FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1995
or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
For Quarter Ended Commission File Number
June 30, 1995 0-12716
Novitron International, Inc.
(Exact Name of Registrant as Specified in its Charter)
Delaware 04-2573920
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
One Gateway Center, Suite 411, Newton, MA. 02158
(Address of principal executive offices) (Zip Code)
Registrant's Telephone number, including area code:
(617) 527-9933
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or 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
The number of shares of common stock outstanding, as of August 2,
1995 is 3,965,940.
Novitron International, Inc. AND SUBSIDIARIES
FORM 10-Q
Index
Page
Part I: FINANCIAL INFORMATION
Item 1: Consolidated Financial Statements
Consolidated balance sheets at June 30, 1995
and March 31, 1995 1
Unaudited consolidated statements of operations
for the three months ended June 30, 1995 and 1994 3
Consolidated statements of stockholders' investment
for the years ended March 31, 1995, 1994 and the
three months ended June 30, 1995 (unaudited) 4
Unaudited consolidated statements of cash flows for
the three months ended June 30, 1995 and 1994 5
Notes to unaudited consolidated financial statements 7
Item 2:Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Part II: OTHER INFORMATION 11
SIGNATURE 12
Novitron International, Inc. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
ASSETS
June 30, March 31,
1995 1995
CURRENT ASSETS:
Cash and cash equivalents $ 1,577,730 $ 2,508,345
Accounts receivable, less
reserves of $ 128,000 at
June 30, 1995 and $112,000
at March 31, 1995, respectively 3,893,259 4,046,517
Inventories 6,071,721 5,266,981
Prepaid expenses 232,425 490,277
Other current assets 5,310 5,764
Total current assets 11,780,445 12,317,884
EQUIPMENT, at cost:
Manufacturing and computer 3,081,258 3,098,212
equipment
Furniture and fixtures 864,917 852,240
Leasehold improvements 277,856 278,297
Vehicles 100,152 100,946
4,324,183 4,329,695
Less- Accumulated depreciation
and amortization 3,237,808 3,153,830
1,086,375 1,175,865
OTHER ASSETS 1,556,492 1,580,997
$14,423,312 $15,074,746
<FN>
The accompanying notes are an integral part of
these consolidated financial statements.
Novitron International, Inc. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' INVESTMENT
June 30, March 31,
1995 1995
CURRENT LIABILITIES:
Short-term notes payable and
current portion of long-term debt $ 1,249,756 $ 533,951
Accounts payable 2,863,654 3,810,884
Accrued expenses 1,286,430 1,444,255
Customer advances 235,260 235,471
Accrued income taxes 626,171 718,640
Total current liabilities 6,261,271 6,743,201
LONG-TERM DEBT, net of current
portion 94,221 97,766
MINORITY INTEREST 244,557 252,734
COMMITMENTS AND CONTINGENCIES
(Notes 4 and 7)
STOCKHOLDERS' INVESTMENT:
Preferred stock, $.01 par value,
Authorized--1,000,000 shares
Issued and outstanding--none
Common stock, $.01 par value,
Authorized--6,000,000 shares
Issued--3,965,940 shares at
June 30, 1995 and March 31,
1995 39,660 39,660
Capital in excess of par value 4,855,950 4,855,950
Cumulative translation adjustment 996,906 1,068,490
Retained earnings 1,930,747 2,016,945
Total stockholders' investment 7,823,263 7,981,045
$ 14,423,312 $15,074,746
<FN>
The accompanying notes are an integral part of these consolidated
financial statements.
Novitron International, Inc. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30,
1995 1994
REVENUES $3,549,905 $4,418,029
COST OF REVENUES 2,385,320 2,921,674
Gross profit 1,164,585 1,496,355
OPERATING EXPENSES:
Sales and marketing 293,038 276,012
Research and development 335,162 357,609
General and administrative 579,449 646,776
1,207,649 1,280,397
Income from operations (43,064) 215,958
Interest expense (15,857) (4,726)
Interest income 17,601 19,252
Other income 31,137 11,451
(10,183) 241,935
Provision for income taxes 70,265 7,672
(80,448) 234,263
Minority interest (5,750) (854)
Net income $ (86,198) $233,409
Net income per share $ (0.02) $ 0.06
Weighted Average Common
Shares Outstanding 3,965,940 4,026,239
<FN>
The accompanying notes are an integral
part of these consolidated financial statements.
Novitron International, Inc. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT
FOR THE YEARS ENDED MARCH 31, 1995, 1994
AND FOR THE THREE MONTHS ENDED JUNE 30, 1995
Common Stock Capital in Cumulative Treasury
Number Excess Translation Stock at Retained
of Shares Par Value Par Value Adjustment Cost Earnings
Balance at March
31, 1993 3,966,039 $39,660 $4,896,280 $248,499 - $3,366,324
Sale of common 12,500 126 2,918 - - -
stock
Issuance of common
stock in connection
with the
acquisition of
additional interest
in NovaChem 46,500 465 214,597 - - -
Purchase of
treasury stock - - - - (330,550) -
Translation - - - (277,094) - -
adjustment
Net loss - - - - - (1,121,144)
BALANCE at March
31, 1994 4,025,039 $40,251 $5,113,795 $(28,595) $(330,550) $2,245,180
Sale of common 15,201 152 17,212 - - -
stock
Issuance of common
stock in connection
with the
acquisition of
additional interest
in NovaChem 11,000 110 56,140 - - -
Retirement of
treasury stock (85,000) (850) (329,700) - 330,550 -
Retirement of
common stock (300) (3) (1,497) - - -
Translation - - - 1,097,085 - -
adjustment
Net loss - - - - (228,235)
BALANCE at March
31, 1995 3,965,940 $39,660 $4,855,950 $ 1,068,490 - $2,016,945
Translation
Adjustment - - - (71,584) - -
Net loss - - - - - (86,198)
BALANCE at June 30,
1995 3,965,940 $39,660 $4,855,950 $996,906 - $1,930,747
<FN>
The accompanying notes are an integral part of these consolidated financial
statements.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED JUNE 30,
1995 1994
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net income (loss) $ (86,198) $233,409
Adjustments to
reconcile net income
(loss)to net cash
provided by (used
in) operating
activities -
Depreciation and
amortization 109,637 131,405
Minority interest 5,750 854
Accounts receivable 146,459 (1,409,958)
Inventories (802,952) (139,283)
Prepaid expenses 254,514 13,125
Other current assets 499 (19,138)
Accounts payable (931,155) 209,419
Accrued expenses (154,313) (100,436)
Customer advances 93 48,232
Accrued income taxes (90,533) (38,450)
(Net cash provided by
(used in) operating
activities $(1,548,199) $(1,070,821)
CASH FLOWS FROM
INVESTING ACTIVITIES:
Marketable securities $ - $76,702
Other assets 310 362
Purchases of equipment (546) (142,986)
Sales of equipment - 17,614
Other, including
foreign exchange
effects on cash (87,702) 74,857
Net cash provided
by(used in) investing
activities $ (87,938) $26,549
<FN>
The accompanying notes are an
integral part of these consolidated financial statements.
Novitron International, Inc. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED JUNE 30,
(Continued)
1995 1994
CASH FLOWS FROM
FINANCING ACTIVITIES:
Proceeds from short-
term notes payable $ 708,905 $ 142,482
Proceeds (payments
on)long-term debt (3,383) 7,091
Sale of common shares - 1,415
Net cash provided
by(used in)
financing activities $ 705,522 $ 150,988
NET INCREASE (DECREASE)
IN CASH AND CASH
EQUIVALENTS $(930,615) $(893,284)
CASH AND CASH
EQUIVALENTS AT BEGINNING
OF YEAR 2,508,345 3,407,537
CASH AND CASH
EQUIVALENTS AT June 30,
1995 and 1994 $1,577,730 $2,514,253
<FN>
The accompanying notes are an integral part of these consolidated
financial statements.
Novitron International, Inc. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1995
Basis of Presentation
The consolidated financial statements included herein were
prepared by Novitron International, Inc. ("the Company") pursuant to
the rules and regulations of the Securities and Exchange Commission.
Certain information normally included in footnote disclosures in
financial statements prepared in accordance with generally accepted
accounting principles was condensed or omitted pursuant to such rules
and regulations. In management's opinion, the consolidated financial
statements and footnotes reflect all adjustments necessary to disclose
adequately the Company's financial position at June 30, 1995 and June
30, 1994. Management suggests these condensed consolidated financial
statements be read in conjunction with the financial statements and
the notes thereto included in the Company's Annual Report on Form 10-K
for the fiscal year ended March 31, 1995.
(1) Operations and Accounting Policies
(a) Principles of Consolidation
The consolidated financial statements include the accounts of the
Company and its subsidiaries: Clinical Data BV, Clinical Data
(Australia), Pty. Ltd., NovaChem BV, Spectronetics NV, and Vital
Scientific NV (94% owned subsidiary). All significant intercompany
accounts and transactions have been eliminated in consolidation.
(b) Cash and Cash Equivalents
Cash and cash equivalents are stated at cost, which approximates
market, and consist of cash and marketable financial instruments with
original maturities of 90 days or less. Cash and cash equivalents
consist of the following at June 30, and March 31, 1995.
June 30, 1995 March 31, 1995
Cash and money market investments $ 1,032,044 $ 1,782,470
Certificate of deposit 324,440 408,757
U.S. Treasury securities 199,812 295,828
Time deposits 21,434 21,290
$ 1,577,730 $ 2,508,345
Novitron International, Inc. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1995
(Continued)
(c) Marketable Securities
The Company adopted Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt
and Equity Securities" ("SFAS No. 115") effective April 1, 1994.
Under SFAS No. 115, marketable securities which the Company has
the ability and positive intent to hold to maturity are recorded
at amortized cost and classified as "held to maturity"
securities. The adoption of SFAS No. 115 did not have a material
effect on the Company's financial position or results of
operations.
(d) Inventories
Inventories are stated at the lower of cost (first-in, first-
out) or market, include material, labor and manufacturing
overhead, and consist of the following at June 30, and March 31,
1995:
June 30, 1995 March 31, 1995
Raw materials $954,245 $1,072,724
Work-in-process 4,149,081 3,439,258
Finished goods 968,395 754,999
$6,071,721 $5,266,981
(e) Revenue Recognition
The Company recognizes revenue from the sale of products and
supplies at the time of shipment.
(f) Net Income (Loss) per Share
Net income or (loss) per share for the three month periods
ended June 30, 1995 and 1994 is based on the weighted average
number of common shares outstanding during the respective fiscal
period. Common stock equivalents are not used in the computation
of net income per share for the period ended June 30, 1994 as the
resulting dilution is less than 3%.
Novitron International, Inc. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1995
(Continued)
(g) Foreign Currency Translation
The Company accounts for foreign currency transaction and
translation gains and losses in accordance with SFAS No. 52,
"Foreign Currency Translation." The functional currency of the
Company's foreign subsidiaries is the Dutch Guilder. The
translation adjustment required to report these subsidiaries'
financial statements in U.S. dollars is credited or charged to
cumulative translation adjustment, included as a separate
component of stockholders' investment in the accompanying
consolidated balance sheets. Gains and losses resulting from
translating asset and liability accounts which are denominated in
currencies other than the functional currency are included in
other income. Foreign currency transaction gains and losses are
included in other income in the consolidated statements of
operations.
(2) Investment in NovaChem BV
From June 1992 through March 1995, the Company made
investments in certain securities of NovaChem BV. As of March 31,
1995, the Company owns all of the outstanding stock of NovaChem
BV. In connection with the Company's purchase of NovaChem BV's
stock, the Company has recorded goodwill of $981,250, which
represents the excess of the consideration paid over the fair
value of the net assets acquired. The Company has agreed to pay
the former shareholders of NovaChem BV additional consideration
in the form of the Company's common stock, based on a formula
over the next three years.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
First Quarter ended June 30, 1995 compared to the First Quarter
ended June 30, 1994
Revenues for the first quarter of fiscal year 1996 decreased
twenty percent (20%) from the prior year. This result was
primarily attributable to the completion of a major contract from
Russia's Gazprom for NovaChem technology during the first and
second quarters of fiscal year 1995. The results also reflect a
sixteen percent (16%) strengthening of the Dutch Guilder against
the United States Dollar.
The decrease in the gross margin between years, from 33.9%
for the quarter ended June 30, 1994 to 32.8% for the quarter
ended June 30, 1995, reflects primarily a change in product mix
to sales of instruments with lower margins.
Sales and marketing expenses increased six percent (6%)
between years when expressed in U.S. dollars. Actual expenses,
however, when expressed in the functional currency of Dutch
Guilders, decreased ten percent (10%) due to cost containment at
Vital Scientific and a reduction of overhead at NovaChem BV. The
results were also impacted by the sixteen percent (16%) change in
the currency value as noted above.
Research and development expenses declined six percent (6%)
from the comparable period last year primarily because of the
completion of projects at NovaChem BV.
General and administrative expenses have decreased ten
percent (10%) from fiscal 1995 to fiscal 1996. This result was
due primarily to cost containment implemented at NovaChem BV and
the Company and reduced expenses at Spectronetics NV following
the completion of the Russian Gazprom project.
Interest expense increased due to the increased use of the
Company's bank line of credit, while interest income has
decreased because fewer funds were available for investment. The
increase in other income results from the currency translation
gains. Taxes have increased between years because Vital
Scientific NV, as an individual company, had substantially
stronger results for the quarter as compared to fiscal 1995.
For the quarters ended June 30, 1995 and 1994, minority
interest is attributable to the six percent (6%) of Vital
Scientific NV not held by the Company. From October 1993 through
October 1994, the Company owned fifty-two percent (52%) of
NovaChem BV. In October 1994, the Company increased its ownership
in NovaChem BV to sixty percent (60%) and acquired the remaining
forty percent (40%) at March 31, 1995. In accordance with APB No.
18 and Accounting Research Bulletin No. 51, the Company has
recorded one hundred percent (100%) of the NovaChem BV losses
during fiscal year 1995, approximately $75,000 for first quarter
fiscal 1995, because the minority interests were unable to fund
their portion of these losses.
Financial Condition and Liquidity
The decrease in working capital since the Company's fiscal
year ended March 31, 1995, was primarily accounted for by (i) an
increase in inventory levels, (ii) a decrease in accounts payable
and (iii) a decrease in accrued taxes payable. This result was
offset by an increase in the level of short-term debt.
The Company believes that its available funds will continue
to provide for working capital requirements. Approximately $1.5
million of the $1.6 million of cash and cash equivalents and
short-term investments is denominated in U.S. dollars; $0.1
million is subject to foreign currency translation risk. The
translation risk is dependent on the exchange rates in effect at
the time the functional currency (Dutch Guilder) is translated to
U.S. Dollars. The effect on translation is reflected as a
separate component of stockholders' investment in the balance
sheet. The cumulative effect of translation is $996,906 at June
30, 1995 and $1,068,490 at March 31, 1995.
Part II. OTHER INFORMATION
Item 1. Legal proceedings:
None
Items 2 - 6: None
Signature
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed in
its behalf by the undersigned thereunto duly authorized.
Novitron International, Inc.
(Registrant)
Israel M. Stein MD
Date:August 7, 1995 Israel M. Stein MD
President