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<SEC-DOCUMENT>0000927946-06-000133.txt : 20060829
<SEC-HEADER>0000927946-06-000133.hdr.sgml : 20060829
<ACCEPTANCE-DATETIME>20060829143515
ACCESSION NUMBER:		0000927946-06-000133
CONFORMED SUBMISSION TYPE:	10-Q/A
PUBLIC DOCUMENT COUNT:		6
CONFORMED PERIOD OF REPORT:	20060630
FILED AS OF DATE:		20060829
DATE AS OF CHANGE:		20060829

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-Q/A
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-23357
		FILM NUMBER:		061062033

	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-Q/A
<SEQUENCE>1
<FILENAME>bas10qa.htm
<DESCRIPTION>BIOANALYTICAL SYSTEMS INC. FORM 10-Q/A
<TEXT>
<HTML>
<HEAD>
<TITLE>Bioanalytical Systems, Inc. 10Q</TITLE>
</HEAD>
<BODY>



<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
UNITED STATES<BR>
SECURITIES AND EXCHANGE COMMISSION<BR>
WASHINGTON, D.C. 20549<BR>
<BR>
FORM 10-Q/A<BR>
</FONT></P>

<P ALIGN=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
(Mark One)
</FONT></P>

<TABLE WIDTH=100% CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<img src="ballotx.jpg"> </FONT></TD>
<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934<BR>
<BR>
For the quarterly period ended June 30, 2006<BR>
<BR>
OR</FONT></TD>
</TR>
</TABLE>
<BR>

<TABLE WIDTH=100% CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<img src="ballot.jpg"> </FONT></TD>
<TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934<BR>
</FONT></TD>
</TR>
</TABLE>
<BR>

<P ALIGN=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
For the transition period from ___________ to _____________</FONT></P>



<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR>
Commission File Number 0-23357 </FONT></P>




<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
BIOANALYTICAL SYSTEMS, INC.<BR>
(Exact name of the registrant as specified in its charter)</FONT></P>



<TABLE WIDTH=100% CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=50%><div align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
INDIANA<BR>
(State or other jurisdiction of incorporation or organization)<BR>
<BR>
2701 KENT AVENUE<BR>
WEST LAFAYETTE, IN<BR>
(Address of principal executive offices)
</FONT></div></TD>
<TD WIDTH=50%><div align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
35-1345024<BR>
(I.R.S. Employer Identification No.)<BR>
<BR>

47906<BR>
(Zip code)</FONT></div></TD>
</TR>
</TABLE>
<BR>

<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
(765) 463-4527<BR>
(Registrant's telephone number, including area code)</FONT></P>


<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.<BR>
<BR>
YES&nbsp;&nbsp;&nbsp;<img src="ballotx.jpg">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
NO&nbsp;&nbsp;&nbsp;<img src="ballot.jpg"></FONT></P>



<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Indicate by
check mark whether the registrant is a large accelerated filer, an accelerated
filer or a non-accelerated filer. See definition of &#147;accelerated filer and
large accelerated filer&#148; in Rule 12b-2 of the Exchange Act.<BR>
<BR>
Large Accelerated Filer&nbsp;&nbsp;<img src="ballot.jpg">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Accelerated Filer&nbsp;&nbsp;<img src="ballot.jpg">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Non-accelerated Filer&nbsp;&nbsp;<img src="ballotx.jpg">
</FONT></P>



<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 by Rule 12b-2
of the Exchange Act).<BR>
<BR>
YES&nbsp;&nbsp;&nbsp;<img src="ballot.jpg">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
NO&nbsp;&nbsp;&nbsp;<img src="ballotx.jpg"></FONT></P>


<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As of July
31, 2006, 4,892,127 common shares of the registrant were outstanding.</FONT></P>



<PAGE>


<TABLE WIDTH=100% CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
</FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
</FONT></TD>
<TD ALIGN=CENTER WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B>PAGE<BR><U>NUMBER</U></B></FONT></TD>
</TR>
</TABLE>
<BR>

<TABLE WIDTH=100% CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B>PART I</B></FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B>FINANCIAL INFORMATION</B></FONT></TD>
<TD ALIGN=CENTER WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
</FONT></TD>
</TR>
</TABLE>
<BR>


<TABLE WIDTH=100% CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Item 1 </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Condensed Consolidated Financial Statements (Unaudited): </FONT></TD>
<TD ALIGN=CENTER WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
 </FONT></TD>
</TR>
</TABLE>
<BR>



<TABLE WIDTH=100% CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
 </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Condensed Consolidated Balance Sheets as of June 30, 2006<BR>
and September 30, 2005 </FONT></TD>
<TD ALIGN=CENTER WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
3</FONT></TD>
</TR>
</TABLE>
<BR>



<TABLE WIDTH=100% CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
 </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Condensed Consolidated Statements of Operations for the<BR>
Three Months and Nine Months Ended June 30, 2006 and 2005</FONT></TD>
<TD ALIGN=CENTER WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
4</FONT></TD>
</TR>
</TABLE>
<BR>


<TABLE WIDTH=100% CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
 </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Condensed Consolidated Statements of Cash Flows for the<BR>
Nine Months Ended June 30, 2006 and 2005 </FONT></TD>
<TD ALIGN=CENTER WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
5</FONT></TD>
</TR>
</TABLE>
<BR>


<TABLE WIDTH=100% CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
 </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Notes to Condensed Consolidated Financial Statements </FONT></TD>
<TD ALIGN=CENTER WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
6</FONT></TD>
</TR>
</TABLE>
<BR>


<TABLE WIDTH=100% CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Item 2 </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Management's Discussion and Analysis of Financial Condition and
Results of Operations </FONT></TD>
<TD ALIGN=CENTER WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
11</FONT></TD>
</TR>
</TABLE>
<BR>


<TABLE WIDTH=100% CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Item 3 </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Quantitative and Qualitative Disclosures About Market Risk </FONT></TD>
<TD ALIGN=CENTER WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
17</FONT></TD>
</TR>
</TABLE>
<BR>


<TABLE WIDTH=100% CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Item 4 </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Controls and Procedures </FONT></TD>
<TD ALIGN=CENTER WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
17 </FONT></TD>
</TR>
</TABLE>
<BR>
<BR>

<TABLE WIDTH=100% CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B>PART II</B> </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B>OTHER INFORMATION</B></FONT></TD>
<TD ALIGN=CENTER WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
</FONT></TD>
</TR>
</TABLE>
<BR>

<TABLE WIDTH=100% CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Item 1A</FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Risk Factors</FONT></TD>
<TD ALIGN=CENTER WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
18</FONT></TD>
</TR>
</TABLE>
<BR>


<TABLE WIDTH=100% CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Item 5</FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Other Information</FONT></TD>
<TD ALIGN=CENTER WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
18</FONT></TD>
</TR>
</TABLE>
<BR>

<TABLE WIDTH=100% CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Item 6</FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Exhibits</FONT></TD>
<TD ALIGN=CENTER WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
19</FONT></TD>
</TR>
</TABLE>
<BR>


<TABLE WIDTH=100% CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
SIGNATURES</FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
</FONT></TD>
<TD ALIGN=CENTER WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
20</FONT></TD>
</TR>
</TABLE>
<BR>


<BR>
<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
2</FONT></P>

<PAGE>








<P ALIGN=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B>PART I&#151;Financial Information<BR>
Item 1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Financial Statements</B><BR>
</FONT></P>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B>CONDENSED CONSOLIDATED BALANCE SHEETS</B><BR>
(In thousands)<BR>
(Unaudited)<BR>
</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>June 30,<BR>2006</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH>
<TH COLSPAN=1>&nbsp;</TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Sept. 30,<BR>
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=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=73% 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=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=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>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;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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>     777</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   1,254</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;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;Trade</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7,690</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10,352</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;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>1,752</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><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</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;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>1,889</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>2,041</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;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>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>381</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;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>745</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><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;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>602</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><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</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>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>13,965</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><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</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>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>26,325</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><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></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>1,855</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>&nbsp;</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 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>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>572</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,156</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</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><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>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>280</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>264</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><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</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>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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  43,235</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</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></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><B>Liabilities and shareholders' equity</B></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>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 VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   1,356</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   1,681</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;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>2,286</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,791</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;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></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</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;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>4,756</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>5,974</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;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</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;Current portion of capital lease obligation</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>506</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><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</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;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>715</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><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</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>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>9,619</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>12,375</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>Capital lease obligation, 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>1,747</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><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</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>8,278</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><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></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Subordinated debt, long-term</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><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></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>1,189</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,651</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>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;Preferred shares: Authorized shares - 1,000</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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;Issued and outstanding shares - none</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><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;Common shares: Authorized shares - 19,000</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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;Issued and outstanding shares - 4,892 at June 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></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and 4,871 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>1,182</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><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</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>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>11,567</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>11,268</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>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>5,260</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>7,194</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>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>(84</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>(42</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>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>17,925</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><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</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>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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  43,235</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</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></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=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
See accompanying notes to condensed consolidated financial statements.</FONT></P>


<BR>
<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
3</FONT></P>

<PAGE>








<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B>CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS</B><BR>
(In thousands, except per share amounts)<BR>
(Unaudited)<BR>
</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>Three Months Ended<BR>June 30,</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH>
<TH COLSPAN=1>&nbsp;</TH>
<TH COLSPAN=5><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Nine Months Ended<BR>June 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>&nbsp;</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>&nbsp;</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>&nbsp;</TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2005</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>

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


<TR VALIGN=Bottom>
     <TD WIDTH=47% 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>$</FONT></TD><TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   7,956</FONT></TD>
        <TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   9,078</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>$</FONT></TD><TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  25,548</FONT></TD>
        <TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  23,910</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>2,082</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,226</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>6,751</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6,226</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></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>10,038</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>11,304</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>32,299</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>30,136</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>6,343</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5,434</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>18,965</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>16,570</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>1,165</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>844</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,725</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,352</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>
     <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;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>7,508</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>6,278</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>21,690</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>18,922</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>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>2,530</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5,026</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10,609</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>11,214</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>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>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>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>2,038</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,919</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>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>350</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>261</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>989</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>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>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>3,966</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,115</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9,737</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7,781</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></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&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>4,941</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,094</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>12,764</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10,353</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>Operating (loss) 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>(2,411</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>932</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><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</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>&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>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</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><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>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><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>&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>(272</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>(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>(780</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>(782</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>&#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>78</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><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>56</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>Gain 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>&#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>34</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><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>21</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></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>(2,681</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>796</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(2,929</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>163</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>Income tax (benefit) 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>(925</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>440</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(995</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>300</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></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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  (1,756</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>     356</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  (1,934</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>    (137</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>
     <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 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;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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   (0.36</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>    0.07</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   (0.40</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   (0.03</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;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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   (0.36</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>    0.07</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   (0.40</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   (0.03</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 common and common equivalent</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>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;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>4,892</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><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>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,879</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>4,870</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;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>4,892</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5,020</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,879</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>4,870</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
</TABLE>






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

<BR>
<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
4</FONT></P>

<PAGE>








<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B>CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS</B><BR>
(In thousands)<BR>
(Unaudited)
</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>Nine Months Ended June 30,</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=1><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>&nbsp;</TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2005</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>

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


<TR VALIGN=Bottom>
     <TD WIDTH=70% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Operating activities</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=9% 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=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 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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  (1,934</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>    (137</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>Adjustments to reconcile net loss to 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>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;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>3,069</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,462</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;Impairment of 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>1,100</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;Gain 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>&#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>(21</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;Employee stock option 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>210</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><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;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>(591</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 VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&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;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>3,587</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>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(5,569</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;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>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>(673</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;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>(194</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>(100</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;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>(325</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>(295</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;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>(776</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>211</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;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>(505</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>(106</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;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>(1,218</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>3,522</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>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>2,575</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(706</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><B>Investing activities</B></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>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>(1,286</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>(1,631</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>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>45</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><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</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>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>(1,241</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>4,256</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><B>Financing activities</B></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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>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>11,360</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>6,968</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>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>(12,280</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>(9,794</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>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</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><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>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>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>(305</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</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>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>(638</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>(703</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>Net cash 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>(1,769</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>(3,637</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>Effects 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>(42</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>325</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>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>(477</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>238</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>Cash and cash equivalents at beginning of period</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><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</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>773</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>Cash and cash equivalents at end of period</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>     777</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   1,011</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>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Assets acquired and lease obligations incurred utilizing capital 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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>     1,473</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   1,112</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=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
See accompanying notes to condensed consolidated financial statements.</FONT></P>


<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
5</FONT></P>

<PAGE>




<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->
<A NAME=A004></A>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
BIOANALYTICAL SYSTEMS, INC. AND SUBSIDIARIES<BR>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS<BR>
(Unaudited)</FONT></P>
<BR>

<P ALIGN=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B>1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Description of the Business
and Basis of Presentation</B></FONT></P>


<!-- MARKER FORMAT-SHEET="Paragraph Flush" FSL="Workstation" -->
<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Bioanalytical
Systems, Inc. and its subsidiaries (&#147;We,&#148; &#147;the Company&#148; or
&#147;BASi&#148;) engage in laboratory 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. Our customers are located throughout the
world.</FONT></P>

<!-- MARKER FORMAT-SHEET="Paragraph Flush" FSL="Workstation" -->
<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We have
prepared the accompanying unaudited interim condensed consolidated financial
statements pursuant to the rules and regulations of the Securities and Exchange
Commission regarding interim financial reporting. Accordingly, they do not
include all of the information and footnotes required by generally accepted
accounting principles, and therefore should be read in conjunction with our
audited consolidated financial statements, and the notes thereto, for the year
ended September 30, 2005. In the opinion of management, the condensed
consolidated financial statements for the three and nine months ended June 30,
2006 and 2005 include all adjustments which are necessary for a fair
presentation of the results of the interim periods and of our financial position
at June 30, 2006. The results of operations for the three and nine months ended
June 30, 2006 are not necessarily indicative of the results for the year ending
September&nbsp;30, 2005.</FONT></P>

<!-- MARKER FORMAT-SHEET="Paragraph Flush" FSL="Workstation" -->
<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>All amounts
in the condensed consolidated financial statements and the notes thereto are
presented in thousands, except for per share data or where otherwise
noted.</FONT></P>

<!-- MARKER FORMAT-SHEET="Subheading" FSL="Workstation" -->
<A NAME=A007></A>
<P ALIGN=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b>2. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stock Based Compensation</b></FONT></P>

<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's common shares at fair market value 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's
termination of employment with the Company, or ten years from the date of grant.
The plan terminates in fiscal 2008.</FONT></P>

<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's common shares at fair market value 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's termination of board service with the Company, or ten years from the
date of grant. The plan terminates in fiscal 2008.</FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent Lv 0-TNR" FSL="Workstation" -->
<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
On October 1, 2005, we adopted
Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based
Payment (FAS 123R), 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 expenses for employee stock options.</FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent Lv 0-TNR" FSL="Workstation" -->
<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
We adopted FAS 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. Our
Condensed Consolidated Financial Statements as of June 30, 2006, and for the
three and nine month periods then ended, reflect the impact of FAS 123R. In
accordance with the modified prospective transition method, our Condensed
Consolidated Financial Statements for prior periods do not include the impact of
FAS 123R. Stock-based compensation expense for employee stock options recognized
under FAS 123R for the three months and nine months ended June 30, 2006 was
$71,000 and $210,000, respectively. We did not record any tax benefit related to
these options.</FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent Lv 0-TNR" FSL="Workstation" -->
<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
FAS 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 FAS 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 Financial
Accounting Standards No. 123, Accounting for Stock-Based Compensation. Under the
intrinsic value method, no stock-based compensation expense had been recognized
in the Company&#146;s Consolidated Statement of Operations.</FONT></P>





<BR>
<BR>
<BR>
<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
6</FONT></P>

<PAGE>




<!-- MARKER FORMAT-SHEET="Para Indent Lv 0-TNR" 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 Condensed
Consolidated Statement of Operations for the quarter and nine months ended June
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 FAS 123. There have been
no awards granted since the beginning of our fiscal year. Compensation expense
for all share-based payment awards are recognized using the straight-line single
option approach.</FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent Lv 0-TNR" FSL="Workstation" -->
<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
With the adoption of FAS 123R,
we continued to use a binomial option-pricing model as our method of valuation
for share-based awards. For additional information regarding assumptions used
for grants made in periods prior to the current fiscal year, see Note 1(k) to
our financials statements in our form 10-K for the year ended September 30,
2005.</FONT></P>

<P ALIGN=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Stock based compensation expense recongize in the current fiscal year is the
result of grants in prior fiscal years.
</FONT></P>

<P ALIGN=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The assumptions used in computing
our stock based compensation expense for the nine months ended June 30, 2005 were:
</FONT></P>


<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=60%>
<TR VALIGN=Bottom>
     <TH COLSPAN=4><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
</TR>
<TR VALIGN=Bottom>
     <TD WIDTH=62% 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=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=50% ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.00%</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=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0.00%</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=RIGHT><FONT FACE="Times New Roman, 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>0.668</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=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7.0&nbsp;&nbsp;&nbsp;</FONT></TD></TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="Paragraph Flush" FSL="Default" -->
<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
There were no option grants in any other periods presented.<BR>
<BR>
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
periods ended June 30, 2005:</FONT></P>

<TABLE align=center CELLPADDING=0 CELLSPACING=0 BORDER=0 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>Three Months Ended<BR>
June 30,</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH>
<TH COLSPAN=1>&nbsp;</TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Nine Months Ended<BR>
June 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>2005</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH>
<TH COLSPAN=1>&nbsp;</TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2005</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>

<TD WIDTH=45% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net income (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=2% ALIGN=right><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
<TD WIDTH=14% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>356</FONT></TD>
<TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>

<TD WIDTH=2% 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> (137</FONT></TD>
<TD WIDTH=5% 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>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>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>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>(37</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>(130</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 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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>319</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   (267</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 VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>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;Basic and diluted - 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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>      0.07</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>     (0.03</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  - 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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>      0.07</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</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>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;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>
<BR>




<BR>
<BR>
<BR>
<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
7</FONT></P>

<PAGE>




<TABLE WIDTH=100% CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
&nbsp;</FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
A summary of our stock option activity and related information for the quarter
and nine months ended June 30 is as follows:
</FONT></TD>
</TR>
</TABLE>
<BR>


<TABLE align=center CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=70%>
<TR VALIGN=Bottom>
     <TH COLSPAN=4><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=4><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Three Months Ended<BR>
June 30, 2006</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH>
<TH COLSPAN=2>&nbsp;</TH>
     <TH COLSPAN=4><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Nine Months Ended<BR>
June 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=1>&nbsp;</TH>
<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Options</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH>
<TH COLSPAN=2>&nbsp;</TH>
<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Weighted<BR>
average<BR>
exercise<BR>
price</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH>
<TH COLSPAN=2>&nbsp;</TH>
<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Options</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH>
<TH COLSPAN=2>&nbsp;</TH>
<TH COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Weighted<BR>
average<BR>
exercise<BR>
price</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>


<TR VALIGN=Bottom>
<TD WIDTH=31% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Outstanding - beginning of period</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=4% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>434</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=6% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 4.96</FONT></TD>
<TD WIDTH=8% 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=4% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>480</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=6% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 4.95</FONT></TD>
<TD WIDTH=1% 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>&#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>(21</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></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>&#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>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>(10</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>3.32</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>(35</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>4.69</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 COLSPAN=1></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD>
     <TD COLSPAN=1></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD>
<TH COLSPAN=1>&nbsp;</TH>
     <TD COLSPAN=2 ALIGN=RIGHT><HR 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>Outstanding - end of period</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>    5.00</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>424</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>    5.00</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 COLSPAN=1></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD>
     <TD COLSPAN=1></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD>
<TH COLSPAN=1>&nbsp;</TH>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD></TR>
</TABLE>
<BR>


<TABLE WIDTH=100% CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
&nbsp;</FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The intrinsic values of options exercised in the nine months ended June 30, 2006 and 2005 were $37 and $7 respectively.<BR>
<BR>
A summary of non vested options for the nine months ended June 30, 2006 is as
follows:
</FONT></TD>
</TR>
</TABLE>
<BR>


<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=60%>
<TR VALIGN=Bottom>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
<TH COLSPAN=1>&nbsp;</TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Number</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH>
<TH COLSPAN=2>&nbsp;</TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Weighted Average<BR>
Grant Date<BR>
Fair Value</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
<TD WIDTH=60% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Non-vested Shares, beginning of year</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>&nbsp;</FONT></TD>
<TD WIDTH=5% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>343</FONT></TD>
<TD WIDTH=8% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>

<TD WIDTH=5% 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><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=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD 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>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>(58)</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><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>.56</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>(15)</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><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>.67</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
<TH COLSPAN=1>&nbsp;</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>&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>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>$</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>.03</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
<TH COLSPAN=1>&nbsp;</TH>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD></TR>
</TABLE>
<BR>


<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The options on the 424 shares outstanding at June 30, 2006 had an aggregate
intrinsic value of $550 and a weighted average contract term of 7.4 years.
</FONT></TD>
</TR>
</TABLE>
<BR>



<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
At September 30, 2005 and June 30, 2006, there were 137 and 154 shares vested
respectively, all of which were exercisable. At June 30, 2006, the weighted average exercise price
for these shares was $4.95 per share; the aggregate intrinsic value of these
shares was $337 and the weighted average remaining term was 5.8 years.
</FONT></TD>
</TR>
</TABLE>




<BR>
<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
8</FONT></P>

<PAGE>



<!-- MARKER FORMAT-SHEET="Subheading" FSL="Workstation" -->
<A NAME=A008></A>
<P ALIGN=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b>3. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Intangible Assets and Impairment Loss</b></FONT></P>

<!-- MARKER FORMAT-SHEET="Paragraph Flush" FSL="Workstation" -->
<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In fiscal
2003, we completed the acquisitions of LC Resources, Inc. and PharmaKinetics
Laboratories, Inc. (&#147;PKLB&#148;). In valuing the intangibles acquired, we
determined that the replacement cost, in a start-up situation, of establishing
these two operations as FDA compliant research sites was $1,267 and recorded
intangible assets of that amount. We determined that these assets had an
indeterminate life, and accordingly did not amortize the assets. At the request
of the staff of the Securities and Exchange Commission, we have re-examined the
make-up of these assets, and have determined that of the total recorded, $793
related to the hiring and training of the in-place workforce. Financial
Accounting Standard 141 requires that such assets be included in goodwill,
accordingly we have reclassified that amount to goodwill at June 30, 2006. The
remaining $474 of the intangible asset related to the replacement costs of
creating and documenting the operating systems and procedures, 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 amortization in Cost of Services of $12 in the quarter and $157 in the
nine months ended June 30, 2006.</FONT></P>

<!-- MARKER FORMAT-SHEET="Paragraph Flush" FSL="Workstation" -->
<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>PKLB, which now
constitutes our Baltimore clinical research unit, has experienced losses since
acquisition, including $690 and $1,980 in the three and nine months ended June
30, 2006, before adjustment. Although improvement had been achieved in operating
results since acquisition prior to the current year, the acquisition of a major
customer by a company that had other clinical study providers and subsequent
cancellation of previously scheduled studies has seriously impacted current
operating results. Establishing future profitable operations there will require
additional sales effort to attract new customers. Consequently, we have
determined that there is a permanent impairment of value of the assets acquired,
and have recorded a charge to general and administrative expenses of $1,100 to
write down the value of fixed assests by $330, and other intangible assets by
$387 and reduced the value of goodwill by $383 to adjust the values to our
estimate of realizable values. The Baltimore clinical research unit is included
in the Services segment in footnote 6. We also recorded a deferred tax benefit
of $385 related to this charge.</FONT></P>

<!-- MARKER FORMAT-SHEET="Subheading" FSL="Workstation" -->
<A NAME=A009></A>
<P ALIGN=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b>4. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income
(Loss) per Share</b></FONT></P>

<!-- MARKER FORMAT-SHEET="Paragraph Flush" FSL="Workstation" -->
<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We compute basic income
or loss per share using the weighted average number of common shares outstanding. We
compute diluted income (loss) per share using the weighted average number of common and
potential common shares outstanding.</FONT></P>

<!-- MARKER FORMAT-SHEET="Paragraph Flush" FSL="Default" -->
<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The following table
reconciles our computation of basic earnings (loss) per share to diluted earnings (loss)
per share:</FONT></P>


<TABLE CELLPADDING=0 align=center CELLSPACING=0 BORDER=0 WIDTH=70%>
<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>Three Months Ended<BR>
June 30,</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH>
<TH COLSPAN=1>&nbsp;</TH>
     <TH COLSPAN=5><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Nine Months Ended<BR>
June 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>&nbsp;</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>&nbsp;</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>&nbsp;</TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2005</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
<TD WIDTH=40% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Shares:</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=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=8% 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>

<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=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=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>Basic 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>
     <TD ALIGN=RIGHT><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</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><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>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,879</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>4,870</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;Effect of dilutive securities</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times 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;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>&#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>149</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><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;Convertible 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>&#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=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>Diluted 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>
     <TD ALIGN=RIGHT><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</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5,020</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,879</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>4,870</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>Basic 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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   (1,756</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>    356</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (1,934</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   (137</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>Diluted 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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   (1,756</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>    356</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (1,934</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   (137</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>Basic earnings (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>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  (0.36</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   0.07</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  (0.40</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  (0.03</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>Diluted earnings (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>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  (0.36</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>   0.07</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  (0.40</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  (0.03</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
</TABLE>



<BR>
<BR>
<BR>
<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
9</FONT></P>

<PAGE>





<P ALIGN=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b>5. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventories</b></FONT></P>

<!-- MARKER FORMAT-SHEET="Paragraph Flush" FSL="Default" -->
<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Inventories consisted of the following:</FONT></P>


<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 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>June 30,<BR>
2006</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH>
<TH COLSPAN=1>&nbsp;</TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>September 30,<BR>
2005</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=47% 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=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>$</FONT></TD><TD WIDTH=16% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  1,410</FONT></TD>
        <TD WIDTH=10% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=16% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  1,425</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>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>375</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>391</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><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></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>2,072</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><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</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>(183</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</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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  1,889</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  2,041</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>




<!-- MARKER FORMAT-SHEET="Subheading" FSL="Workstation" -->
<A NAME=A011></A>
<P ALIGN=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b>6. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Segment
Information</b></FONT></P>

<!-- MARKER FORMAT-SHEET="Paragraph Flush" FSL="Workstation" -->
<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We operate in
two principal segments &#151; research services and research products. Our
Services segment provides research and development support on a contract basis
directly to pharmaceutical companies. Our Products segment provides liquid
chromatography, electrochemical and physiological monitoring products to
pharmaceutical companies, universities, government research centers and medical
research institutions. Our accounting policies in these segments are the same as
those described in the summary of significant accounting policies.</FONT></P>

<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The following
table presents operating results by segment:</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=5><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Three Months Ended<BR>
June 30,</FONT></TH>
<TH COLSPAN=1>&nbsp;</TH>
     <TH COLSPAN=5><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Nine Months Ended<BR>
June 30,</FONT></TH></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=5><HR NOSHADE COLOR=#000000 SIZE=1></TD>
<TH COLSPAN=1>&nbsp;</TH>
     <TD COLSPAN=5><HR NOSHADE COLOR=#000000 SIZE=1></TD>
</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></TH>
<TH COLSPAN=1>&nbsp;</TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2005</FONT></TH>
<TH COLSPAN=1>&nbsp;</TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2006</FONT></TH>
<TH COLSPAN=1>&nbsp;</TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2005</FONT></TH>
</TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=5><HR NOSHADE COLOR=#000000 SIZE=1></TD>
<TH COLSPAN=1>&nbsp;</TH>
     <TD COLSPAN=5><HR NOSHADE COLOR=#000000 SIZE=1></TD>
</TR>
<TR VALIGN=Bottom>
<TD WIDTH=41% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Operating income (loss):</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=8% 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=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></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>&nbsp;</FONT></TD>
<TD WIDTH=8% 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=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>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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (2,169</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>    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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (2,628</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>    656</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>Products</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(242</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>580</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><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</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>205</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=5><HR NOSHADE COLOR=#000000 SIZE=1></TD>
<TH COLSPAN=1>&nbsp;</TH>
     <TD COLSPAN=5><HR NOSHADE COLOR=#000000 SIZE=1></TD>
</TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>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>(2,411</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>932</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><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</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>&nbsp;</FONT></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>(270</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>(136</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>(774</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>(698</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=5><HR NOSHADE COLOR=#000000 SIZE=1></TD>
<TH COLSPAN=1>&nbsp;</TH>
     <TD COLSPAN=5><HR NOSHADE COLOR=#000000 SIZE=1></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>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (2,681</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>    796</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (2,929</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>    163</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=5><HR NOSHADE COLOR=#000000 SIZE=3></TD>
<TH COLSPAN=1>&nbsp;</TH>
     <TD COLSPAN=5><HR NOSHADE COLOR=#000000 SIZE=3></TD>
</TR>
</TABLE>

<BR>
<BR>
<BR>
<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
10</FONT></P>

<PAGE>




<P ALIGN=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b>7. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Recent Accounting
Pronouncements</b></FONT></P>

<!-- MARKER FORMAT-SHEET="Paragraph Flush" FSL="Default" -->
<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In July 2006,
the Financial Accounting Standards Board issued Interpretation No. 48,
<I>Accounting for Uncertainty in Income Taxes&#151;an interpretation of FASB
Statement No.&nbsp;109 </I>(FIN&nbsp;48), which clarifies the accounting for
uncertainty in tax positions. This Interpretation requires that we recognize in
our financial statements, the impact of a tax position, if that position is more
likely than not of being sustained on audit, based on the technical merits of
the position. The provisions of FIN 48 are effective as of our fiscal year
beginning October 1, 2007, with the cumulative effect of the change in
accounting principle recorded as an adjustment to opening retained earnings. We
are currently evaluating the impact of adopting FIN 48 on our financial
statements.</FONT></P>


<P ALIGN=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B>ITEM 2.&nbsp;&nbsp;&nbsp;&nbsp;MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS</B>
</FONT></P>

<!-- MARKER FORMAT-SHEET="Paragraph Flush" FSL="Workstation" -->
<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>This Form
10-Q may contain &#147;forward-looking statements,&#148; within the meaning of
Section 27A of the Securities Act of 1933, as amended, and/or Section 21E of the
Securities Exchange Act of 1934, as amended. Those statements may include, but
are not limited to, discussions regarding BASi&#146;s intent, belief or current
expectations with respect to (i) BASi&#146;s strategic plans; (ii) BASi&#146;s
future profitability; (iii) BASi&#146;s capital requirements; (iv) industry
trends affecting the Company&#146;s financial condition or results of
operations; (v) the Company&#146;s sales or marketing plans; or (vi) BASi&#146;s
growth strategy. Investors in BASi&#146;s common shares are cautioned that
reliance on any forward-looking statement involves risks and uncertainties,
including the risk factors contained in Exhibit 99.1 to BASi&#146;s annual
report on Form 10-K for the year ended September 30, 2005. 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. In light of the uncertainties inherent in
any forward-looking statement, the inclusion of a forward-looking statement
herein should not be regarded as a representation by the Company that
BASi&#146;s plans and objectives will be achieved.</FONT></P>

<P ALIGN=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b>GENERAL</b></FONT></P>

<!-- MARKER FORMAT-SHEET="Paragraph Flush" FSL="Workstation" -->
<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The business
of Bioanalytical Systems, Inc. is very much 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 their outsourcing of laboratory and analytical needs, 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 Flush" FSL="Workstation" -->
<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In our annual
report on Form 10-K for the year ended September 30, 2005, we commented on the
impacts and anticipated impacts developments in the pharmaceutical industry have
on our businesses, as well as some of the potential risks. Those comments are
still applicable, and are found under &#147;General&#148; in Part I, Item 2 of
that report.</FONT></P>


<BR>
<BR>
<BR>
<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
11</FONT></P>

<PAGE>
















<!-- MARKER FORMAT-SHEET="Subheading" FSL="Workstation" -->
<A NAME=A014></A>
<P ALIGN=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b>RESULTS OF OPERATIONS</b></FONT></P>

<!-- MARKER FORMAT-SHEET="Paragraph Flush" 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=80%>
<TR VALIGN=Bottom>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
<TH COLSPAN=4><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Three Months Ended<BR>
June 30,</FONT></TH>
<TH COLSPAN=4><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Nine Months Ended<BR>
June 30,</FONT></TH></TR>

<TR>
<TH COLSPAN=2>&nbsp;</TH>
     <TD COLSPAN=4><HR align=center width=75% NOSHADE COLOR=#000000 SIZE=1></TD>
     <TD COLSPAN=4><HR align=center width=75% NOSHADE COLOR=#000000 SIZE=1></TD></TR>


<TR VALIGN=Bottom>
<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>2006</FONT></TH>
<TH align=right COLSPAN=1><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2005</FONT></TH>
<TH COLSPAN=1>&nbsp;</TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2006</FONT></TH>
<TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2005</FONT></TH></TR>


<TR>
<TH COLSPAN=2>&nbsp;</TH>
     <TD COLSPAN=4><HR align=center width=75% NOSHADE COLOR=#000000 SIZE=1></TD>
     <TD COLSPAN=4><HR align=center width=75% NOSHADE COLOR=#000000 SIZE=1></TD></TR>


<TR VALIGN=Bottom>
<TD WIDTH=45% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Service revenue</FONT></TD>
<TD WIDTH=4% 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>79</FONT></TD>
<TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.3</FONT></TD>

<TD WIDTH=7% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>80</FONT></TD>
<TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.3</FONT></TD>

<TD WIDTH=7% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>79</FONT></TD>
<TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.1</FONT></TD>

<TD WIDTH=7% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>79</FONT></TD>
<TD WIDTH=5% 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>Product revenue</FONT></TD><TD ALIGN=LEFT><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>.7</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>19</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>20</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>20</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.7</FONT></TD></TR>
<TR>
<TH COLSPAN=2>&nbsp;</TH>
     <TD COLSPAN=4><HR align=center width=75% NOSHADE COLOR=#000000 SIZE=1></TD>
     <TD COLSPAN=4><HR align=center width=75% 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=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>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>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>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 (a)</FONT></TD><TD ALIGN=LEFT><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</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>59</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>74</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>69</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>Cost of product revenue (a)</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>56</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>37</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>40</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>37</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.8</FONT></TD></TR>
<TR>
<TH COLSPAN=2>&nbsp;</TH>
     <TD COLSPAN=4><HR align=center width=75% NOSHADE COLOR=#000000 SIZE=1></TD>
     <TD COLSPAN=4><HR align=center width=75% 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=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>.8</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>.5</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>.2</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>62</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.8</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=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>25</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>44</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>32</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>37</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.2</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=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>49</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>36</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>39</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>34</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.4</FONT></TD></TR>
<TR>
<TH COLSPAN=2>&nbsp;</TH>
     <TD COLSPAN=4><HR align=center width=75% NOSHADE COLOR=#000000 SIZE=1></TD>
     <TD COLSPAN=4><HR align=center width=75% 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>Operating income (loss)</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(24</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>8</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>(6</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>2</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.8</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=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>.7)</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>.2)</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>(2</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.3)</FONT></TD></TR>
<TR>
<TH COLSPAN=2>&nbsp;</TH>
     <TD COLSPAN=4><HR align=center width=75% NOSHADE COLOR=#000000 SIZE=1></TD>
     <TD COLSPAN=4><HR align=center width=75% 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=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(26</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>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>(9</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>0</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.5</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=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9</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>(3</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>3</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>(1</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.0)</FONT></TD></TR>
<TR>
<TH COLSPAN=2>&nbsp;</TH>
     <TD COLSPAN=4><HR align=center width=75% NOSHADE COLOR=#000000 SIZE=1></TD>
     <TD COLSPAN=4><HR align=center width=75% NOSHADE COLOR=#000000 SIZE=1></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=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(17</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>3</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>(6</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>(0</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.5)</FONT></TD></TR>
<TR>
<TH COLSPAN=2>&nbsp;</TH>
     <TD COLSPAN=4><HR align=center width=75% NOSHADE COLOR=#000000 SIZE=3></TD>
     <TD COLSPAN=4><HR align=center width=75% NOSHADE COLOR=#000000 SIZE=3></TD></TR>

</TABLE>



<P ALIGN=center><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>


<P ALIGN=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B>Three Months Ended June 30, 2006 Compared to Three Months Ended June 30,
2005</B></FONT></P>

<P ALIGN=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b><I>Service and Product Revenues</I></b></FONT></P>

<!-- MARKER FORMAT-SHEET="Paragraph Flush" FSL="Workstation" -->
<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Revenues for
the third fiscal quarter ended June 30, 2006 declined 11% to $10.0 million
compared to $11.3 million for the third fiscal quarter last year. Of the $1.3
million decline, Service revenue decreased $1.1 million, comprised of decreases
of $1 million each in our Baltimore clinic and our bioanalytical laboratories,
offset by a $1 million increase in our toxicology facility and $336,000 of new
revenues in our pre-clinical pharmacokinetics/pharmacodynamics
(&#147;PKPD&#148;) facility, which began commercial operation this year. The
Baltimore clinic was impacted by the acquisition of our largest client for the
clinic and subsequent cancellation of its scheduled work, in addition to
postponement of a contract pending FDA clearance. Our laboratories experienced a
decline in samples processed compared to the prior year when larger contracts
resulted in longer production runs, as well as a decline in price per sample due
to the nature of the assays. Our toxicology unit continued to experience strong
demand for its services, particularly among smaller biotech and discovery
clients. Our PKPD unit has experienced good market acceptance of its services,
where we employ our proprietary Culex&reg; technology to provide early stage
preclinical contract studies for our clients. The decline in product revenue was
the result of a decline in Culex&reg; shipments compared to the same quarter
last year.</FONT></P>

<BR>
<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
12</FONT></P>

<PAGE>


<!-- MARKER FORMAT-SHEET="Subheading" FSL="Workstation" -->
<A NAME=A016></A>
<P ALIGN=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b><I>Cost of Revenues</I></b></FONT></P>

<!-- MARKER FORMAT-SHEET="Paragraph Flush" FSL="Default" -->
<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Cost of
revenues for the fiscal quarter ended June 30, 2006 was $7.5 million or 75% of
revenue compared to $6.3 million, or 56% of revenue for the third fiscal quarter
last year. This increase in cost of revenues is a result of several factors. We
have experienced increases in our costs in our toxicology and PKPD operations,
where we have experienced increased revenues, while maintaining our capabilities
in our laboratories and Baltimore clinic in anticipation of restoring activities
to prior levels. Additionally, our revenue growth in toxicology resulted in
those revenues being a higher proportion of our total revenues, and as a result
of a higher percentage cost of revenues in those services than in our laboratory
operations, our overall cost of services increased on a percentage basis. Our
product costs are up due to increasing sales of consumable products related to
our Culex&reg; units, which have lower margins than the units themselves, and to
lower utilization of our manufacturing capacity, which results in excess
capacity being charged to cost of product revenue. In both our Service and
Product Segments, the percentage costs increased relative to sales due to the
relatively fixed nature of our costs being carried by a reduced level of
sales and increased head count in our production facilities.</FONT></P>

<P ALIGN=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b><I>Operating Expenses</I></b></FONT></P>

<!-- MARKER FORMAT-SHEET="Paragraph Flush" FSL="Workstation" -->
<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Selling
expenses for the three months ended June 30, 2006 decreased 13% to $625,000 from
$718,000 for the three months ended June 30, 2005. Our sales expenses declined
due to the timing of incidental expenses related to our sales force
(year-to-date expenditures are up 6%). Research and development expenses of
$350,000 for the three months ended June 30, 2006 compared to $261,000 for the
three months ended June 30, 2005 and are a result of continuing research on
products to support pre-clinical and clinical research.</FONT></P>

<!-- MARKER FORMAT-SHEET="Paragraph Flush" FSL="Workstation" -->
<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>General and
administrative (&#147;G&amp;A&#148;) for the three months ended June 30, 2006
were impacted by the write-down of assets related to our Baltimore
clinical research unit of $1,100,000 as a result of our determination that those
values have been impaired, and by recognition of a bad debt related to the same
location of $231,000. Other items included in G&amp;A expenses for the three months
ended June 30, 2006 decreased $500,000. The principal reasons for this were a
reduction of expenses in Baltimore related to our relocated laboratory and cost
controls there, coupled with translation expenses charged to G&amp;A in our UK
operation last year from a weak pound sterling, compared to translation gains
this year.</FONT></P>

<P ALIGN=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b><I>Other Income/Expense</I></b></FONT></P>

<!-- MARKER FORMAT-SHEET="Paragraph Flush" FSL="Workstation" -->
<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Interest
expense increased 9% to $272,000 in the three months ended June 30, 2006 from
$250,000 in the comparable quarter of the prior year. This increase is due to
our periodic use of our revolving line of credit, which is a floating
interest rate that has been consistently higher in the current quarter compared
to a year ago, as well as the financing of additional laboratory equipment
utilizing capital leases.</FONT></P>

<!-- MARKER FORMAT-SHEET="Subheading" FSL="Workstation" -->
<A NAME=A019></A>
<P ALIGN=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b><I>Income Taxes</I></b></FONT></P>

<!-- MARKER FORMAT-SHEET="Paragraph Flush" FSL="Workstation" -->
<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We computed
our tax benefit using an effective tax rate for the three months ended
June 30, 2006 of 35%. This is the federal rate on our loss in our clinical research unit.  We did not provide a state benefit as we have no income or state deferred taxes against which it could be utilized.
 In the current quarter, we had a profit of $80,000 on
foreign operations for which we have loss carryforwards and therefore provided
no taxes, and recorded $71,000 of stock option expenses for which we took no tax
benefit. In the three months ended June 30, 2005 we provided taxes at the
rate of 41% on US taxable income, and did not record a benefit for our foreign loss,
resulting in an effective tax rate above the statutory rate.</FONT></P>

<!-- MARKER FORMAT-SHEET="Subheading" FSL="Workstation" -->
<A NAME=A020></A>
<P ALIGN=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b><I>Net Income</I></b></FONT></P>

<!-- MARKER FORMAT-SHEET="Paragraph Flush" FSL="Default" -->
<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As a result of the
above factors, we lost $1,756,000 ($.36 per share, both basic and diluted) in
the quarter ended June 30, 2006, compared to net income of $356,000 ($.07 per
share, both basic and diluted) in the same period last year.</FONT></P>

<P ALIGN=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B>Nine Months Ended June 30, 2006 Compared to Nine Months Ended June 30,
2005</B>
</FONT></P>

<!-- MARKER FORMAT-SHEET="Subheading" FSL="Workstation" -->
<A NAME=A021></A>
<P ALIGN=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b><I>Service and Product Revenues</I></b></FONT></P>

<!-- MARKER FORMAT-SHEET="Paragraph Flush" FSL="Workstation" -->
<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Revenues for the nine
months ended June 30, 2006 increased 7% to $32.3 million compared to $30.1
million for the first nine months of fiscal 2005. Service revenue increases of
7% were the result of an increase in toxicology revenues of $3 million, new
revenues from our PKPD facility of $850,000, offset by declines in our Baltimore
clinic of $435,000 and declines in our bioanalytical laboratories of $1.4
million, due to the factors cited above for the current quarter. Revenues for
our products increased 8% for the nine months, which was a general increase
across our product lines.</FONT></P>

<BR>
<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
13</FONT></P>

<PAGE>



<!-- MARKER FORMAT-SHEET="Subheading" FSL="Workstation" -->
<A NAME=A022></A>
<P ALIGN=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b><I>Cost of Revenues</I></b></FONT></P>

<!-- MARKER FORMAT-SHEET="Paragraph Flush" FSL="Default" -->
<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Cost of
revenues for the nine months ended June 30, 2006 was $21.7 million or 67% of
revenue compared to $18.9 million, or 63% of revenue for the same period last
year. Both the cost of Service revenue and Product revenue increased as a
percentage of revenues due to the items cited in the current quarter.</FONT></P>



<P ALIGN=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b><I>Operating Expenses</I></b></FONT></P>

<!-- MARKER FORMAT-SHEET="Paragraph Flush" FSL="Workstation" -->
<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Selling expenses for
the nine months ended June 30, 2006 increased 6% to $2.0 million from $1.9
million for the nine months ended June 30, 2005. This increase is the net of
several personnel changes we have made as we endeavor to improve the
effectiveness of our sales force. Research and development expenses for the nine
months ended June 30, 2006 increased 51% to $989,000 from $653,000 for the nine
months ended June 30, 2005. This increase is attributable to additional
developmental efforts on new products in the current year.</FONT></P>

<!-- MARKER FORMAT-SHEET="Paragraph Flush" FSL="Workstation" -->
<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>General and
administrative expenses for the nine months ended June 30, 2006 increased 25% to
$9.7 million, up from $7.8 million for the nine months ended June 30, 2005,
primarily as a result of the adjustments made in the current quarter mentioned
above. Also included in the increase are additional facilities expense in
Baltimore of approximately $250,000 in the current year from the sale/leaseback
of the facility in January, 2005, increases in our insurance costs, and the
addition of a senior officer in the current year.</FONT></P>

<!-- MARKER FORMAT-SHEET="Subheading" FSL="Workstation" -->
<A NAME=A024></A>
<P ALIGN=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b><I>Other Income/Expense</I></b></FONT></P>

<!-- MARKER FORMAT-SHEET="Paragraph Flush" FSL="Workstation" -->
<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Interest
expense did not change significantly in the nine months ended June 30, 2006 from
the comparable period of the prior year. Lower average borrowing on our
revolving line of credit in the current year was offset by additional financing
costs of capital leases.</FONT></P>

<P ALIGN=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b><I>Income Taxes</I></b></FONT></P>

<!-- MARKER FORMAT-SHEET="Paragraph Flush" FSL="Workstation" -->
<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We computed
our benefit for the nine months ended June 30, 2006 using the federal rate of 35% with no state benefit. For the nine
months ended June 30, 2005 we used an effective tax rate of 40% on the US taxable
income. In that period, we did not provide a
benefit on foreign losses because we had no foreign carrybacks or deferred taxes
against which to utilize those benefits, which resulted in a disproportionate
tax rate.</FONT></P>

<!-- MARKER FORMAT-SHEET="Subheading" FSL="Workstation" -->
<A NAME=A026></A>
<P ALIGN=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b><I>Net Loss</I></b></FONT></P>

<!-- MARKER FORMAT-SHEET="Paragraph Flush" FSL="Default" -->
<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our net loss
for the nine months ended June 30, 2006 was $1,934,000 ($0.40 per share, both
basic and diluted). As a result of the taxes on US income exceeding our
consolidated income before tax in the nine months ended June 30, 2005, we
experienced a net loss of $137,000 ($.03 per share, both basic and
diluted).</FONT></P>

<P ALIGN=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B>Impairment Charges</B></FONT></P>

<P ALIGN=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Our Baltimore clinical research unit has
experienced losses since acquisition, including $690,000 and $1,980,000 in the
three and nine months ended June 30, 2006, before adjustment. Although improvement had been
achieved in operating results since acquisition prior to the current year, the
acquisition of a major customer and subsequent cancellation of previously
scheduled studies has seriously impacted current operating results. Establishing
future profitable operations there will require additional sales effort in
attracting new customers. Consequently, in connection with the preparation of
our financial statements for the fiscal quarter ended June 30, 2006, we have
determined that there is a permanent impairment of value of the
assets acquired, and have recorded a charge to general and administrative
expenses of $1,100,000 to write down the value of fixed assests by $330,000 and other intangible assests 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 $385,000 related to this charge.
</FONT></P>

<BR>
<BR>
<BR>
<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
14</FONT></P>

<PAGE>




<!-- MARKER FORMAT-SHEET="Subheading" FSL="Workstation" -->
<A NAME=A027></A>
<P ALIGN=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b>LIQUIDITY AND CAPITAL RESOURCES</b></FONT></P>

<!-- MARKER FORMAT-SHEET="Paragraph Flush" FSL="Workstation" -->
<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Since its
inception, BASi&#146;s principal sources of cash have been cash flow generated
from operations and funds received from bank borrowings and other financings. At
June 30, 2006 we had cash of $777,000, compared to cash of $1,254,000 at
September 30, 2005. Approximately 50% of our cash balances were in the U.K. We
monitor our U.K. cash needs to avoid currency conversion costs, which in the
current interest rate environment can exceed interest.</FONT></P>

<!-- MARKER FORMAT-SHEET="Paragraph Flush" FSL="Workstation" -->
<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our net cash
provided by operating activities was $2.6 million for the nine months ended June
30, 2006. This was the result of collections against our receivables, and reduced
investment in our inventories, offset by working down the balances in customer
deposits.</FONT></P>

<!-- MARKER FORMAT-SHEET="Paragraph Flush" FSL="Workstation" -->
<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We utilized
this cash from operations to finance $1.3 million of capital asset additions,
principally upgrading of facilities in our toxicology and clinical research
units. Additionally we repaid $1.9 million of debt and capital leases during the
nine month period. We also financed $1.5 million of laboratory equipment in the
nine months ended June 30, 2006 with capital leases.</FONT></P>

<!-- MARKER FORMAT-SHEET="Subheading" FSL="Workstation" -->
<A NAME=A028></A>
<P ALIGN=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b>Capital Resources</b></FONT></P>

<!-- MARKER FORMAT-SHEET="Paragraph Flush" FSL="Workstation" -->
<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We have
outstanding an irrevocable letter of credit issued to secure the lease of our
Baltimore facility. The letter of credit is for $2.0 million currently, reducing
to $1.0 million in January, 2007 and expiring in January, 2008.</FONT></P>

<!-- MARKER FORMAT-SHEET="Paragraph Flush" FSL="Workstation" -->
<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The letter of
credit reduces the amount of funds available under our $6 million revolving
credit facility. The amount of funds available under this facility is calculated
using a borrowing base formula, principally as percentage of qualifying
receivables and inventory. Our recent monthly average qualifying assets for our
borrowing base have been approximately $5,000,000.</FONT></P>

<!-- MARKER FORMAT-SHEET="Paragraph Flush" FSL="Workstation" -->
<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We do not
expect to have any significant additional capital additions in the current
fiscal year. We are currently in our planning cycle for our next fiscal year
beginning October 1, 2006, and anticipate our additions for next year to be
approximately $2.0 million (none of which has currently been committed). We have
not completed arrangements for financing these additions, but anticipate a
combination of debt, leasing and utilization of operating cash flow.</FONT></P>

<!-- MARKER FORMAT-SHEET="Subheading" FSL="Workstation" -->
<A NAME=A029></A>
<P ALIGN=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b>Liquidity</b></FONT></P>

<!-- MARKER FORMAT-SHEET="Paragraph Flush" FSL="Workstation" -->
<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We do not
foresee the need to borrow extensively under our revolving credit agreement to
finance current operations, except for periods when rapid growth of new business
may necessitate amounts to finance the buildup of receivables and inventory.
Nevertheless, continuation of operating results similar to those experienced in
the quarter ended June 30, 2006 would negate our currently positive operating
cash flow, and impact our ability to obtain additional financing. Historically,
we have experienced significantly varying results from quarter to quarter as a
result of the timing of the award and performance of sizable contracts, and we
expect that pattern to continue.</FONT></P>

<!-- MARKER FORMAT-SHEET="Paragraph Flush" FSL="Workstation" -->
<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>At June 30,
2006, we had $777,000 in cash, and approximately $3 million of available
borrowings under our revolving credit facility.</FONT></P>

<!-- MARKER FORMAT-SHEET="Paragraph Flush" FSL="Workstation" -->
<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our revolving
line of credit expires December 31, 2007. The maximum amount available under the
terms of the agreement is $6.0 million with outstanding borrowings limited to
the borrowing base as defined in the agreement. Interest accrues monthly on the
outstanding balance at the bank&#146;s prime rate to prime rate plus 25 basis
points, or at the Eurodollar rate plus 250 to 300 basis points, at our election,
depending upon the ratio of our interest bearing indebtedness (less subordinated
debt) to EBITDA. We pay a fee equal to 25 basis points on the unused portion of
the line of credit.</FONT></P>

<!-- MARKER FORMAT-SHEET="Paragraph Flush" FSL="Default" -->
<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. Based on our current business activities, we believe cash
generated from our operations and amounts available under our existing credit
facilities and cash on hand, will be sufficient to fund the Company&#146;s
working capital and capital expenditure requirements for the coming year.
As a result of the loss in the three months ended June 30, 2006, we did not meet
our fixed charge coverage ratio for the quarter. Our bank has waived this event
of non-compliance.</FONT></P>


<BR>
<BR>
<BR>
<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
15</FONT></P>

<PAGE>





<!-- MARKER FORMAT-SHEET="Paragraph Flush" FSL="Default" -->
<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We are
required to make cash payments in the future on debt and lease obligations. The
following table summarizes BASi&#146;s contractual term debt, lease obligations
and other commitments at June 30, 2006 and the effect such obligations are
expected to have on our liquidity and cash flows in future periods (amounts
presented for 2006 are those items required in the final quarter), for the
fiscal years ending September 30(in thousands):</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=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2006</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH>
<TH COLSPAN=1>&nbsp;</TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2007</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH>
<TH COLSPAN=1>&nbsp;</TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2008</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH>
<TH COLSPAN=1>&nbsp;</TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2009</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH>
<TH COLSPAN=1>&nbsp;</TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2010</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH>
<TH COLSPAN=1>&nbsp;</TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>After 2010</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH>
<TH COLSPAN=1>&nbsp;</TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Total</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>Capital expenditures</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>$</FONT></TD><TD WIDTH=6% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>    250</FONT></TD>
        <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=6% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</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>$</FONT></TD><TD WIDTH=6% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=6% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</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>$</FONT></TD><TD WIDTH=6% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD WIDTH=6% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</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>    250</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>Mortgage notes 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>86</FONT></TD>
        <TD ALIGN=LEFT><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>    362</FONT></TD>
        <TD ALIGN=LEFT><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>    384</FONT></TD>
        <TD ALIGN=LEFT><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>    407</FONT></TD>
        <TD ALIGN=LEFT><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>    431</FONT></TD>
        <TD ALIGN=LEFT><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>  6,963</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8,633</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</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><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>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>4,359</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>118</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><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>133</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><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>557</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>453</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>128</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,253</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>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>1,846</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>387</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><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>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><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>2,770</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>
     <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>    996</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  3,040</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  5,640</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  1,092</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>    884</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>  7,091</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 18,743</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>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD></TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="Paragraph Flush" FSL="Default" -->
<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>For further
details on our indebtedness, see Note 7 to our Consolidated Financial Statements
included in our Annual Report on Form 10-K for the year ended September 30,
2005.</FONT></P>


<P ALIGN=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B>AMENDMENT</B></FONT></P>

<P ALIGN=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
On August 14, 2006, the Company filed its Quarterly Report on Form 10-Q for the
fiscal quarter ended June 30, 2006 (the "Prior Form 10-Q"), mistakenly believing
that its independent accountant, KPMG LLP ("KPMG") had completed the review of
the unaudited interim financial information as of and for the three and nine
month periods ended June 30, 2006 set forth in the Prior Form 10-Q required by
Statement on Auditing Standards No. 100, Interim Financial Statements (the "SAS
100 Review"). On August 15, 2006, KPMG informed the Company that KPMG had not
completed its SAS 100 Review of the unaudited interim financial information
included in the Prior Form 10-Q prior to the time the Prior Form 10-Q was filed
with the U.S. Securities and Exchange Commission. The Company undertook to file
an amended Form 10-Q upon completion of KPMG's SAS 100 review. Due to the fact
that KPMG's SAS 100 Review had not been completed, the Company advised that the
condensed consolidated balance sheets, condensed consolidated statements of
operations, condensed consolidated statements of cash flows and notes to
condensed consolidated financial statements as of and for the three and nine
month periods ended June 30, 2006 included in the Prior Form 10-Q should not be
relied upon.</FONT></P>

<P ALIGN=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
In connection with the completion of KPMG's SAS 100 Review, KPMG and management
identified certain material misstatements in connection with the impairment
charges related to our Baltimore clinical research unit, as discussed above, and
identified certain material weaknesses in our controls and procedures discussed
in Item 4, Controls and Procedures, below.</FONT></P>








<BR>
<BR>
<BR>
<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
16</FONT></P>

<PAGE>






<P ALIGN=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B>ITEM 3.&nbsp;&nbsp;&nbsp;&nbsp;QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK</B>
</FONT></P>

<!-- MARKER FORMAT-SHEET="Paragraph Flush" FSL="Workstation" -->
<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>BASi&#146;s
primary market risk exposure with regard to financial instruments is changes in
interest rates. Borrowings under the credit agreement between BASi and National
City Bank dated January 4, 2005 bear interest at a rate of either the
bank&#146;s prime rate to prime plus 25 basis points, or at the Eurodollar rate
plus 250 to 300 basis points, depending in each case upon the ratio of
BASi&#146;s interest-bearing indebtedness (less subordinated debt) to EBITDA, at
BASi&#146;s option. We have taken steps to fix the interest rate on a
significant amount of our debt through May, 2007. Historically, BASi has not
used derivative financial instruments to manage exposure to interest rate
changes. BASi estimates that a hypothetical 10% adverse change in interest rates
would not affect the consolidated operating results of BASi by a material
amount.</FONT></P>

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

<P ALIGN=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B>ITEM 4.&nbsp;&nbsp;&nbsp;&nbsp;CONTROLS AND PROCEDURES</B></FONT></P>

<!-- MARKER FORMAT-SHEET="Paragraph Flush" FSL="Workstation" -->
<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In the initial report
on Form 10-Q for the fiscal quarter ended June 30, 2006, the Company's Chief
Executive Officer and Chief Financial Officer concluded that the Company's
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) were effective as of June 30, 2006. Based on their most recent
evaluation, and following the review of the letter from the Company's
independent accountants, KPMG LLP ("KPMG"), discussed below, the Company&#146;s
Chief Executive Officer and Chief Financial Officer have now concluded that the
Company&#146;s disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) were not effective, as of June 30, 2006, to
ensure that information required to be disclosed by the Company in this Form
10-Q was recorded, processed, summarized and reported within the time periods
specified by the Securities and Exchange Commission&#146;s rules and forms. This
determination is based upon the material weaknesses identified below.</FONT></P>

<!-- MARKER FORMAT-SHEET="Paragraph Flush" FSL="Workstation" -->
<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
KPMG has 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's internal
control.&#148; The material weaknesses noted by KPMG consisted of a failure to
set an appropriate "tone at the top" 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 concurs with the assessment of KPMG and is currently
reviewing its internal controls and procedures.</FONT></P>

<P ALIGN=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
As a result of the aforementioned material weaknesses in internal control over
financial reporting, material misstatements of our current condensed
consolidated financial statements occurred and were identified. To correct these
errors in accounting, we have filed this Amendment to Quarterly Report on Form
10-Q.</FONT></P>

<!-- MARKER FORMAT-SHEET="Paragraph Flush" FSL="Default" -->
<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>There was no
change in the Company&#146;s internal control over financial reporting during
the Company&#146;s most recently completed fiscal quarter that has materially
affected, or is reasonably likely to materially affect, the Company&#146;s
internal control over financial reporting.</FONT></P>

<BR>
<BR>
<BR>
<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
17</FONT></P>

<PAGE>




<P ALIGN=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B>PART II  &#151; OTHER  INFORMATION</B></FONT></P>

<P ALIGN=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B>ITEM 1A.&nbsp;&nbsp;&nbsp;&nbsp;RISK FACTORS</B></FONT></P>

<P ALIGN=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
In addition to the risk factors disclosed in Exhibit 99 to the Company's Annual
Report on Form 10-K for the fiscal year ended September 30, 2005, the following
factor should be considered in evaluating our business and financial
condition.</FONT></P>

<P ALIGN=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Our
independent registered public accounting firm has advised management and our
audit committee that they have identified material weaknesses in our internal
controls and we have concluded that we have material weaknesses in our
disclosure controls and procedures. Our business and stock price may be
adversely affected if we do not remediate these material weaknesses or if we
have other material weaknesses in our internal controls.</B></FONT></P>

<P ALIGN=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
As we disclose in Part I, Item 4, "Controls and Procedures" of this Form 10-Q,
our management and independent accountants have concluded that our disclosure
controls and procedures were not effective as of June 30, 2006. While we are
reviewing and intend to take immediate steps to correct our internal control
weaknesses, the material weaknesses that have been discovered will not be
considered remediated until new and improved internal controls operate for a
period of time, are tested and it is concluded that such new and improved
internal controls are operating effectively. Pending the successful completion
of such testing, we will identify, develop and perform mitigating procedures
relating to our internal control weaknesses.</FONT></P>

<P ALIGN=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
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>


<P ALIGN=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B>ITEM 5.&nbsp;&nbsp;&nbsp;&nbsp;OTHER INFORMATION</B>
</FONT></P>

<P ALIGN=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
In connection with the preparation of our financial statements for the fiscal
quarter ended June 30, 2006, we concluded that there is a permanent impairment
of value of the assets of one of the companies we acquired, and have recorded a
charge to general and administrative expenses of $1,100,000 to write down the
value of fixed assets by $330,000 and other intangible assets by $387,000, and
reduce the value of goodwill by $383,000. We also recorded a deferred tax benefit
of $385,000 related to this charge. Pursuant to the instructions to Item 2.06 of
Form 8-K, the information required by such Item is included in the Management's
Discussion and Analysis of Financial Condition and Results of Operations above.
Please see the heading Results of Operations &#151; Impairment Loss on
Intangible Assets and Goodwill, which information is incorporated herein by this
reference.
</FONT></P>


<BR>
<BR>
<BR>
<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
18</FONT></P>

<PAGE>








<P ALIGN=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B>ITEM 6.&nbsp;&nbsp;&nbsp;&nbsp;EXHIBITS</B>
</FONT></P>


<P ALIGN=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b>Exhibits</b></FONT></P>



<TABLE WIDTH=100% CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=bottom>
<TD WIDTH=16%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Number assigned<BR>
in Regulation S-K<BR>
<U>Item 601</U>
</FONT></TD>
<TD WIDTH=84%><div align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<U>Description of Exhibits</U></FONT></div></TD>
</TR>
</TABLE>
<BR>



<TABLE WIDTH=100% CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=8%><div align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
(3)</FONT></div></TD>
<TD WIDTH=8%><div align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
3.1</FONT></div></TD>
<TD WIDTH=84%><FONT FACE="Times New Roman, Times, Serif" 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></TD>
</TR>
</TABLE>
<BR>


<TABLE WIDTH=100% CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=8%><div align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
</FONT></div></TD>
<TD WIDTH=8%><div align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
3.2</FONT></div></TD>
<TD WIDTH=84%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Second Restated Bylaws of Bioanalytical Systems, Inc. (incorporated by reference
to Exhibit 3.2 Form 10-Q for the quarter ended December 31, 1997).</FONT></TD>
</TR>
</TABLE>
<BR>

<TABLE WIDTH=100% CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=8%><div align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
(4)</FONT></div></TD>
<TD WIDTH=8%><div align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
4.1</FONT></div></TD>
<TD WIDTH=84%><FONT FACE="Times New Roman, Times, Serif" 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></TD>
</TR>
</TABLE>
<BR>

<TABLE WIDTH=100% CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=8%><div align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
(31)</FONT></div></TD>
<TD WIDTH=8%><div align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
31.1</FONT></div></TD>
<TD WIDTH=84%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Certification of Peter T. Kissinger +</FONT></TD>
</TR>
</TABLE>
<BR>

<TABLE WIDTH=100% CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=8%><div align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
</FONT></div></TD>
<TD WIDTH=8%><div align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
31.2</FONT></div></TD>
<TD WIDTH=84%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Certification of Michael R. Cox +</FONT></TD>
</TR>
</TABLE>
<BR>

<TABLE WIDTH=100% CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=8%><div align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
(32)</FONT></div></TD>
<TD WIDTH=8%><div align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
32.1</FONT></div></TD>
<TD WIDTH=84%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Section 1350 Certifications +</FONT></TD>
</TR>
</TABLE>
<BR>

<TABLE WIDTH=100% CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=8%><div align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
(99)</FONT></div></TD>
<TD WIDTH=8%><div align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
99.1</FONT></div></TD>
<TD WIDTH=84%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Risk factors (incorporated by reference to Exhibit 99.1 to Form 10-K for the
year ended September 30, 2005).</FONT></TD>
</TR>
</TABLE>
<BR>
<BR>



<!-- MARKER FORMAT-SHEET="Paragraph Flush" FSL="Default" -->
<P align=justify><FONT FACE="Times New Roman, Times, Serif"SIZE=2>
&#134;&nbsp;Filed with this Quarterly Report on Form 10-Q.</FONT></P>

<BR>
<BR>
<BR>
<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
19</FONT></P>

<PAGE>




<P ALIGN=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b>SIGNATURES</b></FONT></P>
<BR>

<!-- MARKER FORMAT-SHEET="Paragraph Flush" FSL="Workstation" -->
<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Pursuant to
the requirements 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>



<P ALIGN=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
BIOANALYTICAL SYSTEMS, INC.<BR>
<BR>
<BR>
<BR>
By:&nbsp;&nbsp;/s/&nbsp;PETER  T.  KISSINGER<HR WIDTH=250 ALIGN=LEFT>
Peter T. Kissinger<BR>
President and Chief Executive<BR>
Officer (Principal Executive Officer)<BR>
<BR>
Date:&nbsp;&nbsp;August 29, 2006<BR>
<BR>
<BR>
<BR>
By:&nbsp;&nbsp;/s/&nbsp;MICHAEL R. COX<HR WIDTH=250 ALIGN=LEFT>
Michael R. Cox<BR>
Vice President-Finance and Chief Financial Officer<BR>
(Principal Financial and Accounting Officer)<BR>
<BR>
Date:&nbsp;&nbsp;August 29, 2006<BR>
</FONT></P>


<BR>
<BR>
<BR>
<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
20</FONT></P>


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<DOCUMENT>
<TYPE>EX-31
<SEQUENCE>4
<FILENAME>exhibit311.htm
<DESCRIPTION>EXHIBIT 31.1
<TEXT>
<HTML>
<HEAD>
<TITLE>Exhibit 31.1</TITLE>
</HEAD>
<BODY>


<P ALIGN=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<U><b>Exhibit 31.1</b></U></FONT></P>

<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Workstation" -->
<A NAME=A002></A>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<U><B>CERTIFICATIONS</B></U> </FONT></P>
<BR>

<!-- MARKER FORMAT-SHEET="Para Indent Lv 0-TNR" FSL="Workstation" -->
<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
I, Peter T. Kissinger, Ph.D., Chief Executive Officer, certify that:</FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Hang Lv 0-TNR" FSL="Workstation" -->
     <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
          <TR VALIGN=TOP>
          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>

          1.</FONT></TD>
          <TD WIDTH=95%><div align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>

           I have reviewed this quarterly report on Form 10-Q of Bioanalytical Systems,
          Inc.;</font></div></td></tr>
          </table><br>

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     <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
          <TR VALIGN=TOP>
          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>

          2.</FONT></TD>
          <TD WIDTH=95%><div align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>

           Based on my knowledge, this 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="Para (List) Hang Lv 0-TNR" FSL="Workstation" -->
     <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
          <TR VALIGN=TOP>
          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>

          3.</FONT></TD>
          <TD WIDTH=95%><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 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>

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     <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
          <TR VALIGN=TOP>
          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>

          4.</FONT></TD>
          <TD WIDTH=95%><div align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>

           The registrant&#146;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>

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          <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=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>

               (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>

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          <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=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>

               (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>

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          <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=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>

               (c)</FONT></TD>
               <TD WIDTH=90%><div align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>

                Evaluated the effectiveness of the registrant&#146;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>

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          <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=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>

               (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&#146;s internal control
               over financial reporting that occurred during the registrant&#146;s most recent
               fiscal quarter (the registrant&#146;s fourth fiscal quarter in the case of an
               annual report) that has materially affected, or is reasonably likely to
               materially affect, the registrant&#146;s internal control over financial
               reporting; and</FONT></div></TD>
               </TR>
               </TABLE>
               <BR>

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     <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
          <TR VALIGN=TOP>
          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>

          5.</FONT></TD>
          <TD WIDTH=95%><div align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>

           The registrant&#146;s other certifying officer(s) and I have disclosed, based
          on our most recent evaluation of internal control over financial reporting, to
          the registrant&#146;s auditors and the audit committee of the registrant&#146;s
          board of directors (or persons performing the equivalent functions):</font></div></td></tr>
          </table><br>

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          <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=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>

               (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&#146;s ability to record, process, summarize and
               report financial information; and</FONT></div></TD>
               </TR>
               </TABLE>
               <BR>

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          <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=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>

               (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&#146;s internal control over
               financial reporting.</FONT></div></TD>
               </TR>
               </TABLE>


<P ALIGN=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Date:&nbsp;&nbsp;August 29, 2006</FONT></P>

<TABLE WIDTH=100% CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=60%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
&nbsp;</FONT></TD>
<TD WIDTH=40%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
/s/&nbsp;&nbsp;Peter T. Kissinger<HR>
Peter T. Kissinger, Ph.D.<BR>
Chief Executive Officer<BR>
</FONT></TD>
</TR>
</TABLE>
</BODY>
</HTML>


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31
<SEQUENCE>5
<FILENAME>exhibit312.htm
<DESCRIPTION>EXHIBIT 31.2
<TEXT>
<HTML>
<HEAD>
<TITLE>Exhibit 31.2</TITLE>
</HEAD>
<BODY>



<P ALIGN=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b><U>Exhibit 31.2</U></b></FONT></P>

<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<U><B>CERTIFICATIONS</B></U> </FONT></P>
<BR>

<!-- MARKER FORMAT-SHEET="Para Indent Lv 0-TNR" FSL="Workstation" -->
<P align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
I, Michael R. Cox, Chief Financial Officer, certify that:</FONT></P>

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          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>

          1.</FONT></TD>
          <TD WIDTH=95%><div align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>

           I have reviewed this quarterly report on Form 10-Q of Bioanalytical Systems,
          Inc.;</font></div></td></tr>
          </table><br>

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     <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
          <TR VALIGN=TOP>
          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>

          2.</FONT></TD>
          <TD WIDTH=95%><div align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>

           Based on my knowledge, this 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>

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          3.</FONT></TD>
          <TD WIDTH=95%><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 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>
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          4.</FONT></TD>
          <TD WIDTH=95%><div align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>

           The registrant&#146;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>
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               (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>
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               <BR>

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               (b)</FONT></TD>
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                [paragraph omitted pursuant to SEC Release Nos. 33-8238 and 34-47986];</FONT></div></TD>
               </TR>
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               <BR>

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               (c)</FONT></TD>
               <TD WIDTH=90%><div align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>

                Evaluated the effectiveness of the registrant&#146;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>

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               (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&#146;s internal control
               over financial reporting that occurred during the registrant&#146;s most recent
               fiscal quarter (the registrant&#146;s fourth fiscal quarter in the case of an
               annual report) that has materially affected, or is reasonably likely to
               materially affect, the registrant&#146;s internal control over financial
               reporting; and</FONT></div></TD>
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               <BR>

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          5.</FONT></TD>
          <TD WIDTH=95%><div align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>

           The registrant&#146;s other certifying officer(s) and I have disclosed, based
          on our most recent evaluation of internal control over financial reporting, to
          the registrant&#146;s auditors and the audit committee of the registrant&#146;s
          board of directors (or persons performing the equivalent functions):</font></div></td></tr>
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               (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&#146;s ability to record, process, summarize and
               report financial information; and</FONT></div></TD>
               </TR>
               </TABLE>
               <BR>

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               <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
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               (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&#146;s internal control over
               financial reporting.</FONT></div></TD>
               </TR>
               </TABLE>

<P ALIGN=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Date:&nbsp;&nbsp;August 29, 2006</FONT></P>


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&nbsp;</FONT></TD>
<TD WIDTH=40%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
/s/&nbsp;&nbsp;Michael R. Cox<HR>
Michael R. Cox<BR>
Chief Financial Officer
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<DOCUMENT>
<TYPE>EX-32
<SEQUENCE>6
<FILENAME>exhibit321.htm
<DESCRIPTION>EXHIBIT 32.1
<TEXT>
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<HEAD>
<TITLE>Exhibit 32.1</TITLE>
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<P ALIGN=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B><U>Exhibit 32.1</U></B></FONT></P>
<BR>

<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
CERTIFICATION PURSUANT TO<BR>
18 U.S.C. SECTION 1350,<BR>
AS ADOPTED PURSUANT TO<BR>
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2003
</FONT></P>
<BR>


<P ALIGN=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
I, Peter T. Kissinger, the President and Chief Executive Officer of
Bioanalytical Systems, Inc. certify that (i) the Quarterly Report on Form 10-Q
for the quarter ended June 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>
<BR>


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<TD WIDTH=60%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
&nbsp;</FONT></TD>
<TD WIDTH=40%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
/s/&nbsp;&nbsp;Peter T. Kissinger<HR>
Peter T. Kissinger<BR>
President and Chief Executive Officer<BR>
Date:&nbsp;&nbsp;August 29, 2006<BR>
</FONT></TD>
</TR>
</TABLE>
<BR>
<BR>
<BR>



<P ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
CERTIFICATION PURSUANT TO<BR>
18 U.S.C. SECTION 1350,<BR>
AS ADOPTED PURSUANT TO<BR>
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2003<BR></FONT></P>


<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 Quarterly Report on Form 10-Q
for the quarter ended June 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>
<BR>


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<TD WIDTH=60%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
&nbsp;</FONT></TD>
<TD WIDTH=40%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
/s/&nbsp;&nbsp;Michael R. Cox<HR>
Michael R. Cox<BR>
Vice President, Finance and Chief Financial Officer<BR>
Date:&nbsp;&nbsp;August 29, 2006<BR>
</FONT></TD>
</TR>
</TABLE>
<BR>
<BR>
<BR>

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