SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-KSB
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 2000
Commission File No. 1-11182
BIO-IMAGING TECHNOLOGIES, INC.
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(Exact Name of Registrant as Specified in Its Charter)
Delaware 11-2872047
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(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
826 Newtown-Yardley Road, Newtown, Pennsylvania 18940-1721
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(Address of Principal Executive Offices) (Zip Code)
(267) 757-1360
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(Registrant's Telephone Number,
Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
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Common Stock, $.00025 par Boston Stock Exchange
value per share
Securities registered under Section 12(g) of the Exchange Act:
None
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Check whether the Registrant: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act during the past 12 months (or
for such shorter period that the Registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes: X No:
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Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]
State Registrant's revenues for fiscal year ended September 30, 2000:
$5,772,443
State the aggregate market value of the voting stock held by non-affiliates
of the Registrant: $2,739,040 at November 30, 2000 based on the average bid and
asked prices on that date.
Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of November 30, 2000:
Class Number of Shares
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Common Stock, $.00025 par value 7,773,878
Transitional Small Business Disclosure Format
Yes: No: X
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The following documents are incorporated by reference into the Annual
Report on Form 10-KSB: Portions of the Registrant's definitive Proxy Statement
for its 2001 Annual Meeting of Stockholders are incorporated by reference into
Part III of this Report.
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TABLE OF CONTENTS
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Item Page
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PART I 1. Business..................................................1
2. Properties................................................9
3. Legal Proceedings........................................10
4. Submission of Matters to a Vote of Security Holders......10
PART II 5. Market for the Company's Common Equity and Related
Stockholder Matters......................................10
6. Management's Discussion and Analysis of Financial
Condition and Results of Operations......................11
7. Financial Statements.....................................17
8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure......................17
PART III 9. Directors, Executive Officers, Promoters and Control
Persons; Compliance with Section 16 (a) of the
Exchange Act.............................................18
10. Executive Compensation...................................18
11. Security Ownership of Certain Beneficial Owners
and Management...........................................18
12. Certain Relationships and Related Transactions...........18
13. Exhibits, List and Reports on Form 8-K...................18
SIGNATURES..................................................................19
EXHIBIT INDEX...............................................................21
FINANCIAL STATEMENTS.......................................................F-1
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PART I
ITEM 1. BUSINESS.
GENERAL
Bio-Imaging Technologies, Inc. ("Bio-Imaging" or "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 for
all modalities which consist of computerized tomography ("CT"), magnetic
resonance imaging ("MRI"), x-rays, dual energy x-ray absorptiometry ("DEXA"),
position emission tomography single photon emission computerized tomography
("PET SPECT") and ultrasound.
The Company utilizes proprietary processes and software applications in
providing its services to pharmaceutical companies conducting clinical studies
in which medical imaging modalities are used to evaluate the efficacy and safety
of pharmaceuticals, biologics or medical devices. The Company's digital image
processing and computer analysis techniques enable it to make highly precise
measurements and biostatistical inferences about drug or device effects. The
resulting data enable the Company's clients, and their regulatory reviewers
(primarily the U.S. Food and Drug Administration, the "FDA" and European
Agencies) to evaluate product efficacy and safety. In addition, the Company has
developed specialized computer services and software applications that enable
independent radiologists and other medical specialists involved in clinical
trials to review medical image data in an entirely digital format. The Company's
services also include the regulatory submission of medical images, quantitative
data and text.
The Company continues to believe that it is at an early stage of market
penetration and is directing its marketing and sales efforts towards those
clinical development areas that heavily depend upon medical imaging. These areas
include therapeutic and diagnostic anti-inflammatory, oncology, central nervous
system, osteoporosis and cardiovascular.
In February 1997, the Company opened a European facility in Leiden, the
Netherlands to provide centralized image processing services for European
clients. The Company manages its services for European based clinical trials
from this facility. The Company's European facility has the same capabilities as
the Company's U.S. headquarters.
In May 1999, the Company acquired the operations of Bona Fide, Ltd. ("Bona
Fide"). Bona Fide provides DEXA quality assurance and quality control ("QA/QC")
to the pharmaceutical and medical device industry for studies requiring bone
densitometry and body composition measurements.
In September 2000, the Company announced the formation of a new division,
Bio-Imaging ETC. Bio-Imaging ETC focuses on Education, Training and
Certification for medical imaging equipment, facilities and staff.
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The Company was incorporated in Delaware in 1987 under the name Wise
Ventures, Inc. The Company's name was changed to Bio-Imaging Technologies, Inc.
in 1991. The address of the Company's principal executive offices is 826
Newtown-Yardley Road, Newtown, Pennsylvania, 18940, and its telephone number is
267-757-1360.
BUSINESS SERVICES
CORE LABORATORY SERVICES
Bio-Imaging is a leading provider of medical imaging management services
for clinical development purposes. The Company's imaging core laboratory
facilities in the U.S.A. and Europe provide centralized image data collection,
processing, analysis and archival services for clinical trials conducted
worldwide. The facilities are designed for high-volume efficient processing of
analog (film) and digital image data in a secure environment that complies with
regulatory guidelines for clinical data management.
Medical image data are received by Bio-Imaging facilities from clinical
trial sites, typically academic or community hospitals. The Company has
developed procedures for data tracking and quality control that it believes to
be of significant value to its clients. The Company's facilities contain
specialized hardware and software for the digitization of films and translation
of digital data, enabling data to be standardized, regardless of its source. The
Company believes its ability to handle most commercially available image file
formats is a valuable technical asset and an important competitive advantage in
gaining new business for large global multi-center clinical trials.
The Company performs image analyses on client data using internally
developed or specially configured software. The Company measures key indicators
of drug efficacy in different organs and disease states. The results from image
analysis derived in Bio-Imaging facilities are transferred to databases that can
be transmitted electronically to the Company's clients, or integrated directly
into the Company's Bio/ImageBase(R) package for regulatory submission on the
client's behalf.
INFORMATION MANAGEMENT SERVICES
Bio-Imaging's information management services focus on providing
specialized solutions for improving the quality, speed and flexibility of image
data management for clinical trials. The Company's Computer Assisted Masked
Reading ("CAMR(TM)") systems offer numerous advantages over conventional
film-based medical image reading scenarios, including increased reading speed,
greater standardization of image reading, and reduced error in the capture of
reader interpretations.
Using the Company's CAMR(TM) systems, independent medical specialists can
review medical image data from clinical trials in a digital format. The CAMR(TM)
systems can display all modalities of medical image data, regardless of source
equipment. In addition, the systems can display either translated digital data
or digitized films. Such image reviews are often required
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during clinical trials to evaluate patients' responses to therapy, or to
determine if patients qualify for studies. By using the CAMR(TM) systems to read
and evaluate image data, medical specialists can achieve greater reading speed
than is possible with film, and can perform evaluations in a more objective,
reproducible manner.
The Company has also developed remote CAMR(TM) ("rCAMR(TM)") systems which
are located on the premises, either home or office of the individual medical
specialists who are engaged by the sponsor to perform the analysis of the
medical image data. Historically, the CAMR systems have been utilized to
determine efficacy of the compounds being studied. More recently, clients are
requesting Bio-Imaging to provide "real-time" reads for inclusion/exclusion
criteria, or safety reads. The Company believes that the rCAMR(TM) system is the
optimal tool for this type of work because it allows Bio-Imaging, at the
client's discretion, to provide the images to an expert in the field to
facilitate the review of the images from the expert's office or home.
The Company has developed a proprietary image database software
application, Bio/ImageBase(R), that enables the Company's clients to submit
their medical images and related clinical data to the FDA in a digital format.
Using data stored on CD-ROM disks, Bio/ImageBase(R) allows clients and their FDA
medical reviewers to review medical images and related clinical data. The
Company believes that Bio/ImageBase(R) offers the potential to decrease review
time, resulting in faster regulatory approvals and reduced time-to-market for
new drugs, biologics and medical devices.
The Company's Bio/ImageBase(R) software has been installed at client sites
and on certain computer systems at the FDA. The Company has been using its
Bio/ImageBase(R) software to submit medical images and related data to the FDA
since mid-1993. In March 1996, Bio/ImageBase(R) was cited in the FDA's 1996
Computer-Assisted Product License Application Guidance Manual as an acceptable
database for submission of imaging data.
EDUCATION, TRAINING AND CERTIFICATION
Bio-Imaging ETC focuses on Education, Training and Certification for
medical imaging equipment, facilities and staff. A program of Instrument Quality
Control ("IQC") will provide physicians with a method of ensuring that systems
operate to specifications on a continual basis. This program is designed to
protect the accuracy of diagnostic interpretation of bone density data and give
the physicians current and in-depth feedback on the status of their instruments.
In addition, Bio-Imaging ETC will train entry-level physician and allied health
professionals in routine clinical practice.
OTHER SERVICES
The Company provides technical consulting in the evaluation of the sites
that may participate in clinical trials. The Company also consults with clients
regarding regulatory issues involved in the design, execution, analysis and
submission of medical image data in clinical trials.
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TARGET MARKETS
The Company's primary target market is comprised of pharmaceutical,
biotechnology and medical device companies whose clinical development pipelines
include drugs, biologics or devices that are typically evaluated by medical
imaging methods. This target market includes leading international
pharmaceutical companies and biotechnology companies with products currently in
the clinical development pipeline.
Bio-Imaging focuses its marketing on the following stages of clinical
development:
PHASE II CLINICAL TRIALS
Phase II clinical trials are generally conducted over six months to two
years and involve basic efficacy (effectiveness), safety and dose-range testing
in approximately 50 to 400 patients suffering from the disease or condition
under study. Such trials help determine the best effective dose, confirm that
the drug works as expected and provide initial safety data.
PHASE III CLINICAL TRIALS
Phase III clinical trials are generally conducted over one to four years
and involve efficacy and safety studies in broader populations of hundreds or
thousands of patients and many investigational sites (hospitals and clinics).
These are sometimes referred to as pivotal studies for submission to the
regulatory agencies. Generally, Phase III studies are intended to provide
additional information on drug safety and efficacy, an evaluation of the
risk-benefit of the drug and information for the adequate labeling of the
product.
Bio-Imaging focuses its marketing efforts further on clinical trials for
the following classes of drugs:
ANTI-INFLAMMATORY THERAPEUTICS
Anti-inflammatory clinical trials, such as those focused on arthritis,
include radiologic evaluation of the bones and joints to determine drug
efficacy. The Company believes that demand among drug developers for its
services will increase as new classes of biotechnology-derived drugs enter and
progress through the clinical development pipeline.
CANCER THERAPEUTICS
Many pharmaceutical companies are currently developing new therapies for
the treatment of cancer. For solid tumor studies, medical imaging modalities are
used to determine the response of treated and untreated tumors. These medical
images are evaluated by medical specialists during the course of oncology
clinical trials to determine the extent of disease and changes in tumor size
over time.
The FDA's guidelines aimed at accelerating access to new drugs for the
review and approval of new cancer therapies place greater emphasis on shrinkage
of tumors as an early
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indicator of anti-tumor efficacy. Bio-Imaging believes that these FDA guidelines
may have a favorable impact on its business as pharmaceutical and biotechnology
companies may have an increased need for regulatory compliant medical imaging
services to conduct their oncology clinical trials.
CENTRAL NERVOUS SYSTEM THERAPEUTICS
Various pharmaceutical companies are currently developing drugs for
treatment of diseases and conditions of the central nervous system, most of
which are evaluated with the aid of medical imaging. Most later-stage clinical
trials for these serious and costly conditions involve the evaluation of medical
image data. The Company believes that its central nervous system clinical trials
business may increase as more therapies progress through the research pipeline.
OSTEOPOROSIS
Osteoporosis is the disease of "thinning bones" which leads to fractures in
the elderly. The FDA guidance document for developing treatments for this
disease recognized DEXA as one of the primary efficacy and safety measurement
tools available. Furthermore, all data needs to go through a quality assurance
laboratory. This is now standard practice in all studies using DEXA instruments
whether for osteoporosis oncology or antiobesity or muscle wasting assessment.
DIAGNOSTIC IMAGING AGENTS
Bio-Imaging provides its services to clients developing diagnostic imaging
agents which are designed to diagnose disease conditions more quickly and
accurately in their development in order to facilitate earlier and more accurate
treatment.
CARDIOVASCULAR THERAPEUTICS
Various pharmaceutical companies are currently developing drugs for the
diagnosis and treatment of cardiovascular diseases and conditions which are
evaluated with the aid of medical imaging. The Company provides its services to
clients developing diagnostic agents for the detection and treatment of these
conditions.
MARKET TRENDS
The Company believes that demand for its services should grow because of a
variety of favorable regulatory, technological and market trends:
o The FDA initiatives to streamline the regulatory submission and review
process which are being implemented should have a beneficial impact on
the Company. The FDA is investing in new information technology and
has begun the process of formulating and disseminating guidelines for
standardizing the submission of electronic data, including medical
images. The Company expects submission of
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image data to be a requirement in key therapeutic and diagnostic areas
for evaluating the effectiveness of a drug or imaging agent.
o Consolidation, restructuring and downsizing in the pharmaceutical
industry in response to downward pressure on certain pharmaceutical
and biotechnology companies' drug prices has resulted in increased
outsourcing of certain research and development activities. Currently,
over $4 billion in research services are outsourced to contract
clinical research organizations. Industry estimates place growth of
outsourcing between 15% to 20% per year for at least the next three
years.
o Growth in pharmaceutical and biotechnology research and development
spending is fairly non-cyclical. As a result, the Company believes
that outsourcing of development activities should continue to remain
steady.
o New classes of drugs to treat conditions traditionally evaluated by
imaging are entering or progressing through the clinical development
pipeline, leading to increased demand for medical imaging-related
services. In addition, digital technologies for data acquisition and
management are rapidly penetrating the radiology community.
o As pharmaceutical and biotechnology companies increasingly attempt to
expand the market for new drugs by conducting clinical trials and
pursuing regulatory approval in multiple countries simultaneously,
contract service organizations with an international presence and
expertise will continue to benefit. The Company believes it is
well-positioned to take advantage of these trends due to its U.S. and
European operations.
o The Company also believes that, because its development services are
specialized, it is often able to perform these services with a higher
level of expertise or specialization more quickly and efficiently than
a pharmaceutical or biotechnology company could perform internally.
INTELLECTUAL PROPERTY
Proprietary protection for the Company's computer-imaging programs,
processes and know-how is important to its business. Bio-Imaging has developed
certain technically derived procedures and computer software applications that
are intended to increase the effectiveness and quality of its services. The
Company relies upon trademarks, copyrights, trade secrets, know-how and
continuing technological innovation to develop and maintain its competitive
position. The Company has obtained registered trademark protection for the
Bio/ImageBase(R) and has claimed trademark protection for the CAMR(TM) and
rCAMR(TM). The Company holds patents for the two DEXA phantoms, titled Spine and
Variable Composition Phantoms, which it sells to trial sites. The Company has
registered its Stylized Man Design with the U.S. Patent and Trademark Office.
Furthermore, Bio-Imaging requires all employees, consultants and contractors to
execute confidential disclosure agreements as a condition of employment or
engagement by the Company. There can be no assurance, however, that the Company
can limit unauthorized or
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wrongful disclosures of trade secret information. In addition, to the extent the
Company relies on trade secrets and know-how to maintain its competitive
technological position, there can be no assurance that others may not develop
independently the same, similar or superior techniques. Although the Company's
intellectual property rights are important to the results of its operations, the
Company believes that other factors such as independence, process knowledge,
technical expertise and experience are more important, and that, overall, these
technological capabilities offer significant benefits to its clients.
GOVERNMENT REGULATION
The research and development, manufacture and marketing of drugs and
medical devices are subject to stringent regulation by the FDA in the United
States and by comparable authorities in other countries. In addition,
regulations imposed by other federal agencies, as well as state and local
authorities, may impact such research and development, manufacturing and
marketing.
The FDA has established mandatory procedures and safety standards which
apply to the clinical testing, manufacturing and marketing of drugs and medical
devices. These procedures and safety standards include, among other things, the
completion of adequate and well-controlled human clinical trials to establish
the safety and efficacy of the drug or device for its recommended conditions or
use. The Company advises its clients in the execution of clinical trials and
other drug and device developmental tasks. The Company does not administer drugs
to or utilize medical devices on patients.
The success of the Company's business is dependent upon continued
acceptance by the FDA and other regulatory authorities of the data and analyses
generated by the Company's services in connection with the evaluation of the
safety and efficacy of new drugs and devices. The FDA has formal guidelines
which encourage the use of "surrogate measures," through submission of digital
image data, for evaluation of drugs to treat life-threatening or debilitating
conditions. There can be no assurance, however, that the FDA or other regulatory
authorities will accept the data or analyses generated by the Company in the
future and, even assuming acceptance, there can be no assurance that the FDA or
other regulatory authorities will require the application of imaging techniques
to numbers of patients and over time periods substantially similar to those
required of traditional safety and efficacy techniques.
Changes in the FDA's policy for the evaluation of therapeutic oncology
agents may have a positive impact on the time to market of such therapeutics.
According to the guidelines announced in March 1996, approval times for new
cancer therapies can be shortened if evidence of tumor shrinkage is verifiable
and demonstrable through the use of objective measurement techniques. These
guidelines place much greater reliance on the use of medical image data to
demonstrate objective tumor shrinkage. In addition, in March 1997, the FDA
announced new guidelines aimed at accelerating all therapeutic categories
through the use of surrogate markers such as imaging endpoints. The Company
believes the FDA's initiatives to streamline and accelerate the submission and
review process of therapeutic agents may have a favorable impact on the
Company's business.
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In October 1998, the FDA released a draft guidance for industry relating to
how medical imaging should be defined, handled and evaluated in clinical trials.
In June 2000, the FDA released another draft guidance which provided more
details on the October 1998 draft guidance. The Company believes that the
guidance documents comports with the methodologies and processes utilized by the
Company in providing medical information management services for its clients.
The Company believes that its ability to achieve continued and sustainable
growth will be materially dependent upon, among other factors, the continued
stringent enforcement of the comprehensive regulatory framework by various
government agencies. Any significant change in these regulatory requirements or
the enforcement thereof, especially relaxation of standards, could adversely
affect the Company's prospects.
The current European market regulation is more fragmented than in the
U.S.A., therefore, such European agencies have a tendency to follow FDA
guidelines.
COMPETITION
As a sign of growth in the clinical trials-related medical imaging services
business, the Company continues to experience an increase in competition from
commercial competitors and academic research centers. Over the past two years,
several conventional contract research organizations have either started or
acquired divisions to address the need for medical imaging services as it
relates to clinical trials. As competition increases, Bio-Imaging will look to
provide value-added services and undertake marketing and sales programs to
differentiate its services based on its expertise and experience in specific
therapeutic and diagnostic areas, its technological expertise and regulatory and
clinical development experience, its quality performance and its international
capabilities. Competition in the Company's industry has resulted in additional
pressure being placed on price, service and quality. Although the Company
believes that it is well positioned against its competitors due to its
experience in clinical trials and regulatory compliance along with its
international presence, there can be no assurance that the Company's competitors
or clients will not provide or develop services similar or superior to those
provided by the Company. Any such competition could have a material adverse
impact on the Company. The Company's competitive position also depends upon its
ability to attract and retain qualified personnel and develop and preserve
proprietary technology, processes and know-how.
MARKETING AND SALES
Bio-Imaging provides and markets its services on an international basis
primarily to pharmaceutical and biotechnology companies. The Company's sales and
marketing activities are directed by a Vice President, Business Development, and
supported by in-house staff and field business development personnel.
The Company's selling efforts are focused on North America and Western
Europe. Sales efforts are directed from both of the Company's headquarters in
Pennsylvania and Leiden, the Netherlands. The Company's marketing activities
include exhibiting at major trade shows,
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advertising in trade journals and the sponsoring of industry associations. The
Company continues to evaluate appropriate co-marketing activities and strategic
alliances, in particular with contract research organizations, to augment its
own business development efforts.
SIGNIFICANT CLIENTS
During fiscal 2000, two clients accounted for approximately 33% of the
Company's project revenues encompassing seven projects. No other customers
accounted for more than 10% of project revenues. These contracts are terminable
by the Company's clients at any time and for any reason. The loss of such
clients, or a reduction in services provided to such clients, would have a
material adverse effect on the Company's business, financial condition and
results of operations.
EMPLOYEES
As of September 30, 2000, the Company had 64 employees, five of whom are
officers of the Company.
Of the Company's employees as of September 30, 2000, eight were engaged in
sales and marketing, 51 were engaged in client related projects and five were
engaged in administration and management. A significant number of the Company's
management and professional employees have prior industry experience.
Bio-Imaging believes that it has been successful in attracting skilled and
experienced personnel, however, competition for such personnel is intensifying.
Although all of the Company's employees are covered by confidentiality and
non-competition agreements, there can be no assurance that such agreements will
be enforceable. Bio-Imaging has entered into an employment contract with one of
its officers. See "Item 10. Executive Compensation." Bio-Imaging considers
relations with its employees to be good.
ITEM 2. PROPERTIES.
The Company leases approximately 17,000 square feet of office space located
in Newtown, Pennsylvania. This lease expires January 2005 and provides for a
fixed base rent of approximately $26,000 per month with an annual inflation
increase. The Company also leases approximately 4,000 square feet of office
space in Leiden, the Netherlands. This lease, denominated in Netherland
guilders, expires February 14, 2003 and provides for a base rent of
approximately $7,200 per month with an annual inflation increase. In September
2000, the Company entered into a lease in Vancouver, Washington for
approximately 1,000 square feet for a fixed base rent of approximately $1,000
per month with an annual inflation increase. This lease is for the Bio-Imaging
ETC division and expires September 2003. In November 2000, the Company entered
into a lease for additional space in Newtown, Pennsylvania. This lease expires
November 2001 and provides for approximately $3,000 per month in base rent and
is for approximately 5,000 square feet of office space. The Company believes
that these facilities will be adequate for its needs for the foreseeable future.
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ITEM 3. LEGAL PROCEEDINGS.
The Company is not a party to any material legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
From June 18, 1992 through March 4, 1999, the Company's common stock,
$0.00025 par value, (the "Common Stock") had been traded on the Nasdaq SmallCap
Market under the symbol BITI. On March 4, 1999, the Company's Common Stock
ceased to be listed on the Nasdaq SmallCap Market and became listed on the NASD
OTC Bulletin Board under the symbol BITI.
The following table sets forth the high ask and low bid quotations for the
Common Stock as reported on the Nasdaq SmallCap Market for the quarter ended
December 31, 1998 and the high ask and low bid quotations as reported on the
NASD OTC Bulletin Board for each of the quarters ended March 31, 1999 through
September 30, 2000. Such quotations reflect interdealer prices, without retail
mark-up, mark-down or commission and may not represent actual transactions.
Quarter Common
Ended Stock
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High Low
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December 31, 1998 0.9375 0.2813
March 31, 1999 0.6563 0.3125
June 30, 1999 0.6875 0.3125
September 30, 1999 0.5938 0.2813
December 31, 1999 0.3438 0.2813
March 31, 2000 1.7813 0.2813
June 30, 2000 1.0625 0.5313
September 30, 2000 1.0000 0.5000
Since June 18, 1992, the Common Stock also has been listed on the Boston
Stock Exchange ("BSE") under the symbol BIT.
The following table sets forth the high ask and low bid quotations for the
Common Stock as reported on the BSE for each of the quarters from the quarter
ended December 31, 1998
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through September 30, 2000.
Quarter Common
Ended Stock
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High Low
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December 31, 1998 0.875 0.4375
March 31, 1999 0.625 0.4688
June 30, 1999 0.875 0.5625
September 30, 1999 0.781 0.4375
December 31, 1999 0.5938 0.1875
March 31, 2000 1.6563 0.1875
June 30, 2000 1.7500 0.3750
September 30, 2000 1.6250 0.2500
As of November 30, 2000, the approximate number of holders of record of the
Common Stock was 117 and the approximate number of beneficial holders of the
Common Stock was 1389.
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.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
OVERVIEW
Bio-Imaging 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
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of the medical-imaging component of clinical trials for all modalities which
consist of CT, MRI, x-rays, DEXA, PET SPECT and ultrasound. 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. A new division of the Company, Bio-Imaging ETC, will focus on Education,
Training and Certification for medical imaging equipment, facilities and staff.
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 twelve 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, beginning in the fiscal year ended
September 30, 1998, the Company increased its sales and marketing efforts. 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 achieve profitability. Although the Company experienced a
loss for fiscal 2000, the Company's project revenues increased as compared to
fiscal 1999. Project revenues were generated from 42 clients encompassing 91
projects for fiscal 2000 as compared to 34 clients encompassing 67 projects for
fiscal 1999. This represents an increase of 23.5% in clients and 35.8% in
projects for fiscal 2000 as compared to fiscal 1999. The Company's
contracted/committed backlog was approximately $17,518,000 as of September 30,
2000 as compared to approximately $7,054,000 as of September 30, 1999, a 148.3%
increase. Contracted/committed backlog is the amount of revenue that remains to
be earned on signed and agreed to contracts. Such contracts are subject to
termination by the Company or its clients at any time or for any reason.
The Company believes that demand for its services and technologies will
grow during the long-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 FDA is gaining experience with
electronic submissions and is continuing to develop guidelines for computerized
submission of data, including medical images. Furthermore, the increased use of
digital medical images in clinical trials, especially for important drug classes
such as anti-inflammatory, 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,
sustain growth, or that additional revenue generating opportunities will be
realized by the Company.
Certain matters discussed in this Form 10-KSB 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
-12-
<PAGE>
centralized core laboratories, trends toward the outsourcing of imaging services
in clinical trials, realized return from the Company's marketing efforts, the
favorable impact of the FDA's initiatives to streamline and accelerate its
review process 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
Fiscal Years Ended September 30, 2000 and 1999
----------------------------------------------
Project revenues for fiscal 2000 and fiscal 1999 were approximately
$5,772,000 and $4,349,000, respectively, an increase of approximately
$1,423,000, or 32.7%. 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 fiscal 2000 and fiscal 1999 were comprised of
professional salaries and benefits and allocated overhead. Cost of revenues were
approximately $3,619,000 for fiscal 2000 and approximately $2,661,000 for fiscal
1999, an increase of approximately $958,000, or 36.0%. This increase is
attributable to an increase in staffing levels required for project related
tasks for fiscal 2000 and in anticipation of work to be performed on new
contracts as compared to fiscal 1999.
The difference between project revenues and cost of revenues may fluctuate
as a percentage of project revenues based on the utilization of staff and the
mix of services provided by the Company to its clients during the comparable
periods. The decrease in this percentage in fiscal 2000 from fiscal 1999 of 1.5%
resulted from a lower increase in project revenues as compared to higher project
related costs which was primarily attributable to the Company increasing its
staffing levels in fiscal 2000 to support its existing contracts and in
anticipation of future business.
General and administrative expenses for fiscal 2000 and fiscal 1999
consisted primarily of professional salaries and benefits, depreciation and
amortization, professional and consulting services, office rent and corporate
insurance. General and administrative expenses were
-13-
<PAGE>
approximately $1,276,000 for fiscal 2000 and approximately $1,428,000 for fiscal
1999. The decrease for fiscal 2000, of approximately $152,000, or 10.6%, from
fiscal 1999, is primarily attributable to less professional services associated
with general corporate matters.
Sales and marketing expenses for fiscal 2000 and fiscal 1999 were comprised
of direct sales and marketing costs, professional salaries and benefits and
allocated overhead. Sales and marketing expenses were approximately $1,478,000
for fiscal 2000 and approximately $974,000 for fiscal 1999. The increase for
fiscal 2000, of approximately $504,000, or 51.7%, from fiscal 1999, resulted
from an increase in the Company's expenses associated with increased marketing
efforts, conferences attendance and the appointment of a Vice President of
Business Development in October 1999.
Total costs and expenses during fiscal 2000 and fiscal 1999 consisted
primarily of cost of revenues, general and administrative expenses and sales and
marketing. The Company's cost and expenses were approximately $6,373,000 in
fiscal 2000 and $5,063,000 in fiscal 1999. Such increase of approximately
$1,310,000, or 25.9%, is due primarily to an increase in the Company's sales and
marketing efforts along with an increase in staffing levels required for project
related tasks offset by a decrease in professional services associated with
general corporate matters.
Net interest expense of approximately $92,000 during fiscal 2000, resulted
from interest expense incurred in the assignment of accounts receivable and
interest expense incurred in connection with long-term debt and equipment lease
obligations offset in part by interest earned on cash balances. The Company had
interest income in fiscal 1999 due to higher cash balances maintained during
fiscal 1999 period offset in part by interest expense incurred in connection
with equipment lease obligations. Net interest income was approximately $9,000
in fiscal 1999.
The Company's net loss for fiscal 2000 was approximately $692,000 while the
Company had net loss of approximately $705,000 for fiscal 1999. The Company's
net loss for fiscal 2000 and fiscal 1999 was attributable primarily to
insufficient project revenue to support the infrastructure of the Company.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 2000, the Company had cash and cash equivalents of
approximately $491,000. The working capital deficit at September 30, 2000 was
approximately $56,000.
Net cash provided by operating activities for fiscal 2000 was approximately
$602,000. This is primarily due to the increase in deferred revenue in fiscal
2000 of approximately $1,166,000 and adjustments for depreciation and
amortization, offset in part by the net loss for fiscal 2000 and the increase in
accounts receivable.
For the year ended September 30, 2000, the Company invested approximately
$341,000 in capital and leasehold improvements. The Company currently
anticipates that capital expenditures for the next fiscal year will approximate
$300,000. These expenditures represent additional upgrades in the Company's
networking, data storage and core laboratory capabilities
-14-
<PAGE>
along with similar capital requirements for its European operations.
In December 1999, 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, 1999 through and including December 31,
1999. In June 2000, 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 January 1, 2000 through and including June 30,
2000.
In December 1999, the Company entered into an accounts receivable financing
agreement with Silicon Valley Bank ("Silicon Valley Bank" or the "Bank"),
whereby, the Company may assign up to $500,000 of eligible accounts receivable
to the Bank. In March 2000, the Bank increased the eligible accounts receivable
to $1,000,000. The Bank, in turn, would advance the Company up to 80% of the
assigned accounts receivable amount. Upon collection by the Bank, the balance of
the assigned accounts receivable would be remitted to the Company net of the
Bank's finance charges and administration fees. Although the agreement is
contractually renewable each year, it is cancelable by the Bank at any time. In
fiscal 2000, the Company assigned accounts receivable of approximately
$1,698,000 to the Bank. At September 30, 2000, the Company had repaid its
borrowings and had a $0 balance with the Bank. A 1.00% administrative fee of the
face amount of the assigned receivable was charged by the Bank along with a
1.75% finance charge per month of the average daily account balance outstanding.
In August 1999, the Company entered into an agreement with the Bank for a
revolving line of credit of up to $500,000 collaterized by the Company's assets.
Interest is payable at 1.50% over the bank's prime rate of interest. The
agreement requires the Company, among other things, to maintain minimum levels
of tangible net worth and certain minimum financial ratios. In October 1999, the
Bank notified the Company that it would not make any advances under the existing
line of credit until the Company provides sufficient evidence satisfactory to
the Bank of an improvement in the Company's operating, financial and liquidity
position. At such time, the Bank may consider permitting further advances
pursuant to the loan agreement.
Also, in December 1999, February 2000 and April 2000, the Company entered
into equipment lease obligations consisting of monthly installments of $4,961,
$3,258 and $1,878, respectively, which includes interest rates of 10.52%, 10.53%
and 13.75%, through November 2002, January 2003 and February 2003. The debt is
collateralized by the related equipment.
The Company anticipates that its cash and cash equivalents as at September
30, 2000, 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 achieve profitability on an annual basis in the near
future. The continuation of operating losses and together with the risks
associated with the Company's ability to gain new client contracts, the
variability of the timing of milestone payments on existing client contracts and
other changes in the Company's operating assets and liabilities, may have a
material adverse affect on the Company's future liquidity. In connection
therewith, the Company may need to raise additional capital in the foreseeable
future from equity or debt sources in order to implement its business, sales or
marketing plans, take advantage of
-15-
<PAGE>
unanticipated opportunities (such as more rapid expansion, acquisitions of
complementary businesses or the development of new services), to react to
unforeseen difficulties (such as the decrease in the demand for the Company's
services or the timing of revenues due to a variety of factors previously
discussed) or to otherwise respond to unanticipated competitive pressures. There
can be no assurance that additional financing will be available, if at all, on
terms acceptable to the Company.
The Company's 2001 operating plans contain assumptions regarding revenue
and expenses. The achievement of the operating plan depends heavily on the
timing of work performed by the Company on existing projects and the ability of
the Company to gain and perform work on new projects. Project cancellation, or
delays in the timing of work performed by the Company on existing projects or
the inability of the Company to gain and perform work on new projects could have
an adverse impact on the Company's ability to execute its operating plan and
maintain adequate cash flow. In the event actual results do not meet the
operating plan, the Company's management believes it could execute contingency
plans to mitigate such effects. Such plans include additional financing, to the
extent available, through the accounts receivable financing agreement discussed
above. In addition, in November 2000, the members of the Board of Directors of
the Company, in their individual capacities, committed up to an aggregate amount
totaling $100,000 in the form of a short-term loan, through October 1, 2001, if
needed by the Company. Considering the cash on hand and based on the achievement
of the operating plan and management's actions taken to date, management
believes it has the ability to continue to generate sufficient cash to satisfy
its operating requirements in the normal course of business. However, no
assurance can be given that sufficient cash will be generated from operations.
The Company's cash balance was approximately $491,000 and $616,000 as of
September 30, 2000 and November 30, 2000, respectively.
NEW ACCOUNTING REQUIREMENTS
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities" as amended by
SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities -
Deferral of the Effective Date of FASB Statement No. 133 - an Amendment of FASB
Statement No. 133" and SFAS No. 138, "Accounting for Certain Derivative
Instruments and Certain Hedging Activities - an Amendment of FASB Statement No.
133." Adoption of SFAS No. 133, as amended, is required for fiscal quarters of
fiscal years beginning after June 15, 2000. The Company does not believe that
the new standard will have a material impact on the Company's consolidated
financial statements. In December 1999, the Securities and Exchange Commission
issued Staff Accounting Bulletin No. 101 (SAB 101), Revenue Recognition in
Financial Statements. SAB 101 provides guidance for revenue recognition under
certain circumstances. The accounting and disclosures prescribed by SAB 101 will
be effective for the fourth quarter of fiscal year 2001. The Company is
currently evaluating the impact the application of SAB 101 will have on its
financial position or results of operations.
-16-
<PAGE>
EXISTING CONTRACTS
During fiscal 2000, the Company signed approximately $12,819,000 in new
project contracts as compared to approximately $6,564,000 in fiscal 1999. As of
September 30, 2000, the Company had entered into agreements with 34 companies,
encompassing 72 projects, to provide services in the aggregate amount of
approximately $25,077,000 through December 2004, of which services valued at
approximately $17,518,000 remain to be completed. Such contracts are subject to
termination by the Company or its clients at any time or for any reason. In
addition, client's clinical trials or other projects are subject to timing and
scope changes. Therefore, future revenue generated by the Company may not equal
initial contract values.
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. 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.
ITEM 7. FINANCIAL STATEMENTS.
The financial statements required to be filed pursuant to this Item 7 are
included in this Annual Report on Form 10-KSB. A list of the financial
statements filed herewith is found at "Item 13. Exhibits, List, and Reports on
Form 8-K."
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
-17-
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT.
The information relating to the Company's directors, nominees for election
as directors and executive officers under the headings "Election of Directors"
and "Executive Officers" in the Company's definitive proxy statement for the
2001 Annual Meeting of Stockholders is incorporated herein by reference to such
proxy statement.
ITEM 10. EXECUTIVE COMPENSATION.
The discussion under the heading "Executive Compensation" in the Company's
definitive proxy statement for the 2001 Annual Meeting of Stockholders is
incorporated herein by reference to such proxy statement.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The discussion under the heading "Security Ownership of Certain Beneficial
Owners and Management" in the Company's definitive proxy statement for the 2001
Annual Meeting of Stockholders is incorporated herein by reference to such proxy
statement.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The discussion under the heading "Certain Relationships and Related
Transactions" in the Company's definitive proxy statement for the 2001 Annual
Meeting of Stockholders is incorporated herein by reference to such proxy
statement.
ITEM 13. EXHIBITS, LIST, AND REPORTS ON FORM 8-K.
(a) (1) Financial Statements.
Reference is made to the Index to Financial Statements on Page F-1.
(a) (2) Financial Statement Schedules.
None.
(a) (3) Exhibits.
Reference is made to the Index to Exhibits on Page 21.
(b) Reports on Form 8-K.
None.
-18-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized this 20th day of
December, 2000.
BIO-IMAGING TECHNOLOGIES, INC.
By: /s/ Mark L. Weinstein
--------------------------------------
Mark L. Weinstein, President and Chief
Executive Officer
-19-
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/Mark L. Weinstein President and Chief December 20, 2000
------------------------------- Executive Officer and Director
Mark L. Weinstein (principal executive and financial
officer)
/s/Maria T. Kraus Controller December 20, 2000
------------------------------- (principal accounting officer)
Maria T. Kraus
/s/Jeffrey H. Berg, Ph.D Director December 20, 2000
-------------------------------
Jeffrey H. Berg, Ph.D.
/s/Marc Berger Director December 20, 2000
-------------------------------
Marc Berger
/s/David E. Nowicki, D.M.D. Director December 20, 2000
-------------------------------
David E. Nowicki, D.M.D.
/s/Allen Rubenstein, M.D. Director December 20, 2000
-------------------------------
Allen Rubenstein, M.D.
/s/David Stack Director December 20, 2000
-------------------------------
David Stack
/s/James A. Taylor, Ph.D. Director December 20, 2000
-------------------------------
James A. Taylor, Ph.D.
</TABLE>
-20-
<PAGE>
EXHIBIT INDEX
Exhibit
No. Description of Exhibit
------- ----------------------
3.1 Restated Certificate of Incorporation of the Company.
(Incorporated by reference to Exhibit 3.1 to the Company's
Registration Statement on Form S-1 (File Number 33-47471) which
became effective on June 18, 1992.) (Amendments incorporated by
reference to Exhibit 3.1 to the Company's Annual Report on Form
10-K for the year ended September 30, 1993 and to Exhibit 3.1 to
the Company's Quarterly Report on Form 10-QSB for the quarter
ended March 31, 1995.)
3.2 By-Laws of the Company. (Incorporated by reference to Exhibit
3.2 to the Company's Registration Statement on Form S-1 (File
Number 33-47471) which became effective on June 18, 1992.)
4.1 Specimen Common Stock Certificate. (Incorporated by reference to
Exhibit 4.1 to the Company's Registration Statement on Form S-1
(File Number 33-47471) which became effective on June 18, 1992.)
4.2 Registration Agreement dated October 13, 1994 between the Company
and Corning Pharmaceuticals Services Inc., now Covance, Inc.
("Covance"). (Incorporated by reference to Exhibit 4.1 to the
Company's Current Report on Form 8-K dated October 13, 1994.)
4.3 Purchase Agreement for Units of Convertible Preferred Stock
and Warrants dated December 8, 1995 between Investment Partners
of America, L.P., as Purchaser, and the Company, including
material exhibits (including the Certificate of Designation for
the Convertible Preferred Stock). (Incorporated by reference to
Exhibit 4.1 to the Company's Current Report on Form 8-K dated
December 22, 1995.)
10.1 Lease between Mountain View Office Park and the Company.
(Incorporated by reference to (i) Exhibit 10.1 to the Company's
Registration Statement on Form S-1 (File Number 33-47471) which
became effective on June 18, 1992, (ii) Exhibit 10.1 to the
Company's Annual Report on Form 10-K for the fiscal year ended
September 30, 1992, (iii) Exhibit 10.1 to the Company's Annual
Report on Form 10-KSB for the fiscal year ended September 30,
1994, (iv) Exhibit 10.1 to the Company's Annual Report on Form
10-KSB for the fiscal year ended September 30, 1995), as amended
effective September 5, 1996 (Incorporated by Reference to Exhibit
10.1 to the Company's Annual Report on Form 10-KSB for the fiscal
year ended September 30, 1996) (v) as amended effective June 22,
1998 (Incorporated by Reference to Exhibit 10.1 to the Company's
Annual Report on Form 10-KSB for the fiscal year ended September
30, 1998).
-21-
<PAGE>
Exhibit
No. Description of Exhibit
------- ----------------------
10.2* 1991 Stock Option Plan. (Incorporated by reference to Exhibit
10.6 to the Company's Registration Statement on Form S-1 (File
Number 33-47471) which became effective on June 18, 1992.)
10.3* 401(k) Plan. (Incorporated by reference to Exhibit 10.7 to the
Company's Registration Statement on Form S-1 (File Number
33-47471) which became effective on June 18, 1992.)
10.4 Form of Employee's Invention Assignment, Confidential Information
and Non-Competition Agreement. (Incorporated by reference to
Exhibit 10.9 to the Company's Annual Report on Form 10-K for the
fiscal year ended September 30, 1992.)
10.5 Stock Purchase Agreement dated October 13, 1994 between the
Company and Covance. (Incorporated by reference to Exhibit 10.2
to the Company's Current Report on Form 8-K dated October 13,
1994.)
10.6* Employment Agreement including Invention Assignment and
Confidential Information Agreement dated January 20, 2000, by and
between the Company and Mark L. Weinstein. (Incorporated by
reference to Exhibit 10.1 to the Company's Quarterly Report on
Form 10-QSB for the Quarter ended December 31, 1999.)
10.7 Purchase Agreement for Units of Convertible Preferred Stock and
Warrants dated December 8, 1995 between Investment Partners of
America, L.P., as Purchaser and the Company, including material
exhibits. (Incorporated by reference to Exhibit 4.1 to the
Company's Current Report on Form 8-K dated December 22, 1995.)
10.8 Office Space Lease dated September 22, 1999 between Yardley
Road Associates, L.P. and the Company. (Incorporated by reference
to Exhibit 10.9 to the Company's Annual Report on Form 10-KSB for
the fiscal year ended September 30, 1999).
10.9 Revolving Promissory Note and Loan and Security Agreement dated
August 10, 1999 between Silicon Valley Bank and the Company.
(Incorporated by reference to Exhibit 10.10 to the Company's
Annual Report on Form 10-KSB for the fiscal year ended September
30, 1999).
10.10 Accounts Receivable Purchase Agreement dated December 23, 1999
between Silicon Valley Bank and the Company. (Incorporated by
reference to Exhibit 10.11 to the Company's Annual Report on Form
10-KSB for the fiscal year ended September 30, 1999).
10.11+ Office Space Lease dated September 11, 2000 between Angelo
Investment Company and the Company.
-22-
<PAGE>
Exhibit
No. Description of Exhibit
------- ----------------------
21 List of Subsidiaries of Registrant. (Incorporated by reference
to Exhibit 21.1 to the Company's Annual Report on Form 10-KSB for
the fiscal year ended September 30, 1997.)
23.1+ Consent of Arthur Andersen LLP.
27+ Financial Data Schedule for the year ended September 30, 2000.
------------------------
* A management contract or compensatory plan or arrangement required to
be filed as an exhibit pursuant to Item 13(a) of Form 10-KSB.
+ Included herewith.
(b) Financial Statement Schedules.
None.
-23-
<PAGE>
Bio-Imaging Technologies, Inc. and Subsidiaries
CONTENTS
--------------------------------------------------------------------------------
Report of Independent Public Accountants F-2
Consolidated Financial Statements:
Balance Sheets F-3
Statements of Operations F-4
Statements of Stockholders' Equity F-5
Statements of Cash Flows F-6
Notes to Consolidated Financial Statements F-7
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
Bio-Imaging Technologies, Inc.:
We have audited the accompanying consolidated balance sheets of Bio-Imaging
Technologies, Inc. (a Delaware corporation) and subsidiaries as of September 30,
2000 and 1999, and the related consolidated statements of operations,
stockholders' equity and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Bio-Imaging Technologies, Inc.
and subsidiaries as of September 30, 2000 and 1999, and the results of their
operations and their cash flows for the years then ended in conformity with
accounting principles generally accepted in the United States.
ARTHUR ANDERSEN LLP
Princeton, New Jersey
December 18, 2000
F-2
<PAGE>
Bio-Imaging Technologies, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2000 1999
--------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 491,048 $ 412,903
Accounts receivable, net of allowance
for doubtful accounts of $65,000
in 2000 and 1999 1,627,457 1,237,746
Prepaid expenses and other current assets 234,201 138,127
--------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 2,352,706 1,788,776
Property and equipment, net 1,292,344 1,180,254
Other assets 261,762 179,624
--------------------------------------------------------------------------------
TOTAL ASSETS $ 3,906,812 $3,148,654
================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 321,113 $ 134,685
Accrued expenses and other current
liabilities 229,354 254,565
Deferred revenue 1,707,681 541,933
Current maturities of long-term debt 150,796 69,800
--------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 2,408,944 1,000,983
Long-term debt 164,139 81,511
--------------------------------------------------------------------------------
TOTAL LIABILITIES 2,573,083 1,082,494
--------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY:
Convertible cumulative preferred stock
- $.00025 par value; authorized 3,000,000
shares, issued and outstanding 416,667
shares ($500,000 liquidation preference) 104 104
Common stock - $.00025 par value; authorized
18,000,000 shares, issued and outstanding
7,773,878 shares in 2000 and 1999 1,944 1,944
Additional paid-in capital 9,231,497 9,231,497
Accumulated deficit (7,899,816) (7,167,385)
--------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY 1,333,729 2,066,160
--------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $3,906,812 $3,148,654
================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE BALANCE SHEETS.
F-3
<PAGE>
Bio-Imaging Technologies, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 2000 1999
--------------------------------------------------------------------------------
Project revenues $ 5,772,443 $ 4,349,079
--------------------------------------------------------------------------------
Cost and expenses:
Cost of revenues 3,619,343 2,660,659
General and administrative expenses 1,275,669 1,428,375
Sales and marketing expenses 1,477,841 974,264
--------------------------------------------------------------------------------
Total cost and expenses 6,372,853 5,063,298
--------------------------------------------------------------------------------
Loss from operations (600,410) (714,219)
Interest (expense) income, net (92,021) 8,760
--------------------------------------------------------------------------------
Net loss (692,431) (705,459)
Dividends on preferred stock 40,000 40,000
--------------------------------------------------------------------------------
Net loss applicable to common stock $ (732,431) $ (745,459)
================================================================================
Basic and diluted loss per common share $ (0.09) $ (0.10)
================================================================================
Weighted average number of common shares and
dilutive common equivalent shares 7,773,878 7,773,878
================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
F-4
<PAGE>
Bio-Imaging Technologies, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Additional
Preferred Stock Common Stock Paid-in Accumulated Stockholders'
Shares Amount Shares Amount Capital Deficit Equity
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at
September 30, 1998 416,667 $ 104 7,773,878 $ 1,944 $ 9,231,497 $ (6,421,926) $ 2,811,619
Dividends on preferred stock - - - - - (40,000) (40,000)
Net loss - - - - - (705,459) (705,459)
-----------------------------------------------------------------------------------------------------------------------------
Balance at
September 30, 1999 416,667 104 7,773,878 1,944 9,231,497 (7,167,385) 2,066,160
Dividends on preferred stock - - - - - (40,000) (40,000)
Net loss - - - - - (692,431) (692,431)
-----------------------------------------------------------------------------------------------------------------------------
Balance at
September 30, 2000 416,667 $ 104 7,773,878 $ 1,944 $ 9,231,497 $ (7,899,816) $ 1,333,729
=============================================================================================================================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
F-5
<PAGE>
Bio-Imaging Technologies, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, 2000 1999
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(692,431) $(705,459)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 535,353 551,038
Changes in operating assets and liabilities, net of assets and
liabilities acquired in a business combination:
Increase in accounts receivable (389,711) (611,370)
Increase in prepaid expenses and other current assets (96,074) (53,380)
(Increase) decrease in other assets (82,138) 20,611
Increase (decrease) in accounts payable 186,428 (7,386)
Decrease in accrued expenses and other current liabilities (25,211) (71,498)
Increase (decrease) in deferred revenue 1,165,748 (103,137)
--------------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 601,964 (980,581)
--------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (340,579) (165,858)
Cash paid for business acquisition - (2,535)
--------------------------------------------------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (340,579) (168,393)
--------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments under equipment lease obligations and notes payable (1,501,971) (71,377)
Dividends paid to preferred stockholders (40,000) (40,000)
Proceeds from notes payable 1,358,731 145,924
--------------------------------------------------------------------------------------------------------------------------------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (183,240) 34,547
--------------------------------------------------------------------------------------------------------------------------------
Net decrease in cash and cash equivalents 78,145 (1,114,427)
Cash and cash equivalents at beginning of year 412,903 1,527,330
--------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 491,048 $ 412,903
================================================================================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for interest $ 93,721 $ 12,412
================================================================================================================================
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Equipment purchased under capital lease obligations $ 306,864 $ -
================================================================================================================================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
F-6
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Bio-Imaging Technologies, Inc. and
Subsidiaries
1. PRINCIPAL BUSINESS ACTIVITY AND SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS AND FUTURE OPERATIONS
Bio-Imaging Technologies, Inc. and Subsidiaries ("Bio-Imaging" or "the Company")
is a pharmaceutical contract service organization, operating in one business
segment, 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 for all modalities which consist of
computerized tomography ("CT"), magnetic resonance imaging ("MRI"), x-rays, dual
energy x-ray absorptiometry ("DEXA"), position emission tomography single photon
emission computerized tomography ("PET SPECT") and ultrasound. 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.
The Company's 2001 operating plan contains assumptions regarding revenue and
expenses. The achievement of the operating plan depends heavily on the timing of
work performed by the Company on existing projects and the ability of the
Company to gain and perform work on new projects. Project cancellations, delays
in the timing of work performed by the Company on existing projects or the
inability of the Company to gain and perform work on new projects could have an
adverse impact on the Company's ability to execute its operating plan and
maintain adequate cash flow. In the event actual results do not meet the
operating plan, management believes it could execute contingency plans to
mitigate such effects. Such plans include additional financing, to the extent
available, through the accounts receivable financing agreement. In addition, in
November 2000, the members of the Board of Directors of the Company, in their
individual capacities, committed up to an aggregate amount totaling $100,000 in
the form of a short-term loan, through October 1, 2001, if needed by the
Company. Considering the cash on hand and based on the achievement of the
operating plan and management's actions taken to date, management believes it
has the ability to continue to generate sufficient cash to satisfy its operating
requirements in the normal course of business. However, no assurance can be
given that sufficient cash will be generated from operations. As of November 30,
2000, the Company's cash balance was approximately $616,000.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries, Oxford Bio-Imaging Research, Inc. and
Bio-Imaging Technologies Holding B.V. All significant intercompany transactions
and balances have been eliminated.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
F-7
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Bio-Imaging Technologies, Inc. and
Subsidiaries
CASH AND CASH EQUIVALENTS
The Company maintains substantially all of its cash in one financial
institution. The Company has defined cash equivalents as highly liquid
investments with an original maturity at the time of purchase of three months or
less.
REVENUE RECOGNITION
Project revenues are recognized primarily using the percentage-of-completion
method of accounting for services rendered in connection with contractual
arrangements, which generally range from a few months to two years. Provisions
for losses expected to be incurred on contracts are recognized in full in the
period in which it is determined that a loss will result from performance of the
contractual arrangement. Unbilled services are recorded for revenue recognized
to date that is currently unbilled to the client pursuant to contractual terms.
In general, amounts become billable pursuant to contractual milestones or in
accordance with predetermined payment schedules. Unbilled services are generally
billable within one year from the respective balance sheet date. Accounts
receivable include approximately $770,000 and $806,000 of unbilled receivables
at September 30, 2000 and 1999, respectively. Deferred revenue is recorded for
cash received from clients for services which have not yet been provided at the
respective balance sheet date. Revenue from other activities is recognized as
services are performed.
PROPERTY AND EQUIPMENT
Depreciation of property and equipment is provided for using the straight-line
method over the estimated useful lives of the respective assets. Amortization of
leasehold improvements is provided for over the related lease term.
CAPITALIZED SOFTWARE DEVELOPMENT
The Company capitalizes software development costs after technological
feasibility has been determined and ceases capitalization at such time as the
end product is available for general release to the public. The establishment of
technological feasibility and the ongoing assessment of recoverability of
capitalized software development costs require considerable judgment by
management with respect to certain external factors including, but not limited
to, anticipated future revenue, estimated economic life and changes in software
and hardware technologies. At September 30, 2000, management has estimated an
economic useful life of 60 months and is amortizing these costs on a
straight-line basis over this period. The amortization period is reviewed
annually by management. During 2000, the Company capitalized approximately
$47,000 of software development costs. The Company had no software development
costs that were capitalized during 1999.
LONG LIVED ASSETS
The provisions of Statement of Financial Accounting Standards No. 121
"Accounting for the Impairment of Long-Lived Assets" requires, among other
things, that an enitity review its long-lived assets and certain related
intangibles for impairment whenever changes in circumstances indicate that the
carrying amount of an asset may not be fully recoverable. Impairment of
long-lived assets exist if, at a
F-8
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Bio-Imaging Technologies, Inc. and
Subsidiaries
minimum, the future expected cash flows (undiscounted and without interest
charges) from an entity's operations are less than the carrying value of these
assets. The Company does not believe that any such changes in circumstances have
occurred.
BUSINESS ACQUISITION
In May 1999, the Company acquired the operations of Bona Fide, Ltd. in a
transaction accounted for as a purchase. Tangible assets acquired were $10,000
and liabilities assumed were approximately $190,000, resulting in goodwill of
$180,000. The liabilities assumed primarily represent deferred revenue of
$122,000 which the Company expects to recognize as project revenues over the
duration of the client contracts which were assumed by the Company in the
acquisition. Goodwill is being amortized using a straight-line method over five
years. In addition to the amount paid at closing, additional payments for the
acquisition may be made based on certain revenues being achieved for the
twelve-month period ending on the anniversary of the closing date. Such revenue
was not achieved through May 2000. The acquisition was not material to the
Company's consolidated financial position or results of operations.
FOREIGN CURRENCY TRANSLATION
The U.S. Dollar is the functional currency for the Company's foreign
subsidiaries.
EARNINGS PER SHARE
The Company follows SFAS No. 128 - "Earnings per Share. " SFAS No. 128 requires
the presentation of basic earnings per share and diluted earnings per share.
Basic 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 loss per common share for the year
ended September 30, 2000 and 1999 excludes options (1,412,960 and 1,192,370 as
of September 30, 2000 and 1999, respectively) and warrants (66,667 as of
September 30, 2000 and 1999) as their inclusion would be antidilutive.
RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities" as amended by
SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities -
Deferral of the Effective Date of FASB Statement No. 133 - an Amendment of FASB
Statement No. 133" and SFAS No. 138, "Accounting for Certain Derivative
Instruments and Certain Hedging Activities - an Amendment of FASB Statement No.
133." Adoption of SFAS No. 133, as amended, is required for fiscal quarters of
fiscal years beginning after June 15, 2000. The Company does not believe that
the new standard will have a material impact on the Company's consolidated
financial statements. In December 1999, the Securities and Exchange Commission
issued Staff Accounting Bulletin No. 101 (SAB 101), Revenue Recognition in
Financial Statements. SAB 101 provides guidance for revenue recognition under
certain circumstances. The accounting and disclosures prescribed by SAB 101 will
be effective for the fourth quarter of fiscal year 2001. The Company is
currently evaluating the impact the application of SAB 101 will have on its
financial position or results of operations.
F-9
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Bio-Imaging Technologies, Inc. and
Subsidiaries
2. PROPERTY AND EQUIPMENT
Property and equipment, at cost, consists of the following:
<TABLE>
<CAPTION>
Estimated
September 30, 2000 1999 Useful Life
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Equipment $ 2,253,935 $ 3,496,440 5 years
Equipment under capital leases 673,060 640,914 5 years
Furniture and fixtures 187,853 266,554 7 years
Leasehold improvements 48,391 84,060 Term of lease
Computer software costs 46,667 123,436 60 months
--------------------------------------------------------------------------------------------------------------
3,209,906 4,611,404
Less accumulated depreciation
and amortization (1,917,562) (3,431,150)
--------------------------------------------------------------------------------------------------------------
$ 1,292,344 $ 1,180,254
==============================================================================================================
</TABLE>
During 2000, the Company retired property and equipment of approximately
$2,049,000 that was fully depreciated. Accumulated depreciation related to
equipment acquired under capital leases amounted to approximately $363,000 and
$537,000 at September 30, 2000 and 1999, respectively. Accumulated amortization
related to computer software costs amounted to approximately $3,000 and $123,000
at September 30, 2000 and 1999, respectively.
3. LONG-TERM DEBT
Long-term debt consists of equipment lease obligations and notes payable. The
equipment lease obligations and notes payable are payable in monthly
installments ranging from $1,170 to $4,961, including interest at rates ranging
from 10.24% to 13.75%, through January 2003. The debt is collateralized by the
related equipment.
Aggregate maturities of long-term debt at September 30, 2000 are as follows:
2001 $ 150,796
2002 138,833
2003 25,306
---------------------------------------------------------------------
$ 314,935
=====================================================================
In August 1999, the Company entered into an agreement with a bank for a
revolving line of credit of up to $500,000 collateralized by the Company's
assets. Interest is payable at 1.50% over the bank's prime
F-10
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Bio-Imaging Technologies, Inc. and
Subsidiaries
rate of interest. The agreement requires the Company, among other things, to
maintain minimum levels of tangible net worth and certain minimum financial
ratios. In October 1999, the bank notified the Company that it would not make
any advances under the existing line of credit until the Company provides
sufficient evidence satisfactory to the bank of an improvement in the Company's
operating, financial and liquidity position. At such time, the bank may consider
permitting further advances pursuant to the loan agreement. At September 30,
2000 the Company had no borrowings under the line of credit.
In December 1999, the Company entered into an accounts receivable purchase
agreement with the same bank, whereby, the Company may assign up to $500,000 of
eligible accounts receivable to the bank. The bank, in turn, would advance the
Company up to 80% of the assigned accounts receivable amount. In March 2000, the
bank increased the eligible accounts receivable to $1,000,000. Although the
agreement is contractually renewable each year, it is cancelable by the bank at
any time. During 2000, the Company assigned accounts receivable of $1,698,414 to
the bank of which all has been repaid to the bank. At September 30, 2000, the
Company had no borrowings under the accounts receivable purchase agreement.
4. STOCKHOLDERS' EQUITY
In December 1991 and June 1992, the Company's Board of Directors and
stockholders, respectively, approved the adoption of the Bio-Imaging
Technologies, Inc. Stock Option Plan. In January 1995 and 1997, the Company
amended this plan to provide for the granting of options to key employees,
directors and consultants to purchase an aggregate of not more than 1,800,000
and 2,400,000 shares, respectively, of the Company's common stock. Each option
is exercisable into one share of common stock. Options granted pursuant to the
plan may be qualified incentive stock options, as defined in the Internal
Revenue Code, or nonqualified options. The exercise price of qualified incentive
stock options may not be less than the fair market value of the Company's Common
Stock at the date of grant. The term of such stock options granted under the
plan shall not exceed ten years and the vesting schedule of such stock option
grants varies from immediate vesting on date of grant to vesting over a period
of up to five years.
The following table summarizes the transactions pursuant to the Company's stock
option plan for the two-year period ended September 30, 2000:
F-11
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Bio-Imaging Technologies, Inc. and
Subsidiaries
<TABLE>
<CAPTION>
Number of Weighted Average
Options Exercise Price
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Unexercised options outstanding at
September 30, 1998 1,268,750 $1.41
Options granted 267,620 0.63
Options canceled (344,000) 1.05
----------------------------------------------------------------------------------------------------------------------
Unexercised options outstanding at
September 30, 1999 1,192,370 1.44
Options granted 329,340 0.89
Options canceled (108,750) 0.93
----------------------------------------------------------------------------------------------------------------------
Unexercised options outstanding at
September 30, 2000 1,412,960 $1.49
======================================================================================================================
</TABLE>
Approximately 932,000 and 765,000 options are exercisable at September 30, 2000
and 1999, respectively, at a weighted average exercise price of $1.49 and $1.66,
respectively.
The Company has elected, in accordance with the provisions of SFAS No. 123,
Accounting for Stock-Based Compensation ("SFAS 123"), to apply the accounting
rules under APB Opinion No. 25, Accounting for Stock Issued to Employees, and
related interpretations in accounting for its stock options and, accordingly,
has presented the disclosure-only information as required by SFAS 123. If the
Company had elected to recognize compensation cost based on the fair value
method of SFAS 123, the Company's net loss applicable to common stock and net
loss per common share for the years ended September 30, 2000 and 1999 would have
been the pro forma amounts indicated in the following table:
<TABLE>
<CAPTION>
Year ended September 30, 2000 1999
---------------------------------------------------------------------------------------------------
<S> <C> <C>
Net loss applicable to common stock - as reported $ (732,431) $(745,459)
Net loss applicable to common stock - pro forma $ (789,881) $(842,614)
Net loss per common share - basic and diluted - as reported $ (0.09) $ (0.10)
Net loss per common share - basic and diluted- pro forma $ (0.10) $ (0.11)
</TABLE>
At September 30, 2000, by range of exercise prices, the number of shares
represented by outstanding options with their weighted average exercise price
and weighted average remaining contractual life, in years, and the number of
shares represented by exercisable options with their weighted average exercise
price are as follows:
F-12
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Bio-Imaging Technologies, Inc. and
Subsidiaries
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
--------------------------------------------------------------------------------- ----------------------------------
Range of Weighted Average Weighted Weighted
Exercise Number Remaining Average Number Average
Prices Outstanding Contractual Life Exercise Price Exercisable Exercise Price
--------------------------------------------------------------------------------- ----------------------------------
<S> <C> <C> <C> <C> <C>
$0.63 - $1.44 1,260,960 7.52 years $0.87 779,661 $0.88
$4.13 - $4.69 152,000 1.67 years $4.60 152,000 $4.60
--------------------------------------------------------------------------------- ----------------------------------
$0.63 - $4.69 1,412,960 6.89 years $1.27 931,661 $1.49
================================================================================= ==================================
</TABLE>
The weighted average fair value of options granted in 2000 and 1999 was $0.77
and $0.38, respectively. The fair value of each option granted is estimated on
the date of grant using the Black-Scholes option pricing model with the
following weighted average assumptions:
Grants for the year ended September 30, 2000 1999
--------------------------------------------------------------------------------
Risk-free interest rate 5.9% 4.7%
Expected dividend yield 0.0% 0.0%
Expected volatility 118% 117%
Expected life in years 6.00 6.00
On December 14, 1995, the Company reserved 3,850,000 shares of the Company's
common stock for issuance upon conversion of the preferred stock and exercise of
the warrants issued to Investment Partners of America, L.P. ("IPA") (see below).
On December 21, 1995, IPA purchased (i) 416,667 shares of the Company's
convertible preferred stock, (ii) one five year warrant to purchase 416,667
shares of the Company's common stock at an initial exercise price of $1.50 per
share and (iii) one five year warrant to purchase 416,667 shares of the
Company's common stock at an initial exercise price of $2.50 per share for an
aggregate purchase price of $500,000 pursuant to a purchase agreement dated
December 8, 1995 ("Purchase Agreement"). 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.
On June 26, 1996, the Company issued to IPA, one five-year warrant to purchase
66,667 shares of the Company's common stock at an initial exercise price of
$1.05 per share, the fair market value of the Company's common stock at date of
issuance. The exercise price of this warrant issued to IPA is subject to
adjustment to protect against dilution in the event of certain transactions and
has certain piggyback registration rights. As of September 30, 2000, the
adjusted exercise price of the warrant is $0.63.
F-13
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Bio-Imaging Technologies, Inc. and
Subsidiaries
The 8% convertible cumulative preferred stock is convertible into common stock
of the Company on a one-for-one share basis subject to adjustment to protect
against dilution in the event of certain transactions. Conversion may occur in
whole or in part during the first five-year period from the date of issuance,
December 21, 1995, at the option of the holder. The Company may require a full
conversion at any time after five years from date of issuance. The preferred
stock has certain piggyback registration rights.
The Company is required to pay semiannual dividends on preferred stock at the
rate of approximately $0.096 per share per annum, and as when declared by the
Board of Directors. Dividends are payable either in cash or in the Company's
common stock at the discretion of the Company. At September 30, 2000, accrued
preferred dividends aggregated approximately $10,000 or $0.02 per share of the
preferred stock.
The preferred stockholders are entitled to vote on all matters submitted to the
vote of the common stockholders and are included in determining quorums and
voting results.
5. COMMITMENTS
The Company has entered into noncancelable operating leases for office
facilities which expire through January 2005.
Future minimum aggregate rental payments on the noncancelable portion of the
lease are as follows:
Year ending September 30,
2001 423,000
2002 404,000
2003 372,000
2004 343,000
2005 115,000
----------------------------------------------------
$ 1,657,000
====================================================
Rent expense charged to operations for the years ended September 30, 2000 and
1999 approximated $306,000 and $249,000, respectively.
The Company has an employment contract with an officer which expires February 1,
2002. The amount due under this contract is approximately $253,000.
Additionally, the contract provided for the granting of options to purchase
150,000 shares of the Company's common stock at $0.63 which was greater than the
fair market value of the Company's common stock at the date of grant (see note
4). Options to purchase 37,500 shares of the Company's common stock vested
immediately, and 37,500 on each of the first, second and third of the
anniversary date of grant.
F-14
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Bio-Imaging Technologies, Inc. and
Subsidiaries
6. EMPLOYEE BENEFIT PLAN
On December 17, 1991, the Company adopted the Bio-Imaging Technologies, Inc.
Employees' Savings Plan (the "401(k) Plan"), a defined contribution plan with a
cash or deferred arrangement. Under the terms of the 401(k) Plan, eligible
employees may elect to reduce their annual compensation up to 15%, subject to an
annual limit prescribed by the Internal Revenue Service. The Company may make
discretionary matching contributions in cash, subject to plan limits. The
Company did not make a matching contribution to this account for the years ended
September 30, 2000 and 1999.
7. MAJOR CUSTOMERS
Revenue from two major customers, encompassing seven projects, accounted for
approximately 20% and 13% of project revenues for the year ended September 30,
2000 and revenue from three major customers, encompassing eleven projects,
accounted for approximately 16%, 13% and 11% of project revenues for the year
ended September 30, 1999. No other customers accounted for more than 10% of
project revenues.
Two customers accounted for approximately 25% and 20% of accounts receivable at
September 30, 2000 and two customers accounted for approximately 17% and 14% of
accounts receivable at September 30, 1999. No other customers accounted for more
than 10% of accounts receivable.
8. INCOME TAXES
The Company has federal net operating loss carryforwards of approximately
$7,123,000 which expire in various years through 2020. The deferred income tax
assets at September 30, 2000 and 1999 of approximately $2,400,000 and
$2,200,000, respectively, represent the tax effect of the net operating loss
carryforwards. Due to the uncertainty regarding the ultimate amount of income
tax benefits to be derived from the net operating loss carryforwards, the
Company has recorded valuation allowances against the entire deferred tax asset.
As a result of moving the corporate headquarters to Pennsylvania, the Company is
not able to utilize their New Jersey net operating loss carryforwards of
approximately $6,800,000.
9. FOREIGN OPERATIONS
Foreign customers accounted for approximately 11% and 32% of project revenues
for the years ended September 30, 2000 and 1999, respectively.
F-15
