<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
Commission File No. 1-11182
BIO-IMAGING TECHNOLOGIES, INC.
(Exact Name of Small Business Issuer as Specified in Its Charter)
- - ------------------------------------------------------------------------------
Delaware 11-2872047
- - ------------------------------- -----------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
830 Bear Tavern Road, West Trenton, New Jersey 08628
- - -----------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(609) 883-2000
--------------------------
(Issuer's Telephone Number,
Including Area Code)
Check whether the Issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
Yes: X No:
--------- --------
State the number of shares outstanding of each of the Issuer's classes
of common stock, as of June 30, 1996:
Class Number of Shares
- - ------- ----------------
Common Stock, $.00025 par value 5,903,550
Transitional Small Business Disclosure Format:
Yes: No: X
----------- ---------
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BIO-IMAGING TECHNOLOGIES, INC. AND SUBSIDIARY
TABLE OF CONTENTS
-----------------
Page
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PART I FINANCIAL INFORMATION
Item 1. Financial Statements................................ 1
CONSOLIDATED BALANCE SHEETS
as at June 30, 1996 (unaudited)
and September 30, 1995................................. 2
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Nine Months Ended
June 30, 1996 and 1995
(unaudited)............................................ 3
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended
June 30, 1996 and 1995
(unaudited)............................................ 4
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended
June 30, 1996 and 1995
(unaudited)............................................ 5
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (unaudited)................................. 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations........ 9
Liquidity and Capital Resources........................ 9
Results of Operations.................................. 10
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K..................... 15
SIGNATURES............................................................. 16
<PAGE>
PART I
Item 1. Financial Statements.
Certain information and footnote disclosures required under generally
accepted accounting principles have been condensed or omitted from the following
consolidated financial statements pursuant to the rules and regulations of the
Securities and Exchange Commission, although Bio-Imaging Technologies, Inc. (the
"Issuer" or the "Company") believes that the disclosures are adequate to assure
that the information presented is not misleading in any material respect. It is
suggested that the following consolidated financial statements be read in
conjunction with the year-end consolidated financial statements and notes
thereto included in the Issuer's Annual Report on Form 10-KSB for the year ended
September 30, 1995.
The results of operations for the interim periods presented herein are not
necessarily indicative of the results to be expected for the entire fiscal year.
1
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BIO-IMAGING TECHNOLOGIES, INC. AND SUBSIDIARY
---------------------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
<TABLE>
<CAPTION>
June 30, September 30,
1996 1995
------------- -------------
(unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents............. $ 1,298,076 $ 704,684
Restricted cash....................... 60,000 120,000
Accounts receivable, net.............. 450,614 497,866
Prepaid expenses and other current
assets............................... 62,010 40,465
----------- -----------
Total current assets.......... 1,870,700 1,363,015
Property and equipment, net............. 1,250,896 1,272,982
Deferred income tax asset, net.......... -- --
Other assets............................ 7,034 8,187
----------- -----------
Total assets.................. $ 3,128,630 $ 2,644,184
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Deferred revenue...................... $ 516,869 $ 654,833
Accounts payable...................... 25,359 85,384
Accrued expenses and other current
liabilities.......................... 258,100 124,438
Current maturities of long-term debt.. 89,133 180,043
----------- -----------
Total current liabilities..... 889,461 1,044,698
Long-term debt.......................... 123,584 139,224
----------- -----------
Total liabilities............. 1,013,045 1,183,922
----------- -----------
Stockholders' equity:
Preferred stock - $.00025 par value,
authorized 3,000,000 shares; 416,667
shares issued and outstanding at
June 30, 1996 and none issued at
September 30, 1995 ................... 104 --
Common stock - $.00025 par value,
authorized 18,000,000 shares;
5,903,550 shares issued and
outstanding at June 30, 1996
and 5,889,350 issued and
outstanding at September 30, 1995... 1,477 1,473
Additional paid-in capital.......... 7,664,804 7,217,129
Accumulated deficit................. (5,550,800) (5,758,340)
----------- -----------
Stockholders' equity.............. 2,115,585 1,460,262
----------- -----------
Total liabilities and
stockholders' equity....... $ 3,128,630 $ 2,644,184
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements
2
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BIO-IMAGING TECHNOLOGIES, INC. AND SUBSIDIARY
---------------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
(unaudited)
<TABLE>
<CAPTION>
For the Nine Months Ended
June 30,
1996 1995
------------ ------------
<S> <C> <C>
Revenue:
Project revenue......................... $2,360,462 $2,087,029
Exclusivity fee - Co-Marketing
Agreement.............................. 192,000 75,000
---------- ----------
2,552,462 2,162,029
Project costs............................ 897,351 953,176
---------- ----------
Gross profit............................. 1,655,111 1,208,853
General and administrative expenses...... 1,372,898 1,470,501
Research and development expenses........ 89,169 213,596
---------- ----------
Income (loss) from operations............ 193,044 (475,244)
Severance costs.......................... -- (205,015)
Interest income - net.................... 14,496 12,903
---------- ----------
Net income (loss)........................ $ 207,540 $ (667,356)
========== ==========
Net income (loss) per common share....... $0.03 $(0.12)
========== ==========
Weighted average number of common shares
outstanding.............................. 6,051,580 5,721,651
========== ==========
</TABLE>
See Notes to Consolidated Financial Statements
3
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BIO-IMAGING TECHNOLOGIES, INC. AND SUBSIDIARY
---------------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
(unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended
June 30,
--------------------------
1996 1995
---- ----
<S> <C> <C>
Revenue:
Project revenue........................... $ 903,248 $ 587,203
Exclusivity fee - Co-Marketing
Agreement................................ -- 25,000
---------- ----------
903,248 612,203
Project costs.............................. 330,476 323,557
---------- ----------
Gross profit............................... 572,772 288,646
General and administrative expenses........ 499,560 528,250
Research and development expenses.......... 13,438 81,652
---------- ----------
Income (loss) from operations.............. 59,774 (321,256)
Interest income - net...................... 8,345 4,687
---------- ----------
Net income (loss).......................... $ 68,119 $ (316,569)
========== ==========
Net income (loss) per common share......... $0.01 $(0.05)
========== ==========
Weighted average number of common
shares outstanding........................ 6,377,822 6,039,350
========== ==========
</TABLE>
See Notes to Consolidated Financial Statements
-4-
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BIO-IMAGING TECHNOLOGIES, INC. AND SUBSIDIARY
---------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(unaudited)
<TABLE>
<CAPTION>
For the Nine Months Ended
June 30,
1996 1995
------------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss).......................................... $ 207,540 $ (667,356)
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating activities:
Depreciation and amortization........................... 389,155 308,773
Provision for losses on accounts
receivable............................................. 35,000 16,000
Changes in operating assets and
liabilities:
(Increase) decrease in accounts
receivable............................................. 12,252 (212,056)
Increase in prepaid expenses and
other current assets................................... (21,545) (4,465)
Decrease in other assets................................ 1,153 65,434
Increase (decrease) in deferred
revenue................................................ (137,964) 182,099
Decrease in accounts payable............................ (60,025) (49,482)
Increase (decrease) in accrued
expenses and other current liabilities.................. 133,662 (192,885)
---------- ----------
Net cash provided by (used in)
operating activities................................... 559,228 (553,938)
---------- ----------
Cash flows from investing activities:
Purchases of property and equipment........................ (307,689) (256,255)
Decrease in restricted cash................................ 60,000 40,000
---------- ----------
Net cash used in investing
activities............................................. (247,689) (216,255)
---------- ----------
Cash flows from financing activities:
Net repayment of loan payable.............................. (89,600) (115,200)
Payments under equipment lease
obligations............................................... (76,330) (28,466)
Repayment of subordinated debentures....................... -- (150,000)
Decrease in capital contribution in
advance of common stock sale.............................. -- (500,000)
Net proceeds from private placement
of common stock.......................................... -- 1,729,500
Net proceeds from exercise of options
to purchase common stock.................................. 14,450 --
Net proceeds from private placement of
preferred stock............................................ 433,333 --
---------- ----------
Net cash provided by financing
activities............................................. 281,853 935,834
---------- ----------
Net increase in cash and cash
equivalents................................................ 593,392 165,641
Cash and cash equivalents at beginning
of period.................................................. 704,684 589,541
---------- ----------
Cash and cash equivalents at end of
period..................................................... $1,298,076 $ 755,182
========== ==========
Supplemental disclosures of cash flow
information:
Cash paid during the period for
interest.................................................. $ 18,603 $ 34,794
========== ==========
Equipment purchased under capital
lease obligations......................................... $ 59,381 $ --
========== ===========
</TABLE>
See Notes to Consolidated Financial Statements
5
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BIO-IMAGING TECHNOLOGIES, INC. AND SUBSIDIARY
---------------------------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
(unaudited)
Note 1 - Basis of Presentation:
The financial statements included herein have been prepared by the Company,
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations. These consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes thereto
included in the Company's Annual Report on Form 10-KSB for the year ended
September 30, 1995.
In the opinion of the Company's management the accompanying unaudited
consolidated financial statements contain all adjustments, consisting solely of
those which are of a normal recurring nature, necessary to present fairly its
financial position as of June 30, 1996 and the results of its operations and its
cash flows for the three-month and nine-month periods ended June 30, 1996 and
1995.
Net income (loss) per common share is calculated based upon the weighted
average number of shares of Common Stock outstanding during the period. Certain
options and warrants have been excluded in the calculation of weighted average
shares outstanding since their inclusion would have had an antidilutive effect
in the calculation of loss per common share and since the exercise prices of
certain options and warrants exceed the current fair market value per share of
the Company's Common Stock.
Interim results are not necessarily indicative of results for the full
fiscal year.
Note 2 - Stockholders' Equity:
On October 13, 1994, the Company and Corning Pharmaceutical Services Inc.
("CPS") consummated the purchase by CPS of (i) 2,355,000 shares of Common Stock,
and (ii) a Warrant to purchase 250,000 shares of Common Stock with an initial
exercise price of $1.25 per share and a Warrant to purchase 250,000 shares of
Common Stock with an initial price of $1.50 per share (the "CPS Warrants") for
an aggregate purchase price of $1,819,500. The CPS Warrants are subject to
adjustment to protect against dilution in the event of certain transactions.
The Company received cash payment totaling $1,312,925 in partial payment of the
purchase price. In addition, as further payment of the purchase price, CPS
discharged the loan which was made by CPS in favor of the Company on August 26,
1994 which consisted of $500,000 of principal plus
6
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BIO-IMAGING TECHNOLOGIES, INC. AND SUBSIDIARY
---------------------------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
(unaudited)
Note 2 - Stockholders' Equity (continued):
$6,575 of interest due and canceled the promissory note evidencing such loan.
The preferred stock warrant issued to CPS in connection with the loan also was
canceled by its terms. Costs associated with this transaction amounted to
approximately $90,000 and reduced paid-in capital at the transaction date.
Furthermore, on February 7, 1995, Corning Besselaar, Inc. (formerly G.H.
Besselaar Associates), a unit of Corning Incorporated ("Besselaar"), paid an
exclusivity fee of $300,000 under the previously executed Co-Marketing Agreement
between Besselaar and the Company (the "Co-Marketing Agreement"). The Co-
Marketing Agreement was terminated by the Company, in accordance with the terms
of such agreement, as of December 31, 1995. The Company had the right to
terminate such agreement if certain revenue targets which were expected to be
earned by the Company, as a result of co-marketing by the Company and Besselaar,
were not achieved. Since such revenue targets were not achieved, the Company
exercised its right to terminate the Co-Marketing Agreement.
In December 1991 and June 1992, the Company's Board of Directors and
stockholders, respectively, approved the adoption of the Bio-Imaging
Technologies, Inc. Stock Option Plan (the "Plan"). In January 1995, the Company
amended the Plan to provide for the granting of options to key employees,
directors and consultants to purchase an aggregate of not more than 1,800,000
shares of the Company's Common Stock, an increase of 600,000 shares. Each
option is exercisable into one share of Common Stock. Options granted pursuant
to the Plan, to be granted at prices not less than fair value at the date of
grant, consist of qualified incentive stock options, as defined in the Internal
Revenue Code, and non-qualified options.
On December 8, 1995, the Company and Investment Partners of America, L.P.
("IPA") executed a purchase agreement (the "Purchase Agreement") pursuant to
which IPA agreed to purchase and the Company agreed to issue and sell a minimum
of 625,000 and a maximum of 1,250,000 units (each, a "Unit") at a purchase price
of $1.20 per Unit, each Unit consisting of (i) one share of Series A
Convertible Voting Preferred Stock, $.00025 par value per share (the "Preferred
Stock"), convertible into Common Stock of the Company on a one share for one
share basis; (ii) one five-year Class A Warrant (the "Class A Warrants") to
purchase one share of the Company's Common Stock at an initial exercise price
of $1.50 per share; and (iii) one five-year Class B Warrant (the "Class B
Warrants") to purchase one share of the Company's Common Stock at an initial
exercise price of $2.50 per share. Each of the Class A Warrants and Class B
Warrants underlying the Units is exercisable for a period of five years from the
date of issuance. The Preferred Stock provides for (i) voting rights on an as-
converted to Common Stock basis,
7
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BIO-IMAGING TECHNOLOGIES, INC. AND SUBSIDIARY
---------------------------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
(unaudited)
Note 2 - Stockholders' Equity (continued):
with standard protective provisions; (ii) a liquidation preference of $1.20 per
share; (iii) standard anti-dilution protection and price protection provisions;
(iv) cumulative dividends of $0.096 per share per annum, payable out of any
assets legally available for the payment of such dividends, including Common
Stock, and only upon declaration of such dividends by the Board of Directors of
the Company; and (v) registration rights with respect to the shares of Common
Stock issuable upon conversion of the Preferred Stock.
A closing was held with IPA on December 21, 1995, at which time 416,667
Units were sold, resulting in net proceeds to the Company of $433,333, after
aggregate closing costs of $66,667.
The Company also agreed pursuant to the Purchase Agreement to pay to
Investment Partners, Inc. ("IPI") in consideration for its services as agent for
the investors, upon the closing of at least the minimum number of Units, five-
year Class C Warrants (the "Class C Warrants") to purchase 100,000 shares of the
Company's Common Stock at an initial exercise price of $1.00 per share. Because
the number of Units sold at the initial closing held December 21, 1995 was below
the minimum, the Class C Warrants were not issued at such time. The Company
subsequently determined on June 26, 1996 that there would be no further
issuances of Units under the Purchase Agreement and terminated such Purchase
Agreement. In connection therewith, the Company issued to IPI Class C Warrants
to purchase 66,667 shares of the Company's Common Stock at an exercise price of
$1.05 per share and entered into a two-year consulting agreement (the
"Consulting Agreement") with IPI pursuant to which IPI agreed to render to the
Company product market development and financial consulting services. Upon
execution of the Consulting Agreement, the Company was required to pay IPI a
non-refundable amount of $30,000 and IPI's legal fees of $8,333. Such
Consulting Agreement is terminable at any time and upon notice by the Company.
Each of the Class A Warrants, Class B Warrants and Class C Warrants contain
standard anti-dilution provisions. The Company granted registration rights,
subject to certain conditions, with respect to each of the Class A Warrants,
Class B Warrants and the Class C Warrants and the shares of Common Stock
underlying such securities.
In connection with the transaction with IPA, holders of certain of the
Company's securities waived their pre-existing anti-dilution rights with respect
to the transaction.
8
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Liquidity and Capital Resources
At June 30, 1996, the Company had cash and cash equivalents of
approximately $1,358,000, including $60,000 of cash restricted pursuant to the
terms of collateral pledge agreements described below, and including the net
proceeds received by the Company upon the consummation of the transaction with
Investment Partners of America, L.P. ("IPA") on December 21, 1995. On December
8, 1995, the Company executed a purchase agreement (the "Purchase Agreement")
pursuant to which IPA agreed to purchase and the Company agreed to issue and
sell a minimum of 625,000 and a maximum of 1,250,000 units (each, a "Unit") at a
purchase price of $1.20 per Unit, each Unit consisting of (i) one share of
Series A Convertible Voting Preferred Stock, $.00025 par value per share (the
"Preferred Stock"), convertible into Common Stock of the Company on a one share
for one share basis; (ii) one five-year Class A Warrant (the "Class A Warrants")
to purchase one share of the Company's Common Stock at an initial exercise price
of $1.50 per share; and (iii) one five-year Class B Warrant (the "Class B
Warrants") to purchase one share of the Company's Common Stock at an initial
exercise price of $2.50 per share. Each of the Class A Warrants and Class B
Warrants underlying the Units is exercisable for a period of five years from the
issuance date. An initial closing was held with IPA on December 21, 1995, at
which time 416,667 Units were sold, resulting in net proceeds to the Company of
$433,333, after aggregate closing costs of approximately $66,667. The Company
subsequently determined on June 26, 1996 that there would be no further
issuances of Units under the Purchase Agreement and terminated such Purchase
Agreement. In connection therewith, the Company issued to IPI Class C Warrants
to purchase 66,667 shares of the Company's Common Stock at an exercise price of
$1.05 per share and entered into a two-year consulting agreement (the
"Consulting Agreement") with IPI pursuant to which IPI agreed to render to the
Company product/market development and financial consulting services. Upon
execution of the Consulting Agreement, the Company was required to pay IPI a
non-refundable amount of $30,000 and IPI's legal fees of $8,333. Such
Consulting Agreement is terminable at any time and upon notice by the Company.
Working capital at June 30, 1996 was approximately $981,000.
The Company had, as of June 30, 1996, invested approximately $2,696,000 in
capital equipment and leasehold improvements, of which approximately $565,000
had been funded through capital leases. In April 1993, the Company entered into
a loan relating to certain capital equipment whereby it borrowed $400,000 and
gave the lender a security interest in such capital equipment. Pursuant to the
transaction, the Company agreed to pay the amount borrowed, with interest, in
thirty-six monthly installments of $12,800 each. The monthly payments commenced
in May 1993 and ended in April 1996. The Company's obligations under the
agreement were collateralized by the related equipment through April 1996. In
April 1994, May and August 1995 and May 1996, the Company invested an additional
$103,000, $52,000, $179,000 and
9
<PAGE>
$59,000, respectively, in capital improvements funded through capital leases.
Pursuant to collateral pledge agreements, the Company's obligations under such
capital leases were collateralized by two certificates of deposit of equal
amounts in the face amount of $60,000. In April 1996, one of the two
certificates of deposit matured and was released to the Company, and the Company
is required only to maintain $60,000 in collateral. Other than its existing
capital lease obligations, the Company has no material commitments for capital
expenditures currently outstanding.
The Company anticipates that its cash and cash equivalents as at June 30,
1996 will be sufficient to fund working capital needs and capital requirements
for approximately eighteen months.
Results of Operations
The Company was profitable for the quarter ended June 30, 1996 primarily as
a result of an increase in project revenue coupled with a reduction in operating
expenses. Such reduction in operating expenses was primarily the result of cost
controls implemented by the Company in fiscal 1995. The Company believes that
demand for its services and technologies will continue to grow because a
restructuring and downsizing in the pharmaceutical industry has resulted in
increased outsourcing of certain research and data management activities, while
digital technologies for data acquisition and management are rapidly penetrating
the radiology and drug development communities. In addition, the United States
Food and Drug Administration is gaining experience with electronic submissions
and is continuing to develop guidelines for computerized submissions of data,
including medical images. Furthermore, the increased use of digital medical
images in clinical trials, especially for important drug classes such as
neurologic and oncologic therapeutics and diagnostic image agents, should
generate large amounts of image data that will require processing, analysis,
data management and submission services. There can be no assurance, however,
that demand for the Company's services and technologies will experience growth
or that additional revenue generating opportunities will be realized by the
Company.
During the first nine months of fiscal 1996, the Company has signed
approximately $3,454,000 in new project contracts which are expected to produce
project revenue in the ensuing twenty-four month period. Such contracts are
subject to termination by the Company or its clients for any reason and,
therefore, revenue generated by the Company may not meet initial contract
values.
The foregoing sets forth certain forward-looking statements that involve
risks and uncertainties. The Company's actual results may differ materially
from any results discussed in such forward-looking statements.
10
<PAGE>
Nine Months Ended June 30, 1996 and 1995
----------------------------------------
Total revenue for the nine months ended June 30, 1996 and 1995 was
approximately $2,552,000 and $2,162,000, respectively, an increase of $390,000,
or 18.0%. Project revenue in the nine months ended June 30, 1996 was derived
from 20 clients and such revenue in the nine months ended June 30, 1995 was
derived from 23 clients. Total revenue for the nine months ended June 30, 1996
was higher than revenue for the nine months ended June 30, 1995 as a result of
the increase in the scope of projects for which the Company was engaged to
perform work and, to a lesser extent, the recognition by the Company of $192,000
in revenue resulting from the termination by the Company of the Co-Marketing
Agreement with Besselaar. Project revenue increased approximately $273,000, or
13.1%, to approximately $2,360,000 for the nine months ended June 30, 1996 from
approximately $2,087,000 for the corresponding 1995 period. Such increase was
due primarily to an increase in use among the Company's clients of digital
imaging data management services in clinical trials, especially in the oncology
segment. Project revenue in the nine months ended June 30, 1996 and 1995
consisted primarily of medical image processing and digital image management
services, including the databasing and regulatory submission of digital medical
images and other clinical data.
The Company's total operating expenses were approximately $2,359,000 in the
nine months ended June 30, 1996 and $2,637,000 in the corresponding period in
fiscal 1995, a decrease of $278,000, or 10.5%. Such expenses in the nine months
ended June 30, 1996 and the nine months ended June 30, 1995 consisted of general
and administrative expenses, project costs and research and development
expenses. The Company also incurred a one-time charge of approximately $205,000
in severance costs during the nine months ended June 30, 1995.
General and administrative expenses were approximately $1,373,000 in the
nine months ended June 30, 1996. Such expenses consisted primarily of
professional salaries and benefits, depreciation and amortization, professional
and consulting services, marketing, sales and investor relations expenses,
corporate insurance and office rent during the nine months ended June 30, 1996
and 1995. The decrease in general and administrative expenses for the nine
months ended June 30, 1996 of approximately $98,000, or 6.7%, from approximately
$1,471,000 in the corresponding fiscal 1995 period, resulted primarily from the
residual effect of cost controls implemented by the Company in fiscal 1995.
Project costs were approximately $897,000 during the nine months ended June
30, 1996 and, as in the same period in fiscal 1995, were comprised of
professional salaries and benefits, travel and communication expenses and
allocated overhead. Project costs for the corresponding period in fiscal 1995
were approximately $953,000. The decrease in project costs for the nine months
ended June 30, 1996 of approximately $56,000, or 5.9%, from the corresponding
fiscal 1995 period resulted primarily from an increase in efficiency related to
the performance of project-related activities.
11
<PAGE>
The gross margin percentage during the nine months ended June 30, 1996
increased to 64.9% from 55.9% for the corresponding 1995 period. Such increase
is attributable primarily to the recognition of revenue resulting from the
termination by the Company of the Co-Marketing Agreement with Besselaar and, to
a lesser extent, to an increase in efficiency related to the performance of
project-related activities.
Research and development expenses during the nine months ended June 30,
1996 were approximately $89,000. Research and development expenses during the
corresponding period in fiscal 1995 were approximately $214,000. In each case,
research and development expenses consisted of professional salaries and
benefits and overhead charged to research and development projects. The
decrease in such expenses during the nine months ended June 30, 1996 of
approximately $125,000, or 58.4%, from the corresponding fiscal 1995 period
resulted primarily from the capitalization of certain computer software
development costs in accordance with SFAS No. 86, Accounting for the Cost of
Computer Software to be Sold, Leased or Otherwise Marketed. The capitalized
costs were approximately $85,000 for the nine months ended June 30, 1996.
Research and development projects during the nine months ended June 30, 1996
focused on the design and coding of image display and image analysis, which has
already reached technological feasibility. The Company also introduced a
Windows compatible version of its Bio/ImageBase software during the quarter
ended June 30, 1996.
Net interest income of approximately $14,000 in the nine months ended June
30, 1996 resulted from interest earned on cash balances offset in part by
interest expense incurred in conjunction with the Company's loan agreement and
certain equipment lease obligations. The Company earned higher interest income
in the nine months ended June 30, 1996 than in the corresponding fiscal 1995
period due to higher cash balances.
The Company's net income for the nine months ended June 30, 1996 was
approximately $208,000 as compared to a net loss of approximately $667,000 in
the corresponding period in fiscal 1995. The Company's net loss for the nine
month period ended June 30, 1995 resulted primarily from project revenue
inadequate to support the infrastructure of the business coupled with a one-time
charge in severance costs. The Company's net income for the first nine months
of fiscal 1996 resulted primarily from an increase in project-related services
performed by the Company and the recognition of revenue by the Company resulting
from the termination by the Company of the Co-Marketing Agreement with
Besselaar, coupled with a reduction in operating expenses by the Company as a
result of cost controls implemented during fiscal 1995.
Three Months Ended June 30, 1996 and 1995
-----------------------------------------
Total revenue for the quarters ended June 30, 1996 ("Third Quarter of
Fiscal 1996") and June 30, 1995 ("Third Quarter of Fiscal 1995") was
approximately $903,000 and $612,000, respectively, an increase of $291,000, or
47.5%. Project revenue in the Third Quarter of Fiscal 1996 was derived from 12
clients and such revenue in the Third Quarter of Fiscal 1995 was derived from 14
clients. Project revenue increased approximately $316,000, or 53.8%, to
12
<PAGE>
$903,000 for the Third Quarter of Fiscal 1996 from approximately $587,000 of
such revenue for the Third Quarter of Fiscal 1995. Such increase was primarily
a result of the increase in the scope of projects for which the Company was
engaged to perform work coupled with an increase in use among the Company's
clients of digital imaging data management services in clinical trials,
especially in the oncology segment. Project revenue in both the Third Quarter
of Fiscal 1996 and Fiscal 1995 consisted primarily of medical image processing
and digital image management services, including the databasing and regulatory
submission of digital medical images and other clinical data.
The Company's total operating expenses were approximately $843,000 in the
Third Quarter of Fiscal 1996 and $934,000 in the corresponding quarter in fiscal
1995, a decrease of $91,000, or 9.7%. Such expenses in both the Third Quarter
of Fiscal 1996 and Fiscal 1995 consisted primarily of general and administrative
expenses, project costs and research and development expenses.
General and administrative expenses were approximately $500,000 in the
Third Quarter of Fiscal 1996. Such expenses consisted primarily of professional
salaries and benefits, depreciation and amortization, professional and
consulting services, marketing, sales and investor relations expenses, corporate
insurance and office rent for the 1996 and 1995 periods. The decrease in
general and administrative expenses of approximately $28,000, or 5.3%, from
approximately $528,000 in the corresponding fiscal 1995 quarter resulted
directly and primarily from the residual effect of cost controls implemented by
the Company during fiscal 1995.
Project costs were approximately $330,000 during the Third Quarter of
Fiscal 1996 and, as in the same period in fiscal 1995, were comprised of
professional salaries and benefits, travel and communication expenses and
allocated overhead. Project costs for the corresponding quarter in fiscal 1995
were approximately $324,000. The increase in project costs during the Third
Quarter of Fiscal 1996 of approximately $6,000, or 1.9%, from the corresponding
fiscal 1995 quarter was due primarily to the increase in resources applied by
the Company to perform the increased scope of projects for which the Company was
engaged to perform work.
The gross margin percentage during the Third Quarter of Fiscal 1996
increased to 63.4% from 49.2% for the corresponding 1995 period. Such increase
is attributable primarily to an increase in efficiency related to the
performance of project-related activities.
Research and development expenses during the Third Quarter of Fiscal 1996
were approximately $13,000. Research and development expenses during the
corresponding quarter in fiscal 1995 were approximately $82,000. In each case,
research and development expenses consisted of professional salaries and
benefits and overhead charged to research and development projects. The
decrease during the Third Quarter of Fiscal 1996 of approximately $69,000, or
84.1%, from the corresponding fiscal 1995 period resulted primarily from a
decrease in external consulting fees and the capitalization of certain computer
software development costs in accordance with SFAS No. 86, Accounting for the
Cost of Computer Software to be Sold,
13
<PAGE>
Leased or Otherwise Marketed. The capitalized costs were $25,000 for the three
months ended June 30, 1996. Research and development projects during the Third
Quarter of Fiscal 1996 focused on the design and coding of image display and
image analysis software, which has already reached technological feasibility.
The Company also introduced a Windows compatible version of its Bio/ImageBase
software during the Third Quarter of Fiscal 1996.
Net interest income of approximately $8,000 in the Third Quarter of Fiscal
1996 resulted from interest earned on cash balances offset, in part, by interest
expense incurred in conjunction with the Company's loan agreement and certain
equipment lease obligations. The Company earned greater interest income in the
Third Quarter of Fiscal 1996 than in the corresponding fiscal 1995 quarter due
to greater cash balances.
The Company's net income for the Third Quarter of Fiscal 1996 was
approximately $68,000 as compared to a net loss of approximately $317,000 in the
corresponding quarter of Fiscal 1995. The loss incurred in the Third Quarter of
Fiscal 1995 resulted primarily from project revenue inadequate to support the
infrastructure of the business. The Company's net income for the Third Quarter
of Fiscal 1996 was attributable primarily to an increase in project-related
services performed by the Company, coupled with a reduction in operating
expenses resulting from cost controls implemented by the Company during Fiscal
1995.
14
<PAGE>
PART II
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
Exhibit No. Description of Exhibit
----------- ----------------------
10.1 Consulting Agreement by and between the Company and
Investment Partners Capital & Management Corp. dated
June 26, 1996.
27 Financial Data Schedule, which is submitted
electronically to the Securities & Exchange Commission
for information only and not filed.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter for which this
report on Form 10-QSB is filed.
15
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934,
the registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BIO-IMAGING TECHNOLOGIES, INC.
DATE: July 31, 1996 By: /s/ Donald W. Lohin
----------------------
Donald W. Lohin, President
and Chief Executive Officer
(Principal Executive Officer)
DATE: July 31, 1996 By: /s/ Robert J. Phillips
------------------------
Robert J. Phillips,
Vice President and Chief
Financial Officer
(Principal Financial and
Accounting Officer)
16
<PAGE>
EXHIBIT 10.1
CONSULTING AGREEMENT
--------------------
Agreement made as of this 26th day of June 1996, between BIO-IMAGING
TECHNOLOGIES, INC., a Delaware corporation (the "Corporation") with its
principal place of business at 830 Bear Tavern Road, West Trenton, New Jersey
07060, and INVESTMENT PARTNERS CAPITAL & MANAGEMENT CORP., a New York
Corporation ("IPCM") with its principal place of business at 732 West Eighth
Street, Plainfield, New Jersey 07090.
In consideration of the covenants and agreements herein contained, the
parties agree as follows:
1. Employment. The Corporation hereby retains IPCM as an independent
----------
consultant, and IPCM hereby accepts such retention for a term commencing on June
6, 1996 and ending on June 5, 1998. The Company may terminate this Agreement at
any time upon three days written notice. In the event of such termination, IPCM
shall not be required to repay the $30,000, or any part of it, set forth in
Paragraph 3(a).
2. Duties. During the term of this Agreement, IPCM agrees to render to
------
the Corporation, product/market development and financial consulting services at
the Corporation's headquarters or in New Jersey, Pennsylvania, New York or
Washington, D.C. IPCM will be available for such services as may be requested by
the chief executive officer of the Corporation, at reasonable times during the
term hereof, upon adequate notice from said officer. IPCM agrees to devote
necessary time, not to exceed 5 hours per month, for the term of this Agreement.
The
1
<PAGE>
compensation set forth in Paragraph 3 hereof shall be payable without
diminution, whether or not IPCM has been requested to perform 5 hours in any
month.
3. Compensation.
------------
(a) The Corporation shall pay IPCM $30,000 for its services hereunder,
which amount shall be payable upon the execution hereof.
(b) The Corporation will reimburse IPCM within ten (10) days after the
receipt of a quarterly summary of its out-of-pocket expenses reasonably incurred
in connection with its performance of services authorized by the Company,
including the cost of transportation to West Trenton, New Jersey, or other
locations as required by the services being performed.
4. New Financing. In the event the Corporation seeks new financing, or
-------------
capital, or an acquisition or merger, or other strategic partnering arrangement,
("New Financing") the Company may, at its option, give IPCM an opportunity to
arrange such New Financing (but excluding any transaction with Corning
Pharmaceutical Service, Inc. or its subsidiaries and affiliates). In the event
IPCM arranges such a New Financing which is consummated, IPCM will have earned,
and the Corporation will pay, the transaction fee set forth in subparagraph (b)
hereof.
(b) Transaction Fee. The transaction fee payable by the Corporation
---------------
pursuant to subparagraph (a) shall be paid in cash at the closing of the
transaction in an amount, equal to 5% of the first million dollars involved in
the transaction, 4% of the second million, 3% of the third million, 2% of the
next million and 1% of the balance involved in the transaction. Payments made of
the consulting fee under Paragraph 3 shall be credited against the Transaction
Fee payable under this paragraph 4.
2
<PAGE>
(c) Valuation. The transaction shall be valued for purposes of this Paragraph
---------
4 as follows:
(i) The transaction value shall be the total investment, or purchase
price paid or received by the Corporation, including cash or property advanced,
liabilities assumed and any and all other financial benefits paid, accepted, or
assumed;
(ii) The value of any property shall be the value used by the parties
to the transaction.
5. Confidential Information. IPCM further agrees that the Corporation has
------------------------
valuable and unique confidential information and trade secrets and it will not
at any time during the term hereof or hereafter disclose to any person,
corporation, firm, partnership or other entity whatsoever, or any officer,
director, stockholder, partner, associate, employee, agent or representative of
any such partnership, firm or corporation or other entity any confidential
information or confidential trade secrets of the Corporation or its subsidiaries
except as may be appropriate in carrying out various assignments requested by
the Corporation.
The Corporation shall be entitled, in addition to any other right or remedy
it may have, at law or in equity, to an injunction without the posting of any
bond or other security, enjoining or restraining IPCM from any violation or
threatened violation of this Paragraph 5, and IPCM hereby consents to the
issuance of such injunction.
6. Survival of Restrictions. If any of the restrictions contained in
------------------------
Paragraph 5 herein shall be deemed to be unenforceable by reason of the extent,
duration or geographical scope thereof or otherwise, then the parties
contemplate that the Court shall reduce the extent, duration, geographical scope
or other provision thereof and enforce those Sections in their reduced form for
all purposes in the manner contemplated.
3
<PAGE>
7. Agreement Complete; Amendments. There are no oral agreements or
------------------------------
understandings with respect to or affecting this Agreement and this Agreement
may not be amended, supplemented, cancelled or discharged except by a written
instrument executed by the party to be charged. The parties do not intend to
confer any benefit hereunder on any third person and, without limiting the
generality of the foregoing, the parties may, in writing, without notice to or
consent of any third person at any time waive any rights hereunder or amend this
Agreement in any respect or terminate this Agreement.
8. Authority. Each party represents to the other, that:
---------
(a) it has legal power to execute and deliver this Agreement and to
consummate the transactions contemplated hereby and has taken all action
necessary to authorize the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby;
(b) it has duly executed and delivered this Agreement, and that the
Agreement is a valid and binding agreement enforceable against it in accordance
with its terms.
9. Non-assignability. This Agreement and the benefits hereunder may not
-----------------
be assigned or transferred, nor may the services to be performed hereunder be
assigned by the Corporation to any person, firm or corporation except any of its
subsidiaries; provided, however, that this Agreement and the benefits hereunder
may be assigned by the Corporation to any corporation into which the Corporation
may be merged or consolidated, and this Agreement and the benefits hereunder
will automatically be deemed assigned to any such corporation.
10. Governing Law. This Agreement will be governed by and construed in
-------------
accordance with the laws of the State of New Jersey, applicable to agreements
made and to be performed entirely within such State.
4
<PAGE>
11. Controversy. Any controversy or claim arising under or in connection
-----------
with this Agreement shall be arbitrated before the American Arbitration
Association in New York City in accordance with its rules.
12. Independent Contractor. IPCM shall be an independent contractor
----------------------
hereunder and nothing herein shall constitute IPCM an employee of the
Corporation for any purpose, including without limitation, employer's
withholding or similar tax obligations.
13. Notices. All notices which the Corporation is required or permitted
-------
to give to IPCM shall be sufficiently given if sent by certified mail, postage
prepaid, or by telegram, addressed to IPCM at its address referred to above, or
at such other place as IPCM may from time to time designate in writing. All
notices which IPCM is required or permitted to give to the Corporation shall be
sufficiently given if sent by certified mail, postage prepaid, or by telegram,
addressed to the Corporation at its principal office (Attention President), as
set forth above, or at such other place as the Corporation may from time to time
designate in writing. Any such notice shall be deemed to have been given as of
the date so mailed or telegraphed as evidenced by the postmark on the envelope
or official notation of time and date on a telegram. Any notice delivered
otherwise than as provided above shall be deemed received only at the time
actually received by the person to whom it is addressed.
14. Waivers. No waiver by either party of any breach or non-performance
-------
of any provision or obligation of this Agreement shall be deemed to be a waiver
of any preceding or succeeding breach of the same or any other provision of this
Agreement.
15. Captions. All captions and headings herein are for convenience of
--------
reference only and shall not be deemed to affect the meaning of this Agreement.
5
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
BIO-IMAGING TECHNOLOGIES, INC.
By:/s/ Donald W. Lohin
----------------------------------------
President and Chief Executive Officer
INVESTMENT PARTNERS CAPITAL & MANAGEMENT CORP.
By: /s/ Frank Abella
---------------------------------------
President
6
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED INTERIM FINANCIAL STATEMENTS INCLUDED IN THE REGISTRANT'S FORM 10-QSB
FOR THE PERIOD ENDED JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> JUN-30-1996
<CASH> 1,358,076
<SECURITIES> 0
<RECEIVABLES> 510,614
<ALLOWANCES> 60,000
<INVENTORY> 0
<CURRENT-ASSETS> 1,870,700
<PP&E> 2,780,978
<DEPRECIATION> 1,530,082
<TOTAL-ASSETS> 3,128,630
<CURRENT-LIABILITIES> 889,461
<BONDS> 0
0
104
<COMMON> 1,477
<OTHER-SE> 2,114,004
<TOTAL-LIABILITY-AND-EQUITY> 3,128,630
<SALES> 0
<TOTAL-REVENUES> 2,552,462
<CGS> 0
<TOTAL-COSTS> 897,351
<OTHER-EXPENSES> 1,462,067
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 207,540
<INCOME-TAX> 0
<INCOME-CONTINUING> 207,540
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 207,540
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
</TABLE>
