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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-KSB
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 1996
Commission File No. 1-11182
BIO-IMAGING TECHNOLOGIES, INC.
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(Exact Name of Registrant as Specified in Its Charter)
Delaware 11-2872047
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(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
830 Bear Tavern Road, West Trenton, New Jersey 08628-1020
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(Address of Principal Executive Offices) (Zip Code)
(609) 883-2000
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(Registrant's Telephone Number,
Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
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Common Stock, $.00025 par Boston Stock Exchange
value per share
Securities pursuant to Section 12(g) of the Act:
None
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Check whether the Registrant: (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:
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Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]
State Registrant's revenues for fiscal year ended September 30, 1996:
$3,657,320.
State the aggregate market value of the voting stock held by non-affiliates
of the Registrant: $4,704,396 at November 30, 1996 based on the average bid and
asked prices on that date.
Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of November 30, 1996:
Class Number of Shares
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Common Stock, $.00025 par value 6,018,550
Transitional Small Business Disclosure Format
Yes: No: X
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The following documents are incorporated by reference into the Annual
Report on Form 10-KSB: Portions of the Registrant's definitive Proxy Statement
for its 1997 Annual Meeting of Stockholders are incorporated by reference into
Part III of this Report.
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TABLE OF CONTENTS
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Item Page
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PART I 1. Business.................................................. 1
2. Properties................................................14
3. Legal Proceedings.........................................14
4. Submission of Matters to a Vote of Security Holders.......14
PART II 5. Market for the Company's Common Equity and Related
Stockholder Matters.......................................15
6. Management's Discussion and Analysis of Financial
Condition and Results of Operations.......................17
7. Financial Statements......................................21
8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.......................21
PART III 9. Directors, Executive Officers, Promoters and Control
Persons; Compliance with Section 16(a) of the
Exchange Act..............................................22
10. Executive Compensation....................................22
11. Security Ownership of Certain Beneficial Owners
and Management............................................22
12. Certain Relationships and Related Transactions............22
PART IV 13. Exhibits, List and Reports on Form 8-K....................23
SIGNATURES..................................................................24
EXHIBIT INDEX...............................................................26
FINANCIAL STATEMENTS.......................................................F-1
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PART I
Item 1. Business.
General
Bio-Imaging Technologies, Inc. ("Bio-Imaging Technologies" or the
"Company") is a biomedical information technology and services company that
provides medical image processing, digital image management and clinical data
management services and software applications to the pharmaceutical,
biotechnology and medical device industries. The Company specializes in the
processing and analysis of medical images and in the data-basing and regulatory
submission of medical images and related text, quantitative data and document-
based information from human clinical trials.
The Company has developed proprietary procedures and software methodologies
for conducting clinical studies in which medical imaging modalities, including
computed tomography (CT), magnetic resonance imaging (MRI), conventional X-ray,
ultrasound and digital photography, are used to evaluate the efficacy and safety
of pharmaceuticals, biologics or medical devices. The Company's digital image
processing and computer analysis techniques enable it to visualize and measure
drug or device effects that can only be detected via medical imaging. These
image analysis techniques enable the Company to make highly precise measurements
and biostatistical inferences about drug or device effects. The resulting data
enable the Company's clients, and their regulatory reviewers (primarily the U.S.
Food and Drug Administration, the "FDA") to evaluate product efficacy and safety
in a more accurate and reliable manner than was previously possible.
In addition, the Company has developed specialized computer services and
software applications that enable radiologists and other medical specialists
involved in clinical trials to review medical image data in an entirely digital
format. The Company's Computer-Assisted Masked Reading ("CAMR") system offers
numerous advantages over conventional film-based medical image reading systems,
including increased reading speed, greater standardization of image reading, and
reduced error in the capture of reader interpretations. Furthermore, the
Company has developed a proprietary image database software application, called
Bio/ImageBase(R), that enables the Company's clients to submit their medical
images and related clinical data to the FDA in a digital format. Using data
stored on CD-ROM disks, Bio/ImageBase(R) can allow clients and their FDA medical
reviewers to review medical images and other data via a familiar graphical user
interface that runs on either IBM-PC compatible or Apple Power Macintosh desktop
computers. The Company believes that Bio/ImageBase(R) offers the potential to
decrease review time for New Drug Applications (NDAs), Product License
Applications (PLAs) and Product Marketing Applications (PMAs), which could
result in faster regulatory approvals and reduced time-to-market for new drugs,
biologics and medical devices, respectively.
Based upon increased demand among pharmaceutical and biotechnology
companies for computer-based, digital-image-enabled and multimedia presentation
capabilities, in October
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1996, Bio-Imaging Technologies established a new business unit, the Marketing
Information Services Division ("MISD"). The MISD will expand upon the Company's
core medical imaging technology to provide a variety of computer-based, medical
image-enabled presentation tools to client's sales and marketing organizations.
Industry sources estimate the market for medical image-based clinical
development and marketing information services to be in excess of $250,000,000
worldwide. The Company believes that it is at an early stage of market
penetration and is directing its marketing and sales efforts towards those
clinical development areas that have the highest current reliance upon medical
imaging. These areas include oncology therapeutics and diagnostics, central
nervous system therapeutics and diagnostics, anti-inflammatory/musculoskeletal
therapeutics (primarily anti-arthritics) and cardiovascular therapeutics and
diagnostics. These four major targets alone constitute in excess of 500
different therapeutic and diagnostic agents currently under development.
The Company was incorporated in Delaware in 1987 under the name Wise
Ventures, Inc. The Company's name was changed to Bio-Imaging Technologies, Inc.
in 1991. The address of the Company's principal executive offices is 830 Bear
Tavern Road, West Trenton, New Jersey, 08628, and its telephone number is 609-
883-2000.
Business Areas
Medical Imaging Core Laboratory Services
Bio-Imaging Technologies is a leading provider of medical imaging core
laboratory services exclusively for commercial clinical development
purposes. The Company's imaging core laboratory facility is located at its
headquarters in New Jersey. The imaging core laboratory provides
centralized image data collection, processing, analysis and archival
services for clinical trials conducted worldwide. The imaging core
laboratory is staffed by imaging scientists, computer engineers and
certified imaging technologists in fields including CT, MRI, nuclear
medicine, ultrasound and X-ray imaging. The imaging core laboratory is
designed for high-volume processing of analog (film) and digital image data
in a secure environment that complies with regulatory guidelines for
clinical data management. The imaging core laboratory is equipped with
multiple imaging workstations and a variety of specialized peripheral
devices, including disk and tape drives, large capacity data storage
devices, film digitization devices and printers. All computer equipment
within the imaging core laboratory and throughout the Company is connected
to a high bandwidth local area network, to the Internet, and to on-line
mass data storage devices.
Imaging data are received by the core laboratory on a daily basis from
clinical trial sites, typically major academic or community hospitals. The
Company has developed proprietary procedures for data tracking and quality
control that it believes to be of significant value to its clients. Data
may be received either as computer files stored on various optical or
magnetic media, or as films, such as conventional X-rays. The Company's
core laboratory contains specialized hardware and software for translation
of
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digital data or digitization of films, so that all data can be
standardized, regardless of source. The Company believes its ability to
handle most commercially available image file formats is a valuable
technical asset and important competitive advantage in gaining new business
for multi-center clinical trials.
The Company is able to perform production-scale image analyses on its
clients' data using internally developed or specially configured software.
The image analysis results derived in the core laboratory are transferred
to databases that can be transmitted electronically to the Company's
clients, or integrated directly into the Company's Bio/ImageBase(R) package
for regulatory submission on the client's behalf. The Company is able to
measure key indicators of drug efficacy in different organs and disease
states. For example, the Company's imaging core laboratory experts are
able to measure the size of tumors over time, to determine if a new cancer
therapy is effective. Anatomical or functional (physiological)
abnormalities or diseases can be measured by the Company in medical images
of the brain, eyes, heart, lungs, liver, kidneys, gastrointestinal system,
genitourinary system, peripheral vascular system, musculoskeletal system,
skin and other organs and structures.
Image-Based Information Management Services
The Company provides a variety of clinical information management
services and software applications designed to accommodate the unique
requirements of medical image data. The amount of image data collected in
a Phase III clinical trial is very substantial. Complete image files for a
large study can equal tens to hundreds of gigabytes, or even terabytes, of
information. Such large amounts of data present unique challenges for
clinical trials and regulatory review. In particular, drug and medical
device developers are now challenged with the need to acquire, collect,
evaluate and submit medical image data for regulatory review. Bio-Imaging
Technologies' information management services focus on providing
specialized solutions for improving the quality, speed and flexibility of
image data management for clinical trials.
The Company's CAMR system offers numerous advantages over conventional
film-based medical image reading systems, including increased reading
speed, greater standardization of image reading, and reduced error in the
capture of reader interpretations. A typical CAMR system consists of a
bank of high-resolution imaging monitors that are connected to high-
capacity image storage devices and an on-line data entry system. Using
this system, radiologists, oncologists, cardiologists or other medical
specialists can review medical image data from clinical trials in an
automated fashion. Such image reviews are often required during clinical
trials to evaluate patients' response to therapy, or to determine if
patients qualify to be entered into studies. The CAMR system can display
all modalities of imaging data (CT, MRI, nuclear medicine, X-ray,
ultrasound, photography), regardless of source equipment. In addition, the
system can display either translated digital data (data originally received
by the Company from hospitals in a digital format) or digitized films. By
using the CAMR system to read and evaluate image data, medical specialists
can achieve greater reading speed than is possible with film, and can
perform evaluations in a more objective, reproducible
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manner. The Company has three CAMR systems at its facility, and is
currently developing capabilities to conduct "remote" CAMR's at other
geographic locations.
The Company has developed a proprietary image database software
application, called Bio/ImageBase(R), that enables the Company's clients to
submit their medical images and related clinical data to the FDA in a
digital format. Using data stored on CD-ROM disks, Bio/ImageBase(R) can
allow clients and their FDA medical reviewers to review medical images and
other data via a familiar graphical user interface that runs on either
IBM-PC compatible or Apple Power Macintosh desktop computers. The Company
believes that Bio/ImageBase(R) offers the potential to decrease review time
for New Drug Applications (NDAs), Product License Applications (PLAs) and
Product Marketing Applications (PMAs), which could result in faster
regulatory approvals and reduced time-to-market for new drugs, biologics
and medical devices, respectively.
The Company's Bio/ImageBase(R) software has been installed at several
client sites and on select computer systems at the FDA. The Company has
been using its Bio/ImageBase(R) software to submit medical images and
related data to the FDA since mid-1993. In March 1996, Bio/ImageBase(R) was
cited in the FDA's 1996 Computer-Assisted Product License Application
Guidance Manual as an acceptable database for submission of imaging data.
To date, the Company has completed and delivered six Bio/ImageBase(R)
packages on its clients' behalf and has four additional packages in
progress.
Marketing Information Services
In early October 1996, the Company established a new business unit,
the MISD. The MISD will focus initially on development and sales of
medical imaging-oriented, laptop computer-based sales and marketing support
presentations and databases. The MISD will draw upon the Company's core
imaging technology to provide new capabilities to clients for visual or
multimedia communication of product features and benefits. Using MISD
software applications, client sales personnel will be able to integrate
medical imaging data from clinical trials directly into their sales and
physician education presentations.
Technical Consulting, Training and End-User Support for Medical Imaging
The Company also provides expert technical consulting, training and
end-user support services. For clinical trial projects, the Company's
experts assist in imaging trials design and in the evaluation of hospital
sites that will participate in studies. The Company maintains
relationships with many leading academic investigators and research sites
that it believes are vital to its reputation as an expert and innovator in
its field. The Company also consults with clients regarding regulatory
issues involved in the design, execution, analysis and submission of
imaging trials. The Company believes that its knowledge of the FDA's
policies, procedures and technology for submission and review of medical
imaging is highly valued by its clients.
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For its Bio/ImageBase(R) packages, the Company provides computer
systems consulting and integration and setup, end-user training and ongoing
technical support. The Company performs these functions with both clients
and client's FDA reviewers.
Target Markets
The Company's primary target market includes pharmaceutical, biotechnology
and medical device companies whose clinical development pipelines include drugs,
biologics or devices that are typically evaluated by medical imaging methods.
This target market includes the top 50 pharmaceutical companies as well as over
100 biotechnology companies with products currently in the clinical development
pipeline.
Classes of drugs which fall within Bio-Imaging Technologies' marketing
focus include:
Cancer Therapeutics
Over 250 new therapies are currently under development by various
pharmaceutical companies for the treatment of cancer. For solid tumor
studies, medical imaging modalities including X-ray, CT and MRI, and
occasionally, nuclear medicine and ultrasound, are used to determine the
response of treated and untreated tumors. These medical images are
evaluated by medical specialists during the course of oncology clinical
trials to determine not only the extent of disease, but also changes in
tumor size over time.
Oncology clinical trials can generate substantial amounts of
radiographic films that, due to their size, bulk and variety, can be
inefficient to manage, costly to store and difficult to evaluate in a
standardized fashion. With its digital imaging technology, Bio-Imaging
Technologies is able to process medical images from oncology trials in an
entirely digital format. In the case of CT, MRI or nuclear medicine data,
the Company collects digital image data directly from the scanning
equipment on which the images are acquired. The Company can also digitize
hard-copy films output by these scanning devices, or by X-ray or ultrasound
machines. Using its digital technology, the Company can perform highly
accurate and reproducible measurements of tumor size. This allows for more
reliable evaluations of new cancer therapies. Furthermore, with its CAMR
system and Bio/ImageBase(R) software, the Company enables its clients to
evaluate and submit medical images to the FDA with greater speed than is
possible with film-based data, potentially reducing time-to-market for new
therapies.
In March of 1996, the FDA announced new guidelines, aimed at
accelerating access to new drugs, for the review and approval of new cancer
therapies. These new regulatory guidelines place greater emphasis on
shrinkage of tumors as an early indicator of anti-tumor efficacy. Bio-
Imaging Technologies believes that these new FDA guidelines have had a
favorable impact on its business, because pharmaceutical and biotechnology
companies have an increased need for specialized medical imaging services
to conduct their oncology clinical trials.
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Central Nervous System
Currently, there are over 120 drugs in development by various
pharmaceutical companies for treatment of diseases and conditions of the
central nervous system. Many such conditions, including ischemic stroke,
multiple sclerosis, Alzheimer's Disease, Parkinson's Disease, and epilepsy,
are evaluated with the aid of medical imaging. Most later-stage clinical
trials for these serious and costly conditions involve the subjective or
objective evaluation of medical image data.
Bio-Imaging Technologies has become a leader in medical imaging
services for the clinical evaluation of a new class of drugs, called
neuroprotectants, to treat ischemic stroke. The Company has participated as
the central imaging core laboratory in large, multi-center stroke trials
with clinical sites throughout North America and Europe. Furthermore, Bio-
Imaging, through its collaborative relationships with leading neurology
researchers, is among the first academic and commercial research groups
conducting stroke studies with new imaging technology called functional
MRI.
While no assurance can be made, the Company expects that its central
nervous system clinical trials business should increase as more therapies
progress through the research pipeline.
Diagnostic Imaging
Bio-Imaging Technologies has played an important role in the
development of next-generation diagnostic imaging agents, including
radiolabeled monoclonal antibodies, peptides and other chemical structures,
and MRI and ultrasound contrast agents. The Company has conducted research
projects with several companies in this area.
The Company's experience in this area ranges from new diagnostics for
gastrointestinal, abdominal, breast and brain tumor imaging, to new
diagnostics for cardiovascular disease, infectious disease, peripheral
vascular disease, Alzheimer's Disease and Parkinson's Disease.
Anti-Inflammatory/Musculoskeletal
Arthritis clinical trials include radiologic evaluation of the bones
and joints to determine drug efficacy. These types of trials include many
hundreds of patients, typically require several years to complete and
generate thousands of X-ray films. Bio-Imaging Technologies is in the
process of developing a remote version of its CAMR system that will allow
rheumatologists and musculoskeletal radiologists to review digitized X-rays
at their offices or homes. These remote reading systems may greatly reduce
the amount of time required to evaluate images from arthritis trials,
potentially accelerating study completion and reducing time-to-market.
The Company believes that demand among arthritis drug developers for
its digital imaging technology and services will increase as new classes of
biotechnology-derived drugs enter and progress through the clinical
development pipeline.
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Cardiovascular
Currently, there are over 140 drugs in development by various
pharmaceutical companies for the diagnosis and treatment of cardiovascular
diseases and conditions, including congestive heart failure and
atherosclerosis, which are evaluated with the aid of medical imaging. The
Company's services can play an important role in the development of new in
vivo diagnostic agents for the detection of impaired myocardial function,
perfusion and metabolism, atherosclerosis, restenosis, and peripheral
vascular disease as well as therapeutics to treat these conditions.
Market Trends
The Company believes that demand for its services and technologies should
grow because of a variety of favorable regulatory, technological and market
trends:
. The FDA has begun to realize the beneficial impact of its initiatives
to streamline the regulatory submission and review process. The FDA is
investing in new information technology and has begun the process of
formulating and disseminating guidelines for submission of electronic
data, including medical images. The Company expects submission of
image data to be a requirement in key areas such as solid tumor
oncology trials.
. Restructuring and downsizing in the pharmaceutical industry has
resulted in increased outsourcing of certain research and data
management activities. Currently, over $4.6 billion in research
services are outsourced to contract clinical research organizations
and universities. Industry estimates place growth of outsourcing at
more than 20% per year and may reach $10 billion by the year 2000.
. The pharmaceutical industry has identified information management as a
key to competitive advantage, and is investing heavily in new
technology to solve data management challenges. Companies are
incorporating digital images into their information infrastructure and
need specialized expertise for the unique requirements of digital
image data.
. Digital technologies for image data acquisition, processing,
transmission, analysis and management are rapidly penetrating the
radiology community.
. New classes of drugs to treat conditions traditionally evaluated by
imaging (e.g. oncology, stroke) are entering or progressing through
the clinical development pipeline, leading to increased demand for
medical-imaging-related services.
. The biotechnology drug development pipeline is maturing. Consequently,
more biologics are entering or progressing through the clinical
development process, leading to an increased demand for medical
imaging-related research services.
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Research and Development
The Company's research and development efforts are focused on a variety of
inter-related services and products geared toward the evolving needs of the
clinical development marketplace.
Increases in microprocessor speed, data storage capacity and imaging
hardware performance are driving the gradual changeover of medical imaging from
film-based to digital data. Related improvements in software performance,
network bandwidth and telecommunications technology have created entirely new
products and services for the transmission of medical image data within local
areas or over long distances. Bio-Imaging Technologies anticipates that many of
the positive changes that these new imaging technologies are bringing to the
healthcare system in general will have a particularly important impact on the
drug and medical device development process. This impact may be especially
important in the area of clinical information management.
Drawing upon its core medical imaging technology and clinical development
expertise, Bio-Imaging Technology is developing services and software tools that
will enable client companies to manage, integrate and evaluate their data in
more useful and meaningful ways. As a common theme throughout its research and
development efforts, the Company is drawing upon the power of computers and
medical imaging to communicate complex clinical information visually. As a
central tenet of its research and development efforts, the Company pursues
opportunities that are strongly related to its current business and which are
clearly supported by current client demand.
In 1996, the Company successfully developed an IBM-PC compatible version of
its Bio/ImageBase(R) software, thereby extending this important product to the
dominant computer platform and operating system in the pharmaceutical industry,
but also reducing its reliance on the Apple MacIntosh computer platform.
However, the Company will continue to support the Apple platform for its
existing customer base. In addition, in 1996, the Company successfully
introduced image analysis and display software that enables the Company's
imaging core laboratory to manage and display images on a common software
platform. It is used in image quality control, lesion quantitation and as an
image display engine for CAMR's and Bio/ImageBase(R) software for existing and
prospective clients. The software contains a variety of quantitative analysis
techniques for stoke and tumor measurements. This new software will also
contribute to continued improvements in operating efficiency and reductions in
time required for operator training. Also in 1996, the Company commenced the
first stage of development of new software to be marketed by its MISD.
Demonstration versions of this software are now being evaluated through
presentations to prospective clients. During the fiscal years ended September
30, 1996 and 1995, the Company spent approximately $134,000 and $285,000,
respectively, on research and development activities.
In 1997, the Company will expand its development efforts to encompass a
broader range of information management, data-basing and networking capabilities
for the linkage of clinical-trials-related medical images to other clinical
data. The Company plans to develop open compatibility between its
Bio/ImageBase(R) applications and certain industry-standard databases.
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Furthermore, the Company is developing plans for networkable Bio/ImageBase(R)
software as a natural evolution of the current desktop computer CD-ROM version.
The Company is also investing in Internet and World Wide Web infrastructure and
development tools both to enable the transfer of certain corporate functions to
the Web, as well as to develop medical imaging-related products and services for
the Internet.
Patents, Trade Secrets and Licenses
Proprietary protection for the Company's computer-imaging programs,
processes and know-how is important to its business. The Company relies upon
trade secrets, know-how and continuing technological innovation to develop and
maintain its competitive position. To date, the Company has sought trademark and
copyright protection for certain computer software programs and is seeking
patent protection for its other proprietary technology where applicable. Bio-
Imaging Technologies requires all employees, consultants and contractors to
execute confidential disclosure agreements as a condition of engagement by the
Company. There can be no assurance, however, that the Company can limit
unauthorized or wrongful disclosures of trade secret information. In addition,
to the extent the Company relies on trade secrets and know-how to maintain its
competitive technological position, there can be no assurance that others may
not develop independently the same or similar techniques.
Government Regulation
The research and development, manufacture and marketing of drugs and
medical devices are subject to stringent regulation by the FDA in the United
States and by comparable authorities in other countries. In addition,
regulations imposed by other federal agencies, as well as state and local
authorities, may impact such research and development, manufacture and
marketing.
The FDA has established mandatory procedures and safety standards which
apply to the clinical testing, manufacture and marketing of drugs and medical
devices. These procedures and safety standards include, among other things, the
completion of adequate and well-controlled human clinical trials to establish
the safety and efficacy of the drug or device for its recommended conditions or
use. The Company advises its clients in the execution of clinical trials and
other drug and device developmental tasks. The Company does not administer drugs
to or utilize medical devices on patients.
The success of the Company's business is dependent upon acceptance by the
FDA and other regulatory authorities which review the data and analyses
generated by the Company's imaging techniques in the evaluation of the safety
and efficacy of new drugs and devices. The FDA has accepted the data and
analyses generated by the Company's imaging techniques to date. The FDA has
formal guidelines which encourage the use of "surrogate measures," through
submission of digital image data, for evaluation of drugs to treat life-
threatening or debilitating conditions. There can be no assurance, however, that
the FDA or other regulatory authorities will accept the data or analyses
generated by the Company in the future and, even assuming acceptance, there can
be no assurance that the FDA or other regulatory authorities will not require
the application of imaging techniques to numbers of patients and over time
periods substantially similar to those required of traditional safety and
efficacy techniques.
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Clinical trials usually involve the administration of a drug to, or the use
of a device on or by, patients under the supervision of a qualified principal
investigator. Clinical trials are conducted in accordance with protocols that
detail the objectives of the study, the parameters to be used to monitor safety
and the efficacy criteria to be evaluated. The Company assists its clients in
primarily Phases I-III of drug and device development. The safety and efficacy
results of product development, preclinical studies and clinical studies are
submitted to the FDA as part of the approval process for the marketing of a drug
or medical device. Sales of drugs and medical devices outside the United States
are subject to regulatory requirements governing human clinical trials and
marketing for drugs and biological products. The requirements may vary widely
from country to country, but FDA requirements generally are the most stringent
world-wide, and data acceptable to the FDA generally is acceptable to regulatory
authorities outside of the United States.
Recent changes in the FDA's policy for the evaluation of therapeutic
oncology agents can have a positive impact on the time to market of such
therapeutics. According to the new guidelines announced on March 29, 1996,
approval times for new cancer therapies can be shortened if evidence of tumor
shrinkage is verifiable and demonstrable through the use of objective
"photographic" measurement techniques. These new guidelines place much greater
reliance on the use of medical image data to demonstrate objective tumor
shrinkage. The volume and complexity of medical image data that must be
acquired, analyzed, and entered into databases for oncology clinical trials
requires the expertise of professionals experienced in the management and
submission of medical imaging data to the FDA. The Company believes the FDAs
initiatives to streamline and accelerate the submission and review process of
therapeutic oncology agents may have a favorable impact on the Company's
business.
The Company believes that its ability to achieve continued and sustainable
growth will be materially dependent upon, among other factors, the continued
stringent enforcement of the comprehensive regulatory framework by various
government agencies. Any significant change in these regulatory requirements or
the enforcement thereof, especially relaxation of standards, could adversely
affect the Company's prospects.
Competition
As a favorable sign of growth in the clinical trials-related medical
imaging services business, the Company has experienced an increase in
competition from its traditional competitors, academic research centers, and new
commercial competitors. To date, the Company's primary competition is still
limited to academically-oriented imaging laboratories. These include
laboratories of certain Harvard-affiliated hospitals, the University of
California-affiliated hospitals and other premier medical institutions. In the
commercial arena, conventional contract clinical research organizations (CROs)
compete for medical imaging-related business, and certain CROs are believed to
have developed capabilities to provide film digitization services. However, the
Company does not believe that CROs can attain the required level of technology,
expertise and experience in the short run to compete on equal footing with
either Bio-Imaging Technologies or the academic imaging laboratories. In the
past year, the Company has become aware of at least one new direct commercial
competitor.
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Competition in the Company's industry is based primarily upon price,
service, quality, professional reputation and technology. Although the Company
uses technology presently unavailable to its competitors which management
believes differentiates the Company in many respects from them, many of the
Company's competitors are substantially larger than the Company, and have
greater resources, including more extensive facilities, greater capital
resources and equipment, larger staffs and the ability to offer a broader range
of services than the Company. There can be no assurance that the Company's
competitors or clients will not develop and utilize technology similar or
superior to that utilized by the Company. Any such competition could have a
material adverse impact on the Company. The Company's competitive position also
depends upon its ability to attract and retain qualified personnel and develop
and preserve proprietary technology, processes and know-how.
As part of its overall strategy, Bio-Imaging Technologies will monitor
competitive developments and will evaluate appropriate defensive tactics,
strategic partnering opportunities or acquisition opportunities. While the
Company has entertained certain strategic partnering discussions, it has no
specific acquisition plans at this time.
Marketing
Bio-Imaging Technologies markets its services and software products
directly to its target market through its business development staff. At the
present time, the Company believes that the complexity of its technology and
applications requires the use of a dedicated sales force. The Company's business
development staff consists of a V.P., Business Development, a Director of Client
Technical Services, a Manager of Client Technical Services and a Manager,
Business Development. Recently, the newly created position of Senior V.P.,
General Manager of the MISD was created and filled by a senior marketing
executive. The Company's selling efforts are focused on North America and
Western Europe. Due to the geographic concentration of the Company's
pharmaceutical and biotechnology targets, selling efforts are largely confined
to the Northeast, certain cities in the Midwest and South-Central U.S., and
biotechnology "hotbeds" in Northern California, Southern California and the
Northwest. The Company's European sales efforts are largely concentrated in the
U.K., Switzerland and Germany. Sales efforts currently are directed from the
Company's headquarters in New Jersey. The Company anticipates beginning
European-based sales efforts in 1997. The Company also anticipates adding to its
sales force to support the launch of the MISD's software product in 1997.
In mid-1996, the Company launched a major marketing and sales initiative
directed at developers of new cancer therapies. Following closely after the
FDA's March 1996 announcement of its new guidelines for accelerated review and
approval of new cancer treatments, the Company's oncology business development
initiative included a targeted direct mail and telemarketing campaign, followed
by individual sales calls and presentation to target companies. To date, this
initiative has resulted in a significant increase in new client inquiries, sales
leads and new contracts.
-11-
<PAGE>
In 1997, the Company expects to launch other business development
initiatives targeted at potential clients in its major service areas. The
Company also expects to begin marketing via its own World Wide Web site.
The Company will evaluate appropriate co-marketing activities to augment
its own business development efforts. In 1996, the Company terminated a co-
marketing agreement with Corning Besselaar, a large CRO. The Company believes
that its termination of this co-marketing agreement had no negative impact on
its sales efforts, and that the highly specialized nature of its business will
continue to require a dedicated sales force under Company control.
Existing Contracts and Proposals
As of October 31, 1996, the Company had entered into contracts with 14
companies to provide services in the aggregate amount of approximately
$5,926,000 through March 1998, of which approximately $3,108,000 remains to be
completed. In addition, as of October 31, 1996, the Company had submitted
written proposals for contracts which had not yet been accepted or rejected by
the potential clients calling for gross payments to the Company of approximately
$4,491,000. No assurance can be given that any of these proposals will be
accepted and, if accepted, whether the projects contemplated thereby will be
completed and payments thereunder made. Contracts are terminable by the
Company's clients at any time and for any reason. Factors considered by the
Company to determine the fees charged to its clients include the complexity,
magnitude and scope of the project, the cost of developing new imaging
technology, if necessary, and the quality of the images to be analyzed.
Significant Clients
During fiscal 1996, three clients accounted for approximately 52% of the
Company's consolidated project revenue. Such clients individually made up
approximately 22%, 18% and 12% of such revenue. These contracts are terminable
by the Company's clients at any time and for any reason. Loss of any of these
clients or a reduction in services provided to these clients could have a
material adverse effect on the Company's business, financial condition and
results of operations.
Employees
As of September 30, 1996, the Company had 24 full-time employees, three of
whom are officers of the Company.
Of the Company's full-time employees as of September 30, 1996, five were
engaged in sales and marketing, 15 were engaged in client related projects and
in-house research and development and four were engaged in administration and
management. A significant number of the Company's management and professional
employees have had prior experience with pharmaceutical, biotechnology or
medical device companies. Bio-Imaging Technologies believes that it has been
successful in attracting skilled and experienced personnel; however, competition
for such personnel is intensifying. None of the Company's employees are covered
by collective bargaining agreements and the Company has experienced low turnover
among its
-12-
<PAGE>
employees. All of the Company's employees are covered by confidentiality and
non-competition agreements. The Company cannot provide assurances as to the
enforceability of such agreements. Bio-Imaging Technologies has entered into
employment contracts with certain of its key officers. See "Item 10. Executive
Compensation." Bio-Imaging Technologies considers relations with its employees
to be good.
Rex D. Bright resigned as Interim President and Chief Executive Officer and
Director of the Company on January 31, 1996 upon the successful recruitment and
employment by the Company of Donald W. Lohin, President and Chief Executive
Officer. Mr. Lohin commenced his employment with the Company on January 31, 1996
and was duly elected to the Company's Board of Directors by the Board pursuant
to the Company's By-laws on such date.
-13-
<PAGE>
Item 2. Properties.
The Company leases approximately 9,100 square feet of office space in a
building located at 830 Bear Tavern Road, West Trenton, New Jersey. The lease
expires November 30, 1998 and provides for a base rent of approximately $9,400
per month through November 30, 1998. The lease may be terminated on November 30,
1997 at the Company's option. With the exception of the Company's proposed
operations in Europe, the Company believes that these facilities will be
adequate for its needs for the foreseeable future.
Item 3. Legal Proceedings.
There is no material litigation pending to which the Company is a party or
to which any of its property is subject.
Item 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
-14-
<PAGE>
PART II
Item 5. Market for the Company's Common Equity and Related Stockholder
Matters.
Prior to June 1992, there was no established market for the Company's
securities which were traded on the over-the-counter market. Trades were
reported in the "pink sheets" by the National Quotation Bureau, Inc. On June
18, 1992, the Company registered and offered for sale 1,000,000 Units each
consisting of one share of Common Stock and one Class G Warrant which entitled
the holder to purchase, during the four-year period which commenced June 18,
1992, one share of the Company's Common Stock at an exercise price of $5.50 per
share. In accordance with their terms, the Class G Warrants expired unexercised
in June 1996.
Since June 18, 1992, the Common Stock has been traded on the Nasdaq
SmallCap Market under the symbol BITI.
The following table sets forth the high and low sales bid quotations for
the Common Stock for each of the quarters since the quarter ended December 31,
1994 as reported on the Nasdaq SmallCap Market. Such quotations reflect inter-
dealer prices, without retail mark-up, mark-down or commission and may not
represent actual transactions.
<TABLE>
<CAPTION>
Quarter Common
Ended Stock
----- -----
High Low
---- ---
<S> <C> <C>
December 31, 1994 $ 1.25 $0.594
March 31, 1995 1.0 0.563
June 30, 1995 0.938 0.50
September 30, 1995 1.0 0.625
December 31, 1995 0.875 0.50
March 31, 1996 0.875 0.50
June 30, 1996 1.75 0.50
September 30, 1996 1.313 0.938
</TABLE>
-15-
<PAGE>
Since June 18, 1992, the Common Stock also has been listed on the Boston
Stock Exchange ("BSE") under the symbol BIT.
The following table sets forth the high ask and low bid quotations for the
Common Stock for each of the quarters since the quarter ended December 31, 1994
as reported on the BSE.
<TABLE>
<CAPTION>
Quarter Common
Ended Stock
----- -----
High Low
---- ---
<S> <C> <C>
December 31, 1994 $ 1.375 $ 0.375
March 31, 1995 1.25 0.25
June 30, 1995 1.125 0.50
September 30, 1995 1.125 0.25
December 31, 1995 1.125 0.50
March 31, 1996 0.875 0.50
June 30, 1996 1.688 0.50
September 30, 1996 1.438 0.813
</TABLE>
As of October 31, 1996, the approximate number of holders of record of the
Common Stock was 109 and the approximate number of beneficial holders of the
Common Stock was 914.
On August 29, 1995, the Company received notice from the Nasdaq Stock
Market, Inc. dated August 22, 1995 that the Company was not in compliance with
the minimum bid price requirement or the alternative minimum capital and surplus
requirement of the Nasdaq SmallCap Market. The Company was granted a hearing to
determine whether a temporary exception to the listing criteria was warranted.
Such hearing was held on January 3, 1996. At that time, the Nasdaq Listing
Qualification Committee of the Nasdaq Stock Market, Inc. ("Nasdaq") granted a
temporary exception to such criteria and placed the Company's publicly-traded
securities on a conditional listing status. The Company filed documentation with
the Securities and Exchange Commission and with Nasdaq on January 31, 1996 which
evidenced compliance with the alternative minimum bid price criteria. Nasdaq
subsequently informed the Company that, effective February 7, 1996, the
Company's publicly-traded securities would continue to be listed on the Nasdaq
SmallCap Market on an unconditional basis.
There can be no assurance, however, that the Company will, in subsequent
periods, be able to continue to meet or maintain the Nasdaq criteria for
continued listing. Nasdaq currently is proposing more stringent criteria for
continued listing on the Nasdaq SmallCap Market. In the event the Company fails
to meet or maintain the current or proposed listing criteria in the future, the
Company's securities could cease to be quoted and traded on the Nasdaq SmallCap
Market. In such event, it is expected that such securities would continue to be
quoted and traded in the over-the-counter market or on the OTC Bulletin Board.
However, the marketability of the Company's securities would be negatively
impacted. A decrease in the marketability of such
-16-
<PAGE>
securities could potentially cause a decrease in the value of such securities.
The rights of the Company's stockholders would not be affected by delisting from
the Nasdaq SmallCap Market.
The Company has neither paid nor declared dividends on its Common Stock
since its inception and does not plan to pay dividends on its Common Stock in
the foreseeable future. Any earnings which the Company may realize will be
retained to finance the growth of the Company. However, the Company's issued
and outstanding shares of Series A Preferred Stock provide the holders thereof
to certain dividends rights. Such holders are entitled to receive cumulative
dividends, in an annual amount per share equal to 8.0% of the preferential
amount, as defined in the Company's certificate of designation (currently the
preferential amount is $1.20 and the annual dividend per share of outstanding
Series A Preferred Stock is $0.096). Such preferential amount may from time to
time be adjusted in certain circumstances. In November 1996, the Company paid
to the holders of its Series A Preferred Stock an aggregate dividend of $21,222
which amount represented accrued but unpaid dividends from the date of issuance
through June 30, 1996. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources."
Item 6. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Liquidity and Capital Resources
At September 30, 1996, the Company had cash and cash equivalents of
approximately $1,438,000, 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 Investment Partners,
Inc. ("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 Investment Partners
Capital & Management Corp. ("IPCM") pursuant to which IPCM agreed to render to
the
-17-
<PAGE>
Company product/market development and financial consulting services. Upon
execution of the Consulting Agreement, the Company was required to pay IPCM 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.
On October 13, 1994, the Company issued and sold to Corning Pharmaceutical
Services Inc. ("CPS") (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 exercise price of $1.50 per share (the "Warrants") for an aggregate
purchase price of $1,819,500. The Company received a cash payment of $1,212,925
in partial payment of the purchase price on October 13, 1994. In addition, as
further payment of the purchase price, CPS discharged a loan which was made by
CPS to the Company on August 26, 1994, which consisted of $500,000 of principal
plus $6,575 of interest due, and canceled the promissory note evidencing the
loan. The preferred stock warrant previously issued to CPS in connection with
such loan also was canceled by its terms.
On February 7, 1995, CPS paid the remaining $100,000 of the aggregate
purchase price to complete the foregoing transaction with CPS. In addition,
Corning Besselaar paid an exclusivity fee of $300,000 under the previously
executed Co-Marketing Agreement between Corning Besselaar and the Company. Such
payments became due once both stockholder approval of a proposal and the
requisite filing of an amendment to the Company's Restated Certificate of
Incorporation, as amended, to increase the number of authorized shares of Common
Stock from 10,000,000 to 18,000,000 shares was obtained and completed in January
1995. The Co-Marketing Agreement was terminated by the Company, in accordance
with its terms, as of December 31, 1995 because certain revenue targets were not
achieved.
Working capital at September 30, 1996, was approximately $1,260,000.
The Company had, as of September 30, 1996, invested approximately
$2,774,000 in capital 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 $103,000, $52,000 and $179,000, and $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. The other certificate of deposit,
which is scheduled to mature in March 1997, was held as collateral for
obligations under a new capital lease entered into by the Company in November
1996. The Company currently anticipates that capital expenditures for
additional networking and data storage technology
-18-
<PAGE>
during its next fiscal year will approximate $750,000. Such expenditures may be
financed through capital leases.
The Company anticipates that its cash as at September 30, 1996 will be
sufficient to fund working capital needs and capital requirements through fiscal
1997.
Results of Operations
The Company attributes its improved performance for fiscal 1996 primarily
to the increase in project revenue. The Company believes that demand for its
services and technologies will continue to grow as the use of digital
technologies for data acquisition and management increases in the radiology and
drug development communities. In addition, the FDA is gaining experience with
electronic submissions and is continuing to develop guidelines for computerized
submission 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 imaging 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
continued or sustainable growth or that additional revenue generating
opportunities will be realized by the Company.
During fiscal 1996, the Company signed approximately $5,754,000 in new
project contracts which are expected to produce project revenues in the ensuing
24 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.
This Form 10-KSB contains forward-looking statements that involve risks and
uncertainties. Such risks include, but are not limited to, market acceptance of
the Company's current and planned products and services, decisions made by the
FDA, the Company's ability to hire and retain qualified employees, and the fact
that project contracts may be terminated by the Company's clients at any time
and for any reason. The Company's actual results may differ materially from the
results discussed in such forward-looking statements.
Years Ended September 30, 1995 and 1996
---------------------------------------
Total project revenue for the years ended September 30, 1995 and 1996 was
approximately $2,625,000 and $3,657,000, respectively, an increase of
approximately $1,032,000, or 39%. Project revenue in fiscal 1995 was derived
from 28 clients and revenue in fiscal 1996 was derived from 20 clients. Revenue
for the year ended September 30, 1996 was higher than revenue for the year ended
September 30, 1995 as a result of the increase in the scope of projects for
which the Company was engaged to perform work. The Company's scope of work
ranged from up-front consulting and site administrative tasks to imaging core
laboratory activities. In addition, especially during the third and fourth
quarters of fiscal 1996, the Company completed a higher volume of work on
several projects which encompassed high revenue tasks, including computer-
assisted masked readings and the digital management of medical imaging data. In
general, project revenue for the year ended September 30, 1996
-19-
<PAGE>
consisted primarily of medical image processing and analysis and image data
management services, including computer-assisted masked readings and the data-
basing and regulatory submission of digital medical images and related clinical
data.
The Company's total operating expenses were approximately $3,358,000 in
fiscal 1995 and $3,300,000 in fiscal 1996, a modest decrease of approximately
$58,000, or 2%. The decrease resulted primarily from a decrease in research and
development expenses. The expenses during the years ended September 30, 1995
and 1996 consisted primarily of general and administrative expenses, project
costs, and research and development costs. The Company also incurred a one-time
charge of approximately $205,000 in severance costs during fiscal 1995.
General and administrative expenses of approximately $1,882,000 during the
year ended September 30, 1996 resulted primarily from professional salaries and
benefits, depreciation and amortization, professional and consulting services,
sales, marketing and investor relations expenses, office rent and corporate
insurance. Such expenses remained relatively constant. General and
administrative expenses during the year ended September 30, 1995, were
approximately $1,878,000.
Project costs of approximately $1,284,000 during the year ended September
30, 1996 were comprised of professional salaries and benefits, travel and
communication expenses and overhead allocated to client projects. Project costs
for fiscal 1995 were approximately $1,194,000. The increase during the year
ended September 30, 1996, of approximately $90,000, or 8%, from fiscal 1995,
resulted primarily from the increase in project revenue.
The gross margin percentages during the year ended September 30, 1996
increased to 65% from 55% for the year ended September 30, 1995. Such increase
is attributable primarily to an increase in efficiency related to the
performance of project-related activities coupled with revenue generated from a
mix of products and services which yield higher gross margins.
Research and development expenses during the year ended September 30, 1995
and 1996, were approximately $285,000 and $134,000, respectively. Research and
development expenses consisted of professional salaries and benefits and
consulting fees charged to research and development projects. The decrease in
such expenses during the year ended September 30, 1996 of approximately
$151,000, or 53%, from fiscal 1995, 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 $100,000 for the year ended
September 30, 1996. Research and development projects during the year ended
September 30, 1996 focused on the conceptual formulation, design, testing and
modification of new products and process alternatives. The Company also
introduced an IBM-PC compatible version of its Bio/ImageBase(R) software during
fiscal 1996.
Net interest income of approximately $25,000 during the year ended
September 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
-20-
<PAGE>
increase in interest income during fiscal 1996 was due to higher cash balances
maintained throughout the year. Net interest income was approximately $13,000
in fiscal 1995.
The Company's net income for the year ended September 30, 1996 was
approximately $382,000 as compared to a net loss of approximately $925,000 in
fiscal 1995. The Company's net income for fiscal 1996 resulted primarily from
an increase in project-related services performed by the Company. The loss
incurred in the year ended September 30, 1995 was due primarily to project
revenue which was inadequate to support the infrastructure of the business.
Item 7. Financial Statements.
The financial statements required to be filed pursuant to this Item 7 are
included in this Annual Report on Form 10-KSB. A list of the financial
statements filed herewith is found at "Item 13. Exhibits, List, and Reports on
Form 8-K."
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
Not applicable.
-21-
<PAGE>
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act.
The information relating to the Company's directors, nominees for election
as directors and executive officers under the headings "Election of Directors"
and "Executive Officers" in the Company's definitive proxy statement for the
1997 Annual Meeting of Stockholders is incorporated herein by reference to such
proxy statement.
Item 10. Executive Compensation.
The discussion under the heading "Executive Compensation" in the Company's
definitive proxy statement for the 1997 Annual Meeting of Stockholders is
incorporated herein by reference to such proxy statement.
Item 11. Security Ownership of Certain Beneficial Owners and Management.
The discussion under the heading "Security Ownership of Certain Beneficial
Owners and Management" in the Company's definitive proxy statement for the 1997
Annual Meeting of Stockholders is incorporated herein by reference to such proxy
statement.
Item 12. Certain Relationships and Related Transactions.
The discussion under the heading "Certain Relationships and Related
Transactions" in the Company's definitive proxy statement for the 1997 Annual
Meeting of Stockholders is incorporated herein by reference to such proxy
statement.
-22-
<PAGE>
PART IV
Item 13. Exhibits, List, and Reports on Form 8-K.
(a) (1) Financial Statements.
Reference is made to the Index to Financial Statements on Page F-1.
(a) (2) Financial Statement Schedules.
None.
(a) (3) Exhibits.
Reference is made to the Index to Exhibits on Page 26.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the Company's fourth fiscal
quarter.
-23-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized this 18th day of
December, 1996.
BIO-IMAGING TECHNOLOGIES, INC.
By: /s/Donald W. Lohin
-------------------------
Donald W. Lohin, President
and Chief Executive Officer
-24-
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Donald W. Lohin President and Chief December 18, 1996
- ------------------------------- Executive Officer and Director
Donald W. Lohin (principal executive
officer)
/s/ James J. Conklin, M.D. Chairman of the December 18, 1996
- ------------------------------- Board, Chief
James J. Conklin, M.D. Scientific Officer
and Director
/s/ Robert J. Phillips Vice President and Chief December 18, 1996
- ------------------------------- Financial Officer
Robert J. Phillips (principal financial and
accounting officer)
/s/ Jeffrey H. Berg, Ph.D Director December 18, 1996
- -------------------------------
Jeffrey H. Berg, Ph.D.
/s/ Harris Koffer, Pharm.D. Director December 18, 1996
- -------------------------------
Harris Koffer, Pharm.D.
/s/ Charles C. Harwood, Jr. Director December 18, 1996
- -------------------------------
Charles C. Harwood, Jr.
/s/ Jeffrey S. Hurwitz, Esq. Director December 18, 1996
- -------------------------------
Jeffrey S. Hurwitz, Esq.
/s/ James A. Taylor, Ph.D. Director December 18, 1996
- -------------------------------
James A. Taylor, Ph.D.
</TABLE>
-25-
<PAGE>
BIO-IMAGING TECHNOLOGIES, INC. AND SUBSIDIARY
CONTENTS
================================================================================
Independent Auditor's Report F-2
Consolidated Financial Statements:
Balance Sheet F-3
Statement of Operations F-4
Statement of Stockholders' Equity F-5
Statement of Cash Flows F-6
Notes to Consolidated Financial Statements F-7 - F-14
F-1
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Bio-Imaging Technologies, Inc.
We have audited the accompanying consolidated balance sheets of Bio-Imaging
Technologies, Inc. and subsidiary as of September 30, 1996 and 1995, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Bio-Imaging
Technologies, Inc. and subsidiary as of September 30, 1996 and 1995, and the
results of their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles.
GOLDSTEIN GOLUB KESSLER & COMPANY, P.C.
New York, New York
October 9, 1996
F-2
<PAGE>
BIO-IMAGING TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
===============================================================================================================
September 30, 1996 1995
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents (Note 1) $ 1,377,633 $ 704,684
Restricted cash (Note 4) 60,000 120,000
Accounts receivable, net of allowance for doubtful accounts
of $60,000 and $25,000 in 1996 and 1995, respectively (Notes 1 and 8) 879,183 497,866
Prepaid expenses and other current assets 12,460 40,465
- ---------------------------------------------------------------------------------------------------------------
Total current assets 2,329,276 1,363,015
Property and Equipment, net (Notes 1, 2 and 4) 1,198,943 1,272,982
Deferred Income Tax Asset, net of valuation allowance of
$2,100,000 and $2,300,000 in 1996 and 1995, respectively (Note 9) - -
Other Assets 5,852 8,187
- ---------------------------------------------------------------------------------------------------------------
Total Assets $ 3,534,071 $ 2,644,184
===============================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Deferred revenue (Note 1) $ 635,562 $ 654,833
Accounts payable 74,180 85,384
Accrued expenses and other current liabilities (Note 3) 268,000 124,438
Current maturities of long-term debt (Note 4) 91,382 180,043
- ---------------------------------------------------------------------------------------------------------------
Total current liabilities 1,069,124 1,044,698
Long-term Debt (Note 4) 99,878 139,224
- ---------------------------------------------------------------------------------------------------------------
Total liabilities 1,169,002 1,183,922
- ---------------------------------------------------------------------------------------------------------------
Commitments (Note 7)
Stockholders' Equity (Note 6):
Preferred stock - $.00025 par value; authorized 3,000,000
shares, issued 416,667 shares in 1996 ($500,000 liquidation preference) 104 -
Common stock - $.00025 par value; authorized 18,000,000
shares, issued and outstanding 5,968,550 and 5,889,350
shares in 1996 and 1995, respectively 1,493 1,473
Additional paid-in capital 7,739,688 7,217,129
Accumulated deficit (5,376,216) (5,758,340)
- ---------------------------------------------------------------------------------------------------------------
Stockholders' equity 2,365,069 1,460,262
- ---------------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $ 3,534,071 $ 2,644,184
===============================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements
F-3
<PAGE>
BIO-IMAGING TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
========================================================================================
Year ended September 30, 1996 1995
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Project revenue (Notes 1 and 8) $3,657,320 $2,624,830
Project costs 1,284,180 1,193,818
- ----------------------------------------------------------------------------------------
Gross profit 2,373,140 1,431,012
General and administrative expenses 1,882,068 1,878,477
Research and development expenses 133,766 285,354
- ----------------------------------------------------------------------------------------
Income (loss) from operations 357,306 (732,819)
Interest income 48,514 39,914
Interest expense (Notes 4 and 6) (23,696) (26,915)
Severance costs (Note 7) - (205,015)
- ----------------------------------------------------------------------------------------
Net income (loss) 382,124 (924,835)
Dividends on preferred stock (Note 6) 31,038 -
- ----------------------------------------------------------------------------------------
Net income (loss) applicable to common stock $ 351,086 $ (924,835)
========================================================================================
Net income (loss) per common share (Note 1) $.06 $(.16)
========================================================================================
Weighted average number of common and common equivalent
shares outstanding (Note 1) 6,183,735 5,725,290
========================================================================================
</TABLE>
See Notes to Consolidated Financial Statements
F-4
<PAGE>
BIO-IMAGING TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
==================================================================================================================================
(Note 6)
Additional
Preferred Stock Common Stock Paid-in Accumulated Stockholders'
Shares Amount Shares Amount Capital Deficit Equity
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1994 - - 3,484,350 $ 871 $5,262,581 $(4,833,505) $ 429,947
Issuance of common stock through
private placement transaction - - 2,355,000 589 1,728,911 - 1,729,500
Issuance of common stock pursuant
to terms of license agreement - - 50,000 13 56,237 - 56,250
Issuance of treasury stock to employees'
savings plan (Note 7) - - - - 169,400 - 169,400
Net loss - - - - (924,835) (924,835)
- ----------------------------------------------------------------------------------------------------------------------------------
Balance at September 30, 1995 - - 5,889,350 1,473 7,217,129 (5,758,340) 1,460,262
Issuance of preferred stock through
private placement transaction (Note 6) 416,667 $104 - - 433,229 - 433,333
Stock options exercised (Note 6) - - 14,200 4 14,446 - 14,450
Issuance of common stock to employees'
savings plan (Note 7) - - 65,000 16 74,884 - 74,900
Net income - - - - - 382,124 382,124
- ----------------------------------------------------------------------------------------------------------------------------------
Balance at September 30, 1996 416,667 $104 5,968,550 $1,493 $7,739,688 $(5,376,216) $2,365,069
==================================================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements
F-5
<PAGE>
BIO-IMAGING TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
=============================================================================================================
Year ended September 30, 1996 1995
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 382,124 $ (924,835)
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:
Depreciation and amortization 533,773 434,632
Provision for (reduction of) losses on accounts receivable 35,000 (25,000)
Stock issued for licensing agreement (Note 6) - 56,250
Stock contribution to employees' savings plan (Note 7) 74,900 84,000
Changes in operating assets and liabilities:
Increase in accounts receivable (416,317) (125,465)
Decrease (increase) in prepaid expenses and other current assets 28,005 (19,440)
Decrease in other assets 2,335 75,807
Decrease (increase) in deferred revenue (19,271) 280,659
Decrease in accounts payable (11,204) (46,791)
Increase (decrease) in accrued expenses and other current liabilities 143,562 (278,614)
- -------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities 752,907 (488,797)
- -------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Purchases of property and equipment (400,353) (315,069)
Decrease in restricted cash 60,000 40,000
- -------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (340,353) (275,069)
- -------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Repayment of loan payable (86,852) (138,247)
Repayment of capital contribution in advance of common stock sale (Note 5) - (500,000)
Payments under equipment lease obligations (100,536) (62,244)
Repayment of debentures - (150,000)
Net proceeds from private placement of preferred stock (Note 6) 433,333 1,729,500
Proceeds from exercise of stock options 14,450 -
- -------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 260,395 879,009
- -------------------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents 672,949 115,143
Cash and cash equivalents at beginning of year 704,684 589,541
- -------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $1,377,633 $ 704,684
=============================================================================================================
Supplemental disclosure of cash flow information:
Cash paid during the year for interest $ 23,696 $ 40,946
=============================================================================================================
Supplemental schedule of noncash investing and financing activities:
Equipment purchased under capital lease obligations $ 59,381 $ 214,925
=============================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements
F-6
<PAGE>
BIO-IMAGING TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
1. PRINCIPAL BUSINESS ACTIVITY AND SIGNIFICANT ACCOUNTING POLICIES:
Bio-Imaging Technologies, Inc. ("BIT") is a biomedical information technology
and services company that provides medical image processing, digital image
management and clinical data management services and software applications to
the pharmaceutical, biotechnology and medical device industries. BIT
specializes in the processing and analysis of medical images and in the data-
basing and regulatory submission of medical images and related text,
quantitative data and document-based information from human clinical trials.
The accompanying consolidated financial statements include the accounts of BIT
and its wholly owned subsidiary, Oxford Bio-Imaging Research, Inc. (collectively
referred to as the "Company"). All intercompany accounts and transactions have
been eliminated in consolidation.
Project revenue is recognized when services are performed and the related costs
are incurred. Deferred revenue is recorded when cash is received prior to the
performance of services. Unbilled receivables are billed upon the completion of
milestones as defined in specific contracts. Accounts receivable include
approximately $647,000 and $71,000 of unbilled receivables at September 30, 1996
and 1995, respectively.
The Company capitalizes software development costs after technological
feasibility has been determined and ceases capitalization at such time as the
end product is available for general release to the public. The establishment
of technological feasibility and the ongoing assessment of recoverability of
capitalized software development costs require considerable judgment by
management with respect to certain external factors including, but not limited
to, anticipated future revenue, estimated economic life and changes in software
and hardware technologies. At September 30, 1996, management has estimated an
economic useful life of 30 months and is amortizing these costs on a straight-
line basis over this period. The amortization period is reviewed annually by
management.
Depreciation of property and equipment is provided for by the straight-line
method over the estimated useful lives of the respective assets. Amortization
of leasehold improvements is provided for over the related lease term.
Net income (loss) per common share is calculated based upon the weighted average
number of common shares and dilutive common equivalent shares outstanding. For
the years ended September 30, 1996 and 1995, the weighted average number of
common and common equivalent shares amounted to 6,183,735 and 5,725,290,
respectively. The calculation of loss per share in 1995 excludes all options
and warrants from the calculation of the weighted average number of shares
outstanding since their inclusion would have had an antidilutive effect.
The Company maintains substantially all of its cash in one financial
institution. To the extent that such cash exceeds the maximum insurance level,
it is uninsured.
The Company has defined cash equivalents as highly liquid investments with an
original maturity of three months or less.
F-7
<PAGE>
BIO-IMAGING TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
The consolidated financial statements have been prepared in conformity with
generally accepted accounting principles which require the use of estimates by
management.
In October 1995, the Financial Accounting Standards Board issued SFAS No. 123,
Accounting for Stock-based Compensation, which is effective for financial
statements with fiscal years beginning after December 15, 1995. Management has
not determined the effect, if any, the adoption of SFAS No. 123 will have on its
financial position or results of operations.
2. PROPERTY AND EQUIPMENT:
Property and equipment, at cost, consists of the following:
<TABLE>
<CAPTION>
Estimated
September 30, 1996 1995 Useful Life
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Imaging equipment $2,026,010 $1,737,643 5 years
Equipment under capital leases 565,319 505,938 5 years
Furniture and fixtures 131,471 127,421 7 years
Leasehold improvements 50,843 42,907 Term of lease
Computer software costs 100,000 - 30 months
- --------------------------------------------------------------------------
2,873,643 2,413,909
Less accumulated depreciation
and amortization 1,674,700 1,140,927
- --------------------------------------------------------------------------
$1,198,943 $1,272,982
==========================================================================
</TABLE>
Accumulated depreciation related to equipment acquired under capital leases
amounted to approximately $288,000 and $182,000 at September 30, 1996 and 1995,
respectively.
Accumulated amortization related to computer software costs amounted to
approximately $17,000 and $ - 0 - at September 30, 1996 and 1995, respectively.
3. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES:
Accrued expenses and other current liabilities consist of the following:
<TABLE>
<CAPTION>
September 30, 1996 1995
- ------------------------------------------------------------------------------
<S> <C> <C>
Professional fees $121,000 $109,000
Salaries and fringe benefits 92,000 7,438
Consulting fees 32,000 -
Other 23,000 8,000
- ------------------------------------------------------------------------------
$268,000 $124,438
==============================================================================
</TABLE>
F-8
<PAGE>
BIO-IMAGING TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
4. LONG-TERM DEBT:
Long-term debt consists of the following:
<TABLE>
<CAPTION>
September 30, 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Loan payable (a) $ - $ 86,852
Equipment lease obligations (b) 191,260 232,415
- --------------------------------------------------------------------------------
191,260 319,267
Less current maturities 91,382 180,043
- --------------------------------------------------------------------------------
Long-term debt $ 99,878 $139,224
================================================================================
</TABLE>
(a) In connection with the purchase of certain capital equipment, the Company,
in April 1993, entered into a loan agreement with a financing institution
in the amount of $400,000. The loan bore interest at 9.43% per annum and
was payable in 36 monthly installments of principal and interest in the
amount of $12,800 through April 1996.
(b) The equipment lease obligations are payable in monthly installments ranging
from $1,691 to $5,277, including interest at rates ranging from 8.78% to
10.46%, through April 1999. The debt is collateralized by the related
equipment and a restricted cash account. The restricted cash in the amount
of $60,000 is in a certificate of deposit, maturing September 1996, bearing
interest at 5.13%. In September 1996, the $60,000 certificate of deposit
was rolled over and retained by the lessor as collateral for a new capital
lease to be signed during November 1996.
Aggregate maturities of long-term debt at September 30, 1996 are as follows:
Year ending September 30,
1997 $91,382
1998 87,084
1999 12,794
- --------------------------------------------------------------------------------
$191,260
================================================================================
5. CAPITAL CONTRIBUTION IN ADVANCE OF COMMON STOCK SALE:
On August 26, 1994, the Company signed a Co-Marketing Agreement with G.H.
Besselaar Associates, a unit of Corning Incorporated ("Besselaar"), which
permits Besselaar to exclusively co-market BIT's core laboratory services and
Bio/ImageBase(R) software product for computerized regulatory submission of
medical imaging data. Under the co-marketing agreement, BIT shall exclusively
co-market the services of Besselaar to BIT's current and prospective clients.
This agreement was terminated December 1995 (see Note 6).
Simultaneously, the direct parent of Besselaar, Corning Pharmaceutical Services
Inc. ("CPS"), a Delaware corporation, made an immediate $500,000 loan to the
Company pursuant to a loan agreement and an accompanying nonnegotiable
promissory note (the "Loan"). On October 13, 1994, CPS discharged the Loan and
the promissory note evidencing such Loan in connection with a stock purchase
agreement executed on October 13, 1994 (see Note 6).
F-9
<PAGE>
BIO-IMAGING TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
6. STOCKHOLDERS' EQUITY:
During April 1992, the Company completed a private placement whereby it issued,
for an aggregate of $750,000, promissory notes in the aggregate principal amount
of $750,000, an aggregate of 150,000 shares of common stock and warrants to
purchase an aggregate of 150,000 shares of common stock at an exercise price of
$5.50 per share. Such warrants expired during June 1996.
In June 1992, the Company completed a public offering of 1,000,000 units at $5
per unit. Each unit consisted of one share of common stock and one Class G
warrant entitling the holder to purchase one share of common stock at an
exercise price of $5.50. The warrants expired during June 1996. The Company
received approximately $3,736,000 after deducting underwriting discounts and
expenses of the offering of approximately $1,264,000.
In addition, in June 1992, the Company issued 200,000 warrants to purchase
shares of common stock to the underwriter of the Company's public offering at an
initial exercise price of $7.00 per share. These warrants contain certain anti-
dilution protection. After the effect of the antidilution provisions, as a
result of the Company's private placement transactions in September 1994 and
December 1995 (referred to below), the Company is obligated to issue 773,480
shares of common stock upon the exercise of these warrants at an adjusted price
of $1.20 per share. These warrants expire June 18, 1997.
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. In January 1995, the Company amended this
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. 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 nonqualified options.
The following table summarizes the transactions pursuant to the Company's stock
option plan for the two-year period ended September 30, 1996:
<TABLE>
<CAPTION>
Number of
Options Option Price
<S> <C> <C>
- --------------------------------------------------------------------------------
Unexercised options outstanding at
September 30, 1994 949,800 $1.25 - $5.16
Options granted 279,000 .75 - 1.13
Options canceled (34,300) .84 - 1.25
- --------------------------------------------------------------------------------
Unexercised options outstanding at
September 30, 1995 1,194,500 .75 - 5.16
Options granted 406,500 .63 - 1.31
Options canceled (85,300) .75 - 1.25
Options exercised (14,200) .75 - 1.25
- --------------------------------------------------------------------------------
Unexercised options outstanding at
September 30, 1996 1,501,500 $ .63 - $5.16
================================================================================
</TABLE>
F-10
<PAGE>
BIO-IMAGING TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
Approximately 1,192,000 options are exercisable at September 30, 1996. The
balance of the options becomes exercisable through January 2006.
On October 13, 1994, the Company and CPS consummated the purchase by CPS of (i)
2,355,000 shares of the Company's common stock, $.00025 par value, (ii) a
warrant to purchase 250,000 shares of common stock with an initial exercise
price of $1.25 per share and (iii) a warrant to purchase 250,000 shares of
common stock with an initial price of $1.50 per share (the "Warrants") for an
aggregate purchase price of $1,819,500. The Warrants are subject to adjustment
to protect against dilution in the event of certain transactions. The exercise
price of the Warrants is subject to price adjustment, as defined. The Company
received a cash payment of $1,312,925 in payment of the purchase price. In
addition, as further payment of the purchase price, CPS discharged a loan which
was made by CPS in favor of the Company on August 26, 1994 which consisted of
$500,000 of principal plus $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 has also been canceled by its terms. Costs associated
with this transaction amounted to approximately $90,000 and reduced paid-in
capital at the transaction date.
Furthermore, Besselaar paid the Company an exclusivity fee of $300,000 under the
Co-Marketing Agreement between the parties entered into on August 26, 1994.
During December 1995, the Co-Marketing Agreement was terminated by the Company
in accordance with the terms of the Agreement. The balance of unearned revenue
of approximately $191,000 was recorded as project revenue during the year ended
September 30, 1996.
In November 1994, the Company issued to Loats Associates, Inc. ("LAI") 50,000
shares of the Company's common stock which have certain piggyback registration
rights pursuant to the terms of a license agreement. The Company licensed a
portion of its imaging technology under a 20-year nonexclusive royalty-free
license agreement, as amended June 1994. This agreement provides for
compensation to be paid to LAI based upon units of LAI software sold. No
payments were made to the licensor in 1996 and 1995.
On December 14, 1995, the Company reserved 3,850,000 shares of the Company's
common stock for issuance upon conversion of the Preferred Stock and exercise of
the warrants issued to Investment Partners of America, L.P. ("IPA") (see below).
On December 21, 1995, IPA purchased (i) 416,667 shares of the Company's
preferred stock, (ii) one five-year warrant to purchase 416,667 shares of the
Company's common stock at an initial exercise price of $1.50 per share, and
(iii) one five-year warrant to purchase 416,667 shares of the Company's common
stock at an initial exercise price of $2.50 per share for an aggregate purchase
price of $500,000 pursuant to a purchase agreement dated December 8, 1995
("Purchase Agreement"). Costs associated with this transaction amounted to
approximately $67,000 and reduced paid-in capital at the transaction date. The
Purchase Agreement provided for a minimum investment of $750,000 and a maximum
investment of $1,500,000 from IPA.
F-11
<PAGE>
BIO-IMAGING TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
On June 26, 1996, the Company and IPA terminated the Purchase Agreement. In
conjunction with this termination, the Company issued to Investment Partners,
Inc., ("IPI") a related investment entity of IPA, one five-year warrant to
purchase 66,667 shares of the Company's common stock at an initial exercise
price of $1.05 per share, the fair market value of the Company's common stock at
date of issuance. Additionally, the Company entered into a two-year consulting
agreement with Investment Partners Capital & Management Corp., a related
investment entity of IPA, for a nonrefundable fee of $30,000 which has been
expensed by Company as of September 30, 1996.
The exercise price of all warrants issued to IPA and IPI is subject to
adjustment to protect against dilution in the event of certain transactions.
All warrants issued to IPA and IPI have certain piggyback registration rights.
The 8% convertible cumulative preferred stock is convertible into common stock
of the Company on a one-for-one share basis subject to adjustment to protect
against dilution in the event of certain transactions. Conversion may occur in
whole or in part during the first five-year period from the date of issuance at
the option of the holder. The Company may require a full conversion at any time
after five years from date of issuance. The preferred stock has certain
piggyback registration rights.
The Company is required to pay semiannual dividends on preferred stock at the
rate of $.10 per share per annum, and as when declared by the Board of
Directors. Dividends are payable in cash or in the Company's common stock. At
September 30, 1996, no dividends have been declared. At September 30, 1996,
preferred dividends in arrears aggregated approximately $31,000 or $.07 per
share.
The preferred stockholders are entitled to vote on all matters submitted to the
vote of the common stockholders and are included in determining quorums and
voting results.
7. COMMITMENTS:
The Company has entered into an operating lease for office facilities which
expires in November 1998. This lease may be terminated on November 30, 1997 at
the Company's request.
Future minimum aggregate annual rental payments on the noncancelable portion of
the lease are as follows:
Year ended September 30,
1997 $110,060
1998 18,878
- -----------------------------------------------------------------------------
$128,938
=============================================================================
Rent expense charged to operations for the years ended September 30, 1996 and
1995 amounted to approximately $139,000 and $140,000, respectively.
F-12
<PAGE>
BIO-IMAGING TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
On December 17, 1991, the Company adopted the Bio-Imaging Technologies, Inc.
Employees' Savings Plan (the "401(k) Plan"), a defined contribution plan with a
cash or deferred arrangement. Under the terms of the 401(k) Plan, eligible
employees may elect to reduce their annual compensation up to 15%, subject to an
annual limit prescribed by the Internal Revenue Service. In addition, the
Company may make discretionary matching contributions in cash or common stock.
The Company made matching stock contributions to the account of the 401(k) Plan
of 65,000 and 168,000 shares of its common stock during September 1996 and March
1995, respectively. The 65,000 shares were newly issued shares previously
reserved in November 1994 and the 168,000 shares were previously held by the
Company at no cost as treasury stock.
The Company's matching contributions to the 401(k) Plan for the year ended
September 30, 1996 and 1995 amounted to approximately $75,000 and $84,000,
respectively.
The Company has employment contracts with two of its officers. Amounts due
under these contracts are as follows:
Year ended September 30,
1997 $287,500
1998 58,333
- -------------------------------------------------------------------------
$345,833
=========================================================================
Additionally, the contract with one of the officers provides for the granting of
options to purchase 250,000 shares of the Company's common stock at fair market
value at the date of grant. Options to purchase 50,000 shares of the Company's
common stock vested immediately, with the balance vesting in equal amounts
annually for the next five years.
The Company incurred a charge of approximately $205,000 in severance costs
associated with the resignation of a former officer which was charged to other
costs for the year ended September 30, 1995.
8. MAJOR CUSTOMERS:
At September 30, 1996, four customers accounted for approximately 32%, 25%, 12%
and 11% of accounts receivable.
At September 30, 1995, four customers accounted for approximately 21%, 17%, 15%
and 12% of accounts receivable.
For the year ended September 30, 1996, revenue from three major customers
accounted for approximately 22%, 18% and 12% of project revenue.
For the year ended September 30, 1995, revenue from three major customers
accounted for approximately 16%, 13% and 10% of project revenue.
F-13
<PAGE>
BIO-IMAGING TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
9. INCOME TAXES:
The Company has net operating loss carryforwards of approximately $5,400,000
which expire in various years through 2011. The deferred income tax assets at
September 30, 1996 and 1995 represent the tax effect of the net operating loss
carryforwards. Due to the uncertainty regarding the ultimate amount of income
tax benefits to be derived from the net operating loss carryforwards, the
Company has recorded valuation allowances against the entire deferred tax asset.
F-14
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Description of Exhibit
No. ----------------------
- -------
<C> <S>
3.1 Restated Certificate of Incorporation of the Company. (Incorporated
by reference to Exhibit 3.1 to the Company's Registration Statement
on Form S-1 (File Number 33-47471) which became effective on June 18,
1992.) (Amendments incorporated by reference to Exhibit 3.1 to the
Company's Annual Report on Form 10-K for the year ended September 30,
1993 and to Exhibit 3.1 to the Company's Quarterly Report on Form 10-
QSB for the quarter ended March 31, 1995.)
3.2 By-Laws of the Company. (Incorporated by reference to Exhibit 3.2 to
the Company's Registration Statement on Form S-1 (File Number 33-
47471) which became effective on June 18, 1992.)
4.1 Specimen Common Stock Certificate. (Incorporated by reference to
Exhibit 4.1 to the Company's Registration Statement on Form S-1 (File
Number 33-47471) which became effective on June 18, 1992.)
4.2 Form of Class G Warrant Certificate. (Incorporated by reference to
Exhibit 4.2 to the Company's Registration Statement on Form S-1 (File
Number 33-47471) which became effective on June 18, 1992.)
4.3 Form of Underwriter's Unit Purchase Option. (Incorporated by
reference to Exhibit 4.3 to the Company's Registration Statement on
Form S-1 (File Number 33-47471) which became effective on June 18,
1992.)
4.4 Form of Warrant Agreement between the Company and North American
Transfer Company. (Incorporated by reference to Exhibit 4.4 to the
Company's Registration Statement on Form S-1 (File Number 33-47471)
which became effective on June 18, 1992.)
4.5 Form of Warrant Agreement between the Company and North American
Transfer Company. (Incorporated by reference to Exhibit 4.5 to the
Company's Registration Statement on Form S-1 (File Number 33-47471)
which became effective on June 18, 1992.)
4.6 Form of Class A Warrant Certificate. (Incorporated by reference to
Exhibit 4.6 to the Company's Registration Statement on Form S-1 (File
Number 33-47471) which became effective on June 18, 1992.)
4.7 Form of Class B Warrant Certificate. (Incorporated by reference to
Exhibit 4.7 to the Company's Registration Statement on Form S-1 (File
Number 33-47471) which became effective on June 18, 1992.)
4.8 Form of Class C Warrant Certificate. (Incorporated by reference to
Exhibit 4.8 to the Company's Registration Statement on Form S-1 (File
Number 33-47471) which became effective on June 18, 1992.)
</TABLE>
-26-
<PAGE>
<TABLE>
<CAPTION>
Exhibit Description of Exhibit
No. ----------------------
- -------
<C> <S>
4.9 Registration Agreement dated October 13, 1994 between the Company and
CPS. (Incorporated by reference to Exhibit 4.1 to the Company's
Current Report on Form 8-K dated October 13, 1994.)
4.10 Form of Warrant dated October 13, 1994 between the Company and CPS.
(Incorporated by reference to Exhibit 4.2 to the Company's Current
Report on Form 8-K dated October 13, 1994.)
4.11 Purchase Agreement for Units of Convertible Preferred Stock and
Warrants dated December 8, 1995 between Investment Partners of
America, L.P., as Purchaser, and the Company, including material
exhibits (including the Certificate of Designation for the
Convertible Preferred Stock). (Incorporated by reference to Exhibit
4.1 to the Company's Current Report on Form 8-K dated December 22,
1995.)
10.1 Lease between Mountain View Office Park and the Company.
(Incorporated by reference to (i) Exhibit 10.1 to the Company's
Registration Statement on Form S-1 (File Number 33-47471) which
became effective on June 18, 1992, (ii) Exhibit 10.1 to the Company's
Annual Report on Form 10-K for the fiscal year ended September 30,
1992, (iii) Exhibit 10.1 to the Company's Annual Report on Form 10-
KSB for the fiscal year ended September 30, 1994, and (iv) Exhibit
10.1 to the Company's Annual Report on Form 10-KSB for the fiscal
year ended September 30, 1995), as amended effective September 5,
1996 (such amendment filed herewith).
10.2* Form of Employment Agreement between the Company and James J.
Conklin. (Incorporated by reference to Exhibit 10.2 to the Company's
Registration Statement on Form S-1 (File Number 33-47471) which
became effective on June 18, 1992.) See Exhibits 10.14 and 10.23 for
Amendments to Employment Agreement.
10.3* Form of Employment Agreement between the Company and Richard S.
Serbin. (Incorporated by reference to Exhibit 10.3 to the Company's
Registration Statement on Form S-1 (File Number 33-47471) which
became effective on June 18, 1992.)
10.4 Financial Consulting Agreement between the Company and GKN Securities
Corp. (Incorporated by reference to Exhibit 10.4 to the Company's
Registration Statement on Form S-1 (File Number 33-47471) which
became effective on June 18, 1992.)
10.5 Merger and Acquisition Agreement between the Company and GKN
Securities Corp. (Incorporated by reference to Exhibit 10.5 to the
Company's Registration Statement on Form S-1 (File Number 33-47471)
which became effective on June 18, 1992.)
10.6* 1991 Stock Option Plan. (Incorporated by reference to Exhibit 10.6 to
the Company's Registration Statement on Form S-1 (File Number 33-
47471) which became effective on June 18, 1992.)
10.7* 401(k) Plan. (Incorporated by reference to Exhibit 10.7 to the
Company's Registration Statement on Form S-1 (File Number 33-47471)
which became
</TABLE>
-27-
<PAGE>
<TABLE>
<CAPTION>
Exhibit Description of Exhibit
No. ----------------------
- -------
<C> <S>
effective on June 18, 1992.)
10.8 Amended and Restated Exclusive License Agreement between the Company
and Loats Associates, Inc. (Incorporated by reference to Exhibit 10.8
to the Company's Registration Statement on Form S-1 (File Number 33-
47471) which became effective on June 18, 1992.) See Exhibit 10.15
for Amendment to License Agreement.
10.9 Form of Employee's Invention Assignment, Confidential Information and
Non-Competition Agreement. (Incorporated by reference to Exhibit 10.9
to the Company's Annual Report on Form 10-K for the fiscal year ended
September 30, 1992.)
10.10* Employment Agreement dated as of January 18, 1993 between the Company
and William J. Fitzpatrick. (Incorporated by reference to Exhibit
10.10 to the Company's Annual Report on Form 10-K for the fiscal year
ended September 30, 1993.)
10.11 Purchase Money Security Agreement dated April 26, 1993 between the
Company and Wasco Funding Corp., together with Collateral Pledge and
Guaranty. (Incorporated by reference to Exhibit 10.11 to the
Company's Annual Report on Form 10-K for the fiscal year ended
September 30, 1993.)
10.12* Employment Agreement dated as of January 25, 1994 by and between the
Company and Terrence P. Brennan. (Incorporated by reference to
Exhibit 10.1 to the Company's Quarterly Report on Form 10-QSB for the
quarter ended March 31, 1994.)
10.13* Change in Control Agreement dated as of February 14, 1994 by and
between the Company and Terrence P. Brennan. (Incorporated by
reference to Exhibit 10.2 to the Company's Quarterly Report on Form
10-QSB for the quarter ended March 31, 1994.)
10.14* Amendment dated January 26, 1994 to Employment Agreement by and
between the Company and James J. Conklin, M.D. (Incorporated by
reference to Exhibit 10.3 to the Company's Quarterly Report on Form
10-QSB for the quarter ended March 31, 1994.) (See Exhibit 10.23.)
</TABLE>
-28-
<PAGE>
<TABLE>
<CAPTION>
Exhibit Description of Exhibit
No. ----------------------
- -------
<C> <S>
10.15 Amendment dated June 21, 1994 to the Amended and Restated License
Agreement between LAI and the Company. (Incorporated by reference to
Exhibit 10.2 to the Company's Quarterly Report on Form 10-QSB for the
quarter ended June 30, 1994.)
10.16 Co-Marketing Agreement dated August 26, 1994 between the Company and
CPS. (Incorporated by reference to Exhibit 10.3 to the Company's
Current Report on Form 8-K dated August 26, 1994.)
10.17 Voting Agreement dated October 13, 1994 between the Company, Dr.
James J. Conklin and CPS. (Incorporated by reference to Exhibit 10.1
to the Company's Current Report on Form 8-K dated October 13, 1994.)
10.18 Stock Purchase Agreement dated October 13, 1994 between the Company
and CPS. (Incorporated by reference to Exhibit 10.2 to the Company's
Current Report on Form 8-K dated October 13, 1994.)
10.19* Separation Agreement dated November 7, 1994 between the Company and
William J. Fitzpatrick. (Incorporated by reference to Exhibit 10.19
to the Company's Annual Report on Form 10-KSB for the fiscal year
ended September 30, 1994.)
10.20* Separation Agreement dated November 8, 1994 between the Company and
Richard S. Serbin. (Incorporated by reference to Exhibit 10.20 to the
Company's Annual Report on Form 10-KSB for the fiscal year ended
September 30, 1994.)
10.21* Separation Agreement dated March 7, 1995 by and between the Company
and Terrence P. Brennan. (Incorporated by reference to Exhibit 10.1
to the Company's Quarterly report on Form 10-QSB for the quarter
ended March 31, 1995.)
10.22* Employment Agreement dated February 20, 1995 by and between the
Company and Rex D. Bright. (Incorporated by reference to Exhibit 10.2
to the Company's Quarterly Report on Form 10-QSB for the quarter
ended March 31, 1995.)
10.23* Amendment dated September 30, 1995 to Employment Agreement by and
between the Company and James J. Conklin, M.D. . (Incorporated by
reference to Exhibit 10.23 to the Company's Annual Report on Form 10-
KSB for the fiscal year ended September 30, 1995.)
10.24 Master Lease Agreement dated April 25, 1994 by and between the
Company and Wasco Funding Corp. and schedules thereto dated May 9,
1995 and August 31, 1995. (Incorporated by reference to Exhibit 10.24
to the Company's Annual Report on Form 10-KSB for the fiscal year
ended September 30, 1995.)
</TABLE>
-29-
<PAGE>
<TABLE>
<CAPTION>
Exhibit Description of Exhibit
No. ----------------------
- -------
<C> <S>
10.25* Employment Agreement including Invention Assignment and Confidential
Information Agreement dated January 30, 1996, by and between the
Company and Donald W. Lohin. (Incorporated by reference to Exhibit
10.1 to the Company's Quarterly Report on Form 10-QSB for the quarter
ended March 31, 1996.)
10.26 Consulting Agreement by and between the Company and Investment
Partners Capital & Management Corp. dated June 26, 1996.
(Incorporated by reference to Exhibit 10.1 to the Company's Quarterly
Report on Form 10-QSB for the quarter ended June 30, 1996.
22.1 List of Subsidiaries of Registrant. (Incorporated by reference to
Exhibit 22.1 to the Company's Registration Statement on Form S-1
(File Number 33-47471) which became effective on June 18, 1992.)
23.1 Consent of Goldstein Golub Kessler & Company, P.C.
27.1 Financial Data Schedule for the year ended September 30, 1996.
</TABLE>
- ---------------
* A management contract or compensatory plan or arrangement required to be
filed as an exhibit pursuant to 13(a) of Form 10-KSB.
(b) Financial Statement Schedules
None
-30-
<PAGE>
EXHIBIT 10.1
AMENDMENT TO LEASE
This Amendment to Lease dated the 5th day of September 1996, between
MOUNTAIN VIEW OFFICE PARK, a partnership with offices at 3131 Princeton Pike,
Lawrenceville, New Jersey 08648, (hereinafter referred to as "Landlord") and BIO
IMAGING TECHNOLOGIES, INC., with offices at 830 Bear Tavern Road, Trenton, New
Jersey 08628, hereinafter referred to as Tenant.
WITNESSETH:
That the Lease of Business Premises, dated October 11, 1991 and
subsequent Amendments dated July 2, 1992, August 31, 1992, December 16, 1993,
and August 3, 1995 between the parties hereto, consisting of 7,835 rentable
square feet is hereby amended as follows:
Now, Therefore, the parties hereto agree to amend the aforesaid Lease in
the following specific manner and on the following specific terms.
1. The term of this renewal shall be for a period of two (2) years
beginning December 1, 1996 and ending November 30, 1998, however, it is
understood and agreed this agreement may be cancelled on November 30, 1997,
by providing Landlord ninety (90) days written notice of cancellation.
2. The demised premises shall be increased to 9,061 rentable square
feet.
3. The base rent for this term shall be TWO HUNDRED TWENTY-SIX
THOUSAND, FIVE HUNDRED TWENTY-FIVE and 00/100 ($226,525.00) DOLLARS.
The said rent is to be payable monthly in advance on the first day of
each calendar month for the term hereof, in installments of NINE THOUSAND, FOUR
HUNDRED THIRTY-EIGHT and 54/100 ($9,438.54) DOLLARS, at the office of Mountain
View Office Park, 3131 Princeton Pike, Building 4, Suite 209, Lawrenceville, New
Jersey 08648 or as may be otherwise directed by the Landlord in writing.
4. The Twenty-Seventh and Twenty-Eighth paragraphs shall be changed
from 14% to 16.5%.
5. The parties agree that in all other respects, the terms of the
Lease dated October 11, 1991 and subsequent Amendments are hereby affirmed.
<PAGE>
In Witness Whereof, the said parties have hereunto set their hands and
seals the day and year first above written.
WITNESS: MOUNTAIN VIEW OFFICE PARK
/s/ Clark Sparano /s/ Joseph R. Jingoli
- ---------------------------- ------------------------------
Joseph R. Jingoli
General Partner and Landlord
WITNESS: BIO IMAGING TECHNOLOGIES, INC.
/s/ Robert J. Phillips /s/ Donald W. Lohin
- ---------------------------- ------------------------------
Vice President and Tenant
Chief Financial Officer
<PAGE>
EXHIBIT 23.1
Consent of Independent Auditors
We hereby consent to the incorporation by reference in the Registration
Statements of Bio-Imaging Technologies, Inc. (i) on Form S-8 (relating to the
Company's 1991 Stock Option Plan) filed on March 17, 1995 (Registration No.
33-90412), (ii) on Form S-8 (relating to the Company's 1991 Stock Option Plan)
filed on January 17, 1994 (Registration No. 33-74152), and (iii) on Form S-3
declared effective March 8, 1994 (Registration No. 33-75370), of our report
dated October 9, 1996 on our audits of the consolidated financial statements of
Bio-Imaging Technologies, Inc. and subsidiary as of September 30, 1996 and 1995
and for the years then ended, which reports are included in this Annual Report
on Form 10-KSB.
GOLDSTEIN GOLUB KESSLER & COMPANY, P.C.
New York, New York
December 18, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FOR THE FISCAL YEAR ENDED
SEPTEMBER 30, 1996 EXTRACTED FROM THE REGISTRANT'S ANNUAL REPORT ON FORM 10-KSB
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-KSB.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> SEP-30-1996
<CASH> 1,437,633
<SECURITIES> 0
<RECEIVABLES> 939,183
<ALLOWANCES> 60,000
<INVENTORY> 0
<CURRENT-ASSETS> 2,329,276
<PP&E> 2,873,643
<DEPRECIATION> 1,674,700
<TOTAL-ASSETS> 3,534,071
<CURRENT-LIABILITIES> 1,069,124
<BONDS> 99,878
0
104
<COMMON> 1,493
<OTHER-SE> 2,363,472
<TOTAL-LIABILITY-AND-EQUITY> 3,534,071
<SALES> 0
<TOTAL-REVENUES> 3,657,320
<CGS> 0
<TOTAL-COSTS> 1,284,180
<OTHER-EXPENSES> 2,015,834
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (24,818)
<INCOME-PRETAX> 382,124
<INCOME-TAX> 0
<INCOME-CONTINUING> 382,124
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 382,124
<EPS-PRIMARY> .06
<EPS-DILUTED> .06
</TABLE>
