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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
Commission file number 1-11182
BIO-IMAGING TECHNOLOGIES, INC.
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(Exact Name of Small Business Issuer 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, including Zip Code)
(609) 883-2000
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(Issuer's Telephone Number,
Including Area Code)
Check whether the Issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
Yes: X No:
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State the number of shares outstanding of each of the Issuer's classes
of common stock, as of March 31, 1997:
Class Number of Shares
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Common Stock, $.00025 par value 6,203,825
Transitional Small Business Disclosure Format (check one):
Yes: ____ No: X
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BIO-IMAGING TECHNOLOGIES, INC. AND SUBSIDIARIES
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TABLE OF CONTENTS
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PART I FINANCIAL INFORMATION
Item 1. Financial Statements..................................1
CONSOLIDATED BALANCE SHEETS
as of March 31, 1997 (unaudited)
and September 30, 1996........................................2
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Six Months Ended March 31, 1997 and 1996
(unaudited)...................................................3
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended March 31, 1997 and 1996
(unaudited)...................................................4
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended March 31, 1997 and 1996
(unaudited)...................................................5
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (unaudited)........................................6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.......................9
Liquidity and Capital Resources...............................9
Results of Operations.........................................9
PART II OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders........15
Item 5. Other Information..........................................18
Item 6. Exhibits and Reports on Form 8-K...........................19
SIGNATURES..............................................................20
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PART I
Item 1. Financial Statements.
Certain information and footnote disclosures required under generally
accepted accounting principles have been condensed or omitted from the following
consolidated financial statements pursuant to the rules and regulations of the
Securities and Exchange Commission, although Bio-Imaging Technologies, Inc. (the
"Issuer" or the "Company") believes that the disclosures are adequate to assure
that the information presented is not misleading in any material respect. It is
suggested that the following consolidated financial statements be read in
conjunction with the year-end consolidated financial statements and notes
thereto included in the Issuer's Annual Report on Form 10-KSB for the fiscal
year ended September 30, 1996.
The results of operations for the interim periods presented herein are
not necessarily indicative of the results to be expected for the entire fiscal
year.
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BIO-IMAGING TECHNOLOGIES, INC. AND SUBSIDIARIES
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CONSOLIDATED BALANCE SHEETS
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March 31, September 30,
1997 1996
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(unaudited)
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ASSETS
Current assets:
Cash and cash equivalents .................... $ 1,476,930 $ 1,377,633
Restricted cash .............................. 60,000 60,000
Accounts receivable, net ..................... 1,248,322 879,183
Prepaid expenses and other current assets .... 30,302 12,460
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Total current assets ....................... 2,815,554 2,329,276
Property and equipment, net ..................... 1,425,219 1,198,943
Other assets .................................... 15,464 5,852
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Total assets ............................... $ 4,256,237 $ 3,534,071
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LIABILITIES AND STOCKHOLDERS' EQUITY
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Current liabilities:
Deferred revenue ............................. $ 533,381 $ 635,562
Accounts payable ............................. 303,201 74,180
Accrued expenses and other current liabilities 304,650 268,000
Current maturities of long-term debt ......... 96,052 91,382
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Total current liabilities .................. 1,237,284 1,069,124
Long-term debt .................................. 50,654 99,878
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Total liabilities .......................... 1,287,938 1,169,002
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Stockholders' equity:
Preferred stock - $.00025 par value,
authorized 3,000,000 shares, 416,667 shares
issued and outstanding ($500,000
liquidation preference) ..................... 104 104
Common stock - $.00025 par value;
authorized 18,000,000 shares, 6,203,825 and
5,968,550 shares issued and outstanding at
March 31, 1997 and September 30, 1996,
respectively ................................ 1,554 1,493
Additional paid-in capital ................... 8,014,838 7,739,688
Accumulated deficit .......................... (5,048,197) (5,376,216)
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Stockholders' equity ....................... 2,968,299 2,365,069
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Total liabilities and stockholders' equity . $ 4,256,237 $ 3,534,071
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</TABLE>
See Notes to Condensed Consolidated Financial Statements
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BIO-IMAGING TECHNOLOGIES, INC. AND SUBSIDIARIES
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CONSOLIDATED STATEMENTS OF OPERATIONS
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(unaudited)
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For the Six Months Ended
March 31,
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1997 1996
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Project revenue...................................................... $ 2,626,401 $ 1,649,214
Project costs........................................................ 954,987 566,875
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Gross profit......................................................... 1,671,414 1,082,339
General and administrative expenses.................................. 1,227,267 873,338
Research and development expenses.................................... 94,183 75,731
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Income from operations............................................... 349,964 133,270
Interest income - net................................................ 19,277 6,151
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Net income........................................................... $ 369,241 $ 139,421
Dividends on preferred stock......................................... 20,000 --
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Net income applicable to common stock................................ $ 349,241 $ 139,421
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Net income per common share.......................................... $ 0.05 $ 0.02
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Weighted average number of common and
common equivalent shares outstanding................................. 7,449,344 5,889,350
================ ==============
</TABLE>
See Notes to Condensed Consolidated Financial Statements
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BIO-IMAGING TECHNOLOGIES, INC. AND SUBSIDIARIES
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CONSOLIDATED STATEMENTS OF OPERATIONS
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(unaudited)
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For the Three Months Ended
March 31,
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1997 1996
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Project revenue...................................................... $ 1,423,851 $ 796,728
Project costs........................................................ 504,580 317,376
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Gross profit......................................................... 919,271 479,352
General and administrative expenses.................................. 672,059 453,570
Research and development expenses.................................... 54,415 21,086
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Income from operations............................................... 192,797 4,696
Interest income - net................................................ 12,469 6,023
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Net income........................................................... $ 205,266 $ 10,719
Dividends on preferred stock......................................... 10,000 --
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Net income applicable to common stock................................ $ 195,266 $ 10,719
================ ==============
Net income per common share.......................................... $ 0.03 $ 0.00
================ ==============
Weighted average number of common and
common equivalent shares outstanding................................. 7,663,884 5,889,350
================ ==============
</TABLE>
See Notes to Condensed Consolidated Financial Statements
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BIO-IMAGING TECHNOLOGIES, INC. AND SUBSIDIARIES
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CONSOLIDATED STATEMENTS OF CASH FLOWS
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(unaudited)
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For the Six Months Ended
March 31,
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1997 1996
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Cash flows from operating activities:
Net income........................................................ $ 369,241 $ 139,421
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization................................... 318,008 247,646
Provision for losses on accounts receivable..................... -- 35,000
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable.................... (369,139) 13,799
Increase in prepaid expenses and other current assets......... (17,842) (33,839)
(Increase) decrease in other assets........................... (9,612) 1,153
Decrease in deferred revenue.................................. (102,181) (156,534)
Increase (decrease) in accounts payable....................... 229,021 (8,721)
Increase in accrued expenses and other
current liabilities.......................................... 36,650 7,262
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Net cash provided by operating activities..................... 454,146 245,187
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Cash flows from investing activities:
Purchases of property and equipment............................... (544,284) (177,213)
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Net cash used in investing activities......................... (544,284) (177,213)
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Cash flows from financing activities:
Net repayment of loan payable..................................... -- (76,800)
Payments under equipment lease obligations........................ (44,554) (56,934)
Net proceeds from private placement of
preferred stock.................................................. -- 433,333
Dividends paid on preferred stock................................. (41,222) --
Proceeds from exercise of stock options........................... 275,211 --
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Net cash provided by financing activities..................... 189,435 299,599
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Net increase in cash and cash equivalents............................ 99,297 367,573
Cash and cash equivalents at beginning of period..................... 1,377,633 704,684
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Cash and cash equivalents at end of period........................... $ 1,476,930 $ 1,072,257
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Supplemental disclosures of cash flow information:
Cash paid during the period for interest.......................... $ 8,549 $ 13,331
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</TABLE>
See Notes to Condensed Consolidated Financial Statements
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BIO-IMAGING TECHNOLOGIES, INC. AND SUBSIDIARIES
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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(unaudited)
Note 1 - Basis of Presentation:
The financial statements included herein have been prepared by the
Company, without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations. These consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes thereto
included in the Company's Annual Report on Form 10-KSB for the fiscal year ended
September 30, 1996.
In the opinion of the Company's management the accompanying unaudited
consolidated financial statements contain all adjustments, consisting solely of
those which are of a normal recurring nature, necessary to present fairly its
financial position as of March 31, 1997 and the results of its operations and
its cash flows for the three-month and six-month periods ended March 31, 1997
and 1996.
Net income per common share is calculated based upon the weighted
average number of shares of Common Stock and dilutive common equivalent shares
outstanding during the period.
Interim results are not necessarily indicative of results for the full
fiscal year.
Note 2 - Stockholders' Equity:
On December 8, 1995, the Company and Investment Partners of America,
L.P. ("IPA") executed a purchase agreement (the "Purchase Agreement") pursuant
to which IPA agreed to purchase and the Company agreed to issue and sell a
minimum of 625,000 and a maximum of 1,250,000 units (each, a "Unit") at a
purchase price of $1.20 per Unit, each Unit consisting of (i) one share of
Series A Convertible Voting Preferred Stock, $.00025 par value per share (the
"Preferred Stock"), convertible into Common Stock of the Company on a one share
for one share basis; (ii) one five-year Class A Warrant (the "Class A Warrants")
to purchase one share of the Company's Common Stock at an initial exercise price
of $1.50 per share; and (iii) one five-year Class B Warrant (the "Class B
Warrants") to purchase one share of the Company's Common Stock at an initial
exercise price of $2.50 per share. Each of the Class A Warrants and Class B
Warrants underlying the Units is exercisable for a period of five years from the
date of issuance. The Preferred Stock provides for (i) voting rights on an as-
converted to Common Stock basis, with standard protective provisions; (ii) a
liquidation preference of $1.20 per share; (iii) standard
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BIO-IMAGING TECHNOLOGIES, INC. AND SUBSIDIARIES
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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(unaudited)
anti-dilution protection and price protection provisions; (iv) cumulative
dividends of $0.096 per share per annum, payable out of funds legally available
for the payment of dividends and only upon declaration of dividends by the Board
of Directors of the Company; (v) registration rights with respect to the shares
of Common Stock issuable upon conversion of the Preferred Stock; and (vi)
certain maintenance rights.
A closing was held with IPA on December 21, 1995, at which time 416,667
Units were sold, resulting in net proceeds to the Company of $433,333, after
aggregate closing costs of $66,667.
The Company also agreed pursuant to the Purchase Agreement to pay to
Investment Partners, Inc. ("IPI") in consideration for its services as agent for
the investors, upon the closing of at least the minimum number of Units, five-
year Class C Warrants (the "Class C Warrants") to purchase 100,000 shares of the
Company's Common Stock at an initial exercise price of $1.00 per share. Because
the number of Units sold at the initial closing held December 21, 1995 was below
the minimum, the Class C Warrants were not issued at such time. The Company
subsequently determined on June 26, 1996 that there would be no further
issuances of Units under the Purchase Agreement and terminated such Purchase
Agreement. In connection therewith, the Company issued to IPA Class C Warrants
to purchase 66,667 shares of the Company's Common Stock at an initial exercise
price of $1.05 per share and entered into a two-year consulting agreement (the
"Consulting Agreement") with Investment Partners Capital & Management Corp., a
related investment entity of IPA, pursuant to which such entity agreed to render
to the Company product/market development and financial consulting services.
Upon execution of the Consulting Agreement, the Company was required to pay to
such entity a non-refundable consulting fee of $30,000 and IPI's legal fees of
$8,333. Such Consulting Agreement is terminable at any time and upon notice by
the Company.
Each of the Class A Warrants, Class B Warrants and Class C Warrants
(collectively, the "Warrants") contain standard anti-dilution provisions. The
Company granted registration rights, subject to certain conditions, with respect
to each of the Warrants and the shares of Common Stock underlying such
securities. Giving effect to certain price protection provisions of each of the
Warrants, the current exercise price is $0.63 per share of Common Stock.
The Company is required to pay semiannual dividends on the Preferred
Stock at the rate of $0.096 per share per annum, as and when declared by the
Board of Directors. Dividends are payable in cash or in the Company's Common
Stock. The Board of Directors, in November 1996, declared and paid a cash
dividend in the aggregate amount of $21,222.24 to the holders of Preferred
Stock, representing the accrued cumulative dividends for the period from
December
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BIO-IMAGING TECHNOLOGIES, INC. AND SUBSIDIARIES
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
(unaudited)
21, 1995 through and including June 30, 1996. In January 1997, the Board of
Directors declared and paid a cash dividend in the aggregate amount of
$20,000.02 to the holders of Preferred Stock, representing the accrued
cumulative dividends for the period from July 1, 1996 through and including
December 31, 1996.
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 and which are
not paid as dividends to holders of Preferred Stock will be retained to finance
the growth of the Company.
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Liquidity and Capital Resources
At March 31, 1997, the Company had cash and cash equivalents of
approximately $1,537,000, including $60,000 of cash restricted pursuant to the
terms of collateral pledge agreements described below.
Working capital at March 31, 1997 was approximately $1,578,000.
The Company had, as of March 31, 1997, invested approximately $3,418,000
in capital and leasehold improvements, of which approximately $565,000 had been
funded through capital leases. Pursuant to collateral pledge agreements, the
Company's obligations under such capital leases are collateralized by a
certificate of deposit in the face amount of $60,000. The Company currently
anticipates that capital expenditures for the balance of fiscal 1997 will
approximate $500,000. These expenditures represent additional upgrades in the
Company's networking, data storage and core laboratory capabilities along with
capital requirements for its European operations. Such expenditures may be
financed through capital leases.
In November 1996, the Board of Directors declared and paid a cash
dividend in the aggregate amount of $21,222.24 to the holders of Preferred
Stock, representing the accrued cumulative dividends for the period from
December 21, 1995 through and including June 30, 1996. In January 1997, the
Board of Directors declared and paid a cash dividend in the aggregate amount of
$20,000.02 to the holders of Preferred Stock, representing the accrued
cumulative dividends for the period from July 1, 1996 through and including
December 31, 1996. For future dividend obligations, see "Note 2 - Notes to
Condensed Consolidated Financial Statements."
The Company anticipates that its cash and cash equivalents as of March
31, 1997, together with cash flow expected to be generated from operations, will
be sufficient to fund working capital needs and capital requirements for at
least the next twelve months.
Results of Operations
The Company was profitable for the quarter ended March 31, 1997
primarily as a result of an 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 United States Food
and Drug Administration is gaining experience with electronic submissions and is
continuing to develop guidelines for computerized submissions of data, including
medical images. Furthermore, the increased use of digital medical images in
clinical trials, especially for important drug classes such as neurologic and
oncologic therapeutics and diagnostic imaging agents, should generate large
amounts of image data that will require processing, analysis, data
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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.
In early October 1996, the Company established two new business units,
the Marketing Information Services Division (the "MISD") and the Data Management
and Information Systems Division (the "DMISD"). The MISD focuses on development
and sales of medical imaging-oriented, laptop computer-based sales and marketing
support presentations and databases. The DMISD, currently under development,
will focus on providing clinical database management services and products.
In addition, in late February 1997, the Company opened its European
office and core laboratory in Leiden, The Netherlands. The Company will manage
its services for European-based clinical trials from such laboratory. The Leiden
core laboratory is linked via the Company's intranet to the Company's New Jersey
laboratory so that workload may be shared to optimize capacity utilization in
either office. The information services provided by the European operations
encompass the full array of medical imaging core laboratory and digital
management services currently being provided by the Company's laboratory at its
headquarters.
Certain statements included in this Form 10-QSB, including without
limitation, statements regarding the anticipated growth in the markets for the
Company's services, the continuation of the trends favoring outsourcing of
biomedical information technology services by pharmaceutical and biotechnology
companies and trends favoring the use of such information technologies by the
United States Food and Drug Administration, the anticipated growth of the
Company's business, the timing of the development and implementation of the
Company's new service offerings and the utilization of such services by the
Company's clients, and trends in future operating performance, are forward-
looking statements within the meaning of Section 21E of the Securities Exchange
Act of 1934, as amended. The factors discussed herein and expressed from time to
time in the Company's filings with the Securities and Exchange Commission could
cause actual results and developments to be materially different from those
expressed in or implied by such statements.
Six Months Ended March 31, 1997 and 1996
----------------------------------------
Revenue for the six months ended March 31, 1997 and 1996 was
approximately $2,626,000 and $1,649,000, respectively, an increase of 59.2%, or
$977,000. Project revenue in the six months ended March 31, 1997 and 1996
consisted primarily of medical image processing and analysis and digital image
management services, including computer-assisted masked readings and the data-
basing of digital medical images and related clinical data. Revenue in the six
months ended March 31, 1996 also included a one-time recognition by the Company
of $192,000 in revenue resulting from the termination by the Company of a co-
marketing agreement with an affiliate. The increase in project revenue during
the six months ended March 31, 1997 was primarily due to an increase in the
scope of projects for which the Company was
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engaged to perform work. The increase also included revenue generated by the
Company's European clinical services laboratory. Project revenue for the six
months ended March 31, 1997 was derived from 18 clients and such revenue in the
six months ended March 31, 1996 was also derived from 18 clients. The Company
generated $825,000, or 31.4% of project revenue for the six months ended March
31, 1997 from one European-based client.
The Company's total operating expenses were approximately $2,276,000 in
the six months ended March 31, 1997 and $1,516,000 in the corresponding fiscal
1996 period, an increase of 50.1%, or $760,000. Such increase was due primarily
to an increase in salaries and fringe benefits associated with an increase in
personnel to accommodate growth in project related services of the Company
coupled with the increase in operating costs related to the MISD, the DMISD and
the Company's European clinical services laboratory. Total operating expenses in
the six months ended March 31, 1997 and the six months ended March 31, 1996
consisted primarily of general and administrative expenses, project costs and
research and development expenses.
General and administrative expenses in each of the six months ended
March 31, 1997 and the six months ended March 31, 1996 consisted primarily of
professional salaries and benefits, depreciation and amortization, professional
and consulting services, sales and marketing, office rent and corporate
insurance. General and administrative expenses were approximately $1,227,000 in
the six months ended March 31, 1997 and approximately $873,000 in the six months
ended March 31, 1996. The increase during the six months ended March 31, 1997 of
approximately 40.5%, or $354,000, from the corresponding fiscal 1996 period,
resulted primarily from expenses incurred in support of the operational growth
of the Company and in connection with the establishment and initial operations
of the MISD, the DMISD and the Company's European clinical services laboratory.
Project costs were approximately $955,000 during the six months ended
March 31, 1997 and were approximately $567,000 for the corresponding period in
fiscal 1996. Project costs were comprised of professional salaries and benefits
and allocated overhead. The increase during the six months ended March 31, 1997
of approximately 68.4%, or $388,000, from the corresponding fiscal 1996 period
was due primarily to the increase in resources applied by the Company to perform
the increased scope of projects for which the Company was engaged to perform
work, including projects generated by the Company's European clinical services
laboratory.
The gross margin percentage during the six months ended March 31, 1997
decreased to 63.6% from 65.6% for the corresponding 1996 period. Such decrease
is attributable primarily to the recognition of revenue in the six months ended
March 31, 1996 which resulted from the termination by the Company of the co-
marketing agreement referred to above. Without such revenue, the gross margin
percentage was 63.6% and 61.1% in the six months ended March 31, 1997 and the
six months ended March 31, 1996, respectively. Such increase is attributable
primarily to an increase in efficiency related to the performance of project-
related activities.
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Research and development expenses during the six months ended March 31,
1997 were approximately $94,000. Research and development expenses during the
corresponding period in fiscal 1996 were approximately $76,000. In each period,
research and development expenses consisted of professional salaries and
benefits and overhead charged to research and development projects. The increase
during the six months ended March 31, 1997 of approximately $18,000, or 23.7%,
from the corresponding fiscal 1996 period resulted primarily from an increase in
resources dedicated to research and development projects, including the MISD
business unit. Research and development expenses in the fiscal 1997 and 1996
periods focused on the design and coding of image display and image analysis
software required to increase the efficiency of the Company's imaging laboratory
operations. In addition, in the fiscal 1997 period, research and development
expenses also included developmental work on the product line for the MISD
business unit. There were no capitalized computer software development costs in
the six months ended March 31, 1997 and $60,000 of computer software development
costs were capitalized in the six months ended March 31, 1996. Such costs were
capitalized in accordance with FASB Statement No. 86 after technological
feasibility had been demonstrated. Such capitalized amounts are amortized
commencing with product introduction on a straight-line basis utilizing the
estimated economic useful life of the product. The Company may capitalize
certain development costs in the future, as appropriate.
Net interest income of approximately $19,000 in the six months ended
March 31, 1997 resulted from interest earned on cash balances, partially offset
by interest expense incurred in connection with certain equipment lease
obligations. The Company earned greater interest income in the six months ended
March 31, 1997 than in the corresponding fiscal 1996 period primarily due to
higher cash balances.
The Company's net income for the six months ended March 31, 1997 was
approximately $369,000, while the Company had net income of approximately
$139,000 in the corresponding period of fiscal 1996. The Company's net income
for the six months ended March 31, 1996 was attributable to the recognition of
revenue resulting from the termination by the Company of the co-marketing
agreement referred to above, coupled with cost controls implemented by the
Company. Net income for the six months ended March 31, 1997 resulted
primarily from increased project-related revenue in the Company's clinical
trials service business, including revenue generated from its European clinical
services laboratory and from continued efforts to improve operating
efficiencies.
Three Months Ended March 31, 1997 and 1996
------------------------------------------
Project revenue for the quarters ended March 31, 1997 ("Second Quarter
of Fiscal 1997") and 1996 ("Second Quarter of Fiscal 1996") was approximately
$1,424,000 and $797,000, respectively, an increase of 78.7%, or $627,000.
Project revenue in both periods consisted primarily of medical image processing
and analysis and digital image management services, including computer-assisted
masked readings and the data-basing of digital medical images and
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related clinical data. The increase in project revenue during the Second
Quarter of Fiscal 1997 was primarily due to an increase in the scope of projects
for which the Company was engaged to perform work. The increase also included
revenue generated by the Company's European clinical services laboratory.
Project revenue in the Second Quarter of Fiscal 1997 was derived from 16 clients
and such revenue in the Second Quarter of Fiscal 1996 was derived from 14
clients. The Company generated $825,000, or 57.9% of its project revenue for the
Second Quarter of Fiscal 1997 from one European-based client.
The Company's total operating expenses were approximately $1,231,000 in
the Second Quarter of Fiscal 1997 and $792,000 in the corresponding quarter in
fiscal 1996, an increase of 55.4%, or $439,000. Such increase was due primarily
to an increase in salaries and fringe benefits associated with an increase in
personnel to accommodate the operational growth of the Company coupled with the
increase in costs related to the MISD, the DMISD and the Company's European
clinical services laboratory. Total operating expenses in the Second Quarter of
Fiscal 1997 and the Second Quarter of Fiscal 1996 consisted primarily of general
and administrative expenses, project costs and research and development
expenses.
General and administrative expenses in each of the Second Quarter of
Fiscal 1997 and the Second Quarter of Fiscal 1996 consisted primarily of
professional salaries and benefits, depreciation and amortization, professional
and consulting services, sales and marketing, office rent and corporate
insurance. General and administrative expenses were approximately $672,000 in
the Second Quarter of Fiscal 1997 and approximately $454,000 in the Second
Quarter of Fiscal 1996. The increase during the Second Quarter of Fiscal 1997 of
approximately 48.0%, or $218,000, from the corresponding fiscal 1996 quarter
resulted primarily from expenses incurred in support of the operational growth
of the Company and in connection with the establishment and initial operations
of the MISD, the DMISD and the Company's European clinical services laboratory.
Project costs of approximately $505,000 during the Second Quarter of
Fiscal 1997 and, as in the same period in fiscal 1996, were comprised of
professional salaries and benefits and allocated overhead. Project costs for the
corresponding quarter in fiscal 1996 were approximately $317,000. The increase
during the Second Quarter of Fiscal 1997 of approximately 59.3%, or $188,000,
from the corresponding fiscal 1996 quarter was due primarily to the increase in
resources applied by the Company to perform the increased scope of projects for
which the Company was engaged to perform work, including projects generated by
the Company's European clinical services laboratory.
The gross margin percentage during the Second Quarter of Fiscal 1997
increased to 64.6% from 60.2% for the corresponding period in 1996. Such
increase is attributable primarily to an increase in efficiency related to the
performance of project-related activities.
-13-
<PAGE>
Research and development expenses during the Second Quarter of Fiscal
1997 were approximately $54,000. Research and development expenses during the
corresponding quarter in fiscal 1996 were approximately $21,000. In each period,
research and development expenses consisted of professional salaries and
benefits and overhead charged to research and development projects. The increase
during the Second Quarter of Fiscal 1997 of approximately $33,000, or 157.1%,
from the corresponding fiscal 1996 period resulted primarily from an increase in
resources dedicated to research and development projects, including the MISD
business unit. Research and development projects during the quarters ended March
31, 1997 and 1996 focused on the design and coding of image display and image
analysis software. In addition, research and development projects during the
quarter ended March 31, 1997 also included developmental work on the product
line for the MISD business unit. There were no capitalized computer software
development costs in the Second Quarter of Fiscal 1997 and $60,000 of computer
software development costs were capitalized in the Second Quarter of Fiscal
1996. Such costs were capitalized in accordance with FASB Statement No. 86 after
technological feasibility had been demonstrated. Such capitalized amounts are
amortized commencing with product introduction on a straight-line basis
utilizing the estimated economic useful life of the product. The Company may
capitalize certain development costs in the future, as appropriate.
Net interest income in the Second Quarter of Fiscal 1997 resulted from
interest earned on cash balances, partially offset by interest expense incurred
in connection with certain equipment lease obligations. The Company earned
greater interest income in the Second Quarter of Fiscal 1997 than in the
corresponding fiscal 1996 quarter primarily due to higher cash balances.
The Company's net income for the Second Quarter of Fiscal 1997 was
approximately $205,000, while the Company had net income of approximately
$11,000 in the corresponding quarter of fiscal 1996. The Company's net income
for the Second Quarter of Fiscal 1996 was attributable primarily to an increase
in project related services performed by the Company, coupled with cost controls
implemented by the Company. Net income for the Second Quarter of Fiscal 1997
resulted primarily from increased project revenue from the Company's clinical
trials service business, and particularly from revenue generated from its
European clinical services laboratory and from continued efforts to improve
operating efficiencies.
-14-
<PAGE>
PART II
Item 4. Submission of Matters to a Vote of Security Holders.
(a) The Annual Meeting of Stockholders of the Company (the "Meeting")
was held on January 31, 1997.
(b) The following is a list of all of the Directors of the Company who
were elected at and whose term of office continued after the Meeting:
James J. Conklin, M.D.
Donald W. Lohin
Jeffrey H. Berg, Ph.D.
Charles C. Harwood, Jr.
Jeffrey S. Hurwitz, Esq.
Harris Koffer, Pharm.D.
James A. Taylor, Ph.D.
(c)(i) There were 5,562,416 shares present at the Meeting in person or
by proxy out of a total number of 6,018,550 shares of Common Stock and 416,667
shares of Preferred Stock present at the Meeting in person or by proxy out of a
total number of 416,667 shares of Preferred Stock, in each case, issued and
outstanding and entitled to vote at the Meeting. The holders of shares of Common
Stock and Preferred Stock voted together as a single class on all matters
presented at the Meeting. The results of the vote taken at the Meeting with
respect to each such nominee for Director were as follows:
I. Common Stock
<TABLE>
<CAPTION>
Nominee For Withheld
------------- --------- --------
<S> <C> <C>
James J. Conklin, M.D. 5,507,420 54,996
Donald W. Lohin 5,461,416 101,000
Jeffrey H. Berg, Ph.D. 5,542,816 19,600
Charles C. Harwood, Jr. 5,538,816 23,600
Jeffrey S. Hurwitz, Esq. 5,540,316 22,100
Harris Koffer, Pharm.D. 5,539,316 23,100
James A. Taylor, Ph.D. 5,542,816 19,600
</TABLE>
-15-
<PAGE>
II. Preferred Stock
<TABLE>
<CAPTION>
Nominee For Withheld
------------ -------- ----------
<S> <C> <C>
James J. Conklin, M.D. 416,667 --
Donald W. Lohin -- 416,667
Jeffrey H. Berg, Ph.D. 416,667 --
Charles C. Harwood, Jr. 416,667 --
Jeffrey S. Hurwitz, Esq. 416,667 --
Harris Koffer, Pharm.D. 416,667 --
James A. Taylor, Ph.D. 416,667 --
</TABLE>
(ii) A vote was taken on the proposal to amend the Company's 1991
Stock Option Plan, as amended, to increase the number of shares reserved for
issuance upon the exercise of options granted under such plan from 1,800,000 to
2,400,000 shares. The results of the vote taken at the meeting with respect to
such amendment were as follows:
I. Common Stock
<TABLE>
<CAPTION>
For Against Abstain Broker Non-Votes
--- ------- ------- ----------------
<S> <C> <C> <C>
3,420,595 209,476 38,800 1,893,545
</TABLE>
II. Preferred Stock
<TABLE>
<CAPTION>
For Against Abstain
--- ------- -------
<S> <C> <C>
-- 416,667 --
</TABLE>
-16-
<PAGE>
(iii) A vote was taken on the proposal to ratify the appointment of
Goldstein Golub Kessler & Company, P.C. as the independent auditors of the
Company for the fiscal year ending September 30, 1997. The results of the vote
taken at the meeting with respect to such ratification were as follows:
I. Common Stock
<TABLE>
<CAPTION>
For Against Abstain
--- ------- -------
<S> <C> <C>
5,445,516 22,100 94,800
</TABLE>
II. Preferred Stock
<TABLE>
<CAPTION>
For Against Abstain
--- ------- -------
<S> <C> <C>
-- -- 416,667
</TABLE>
-17-
<PAGE>
Item 5. Other Information.
On February 25, 1997, the Company announced the establishment of its
European headquarters, Bio-Imaging Technologies B.V., a Netherlands corporation,
and core laboratory to support European-based clinical trials. The European
headquarters are based in Leiden, The Netherlands. The Company also announced
that it had secured its first European customer and had begun generating
revenues. European-based clinical trials will be managed from the Leiden
laboratory. Such office has intranet linkage to the Company's New Jersey
laboratory so that workload may be shared to optimize capacity utilization in
either laboratory. The information services provided by the Leiden laboratory
encompass the full array of medical imaging core laboratory and digital data
management services currently being provided by the New Jersey laboratory.
Richard S. Mink resigned as Senior Vice President and General Manager of
the Marketing Information Services Division (the "MISD") in April 1997. In
addition, in April 1997, the Company appointed Anthony P. Nowicki, Senior Vice
President and General Manager of the Data Management and Information Systems
Division, to manage the MISD.
On April 21, 1997, Andrew Reiter was elected to Vice President and
Managing Director of the Company's European operations.
-18-
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
27 Financial Data Schedule.
(b) Reports on Form 8-K.
None.
-19-
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BIO-IMAGING TECHNOLOGIES, INC.
DATE: May 13, 1997 By: /s/ Donald W. Lohin
-------------------------------
Donald W. Lohin, President
and Chief Executive Officer
(Principal Executive Officer)
DATE: May 13, 1997 By: /s/ Robert J. Phillips
-------------------------------
Robert J. Phillips,
Vice President and Chief
Financial Officer
(Principal Financial and
Accounting Officer)
-20-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> MAR-31-1997
<CASH> 1,536,930
<SECURITIES> 0
<RECEIVABLES> 1,308,322
<ALLOWANCES> 60,000
<INVENTORY> 0
<CURRENT-ASSETS> 2,815,554
<PP&E> 3,417,927
<DEPRECIATION> 1,992,708
<TOTAL-ASSETS> 4,256,237
<CURRENT-LIABILITIES> 1,237,284
<BONDS> 50,654
0
104
<COMMON> 1,554
<OTHER-SE> 2,966,641
<TOTAL-LIABILITY-AND-EQUITY> 4,256,237
<SALES> 0
<TOTAL-REVENUES> 2,626,401
<CGS> 0
<TOTAL-COSTS> 954,987
<OTHER-EXPENSES> 1,321,450
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (19,277)
<INCOME-PRETAX> 369,241
<INCOME-TAX> 0
<INCOME-CONTINUING> 369,241
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 369,241
<EPS-PRIMARY> 0.05
<EPS-DILUTED> 0.05
</TABLE>
