SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
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 08628-1020
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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 March 31, 1998:
Class Number of Shares
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Common Stock, $.00025 par value 7,773,878
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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Page
PART I FINANCIAL INFORMATION
Item 1. Financial Statements................................... 1
CONSOLIDATED BALANCE SHEETS
as of March 31, 1998 (unaudited) and
September 30, 1997......................................... 2
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Six Months Ended March 31, 1998 and 1997
(unaudited)................................................ 3
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended March 31, 1998 and 1997
(unaudited)................................................ 4
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended March 31, 1998 and 1997
(unaudited)................................................ 5
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (unaudited)..................................... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................... 10
Results of Operations...................................... 10
Liquidity and Capital Resources............................ 16
PART II OTHER INFORMATION
Item 1. Legal Proceedings...................................... 17
Item 4. Submission of Matters to a Vote of Security Holders.... 18
Item 5. Other Information...................................... 20
Item 6. Exhibits and Reports on Form 8-K....................... 21
SIGNATURES ....................................................... 22
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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
"Company") believes that the disclosures are adequate to assure that the
information presented is not misleading in any material respect. The following
consolidated financial statements should be read in conjunction with the
year-end consolidated financial statements and notes thereto included in the
Company's Annual Report on Form 10-KSB for the fiscal year ended September 30,
1997.
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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<CAPTION>
BIO-IMAGING TECHNOLOGIES, INC. AND SUBSIDIARIES
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CONSOLIDATED BALANCE SHEETS
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March 31, September 30,
1998 1997
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(unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents .......................................... $ 1,892,827 $ 2,367,658
Accounts receivable, net ........................................... 1,182,938 1,214,052
Prepaid expenses and other current assets .......................... 110,033 88,518
----------- -----------
Total current assets ............................................. 3,185,798 3,670,228
Property and equipment, net ........................................... 1,481,852 1,669,678
Other assets .......................................................... 55,959 67,076
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Total assets ..................................................... $ 4,723,609 $ 5,406,982
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Deferred revenue ................................................... $ 321,898 $ 414,360
Accounts payable ................................................... 174,451 81,832
Accrued expenses and other current liabilities ..................... 446,250 239,351
Current maturities of long-term debt ............................... 48,791 87,084
----------- -----------
Total current liabilities ........................................ 991,390 822,627
Long-term debt ........................................................ 1,862 12,794
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Total liabilities ................................................ 993,252 835,421
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Stockholders' equity:
Preferred stock - $.00025 par value; authorized
3,000,000 shares, 416,667 issued and
outstanding ($500,000 liquidation preference) ..................... 104 104
Common stock - $.00025 par value; authorized
18,000,000 shares, 7,773,878 and 7,753,878
shares issued and outstanding at March 31, 1998
and September 30, 1997, respectively .............................. 1,944 1,939
Additional paid-in capital ......................................... 9,231,497 9,215,603
Accumulated deficit ................................................ (5,503,188) (4,646,085)
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Stockholders' equity ............................................. 3,730,357 4,571,561
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Total liabilities and stockholders' equity ....................... $ 4,723,609 $ 5,406,982
=========== ===========
See Notes to 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)
For the Six Months Ended
March 31,
-------------------------------
1998 1997
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<S> <C> <C>
Project revenue .................................. $ 2,063,911 $ 2,626,401
Project costs .................................... 962,721 954,987
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Gross profit ..................................... 1,101,190 1,671,414
General and administrative expenses .............. 764,096 839,817
Sales and marketing expenses ..................... 526,097 387,450
Research and development expenses ................ 139,309 94,183
Proxy and litigation expenses .................... 281,136 --
Restructuring and severance expenses ............. 277,000 --
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(Loss) income from operations .................... (886,448) 349,964
Interest income - net ............................ 49,631 19,277
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Net (loss) income ................................ (836,817) 369,241
Dividends on preferred stock ..................... 20,000 20,000
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Net (loss) income applicable to common stock ..... $ (856,817) $ 349,241
=========== ===========
Basic (loss) earnings per share .................. $ (0.11) $ 0.06
=========== ===========
Weighted average number of common
shares ......................................... 7,770,563 6,084,687
=========== ===========
Diluted (loss) earnings per share ................ $ (0.11) $ 0.05
=========== ===========
Weighted average number of common and dilutive
common equivalent shares ....................... 7,770,563 7,990,193
=========== ===========
See Notes to Consolidated Financial Statements
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</TABLE>
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<CAPTION>
BIO-IMAGING TECHNOLOGIES, INC. AND SUBSIDIARIES
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CONSOLIDATED STATEMENTS OF OPERATIONS
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(unaudited)
For the Three Months Ended
March 31,
----------------------------
1998 1997
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<S> <C> <C>
Project revenue ..................................... $ 945,815 $ 1,423,851
Project costs ....................................... 458,218 504,580
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Gross profit ........................................ 487,597 919,271
General and administrative expenses ................. 295,337 457,904
Sales and marketing expenses ........................ 249,163 214,155
Research and development expenses ................... 66,653 54,415
Proxy and litigation expenses ....................... 281,136 --
Restructuring and severance expenses ................ 127,000 --
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(Loss) income from operations ....................... (531,692) 192,797
Interest income - net ............................... 22,933 12,469
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Net (loss) income ................................... (508,759) 205,266
Dividends on preferred stock ........................ 10,000 10,000
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Net (loss) income applicable to common stock ........ $ (518,759) $ 195,266
=========== ===========
Basic (loss) earnings per share ..................... $ (0.07) $ 0.03
=========== ===========
Weighted average number of common
shares ............................................ 7,773,878 6,095,226
=========== ===========
Diluted (loss) earnings per share ................... $ (0.07) $ 0.03
=========== ===========
Weighted average number of common and dilutive
common equivalent shares .......................... 7,773,878 8,187,178
=========== ===========
See Notes to Consolidated Financial Statements
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</TABLE>
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BIO-IMAGING TECHNOLOGIES, INC. AND SUBSIDIARIES
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CONSOLIDATED STATEMENTS OF CASH FLOWS
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(unaudited)
For the Six Months Ended
March 31,
--------------------------
1998 1997
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<S> <C> <C>
Cash flows from operating activities:
Net (loss) income ............................................ $ (836,817) $ 369,241
Adjustments to reconcile net (loss) income to net cash
(used in) provided by operating activities:
Depreciation and amortization .............................. 308,656 318,008
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable ............... 31,114 (369,139)
Increase in prepaid expenses and other current assets .... (21,515) (17,842)
Decrease (increase) in other assets ...................... 11,117 (9,612)
Decrease in deferred revenue ............................. (92,462) (102,181)
Increase in accounts payable ............................. 92,619 229,021
Increase in accrued expenses and other current
liabilities ............................................ 206,899 36,650
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Net cash (used in) provided by operating activities ...... (300,389) 454,146
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Cash flows from investing activities:
Purchases of property and equipment .......................... (118,969) (544,284)
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Net cash used in investing activities .................... (118,969) (544,284)
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Cash flows from financing activities:
Payments under equipment lease obligations ................... (51,086) (44,554)
Dividends paid on preferred stock ............................ (20,286) (41,222)
Proceeds from exercise of stock options ...................... 15,899 275,211
----------- -----------
Net cash (used in) provided by financing activities ...... (55,473) 189,435
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Net (decrease) increase in cash and cash equivalents ............ (474,831) 99,297
Cash and cash equivalents at beginning of period ................ 2,367,658 1,377,633
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Cash and cash equivalents at end of period ...................... $ 1,892,827 $ 1,476,930
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for interest ..................... $ 3,878 $ 8,549
=========== ===========
See Notes to Consolidated Financial Statements
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BIO-IMAGING TECHNOLOGIES, INC. AND SUBSIDIARIES
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NOTES TO 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, 1997.
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, 1998, the results of its operations for the
three-month and six-month periods ended March 31, 1998 and 1997 and its cash
flows for the six-month periods ended March 31, 1998 and March 31, 1997.
Interim results are not necessarily indicative of results for the full
fiscal year.
Basic (loss) earnings per share was calculated based upon the net income
available to common stockholders divided by the weighted average number of
shares of Common Stock outstanding during the period. Diluted loss per common
share for the three-month and six-month periods ended March 31, 1998 excludes
the impact of options and warrants as they are antidilutive. Diluted earnings
per common share for the three-month and six-month periods ended March 31, 1997
were calculated based upon the net income available to common stockholders,
after giving effect to the assumed conversions of preferred stock divided by the
weighted average number of shares of Common Stock adjusted for the incremental
dilution of outstanding options, warrants and preferred stock during such
periods.
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BIO-IMAGING TECHNOLOGIES, INC. AND SUBSIDIARIES
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(unaudited)
Note 1 - Basis of Presentation: (continued)
The computation of basic (loss) earnings per share and diluted (loss)
earnings per share were as follows:
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
March 31, March 31,
---------------------------- -----------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net (loss) income ...................... $ (836,817) $ 369,241 $ (508,759) $ 205,266
Dividends on preferred stock ........... 20,000 20,000 10,000 10,000
----------- ----------- ----------- -----------
Net (loss) income applicable
to common stock - basic ............. $ (856,817) $ 349,241 $ (518,759) $ 195,266
----------- ----------- ----------- -----------
Dilutive dividends on preferred
stock ............................... -- 20,000 -- 10,000
----------- ----------- ----------- -----------
Net (loss) income applicable to common
stock-diluted ....................... (856,817) 369,241 (518,759) 205,266
----------- ----------- ----------- -----------
Denominator:
Weighted average number of
common shares ........................ 7,770,563 6,084,687 7,773,878 6,095,226
Basic (loss) earnings per
share ................................ $ (0.11) $ 0.06 $ (0.07) $ 0.03
=========== =========== =========== ===========
Denominator:
Weighted average number of
common shares ........................ 7,770,563 6,084,687 7,773,878 6,095,226
Common share equivalents of
outstanding stock options and
warrants ............................. -- 1,488,839 -- 1,675,285
Common share equivalents of
dilutive outstanding preferred
stock ................................ -- 416,667 -- 416,667
----------- ----------- ----------- -----------
Total shares ........................... 7,770,563 7,990,193 7,773,878 8,187,178
----------- ----------- ----------- -----------
Diluted (loss) earnings
per share ............................ $ (0.11) $ 0.05 $ (0.07) $ 0.03
=========== =========== =========== ===========
</TABLE>
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BIO-IMAGING TECHNOLOGIES, INC. AND SUBSIDIARIES
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(unaudited)
Note 2 - Stockholders' Equity:
The Company has 416,667 shares of Series A Preferred Stock (the "Preferred
Stock") outstanding. 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) 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; and
(v) registration rights with respect to the shares of Common Stock issuable upon
conversion of the Preferred Stock. Dividends are payable in cash or in the
Company's Common Stock at the Company's discretion. The Company, in March 1998,
paid to the holders of the Preferred Stock an aggregate amount of $20,285,
representing $20,000 of accrued cumulative dividends for the period from July 1,
1997 through and including December 31, 1997 and interest of $285 from January
1, 1998 through the payment date. At March 31, 1998 preferred dividends in
arrears aggregated approximately $10,000 or $0.02 per share of the Preferred
Stock.
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.
Note 3 - Litigation:
On February 23, 1998, five stockholders of the Company (the "Committee
Members") describing themselves as The Bio-Imaging Technologies Independent
Shareholders' Committee (the "Committee"), as plaintiffs, filed a verified
complaint and motion in the United States District Court for the District of New
Jersey (the "New Jersey District Court") seeking to enjoin the Company and each
of Jeffrey S. Hurwitz, Esq., Jeffrey H. Berg, Ph.D. and James A. Taylor, Ph.D.
(collectively, the "Incumbent Directors") from holding the election of the Board
of Directors, at the Annual Meeting of Stockholders, on February 27, 1998. The
Committee Members alleged, among other things, use of a false and misleading
proxy statement, manipulation of the proxy process and manipulation of the
stockholder democracy process in connection with the pending election on
February 27, 1998. The New Jersey District Court, on February 26, 1998, denied
the Committee Members' application for a temporary restraining order and denied
the Committee Members' application for a preliminary injunction. The New Jersey
District Court determined, among other things, that the proxy statement
furnished in connection with the solicitation by the Incumbent Directors was not
misleading. The New Jersey District Court did not rule on the Committee Members'
verified complaint. For further discussion of this litigation see -- "Part II.
Other Information -- Item 1. Legal Proceedings."
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BIO-IMAGING TECHNOLOGIES, INC. AND SUBSIDIARIES
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(unaudited)
Note 3 - Litigation: (continued)
The Company is currently negotiating a settlement agreement with the
Committee relating to the litigation above. The Company is also negotiating a
settlement agreement, which contains severance terms, with Dr. James J. Conklin,
a former director and executive officer of the Company and member of the
Committee. There can be no assurance, however, that a settlement agreement can
be reached with either Dr. Conklin or the Committee on terms satisfactory to the
Company. As a result of such settlement negotiations with Dr. Conklin, the
Company accrued $127,000 of severance expenses during the quarter ended March
31, 1998. If the litigation is not settled, the Company intends to vigorously
pursue its claims against the Committee, each of the Committee Members and
Investment Partners of America, L.P. ("IPA").
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<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
RESULTS OF OPERATIONS
The Company experienced a loss for the three months and six months ended
March 31, 1998, as a result of (i) a proxy contest and related litigation, (ii)
restructuring and severance expenses related to the elimination of two former
business divisions and the resignation in December 1997 of a former executive
officer and (iii) insufficient project revenue to support the infrastructure of
the Company. The Company's project revenue was adversely impacted by its lengthy
sales cycle (the period from the presentation by the Company to a potential
client to the engagement of the Company by such client) which is approximately
nine months. In addition, project timing impacts the Company's results of
operations. Typically, the contracts under which the Company is engaged to
perform services cover a period of 12-24 months and the volume and type of
services performed by the Company vary during the course of a project. The
Company's lengthy sales cycle and contract timing adversely affected the
Company's project revenue for the three months and six months ended March 31,
1998. During Fiscal 1997, the Company increased its sales and marketing
activities but expects project revenue to continue to be adversely affected
through at least the third quarter of Fiscal 1998. No assurance, however, can be
made that the Company's project revenue will increase to levels required to
achieve and maintain profitability. In addition, the revenue generated from the
Company's client base remains highly concentrated. Three clients represented
approximately 61% of the Company's project revenue for the six months ended
March 31, 1998, of which one European client represented approximately 35% of
project revenue.
In February 1998 the Committee and the Company engaged in a proxy contest
in an effort to, among other things, elect the members of the Company's Board of
Directors at the Annual Meeting of Stockholders held on February 27, 1998. In
connection with such proxy contest and the related litigation, the Company
expended approximately $281,000 in the three months ended March 31, 1998. For
further discussion of this litigation see "Part II. Other Information -- Item 1.
Legal Proceedings."
In December 1997, the Company terminated two business divisions, the
Marketing Information Services Division (the "MISD") and the Data Management and
Information Systems Division (the "DMISD"), which were established in October
1996. These divisions did not meet the Company's expectations and the Company
believed that its resources were better focused on its core clinical trials
service business. In addition, two executive officers of the Company resigned in
December. The Company is negotiating a settlement agreement, which contains
severance terms, with one such former executive officer. As a result of these
events, the Company recorded restructuring and severance expenses of $277,000
during the six months ended March 31, 1998.
Despite lower project revenue for the first six months of Fiscal 1998, the
Company believes that demand for its services and technologies will grow during
the longer term as the use
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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 submission of data, including
medical images. Furthermore, the increased use of digital medical images in
clinical trials, especially for important drug classes such as neurologic and
oncologic therapeutics and diagnostic image agents, generate large amounts of
image data that will require processing, analysis, data management and
submission services. Due to several factors, including an increase in
competition, there can be no assurance that demand for the Company's services
and technologies will grow, or sustain growth, or that additional revenue
generating opportunities will be realized by the Company.
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 longer term growth
of the Company's business, the information concerning existing client contracts,
the timing of the projects 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, such as the
Company's client concentration and lengthy sales cycle, the Company's ability to
obtain new business and accurately estimate the timing of projects due to the
variability in size, scope and duration of projects, regulatory delays, clinical
study results which lead to reductions or cancellations of projects, potential
costs of litigation and other factors not within the Company's control, and
others 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, 1998 and 1997
----------------------------------------
Project revenue for the six months ended March 31, 1998 and 1997 were
approximately $2,064,000 and $2,626,000, respectively, a decrease of
approximately $562,000 or 21.4%. Project revenues in the six months ended March
31, 1998 and 1997 were derived from 22 and 18 clients, respectively. Revenue
generated from the Company's client base remains highly concentrated. Three
clients represented approximately 61% of the Company's project revenue for the
six months ended March 31, 1998 of which one European client represented
approximately 35% or $721,000 of project revenue. For the comparable period last
year, three clients represented approximately 60% of the Company's project
revenue of which one European client represented 31% or $825,000 of project
revenue. The decrease in project revenue is primarily a result of a decrease in
the work scheduled to be performed by the Company on existing contracts in the
six months ended March 31, 1998 as compared to the same period in Fiscal 1997.
The Company's scope of work in both periods included medical imaging core
laboratory services and image-based information management services. The Company
currently has three new projects with such European client, which it entered
into in April 1998 and which
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it expects to complete by the end of calendar 1999. There can be no assurance
that project revenues from such client will continue at their historic levels.
Project costs for the six months ended March 31, 1998 and 1997 were
comprised of professional salaries and benefits and allocated overhead. Project
costs for the six months ended March 31, 1998 and 1997 were approximately
$963,000 and $955,000, respectively, an increase of approximately $8,000 or
0.8%. Project costs remained relatively flat, despite a decrease in project
revenues, as project related staffing levels remained approximately the same in
the six months ended March 31, 1998 and 1997.
The gross margin percentage during the six months ended March 31, 1998
decreased to 53.4% from 63.6% for the corresponding Fiscal 1997 period. Such
decrease is attributable primarily to constant staffing levels and the mix of
services for which the Company was engaged to provide, and, to a lesser extent,
a decrease in prices the Company charged for certain services as a result of
increased competition from academic core laboratories and clinical research
organizations. The Company expects that increased competition will continue to
create pricing pressure for its services.
General and administrative expenses in each of the six months ended March
31, 1998 and 1997 consisted primarily of professional salaries and benefits,
depreciation and amortization, professional and consulting services, office rent
and corporate insurance. General and administrative expenses were approximately
$764,000 in the six months ended March 31, 1998 and approximately $840,000 in
the six months ended March 31, 1997. The decrease during the six months ended
March 31, 1998 of approximately $76,000 or 9.0%, from the corresponding Fiscal
1997 period, resulted primarily from the elimination of expenditures in support
of the former MISD and DMISD divisions and personnel costs associated with
former executive officers who resigned in December 1997. Such decrease reflects,
and is partially offset by, a full six months of expenses incurred during the
Fiscal 1998 period by the Company's European facility which commenced operations
during the second quarter of Fiscal 1997.
Sales and marketing expenses in each of the six months ended March 31,
1998 and 1997 were comprised of direct sales and marketing costs, professional
salaries and benefits and allocated overhead. Sales and marketing expenses were
approximately $526,000 in the six months ended March 31, 1998 and approximately
$387,000 in the corresponding Fiscal 1997 period. The increase during the six
months ended March 31, 1998 of approximately $139,000, or 35.9%, from the
corresponding Fiscal 1997 period, resulted primarily from the increase in
personnel and resources dedicated to sales and marketing activities in the
United States and in Europe.
Research and development expenses in each of the six months ended March
31, 1998 and 1997 consisted of professional salaries and benefits and overhead
charged to research and development projects. Research and development expenses
during the six months ended March 31, 1998 and 1997 were approximately $139,000
and $94,000, respectively. The increase during the six months ended March 31,
1998 of approximately $45,000, or 47.9%, from the
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corresponding Fiscal 1997 period, resulted primarily from an increase in
resources dedicated to research and development projects. Research and
development expenses in each of the six months ended March 31, 1998 and 1997
primarily focused on the formulation and design of product and process
alternatives. There were no capitalized computer software development costs in
either the six months ended March 31, 1998 or 1997. However, the Company has in
the past capitalized, and in the future may capitalize, certain computer
development costs in accordance with the Statement of Financial Accounting
Standards Board No. 86.
Total operating expenses in each of the six months ended March 31, 1998
and 1997 consisted primarily of project costs, general and administrative
expenses, sales and marketing expenses and research and development expenses.
The Company's total operating expenses were approximately $2,392,000 in the six
months ended March 31, 1998 (excluding restructuring and severance expenses of
$277,000 and proxy and litigation expenses of approximately $281,000) and
approximately $2,276,000 in the corresponding period in Fiscal 1997. Such
increase of approximately $116,000 or 5.1% is primarily attributable to expenses
incurred by the Company's European facility which commenced operations in the
second quarter of Fiscal 1997 and an increase in the Company's sales and
marketing expenses offset, in part, by the elimination of expenditures in
support of the former MISD and DMISD divisions and lower personnel costs due to
the resignation of former executive officers in December 1997.
Net interest income of approximately $50,000 during the six months ended
March 31, 1998, resulted from interest earned on cash balances, offset, in part,
by interest expense incurred in conjunction with equipment lease obligations.
The Company earned greater interest income in the six months ended March 31,
1998 than in the corresponding period of Fiscal 1997 due to higher cash
balances. Net interest income was approximately $19,000 in the six months ended
March 31, 1997.
The Company's net loss for the six months ended March 31, 1998 was
approximately $837,000, while the Company had net income of approximately
$369,000 in the six months ended March 31, 1997. The Company's net loss for the
six months ended March 31, 1998 was attributable primarily to expenses
associated with a proxy contest and related litigation, restructuring and
severance expenses related to the elimination of the former MISD and DMISD
divisions and the resignation in December 1997 of a former executive officer,
coupled with insufficient project revenue to support the infrastructure of the
Company.
Three Months Ended March 31, 1998 and 1997
------------------------------------------
Project revenue for the quarters ended March 31, 1998 ("Second Quarter of
Fiscal 1998") and 1997 ("Second Quarter of Fiscal 1997") were approximately
$946,000 and $1,424,000, respectively, a decrease of approximately $478,000 or
33.6%. Project revenues in the Second Quarter of Fiscal 1998 and Fiscal 1997
were derived from 18 and 16 clients, respectively. Revenue generated from the
Company's client base remains highly concentrated. Four clients represented
approximately 69% of the Company's project revenue for the three months ended
March 31, 1998 of which one European client represented 25% or $234,000 of
project revenue.
-13-
<PAGE>
For the comparable period last year, three clients represented approximately 80%
of the Company's project revenue of which one European client represented 58% or
$825,000 of project revenue. The decrease in project revenue is primarily a
result of a decrease in the work scheduled to be performed by the Company on
existing contracts in the Second Quarter of Fiscal 1998 as compared to the
Second Quarter of Fiscal 1997. The Company's scope of work in both periods
included medical imaging core laboratory services and image-based information
management services. The Company currently has three new projects with such
European client, which it entered into in April 1998 and which it expects to
complete by the end of calendar 1999. There can be no assurance that project
revenues from such client will continue at their historic levels.
Project costs in each of the Second Quarter of Fiscal 1998 and Fiscal 1997
were comprised of professional salaries and benefits and allocated overhead.
Project costs for the Second Quarter of Fiscal 1998 and Fiscal 1997 were
approximately $458,000 and $505,000, respectively, a decrease of approximately
$47,000 or 9.3%. This decrease is attributable to the decrease in project
revenue in the Second Quarter of Fiscal 1998. As a percentage, projects costs
decreased less than project revenues as project related staffing levels remained
approximately the same in the Second Quarter of Fiscal 1998 and the Second
Quarter of Fiscal 1997.
The gross margin percentage during the Second Quarter of Fiscal 1998
decreased to 51.6% from 64.6% for the corresponding period in 1997. Such
decrease is attributable to constant staffing levels and the mix of services for
which the Company was engaged to provide, and, to a lesser extent, a decrease in
prices the Company charged for certain services as a result of increased
competition from academic core laboratories and clinical research organizations.
The Company expects that increased competition will continue to create pricing
pressure for its services.
General and administrative expenses in each of the Second Quarter of
Fiscal 1998 and Fiscal 1997 consisted primarily of professional salaries and
benefits, depreciation and amortization, professional and consulting services,
office rent and corporate insurance. General and administrative expenses were
approximately $295,000 in the Second Quarter of Fiscal 1998 and approximately
$458,000 in the Second Quarter of Fiscal 1997. The decrease during the Second
Quarter of Fiscal 1998 of approximately $163,000 or 35.6%, from the
corresponding Fiscal 1997 quarter, resulted primarily from the elimination of
expenditures in support of the former MISD and DMISD divisions and personnel
costs associated with former executive officers who resigned in December 1997.
Sales and marketing expenses in each of the Second Quarter of Fiscal 1998
and Fiscal 1997 were comprised of direct sales and marketing costs, professional
salaries and benefits and allocated overhead. Sales and marketing expenses were
approximately $249,000 in the Second Quarter of Fiscal 1998 and approximately
$214,000 in the Second Quarter of Fiscal 1997. The increase during the Second
Quarter of Fiscal 1998 of approximately $35,000, or 16.3%, from the
-14-
<PAGE>
corresponding Fiscal 1997 quarter, resulted primarily from the increase in
personnel and resources dedicated to sales and marketing activities in the
United States and in Europe.
Research and development expenses in each of the Second Quarter of Fiscal
1998 and Fiscal 1997 consisted of professional salaries and benefits and
overhead charged to research and development projects. Research and development
expenses during the Second Quarter of Fiscal 1998 and 1997 were approximately
$67,000 and $54,000, respectively. The increase during the Second Quarter of
Fiscal 1998 of approximately $13,000, or 24.1%, from the corresponding Fiscal
1997 quarter, resulted primarily from an increase in resources dedicated to
research and development projects. Research and development expenses in each of
the Second Quarter of Fiscal 1998 and Fiscal 1997 primarily focused on the
formulation and design of product and process alternatives. There were no
capitalized computer software development costs in each of the Second Quarter of
Fiscal 1998 and the Second Quarter of Fiscal 1997. However, the Company has in
the past capitalized, and in the future may capitalize, certain computer
development costs in accordance with the Statement of Financial Accounting
Standards Board No. 86.
Total operating expenses in each of the Second Quarter of Fiscal 1998 and
Fiscal 1997 consisted primarily of project costs, general and administrative
expenses, sales and marketing expenses and research and development expenses.
The Company's total operating expenses were approximately $1,069,000 in the
Second Quarter of Fiscal 1998 (excluding restructuring and severance expenses of
$127,000 and proxy and litigation expenses of approximately $281,000) and
approximately $1,231,000 in the corresponding quarter in Fiscal 1997. Such
decrease of approximately $162,000 or 13.2% is primarily attributed to the
elimination of expenditures in support of the former MISD and DMISD divisions
and lower personnel costs due to the resignation of former executive officers in
December 1997.
Net interest income of approximately $23,000 during the Second Quarter of
1998, resulted from interest earned on cash balances, offset, in part, by
interest expense incurred in conjunction with equipment lease obligations. The
Company earned greater interest income in the Second Quarter of 1998 than in the
Second Quarter of 1997 due to higher cash balances. Net interest income was
approximately $12,000 in the Second Quarter of 1997.
The Company's net loss for the Second Quarter of 1998 was approximately
$509,000, while the Company had net income of approximately $205,000 in the
Second Quarter of 1997. The Company's net loss for the Second Quarter of 1998
was attributable primarily to the expenses associated with a proxy contest and
related litigation, restructuring and severance expenses related to the
elimination of the former MISD and DMISD divisions and the resignation in
December 1997 of a former executive officer, coupled with insufficient project
revenue to support the infrastructure of the Company.
-15-
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1998, the Company had cash and cash equivalents of
approximately $1,893,000. Working capital at March 31, 1998 was approximately
$2,194,000.
For the six months ended March 31, 1998, the Company invested
approximately $119,000 in capital and leasehold improvements. The Company
currently anticipates that capital expenditures for the balance of Fiscal 1998
will approximate $150,000. 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 March 1998, the Company paid to the holders of its Preferred Stock an
aggregate amount of $20,285 which amount represented accrued cumulative
dividends of $20,000 for the period from July 1, 1997 through and including
December 31, 1997 and interest of $285 from January 1, 1998 through the date of
payment. For future dividend obligations, see "Note 2 - Notes to Consolidated
Financial Statements."
The Company anticipates that its cash and cash equivalents as at March 31,
1998, together with cash from operations, will be sufficient to fund working
capital needs and capital requirements through Fiscal 1998.
YEAR 2000 COMPLIANCE
Historically, certain computer programs have been written using two digits
rather than four to define the applicable year, which could result in the
computer recognizing a date using "00" as the year 1900 rather than the year
2000. This, in turn, could result in major system failures or miscalculations,
and is generally referred to as the "Year 2000 Problem." The Company's
management information systems department has reviewed and tested the Company's
internal business systems for Year 2000 compliance. The Company believes that,
based on the results of such review and testing, the Company's internal business
systems, including its computer systems, are Year 2000 compliant. There can be
no assurance, however, that the Year 2000 Problem will not adversely affect the
Company's business, financial condition, results of operations or cash flows.
In addition, the Company receives imaging data derived from the computer
systems of its clients, which data or software may or may not be Year 2000
compliant. Although the Company is currently taking steps to address the impact,
if any, of the Year 2000 Problem relating to the data received from its clients,
failure of such computer systems to properly address the Year 2000 Problem may
adversely affect the Company's business, financial condition, results of
operation or cash flows.
-16-
<PAGE>
PART II. OTHER INFORMATION.
---------------------------
Item 1. Legal Proceedings.
On February 23, 1998, the Committee Members, as plaintiffs, filed a
verified complaint and motion in the New Jersey District Court seeking to enjoin
the Company and each of the Incumbent Directors from holding the election of the
Board of Directors, at the Annual Meeting of Stockholders, on February 27, 1998.
The Committee Members alleged, among other things, use of a false and misleading
proxy statement, manipulation of the proxy process and manipulation of the
stockholder democracy process in connection with the pending election on
February 27, 1998. The New Jersey District Court, on February 26, 1998, denied
the Committee Members' application for a temporary restraining order and denied
the Committee Members' application for a preliminary injunction. The New Jersey
District Court determined, among other things, that the proxy statement
furnished in connection with the solicitation by the Incumbent Directors was not
misleading. The New Jersey District Court did not rule on the Committee Members'
verified complaint.
On February 24, 1998, the Company, as plaintiff, filed a civil complaint
in the New Jersey District Court against the Committee, each of the Committee
Members, the IPA and Donald W. Lohin, the Company's former Chief Executive
Officer ("Lohin"). The complaint seeks, among other things, damages,
invalidation of the Committee's proxies, a return of all confidential,
non-public information, and preliminary and permanent injunctive relief. The
complaint alleged, among other things, illegal solicitation of stockholders, the
submission of false and misleading materials to the Securities and Exchange
Commission and to stockholders, the use of Company resources to fund and/or plan
the formation of a business which would compete with the Company and trading of
shares upon insider information. On March 6, 1998, the New Jersey District Court
consolidated the February 23, 1998 and February 24, 1998 cases for all purposes
under one civil action.
On March 27, 1998, the Company filed a counterclaim, in the New Jersey
District Court, against each of the Committee Members relating to the February
23, 1998 verified complaint. The Company re-alleged each claim previously
asserted in its February 24, 1998 complaint. Such counterclaim seeks damages,
preliminary and permanent injunctive relief, and the return of all confidential,
non-public information. The Company also alleged, among other things, that
unless the counterclaim defendants are required to make corrective disclosures,
the business, goodwill and reputation of the Company will be irreparably harmed
and the Company's stockholders will be misled to their detriment. In addition,
on March 27, 1998, the Company filed an answer in which it denied certain
allegations made by the Committee Members in their verified complaint.
Subsequent to the end of the quarter, on April 16, 1998, the Company
dismissed its claims against Lohin, without prejudice.
-17-
<PAGE>
The Company is currently negotiating a settlement agreement with the
Committee relating to the litigation above. The Company is also negotiating a
settlement agreement, which contains severance terms, with Dr. James J. Conklin,
a former director and executive officer of the Company and member of the
Committee. There can be no assurance, however, that a settlement agreement can
be reached with either Dr. Conklin or the Committee on terms satisfactory to the
Company. As a result of such settlement negotiations with Dr. Conklin, the
Company accrued $127,000 of severance expenses during the quarter ended March
31, 1998. If the litigation is not settled, the Company intends to vigorously
pursue its claims against the Committee, each of the Committee Members and IPA.
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 February 27, 1998.
(b) The following is a list of all of the Directors of the Company who were
elected at the Meeting and whose term of office continued after the
Meeting:
Jeffrey H. Berg, Ph.D.
Jeffrey S. Hurwitz, Esq.
James A. Taylor, Ph.D.
(c) There were 6,293,046 shares present at the Meeting in person or by proxy
out of a total number of 8,190,545 shares representing 7,773,878 shares of
Common Stock and 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.
(i) The results of the vote of the stockholders taken at the Meeting by
ballot and by proxy as solicited by the Company on behalf of the
Board of Directors were as follows:
-18-
<PAGE>
(A) The results of the vote taken at the Meeting for the election of the
nominees for the Board of Directors of the Company were as follows:
Nominee For Withheld
------------------------ ------------------- -----------------
Jeffrey H. Berg, Ph.D. 3,582,726 43,900
Jeffrey S. Hurwitz, Esq. 3,581,126 45,500
James A. Taylor, Ph.D. 3,582,726 43,900
(B) A vote was taken on the proposal to ratify the appointment of Arthur
Andersen LLP as independent auditors of the Company for the fiscal
year ending September 30, 1998. The results of the vote taken at the
Meeting with respect to such appointment were as follows:
For Against Abstain
------------------------ ------------------- -----------------
3,591,026 11,400 10,500
(C) A vote was taken on the proposal to amend the By-laws of the Company
to require a minimum of six directors. The results of the vote taken
at the Meeting with respect to such amendment were as follows:
For Against Abstain
------------------------ ------------------- -----------------
14,240 2,723,101 1,000
(ii) The results of the vote of the stockholders taken at the Meeting by
ballot and by proxy as solicited by the Committee were as follows:
(A) A vote was taken on the proposal to amend the By-laws of the Company
to require a minimum of six directors. The results of the vote taken
at the Meeting with respect to such amendment were as follows:
For Against Abstain
------------------------ ------------------- -----------------
2,664,780 900 740
-19-
<PAGE>
(B) The results of the vote taken at the Meeting for the election of the
nominees for the Board of Directors of the Company were as follows:
Nominee For Withheld
------------------------ ------------------- -----------------
Frank J. Abella, Jr. 2,653,587 12,833
Marc Berger 2,653,587 12,833
J.A. Cole, Jr. 2,653,587 12,833
James J. Conklin, M.D. 2,653,587 12,833
Richard Dumler 2,653,587 12,833
David Nowicki, M.D. 2,653,587 12,833
(iii) The results of the vote of the stockholders taken at the Meeting by
ballot and by proxy as solicited by each of the Board of Directors
of the Company and the Committee were as follows:
(A) A vote was taken on the Board of Directors' proxy authorizing a vote
upon other matters as may properly come before the Meeting. The
results of the vote taken at the Meeting with respect to such proxy
were as follows:
For Against Abstain
------------------------ ------------------- -----------------
3,192,120 25,282 54,167
(B) A vote was taken on the Committee's proxy authorizing a vote upon
other matters as may properly come before the Meeting. The results
of the vote taken at the Meeting with respect to such proxy were as
follows:
For Against Abstain
------------------------ ------------------- -----------------
2,644,180 500 21,740
Item 5. Other Information.
MANAGEMENT CHANGE AND ADDITION TO THE BOARD OF DIRECTORS
On February 20, 1998, Mark L. Weinstein was elected to the offices of
President and Chief Executive Officer of the Company. In addition, on March 9,
1998, Mr. Weinstein was elected to serve on the Company's Board of Directors
until the next Annual Meeting of Stockholders and until his successor has been
duly elected and qualified.
-20-
<PAGE>
NOTIFICATION FROM NASDAQ
On March 2, 1998, the Company received notice from the Nasdaq Stock
Market, Inc. ("Nasdaq"), that the Company's Common Stock is trading below the
new minimum bid price requirement of $1.00 required for continued listing on the
Nasdaq SmallCap Market. As a result, the Company has until May 28, 1998 for its
Common Stock to trade at or above the minimum requirement for at least
10-consecutive trade days. If the Common Stock does not regain compliance before
May 28, 1998, Nasdaq will issue a delisting letter which will identify the
review procedures available to the Company. The Company may request a review at
that time, which will generally stay delisting. There can be no assurance,
however, that Nasdaq will stay the delisting or that the Company will be able to
maintain compliance with the Nasdaq requirements for continued listing.
In the event the Company's Common Stock ceases to be listed on the Nasdaq
SmallCap Market, the Company believes that its Common Stock would continue to be
quoted and traded in either the OTC Bulletin Board or on the over-the-counter
market. However, the Company believes that the marketability of its Common Stock
would be negatively impacted if moved to either the OTC Bulletin Board or the
over-the-counter market. A decrease in the marketability of the Company's Common
Stock may cause a decline in the Company's stock price. The Company is currently
exploring possible courses of action and evaluating alternatives to comply with
Nasdaq's new continued listing requirements. There can be no assurance, however,
that pursuing available alternatives will result in the Company's continued
listing with the Nasdaq SmallCap Market.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
3.1 By-Laws of the Company, as amended.
27 Financial Data Schedule.
(b) Reports on Form 8-K.
On January 15, 1998, the Company filed a report on Form 8-K relating
the change in certifying accountants, for the fiscal year ended September
30, 1998, from Goldstein, Golub, Kessler & Company, P.C. to Arthur
Andersen LLP.
-21-
<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 15, 1998 By:/s/ Mark L. Weinstein
-------------------------------------
Mark L. Weinstein, President and
Chief Executive Officer
(Principal Executive Officer)
DATE: May 15, 1998 By:/s/ Robert J. Phillips
-------------------------------------
Robert J. Phillips, Vice President
and Chief Financial Officer
(Principal Financial and Accounting
Officer)
-22-
<PAGE>
AMENDED BY-LAWS
---------------
OF
--
BIO-IMAGING TECHNOLOGIES, INC.
------------------------------
(FORMERLY WISE VENTURES, INC.)
INITIALLY ADOPTED MAY 11, 1987
------------------------------
ARTICLE I - OFFICES
-------------------
The office of the Corporation shall be located in the City and State designated
in the Articles of Incorporation. The Corporation may also maintain offices at
such other places within or without the United States as the Board of Directors
may, from time to time, determine.
ARTICLE II - MEETING OF SHAREHOLDERS
------------------------------------
Section l - Annual Meetings:
- ----------------------------
The annual meeting of the shareholders of the Corporation shall be held within
five months after the close of the fiscal year of the Corporation, for the
purpose of electing directors, and transacting such other business as may
properly come before the meeting.
Section 2 - Special Meetings:
- -----------------------------
Special meetings of the shareholders may be called at any time by the Board of
Directors or by the President, or as otherwise required under the provisions of
the Delaware General Corporation Law.
Section 3 - Place of Meetings:
- ------------------------------
All meetings of shareholders shall be held at the principal office of the
Corporation, or at such other places as shall be designated in the notices or
waivers of notice of such meetings.
Section 4 - Notice of Meetings:
- -------------------------------
(a) Except as otherwise provided by Statute, written notice of each meeting of
shareholders, whether annual or special, stating the time when and place where
it is to be held, shall be served either personally or by mail, not less than
ten or more than fifty days before the meeting, upon each shareholder of record
entitled to vote at such meeting, and to any other shareholder to whom the
giving of notice may be required by law. Notice of a special meeting shall also
state the purpose or purposes for which the meeting is called, and shall
indicate that it is being issued by, or at the direction of, the person or
persons calling the meeting. If, at any meeting, action is proposed to be taken
that would, if taken, entitle shareholders to receive payment for their shares
By-Laws - 1
<PAGE>
pursuant to Statute, the notice of such meeting shall include a statement of
that purpose and to that effect. If mailed, such notice shall be directed to
each such shareholder at his address, as it appears on the records of the
shareholders of the Corporation, unless he shall have previously filed with the
Secretary of the Corporation a written request that notices intended for him be
mailed to some other address, in which case, it shall be mailed to the address
designated in such request.
(b) Notice of any meeting need not be given to any person who may become a
shareholder of record after the mailing of such notice and prior to the meeting,
or to any shareholder who attends such meeting, in person or by proxy, or to any
shareholder who, in person or by proxy, submits a signed waiver of notice either
before or after such meeting. Notice of any adjourned meeting of shareholders
need not be given, unless otherwise required by statute.
Section 5 - Quorum:
- -------------------
(a) Except as otherwise provided herein, or by statute, or in the Certificate of
Incorporation (such Certificate and any amendments thereof being hereinafter
collectively referred to as the "Certificate of Incorporation"), at all meetings
of shareholders of the Corporation, the presence at the commencement of such
meetings in person or by proxy of shareholders holding of record a majority of
the total number of shares of the Corporation then issued and outstanding and
entitled to vote, shall be necessary and sufficient to constitute a quorum for
the transaction of any business. The withdrawal of any shareholder after the
commencement of a meeting shall have no effect on the existence of a quorum,
after a quorum has been established at such meeting.
(b) Despite the absence of a quorum at any annual or special meeting of
shareholders, the shareholders, by a majority of the votes cast by the holders
of shares entitled to vote thereon, may adjourn the meeting. At any such
adjourned meeting at which a quorum is present, any business may be transacted
at the meeting as originally called if a quorum had been present.
Section 6 - Voting:
- -------------------
(a) Except as otherwise provided by statute or by the Certificate of
Incorporation, any corporate action, other than the election of directors, to be
taken by vote of the shareholders, shall be authorized by a majority of votes
cast at a meeting of shareholders by the holders of shares entitled to vote
thereon.
(b) Except as otherwise provided by statute or by the Certificate of
Incorporation, at each meeting of shareholders, each holder of record of stock
of the Corporation entitled to vote thereat, shall be entitled to one vote for
each share of stock registered in his name on the books of the Corporation.
(c) Each shareholder entitled to vote or to express consent or dissent without a
meeting, may do so by proxy; provided, however, that the instrument authorizing
such proxy to act shall have been executed in writing by the shareholder
himself, or by his attorney-in-fact thereunto duly authorized in writing. No
proxy shall be valid after the expiration of eleven months from the
By-Laws - 2
<PAGE>
date of its execution, unless the person executing it shall have specified
therein the length of time it is to continue in force. Such instrument shall be
exhibited to the Secretary at the meeting and shall be filed with the records of
the Corporation.
(d) Any resolution in writing, signed by all of the shareholders entitled to
vote thereon, shall be and constitute action by such shareholders to the effect
therein expressed, with the same force and effect as if the same had been duly
passed by unanimous vote at a duly called meeting of shareholders and such
resolution so signed shall be inserted in the Minute Book of the Corporation
under its proper date.
ARTICLE III - BOARD OF DIRECTORS
--------------------------------
Section 1 - Number, Election and Term of Office:
- ------------------------------------------------
(a) The number of the directors of the Corporation shall be four (4) unless and
until otherwise determined by vote of a majority of the entire Board of
Directors. The number of Directors shall not be less than three, unless all of
the outstanding shares are owned beneficially and of record by less than three
shareholders, in which event the number of directors shall not be less than the
number of shareholders permitted by statute.
(b) Except as may otherwise be provided herein or in the Certificate of
Incorporation, the members of the Board of Directors of the Corporation, who
need not be shareholders, shall be elected by a majority of the votes cast at a
meeting of shareholders, by the holders of shares, present in person or by
proxy, entitled to vote in the election.
(c) Each director shall hold office until the annual meeting of the shareholders
next succeeding his election, and until his successor is elected and qualified,
or until his prior death, resignation or removal.
Section 2 - Duties and Powers:
- ------------------------------
The Board of Directors shall be responsible for the control and management of
the affairs, property and interests of the Corporation, and may exercise all
powers of the Corporation, except as are in the Certificate of Incorporation or
by statute expressly conferred upon or reserved to the shareholders.
Section 3 - Annual and Regular Meetings; Notice:
- ------------------------------------------------
(a) A regular annual meeting of the Board of Directors shall be held immediately
following the annual meeting of the shareholders, at the place of such annual
meeting of shareholders.
(b) The Board of Directors, from time to time, may provide by resolution for the
holding of other regular meetings of the Board of Directors, and may fix the
time and place thereof.
By-Laws - 3
<PAGE>
(c) Notice of any regular meeting of the Board of Directors shall not be
required to be given and, if given, need not specify the purpose of the meeting;
provided, however, that in case the Board of Directors shall fix or change the
time or place of any regular meeting, notice of such action shall be given to
each director who shall not have been present at the meeting at which such
action was taken within the time limited, and in the manner set forth in
paragraph (b) Section 4 of this Article III, with respect to special meetings,
unless such notice shall be waived in the manner set forth in paragraph (c) of
such Section 4.
Section 4 - Special Meetings; Notice
- ------------------------------------
(a) Special meetings of the Board of Directors shall be held whenever called by
the President or by one of the directors, at such time and place as may be
specified in the respective notices or waivers of notice thereof.
(b) Except as otherwise required by statute, notice of special meetings shall be
mailed directly to each director, addressed to him at his residence or usual
place of business, at least two (2) days before the day on which the meeting is
to be held, or shall be sent to him at such place by telegram, radio or cable,
or shall be delivered to him personally or given to him orally, not later than
the day before the day on which the meeting is to be held. A notice, or waiver
of notice, except as required by Section 8 of this Article III, need not specify
the purpose of the meeting.
(c) Notice of any special meeting shall not be required to be given to any
director who shall attend such meeting without protesting prior thereto or at
its commencement, the lack of notice to him, or who submits a signed waiver of
notice, whether before or after the meeting. Notice of any adjourned meeting
shall not be required to be given.
Section 5 - Chairman:
- ---------------------
At all meetings of the Board of Directors, the Chairman of the Board, if any and
if present, shall preside. If there shall be no Chairman, or he shall be absent,
then the President shall preside, and in his absence, a Chairman chosen by the
directors shall preside.
Section 6 - Quorum and Adjournments:
- ------------------------------------
(a) At all meetings of the Board of Directors, the presence of a majority of the
entire Board shall be necessary and sufficient to constitute a quorum for the
transaction of business, except as otherwise provided by law, by the Certificate
of Incorporation, or by these By-Laws.
(b) A majority of the directors present at the time and place of any regular or
special meeting, although less than a quorum, may adjourn the same from time to
time without notice, until a quorum shall be present.
By-Laws - 4
<PAGE>
Section 7 - Manner of Acting:
- -----------------------------
(a) At all meetings of the Board of Directors, each director present shall have
one vote, irrespective of the number of shares of stock, if any, which he may
hold.
(b) Except as otherwise provided by statute, by the Certificate of
Incorporation, or by these By-Laws, the action of a majority of the directors
present at any meeting at which a quorum is present shall be the act of the
Board of Directors. Any action authorized, in writing, by all of the directors
entitled to vote thereon and filed with the minutes of the corporation shall be
the act of the Board of Directors with the same force and effect as if the same
had been passed by unanimous vote at a duly called meeting of the Board.
Section 8 - Vacancies:
- ----------------------
Any vacancy in the Board of Directors occurring by reason of an increase in the
number of directors, or by reason of the death, resignation, disqualification,
removal (unless a vacancy created by the removal of a director by the
shareholders shall be filled by the shareholders at the meeting at which the
removal was effected) or inability to act of any director, or otherwise, shall
be filled for the unexpired portion of the term by a majority vote of the
remaining directors, though less than a quorum, at any regular meeting or
special meeting of the Board of Directors called for that purpose.
Section 9 - Resignation:
- ------------------------
Any director may resign at any time by giving written notice to the Board of
Directors, the President or the Secretary of the Corporation. Unless otherwise
specified in such written notice, such resignation shall take effect upon
receipt thereof by the Board of Directors or such officer, and the acceptance of
such resignation shall not be necessary to make it effective.
Section 10 - Removal:
- ---------------------
Any director may be removed with or without cause at any time by the affirmative
vote of shareholders holding of record in the aggregate at least a majority of
the outstanding shares of the Corporation at a special meeting of the
shareholders called for that purpose, and may be removed for cause by action of
the Board.
Section 11 - Salary:
- --------------------
No stated salary shall be paid to directors, as such, for their services, but by
resolution of the Board of Directors a fixed sum and expenses of attendance, if
any, may be allowed for attendance at each regular or special meeting of the
Board; provided, however, that nothing herein contained shall be construed to
preclude any director from serving the Corporation in any other capacity and
receiving compensation therefor.
By-Laws - 5
<PAGE>
Section 12 - Contracts:
- -----------------------
(a) No contract or other transaction between this Corporation and any other
Corporation shall be impaired, affected or invalidated, nor shall any director
be liable in any way by reason of the fact that any one or more of the directors
of this Corporation is or are interested in, or is a director or officer, or are
directors or officers of such other Corporation, provided that such facts are
disclosed or made known to the Board of Directors.
(b) Any director, personally and individually, may be a party to or may be
interested in any contract or transaction of this Corporation, and no director
shall be liable in any way by reason of such interest, provided that the fact of
such interest be disclosed or made known to the Board of Directors, and provided
that the Board of Directors shall authorize, approve or ratify such contract or
transaction by the vote (not counting the vote of any such director) of a
majority of a quorum, notwithstanding the presence of any such director at the
meeting at which such action is taken. Such director or directors may be counted
in determining the presence of a quorum at such meeting. This Section shall not
be construed to impair or invalidate or in any way affect any contract or other
transaction which would otherwise be valid under the law (common, statutory or
otherwise) applicable thereto.
Section 13 - Committees:
- ------------------------
The Board of Directors, by resolution adopted by a majority of the entire Board,
may from time to time designate from among its members an executive committee
and such other committees, and alternate members thereof, as they may deem
desirable, each consisting of three or more members, with such powers and
authority (to the extent permitted by law) as may be provided in such
resolution. Each such committee shall serve at the pleasure of the Board.
ARTICLE IV - OFFICERS
---------------------
Section 1 - Number, Qualifications, Election and Term of Office:
- ----------------------------------------------------------------
(a) The officers of the Corporation shall consist of a President, a Secretary, a
Treasurer, and such other officers, including a Chairman of the Board of
Directors, and one or more Vice Presidents, as the Board of Directors may from
time to time deem advisable. Any officer other than the Chairman of the Board of
Directors may be, but is not required to be, a director of the Corporation. Any
two or more offices may be held by the same person.
(b) The officers of the Corporation shall be elected by the Board of Directors
at the regular annual meeting of the Board following the annual meeting of
shareholders.
(c) Each officer shall hold office until the annual meeting of the Board of
Directors next succeeding his election, and until his successor shall have been
elected and qualified, or until his death, resignation or removal.
By-Laws - 6
<PAGE>
Section 2 - Resignation:
- ------------------------
Any officer may resign at any time by giving written notice of such resignation
to the Board of Directors, or to the President or the Secretary of the
Corporation. Unless otherwise specified in such written notice, such resignation
shall take effect upon receipt thereof by the Board of Directors or by such
officer, and the acceptance of such resignation shall not be necessary to make
it effective.
Section 3 - Removal:
- --------------------
Any officer may be removed, either with or without cause, and a successor
elected by a majority vote of the Board of Directors at any time.
Section 4 - Vacancies:
- ----------------------
A vacancy in any office by reason of death, resignation, inability to act,
disqualification, or any other cause, may at any time be filled for the
unexpired portion of the term by a majority vote of the Board of Directors.
Section 5 - Duties of Officers:
- -------------------------------
Officers of the Corporation shall, unless otherwise provided by the Board of
Directors, each have such powers and duties as generally pertain to their
respective offices as well as such powers and duties as may be set forth in
these by-laws, or may from time to time be specifically conferred or imposed by
the Board of Directors. The President shall be the chief executive officer of
the Corporation.
Section 6 - Sureties and Bonds:
- -------------------------------
In case the Board of Directors shall so require, any officer, employee or agent
of the Corporation shall execute to the Corporation a bond in such sum, and with
such surety or sureties as the Board of Directors may direct, conditioned upon
the faithful performance of his duties to the Corporation, including
responsibility for negligence and for the accounting for all property, funds or
securities of the Corporation which may come into his hands.
Section 7 - Shares of Other Corporations:
- -----------------------------------------
Whenever the Corporation is the holder of shares of any other Corporation, any
right or power of the Corporation as such shareholder (including the attendance,
acting and voting at shareholders' meetings and execution of waivers, consents,
proxies or other instruments) may be exercised on behalf of the Corporation by
the President, any Vice President, or such other person as the Board of
Directors may authorize.
By-Laws - 7
<PAGE>
ARTICLE V - SHARES OF STOCK
---------------------------
Section 1 - Certificate of Stock:
- ---------------------------------
(a) The certificates representing shares of the Corporation shall be in such
form as shall be adopted by the Board of Directors, and shall be numbered and
registered in the order issued. They shall bear the holder's name and the number
of shares, and shall be signed by (i) the Chairman of the Board or the President
or a Vice President, and (ii) the Secretary or Treasurer, or any Assistant
Secretary or Assistant Treasurer, and shall bear the corporate seal.
(b) No certificate representing shares shall be issued until the full amount of
consideration therefor has been paid, except as otherwise permitted by law.
(c) To the extent permitted by law, the Board of Directors may authorize the
issuance of certificates for fractions of a share which shall entitle the holder
to exercise voting rights, receive dividends and participate in liquidating
distributions, in proportion to the fractional holdings; or it may authorize the
payment in cash of the fair value of fractions of a share as of the time when
those entitled to receive such fractions are determined; or it may authorize the
issuance, subject to such conditions as may be permitted by law, of scrip in
registered or bearer form over the signature of an officer or agent of the
Corporation, exchangeable as therein provided for full shares, but such scrip
shall not entitle the holder to any rights of a shareholder, except as therein
provided.
Section 2 - Lost or Destroyed Certificates:
- -------------------------------------------
The holder of any certificate representing shares of the Corporation shall
immediately notify the Corporation of any loss or destruction of the certificate
representing the same. The Corporation may issue a new certificate in the place
of any certificate theretofore issued by it, alleged to have been lost or
destroyed. On production of such evidence of loss or destruction as the Board of
Directors in its discretion may require, the Board of Directors may, in its
discretion, require the owner of the lost or destroyed certificate, or his legal
representatives, to give the Corporation a bond in such sum as the Board may
direct, and with such surety or sureties as may be satisfactory to the Board, to
indemnify the Corporation against any claims, loss, liability or damage it may
suffer on account of the issuance of the new certificate. A new certificate may
be issued without requiring any such evidence or bond when, in the judgment of
the Board of Directors, it is proper so to do.
Section 3 - Transfers of Shares:
- --------------------------------
(a) Transfers of shares of the Corporation shall be made on the share records of
the Corporation only by the holder of record thereof, in person or by his duly
authorized attorney, upon surrender for cancellation of the certificate or
certificates representing such shares, with an assignment or power of transfer
endorsed thereon or delivered therewith, duly executed, with such proof of the
authenticity of the signature and of authority to transfer and of payment of
transfer taxes as the Corporation or its agents may require.
By-Laws - 8
<PAGE>
(b) The Corporation shall be entitled to treat the holder of record of any share
or shares as the absolute owner thereof for all purposes and, accordingly, shall
not be bound to recognize any legal, equitable or other claim to, or interest
in, such share or shares on the part of any other person, whether or not it
shall have express or other notice thereof, except as otherwise expressly
provided by law.
Section 4 - Record Date:
- ------------------------
In lieu of closing the share records of the Corporation, the Board of Directors
may fix, in advance, a date not exceeding fifty days nor less than ten days, as
the record date for determination of shareholders entitled to receive notice of,
or to vote at, any meeting of shareholders, or to consent to any proposal
without a meeting, or for the purpose of determining shareholders entitled to
receive payment of any dividends, or allotment of any rights, or for the purpose
of any other action. If no record date is fixed, the record date for the
determination of shareholders entitled to notice of or to vote at a meeting of
shareholders shall be at the close of business on the day next preceding the day
on which notice is given, or, if no notice is given, the day on which the
meeting is held; the record date for determining shareholders for any other
purpose shall be at the close of business on the day on which the resolution of
the directors relating thereto is adopted. When a determination of shareholders
of record entitled to notice of or to vote at any meeting of shareholders has
been made as provided for herein, such determination shall apply to any
adjournment thereof, unless the directors fix a new record date for the
adjourned meeting.
ARTICLE VI - DIVIDENDS
----------------------
Subject to applicable law, dividends may be declared and paid out of any funds
available therefor, as often, in such amounts, and at such time or times as the
Board of Directors may determine.
ARTICLE VII - FISCAL YEAR
-------------------------
The fiscal year of the Corporation shall be fixed by the Board of Directors from
time to time, subject to applicable law.
ARTICLE VIII - CORPORATE SEAL
-----------------------------
The corporate seal, if any, shall be in such form as shall be approved from time
to time by the Board of Directors.
By-Laws - 9
<PAGE>
ARTICLE IX - AMENDMENTS
-----------------------
Section 1 - By Shareholders:
- ----------------------------
All by-laws of the Corporation shall be subject to alteration or repeal, and new
by-laws may be made, by the affirmative vote of shareholders holding of record
in the aggregate at least a majority of the outstanding shares entitled to vote
in the election of directors at any annual or special meeting of shareholders,
provided that the notice or waiver of notice of such meeting shall have
summarized or set forth in full therein, the proposed amendment.
Section 2 - By Directors:
- -------------------------
The Board of Directors shall have power to make, adopt, alter, amend and repeal,
from time to time, by-laws of the Corporation; provided, however, that the
shareholders entitled to vote with respect thereto as in this Article IX
above-provided may alter, amend or repeal by-laws made by the Board of
Directors, except that the Board of Directors shall have no power to change the
quorum for meetings of shareholders or of the Board of Directors, or to change
any provisions of the by-laws with respect to the removal of directors or the
filling of vacancies in the Board resulting from the removal by the
shareholders. If any by-law regulating an impending election of directors is
adopted, amended or repealed by the Board of Directors, there shall be set forth
in the notice of the next meeting of shareholders for the election of directors,
the by-law so adopted, amended or repealed together with a concise statement of
the changes made.
ARTICLE X - INDEMNITY
---------------------
(a) Any person made a party to any action, suit or proceeding, by reason of the
fact that he, his testator or intestate representative is or was a director,
officer or employee of the Corporation, or of any Corporation in which he served
as such at the request of the Corporation, shall be indemnified by the
Corporation against the reasonable expenses, including attorney's fees, actually
and necessarily incurred by him in connection with the defense of such action,
suit or proceedings, or in connection with any appeal therein, except in
relation to matters as to which it shall be adjudged in such action, suit or
proceeding, or in connection with any appeal therein that such officer, director
or employee is liable for negligence or misconduct in the performance of his
duties.
(b) The foregoing right of indemnification shall not be deemed exclusive of any
other rights to which any officer or director or employee may be entitled apart
from the provisions of this section.
(c) The amount of indemnity to which any officer or any director may be entitled
shall be fixed by the Board of Directors, except that in any case where there is
no disinterested majority of the Board available, the amount shall be fixed by
arbitration pursuant to the then existing rules of the American Arbitration
Association.
By-Laws - 10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
unaudited interim consolidated financial statements as of March 31, 1998 and
March 31, 1997 contained in the Registrant's Quarterly Reports on Form 10-QSB
for each of the periods ended March 31, 1998 and March 31, 1997, and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000822418
<NAME> Bio-Imaging Technologies, Inc.
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> SEP-30-1998 SEP-30-1997
<PERIOD-START> OCT-01-1997 OCT-01-1997
<PERIOD-END> MAR-31-1998 MAR-31-1997
<EXCHANGE-RATE> 1 1
<CASH> 1,892,827 1,536,930
<SECURITIES> 0 0
<RECEIVABLES> 1,202,938 1,308,322
<ALLOWANCES> 20,000 60,000
<INVENTORY> 0 0
<CURRENT-ASSETS> 3,185,798 2,815,554
<PP&E> 4,098,418 3,417,927
<DEPRECIATION> 2,616,566 1,992,708
<TOTAL-ASSETS> 4,723,609 4,256,237
<CURRENT-LIABILITIES> 991,390 1,237,284
<BONDS> 1,862 50,654
0 0
104 104
<COMMON> 1,944 1,554
<OTHER-SE> 3,728,309 2,966,641
<TOTAL-LIABILITY-AND-EQUITY> 4,723,609 4,256,237
<SALES> 0 0
<TOTAL-REVENUES> 2,063,911 2,626,401
<CGS> 0 0
<TOTAL-COSTS> 962,721 954,987
<OTHER-EXPENSES> 1,987,638 1,321,450
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> (49,631) (19,277)
<INCOME-PRETAX> (836,817) 369,241
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (836,817) 369,241
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (836,817) 369,241
<EPS-PRIMARY> (0.11)<F1> 0.06<F3>
<EPS-DILUTED> (0.11)<F2> 0.05<F4>
<FN>
<F1> This amount represents Basic Earnings per Share in accordance with the
requirements of Statement of Financial Accounting Standards No. 128 -
"Earnings per Share."
<F2> This amount represents Diluted Earnings per Share in accordance with the
requirements of Statement of Financial Accounting Standards No. 128 -
"Earnings per Share."
<F3> This amount represents Basic Earnings per Share restated in accordance with
the requirements of Statement of Financial Accounting Standards No. 128 -
"Earnings per Share."
<F4> This amount represents Diluted Earnings per Share restated in accordance
with the requirements of Statement of Financial Accounting Standards No.
128 - "Earnings per Share."
</FN>
</TABLE>
