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 December 31, 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
December 31, 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 February 2,
1996 is 3,965,940.
Novitron International, Inc. AND SUBSIDIARIES
FORM 10-Q
Index
Page
Part I: FINANCIAL INFORMATION
Item 1: Consolidated Financial Statements
Unaudited consolidated balance sheets at
December 31, 1995 and March 31, 1995 3
Unaudited consolidated statements of operations
for the three and nine months ended December 31,
1995 and 1994 5
Unaudited consolidated statements of stockholders'
investment for the years ended March 31, 1995 and 1994
and the nine months ended December 31, 1995 6
Unaudited consolidated statements of cash flows for
the nine months ended December 31, 1995 and 1994 7
Notes to unaudited consolidated financial statements 9
Item 2: Management's Discussion and Analysis of
Financial Condition and Results of Operations 13
Part II: OTHER INFORMATION 14
SIGNATURE 15
Novitron International, Inc. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
ASSETS
December 31, 1995 March 31, 1995
CURRENT ASSETS:
Cash and cash equivalents $ 963,662 $ 2,508,345
Marketable securities 399,259 -
Accounts receivable, less
reserves of $113,000 at
December 31, 1995 and
$112,000 at March 31, 1995,
respectively 4,932,748 4,046,517
Inventories 5,495,485 5,266,981
Prepaid expenses 170,247 490,277
Other current assets 1,771 5,764
Total current assets 11,963,172 12,317,884
EQUIPMENT, at cost:
Manufacturing and computer
equipment 3,091,926 3,098,212
Furniture and fixtures 842,059 852,240
Leasehold improvements 273,893 278,297
Vehicles 105,277 100,946
4,313,155 4,329,695
Less-Accumulated depreciation
and amortization 3,410,019 3,153,830
903,136 1,175,865
OTHER ASSETS 1,468,542 1,580,997
$ 14,334,850 $ 15,074,746
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
December 31, 1995 March 31, 1995
CURRENT LIABILITIES:
Short-term notes payable and
current portion of long-term debt $ 1,517,220 $ 533,951
Accounts payable 2,989,089 3,810,884
Accrued expenses 1,106,432 1,444,255
Customer advances 242,858 235,471
Accrued income taxes 357,708 718,640
Total current liabilities 6,213,307 6,743,201
LONG-TERM DEBT, net of current
portion 95,673 97,766
MINORITY INTEREST 258,874 252,734
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 and outstanding
3,965,940 at December 31, 1995
and March 31, 1995 39,660 39,660
Capital in excess of par value 4,855,950 4,855,950
Cumulative translation adjustment 974,964 1,068,490
Retained Earnings 1,896,422 2,016,945
Total stockholders' investment 7,766,996 7,981,045
$ 14,334,850 $ 15,074,746
The accompanying notes are an integral part of these
consolidated financial statements
Novitron International, Inc. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
For Three Months For the Nine Months
Ended December 31, Ended December 31,
1995 1994 1995 1994
REVENUES $4,920,022 $3,747,551 $12,761,842 $12,900,520
COST OF REVENUES 3,543,266 2,720,563 9,029,030 8,920,021
Gross profit 1,376,756 1,026,988 3,732,812 3,980,499
OPERATING EXPENSES:
Sales & marketing 319,069 359,261 953,733 899,358
Research and development 350,821 281,749 996,917 890,576
General and administrative 584,479 615,485 1,678,136 1,961,676
1,254,369 1,256,495 3,628,786 3,751,610
Income (loss) from 122,387 (229,507) 104,026 228,889
operations
Interest Expense (35,436) (16,661) (79,491) (21,000)
Interest Income 13,815 27,278 53,755 52,927
Other Income (Expense) 42,898 (14,801) (38,730) 19,352
143,664 (233,691) 39,560 280,168
Provision for Income Taxes 67,170 56,238 140,016 142,294
76,494 (289,929) (100,456) 137,874
Minority Interest 16,608 5,901 20,067 12,838
Net income (loss) $ 59,886 $(295,830) $(120,523) $ 125,036
Net income (loss) per share $ 0.02 $ (0.07) $ (0.03) $ 0.03
Weighted Average Common
Shares Outstanding 3,965,940 3,958,826 3,965,940 3,981,418
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 AND 1994
AND THE NINE MONTHS ENDED DECEMBER 31, 1995 (unaudited)
Capital in Cumulative Treasury
Common Stock Excess of Par Translation Stock, at Retained
Number Par Value 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 stock 12,500 126 2,918 - - -
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 adjustment - - - (277,094) - -
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 stock 15,201 152 17,212 - - -
Issuance of common
stock in connection
with the acquisition
ofadditional 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 adjustment - - - 1,097,085 - -
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 - - - (93,526) - -
Net loss - - - - - (120,523)
BALANCE at December 31,
1995 3,965,940 $ 39,660 $ 4,855,950 $ 974,964 - $ 1,896,422
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 NINE MONTHS ENDED DECEMBER 31,
1995 1994
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net income (loss) $ (120,523) $ 125,036
Adjustments to
reconcile net income
(loss) to net cash
provided by (used
in) operating activities -
Depreciation and amortization 430,280 413,883
Minority interest 20,067 12,838
Accounts receivable (1,039,542) (810,745)
Inventories (419,633) (500,496)
Prepaid expenses 305,769 153,084
Other current assets 3,993 12,357
Accounts payable (694,401) 110,587
Accrued expenses (292,412) (243,905)
Customer advances 15,907 (184,613)
Accrued income taxes (336,197) (696,420)
Net cash provided by
(used in) operating activities (2,126,692) (1,608,394)
CASH FLOWS FROM
INVESTING ACTIVITIES:
Marketable securities (399,259) 278,715
Other assets 816 46,437
Purchases of equipment (151,996) (296,873)
Sales of equipment 11,403 48,969
Investment in NovaChem BV - (51,520)
Other, including foreign exchange
effects on cash 108,263 48,325
Net cash provided by
(used in) investing activities (430,773) 74,053
Continues on next page
Novitron International, Inc. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED DECEMBER 31,
(Continued)
1995 1994
CASH FLOWS FROM
FINANCING ACTIVITIES:
Proceeds from short-term debt $ 1,011,385 $ 5,680
Proceeds from (payments on)
long-term debt 1,397 (6,489)
Sale of common shares - 66,739
Net cash provided by
financing activities 1,012,782 65,930
NET DECREASE IN
CASH AND CASH EQUIVALENTS (1,544,683) (1,468,411)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR 2,508,345 3,407,537
CASH AND CASH EQUIVALENTS
AT December 31, 1995 and 1994 $ 963,662 $ 1,939,126
The accompanying notes are an integral part of these
consolidated financial statements.
Novitron International, Inc. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 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 December 31, 1995 and December 31, 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 December 31, and March 31, 1995:
December 31, 1995 March 31, 1995
Cash and money market $ 763,662 $ 1,782,470
investments
Certificate of deposit 200,000 408,757
U.S. Treasury securities - 295,828
Time deposits - 21,290
$ 963,662 $ 2,508,345
Novitron International, Inc. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 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:
December 31, 1995 March 31, 1995
Raw materials $ 1,235,365 $ 1,072,724
Work-in-process 3,098,183 3,439,258
Finished goods 1,161,937 754,999
$ 5,495,485 $ 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 and nine month periods
ended December 31, 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
three month period ended December 31, 1995 and the nine month period ended
December 31, 1994 as the resulting dilution is less than 3%.
Novitron International, Inc. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 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.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
Third Quarter ended December 31, 1995 compared to the Third Quarter ended
December 31, 1994
Revenue for the three month period ending December 31, 1995 increased
31.0% from the same period one year ago, whereas the nine month year-to-
date sales showed a decline of 1.0% from the corresponding period ending
December 31, 1994. The increase in revenues for the three month period was
primarily due to a 40.0% increase in sales at Vital Scientific coupled with
an 11.0% strengthening of the Dutch Guilder (the Company's functional
currency) against the United States Dollar offset by the fiscal year 1995
completion of a major contract for NovaChem technology. The decrease in
revenue for the nine months ended December 31, 1995 and 1994 was primarily
due to the aforementioned completed contract offset by the 11.0% increase
in the guilder against the dollar.
The gross margin showed an improvement from 27.4% to 28.0% for the
three month period ending December 31, 1994 and 1995, respectively; whereas
there was a decrease in the margin from 30.9% to 29.3% for the year-to-date
numbers. The quarterly improvement resulted from reduced manufacturing
costs which are expected to continue.
Sales and marketing expenses have increased 6.1% for the nine month
comparatives and have decreased 11.2% on a quarterly basis. The increase
was primarily attributable to the 11.0% strengthening of the guilder
against the dollar. On a quarterly basis, the decrease was largely due to
reduced sales commissions at Clinical Data (Australia) Pty. Ltd.
Research and development expenses increased 11.9% for the nine month
period ending December 31 and 24.5% for the three month period. For the
year-to-date comparatives, the noted increase was due to the strengthening
of the functional currency against the dollar. The quarterly increase was
affected by the aforementioned currency fluctuation and by the timing of
certain research and development expenses at Vital Scientific and NovaChem
BV.
General and administrative expenses have decreased 5.0% on a quarterly
basis and 14.4% for the nine month comparatives. The declines was due to
the fiscal year 1995 completion of a major contract at NovaChem coupled
with a reduction of administrative expenses.
Interest income decreased 49.4% for the quarter ended December 31
because of fewer funds were available for investment. Comparatives for the
year-to-date showed an increase of 1.6% which was partially due to the
strengthening of the functional currency against the dollar and from the
increased rates of return from the same period last year. Interest expense
increased 112.7% for the quarter and 278.5% for the nine month period
because of the need for additional borrowings. Other income and expense
consisted primarily of the effect of foreign currency transaction gains and
losses on the results of operations.
For the quarters ended December 31, 1995 and 1994, minority interest
was attributable to the 6.0% of Vital Scientific NV not held by the
Company. In October 1994, the Company increased its ownership of NovaChem
BV to 60.0% and acquired the remaining 40.0% at March 31, 1995. In
accordance with APB No. 18 and Accounting Research Bulletin No. 51, the
Company has recorded 100.0% of the losses incurred during the nine months
ending December 31, 1994, approximately $137,000.
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 accounts
receivable, (ii) an increase in marketable securities, (iii) an increase in
inventory levels, (iv) a decrease in accounts payable, (v) a decrease in
taxes payable, and (vi) a decrease in accrued liabilities offset by an
increase in short-term borrowings.
The Company believes that its available funds will continue to provide
for working capital requirements. Approximately $1.3 million of the $1.4
million of cash and cash equivalents and marketable securities is
denominated in U.S. Dollars. The effect of translation into U.S. Dollars is
reflected as a separate component of stockholders' investment in the
balance sheet. The cumulative translation exchange adjustment in
stockholders' investment is $974,964 at December 31, 1995 and $1,068,490 at
March 31, 1995. Any impact on the Company's liquidity is largely dependent
on the exchange rates in effect at the time the functional currency (Dutch
Guilder) is translated to U.S. Dollars. The effects of currency exchange
rates on future quarterly or fiscal periods on the results of operations
and liquidity are difficult to estimate.
There are no formal hedging procedures employed by the Company. The
primary risk is to monetary assets and liabilities denominated in
currencies other than the U.S. Dollar. Approximately $11.0 million of the
$12.0 million of current assets reside in the Company's foreign
subsidiaries.
Part II. OTHER INFORMATION
Item 1:
A former principal of a subsidiary has filed suit with the Attorney
General of Massachusetts claiming back wages are due on an alleged
employment agreement as signed by another former principal in the amount of
$79,750 plus severance. The Company has notified the Attorney General that
the claim is without merit and is a fraud. The Company intends to
vigorously defend against the allegation and is seeking criminal
prosecution of both principals.
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: February 8, 1996 Israel M. Stein MD
President