SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
Commission File No. 1-11182
BIO-IMAGING TECHNOLOGIES, INC.
-----------------------------------------------------------------
(Exact Name of Small Business Issuer as Specified in Its Charter)
Delaware 11-2872047
- -------------------------------- ------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
830 Bear Tavern Road, West Trenton, New Jersey 08628-1020
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(609) 883-2000
------------------------------
(Issuer's Telephone Number,
Including Area Code)
Check whether the Issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
Yes: X No:
---- ----
State the number of shares outstanding of each of the Issuer's classes of
common stock, as of March 31, 1999:
Class Number of Shares
- ----- ----------------
Common Stock, $.00025 par value 7,773,878
Transitional Small Business Disclosure Format (check one):
Yes: No: X
---- ----
<PAGE>
BIO-IMAGING TECHNOLOGIES, INC. AND SUBSIDIARIES
-----------------------------------------------
TABLE OF CONTENTS
-----------------
Page
----
PART I FINANCIAL INFORMATION
Item 1. Financial Statements......................................... 1
CONSOLIDATED BALANCE SHEETS
as of March 31, 1999 (unaudited) and
September 30, 1998................................................ 2
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Six Months Ended March 31, 1999 and 1998
(unaudited)....................................................... 3
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended March 31, 1999 and 1998
(unaudited)....................................................... 4
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended March 31, 1999 and 1998
(unaudited)....................................................... 5
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (unaudited)............................................ 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.......................... 9
Results of Operations............................................. 10
Liquidity and Capital Resources................................... 15
PART II OTHER INFORMATION
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............................. 22
SIGNATURES.................................................................. 23
- i -
<PAGE>
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 such financial 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,
1998.
The results of operations for the interim periods presented herein are not
necessarily indicative of the results to be expected for the entire fiscal year.
-1-
<PAGE>
BIO-IMAGING TECHNOLOGIES, INC. AND SUBSIDIARIES
-----------------------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
March 31, September 30,
1999 1998
--------------- --------------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents..................... $ 567,980 $ 1,527,330
Accounts receivable, net...................... 1,551,803 626,376
Prepaid expenses and other current assets..... 133,022 84,747
---------- ----------
Total current assets........................ 2,252,805 2,238,453
Property and equipment, net..................... 1,317,883 1,543,434
Other assets ................................... 31,305 32,235
---------- ----------
Total assets................................ $ 3,601,993 $ 3,814,122
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Deferred revenue.............................. $ 403,865 $ 522,605
Accounts payable.............................. 160,358 142,071
Accrued expenses and other current
liabilities................................. 366,396 261,063
Current maturities of long-term debt.......... 74,118 49,956
---------- ----------
Total current liabilities................... 1,004,737 975,695
Long-term debt.................................. 80,951 26,808
---------- ----------
Total liabilities........................... 1,085,688 1,002,503
---------- ----------
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 shares issued
and outstanding at March 31, 1999 and
September 30, 1998........................... 1,944 1,944
Additional paid-in capital.................... 9,231,497 9,231,497
Accumulated deficit........................... (6,717,240) (6,421,926)
---------- ----------
Stockholders' equity........................ 2,516,305 2,811,619
---------- ----------
Total liabilities and stockholders' equity.. $ 3,601,993 $ 3,814,122
========== ==========
See Notes to Consolidated Financial Statements
-2-
<PAGE>
BIO-IMAGING TECHNOLOGIES, INC. AND SUBSIDIARIES
-----------------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
(unaudited)
For the Six Months Ended
March 31,
--------------------------------
1999 1998
---- ----
Project revenues............................... $ 2,152,760 $ 2,063,911
----------- -----------
Cost and expenses:
Cost of revenues........................... 1,194,788 962,721
General and administrative expenses........ 648,495 764,096
Sales and marketing expenses............... 481,528 526,097
Research and development expenses.......... 116,381 139,309
Non-recurring charges...................... -- 558,136
----------- -----------
Total cost and expenses........................ 2,441,192 2,950,359
----------- -----------
Loss from operations........................... (288,432) (886,448)
Interest income - net.......................... 13,118 49,631
----------- -----------
Net loss....................................... (275,314) (836,817)
Dividends on preferred stock................... 20,000 20,000
----------- -----------
Net loss applicable to common stock............ $ (295,314) $ (856,817)
=========== ===========
Basic loss per common share.................... $ (0.04) $ (0.11)
=========== ===========
Weighted average number of common
shares....................................... 7,773,878 7,770,563
=========== ===========
Diluted loss per common share.................. $ (0.04) $ (0.11)
=========== ===========
Weighted average number of common and dilutive
common equivalent shares..................... 7,773,878 7,770,563
=========== ===========
See Notes to Consolidated Financial Statements
-3-
<PAGE>
BIO-IMAGING TECHNOLOGIES, INC. AND SUBSIDIARIES
-----------------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
(unaudited)
For the Three Months Ended
March 31,
-------------------------------
1999 1998
---- ----
Project revenues............................... $ 1,328,468 $ 945,815
----------- -----------
Cost and expenses:
Cost of revenues........................... 634,027 458,218
General and administrative expenses........ 331,096 295,337
Sales and marketing expenses............... 240,211 249,163
Research and development expenses.......... 56,813 66,653
Non-recurring charges...................... -- 408,136
----------- -----------
Total cost and expenses........................ 1,262,147 1,477,507
----------- -----------
Income (loss) from operations.................. 66,321 (531,692)
Interest income - net.......................... 4,189 22,933
----------- -----------
Net income (loss).............................. 70,510 (508,759)
Dividends on preferred stock................... 10,000 10,000
----------- -----------
Net income (loss) applicable to common stock... $ 60,510 $ (518,759)
=========== ===========
Basic earnings (loss) per common share......... $ 0.01 $ (0.07)
=========== ===========
Weighted average number of common
shares....................................... 7,773,878 7,773,878
=========== ===========
Diluted earnings (loss) per common share....... $ 0.01 $ (0.07)
=========== ===========
Weighted average number of common and dilutive
common equivalent shares..................... 7,773,878 7,773,878
=========== ===========
See Notes to Consolidated Financial Statements
-4-
<PAGE>
BIO-IMAGING TECHNOLOGIES, INC. AND SUBSIDIARIES
-----------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(unaudited)
For the Six Months Ended
March 31,
------------------------------
1999 1998
---- ----
Cash flows from operating activities:
Net loss .................................... $ (275,314) $ (836,817)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization.............. 273,774 308,656
Changes in operating assets and liabilities:
(Increase) decrease in accounts
receivable............................ (925,427) 31,114
Increase in prepaid expenses and other
current assets........................ (48,275) (21,515)
Decrease in other assets................. 930 11,117
Decrease in deferred revenue............. (118,740) (92,462)
Increase in accounts payable............. 18,287 92,619
Increase in accrued expenses and other
current liabilities................... 105,333 206,899
----------- -----------
Net cash used in operating activities.... (969,432) (300,389)
----------- -----------
Cash flows from investing activities:
Purchases of property and equipment.......... (48,223) (118,969)
----------- -----------
Net cash used in investing activities.... (48,223) (118,969)
----------- -----------
Cash flows from financing activities:
Payments under equipment lease obligations... (31,695) (51,086)
Dividends paid on preferred stock............ (20,000) (20,286)
Proceeds from notes payable.................. 110,000 -
Proceeds from exercise of stock options...... - 15,899
----------- -----------
Net cash provided by (used in) financing
activities............................. 58,305 (55,473)
----------- -----------
Net decrease in cash and cash equivalents...... (959,350) (474,831)
Cash and cash equivalents at beginning of
period........................................ 1,527,330 2,367,658
----------- -----------
Cash and cash equivalents at end of period..... $ 567,980 $ 1,892,827
=========== ===========
Supplemental disclosures of cash flow
information:
Cash paid during the period for interest..... $ 2,298 $ 3,878
=========== ===========
See Notes to Consolidated Financial Statements
-5-
<PAGE>
BIO-IMAGING TECHNOLOGIES, INC. AND SUBSIDIARIES
-----------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(unaudited)
Note 1 - Basis of Presentation:
The financial statements included herein have been prepared by the Company,
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations. These consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes thereto
included in the Company's Annual Report on Form 10-KSB for the year ended
September 30, 1998.
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, 1999, the results of its operations for the
three-month and six-month periods ended March 31, 1999 and 1998 and its cash
flows for the six-month periods ended March 31, 1999 and March 31, 1998.
Interim results are not necessarily indicative of results for the full
fiscal year.
Basic earnings (loss) per common share was calculated based upon the net
loss available to common stockholders divided by the weighted average number of
shares of common stock outstanding during the period. Diluted earnings per
common share for the three months ended March 31, 1999 exclude the impact of
preferred stock and options and warrants as they are antidilutive. Diluted loss
per common share for the three months ended March 31, 1998 and six months ended
March 31, 1999 and 1998 exclude the impact of preferred stock and options and
warrants as they are antidilutive.
-6-
<PAGE>
BIO-IMAGING TECHNOLOGIES, INC. AND SUBSIDIARIES
-----------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(unaudited)
Note 1 - Basis of Presentation: (continued)
The computation of basic (loss) earnings per common share and diluted
(loss) earnings per common share were as follows:
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
March 31, March 31,
------------------------------- ------------------------------
1999 1998 1999 1998
-------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
Net (loss) income.................. $ (275,314) $ (836,817) $ 70,510 $ (508,759)
Dividends on preferred stock....... 20,000 20,000 10,000 10,000
----------- ----------- ---------- -----------
Net (loss) income applicable
to common stock - basic.......... $ (295,314) $ (856,817) $ 60,510 $ (518,759)
----------- ----------- ---------- -----------
Dilutive dividends on preferred
stock............................ -- -- -- --
----------- ----------- ---------- -----------
Net (loss) income applicable
to common stock - diluted........ $ (295,314) $ (856,817) $ 60,510 $ (518,759)
----------- ----------- ---------- -----------
Denominator:
Weighted average number of
common shares.................... 7,773,878 7,770,563 7,773,878 7,773,878
Basic (loss) earnings per
common share..................... $ (0.04) $ (0.11) $ 0.01 $ (0.07)
=========== =========== =========== ===========
Denominator:
Weighted average number of
common shares.................... 7,773,878 7,770,563 7,773,878 7,773,878
Common share equivalents of
outstanding stock options and
warrants......................... -- -- -- --
Common share equivalents of
dilutive outstanding preferred
stock............................ -- -- -- --
----------- ----------- ---------- -----------
Total shares....................... 7,773,878 7,770,563 7,773,878 7,773,878
----------- ----------- ---------- -----------
Diluted (loss) earnings per
common share..................... $ (0.04) $ (0.11) $ 0.01 $ (0.07)
=========== =========== =========== ===========
</TABLE>
-7-
<PAGE>
BIO-IMAGING TECHNOLOGIES, INC. AND SUBSIDIARIES
-----------------------------------------------
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 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. The Company expects that 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 - Subsequent Event:
On April 23, 1999, the Company executed a letter of intent to acquire Bona
Fide, Ltd. ("Bona Fide"), an independent contract research organization that
provides DEXA QA/QC to the pharmaceutical industry for studies requiring bone
densitometry as well as studies requiring body composition measurements. Bona
Fide was founded in 1993 and has been a wholly owned subsidiary of the LUNAR
Corporation. Based on successful completion of the due diligence process, the
transaction is expected to close in May 1999, and all Bona Fide operations will
be relocated to the Company's corporate headquarters located in West Trenton,
New Jersey. There can be no assurance, however, that such acquisition will be
consummated on terms acceptable to the Company, if at all.
-8-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
OVERVIEW
The Company is a pharmaceutical contract service organization providing
services that support the product development process of the pharmaceutical,
biotechnology and medical device industries. The Company specializes in
assisting its clients in the design and management of the medical-imaging
component of clinical trials. The Company provides services which include the
processing and analysis of medical images and the data-basing and regulatory
submission of medical images, quantitative data and text. Although the Company
experienced a loss for the six months ended March 31, 1999, the Company's
project revenues increased as compared to the same period last year. In
addition, the Company was profitable for the three months ended March 31, 1999
as compared to a net loss for the same period last year. Project revenues were
generated from 25 clients encompassing 39 projects for the six months ended
March 31, 1999 as compared to 22 clients encompassing 32 projects for the same
period last year.
The Company's sales cycle (the period from the presentation by the Company
to a potential client to the engagement of the Company by such client) is
generally nine months. In addition, the contracts under which the Company is
engaged to perform services typically cover a period of 12 to 36 months and the
volume and type of services performed by the Company generally vary during the
course of a project. In an effort to expand its client base, obtain additional
contracts and generate additional revenues, the Company increased its sales and
marketing efforts during the fiscal year ended September 30, 1998. As of March
31, 1999, the Company believes that these efforts are beginning to yield
positive results. No assurance can be made that the Company's project revenues
will increase to levels required to maintain profitability.
The Company believes that demand for its services and technologies will
grow during the longer term as the use of digital technologies for data
acquisition and management increases in the radiology and drug development
communities. The Company also believes that there is a growing recognition
within the bio-pharmaceutical industry regarding the use of an independent
centralized core laboratory for analysis of medical imaging data that is derived
from clinical trials and the rigorous regulatory requirements relating to the
submission of this data. 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, without limitation, 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.
-9-
<PAGE>
Certain matters discussed in the Form 10-QSB are "forward-looking
statements" intended to qualify for the safe harbors from liability established
by the Private Securities Litigation Reform Act of 1995. In particular, the
Company's statements regarding the demand for the Company's services and
technologies, growing recognition for the use of independent centralized core
laboratories, trends toward the outsourcing of imaging services in clinical
trials, realized return from the Company's marketing efforts and increased use
of digital medical images in clinical trials are examples of such
forward-looking statements. The forward-looking statements include risks and
uncertainties, including, but not limited to, the timing of revenues due to the
variability in size, scope and duration of projects, regulatory delays, clinical
study results which lead to reductions or cancellations of projects, and other
factors, including general economic conditions and regulatory developments, not
within the Company's control. 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. The
forward-looking statements are made only as of the date of this filing and the
Company undertakes no obligation to publicly update such forward-looking
statements to reflect subsequent events or circumstances.
RESULTS OF OPERATIONS
Six Months Ended March 31, 1999 and 1998
----------------------------------------
Project revenues for the six months ended March 31, 1999 and 1998 were
approximately $2,153,000 and $2,064,000, respectively, an increase of
approximately $89,000 or 4.3%. Project revenues in the six months ended March
31, 1999 and 1998 were derived from 25 clients encompassing 39 projects and 22
clients encompassing 32 projects, respectively. Two clients represented
approximately 34.4% of the Company's project revenues for the six months ended
March 31, 1999. For the comparable period last year, three clients represented
approximately 61.0% of the Company's project revenues with one European client
representing 34.9% or $721,000 of project revenues. The increase in project
revenues is primarily a result of the increase in the number of clients and
projects for which the Company was engaged to perform services. This increase
resulted primarily from the increase in the Company's sales and marketing
efforts over the past year. The Company's scope of work in both periods included
medical imaging core laboratory services and image-based information management
services.
Cost of revenues for the six months ended March 31, 1999 and 1998 were
comprised of professional salaries and benefits and allocated overhead. Cost of
revenues for the six months ended March 31, 1999 and 1998 were approximately
$1,195,000 and $963,000, respectively, an increase of approximately $232,000 or
24.1%. This increase is primarily attributable to an increase in staffing levels
required for project related tasks for the six months ended March 31, 1999 as
compared to the same period in the prior year.
The difference between project revenues and cost of revenues for the six
months ended March 31, 1999 decreased as a percentage to project revenues
compared to the six months ended March 31, 1998. This is primarily due to a
higher gross profit margin generated from work
-10-
<PAGE>
performed on the one European client, which represented 34.9% of project
revenues for the six months ended March 31, 1998, compared to the gross profit
margin generated from work performed on the Company's other clients for the six
months ended March 31, 1999. The higher gross margin during the six months ended
March 31, 1998 also resulted from the mix of services and the fees associated
with the work performed by the Company for this European client. In addition,
the Company increased its staffing levels during the six months ended March 31,
1999 to support its existing contracts and in anticipation of future business.
General and administrative expenses in each of the six months ended March
31, 1999 and 1998 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
$648,000 in the six months ended March 31, 1999 and approximately $764,000 in
the six months ended March 31, 1998. The decrease during the six months ended
March 31, 1999 of approximately $116,000 or 15.2%, from the corresponding fiscal
1998 period, resulted primarily from the elimination of expenditures in support
of the former Marketing Information Services Division (the "MISD") and Data
Management and Information Systems Division (the "DMISD") and personnel costs
associated with former executive officers who resigned in December 1997. Such
personnel costs were independent of the expenditures that supported the former
MISD and DMISD divisions. This decrease was offset, in part, by personnel costs
associated with the appointment of a new President and Chief Executive Officer
after the three months ended December 31, 1997.
Sales and marketing expenses in each of the six months ended March 31, 1999
and 1998 were comprised of direct sales and marketing costs, professional
salaries and benefits and allocated overhead. Sales and marketing expenses were
approximately $482,000 in the six months ended March 31, 1999 and approximately
$526,000 in the corresponding fiscal 1998 period. The decrease during the six
months ended March 31, 1999 of approximately $44,000, or 8.4%, from the
corresponding fiscal 1998 period, resulted primarily from the decrease in
personnel costs associated with the Senior Vice President of Sales and Marketing
incurred in the three months ended December 31, 1997. The executive officer that
held that position was appointed President and Chief Executive Officer after the
three months ended December 31, 1997. These personnel costs are reflected in
general and administrative expenses for the six months ended March 31, 1999.
Research and development expenses in each of the six months ended March 31,
1999 and 1998 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, 1999 and 1998 were approximately $116,000
and $139,000, respectively. The decrease during the six months ended March 31,
1999 of approximately $23,000, or 16.5%, from the corresponding fiscal 1998
period, resulted primarily from a decrease in resources dedicated to research
and development projects. Research and development expenses in each of the six
months ended March 31, 1999 and 1998 primarily focused on the formulation,
design and testing of product and process alternatives.
-11-
<PAGE>
During the six months ended March 31, 1998, the Company recorded
non-recurring charges of approximately $558,000 consisting of (i) costs of
approximately $281,000 associated with a proxy contest and related litigation
and (ii) restructuring and severance expenses of $277,000 related to the
elimination of two former business divisions and the resignation in December
1997 of a former executive officer.
In February 1998, the Company and a shareholder group engaged in a proxy
contest in an effort to, among other things, elect 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 six months ended March 31, 1998.
In the six months ended March 31, 1998, the Company recorded restructuring
and severance expenses of $277,000. This amount consists of restructuring
expenses of $105,000 and severance expenses of $172,000.
In December 1997, the Company terminated two business divisions, the MISD
and 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. The Company
incurred restructuring charges of approximately $105,000 which consisted of (i)
$38,000 of severance costs paid to the former Senior Vice President and General
Manager of the MISD and (ii) $67,000 related to the write-off of assets and
costs associated with the termination of the MISD and DMISD. Each of these
charges has been reflected in non-recurring charges for the six months ended
March 31, 1998.
In a separate matter, two executive officers of the Company resigned in
December 1997. The Company entered into a separation agreement with one such
former executive officer. The Company agreed to pay such former executive
officer $127,000 in connection with the separation agreement. The Company has
not entered, and does not expect to enter, into an agreement with the other
executive officer who resigned in December 1997. As a result of these
resignations, the Company recorded severance expenses of approximately $172,000.
Such expenses have been reflected in non-recurring charges for the six months
ended March 31, 1998.
Total cost and expenses in each of the six months ended March 31, 1999 and
1998 consisted primarily of cost of revenues, general and administrative
expenses, sales and marketing expenses and research and development expenses.
The Company's cost and expenses were approximately $2,441,000 in the six months
ended March 31, 1999 and approximately $2,392,000 (excluding non-recurring
charges of approximately $558,000) in the corresponding period in fiscal 1998.
Such increase of approximately $49,000 or 2.0% is primarily attributable to an
increase in staffing levels for project related tasks offset by 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 personnel costs were independent of the expenditures that supported the
former MISD and DMISD divisions.
-12-
<PAGE>
Net interest income of approximately $13,000 during the six months ended
March 31, 1999, resulted from interest earned on cash balances, offset, in part,
by interest expense incurred in conjunction with equipment lease obligations.
The Company earned less interest income in the six months ended March 31, 1999
than in the corresponding period of fiscal 1998 due to lower cash balances
maintained during the fiscal 1999 period. Net interest income was approximately
$50,000 in the six months ended March 31, 1998.
The Company's net loss for the six months ended March 31, 1999 was
approximately $275,000, while the Company had net loss of approximately $837,000
in the six months ended March 31, 1998. The Company's net loss for the six
months ended March 31, 1999 was attributable primarily to insufficient project
revenue to support the infrastructure of the Company.
Three Months Ended March 31, 1999 and 1998
------------------------------------------
Project revenues for the quarters ended March 31, 1999 ("Second Quarter of
Fiscal 1999") and 1998 ("Second Quarter of Fiscal 1998") were approximately
$1,328,000 and $946,000, respectively, an increase of approximately $382,000, or
40.4%. Project revenues in the Second Quarter of Fiscal 1999 and Fiscal 1998
were derived from 23 clients encompassing 34 projects and 18 clients
encompassing 27 projects, respectively. Five clients represented approximately
71.5% of the Company's project revenues for the three months ended March 31,
1999. For the comparable period last year, four clients represented
approximately 69.0% of the Company's project revenue of with European client
representing 24.7% or $234,000 of project revenues. The increase in project
revenues is primarily a result of the increase in the number of clients and
projects for which the Company was engaged to perform services. This increase
resulted primarily from the increase in the Company's sales and marketing
efforts over the past year. The Company's scope of work in both periods included
medical imaging core laboratory services and image-based information management
services.
Cost of revenues in each of the Second Quarter of Fiscal 1999 and Fiscal
1998 were comprised of professional salaries and benefits and allocated
overhead. Cost of revenues for the Second Quarter of Fiscal 1999 and Fiscal 1998
were approximately $634,000 and $458,000, respectively, an increase of
approximately $176,000 or 38.4%. This increase is primarily attributable to an
increase in staffing levels required to support the mix of services provided by
the Company in the Second Quarter of Fiscal 1999 as compared to the Second
Quarter of Fiscal 1998.
The difference between project revenues and cost of revenues in each of the
Second Quarters of Fiscal 1999 and 1998 remained consistent.
General and administrative expenses in each of the Second Quarter of Fiscal
1999 and Fiscal 1998 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
$331,000 in the Second Quarter of Fiscal 1999 and approximately $295,000 in the
Second Quarter of Fiscal 1998. The increase of approximately $36,000 or 12.2% is
primarily attributable to an increase in professional fees associated with
general corporate matters during the Fiscal 1999 period.
-13-
<PAGE>
Sales and marketing expenses in each of the Second Quarter of Fiscal 1999
and Fiscal 1998 remained relatively consistent and were comprised of direct
sales and marketing costs, professional salaries and benefits and allocated
overhead. Sales and marketing expenses were approximately $240,000 in the Second
Quarter of Fiscal 1999 and approximately $249,000 in the Second Quarter of
Fiscal 1998, a decrease of approximately $9,000 or 3.6%.
Research and development expenses in each of the Second Quarter of Fiscal
1999 and Fiscal 1998 consisted of professional salaries and benefits and
overhead charged to research and development projects. Research and development
expenses during the Second Quarter of Fiscal 1999 and 1998 were approximately
$57,000 and $67,000, respectively. The decrease during the Second Quarter of
Fiscal 1999 of approximately $10,000, or 14.9%, from the Second Quarter of
Fiscal 1998, resulted primarily from a decrease in resources dedicated to
research and development projects. Research and development expenses in each of
the Second Quarter of Fiscal 1999 and Fiscal 1998 primarily focused on the
formulation, design and testing of product and process alternatives.
During the Second Quarter of Fiscal 1998, the Company recorded
non-recurring charges of approximately $408,000 consisting of (i) costs of
approximately $236,000 associated with a proxy contest and related litigation
and (ii) severance expenses of $172,000 related to the resignation in December
1997 of two former executive officers.
In February 1998, the Company and a shareholder group engaged in a proxy
contest in an effort to, among other things, elect 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 $236,000 in the Second Quarter of Fiscal 1998.
Two executive officers of the Company resigned in December 1997. The
Company entered into a separation agreement with one such former executive
officer. The Company agreed to pay such former executive officer $127,000 in
connection with the separation agreement. The Company has not entered, and does
not expect to enter, into an agreement with the other executive officer who
resigned in December 1997. As a result of these resignations, the Company
recorded severance expenses of approximately $172,000. Such expenses have been
reflected in non-recurring charges for the Second Quarter of Fiscal 1998.
Total cost and expenses in each of the Second Quarter of Fiscal 1999 and
Fiscal 1998 consisted primarily of cost of revenues, general and administrative
expenses, sales and marketing expenses and research and development expenses.
The Company's cost and expenses were approximately $1,262,000 in the Second
Quarter of Fiscal 1999 and approximately $1,069,000 in the Second Quarter of
Fiscal 1998 (excluding non-recurring charges of approximately $408,000). Such
increase of approximately $193,000 or 18.1% is primarily due to an increase in
staffing levels required to support the mix of services provided by the Company
in the Second Quarter of Fiscal 1999.
-14-
<PAGE>
Net interest income of approximately $4,000 during the Second Quarter of
1999, resulted from interest earned on cash balances, offset, in part, by
interest expense incurred in conjunction with equipment lease obligations. The
Company earned less interest income in the Second Quarter of 1999 than in the
Second Quarter of Fiscal 1998 due to lower cash balances maintained during the
Fiscal 1999 period. Net interest income was approximately $23,000 in the Second
Quarter of Fiscal 1998.
The Company's net income for the Second Quarter of Fiscal 1999 was
approximately $71,000, while the Company had a net loss of approximately
$509,000 in the Second Quarter of 1998. The Company's net income in the Second
Quarter of Fiscal 1999 was primarily attributable to the increase in project
revenues. The increase in project revenues is primarily a result of the increase
in the number of clients and projects for which the Company was engaged to
perform services. This increase was the product of the Company's increased sales
and marketing efforts over the past year.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1999, the Company had cash and cash equivalents of
approximately $568,000. Working capital at March 31, 1999 was approximately
$1,248,000.
Net cash used in operating activities for the six months ended March 31,
1999 was approximately $969,000. Such use of cash reflects the net loss for the
six months ended March 31, 1999 and changes in certain of the Company's
operating assets and liabilities. Accounts receivable increased by approximately
$925,000 during the six months March 31, 1999 as a result of an increase in
unbilled receivables during such period. Unbilled receivables are recorded for
revenue recognized to date that is currently unbillable pursuant to contractual
terms. Amounts become billable upon the achievement of milestones or in
accordance with predetermined payment schedules. In addition, accrued expenses
and other current liabilities increased by approximately $105,000 due primarily
to an increase in expenses associated with the Company's European operations.
For the six months ended March 31, 1999, the Company invested approximately
$48,000 in capital and leasehold improvements. The Company currently anticipates
that capital expenditures for the balance of Fiscal 1999 will approximate
$100,000. 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 December 1998, the Company paid to the holders of its Preferred Stock an
aggregate amount of $20,000, which amount represented accrued cumulative
dividends for the period from July 1, 1998 through and including December 31,
1998. For future dividend obligations, see "Note 2 -Notes to Consolidated
Financial Statements."
-15-
<PAGE>
In March 1999, the Company received financing of $110,000 secured by
certain equipment. The loan is payable in 36 monthly installments, commencing
April 1999, including interest of 10.24%.
The Company anticipates that its cash and cash equivalents as at March 31,
1999, together with anticipated cash from operations, will be sufficient to fund
current working capital needs and capital requirements for at least the next
twelve months. There can be no assurance, however, that the Company's operating
results will return to profitability on an annual basis in the future or that
the continuation of such trends, including the changes in the Company's
operating assets and liabilities, will not adversely affect the Company's future
liquidity requiring the need for the Company to raise additional capital.
European Monetary Union
On January 1, 1999, eleven of the fifteen member countries of the European
Union set fixed conversion rates between their existing legacy currencies and
the euro. As such, these participating countries have agreed to adopt the euro
as their common legal currency. The eleven participating countries will issue
sovereign debt exclusively in euro and will redenominate outstanding sovereign
debt. The legal currencies will continue to be used as legal tender through
January 1, 2002, at which point the legacy currencies will be canceled and euro
bills and coins will be used for cash transactions in the participating
countries.
As of March 31, 1999, all of the Company's project contracts, including
contracts with international clients, have been denominated in Unites States
dollar. However, in April 1999, the Company has entered into a contract with an
international client which is denominated in euro. The Company currently does
not believe that the euro conversion will have a material impact on the
Company's financial condition or results of operations. There can be no
assurance, however, that such euro conversion will not adversely affect the
Company's business, financial condition, results of operations or cash flows.
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 has
assessed its state of readiness with respect to 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. The Company does not anticipate any material future expenditures
relating to the Year 2000 compliance of its internal systems. 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.
-16-
<PAGE>
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
operations or cash flows. The Company currently requires its clients to
represent that the data-sets sent to the Company are Year 2000 compliant.
The Year 2000 disclosures discussed above are based on numerous
expectations which are subject to uncertainties. Certain risk factors which
could have a material adverse effect on the Company's results of operations and
financial condition include but are not limited to: failure to identify critical
systems which will experience failures, errors in the remediation efforts,
inability to obtain new replacements for non-compliant systems or equipment,
general economic downturn relating to Year 2000 failures in the U.S. and in
other countries, failures in global banking systems and capital markets, or
extended failures by public and private utility companies or common carriers
supplying services to the Company.
-17-
<PAGE>
PART II. OTHER INFORMATION.
--------------------------
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 26, 1999.
(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:
Mark L. Weinstein
Jeffrey H. Berg, Ph.D.
Marc Berger
David E. Nowicki, D.M.D.
James A. Taylor, Ph.D.
(c) There were present at the Meeting, in person or by proxy, 6,966,298 shares
of Common Stock out of a total number of 7,773,878 shares of Common Stock
and 416,667 shares of Preferred Stock, out of a total number of 416,667
shares of Preferred Stock, in each case, issued and outstanding and
entitled to vote at the Meeting. The holders of shares of Common Stock and
Preferred Stock voted together as a single class on all matters presented
at the Meeting. In addition, however, the holders of Preferred Stock also
voted as a separate class on the proposal to grant the Board of Directors
the authority to amend the Company's Certificate of Incorporation, as
amended, to effect, by March 1, 1999, a reverse stock split, whereby the
Company would issue one new share of Common Stock in exchange for up to
four outstanding shares of Common Stock (the "Reverse Stock Split").
(d) 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:
(i) 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
-------------------------- ---------------- ------------------
Mark L. Weinstein 7,298,165 84,800
Jeffrey H. Berg, Ph.D. 7,328,715 54,250
Marc Berger 7,321,715 61,250
David E. Nowicki, D.M.D. 7,300,115 82,850
James A. Taylor, Ph.D. 7,308,215 74,750
-18-
<PAGE>
(ii) 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, 1999. The results of the vote taken at the
Meeting with respect to such appointment were as follows:
For Against Abstain
--------------- ------------- -------------
7,337,575 27,625 17,765
(iii) A vote was taken on the proposal to grant the Board of Directors the
authority to amend the Company's Certificate of Incorporation, as
amended, to effect, by March 1, 1999, the Reverse Stock Split. The
results of the vote taken at the Meeting with respect to such
amendment were as follows:
For Against Abstain
--------------- ------------- -------------
7,192,441 180,295 10,229
(e) The results of the vote by the Preferred Stockholders taken at the meeting
by ballot and/or by proxy as solicited by the Company on behalf of the
Board of Directors, voting as a separate class on the proposal to grant the
Board of Directors the authority to amend the Company's Certificate of
Incorporation, as amended, to effect, by March 1, 1999, the Reverse Stock
Split, were as follows:
For Against Abstain
--------------- ------------- -------------
416,667 0 0
-19-
<PAGE>
ITEM 5. OTHER INFORMATION.
LISTING ON THE NASDAQ SMALLCAP MARKET
On August 25, 1998, the Company received notification from Nasdaq that the
Company's Common Stock was trading below the minimum bid price requirement of
$1.00 required for continued listing on The Nasdaq SmallCap Market. As a result,
the Company had until November 25, 1998 for its Common Stock to trade at or
above the minimum requirement for at least 10 consecutive trading days. This
notification was based on review of the Company's Common Stock trading history
with respect to the closing bid price for the previous thirty consecutive
trading days from the date of notification. The Company's Common Stock did not
regain compliance before November 25, 1998. Therefore, on November 23, 1998, the
Company requested a hearing, by written submission, from Nasdaq and further
requested a stay of any termination proceeding pending the outcome of such
hearing. Such hearing was held on January 14, 1999.
On January 25, 1999, the Nasdaq Hearing Panel granted the Company an
exception from the minimum bid price requirement until March 1, 1999 in order to
allow the Company the opportunity to effectuate a reverse stock split of its
Common Stock. The Company's Board of Directors recommended that the stockholders
approve a proposal to provide the Board of Directors the authority to amend the
Company's Certificate of Incorporation, as amended, to effect, by March 1, 1999,
the Reverse Stock Split. Nasdaq's exception included a condition that after
March 1, 1999, the Company must have evidenced a closing bid price at or above
$1.00 per share for a minimum of ten consecutive trading days. In order to fully
comply with the terms of this exception, the Company also would have been
required to demonstrate compliance with all requirements for continued listing
on The Nasdaq SmallCap Market. In the event the Company was deemed to have met
the terms of the exception, it would have continued to be listed on The Nasdaq
SmallCap Market. However, if the Company failed to comply with the terms of the
exception, the Company's Common Stock would be delisted from The Nasdaq SmallCap
Market. Accordingly, effective January 27, 1999 and for the duration of the
exception, the trading symbol of the Company's Common Stock was changed from
BITI to BITIC.
At the Annual Stockholders Meeting of the Company held on February 26,
1999, the Company's stockholders approved the Reverse Stock Split. Following the
Annual Stockholders Meeting, however, the Company's Board of Directors voted
unanimously against the Reverse Stock Split. The Board of Directors of the
Company based its decision on a number of factors including, the current price
and low trading volume of the Company's Common Stock, prevailing market
conditions, the anticipated effect of the Reverse Stock Split on the market
price of the Common Stock and the relative voting rights of the holders of the
Common Stock and the Series A Preferred Stock. Thereafter, on March 4, 1999, the
Company's Common Stock was listed on the NASD OTC Bulletin Board under the
symbol BITI and ceased to be listed on The Nasdaq SmallCap Market.
-20-
<PAGE>
Potential Acquisition
On April 23, 1999, the Company executed a letter of intent to acquire Bona
Fide, Ltd. ("Bona Fide"), an independent contract research organization that
provides DEXA QA/QC to the pharmaceutical industry for studies requiring bone
densitometry as well as studies requiring body composition measurements. Bona
Fide was founded in 1993 and has been a wholly owned subsidiary of the LUNAR
Corporation. Based on successful completion of the due diligence process, the
transaction is expected to close in May 1999, and all Bona Fide operations will
be relocated to the Company's corporate headquarters located in West Trenton,
New Jersey. There can be no assurance, however, that such acquisition will be
consummated on terms acceptable to the Company, if at all.
-21-
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
Exhibit No. Description of Exhibit
----------- ----------------------
27 Financial Data Schedule.
(b) Reports on Form 8-K.
None.
-22-
<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 6, 1999 By: /s/ Mark L. Weinstein
--------------------------------------
Mark L. Weinstein, President and Chief
Executive Officer
(Principal Executive Officer)
DATE: May 6, 1999 By: /s/ Robert J. Phillips
--------------------------------------
Robert J. Phillips, Vice President
and Chief Financial Officer
(Principal Financial and
Accounting Officer)
-23-
<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 MARCH 31, 1999 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>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1998
<PERIOD-END> MAR-31-1999
<EXCHANGE-RATE> 1
<CASH> 567,980
<SECURITIES> 0
<RECEIVABLES> 1,616,803
<ALLOWANCES> 65,000
<INVENTORY> 0
<CURRENT-ASSETS> 2,252,805
<PP&E> 4,483,769
<DEPRECIATION> 3,165,886
<TOTAL-ASSETS> 3,601,993
<CURRENT-LIABILITIES> 1,004,737
<BONDS> 80,951
0
104
<COMMON> 1,944
<OTHER-SE> 2,514,257
<TOTAL-LIABILITY-AND-EQUITY> 3,601,993
<SALES> 0
<TOTAL-REVENUES> 2,152,760
<CGS> 0
<TOTAL-COSTS> 1,194,788
<OTHER-EXPENSES> 1,246,404
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (13,118)
<INCOME-PRETAX> (275,314)
<INCOME-TAX> 0
<INCOME-CONTINUING> (275,314)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (275,314)
<EPS-PRIMARY> (0.04) <F1>
<EPS-DILUTED> (0.04) <F2>
<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."
</FN>
</TABLE>
