASI<BR>
phone 765-463-4527, fax 765-497-1102,<BR>
<I>basi@bioanalytical.com, www.bioanalytical.com</I></FONT></TD>
</TR>
</TABLE>
<BR>


<PAGE>

<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B>Selected Consolidated Financial Data</B><hr align=left noshade width=100%></FONT></P>


<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=100%>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=14><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Year Ended September 30,</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2006</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2005</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2004</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2003</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2002</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TD align=center COLSPAN=15><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(in thousands, except per share data)</FONT></TD>
</TR>
<TR VALIGN=Bottom>
     <TD WIDTH=49% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Statement of Operations Data:</FONT></TD>
     <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD WIDTH=6% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
        <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD WIDTH=6% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
        <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD WIDTH=6% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
        <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD WIDTH=6% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
        <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD WIDTH=6% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
        <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>

<TR>
<TD>&nbsp;</TD></TR>


<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Service revenue</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  34,318</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  32,951</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  24,928</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  19,987</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  16,140</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Product revenue</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8,730</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9,444</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>12,224</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9,852</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10,373</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=14 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total revenue</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>43,048</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>42,395</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>37,152</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>29,839</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>26,513</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>

<TR>
<TD>&nbsp;</TD></TR>


<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Cost of service revenue</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>25,961</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>23,589</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>21,348</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>15,625</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>11,556</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Cost of product revenue</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,547</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,462</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,270</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,804</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,393</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=14 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total cost of revenue</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>29,238</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>27,051</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>25,618</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>19,429</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>15,949</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=14 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>

<TR>
<TD>&nbsp;</TD></TR>


<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Gross profit</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>13,810</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>15,344</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>11,534</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10,410</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10,564</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=14 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Operating expenses:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Selling</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,750</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,592</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,703</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,853</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,940</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Research and development</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,444</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,326</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,100</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,327</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,521</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>General and administrative</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>11,938</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10,166</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7,505</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5,067</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,476</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Impairment loss</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,100</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=14 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total operating expenses</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>17,232</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>14,084</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>11,308</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9,247</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8,937</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=14 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>

<TR>
<TD>&nbsp;</TD></TR>


<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Operating income (loss)</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(3,422</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,260</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>226</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,163</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,627</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Other (expense), net</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1,013</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(969</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(833</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(592</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(80</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=14 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Income (loss) before income taxes</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(4,435</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>291</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(607</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>571</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,547</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Income tax provision (benefit)</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1,825</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>392</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(404</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>484</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>481</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=14 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net income (loss)</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  (2,610</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>    (101</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>    (203</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>      87</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   1,066</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=14 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net income (loss) per share</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Basic</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   (0.53</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   (0.02</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   (0.04</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>    0.02</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>    0.23</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Diluted</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   (0.53</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   (0.02</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   (0.04</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>    0.02</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>    0.23</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>

<TR>
<TD>&nbsp;</TD></TR>


<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Weighted average common shares outstanding</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Basic</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,882</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,870</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,860</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,655</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,576</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Diluted</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,882</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,870</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,860</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,673</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,625</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>


<TR>
<TD>&nbsp;</TD></TR>






<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=14><FONT FACE="Times New Roman, Times, Serif" SIZE=2>September 30,</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2006</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2005</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2004</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2003</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2002</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <Td align=center COLSPAN=15><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(in thousands)<BR>(unaudited)</FONT></Td>
</TR>












<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Balance Sheet Data:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Working capital (deficit)</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   3,552</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   4,671</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>    (495</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>    (295</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>    (911</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Property and equipment, net</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>25,765</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>26,565</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>31,901</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>31,172</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>22,824</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Goodwill and other intangible assets, net</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,372</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,600</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,936</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,762</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>884</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Total assets</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>42,314</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>47,838</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>46,795</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>44,985</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>33,463</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Long-term debt, less current portion</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8,186</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8,579</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8,893</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6,949</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,247</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Subordinated debt, less current portion</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,477</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,829</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5,188</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5,188</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Shareholders&#146; equity</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>17,354</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>19,598</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>19,420</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>19,726</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>18,898</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
</TABLE>
<BR>


<hr noshade>
<BR>




<TABLE align=left WIDTH=25% CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD width=95%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The above is selected unaudited consolidated financial data of the Company for
the five years ended September 30, 2006. This annual report has been produced in
two separate segments. One segment is a reprint of the BASi 10-K for fiscal year
2006 which is enclosed. In the event the 10-K information has been separated, it
can be obtained from the SEC or BASI web sites, or we would be pleased to mail
or email a copy at your request.</FONT></DIV></TD>
</tr>
</table>

<TABLE align=right WIDTH=70% CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B>Quarterly Financial Data<BR>
Unaudited (amounts in thousands, except for per share data)</B></FONT><BR>
<BR></td></TR></table>
<BR>
<BR>
<BR>

<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=right WIDTH=70%>
<TR VALIGN=Bottom>
     <Td COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1><U>For the Quarter Ended in Fiscal 2006</U></FONT></Td>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>December 31</FONT></TH>
<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>March 31</FONT></TH>
<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>June 30</FONT></TH>
<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>September 30</FONT></TH></TR>
<TR VALIGN=Bottom>
<TD WIDTH=48% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Total revenue</FONT></TD>
<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>

<TD WIDTH=2% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>$</FONT></TD>
<TD WIDTH=9% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1> 9,844</FONT></TD>
<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>

<TD WIDTH=2% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>$</FONT></TD>
<TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1> 12,417</FONT></TD>
<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>

<TD WIDTH=2% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>$</FONT></TD>
<TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1> 10,038</FONT></TD>
<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>

<TD WIDTH=2% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>$</FONT></TD>
<TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1> 10,748</FONT></TD>
<TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Gross profit</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>3,146</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>4,934</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2,530</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>3,201</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Impairment loss</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>1,100</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Net income (loss)</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(716</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>538</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(1,756</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>676</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Basic net income (loss) per common share outstanding<SUP>(1)</SUP></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(0.15</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>0.11</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(0.36</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(0.14</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Diluted net income (loss) per common share outstanding<SUP>(1)</SUP></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(0.15</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>0.11</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(0.36</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(0.14</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD></TR>


<TR>
<TD>&nbsp;</TD></TR>






<TR VALIGN=Bottom>
     <Td COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1><U>For the Quarter Ended in Fiscal 2005</U></FONT></Td>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>December 31</FONT></TH>
<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>March 31</FONT></TH>
<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>June 30</FONT></TH>
<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>September 30</FONT></TH></TR>



















<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Total revenue</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>   9,694</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>   9,139</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>  11,304</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>  12,259</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Gross profit</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>3,627</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2,426</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>5,026</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>4,265</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Net income (loss)</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>404</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(896</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>356</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>36</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Basic net income (loss) per common share outstanding<SUP>(1)</SUP></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>0.08</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(0.18</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>0.07</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>0.01</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Diluted net income (loss) per common share outstanding<SUP>(1)</SUP></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>0.08</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(0.18</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>0.07</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>0.01</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
</TABLE>
<BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR>


<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=right WIDTH=70%>
<TR><TD><P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=1><SUP>(1)</SUP>&nbsp;&nbsp;The sum of the net income (loss) per common share may not equal the annual net income (loss) per
share due to interim quarter rounding.</FONT></P></TD>
</TR>
</TABLE>
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`
end
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-14
<SEQUENCE>8
<FILENAME>exhibit14.htm
<DESCRIPTION>EXHIBIT 14 - CODE OF ETHICS
<TEXT>
<HTML>
<HEAD>
<TITLE>Bioanalytical Systems, Inc. - Exhibit 14</TITLE>
</HEAD>
<BODY>

<P ALIGN=right><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Exhibit 14</FONT></P>
<BR>


<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B><Big>B<small>IOANALYTICAL</small> S<small>YSTEMS</small>, I<small>NC</small>.</Big><BR>
<Big>C<small>ODE OF</small> B<small>USINESS</small> C<small>ONDUCT AND</small> E<small>THICS</small></Big></B><BR>
<I>Adopted by the Board of Directors<BR>
November 13, 2003<BR>
Amended November 18, 2005</I></FONT></P>
<BR>


<!-- MARKER FORMAT-SHEET="HEAD LEFT BOLD" FSL="Workstation" -->
<A NAME=A002></A>
<H1 ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><U>INTRODUCTION</U></FONT></H1>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Bioanalytical
Systems, Inc. (the &#147;Company&#148;) Code of Business Conduct and Ethics (&#147;Code of
Ethics&#148;) is designed to deter wrongdoing and promote compliance with legal
requirements and our standards of business conduct. All Company directors, officers and
employees are expected to read and understand this Code of Ethics, uphold these standards
in day-to-day activities, comply with all applicable policies and procedures, and ensure
that all agents and contractors are aware of, understand and adhere to these standards.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Because the principles
described in this Code of Ethics are general in nature, you should also review all
applicable Company policies and procedures for more specific instruction, and contact the
Human Resources Department if you have any questions. Nothing in this Code of Ethics, in
any company policies and procedures, or in other related communications (verbal or
written) creates or implies an employment contract or term of employment.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Please sign the
acknowledgment form at the end of this Code of Ethics and return the form to the Human
Resources Department indicating that you have received, read, understand and agree to
comply with the Code of Ethics. The signed acknowledgment form will be located in your
personnel file. Periodically, or as there are substantive changes to the Code of Ethics,
you may be asked to sign an acknowledgment indicating your continued understanding of the
Code of Ethics.</FONT></P>

<!-- MARKER FORMAT-SHEET="HEAD LEFT BOLD" FSL="Workstation" -->
<A NAME=A003></A>
<H1 ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><U>COMPLIANCE IS
EVERYONE&#146;S BUSINESS</U></FONT></H1>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Default" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>It is the
Company&#146;s policy to comply with and require its directors, officers and employees to
comply with this Code of Ethics, including all applicable legal and regulatory
requirements relating to the matters contained in this Code of Ethics, and to avoid and
require its directors, officers and employees to avoid violations relating to such legal
and regulatory requirements, including without limitation, the following:</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH LEVEL 2" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>o </FONT></TD>
<TD WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Wire
Fraud</FONT></DIV></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="PARAGRAPH LEVEL 2" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>o </FONT></TD>
<TD WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Mail
Fraud</FONT></DIV></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="PARAGRAPH LEVEL 2" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>o </FONT></TD>
<TD WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Bank
Fraud</FONT></DIV></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="PARAGRAPH LEVEL 2" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>o </FONT></TD>
<TD WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Securities
Fraud</FONT></DIV></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="PARAGRAPH LEVEL 2" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>o </FONT></TD>
<TD WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Fraud
Against Shareholders</FONT></DIV></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="PARAGRAPH LEVEL 2" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>o </FONT></TD>
<TD WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Questionable
Accounting</FONT></DIV></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="PARAGRAPH LEVEL 2" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>o </FONT></TD>
<TD WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Internal
Controls and Procedures</FONT></DIV></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="PARAGRAPH LEVEL 2" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>o </FONT></TD>
<TD WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Auditing
Matters (both financial and with respect to all quality assurance systems)</FONT></DIV></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="PARAGRAPH LEVEL 2" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>o </FONT></TD>
<TD WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Dishonest
or Unethical Conduct</FONT></DIV></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="PARAGRAPH LEVEL 2" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>o </FONT></TD>
<TD WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Conflicts
of Interest</FONT></DIV></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="PARAGRAPH LEVEL 2" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>o </FONT></TD>
<TD WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Improper
Disclosures in SEC Reports</FONT></DIV></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="PARAGRAPH LEVEL 2" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>o </FONT></TD>
<TD WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Improper
or Inadequate Public Disclosures</FONT></DIV></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="PARAGRAPH LEVEL 2" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>o </FONT></TD>
<TD WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Integrity
of Scientific Data</FONT></DIV></TD>
</TR>
</TABLE>




<BR>
<BR>
<BR>
<BR>
<TABLE WIDTH=100% CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=33%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
<I>November 2005</I></FONT></TD>
<TD WIDTH=33%><DIV ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
<I>BASi Employee Handbook &#151; Code of Ethics</I></FONT></DIV></TD>
<TD WIDTH=33%><DIV ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
<I>Page 1 of 7</I></FONT></DIV></TD>
</TR>
</TABLE>
<PAGE>




<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Project" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company&#146;s
internal operating controls and corporate reporting and disclosure procedures are intended
to prevent, deter and remedy any violation of this Code of Ethics, including but not
limited to applicable laws and regulations. Even the best systems of controls and
procedures, however, cannot provide absolute safeguards against such violations. The
Company has a responsibility to investigate and report to appropriate governmental
authorities, as required, any violations of applicable legal and regulatory requirements
relating to corporate reporting and disclosure, accounting and auditing controls and
procedures, securities compliance and other matters pertaining to fraud against
shareholders, and the actions taken by the Company to remedy such violations.</FONT></P>

<!-- MARKER FORMAT-SHEET="HEAD SUB 1 ITALICS UNDERLINE" FSL="Default" -->
<A NAME=A004></A>
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I><U>Reporting
Alleged Violations or Concerns</U></I></FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH 1 JUSTIFY" FSL="Project" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
If
a director, officer or employee reasonably believes that the Company or any its employees
or others, acting on behalf of the Company, have violated this Code of Ethics, the
director, officer or employee is required to immediately report or cause to be reported
any such potential violation to the following individual:  </FONT></DIV></TD>
</TR>
</TABLE>
<BR>

<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The designated representative of the Company's Audit Committee<BR>
(the "Audit Committee Representative")<BR>
<BR>
Chairman of the Audit Committee<BR>
William E. Baitinger<BR>
701 Sugarhill Drive<BR>
West Lafayette, IN 47906<BR>
(765) 743-1023<BR>
Email: <U>auditcommittee@bioanalytical.com</U>
</FONT></P>


<!-- MARKER FORMAT-SHEET="PARAGRAPH 1 JUSTIFY" FSL="Project" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
If
the complaint relates to the Audit Committee Representative or there is a potential
conflict of interest, the complaint should be submitted to the Company&#146;s Chief
Financial Officer.  </FONT></DIV></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="PARAGRAPH 1 JUSTIFY" FSL="Project" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
A
complaint may be submitted anonymously by mail or may be delivered confidentially (e.g.,
in person, by internal mail, by regular mail or by electronic mail). If the complaint is
written and sent via the mail, the envelope should be marked as &#147;confidential and
private.&#148; Although a violation report may be oral, written reports are preferred to
assure a clear understanding of the situation. In either case, the complaint should be
factual rather than speculative or conclusory, and should contain as much specific
information as possible to allow for proper assessment. The complaint describing an
alleged violation or concern should be candid and set forth all of the information that
the employee knows regarding the allegation or concern. In addition, all complaints must
contain sufficient corroborating information to support the commencement of an
investigation. The Chief Financial Officer or the Audit Committee Representative may, in
its reasonable discretion, determine not to commence an investigation if a complaint
contains only unspecified or broad allegations of wrongdoing without appropriate
informational support.  </FONT></DIV></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="HEAD SUB 1 ITALICS UNDERLINE" FSL="Default" -->
<A NAME=A005></A>
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I><U>Investigation of
Complaints</U></I></FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH 1 JUSTIFY" FSL="Project" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Upon
receipt of the complaint by any of the Chief Financial Officer or the Audit Committee
Representative (the &#147;Investigating Officer&#148;), the Investigating Officer shall
make a determination, in his or her reasonable judgment, whether a reasonable basis
exists for commencing an investigation into the complaint. To assist in making this
determination, the Investigating Officer may conduct an initial, informal inquiry. Other
parties may become involved in the inquiry based on their oversight responsibility or
expertise.  </FONT></DIV></TD>
</TR>
</TABLE>
<BR>




<BR>
<BR>
<BR>
<BR>
<TABLE WIDTH=100% CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=33%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
<I>November 2005</I></FONT></TD>
<TD WIDTH=33%><DIV ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
<I>BASi Employee Handbook &#151; Code of Ethics</I></FONT></DIV></TD>
<TD WIDTH=33%><DIV ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
<I>Page 2 of 7</I></FONT></DIV></TD>
</TR>
</TABLE>
<PAGE>




<!-- MARKER FORMAT-SHEET="PARAGRAPH 1 JUSTIFY" FSL="Project" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
To
the extent possible, all complaints will be handled in a confidential manner. In no event
will information concerning the complaint be released to persons without specific need to
know about it. Investigation of complaints will be prompt. The determination by the
Investigating Officer will be communicated to the person who brought the complaint
(unless anonymous) to the Audit Committee and to relevant management, as appropriate.  </FONT></DIV></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="PARAGRAPH 1 JUSTIFY" FSL="Project" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Upon
making a determination to recommend a formal investigation, the Investigating Officer
will promptly notify the Audit Committee. The Audit Committee will then determine, in its
reasonable judgment, whether a reasonable basis exists for commencing a formal
investigation into the complaint. If the Audit Committee makes such a determination, then
it shall instruct the Investigating Officer to proceed with a formal investigation. The
Investigating Officer shall oversee all investigations under the authority of the Audit
Committee. The Audit Committee shall ensure coordination of each investigation and shall
have overall responsibility for implementation of this policy. The Audit Committee shall
have the authority to retain outside legal or accounting expertise in any investigation
as it deems necessary to conduct the investigation in accordance with its charter and
this policy.  </FONT></DIV></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="PARAGRAPH 1 JUSTIFY" FSL="Project" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
At
each meeting of the Audit Committee, the Chief Financial Officer and the Audit Committee
Representative shall prepare a report to the Audit Committee stating the nature of each
complaint submitted during the quarter immediately preceding the meeting of the Audit
Committee, whether or not the complaint resulted in the commencement of a formal
investigation, and the status of each investigation.  </FONT></DIV></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="HEAD SUB 1 ITALICS UNDERLINE" FSL="Default" -->
<A NAME=A006></A>
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I><U>Corrective Action</U></I></FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH 1 JUSTIFY" FSL="Project" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
Audit Committee, with the input of the Investigating Officer and Company management, if
requested, will determine the validity of a complaint and any corrective action, as
appropriate. It is the responsibility of the Audit Committee to report to Company
management any noncompliance with legal and regulatory requirements and to assure that
management takes corrective action including, where appropriate, reporting any violation
to the relevant federal, state or regulatory authorities. Directors, officers and
employees that are found to have violated any laws, governmental regulations or Company
policies will face appropriate, case-specific disciplinary action, which may include
demotion or discharge.  </FONT></DIV></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="HEAD SUB 1 ITALICS UNDERLINE" FSL="Default" -->
<A NAME=A007></A>
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I><U>No Retaliation
for Submitting Complaints, Providing Information or Participating in Investigation</U></I></FONT></P>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Neither
the Company nor any of its employees will retaliate or discriminate against any employee
who: (a) lawfully provides information regarding any conduct which the employee
reasonably believes constitutes a violation of this Code of Ethics to a federal
regulatory or law enforcement agency, to any member or committee of Congress, or to any
person with supervisory authority over the employee or the authority to investigate
misconduct relating to potential violations by the Company or its employees; (b)
participates in or otherwise assists with a proceeding relating to potential violations
by the Company or its employees; or (c) submits a complaint pursuant to this Code of
Ethics regarding any conduct which the employee reasonably believes constitutes a
violation of this Code of Ethics, even if after investigation the Company determines that
there has not been a violation. For certain violations of this Code of Ethics, an
employee who believes that his or her rights against retaliation or discrimination have
been violated may have the right to file a complaint with the Department of Labor within
ninety (90) days of the alleged violation. If the Department of Labor has not issued a
final decision within one hundred eighty (180) days of the filing of the complaint, the
employee will have the right to file suit against the Company in a federal court with
proper jurisdiction.  </FONT></DIV></TD>
</TR>
</TABLE>
<BR>





<BR>
<BR>
<BR>
<BR>
<TABLE WIDTH=100% CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=33%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
<I>November 2005</I></FONT></TD>
<TD WIDTH=33%><DIV ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
<I>BASi Employee Handbook &#151; Code of Ethics</I></FONT></DIV></TD>
<TD WIDTH=33%><DIV ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
<I>Page 3 of 7</I></FONT></DIV></TD>
</TR>
</TABLE>
<PAGE>





<!-- MARKER FORMAT-SHEET="HEAD SUB 1 ITALICS UNDERLINE" FSL="Default" -->
<A NAME=A008></A>
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I><U>Retention of
Complaints and Documents.</U></I></FONT></P>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
All
complaints submitted by an employee regarding an alleged violation or concern will remain
confidential to the extent practicable. In addition, all written statements, along with
the results of any investigations relating thereto, shall be retained by the Company for
a minimum of six (6) years. It is illegal and against the Company&#146;s policy to
destroy any corporate audit records that may be subject to or related an investigation by
the Company or any federal, state or regulatory body.  </FONT></DIV></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="HEAD LEFT BOLD" FSL="Project" -->
<A NAME=A009></A>
<H1 ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><U>YOUR
RESPONSIBILITIES TO THE COMPANY AND ITS SHAREHOLDERS</U></FONT></H1>

<!-- MARKER FORMAT-SHEET="HEAD SUB 1 ITALICS UNDERLINE" FSL="Default" -->
<A NAME=A010></A>
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I><U>General
Standards of Conduct.</U></I></FONT></P>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
Company expects all directors, officers, employees, agents and contractors to exercise
good judgment to ensure the safety and welfare of employees, agents and contractors and
to maintain a cooperative, efficient, positive, harmonious and productive work
environment and business organization. These standards apply while working on our
premises, at offsite locations where our business is being conducted, at
Company-sponsored business and social events, or at any other place where you are a
representative of the Company. Employees, agents or contractors who engage in misconduct
or whose performance is unsatisfactory may be subject to corrective action, up to and
including termination.  </FONT></DIV></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="HEAD SUB 1 ITALICS UNDERLINE" FSL="Default" -->
<A NAME=A011></A>
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I><U>Applicable Laws.</U></I></FONT></P>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
All
Company directors, officers, employees, agents and contractors must comply with all
applicable laws, regulations, rules and regulatory orders. Company employees located
outside of the United States must comply with laws, regulations, rules and regulatory
orders of the United States, including the Foreign Corrupt Practices Act and the U.S.
Export Control Act, in addition to applicable local laws. Each employee, agent and
contractor must acquire appropriate knowledge of the requirements relating to his or her
duties sufficient to enable him or her to recognize potential dangers and to know when to
seek advice on specific Company policies and procedures. Violations of laws, regulations,
rules and orders may subject the employee, agent or contractor to individual criminal or
civil liability, as well as to discipline by the Company. Such individual violations may
also subject the Company to civil or criminal liability or the loss of business.  </FONT></DIV></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="HEAD SUB 1 ITALICS UNDERLINE" FSL="Default" -->
<A NAME=A012></A>
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I><U>Obligations
Under Securities Laws-&#147;Insider Trading.&#148;</U></I></FONT></P>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Obligations
under the U.S. securities laws apply to everyone. In the normal course of business,
officers, directors, employees, agents, contractors and consultants of the Company may
come into possession of significant, sensitive information. This information is the
property of the Company &#150; you have been entrusted with it. You may not profit from
it by buying or selling securities yourself, or passing on the information to others to
enable them to profit or for them to profit on your behalf. The Company has adopted a
separate policy concerning insider trading and &#147;tipping.&#148; The purpose of this
policy is both to inform you of your legal responsibilities and to make clear to you that
the misuse of sensitive information is contrary to Company policy and U.S. securities
laws.  </FONT></DIV></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="HEAD SUB 1 ITALICS UNDERLINE" FSL="Default" -->
<A NAME=A013></A>
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I><U>Conflicts of
Interest.</U></I></FONT></P>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Each of us has a responsibility to the Company, our shareholders and each other.
Although this duty does not prevent us from engaging in personal transactions
and investments, it does demand that we avoid situations where a conflict of
interest might occur or appear to occur. The Company is subject to scrutiny from
many different individuals and organizations. We should always strive to avoid
even the appearance of impropriety. A conflict of interest exists where the
interests or benefits of one person or entity conflict with the interests or
benefits of the Company. If you think you have been, are, or may become subject
to such a conflict, report the situation to the Audit Committee Representative.
The prompt reporting of such a situation will be considered favorably.
</FONT></DIV></TD>
</TR>
</TABLE>
<BR>





<BR>
<BR>
<BR>
<BR>
<TABLE WIDTH=100% CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=33%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
<I>November 2005</I></FONT></TD>
<TD WIDTH=33%><DIV ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
<I>BASi Employee Handbook &#151; Code of Ethics</I></FONT></DIV></TD>
<TD WIDTH=33%><DIV ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
<I>Page 4 of 7</I></FONT></DIV></TD>
</TR>
</TABLE>
<PAGE>




<!-- MARKER FORMAT-SHEET="HEAD SUB 1 ITALICS UNDERLINE" FSL="Default" -->
<A NAME=A014></A>
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I><U>Scientific
Integrity</U></I></FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH 1 JUSTIFY" FSL="Project" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Medical
science is our business, and the highest standards of scientific integrity are essential
to our continued success. The U.S. Food and Drug Administration&#146;s Good Laboratory
Practices, Current Good Manufacturing Practices, and Current Good Clinical Practices, as
further explained in our related Standard Operating Procedures (SOPs), set forth many of
our obligations. Employees are expected to adhere to the SOPs and applicable federal
regulations, and to comport themselves to meet the highest standards of scientific
integrity. Full cooperation with quality assurance audits is similarly an essential
obligation of every employee.  </FONT></DIV></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="HEAD SUB 1 ITALICS UNDERLINE" FSL="Default" -->
<A NAME=A015></A>
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I><U>Senior Officers. </U></I></FONT></P>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Senior
Officers (including the Chief Executive Officer, the Chief Financial Officer and the
Controller) hold an important and elevated role in the corporate governance of the
Company. The Senior Officers are vested with both the responsibility and authority to
protect, balance, and preserve the interests of all of the enterprise stakeholders,
including shareholders, clients, employees, suppliers, and citizens of the communities in
which business is conducted. Senior Officers fulfill this responsibility by prescribing
and enforcing the policies and procedures employed in the operation of the enterprise&#146;s
financial organization, and by demonstrating the following:  </FONT></DIV></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="PARAGRAPH 1." FSL="Project" -->
          <TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
                              <TR VALIGN=TOP>
                              <TD ALIGN=RIGHT WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.</FONT></TD>
                              <TD ALIGN=LEFT WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
                              <TD WIDTH=90%><P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
               <U>Honest and Ethical Conduct</U>. Senior Officers will exhibit and promote the
               highest standards of honest and ethical conduct through the establishment and
               operation of policies and procedures that:</FONT></P></TD>
               </TR>
               </TABLE>
               <BR>

<!-- MARKER FORMAT-SHEET="PARAGRAPH a. FLUSH" FSL="Project" -->
               <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
                    <TR VALIGN=TOP>
                    <TD ALIGN=JUSTIFY WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
                    <TD ALIGN=JUSTIFY WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>a.
                    Encourage and support professional integrity in all aspects of the financial
                    organization, by eliminating inhibitions and barriers to responsible behavior,
                    such as coercion, fear of reprisal, or alienation from the financial
                    organization or the enterprise itself.</FONT></DIV></TD>
                    </TR>
                    </TABLE>
                    <BR>

<!-- MARKER FORMAT-SHEET="PARAGRAPH a. FLUSH" FSL="Project" -->
               <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
                    <TR VALIGN=TOP>
                    <TD ALIGN=JUSTIFY WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
                    <TD ALIGN=JUSTIFY WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>b.
                    Prohibit and eliminate the appearance or occurrence of conflicts between what is
                    in the best interest of the enterprise and what could result in material
                    personal gain for a member of the financial organization, including Senior
                    Officers.</FONT></DIV></TD>
                    </TR>
                    </TABLE>
                    <BR>

<!-- MARKER FORMAT-SHEET="PARAGRAPH a. FLUSH" FSL="Project" -->
               <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
                    <TR VALIGN=TOP>
                    <TD ALIGN=JUSTIFY WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
                    <TD ALIGN=JUSTIFY WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>c.
                    Provide a mechanism for members of the finance organization to inform senior
                    management of deviations in practice from policies and procedures governing
                    honest and ethical behavior.</FONT></DIV></TD>
                    </TR>
                    </TABLE>
                    <BR>

<!-- MARKER FORMAT-SHEET="PARAGRAPH a. FLUSH" FSL="Project" -->
               <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
                    <TR VALIGN=TOP>
                    <TD ALIGN=JUSTIFY WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
                    <TD ALIGN=JUSTIFY WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>d.
                    Demonstrate their personal support for such policies and procedures through
                    periodic communication reinforcing these ethical standards throughout the
                    finance organization.</FONT></DIV></TD>
                    </TR>
                    </TABLE>
                    <BR>

<!-- MARKER FORMAT-SHEET="PARAGRAPH 1." FSL="Project" -->
          <TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
                              <TR VALIGN=TOP>
                              <TD ALIGN=RIGHT WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.</FONT></TD>
                              <TD ALIGN=LEFT WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
                              <TD WIDTH=90%><P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
               <U>Financial Records and Periodic Reports</U>. Senior Officers will use best
               efforts to establish and manage the transaction and reporting systems and
               procedures to ensure that:</FONT></P></TD>
               </TR>
               </TABLE>
               <BR>




<BR>
<BR>
<BR>
<BR>
<TABLE WIDTH=100% CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=33%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
<I>November 2005</I></FONT></TD>
<TD WIDTH=33%><DIV ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
<I>BASi Employee Handbook &#151; Code of Ethics</I></FONT></DIV></TD>
<TD WIDTH=33%><DIV ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
<I>Page 5 of 7</I></FONT></DIV></TD>
</TR>
</TABLE>
<PAGE>




<!-- MARKER FORMAT-SHEET="PARAGRAPH a. FLUSH" FSL="Project" -->
               <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
                    <TR VALIGN=TOP>
                    <TD ALIGN=JUSTIFY WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
                    <TD ALIGN=JUSTIFY WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>a.
                    Business transactions are properly authorized and completely and accurately
                    recorded on the Company&#146;s books and records in accordance with Generally
                    Accepted Accounting Principles (GAAP) and established company financial policy.</FONT></DIV></TD>
                    </TR>
                    </TABLE>
                    <BR>

<!-- MARKER FORMAT-SHEET="PARAGRAPH a. FLUSH" FSL="Project" -->
               <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
                    <TR VALIGN=TOP>
                    <TD ALIGN=JUSTIFY WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
                    <TD ALIGN=JUSTIFY WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>b.
                    The retention or proper disposal of Company records shall be in accordance with
                    established financial policies and applicable legal and regulatory requirements.</FONT></DIV></TD>
                    </TR>
                    </TABLE>
                    <BR>

<!-- MARKER FORMAT-SHEET="PARAGRAPH a. FLUSH" FSL="Project" -->
               <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
                    <TR VALIGN=TOP>
                    <TD ALIGN=JUSTIFY WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
                    <TD ALIGN=JUSTIFY WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>c.
                    Periodic financial communications and reports will be delivered in a manner that
                    facilitates the highest degree of clarity of content and meaning so that readers
                    and users will quickly and accurately determine their significance and
                    consequence.</FONT></DIV></TD>
                    </TR>
                    </TABLE>
                    <BR>

<!-- MARKER FORMAT-SHEET="PARAGRAPH 1." FSL="Project" -->
          <TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
                              <TR VALIGN=TOP>
                              <TD ALIGN=RIGHT WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.</FONT></TD>
                              <TD ALIGN=LEFT WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
                              <TD WIDTH=90%><P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
               <U>Compliance with Applicable Laws, Rules and Regulations</U>. Senior Officers
               will establish and maintain mechanisms to:</FONT></P></TD>
               </TR>
               </TABLE>
               <BR>

<!-- MARKER FORMAT-SHEET="PARAGRAPH a. FLUSH" FSL="Project" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=JUSTIFY WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD ALIGN=JUSTIFY WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>a.
&nbsp;Educate members of the finance organization about any federal, state or local
                    statute, regulation or administrative procedure that affects the
operation of                     the finance organization and the enterprise generally.</FONT></DIV></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="PARAGRAPH a. FLUSH" FSL="Project" -->
               <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
                    <TR VALIGN=TOP>
                    <TD ALIGN=JUSTIFY WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
                    <TD ALIGN=JUSTIFY WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>b.
                    Monitor the compliance of the finance organization with any applicable federal,
                    state or local statute, regulation or administrative rule.</FONT></DIV></TD>
                    </TR>
                    </TABLE>
                    <BR>

<!-- MARKER FORMAT-SHEET="PARAGRAPH a. FLUSH" FSL="Workstation" -->
               <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
                    <TR VALIGN=TOP>
                    <TD ALIGN=JUSTIFY WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
                    <TD ALIGN=JUSTIFY WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>c.
                    Identify, report and correct in a swift and certain manner, any detected
                    deviations from applicable federal, state or local statute or regulation.</FONT></DIV></TD>
                    </TR>
                    </TABLE>
                    <BR>

<!-- MARKER FORMAT-SHEET="HEAD LEFT BOLD" FSL="Workstation" -->
<A NAME=A016></A>
<H1 ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><U>WAIVERS</U></FONT></H1>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Any waiver of any
provision of this Code of Ethics for a member of the Company&#146;s Board of Directors or
an executive officer must be approved in writing by the Company&#146;s Board of Directors
and promptly disclosed along with the reason for the waiver. Any waiver of any provision
of this Code of Ethics with respect any other employee, agent or contractor must be
approved in writing by the Company&#146;s Chief Executive Officer.</FONT></P>

<!-- MARKER FORMAT-SHEET="HEAD LEFT BOLD" FSL="Workstation" -->
<A NAME=A017></A>
<H1 ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2><U>DISCIPLINARY
ACTIONS</U></FONT></H1>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The matters covered in
this Code of Ethics are of the utmost importance to the Company, its shareholders and its
business partners, and are essential to the Company&#146;s ability to conduct its business
in accordance with its stated values. We expect all of our employees, agents, contractors
and consultants to adhere to these rules in carrying out their duties for the Company.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company will take
appropriate action against any employee, agent, contractor or consultant whose actions are
found to violate these policies or any other policies of the Company. Disciplinary actions
may include immediate termination of employment or business relationship at the
Company&#146;s sole discretion. Where the Company has suffered a loss, it may pursue its
remedies against the individuals or entities responsible. Where laws have been violated,
the Company will cooperate fully with the appropriate authorities. You should contact the
Company&#146;s Human Resources Department for more detailed information.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Default" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Adhering to this Code
of Ethics is a condition of employment. The Company must have the opportunity to
investigate and remedy any alleged violations or employee concerns, and each employee must
ensure that the Company has an opportunity to undertake such an investigation. This policy
does not constitute a contractual commitment of the Company. This policy does not change
the at-will employment status of an employee. Specifically, employment is for an
indefinite period of time and is terminable at anytime with or without cause.</FONT></P>



<BR>
<BR>
<BR>
<BR>
<TABLE WIDTH=100% CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=33%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
<I>November 2005</I></FONT></TD>
<TD WIDTH=33%><DIV ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
<I>BASi Employee Handbook &#151; Code of Ethics</I></FONT></DIV></TD>
<TD WIDTH=33%><DIV ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
<I>Page 6 of 7</I></FONT></DIV></TD>
</TR>
</TABLE>
<PAGE>




<!-- MARKER FORMAT-SHEET="HEADING CENTER BOLD" FSL="Workstation" -->
<A NAME=A018></A>
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
<U>ACKNOWLEDGMENT OF RECEIPT OF BUSINESS CONDUCT AND ETHICS </U></FONT></H1>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>I have received and
read the Company&#146;s Code of Business Conduct and Ethics. I understand the standards
and policies contained in the Company Code of Business Conduct and Ethics and understand
that there may be additional policies or laws specific to my job. I further agree to
comply with the Company Code of Business Conduct and Ethics.</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH JUSTIFY" FSL="Workstation" -->
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>If I have questions
concerning the meaning or application of the Company Code of Business Conduct and Ethics,
any Company policies, or the legal and regulatory requirements applicable to my job, I
know I can consult my manager, the Human Resources Department or the Chief Financial
Officer, knowing that my questions or reports to these sources will be maintained in
confidence.</FONT></P>
<BR>
<BR>

<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<HR ALIGN=LEFT WIDTH=250 NOSHADE>
Date<BR>
<BR>
<BR>


<HR ALIGN=LEFT WIDTH=600 NOSHADE>
Employee Name (Printed)<BR>
<BR>
<BR>

<HR ALIGN=LEFT WIDTH=600 NOSHADE>
Employee Signature
</FONT></P>





<BR>
<BR>
<BR>
<BR>
<TABLE WIDTH=100% CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=33%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
<I>November 2005</I></FONT></TD>
<TD WIDTH=33%><DIV ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
<I>BASi Employee Handbook &#151; Code of Ethics</I></FONT></DIV></TD>
<TD WIDTH=33%><DIV ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
<I>Page 7 of 7</I></FONT></DIV></TD>
</TR>
</TABLE>





</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23
<SEQUENCE>9
<FILENAME>exhibit231.htm
<DESCRIPTION>EXHIBIT 23.1
<TEXT>
<HTML>
<HEAD>
<TITLE></TITLE>
</HEAD>
<BODY>

<P align=right><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Exhibit 23.1</FONT></P>
<BR>

<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B>CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</B></FONT></P>
<BR>


<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
We consent to the incorporation by reference in Registration Statements (Nos.
333-56123 and 333-56127) on Form S-8 of Bioanalytical Systems, Inc. of our
report dated December 29, 2006, with respect to the consolidated balance sheet
of Bioanalytical Systems, Inc. as of September 30, 2006, and the related
consolidated statements of operations, shareholders' equity and comprehensive
income (loss) and cash flows for the year then ended appearing in this Annual
Report on Form 10-K of Bioanalytical Systems, Inc. for the year ended September
30, 2006.</FONT></P>

<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
/s/&nbsp;&nbsp;Crowe Chizek and Company LLC<BR>
Indianapolis, IN<BR>
December 29, 2006<BR>
</FONT></P>

</BODY>
</HTML>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23
<SEQUENCE>10
<FILENAME>exhibit232.htm
<DESCRIPTION>EXHIBIT 23.2
<TEXT>
<HTML>
<HEAD>
<TITLE>Exhibit 23.2</TITLE>
</HEAD>
<BODY>


<P ALIGN=right><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Exhibit 23.2
</FONT></P>


<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b>Consent of Independent Registered Public Accounting Firm</b></FONT></P>

<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The Board of Directors<BR>
Bioanalytical Systems, Inc.:<BR>
</FONT></P>


<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
We consent to the incorporation by reference in the registration statements
(Nos. 333-56123 and 333-56127) on Form S-8 of Bioanalytical Systems, Inc. and
subsidiaries of our report dated January 7, 2006, with respect to the
consolidated balance sheet of Bioanalytical Systems, Inc. and subsidiaries as of
September 30, 2005, and the related consolidated statements of operations,
stockholders' equity and comprehensive income (loss), and cash flows for each of
the years in the two-year period ended September 30, 2005, which report appears
in the September 30, 2006, annual report on Form 10-K of Bioanalytical Systems,
Inc. and subsidiaries.</FONT></P>



<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<BR>
/s/&nbsp;&nbsp;KPMG LLP<BR>
<BR>
Indianapolis, IN<BR>
December 28, 2006
</FONT></P>


</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31
<SEQUENCE>11
<FILENAME>exhibit311.htm
<DESCRIPTION>EXHIBIT 31.1
<TEXT>
<HTML>
<HEAD>
<TITLE>Exhibit 31.1</TITLE>
</HEAD>
<BODY>



<P ALIGN=right><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Exhibit 31.1</FONT></P>
<BR>

<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B>CERTIFICATIONS</B></FONT></P>
<BR>

<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
I, Richard M. Shepperd, Chief Executive Officer, certify that:</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH LEVEL 2" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1. </FONT></TD>
<TD WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>I
have reviewed this annual report on Form 10-K of Bioanalytical Systems,      Inc.;</FONT></DIV></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="PARAGRAPH LEVEL 2" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2. </FONT></TD>
<TD WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Based
on my knowledge, this annual report does not contain any untrue      statement of a
material fact or omit to state a material fact necessary to      make the statements
made, in light of the circumstances under which such      statements were made, not
misleading with respect to the period covered by      this report;</FONT></DIV></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="PARAGRAPH LEVEL 2" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3. </FONT></TD>
<TD WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Based
on my knowledge, the financial statements, and other financial      information included
in this annual report, fairly present in all material      respects the financial
condition, results of operations and cash flows of      the registrant as of, and for,
the periods presented in this report;</FONT></DIV></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="PARAGRAPH LEVEL 2" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4. </FONT></TD>
<TD WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
registrant's other certifying officer(s) and I are responsible for      establishing and
maintaining disclosure controls and procedures (as defined      in Exchange Act Rules
13a-15(e) and 15d-15(e)) [clause omitted pursuant to      SEC Release Nos. 33-8238 and
34-47986] for the registrant and have:</FONT></DIV></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="PARAGRAPH LEVEL 2" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>     (a) </FONT></TD>
<TD WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Designed
such disclosure controls and procedures, or caused such           disclosure controls and
procedures to be designed under our           supervision, to ensure that material
information relating to the           registrant, including its consolidated
subsidiaries, is made known to           us by others within those entities, particularly
during the period in           which this report is being prepared;</FONT></DIV></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="PARAGRAPH LEVEL 2" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>     (b) </FONT></TD>
<TD WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>[paragraph
omitted pursuant to SEC Release Nos. 33-8238 and 34-47986];</FONT></DIV></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="PARAGRAPH LEVEL 2" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>     (c) </FONT></TD>
<TD WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Evaluated
the effectiveness of the registrant's disclosure controls           and procedures and
presented in this report our conclusions about the           effectiveness of the
disclosure controls and procedures, as of the end           of the period covered by this
report based on such evaluation; and</FONT></DIV></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="PARAGRAPH LEVEL 2" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>     (d) </FONT></TD>
<TD WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Disclosed
in this report any change in the registrant's internal           control over financial
reporting that occurred during the registrant's           most recent fiscal quarter (the
registrant's fourth fiscal quarter in           the case of an annual report) that has
materially affected, or is           reasonably likely to materially affect, the
registrant's internal           control over financial reporting; and</FONT></DIV></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="PARAGRAPH LEVEL 2" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5. </FONT></TD>
<TD WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
registrant's other certifying officer(s) and I have disclosed, based on      our most
recent evaluation of internal control over financial reporting, to      the registrant's
auditors and the audit committee of the registrant's board      of directors (or persons
performing the equivalent functions):</FONT></DIV></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="PARAGRAPH LEVEL 2" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>     (a) </FONT></TD>
<TD WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>All
significant deficiencies and material weaknesses in the design or           operation of
internal control over financial reporting which are           reasonably likely to
adversely affect the registrant's ability to           record, process, summarize and
report financial information; and</FONT></DIV></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="PARAGRAPH LEVEL 2" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>     (b) </FONT></TD>
<TD WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Any
fraud, whether or not material, that involves management or other           employees who
have a significant role in the registrant's internal           control over financial
reporting.</FONT></DIV></TD>
</TR>
</TABLE>
<BR>
<BR>
<BR>

<!-- MARKER FORMAT-SHEET="SIGNATURE BLOCK" FSL="Workstation" -->
<TABLE WIDTH=100% CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=40%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Date:&nbsp;&nbsp;December 21, 2006</FONT></TD>
<TD WIDTH=60%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
By:&nbsp;&nbsp;/s/&nbsp;&nbsp;Richard M. Shepperd<HR>
Richard M. Shepperd<BR>
Chief Executive Officer<BR>
</FONT></TD>
</TR>
</TABLE>
<BR>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31
<SEQUENCE>12
<FILENAME>exhibit312.htm
<DESCRIPTION>EXHIBIT 31.2
<TEXT>
<HTML>
<HEAD>
<TITLE>Exhibit 31.2</TITLE>
</HEAD>
<BODY>

<P ALIGN=right><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Exhibit 31.2</FONT></P>
<BR>


<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>CERTIFICATIONS</B></FONT></P>
<BR>

<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2> I, Michael R. Cox, Chief Financial Officer, certify that:</FONT></P>

<!-- MARKER FORMAT-SHEET="PARAGRAPH LEVEL 2" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1. </FONT></TD>
<TD WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>I
have reviewed this annual report on Form 10-K of Bioanalytical Systems,      Inc.;</FONT></DIV></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="PARAGRAPH LEVEL 2" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2. </FONT></TD>
<TD WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Based
on my knowledge, this annual report does not contain any untrue      statement of a
material fact or omit to state a material fact necessary to      make the statements
made, in light of the circumstances under which such      statements were made, not
misleading with respect to the period covered by      this report;</FONT></DIV></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="PARAGRAPH LEVEL 2" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3. </FONT></TD>
<TD WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Based
on my knowledge, the financial statements, and other financial      information included
in this annual report, fairly present in all material      respects the financial
condition, results of operations and cash flows of      the registrant as of, and for,
the periods presented in this report;</FONT></DIV></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="PARAGRAPH LEVEL 2" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4. </FONT></TD>
<TD WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
registrant's other certifying officer(s) and I are responsible for      establishing and
maintaining disclosure controls and procedures (as defined      in Exchange Act Rules
13a-15(e) and 15d-15(e)) [clause omitted pursuant to      SEC Release Nos. 33-8238 and
34-47986] for the registrant and have:</FONT></DIV></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="PARAGRAPH LEVEL 2" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>     (a) </FONT></TD>
<TD WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Designed
such disclosure controls and procedures, or caused such           disclosure controls and
procedures to be designed under our           supervision, to ensure that material
information relating to the           registrant, including its consolidated
subsidiaries, is made known to           us by others within those entities, particularly
during the period in           which this report is being prepared;</FONT></DIV></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="PARAGRAPH LEVEL 2" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>     (b) </FONT></TD>
<TD WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>[paragraph
omitted pursuant to SEC Release Nos. 33-8238 and 34-47986];</FONT></DIV></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="PARAGRAPH LEVEL 2" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>     (c) </FONT></TD>
<TD WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Evaluated
the effectiveness of the registrant's disclosure controls           and procedures and
presented in this report our conclusions about the           effectiveness of the
disclosure controls and procedures, as of the end           of the period covered by this
report based on such evaluation; and</FONT></DIV></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="PARAGRAPH LEVEL 2" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>     (d) </FONT></TD>
<TD WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Disclosed
in this report any change in the registrant's internal           control over financial
reporting that occurred during the registrant's           most recent fiscal quarter (the
registrant's fourth fiscal quarter in           the case of an annual report) that has
materially affected, or is           reasonably likely to materially affect, the
registrant's internal           control over financial reporting; and</FONT></DIV></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="PARAGRAPH LEVEL 2" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5. </FONT></TD>
<TD WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
registrant's other certifying officer(s) and I have disclosed, based on      our most
recent evaluation of internal control over financial reporting, to      the registrant's
auditors and the audit committee of the registrant's board      of directors (or persons
performing the equivalent functions):</FONT></DIV></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="PARAGRAPH LEVEL 2" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>     (a) </FONT></TD>
<TD WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>All
significant deficiencies and material weaknesses in the design or           operation of
internal control over financial reporting which are           reasonably likely to
adversely affect the registrant's ability to           record, process, summarize and
report financial information; and</FONT></DIV></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="PARAGRAPH LEVEL 2" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>     (b) </FONT></TD>
<TD WIDTH=90%><DIV ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Any
fraud, whether or not material, that involves management or other           employees who
have a significant role in the registrant's internal           control over financial
reporting.</FONT></DIV></TD>
</TR>
</TABLE>
<BR>
<BR>
<BR>


<!-- MARKER FORMAT-SHEET="SIGNATURE BLOCK" FSL="Workstation" -->
<TABLE WIDTH=100% CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=40%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Date:&nbsp;&nbsp;December 21,  2006</FONT></TD>
<TD WIDTH=60%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
/s/&nbsp;&nbsp;Michael R. Cox<HR>
Michael R. Cox<BR>
Chief Financial Officer<BR>
</FONT></TD>
</TR>
</TABLE>
<BR>



</BODY>
</HTML>


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32
<SEQUENCE>13
<FILENAME>exhibit321.htm
<DESCRIPTION>EXHIBIT 32.1
<TEXT>
<HTML>
<HEAD>
<TITLE>Exhibit 32.1</TITLE>
</HEAD>
<BODY>

<P ALIGN=right><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Exhibit 32.1</FONT></P>

<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B>CERTIFICATION PURSUANT TO<BR>
18 U.S.C. SECTION 1350,<BR>
AS ADOPTED PURSUANT TO<BR>
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002</B></FONT></P><BR>


<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>I, Richard
M. Shepperd, the President and Chief Executive Officer of Bioanalytical Systems,
Inc. certify that (i) the Annual Report on Form 10-K for the year ended
September 30, 2006, (the "Report") fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and (ii) the
information contained in the Report fairly presents, in all material respects,
the financial condition and results of operations of BASi as of the dates and
for the periods set forth therein.
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By:&nbsp;&nbsp;/s/&nbsp;&nbsp;Richard M. Shepperd<HR>
Richard M. Shepperd<BR>
President and Chief Executive Officer<BR>
Date:&nbsp;&nbsp;December 21, 2006</FONT></TD>
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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>CERTIFICATION PURSUANT TO<BR>
18 U.S.C. SECTION 1350,<BR>
AS ADOPTED PURSUANT TO<BR>
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002</B>
</FONT></P>
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<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
I, Michael R. Cox, Vice President, Finance and Chief Financial Officer of
Bioanalytical Systems, Inc. certify that (i) the Annual Report on Form 10-K for
the year ended September 30, 2006, (the "Report") fully complies with the
requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934,
and (ii) the information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of BASi as
of the dates and for the periods set forth therein.</FONT></P>
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/s/&nbsp;Michael R. Cox<HR>
Michael R. Cox<BR>
Vice President, Finance<BR>
and Chief Financial Officer<BR>
Date:&nbsp;&nbsp;December 21, 2006</FONT></TD>
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