CONFORMED COPY
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 June 30, 1997
Commission File No. 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
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(Address of Principal Executive Offices) (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 June 30, 1997:
Class Number of Shares
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Common Stock, $.00025 par value 6,843,825
Transitional Small Business Disclosure Format (check one):
Yes: No: X
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BIO-IMAGING TECHNOLOGIES, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
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Page
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PART I FINANCIAL INFORMATION
Item 1. Financial Statements...........................................1
CONSOLIDATED BALANCE SHEETS
as of June 30, 1997 (unaudited)
and September 30, 1996 ........................................2
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Nine Months Ended
June 30, 1997 and 1996
(unaudited) ...................................................3
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended
June 30, 1997 and 1996
(unaudited) ...................................................4
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended
June 30, 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 .................8
Liquidity and Capital Resources ...............................8
Results of Operations .........................................8
PART II OTHER INFORMATION
Item 5. Other Information ............................................15
Item 6. Exhibits and Reports on Form 8-K .............................16
SIGNATURES ..................................................................17
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PART I
FINANCIAL INFORMATION
Item 1. Financial Statements.
Certain information and footnote disclosures required under generally
accepted accounting principles have been condensed or omitted from the following
consolidated financial statements pursuant to the rules and regulations of the
Securities and Exchange Commission, although Bio-Imaging Technologies, Inc. (the
"Issuer" or the "Company") believes that the disclosures are adequate to assure
that the information presented is not misleading in any material respect. It is
suggested that the following consolidated financial statements be read in
conjunction with the year-end consolidated financial statements and notes
thereto included in the Issuer's Annual Report on Form 10-KSB for the year ended
September 30, 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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<CAPTION>
June 30, September 30,
1997 1996
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(unaudited)
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ASSETS
Current assets:
Cash and cash equivalents ...................... $ 2,158,091 $ 1,377,633
Restricted cash ................................ 60,000 60,000
Accounts receivable, net ....................... 768,574 879,183
Prepaid expenses and other current assets ...... 110,833 12,460
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Total current assets ......................... 3,097,498 2,329,276
Property and equipment, net ....................... 1,556,143 1,198,943
Other assets ...................................... 48,488 5,852
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Total assets ................................. $ 4,702,129 $ 3,534,071
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Deferred revenue ............................... $ 436,500 $ 635,562
Accounts payable ............................... 160,286 74,180
Accrued expenses and other current liabilities . 280,877 268,000
Current maturities of long-term debt ........... 95,081 91,382
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Total current liabilities .................... 972,744 1,069,124
Long-term debt .................................... 28,502 99,878
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Total liabilities ............................ 1,001,246 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; 6,843,825
shares issued and outstanding at June 30, 1997
and 5,968,550 issued and outstanding at
September 30, 1996 ............................ 1,711 1,493
Additional paid-in capital ..................... 8,622,630 7,739,688
Accumulated deficit ............................ (4,923,562) (5,376,216)
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Stockholders' equity ......................... 3,700,883 2,365,069
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Total liabilities and stockholders' equity ... $ 4,702,129 $ 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 Nine Months Ended
June 30,
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1997 1996
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Project revenue .................................. $3,935,789 $2,552,462
Project costs .................................... 1,427,218 897,351
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Gross profit ..................................... 2,508,571 1,655,111
General and administrative expenses .............. 1,870,912 1,372,898
Research and development expenses ................ 170,695 89,169
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Income from operations ........................... 466,964 193,044
Interest income - net ............................ 26,912 14,496
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Net income ....................................... 493,876 207,540
Dividends on preferred stock ..................... 30,000 --
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Net income applicable to common stock ............ $ 463,876 207,540
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Net income per common share ...................... $ 0.06 $ 0.03
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Weighted average number of common and common
equivalent shares outstanding..................... 7,433,680 6,051,580
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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)
<TABLE>
<CAPTION>
For the Three Months Ended
June 30,
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1997 1996
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Project revenue................................. $1,309,388 $ 903,248
Project costs................................... 472,231 330,476
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Gross profit.................................... 837,157 572,772
General and administrative expenses............. 643,645 499,560
Research and development expenses............... 76,512 13,438
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Income from operations.......................... 117,000 59,774
Interest income - net........................... 7,635 8,345
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Net income...................................... 124,635 68,119
Dividends on preferred stock.................... 10,000 --
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Net income applicable to common stock........... $ 114,635 $ 68,119
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Net income per common share..................... $ 0.02 $ 0.01
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Weighted average number of common and common
equivalent shares outstanding................... 7,451,151 6,377,822
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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 CASH FLOWS
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(unaudited)
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For the Nine Months Ended
June 30,
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1997 1996
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Cash flows from operating activities:
Net income ........................................ $ 493,876 $ 207,540
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization .................. 508,717 389,155
Provision for losses on accounts receivable .... -- 35,000
Changes in operating assets and liabilities:
Decrease in accounts receivable ............... 110,609 12,252
Increase in prepaid expenses and other
current assets ............................... (98,373) (21,545)
(Increase) decrease in other assets ........... (42,636) 1,153
Decrease in deferred revenue .................. (199,062) (137,964)
Increase (decrease) in accounts payable ....... 86,106 (60,025)
Increase in accrued expenses and other
current liabilities .......................... 12,877 133,662
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Net cash provided by operating activities ...... 872,114 559,228
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Cash flows from investing activities:
Purchases of property and equipment ............... (865,917) (307,689)
Decrease in restricted cash ....................... -- 60,000
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Net cash used in investing activities .......... (865,917) (247,689)
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Cash flows from financing activities:
Net repayment of loan payable ..................... -- (89,600)
Payments under equipment lease obligations ........ (67,677) (76,330)
Dividends paid on preferred stock ................. (41,222) --
Net proceeds from exercise of options to purchase
common stock ..................................... 283,160 14,450
Net proceeds from private placement of
preferred stock .................................. -- 433,333
Net proceeds from exercise of warrants to
purchase common stock ............................ 600,000 --
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Net cash provided by financing activities ..... 774,261 281,853
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Net increase in cash and cash equivalents .......... 780,458 593,392
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 ......... $2,158,091 $1,298,076
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Supplemental disclosures of cash flow information:
Cash paid during the period for interest ........ $ 3,428 $ 18,603
========== ==========
Equipment purchased under capital
lease obligations .. ........................... $ -- $ 59,381
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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 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 June 30, 1997, the results of its operations for the
three-month and nine-month periods ended June 30, 1997 and 1996 and its cash
flows for the nine-month periods ended June 30, 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:
The Company is required to pay semiannual dividends on its outstanding
shares of Series A Convertible Voting Preferred Stock, $.00025 par value (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 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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BIO-IMAGING TECHNOLOGIES, INC. AND SUBSIDIARIES
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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(unaudited)
On April 18, 1997, the Company registered an aggregate of 1,600,000 shares
of Common Stock, $.00025 par value, consisting of 699,999 shares issuable upon
exercise of the underwriter's purchase options ("UPOs") held by GKN Securities
Corp. ("GKN"), its affiliates and transferees, and an aggregate of 900,001
shares issuable upon the exercise of Class A, B and C Warrants, each of which
are held by Investment Partners of America, L.P. The Company will not receive
any of the proceeds from the sales, if any, of such registered shares of Common
Stock.
On June 18, 1997, GKN and certain of its designees exercised UPOs to
purchase 630,000 shares of Common Stock at an exercise price of $1.00 per share,
after giving effect to certain anti-dilution provisions of the UPOs. The Company
received aggregate gross proceeds of $630,000 as a result of such exercise of
the UPOs.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Liquidity and Capital Resources
At June 30, 1997, the Company had cash and cash equivalents of
approximately $2,218,000, including $60,000 of cash restricted pursuant to the
terms of collateral pledge agreements described below. On June 18, 1997, GKN and
certain of its designees exercised UPOs to purchase 630,000 shares of Common
Stock at an exercise price of $1.00 per share, after giving effect to certain
anti-dilution provisions of the UPOs. The Company received aggregate gross
proceeds of $630,000 as a result of such exercise of the UPOs.
Working capital at June 30, 1997 was approximately $2,125,000.
The Company had, as of June 30, 1997, invested approximately $3,740,000 in
capital equipment 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 $200,000. These expenditures represent additional
upgrades in the Company's networking, data storage and core laboratory
capabilities along with similar capital requirements for its European
operations.
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, 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 at June 30,
1997, together with cash flow expected to be generated from operations, will be
sufficient to fund working capital needs and capital equipment requirements for
at least the next twelve months.
Results of Operations
The Company was profitable for the quarter ended June 30, 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 image
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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. In addition, the Company
continues to experience an increase in competition from its traditional
competitors, academic research centers and commercial competitors. This
competition has resulted in additional pressure being placed on price, service,
quality, professional reputation and technology. As part of its overall
strategy, the Company continues to monitor competitive developments and evaluate
appropriate defensive mechanisms.
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 presentation software and databases. The DMISD, currently under
development, will focus on providing clinical database management services and
products. As of June 30, 1997, the operations of the MISD and DMISD had not
realized any revenue.
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 anticipated information services to be provided by the
European operations will encompass the full array of medical imaging core
laboratory and digital management services currently being provided by the
Company's laboratory at its headquarters. Presently, the Company is generating
revenue from one European-based client. The contract with the client is
terminable at anytime upon written notice.
Certain statements included in the 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.
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Nine Months Ended June 30, 1997 and 1996
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Total revenue for the nine months ended June 30, 1997 and 1996 was
approximately $3,936,000 and $2,552,000, respectively, an increase of $1,384,000
or 54.2%. Project revenue in the nine months ended June 30, 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
nine months ended June 30, 1996 also included a one-time recognition by the
Company of $192,000 in revenue and earnings resulting from the termination by
the Company of a co-marketing agreement with Covance, Inc. The increase in
project revenue during the nine months ended June 30, 1997 was primarily due to
revenue generated by the Company's one European-based client and several new
projects that the Company was engaged to perform work. Project revenue for the
nine months ended June 30, 1997 was derived from 21 clients and such revenue in
the nine months ended June 30, 1996 was derived from 20 clients. The Company
generated $1,304,000, or 33.1% of project revenue, for the nine months ended
June 30, 1997 from one European-based client.
The Company's total operating expenses were approximately $3,469,000 in the
nine months ended June 30, 1997 and $2,359,000 in the corresponding period in
fiscal 1996, an increase of $1,110,000 or 47.1%. 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 an increase in operating costs related to the MISD, the DMISD and
the Company's European clinical services laboratory. Total operating expenses in
the nine months ended June 30, 1997 and the nine months ended June 30, 1996
consisted primarily of general and administrative expenses, project costs and
research and development expenses.
General and administrative expenses in each of the nine months ended June
30, 1997 and the nine months ended June 30, 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 $1,871,000 in
the nine months ended June 30, 1997 and approximately $1,373,000 in the nine
months ended June 30, 1996. The increase during the nine months ended June 30,
1997 of approximately $498,000 or 36.3%, 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 $1,427,000 during the nine months ended
June 30, 1997 and were approximately $897,000 for the corresponding period in
fiscal 1996. Project costs were comprised of professional salaries and benefits
and allocated overhead. The increase during the nine months ended June 30, 1997
of approximately $530,000 or 59.1%, from the corresponding fiscal 1996 period
was due primarily to the increase in resources applied by the Company to
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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 nine months ended June 30, 1997
decreased to 63.7% from 64.9% for the corresponding 1996 period. Such decrease
is attributable primarily to the recognition of revenue in the nine months ended
June 30, 1996 which resulted from the Company's termination of the co-marketing
agreement referred to above. Without such revenue and gross profit, the gross
margin percentage was 63.7% and 62.0% in the nine months ended June 30, 1997 and
the nine months ended June 30, 1996, respectively. Such increase is attributable
primarily to an increase in efficiency related to the performance of
project-related activities and the increased mix of information management
services which yielded higher margins partially offset by reduced pricing for
certain core laboratory services.
Research and development expenses during the nine months ended June 30,
1997 were approximately $171,000. Research and development expenses during the
corresponding periods in fiscal 1996 were approximately $89,000. 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 nine months ended June 30, 1997 of approximately $82,000, or 92.1%,
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 expenses in 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 nine months ended June 30, 1997 and $85,000 of computer software development
costs were capitalized in the nine months ended June 30, 1996. Such costs were
capitalized in accordance with FASB Statement No. 86 after technological
feasibility had been demonstrated. Such capitalization 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 $27,000 in the nine months ended June
30, 1997 resulted from interest earned on cash balances offset in part by
interest expense incurred in conjunction with certain equipment lease
obligations. The Company earned greater interest income in the nine months ended
June 30, 1997 than in the corresponding fiscal 1996 period due to higher cash
balances.
The Company's net income for the nine months ended June 30, 1997 was
approximately $494,000, while the Company had net income of approximately
$208,000 in the corresponding period in fiscal 1996. The Company's net income
for the nine months ended June 30, 1997 resulted primarily from increased
project related revenue in the Company's clinical trials services business,
including revenue generated from its European clinical services laboratory and
from continued efforts to improve operating efficiencies. Net income for the
first nine months of
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fiscal 1996 resulted primarily from an increase in project-related services
performed by the Company and the recognition of revenue by the Company resulting
from the termination by the Company of the co-marketing agreement referred to
above, coupled with a reduction in operating expenses by the Company as a result
of cost controls implemented during fiscal 1995.
Three Months Ended June 30, 1997 and 1996
-----------------------------------------
Project revenue for the quarters ended June 30, 1997 ("Third Quarter of
Fiscal 1997") and 1996 ("Third Quarter of Fiscal 1996") was approximately
$1,309,000 and $903,000 respectively, an increase of $406,000, or 45.0%. 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 related
clinical data. The increase in project revenue during the Third Quarter of
Fiscal 1997 was primarily due to revenue generated by the Company's one
European-based client and several new projects that the Company was engaged to
perform work. Project revenue in the Third Quarter of Fiscal 1997 was derived
from 16 clients and such revenue in the Third Quarter of Fiscal 1996 was derived
from 12 clients. The Company generated $479,000, or 36.6%, of its project
revenue for the Third Quarter of Fiscal 1997 from one European-based client.
The Company's total operating expenses were approximately $1,192,000 in the
Third Quarter of Fiscal 1997 and $843,000 in the corresponding quarter of 1996,
an increase of $349,000, or 41.4%. 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
increased cost related to the MISD and the Company's European clinical services
laboratory. Expenses related to the DMISD declined during the three months ended
June 30, 1997 as the Company shifted resources to the MISD. The DMISD continues
to be in the planning stages of operations. Total operating expenses in the
Third Quarter of Fiscal 1997 and the Third 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 Third Quarter of Fiscal
1997 and the Third 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 $644,000 in the Third
Quarter of Fiscal 1997 and approximately $500,000 in the Third Quarter of Fiscal
1996. The increase during the Third Quarter of Fiscal 1997 of approximately
$144,000, or 28.8%, 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 and the Company's European clinical services laboratory.
Project costs were approximately $472,000 during the Third 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 $330,000. The increase
in project costs during the Third Quarter of Fiscal 1997
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of approximately $142,000, or 43.0%, 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 Third Quarter of Fiscal 1997
increased to 63.9% from 63.4% for the corresponding 1996 period. Such increase
is attributable primarily to an increase in efficiency related to the
performance of project-related activities and the increased mix of information
management services which yielded higher margins partially offset by reduced
pricing for certain core laboratory services.
Research and development expenses during the Third Quarter of Fiscal 1997
were approximately $77,000. Research and development expenses during the
corresponding quarter in fiscal 1996 were approximately $13,000. In each case,
research and development expenses consisted of professional salaries and
benefits and overhead charged to research and development projects. The increase
during the Third Quarter of Fiscal 1997 of approximately $64,000, or 492.3%,
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 June
30, 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 June 30, 1997 also included developmental work on the product line
for the MISD business unit. There were no capitalized computer software
development costs in the Third Quarter of Fiscal 1997 and $25,000 of computer
software development costs were capitalized in the Third 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 of approximately $8,000 in the Third 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 less interest income in the Third Quarter of
Fiscal 1997 than in the corresponding fiscal 1996 quarter due to lower cash
balances resulting from the timing of a receipt of payment from a major customer
which was collected by the Company in the latter part of June 1997.
The Company's net income for the Third Quarter of Fiscal 1997 was
approximately $125,000, while the Company had net income of approximately
$68,000 in the corresponding quarter of fiscal 1996. The Company's net income
for the Third Quarter of Fiscal 1997 resulted primarily from increased project
revenue from the Company's clinical trials service business, including revenue
generated from its European clinical services laboratory and from continued
efforts to improve operating efficiencies. Net income for the Third Quarter of
Fiscal 1996 was attributable primarily to an increase in project-related
services performed by the Company,
- 13 -
<PAGE>
coupled with a reduction in operating expenses resulting from cost controls
implemented by the Company during Fiscal 1995.
- 14 -
<PAGE>
PART II
OTHER INFORMATION
Item 5. Other Information.
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.
On June 18, 1997, GKN Securities Corp. ("GKN") and certain of its designees
(the "Exercising Securityholders") exercised outstanding underwriter's purchase
options (the "UPOs") to purchase 630,000 shares (the "Shares") of Common Stock
of Bio-Imaging Technologies, Inc. The following table sets forth the number of
Shares underlying the Exercising Securityholders' UPOs:
<TABLE>
<CAPTION>
Name of Number of Shares
Exercising Securityholder Underlying the UPOs
------------------------- -------------------
<S> <C>
GKN Securities Corp. .......... 206,500
David Nussbaum ................ 140,000
Roger Gladstone ............... 140,000
Robert Gladstone .............. 140,000
Andrea Goldman ................ 3,500
</TABLE>
Pursuant to instructions from such Exercising Securityholders, all of the
Shares were issued to GKN. Giving effect to certain anti-dilution provisions of
the UPOs, the Exercising Securityholders exercised each UPO at the current
exercise price of $1.00 per share, representing aggregate gross proceeds to the
Company from such exercise of $630,000. The UPOs were granted in June 1992 in
connection with the Company's public offering of 1,000,000 units at $5.00 per
unit, each unit consisting of one share of Common Stock and one Class G Warrant
to purchase one share of Common Stock. GKN acted as the underwriter of such
public offering. The Class G Warrants issuable upon the exercise of the UPOs
expired unexercised in June 1996.
- 15 -
<PAGE>
The Company will not receive any of the proceeds from any sales of the
Shares by GKN, if any. The Company has registered the Shares on a Registration
Statement on Form S-3 (the "Form S-3") pursuant to the Securities Act of 1933,
as amended, in accordance with its obligations under a registration rights
agreement with the Exercising Securityholders. The Form S-3 was filed with the
Securities and Exchange Commission on April 18, 1997.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
Exhibit No. Description of Exhibit
----------- ----------------------
10.1 Bracco S.p.A. Contract
27 Financial Data Schedule
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter for which
this report on Form 10-QSB is filed. The Company did, however, file a
report on Form 8-K on July 3, 1997. Such report relates to the
exercise by GKN Securities Corp. and certain of its designees of
options to purchase shares of Common Stock of the Company.
- 16 -
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934,
the registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BIO-IMAGING TECHNOLOGIES, INC.
DATE: July 24, 1997 By: /s/ Donald W. Lohin
-------------------
Donald W. Lohin, Chairman, President
and Chief Executive Officer
(Principal Executive Officer)
DATE: July 24, 1997 By: /s/ Robert J. Phillips
----------------------
Robert J. Phillips,
Vice President and Chief
Financial Officer
(Principal Financial and
Accounting Officer)
- 17 -
MASTER CLINICAL SERVICES AGREEMENT
THIS AGREEMENT, effective as of January 1, 1997
by and between
BRACCO S.p.A., a company incorporated in Italy, having its legal seat and
principal place of business at Via Egidio Folli, 50 - 20134 Milano, Italy
(hereinafter referred to as "BRACCO"),
and
BIO-IMAGING TECHNOLOGIES, INC., a Delaware corporation of the United States of
America, having its legal seat and principal place of business at 830 Bear
Tavern Road, West Trenton, New Jersey (hereinafter referred to as
"BIO-IMAGING").
WITNESSETH
WHEREAS, BRACCO desires to execute the present Agreement with BIO-IMAGING, that
hereby declares to have the full right to execute it, and BIO-IMAGING desires to
sign said Agreement with BRACCO for the purposes of providing BRACCO with
dedicated BIO-IMAGING personnel (hereinafter referred to as Personnel) and
resources (hereinafter referred to as Resources) in order to assist BRACCO with
clinical research activities (hereinafter referred to as Clinical Programs),
described in the Exhibits attached hereto and in any Exhibits attached as
addenda to this Agreement, in Europe;
In consideration of the above premises, which form an integrate part of the
present AGREEMENT, the parties hereby agree as follows:
1. DEFINITIONS
Wherever used in the present Agreement, the following terms shall have the
following meanings:
<PAGE>
Agreement: Agreement has the meaning specified in the preliminary
statements.
BRACCO: BRACCO has the meaning specified in the preliminary statements.
BIO-IMAGING TECHNOLOGIES, INC.: BIO-IMAGING has the meaning specified in
the preliminary statements.
Effective Date: Effective Date is January 1, 1997, irrespective of the date
of the signature of this Agreement.
Claim: claim has the meaning specified in Paragraph 11.
Indemnified Party: Indemnified Party has the meaning specified in Paragraph
11.
Loss: Loss has the meaning specified in Paragraph 11.
Drug: Drug means a new or existing drug under development by BRACCO and is
the subject of a Clinical Program.
Personnel: shall mean the persons employed by BIO-IMAGING and devoted
entirely or almost entirely as the case may be, to BRACCO Clinical Programs.
They may be used on a full-time or part-time basis, in accordance with the
Exhibit attached hereto and any Exhibits attached as addenda. They include
personnel from BIO-IMAGING departments of core laboratory services, image data
management, software development, business development and contract management,
and may include employees from other offices. BIO-IMAGING, under its control and
responsibility and maintaining any contractual liability towards BRACCO, may
have part of the activities herein specified executed by its fully owned
subsidiary, Bio-Imaging Technologies B.V., of Leiden, the Netherlands. A full
time employee is defined as one working 1600 hours in a twelve month period. All
other employees' time is a portion of a full time employee pro-rated in
accordance with the Exhibits to this Agreement.
- 2 -
<PAGE>
Resources: shall mean the BIO-IMAGING overhead which is normally not
directly attributable to particular projects. They include office space,
information services, telephone, travel, management time, finance, legal and
administration services, etc., in order to optimize and facilitate the working
on the Clinical Programs. All the relevant costs for the Resources are included
in the fixed costs to be borne for the dedicated Personnel, as described above,
and as shown in the Exhibit here attached and which will be shown in any
Exhibits attached as Addenda.
Clinical Programs: shall mean the programs for the development of a
clinical drug at any time from Phase 1 to Phase 4 of its development, for the
particular compound for which the relevant regulatory approval must be obtained
in the designated country of Europe. This term shall refer to all the programs
for which the tasks are described in the attached Exhibit, in future Exhibits
attached as Addenda, as well as to future tasks, that may be contracted by the
parties from time to time.
Interface Persons: shall mean the persons appointed by BRACCO and
BIO-IMAGING that shall have the responsibility to act as liaison between BRACCO
and BIO-IMAGING on a regular basis, in order to facilitate adherence to the
monthly priorities, relating to the clinical programs set by BRACCO and agreed
to by BIO-IMAGING in writing and to jointly solve all the problems related to
the tasks to be performed by BIO-IMAGING for the Clinical Programs. The names of
the Interface Persons are shown in the Exhibit attached hereto and will be shown
in future Exhibits attached as Addenda.
Joint Management: shall mean the BRACCO and BIO-IMAGING joint management of
the Clinical Programs through the Interface Persons. BRACCO will define and
definitely take reasonable decisions on (i) the priorities within and across the
Clinical Programs on a monthly basis, and (ii) after discussion with
BIO-IMAGING, on the relevant monthly objectives, the tasks and the allocation of
Personnel and Resources.
Milestones: shall mean the key events in the schedule of the Clinical
Programs. These Milestones are preliminary indicated in Exhibits and can be
modified by BRACCO, after discussion with BIO-IMAGING, every three ( 3 ) months.
Training: shall mean the educational programs which will be provided by
BIO-IMAGING to the Personnel in connection with the Clinical Programs. Training
if required, will be provided at BIO-IMAGING 's expense.
- 3 -
<PAGE>
Confidential Information: shall include all information relating to plans,
products, intellectual property, analyses, projects, processes, marketing
research or development activities, and all technical or scientific know-how of
BIO-IMAGING or BRACCO disclosed by one party ( the "Disclosing Party") to the
other (the "Receiving Party") either orally, in diagram, written or other
recorded form.
2. OBJECT AND OBLIGATION
2.1 BIO-IMAGING, subject to the approval for the relevant Ethical Committee and
of any other competent regulatory authority, and/or of any other necessary
authorization, agree to diligently perform all the tasks described with full
particulars in the attached Exhibit(s) which forms an integral part of the
present Agreement, at the terms and conditions herein set forth.
2.2 BIO-IMAGING shall also devote the necessary Personnel and Resources to
perform for BRACCO the services herein described, and the core laboratory and
data management services described within the attached Exhibit and any future
Exhibits attached as Addenda. It is hereby exclusively agreed that the number of
people that will form the Personnel is detailed in the attached Exhibit and will
be detailed in any future Exhibits attached as Addenda.
The tasks provided for in the present Agreement shall be carried out by Joint
Management. It is understood that such Joint Management shall not include, in
any case, any kind of interference by BRACCO with the management of the
Personnel or of other BIO-IMAGING personnel, since they are fully under the
whole responsibility of BIO-IMAGING.
BRACCO is willing to support Bio-Imaging, if so reasonably requested, in the
performance of the tasks, specified within the present Agreement, in accordance
with the Milestones.
The parties shall measure every three (3) months the achievement of progress on
the Clinical Programs, which will be monitored with reference to the Milestones.
In case said achievement of progress in the Clinical Programs does not match the
Milestones, BIO-IMAGING undertake to take all the necessary steps, in order to
solve the situation, in the shortest possible time, unless otherwise agreed in
writing with BRACCO.
- 4 -
<PAGE>
If no satisfactory remedy is put in practice by BIO-IMAGING, BRACCO shall have
either the right to ask for and obtain the performance from BIO-IMAGING , in a
determined period of time, free of charge, or to terminate immediately the
present Agreement for BIO-IMAGING's fault, unless BIO-IMAGING has proven that
the delay has been directly caused by evident fault or gross negligence of
BRACCO.
2.3 BIO-IMAGING undertake to perform its obligation under this Agreement in
strict accordance with EEC Directives 75/318 and 91/507 (Good Clinical Practice)
and with the provisions of the CPMP Note for Guidance on Good Clinical Practice
for Trials on Medicinal Products in the European Community (111/3976/88-EN),
with the FDA regulations (Regulations in Title 21, Code of Federal Regulations,
Parts 50, 56, 312, 314 and 320) and guidelines (Information and Points to
Consider Sheets; Bioresearch Monitoring; Compliance Program Guidance Manual), as
well as with any other law or regulation applicable in each European country, in
which the Clinical Programs will be conducted.
3. CONFIDENTIAL INFORMATION
3.1 BIO-IMAGING considers all information transmitted in conjunction with the
implementation of the Clinical Programs, whether prior to or subsequent to the
execution of this Agreement, to be proprietary and confidential information from
BRACCO. This confidential information will be held in confidence by BIO-IMAGING,
not disclosed to third parties and not used outside the purpose of the present
Agreement. It shall be understood, however, that confidential information shall
not include the following disclosed information - and the relating obligations
of confidentiality, non-use and non-disclosure shall not apply to - which:
a) is already known to the Receiving Party prior to the date of this Agreement
as documented in the Receiving Party's written records prior to such date; or
b) is already publicly available or which becomes publicly available other than
through a breach of this Agreement by the Receiving Party; or
c) is rightfully received by the Receiving Party from a third party without
similar restriction from such party, where the disclosure by such third party
does not constitute a violation of an obligation by such third party to the
Disclosing Party; or
- 5 -
<PAGE>
d) is required to be disclosed by law, rule, regulation, order, decision, decree
or subpoena or other order by a Court or administrative Authority.
3.2 The Receiving Party will use the confidential information received by the
Disclosing Party only for the purpose of fulfilling its obligations under this
Agreement. Upon the completion or earlier termination of this Agreement, the
Receiving Party will promptly return to the Disclosing Party all written
confidential information, as well as all written material which incorporates any
confidential information.
3.3 The Receiving Party will not disclose, without the prior written consent of
the Disclosing Party, such confidential information to any third party other
than employees, like (i) consultants involved in the Training, who need to know
such information, and (ii) others designated in writing by the Receiving Party,
who prior to disclosure shall have agreed to observe the confidentiality of this
information in the same manner and to the same extent as provided in this
Agreement for the Disclosing Party and its employees.
3.4 The Receiving Party will not use any such confidential information for its
own benefit or for the benefit of any third party and will not give to third
party materials which incorporate any confidential information, except as
otherwise herein above provided. All obligations of confidentiality, non-use and
non-disclosure set forth in this Agreement will survive, without limitation, for
fifteen (15) years after the expiration or earlier termination, for any reason,
of this Agreement.
4. PERSONNEL
4.1 BIO-IMAGING, as above specified, will have a dedicated team of Personnel and
specific Resources, in order to diligently fulfill all its obligations set forth
in the present Agreement. The full time Personnel shall work exclusively for
BRACCO for an agreed number of hours, as specified in the Definitions above. The
choice of individuals shall be made by BIO-IMAGING in consultation with BRACCO,
which shall have a right of veto on each single appointment.
4.2 It is hereby agreed that BIO-IMAGING will organize, at its own expenses, the
Training on Clinical Programs for the people that, during the life of the
present Agreement, shall be part of the Personnel, in order to ensure efficiency
and proper utilization of the Personnel itself. It is
- 6 -
<PAGE>
understood that the Personnel shall report exclusively to BIO-IMAGING,
BIO-IMAGING shall have, always and in any case, the responsibility of the
Personnel.
4.3 BIO-IMAGING shall bear full and exclusive liability also for the payment of
any kind of compensation, salary or other fee or indemnity of whatsoever nature
to the Personnel, as well as any and all kind of contributions, taxes or other,
now or hereafter imposed by any governmental authority, with respect to or
measured by wages, salaries, or other compensation to be paid by BIO-IMAGING to
the Personnel. BIO-IMAGING further agrees to indemnify and save BRACCO and its
affiliates harmless against any and all such liability or claims in connection
with BIO-IMAGING's exclusive liability stated in this Paragraph 4.3.
4.4 BIO-IMAGING shall also be responsible for any injuries (including death)
occurred to the Personnel and other BIO-IMAGING's agents, employees,
representatives or invitees and in general to any and all other persons acting
under or by reason of the present Agreement, unless this is due to willful
misconduct or gross negligence of BRACCO in providing the information regarding
the known hazards.
4.5 It is hereby agreed that if the number of the persons being part of the
Personnel, during the validity of this Agreement, should be too great or too
small, with respect to the Clinical Programs to be performed by BIO-IMAGING, the
parties hereto shall agree upon the exact number of persons to be dedicated to
the Personnel and BIO-IMAGING shall immediately give prompt execution to said
decision.
4.6 BIO-IMAGING agrees to inform BRACCO in writing, thirty (30) days in advance,
if possible and, anyway, as soon as possible, in any case of intended changes in
the Personnel, due to whatsoever reason. BIO-IMAGING hereby ensures that the
substitutes will be educated by the Training on Clinical Programs prior to
joining the Personnel and prior to performing any tasks related to the Clinical
Programs.
4.7 BRACCO hereby agrees not to hire the Personnel, and in general the parties
hereby agree not to hire the personnel of the other party, without a prior
discussion and agreement between them, and, in any case, fully respecting all
the applicable laws and regulations then in force in the field of labor. Any
infringement of this provision made by one of the parties will entitle the other
party to terminate the present Agreement in accordance with Article 7
hereinbelow.
- 7 -
<PAGE>
5. CO-OPERATION BETWEEN THE PARTIES
5.1 The parties will discuss in good faith any terms and conditions of new
Clinical Programs that may be assigned to BIO-IMAGING by BRACCO in the future,
to ensure that the Personnel can be properly technically and adequately staffed
and educated with the Training, as well as to ensure that BIO-IMAGING will
dedicate proper Resources to the new Clinical Programs. BRACCO, in disclosing
new compounds and their development plan to BIO-IMAGING, agrees to perform the
Joint Management also for the possible and future new Clinical Programs, in
order to ensure the fastest and most efficient manner for the European
development for the compound.
5.2 The Parties agree to invite each other to seminars and training workshops on
topics of interest to the Parties, so to enhance the Joint Management between
them. Such seminars and training workshops will be free of charge. The Parties
will keep each other constantly informed about the training opportunities. Each
Party shall bear its own out of pocket costs, relating to the mentioned
workshops.
6. CONSIDERATION
6.1 The consideration for the diligent performance of the obligations undertaken
by BIO-IMAGING is specified in the attached Exhibit, and will be specified in
any future Exhibits attached as Addenda, by means of a cost estimate which
specifies all the costs to be borne by BRACCO under this Agreement and contains
also the anticipated costs for providing a dedicated team of Personnel, together
with Resources. It is hereby agreed that all the costs related to the present
Agreement shall be only fixed costs that have been proposed by BIO-IMAGING, and
accepted by BRACCO, in good knowledge of the services required hereunder by
BRACCO.
6.2 BIO-IMAGING will submit invoices to BRACCO at the end of each calendar month
during the term of the Agreement. Payments will be made by BRACCO accordingly
and will be made sixty (60) days after receipt by BRACCO of the relevant
invoices from BIO-IMAGING. The invoice will include the BIO-IMAGING fees
calculated in accordance with the attached Exhibit and any future Exhibits
attached as Addenda and out-of-pocket expenses. Possible revisions of said costs
may be made after a specific agreement of the parties hereto, and may only take
place annually, as of the Effective Date of the present Agreement.
- 8 -
<PAGE>
6.3 It is expressly understood and agreed between the parties that all direct
BIO-IMAGING out-of-pocket expenses incurred on behalf of BRACCO such as, but not
limited to, travel and shipping expenses, shall be detailed to BRACCO by means
of proper documentation and will involve no administration fee. The bills for
such out-of-pocket expenses will be summarized and attached to each invoice.
BRACCO shall have the right to audit out-of-pocket expenses on a quarterly basis
after advance written notice as of the effective date.
6.4 BRACCO agrees also to make advance payments not higher than the fixed
BIO-IMAGING cost estimates of a three-(3) month period as well as estimated
out-of-pocket costs of a three-(3) month period. Said advance payments shall be
discharged on the relevant costs to be paid by BRACCO and shall be made within
thirty (30) days of signing this Agreement.
6.5 All payments to be made by BRACCO shall not bear interest if paid in due
time. Interest may be charged at the rate of four percent (4%) over the
Interbank Rate of the major bank in the country relating to the currency used
for the relevant payments.
6.6 It is hereby specified that the costs have been estimated on the basis of
the assumptions described in the Exhibit attached hereto, and will be described
in any future Exhibits attached as Addenda. Should an increase in the Personnel
become necessary, the parties will negotiate in good faith such price or amount
of adjustments. Any additional Personnel requested by BRACCO and not specified
in the Exhibit, requires the prior written approval of BIO-IMAGING. The parties
agree that the costs will then be subject to adjustment.
6.7 BRACCO shall inform immediately in writing BIO-IMAGING in case BRACCO needs
a reduction in the Personnel, and BIO-IMAGING shall agree accordingly. However,
it is hereby agreed that the consequent decrease of the relevant costs, due to
the reduction in the Personnel shall take place only three (3) months after the
date of receipt by BIO-IMAGING of the notice hereabove mentioned.
7. TERMINATION
This Agreement may be terminated by BRACCO at any time and without cause upon a
written notice to BIO-IMAGING. In such event, BIO-IMAGING shall be entitled to
receive payments for all the work and services
- 9 -
<PAGE>
performed under this Agreement until the above written notice is received by
BIO-IMAGING. BIO-IMAGING shall use its best efforts to conclude the Clinical
Programs as quickly as possible and in accordance with all the laws and
regulations mentioned in Para. 2.3. It is understood that the out-of-pocket
expenses and BIO-IMAGING costs, due and outstanding at the time of termination,
shall be entirely paid by BRACCO.
8. DEFAULT
BIO-IMAGING shall be in default under the terms and conditions of the Agreement
if BIO-IMAGING negligently fails to perform the Clinical Programs accordingly
with the provisions herein specified. Notwithstanding the foregoing, if any
default occurs, BRACCO shall promptly notify BIO-IMAGING in writing of any such
default. BIO-IMAGING shall have a period of thirty (30) days of the date of
receipt of such notice, to cure such default. If BIO-IMAGING shall fail to cure
it, then this Agreement shall terminate at the end of said thirty (30) day
period.
9. FORCE MAJEURE
Either party shall be excused from performing their obligations under this
Agreement, if its performance is delayed or prevented by any event beyond such
party's reasonable control, including, but not limited to, acts of God, fire,
explosion, disease, weather, war, insurrection, civil strike, riots, government
action or power failure, provided that such performance shall be excused only to
the extent of and during such disability.
Any time specified for completion or performance of the services under this
Agreement or the applicable Clinical Programs falling during (or subsequent) to
the occurrence of any of such events shall be automatically extended for a
period of time equal to the time of such disability.
BIO-IMAGING will promptly notify BRACCO if, by reason of any of the events
referred to herein, BIO-IMAGING is unable to meet such time for performance of
the services hereunder. If any part of the services rendered hereunder is
invalid as a result of such disability, BIO-IMAGING will, upon written request
from BRACCO, at BRACCO's sole cost and expense, repeat that part of the services
rendered hereunder, which are affected by the disability.
- 10 -
<PAGE>
Resignation, sickness or pregnancy of the Personnel will impose the use of
alternative Personnel.
10. LIABILITY
BIO-IMAGING assumes full responsibility and liability, either towards BRACCO or
towards third parties, in order to perform all the obligations and tasks
provided for in the present Agreement, in strict accordance with the provisions
of all the laws and regulations mentioned in Para. 2.3 hereinbefore.
11. INDEMNITY
BIO-IMAGING hereby agrees to indemnify, defend, and hold BRACCO, its affiliates,
agents, servants and employees, safe and harmless against any and all liability,
loss, actions or suites (including reasonable attorney's fees) suffered or
incurred by BRACCO, its affiliates, agents servants and employees in force of
this Agreement as a result of acts or omissions of BIO-IMAGING, except for the
extent that any such liability, loss, actions or suits is caused, totally or
partially, by:
- - a gross negligence or intentional misconduct of BRACCO, its affiliates,
servants, agents and employees;
- - a violation by BRACCO, its affiliates, servants, agents and employees, of any
laws or regulations applicable to this Agreement and to the tasks provided for
therein;
BIO-IMAGING agrees to provide a diligent defense against any claims or actions
brought against BRACCO, its affiliates, agents, servants and employees, whether
such claim or actions are rightly or wrongly brought or filed. BRACCO shall have
the right to participate, at its own discretion, to such a defense, bearing the
relevant expenses.
BRACCO hereby agrees to indemnify, defend, and hold BIO-IMAGING, its affiliates,
agents, servants and employees, safe and harmless against any and all liability,
loss, actions or suites (including reasonable attorney's fees) suffered or
incurred by BIO-IMAGING, its affiliates, agents servants and employees in force
of this Agreement as a result of acts or omission of
- 11 -
<PAGE>
BRACCO, except for the extent that any such liability, loss, actions or suits is
caused, totally or partially, by:
- - a gross negligence or intentional misconduct of BIO-IMAGING, its affiliates,
servants, agents and employees;
- - a violation by BIO-IMAGING, its affiliates, servants, agents and employees, of
any laws or regulations applicable to this Agreement and to the tasks provided
for therein;
BRACCO agrees to provide a diligent defense against any claims or actions
brought against BIO-IMAGING, its affiliates, agents, servants and employees,
whether such claim or actions are rightly or wrongly brought or filed.
BIO-IMAGING shall have the right to participate, at its own discretion, to such
a defense, bearing the relevant expenses.
12. PROPERTY OWNERSHIP
All materials, documents, information and suggestions of any kind and
description supplied to BIO-IMAGING by BRACCO or prepared or developed by
BIO-IMAGING pursuant to this Agreement shall be the sole and exclusive property
of BRACCO and BRACCO shall have the right to make whatever use it deems
desirable of any such materials, documents and information. All technology and
software however developed by BIO-IMAGING on the basis of information, documents
and materials supplied by BRACCO, in the execution of the present Agreement,
shall be the sole property of BIO-IMAGING and BIO-IMAGING hereby undertakes to
license the right to use such technology of software to BRACCO free of charge
for at least 15 years from termination of the present Agreement, at BRACCO's
sole request. BIO-IMAGING procedural manuals and Personnel data, as well as
pre-existing BIO-IMAGING developed computer software or technology shall be the
sole and exclusive property of BIO-IMAGING.
In case of termination of the present Agreement for whatever reason BIO-IMAGING
will immediately make at BRACCO's disposal all the documents concerning the
activities ruled under this Agreement.
- 12 -
<PAGE>
13. PATENT RIGHTS
BIO-IMAGING will disclose promptly to BRACCO or its nominee any and all
inventions, discoveries and improvements, related to the drug(s) under
development by BRACCO, conceived or made by BIO-IMAGING while providing the
services to BRACCO pursuant to this Agreement and relating to such services, and
agrees to assign all its interest therein to BRACCO or its nominee. Whenever
requested to do so by BRACCO, BIO-IMAGING will execute any and all applications,
assignments or other instruments, and give testimony which BRACCO shall deem
necessary, to apply for and to obtain the patent rights in any European country
and to protect otherwise BRACCO's interests therein. BRACCO shall compensate
BIO-IMAGING for the time devoted to said activities and reimburse BIO-IMAGING
for incurred expenses. These obligations shall continue beyond the termination
of the Agreement with respect to inventions, discoveries and improvements
conceived or made by BIO-IMAGING while providing Personnel and Resources to
BRACCO pursuant to the Agreement, and shall be binding upon BIO-IMAGING's
assignees, administrators and other legal representatives.
14. MODIFICATIONS
No changes may be made in this Agreement except by a written agreement of both
parties.
15. ENTIRETY
This Agreement, together with the attached Exhibit, and any future Exhibits to
be attached as Addenda, is the entire and complete understanding between the
parties in regard to the covered subject matter. It replaces, supersedes and
renders void any and all previous agreements between the parties, whether
written or oral.
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<PAGE>
16. INDEPENDENT CONTRACTOR
BIO-IMAGING's relationship with BRACCO under this Agreement shall be that of an
independent contractor and nothing in this Agreement for which it is made shall
make BIO-IMAGING, or anyone furnished or used by BIO-IMAGING in the performance
of the services contemplated by this Agreement, a right to be considered as a
joint venturer, partner, employee, or servant of BRACCO.
17. NOTICES
Any notices to the other party shall be deemed to be duly given, when delivered
personally or mailed by telefax and confirmed by certified or registered mail,
postage prepaid, to the party to whom notice is to be given at the address first
given above or at any other address or addresses of which such party shall have
given written notice.
18. SEVERABILITY
If any provisions hereof shall be determined to be invalid or unenforceable, the
validity and effects of the other provisions of this Agreement shall not be
affected thereby.
19. GOVERNING LAW
This Agreement is governed, construed and interpreted in accordance with the
substantive law of Switzerland.
20. ARBITRATION
The parties will attempt to amicably settle any divergencies or disputes which
may arise in connection with the Agreement.
- 14 -
<PAGE>
If a divergency or a dispute between the parties arising out of this Agreement
cannot be settled by them through negotiations in good faith, the parties
reciprocally agree that such divergency or dispute shall be finally settled by a
Panel of three (3) Arbitrators in Geneva (Switzerland) under the UNCITRAL Rules.
Each party will appoint one Arbitrator and the third Arbitrator, acting as
Chairman, will be appointed by the two Arbitrators so appointed or, in case of
their disagreement, according to said Rules. The language to be used will be
English.
The award to be rendered shall be final and conclusive and binding upon all the
parties. The parties hereby exercise the right granted to them by art. 192 of
the Swiss Private International Law and waive their rights to file an appeal
against the arbitral award pursuant to art. 190 of the Swiss International
Private Law.
21. WAIVER
The waiver by either party or the failure by either party to claim a breach of
any provision of this Agreement shall not be deemed to constitute a waiver or a
precedent with respect to any subsequent breach or with respect to any provision
thereof.
22. TERM OF AGREEMENT
This Agreement takes effect as of the Effective Date and shall last for a period
of two (2) years. Thereafter, the parties may agree in writing to extend the
duration term of the present Agreement. Any and all extensions to this Agreement
shall be agreed in writing no later than 90 days prior to any extension.
23. CAPTIONS
Any caption used in this Agreement is inserted only for convenience and
reference and is to be ignored in the construction and interpretation of the
provisions hereof.
- 15 -
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly authorized officers.
Date: Milan 03-June-1997 Bracco S.p.A.
------------------
Name: Aberto Spinazzi, MD
Title: Director,
International Medical
Affairs
Signature: /s/ Aberto Spinazzi, MD
-------------------------------
Name: Pietro Mascherpa
Title: Administrative
Director
Signature: /s/ Pietro Mascherpa
-------------------------------
Date: West
Trenton June 10, 1997 Bio-Imaging Technologies, Inc.
----------------
Name: Donald W. Lohin
Title: President and CEO
Signature: /s/ Donald W. Lohin
-------------------------------
- 16 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED INTERIM FINANCIAL STATEMENTS INCLUDED IN THE REGISTRANT'S FORM 10-QSB
FOR THE PERIOD ENDED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000822418
<NAME> BIO-IMAGING TECHNOLOGIES INC.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> JUN-30-1997
<CASH> 2,218,091
<SECURITIES> 0
<RECEIVABLES> 788,574
<ALLOWANCES> 20,000
<INVENTORY> 0
<CURRENT-ASSETS> 3,097,498
<PP&E> 3,739,560
<DEPRECIATION> 2,183,417
<TOTAL-ASSETS> 4,702,129
<CURRENT-LIABILITIES> 972,744
<BONDS> 28,502
0
104
<COMMON> 1,711
<OTHER-SE> 3,699,068
<TOTAL-LIABILITY-AND-EQUITY> 4,702,129
<SALES> 0
<TOTAL-REVENUES> 3,935,789
<CGS> 0
<TOTAL-COSTS> 1,427,218
<OTHER-EXPENSES> 2,041,607
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (26,912)
<INCOME-PRETAX> 493,876
<INCOME-TAX> 0
<INCOME-CONTINUING> 493,876
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 493,876
<EPS-PRIMARY> 0.06
<EPS-DILUTED> 0.06
</TABLE>
