FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
for the fiscal year ended March 31, 1996
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
for the transition period from to
Commission File Number: 0-12716
Novitron International, Inc.
(Exact name of registrant as specified in its charter)
Delaware 04-2573920
(State of incorporation) (IRS Employer ID Number)
One Gateway Center, Suite 411, Newton, Massachusetts 02158
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:(617) 527-9933
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.01
par value
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 for such shorter period that the registrant was
required to file such reports), and(2) has been subject to such filing
requirement for the past 90 days. Yes x No __
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not 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-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the voting Common Stock held by non-affiliates of
the registrant was approximately $7,436,000 based on the average high and low
price of the Common Stock as reported by NASDAQ on June 18, 1996.
As of June 18, 1996, there were 3,965,940 shares of the Registrant's Common
Stock issued and outstanding.
Documents Incorporated by Reference: Portions of the Company's Proxy Statement
for its 1996 Annual Meeting into Part III of Form 10-K.
Novitron International, Inc.
ANNUAL REPORT ON FORM 10-K
For the Year Ended March 31, 1996
Table of Contents
Page
PART I
Item 1 Business 1
Item 2 Properties 10
Item 3 Legal Proceedings 11
Item 4 Submission of Matters to a Vote of Security Holders 11
PART II
Item 5 Market Price for Registrant's Common Equity and
Related Stockholder Matters 12
Item 6 Selected Financial Data 13
Item 7 Management's Discussion and Analysis of Financial
Condition and Results of Operations 14
Item 8 Financial Statements and Supplementary Data 17
Item 9 Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 17
PART III
Item 10 Directors and Executive Officers of the Registrant 18
Item 11 Executive Compensation 18
Item 12 Security Ownership of Certain Beneficial Owners
and Management 18
Item 13 Certain Relationships and Related Transactions 18
PART IV
Item 14 Exhibits, Financial Statement Schedules and
Reports on Form 8-K 19
Signatures 20
PART I
Item 1. Business
Novitron International, Inc.(the "Company") is a multinational corporation
focusing operations on scientific instrumentation used in medical and analytical
laboratories and in process monitoring in industry. The Company's Dutch
subsidiary, Vital Scientific NV ("Vital Scientific"), designs and manufactures
scientific instrumentation including blood chemistry analyzers marketed
worldwide primarily by E. Merck. The Company's Dutch subsidiary, NovaChem
BV("NovaChem"), develops and markets process monitoring spectrophotometers with
applications in petrochemical and pharmaceutical production and in environmental
monitoring. The Company's subsidiary, Clinical Data (Australia) Pty.
Ltd. ("Clinical Data Australia"), distributes diagnostic instruments and assays
in the South Pacific and Southeast Asia.
Company History
Novitron International, Inc. was established in 1972 as Clinical Data, Inc.
to develop and market ambulatory electrocardiographic ("ECG") monitoring
technology. In 1983, through a series of acquisitions, the Diagnostic Services
and Drug Research Services Divisions were formed which combined grew to over $14
million in revenue. As the Company believed that future growth was limited, the
former division was sold to United Medical Corporation in February 1990 and the
latter was discontinued in March 1991.
In 1984, the Company acquired a thirty-three percent (33%) equity interest
in Vital Scientific. Through a series of transactions between 1985 to 1988 the
Company increased its equity participation to fifty-six percent (56%). In 1991,
the Company purchased an additional thirty-eight percent (38%) interest in Vital
Scientific which increased its equity position to the present ninety-four
percent (94%).
In June 1992, the Company invested in NovaChem BV, a Dutch company formed
to develop and market spectrophotometric process monitoring technology. In March
1995, NovaChem BV became a wholly owned subsidiary of the Company.
In April 1994, to better reflect the Company's diversification into
industrial process and environmental monitoring technology, the Company's name
was changed from Clinical Data, Inc. to Novitron International, Inc.
VITAL SCIENTIFIC NV
Vital Scientific, established in 1956 and headquartered in
Spankeren/Dieren, The Netherlands, is the nucleus of the Company's operations.
Vital Scientific designs, develops, manufactures, and distributes scientific
instrumentation for medical and industrial applications. The subsidiary's
principal products, marketed under the "Vitalab" tradename, are clinical
chemistry analyzers used in medical laboratories.
Vital Scientific maintains a research and development group of fourteen
professionals augmented by contract personnel which include the disciplines of
mechanical and electronic engineering and software system design and
programming. Its machining and electronic assembly operations are CNC based and
highly automated. Vital Scientific manufactures precision metal and plastic
mechanical components to the high tolerances required in optical and
electromechanical instrumentation.
A strategic partnership has existed since 1990 between Vital Scientific and
E. Merck for the development and marketing of instrumentation for the clinical
laboratory. Under the terms of a series of agreements, Vital Scientific
manufactures and E. Merck distributes worldwide, certain clinical chemistry
analyzers dual-labeled with the Merck and Vital Scientific logos.
E. Merck is a leading provider of diagnostic reagents. Vital Scientific has
over forty(40) years of experience in designing and manufacturing analyzers for
the clinical laboratory. The joint development and marketing agreements allow E.
Merck to offer combined instrumentation and reagent systems designed to satisfy
the needs of the clinical laboratory market.
The arrangements with E. Merck do not preclude other strategic arrangements
between Vital Scientific and other reagent manufacturers. During this past year,
Vital Scientific has been actively marketing its instrument development and
production capabilities to other potential companies in markets and fields not
conflicting with its present strategic partnerships.
In January 1996, Vital Scientific signed an agreement with Hycor
Biomedical, Inc. of Irvine, California for the design and manufacture of an
automated instrument tailored for use with Hycor's allergy and auto-immune
diagnostic assays. The agreement, which covers a four year period, calls for the
exclusive worldwide distribution of the instrument by Hycor Biomedical. The
collaboration with Hycor Biomedical offers the opportunity to diversify Vital
Scientific's instrumentation knowledge base into new diagnostic fields.
During fiscal 1996, Vital Scientific obtained ISO 9002 certification and is
expecting ISO 9001 approval in the coming year.
Marketing and Distribution
At present E. Merck is distributing internationally three instruments
designed and manufactured by Vital Scientific. Sales to E. Merck represented
approximately eighty-four percent (84%) and sixty-three percent (63%) of the
Company's revenues during fiscal 1996 and 1995, respectively.
Vital Scientific also maintains a dealer network for marketing certain
instruments in Europe, the Far East, China and Russia. During fiscal 1995, Vital
Scientific added a salesperson whose efforts are targeted at developing OEM
business opportunities.
Product Development
During fiscal 1996, 1995, and 1994, the Company spent approximately
$1,110,000, $1,217,000, and $1,074,000, respectively, on research and
development at Vital Scientific.
Six new models of clinical chemistry analyzers were developed in the past
seven (7) years. The MicroLab 200, the Vitalab Eclipse,the Vitalab Eclipse Plus,
the Vitalab Eclair, the Vitalab Selectra and the Vitalab Selectra II.The top-of-
the-line Vitalab Selectra II is a patient selective, high throughput clinical
chemistry analyzer, capable of a wide range of routine, immunologic and esoteric
testing. The instrument, designed for use with Merck diagnostics, targets the
hospital and alternative care markets. Vital Scientific believes that the unique
robotic features, the user friendly user interface and the wide range of
applicable reagents for the Vitalab Selectra II provide its target market with
state-of-the-art affordable "walk-away" testing capability.
Research and development efforts at Vital Scientific are expected to
accelerate during fiscal 1997. The Company intends to develop new products
and/or services where the Company perceives a demand and believes the product or
service may be effectively marketed. There is no assurance that any developments
or enhancements will be successfully completed or that, if developed, any of the
products will be successfully marketed.
Competition
In developing instruments for dual-label and private label sales by third
parties, the Company competes with numerous other companies to establish
relationships in Europe and the United States. These include the Kollsman
division of the Sequa Corporation, Wilj International and many other smaller
European and American companies. The Company believes that it competes on its
capabilities, the quality of its products, and its ability to produce in a
timely fashion.
In the sale of clinical chemistry analyzers, the Company experiences
intense competition in the marketplace. Worldwide there are over fifteen
companies, many of which have substantially greater resources than Vital
Scientific or our strategic partner E. Merck. The Company competes on the basis
of specialized features of its technology, added value, simplicity of operation,
high performance-to-cost ratio, compatibility of instruments with reagents of
various manufacturers, and strategic marketing alliances.
CLINICAL DATA(AUSTRALIA) PTY. LTD.
Clinical Data Australia was formed in July 1992 and is responsible for the
sale of Vital Scientific products in Australia, New Zealand, and the South
Pacific. Clinical Data Australia also oversees Vital Scientific instrument sales
to the People's Republic of China through a Hong Kong affiliate of the Company,
Linkyears International Ltd.
Clinical Data Australia's mission is also to provide the Company with
direct access to the instrument and reagent sectors of the diagnostics market.
Australia was chosen as the location because the Company had a capable marketing
individual available on-site and Australian medicine provides an ideal blend of
the characteristics found in Europe and the United States. The Company's
competitors also use Australia as a "test market" for new products.
To support these strategic marketing activities, the Company recognized the
opportunity to establish a "non-aligned" diagnostics distribution business that
was ideally positioned to represent smaller European and U.S. companies. The
activities of Vital Scientific in the OEM market provided Clinical Data
Australia with unique access to a wide range of suppliers seeking distribution
in Australia.
Clinical Data Australia currently represents the following companies in
Australia:
Hycor Biomedical- Urinalysis Systems and Consumables
E. Merck- Clinical Chemistry Reagents
Heinrich Amelung GmbH- Coagulation Analyzers
Nycomed Pharma- QC Sera and Cell Biology Products
R&R Mechatronics- ESR Analyzers
Vital Scientific- Clinical Chemistry Analyzers
Medical Specialties International- Hematology Controls
Sigma Diagnostics - wide range of diagnostics
The Hycor Biomedical line was launched in 1995 and has proven to be very
successful. The product is the leading urinalysis system in Australia with a
market share of approximately 65%.
Beginning in January 1996, Clinical Data Australia has been appointed the
exclusive distributor in Australia for Sigma Diagnosticsr. This company has,
until now, operated as a catalogue based supplier with a number of non-exclusive
distributors. A major "launch" of this product range is now underway and
Clinical Data Australia anticipates that this line will be a major contributor
to its growth.
Sales to Linkyears International Ltd. destined for the People's Republic of
China represented approximately seven percent (7%) and four percent (4%) of the
Company's revenues during fiscal 1996 and 1995, respectively.
NOVACHEM BV
NovaChem was established in August 1992 to develop and market on-line,real-
time, spectrophotometric process monitors. Located in Spankeren/Dieren, The
Netherlands, NovaChem has developed a series of applications for the use of
diode-array spectroscopy which include the monitoring of Claus Plant sulfur
recovery, and the measurement of sulfur dioxide, oxides of nitrogen, and ammonia
in stack emissions. The technology has also been proven effective in controlling
ethylene glycol manufacture, refining cobalt, and monitoring the clean-in-place
process in the production of pharmaceuticals.
The technology originally marketed by NovaChem was developed by and
licensed from another company. In January 1996, NovaChem introduced the Mark II-
IPM Process Analyzer, a new generation of industrial process monitors. Designed
and developed by NovaChem, the Mark II- IPM represents a major step forward in
the advancement of state of the art solid state, fiber-optic, diode-array
technology specifically designed for process control applications.
This new proprietary development introduces over twelve advancements in
spectroscopic hardware, user interface, and chemometric software as compared to
earlier models. In addition, the new Mark II- IPM Process Analyzer complies with
all requirements necessary to obtain the CE marking. This new generation of
diode-array process analyzers is the result of a major development effort by a
newly assembled expert team whose task is to expand the company's proprietary
technology base.
NovaChem's products are production engineered and manufactured by Vital
Scientific.
Marketing and Distribution
The market for process monitoring instrumentation has evolved from a demand
for on-line, real-time analytical techniques similar to those employed in the
industrial laboratory. The market, international in scope, is driven by solving
specific processing application problems. The market is characterized by having
many small niches with specialized vendors. Success factors in this market
include an in-depth knowledge of end-user processing, active product
development, international market targeting, a reputation for stability and
service, and strategic planning.
NovaChem's technology is marketed in Europe, South America and Asia,
through established dealers in the process monitoring industry. Distributors are
engaged in The Netherlands, Belgium, France, Sweden, Eastern Europe, Brazil,
South Korea and Taiwan.
In fiscal 1995, NovaChem commenced the marketing of its process
instrumentation in North America. A national sales/marketing manager and
technical support were added to create the American branch of the company.
Manufacturer's representatives have been recruited in five regional U.S.
locations and in Mexico City.
Product Development
During fiscal 1996 and 1995, NovaChem spent approximately $144,000 and
$260,000, respectively, on research and development. Resources were also used
for the development of related sampling systems necessary for the coupling of
the diode-array monitor to the process line.
Competition
In developing and marketing instruments for process monitoring, NovaChem
competes with many companies in Europe and the United States. These include
Ametek, Applied Systems, Western Research, Applied Analytics and numerous
others. The Company believes that it competes on the basis of specialized
features of its technology, simplicity of operation, high performance-to-cost
ratio, and quality of its products. The above notwithstanding, many of its
competitors have greater financial and marketing resources than NovaChem.
OTHER BUSINESS MATTERS
Government Regulation
Where necessary, the Company has obtained government approval to market its
products and may have to obtain prior approval of certain European regulatory
bodies or the Food and Drug Administration ("FDA") to market products which it
may develop. Domestically, certain of the Company's products are classified as
medical devices under the Federal Food, Drug and Cosmetics Act. As such, if and
when these products are offered for sale in the United States, these products
are subject to regulation by the FDA. The cost of obtaining such approvals may
be high and the process lengthy, with no assurance that such approvals will be
obtained.
To date, neither the FDA nor the European medical regulatory bodies have
developed industry-wide performance standards with respect to the safety and
effectiveness of the products presently marketed by the Company. Although the
Company intends to use reasonable efforts to comply with international
standards, when and if developed, there can be no assurance that all the
Company's products will so comply. Any failure to receive approvals for the
Company's future products, or noncompliance with any international performance
standards promulgated in the future, could have a material adverse effect on the
Company. Furthermore, any material change in the existing rules and regulations
or any new regulations developed might adversely affect the Company.
The Company's subsidiaries comply with European CE regulations and Vital
Scientific is ISO 9002 approved.
The instruments developed by NovaChem for the environmental market may now
or in the future require certification by governmental authorities. Any failure
to receive approvals for such products could have a material adverse effect on
this investment.
Patents
The Company or its subsidiaries own or have applied for patents and
trademarks on certain of their products. However, the Company does not believe
that its business as a whole is or will be materially dependent upon the
protection afforded by such patents or trademarks, and a substantial majority of
the Company's revenues are attributable to products without patent protection.
Warranty and Product Liability
After an in-depth evaluation of the potential liabilities from the sales of
instrumentation and the high premium costs related thereto, the Company decided
to self-insure. The Company believes that the potential risk from international
instrumentation sales is low in view of its past loss experience.
Warranty expenses during fiscal 1996 were approximately one and one-half
percent (1.5%) of product revenue versus two percent (2%) for fiscal 1995.
Production and Availability of Raw Materials
The Company's manufacturing operations require a variety of purchased
components. The Company purchases these components in sufficient quantities to
take advantage of price discounts and currently has an adequate inventory. Most
of the components are available from multiple sources and the Company
anticipates that they will continue to be readily available. Certain components
and supplies are available from single sources only. If such suppliers should
fail in deliveries, delays in production could result. However, these components
and supplies are generally not manufactured to the Company's specifications, but
are produced for other applications, and the Company believes that they will
continue to be available in the foreseeable future. In addition, the Company,
where appropriate, has placed scheduled blanket purchase orders, has placed a
sufficient number of such components in inventory, or has provided vendors with
greater lead time for filling orders for such components.
Backlog
At the close of the fiscal year ended March 31, 1996, the Company had a
backlog of approximately $783,000 as compared to $4,200,000 in 1995. The backlog
at the end of fiscal 1996 represents products to be delivered by Vital
Scientific and NovaChem. It is anticipated that all of the existing backlog will
be filled by shipments during fiscal 1997. Deliveries are now being made within
30 after the receipt of an order.
Seasonality
The Company does not believe that its business has any significant seasonal
factors.
Employees
The Company had one hundred and fourteen (114) full, part-time, and
temporary employees as of March 31, 1996. One hundred three (103) of these
employees are employed by Vital Scientific, four (4) are employed by NovaChem,
five (5) are employed by Clinical Data Australia, and two (2) are employed by
Novitron International, Inc.
Environmental matters
The Company does not believe that compliance with Federal, State or Local
regulations relating to the protection of the environment have any material
effect on the Company's financial or competitive position.
Significant Customers
The loss of the Company's major customer would have a significant material
adverse impact on the Company.
Industry Segments
The information required by this section is specified in Note 12 in the
accompanying notes to consolidated financial statements.
Executive Officers of the Registrant
Subject to the discretion of the Board of Directors, officers serve for a
one(1) year term expiring with the meeting of the Board of Directors following
the next Annual Meeting of Stockholders and until their respective successors
are elected and qualified.
Israel M. Stein, M.D., 53, has served as Chairman of the Board since 1972
and as President from 1972 until February 1988, and again since February 1989.
Dr. Stein is a graduate of the Albert Einstein College of Medicine, a member of
Alpha Omega Alpha, and is a Salk Scholar of the City University of New York.
Prior to joining the Company, Dr. Stein served as Senior Assistant Surgeon at
The National Institutes of Health and as a resident at Harvard Medical School.
Adrian Tennyenhuis, 45, Senior Vice President of the Company is currently
also the Managing Director of Clinical Data(Australia) Pty. Ltd.. Mr.
Tennyenhuis was formerly the Managing Director of Vital Scientific NV from 1989
to 1991. Prior to joining the Company, he held increasingly senior sales and
marketing positions with Behring Diagnostics.
Emile Hugen, 51, has been the Managing Director of Vital Scientific NV
since October 1991. With over 25 years of increasing management responsibility
in manufacturing and operations at Vital Scientific, Mr. Hugen is an experienced
operating officer of the Company.
Item 2. Properties
The Company leases approximately 1,000 square feet of office space in
Newton under a lease expiring in December, 2000.
Vital Scientific leases approximately 35,000 square feet in Dieren, The
Netherlands. The facility was designed specifically for the Company's needs, but
was financed entirely by an unrelated third party. The facility, with an
estimated production capacity on single shift of over $22 million, is leased
until the year 2008 with renewal and expansion options.
NovaChem occupies approximately 1,000 square feet of office space in
Newton, and small offices in Pittsburgh and Dieren, The Netherlands under a
series of short term leases.
Clinical Data Australia occupies approximately 2,000 square feet of office
and warehousing space in Castle Hill, New South Wales under a lease expiring in
February 1999.
The Company believes its current facilities are adequate for its planned
needs in the near future.
Item 3. Legal Proceedings
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
PART II
Item 5. Market for Registrant's Common Equity and Related Security Holder
Matters
a) Market information: The Company's Common Stock trades on the NASDAQ Stock
Market under the symbol NOVI. The following table sets forth the range of high
and low sale prices per share of Common Stock for each quarter in fiscal 1996
and 1995 as reported by the NASDAQ Stock Market.
Prices
Fiscal Year Ended March 31, 1996 High Low
First Quarter $5.75 $4.50
Second Quarter $5.75 $4.375
Third Quarter $5.25 $2.875
Fourth Quarter $4.00 $2.50
Fiscal Year Ended March 31, 1995 High Low
First Quarter $4.75 $3.75
Second Quarter $5.50 $3.25
Third Quarter $7.625 $5.125
Fourth Quarter $6.125 $4.50
b) The approximate number of holders of record and beneficial owners of the
Company's Common Stock at March 31, 1996 and March 31, 1995 were 299 and 1,300,
and 299 and 1,300, respectively .
c) The Company presently intends to reinvest earnings, if any, for use in its
business and therefore does not expect to pay any cash dividends in the
foreseeable future.
Item 6. Selected Financial Data
The following table summarizes certain selected consolidated data and
should be read in conjunction with the consolidated financial statements and
related notes appearing elsewhere in this Form 10-K. No cash dividends have been
declared during the periods presented below.
Fiscal Year Ended March 31
(In thousands, except per share amounts)
1996 1995 1994 1993 1992a
Income Statement Data
Revenues $17,908 $16,818 $11,920 $15,406 $10,862
Gross profit $ 5,002 $ 5,220 $ 3,602 $ 6,342 $ 4,140
Net income(loss) $(1,506) $ (228) $(1,121) $ 1,344 $ 467
Net income(loss) $ (.38) $ (.06) $ (.28) $ .34 $ .12
Weighted average common
shares outstanding 3,966 3,982 3,965 3,949 3,948
<FN>
a Per share amounts have been retroactively adjusted to reflect the 3:2 stock
split.
Balance Sheet Data
Working Capital $ 5,277 $ 7,334 $ 3,214 $ 6,552 $ 5,295
Total Assets $12,294 $15,075 $12,354 $14,490 $12,770
Long-Term Debt Obligations $ 54 $ 98 $ 104 $ 129 $ -
Stockholders' Investment $ 6,192 $ 7,981 $ 7,040 $ 8,551 $ 7,141
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Liquidity and Capital Resources
The Company used approximately $1,084,000 in its operations during fiscal
year 1996, primarily resulting from the Company's net loss and a decrease in
working capital. The decrease in working capital at March 31, 1996, as compared
to March 31, 1995, results from funds used to decrease accounts payable and
accrued income taxes as well as from an increase in the level of accounts
receivable in fiscal year 1996. During fiscal 1996, the Company used
approximately $460,000 in investing activities; funds were used for investment
in marketable securities and to purchase capital equipment. There were no
material cash flows provided by or used in financing activities. The Company's
sources of cash include cash balances and a 5,000,000 Dutch Guilder line of
credit from a Dutch bank. The Company believes that available funds will provide
it with sufficient working capital through fiscal year 1997.
In an effort to expand and diversify the Company's business, the Company
continues to search for acquisition opportunities. The Company currently does
not have any agreements or understandings with respect to any such opportunities
and there can be no assurances that any potential opportunities, if identified,
will be consummated.
Results of Operations
Fiscal Year ended March 31, 1996 compared to Fiscal Year ended March 31, 1995
Consolidated revenues for fiscal year 1996 of $17,908,000 have increased
six and one half percent (6.5%) from the fiscal year 1995 revenues of
$16,818,000. The increase in revenues is primarily due to the eight and one-half
percent (8.5%) strengthening of the Company's functional currency, the Dutch
Guilder, against the dollar. Revenues improved at Vital Scientific and Clinical
Data Australia from increased sales volumes to E. Merck and to the People's
Republic of China, respectively, but were offset by reduced sales volume of
NovaChem technology. The Company did not derive any substantial sales revenue
from price increases.
The gross margin decreased from 31% for fiscal year 1995 to 28% for fiscal
year 1996 principally as a result of competitive pressure impacting the selling
price of certain Vital Scientific instruments.
Sales and marketing expenses increased $274,000, or 25% from fiscal year
1995. The increases are predominantly located at Clinical Data Australia which
had increased sales commissions due on larger sales and at Vital Scientific
which had increased warranty expenses as compared to the prior year. Costs also
increased because of the Dutch Guilder's strengthening against the dollar.
Research and development charges declined by $208,000 or 14% when compared
to the prior year. This reduction was primarily because Vital Scientific entered
into a collaborative research agreement with Hycor Biomedical, who is absorbing
certain research and development expenses associated with the development work
performed on the above mentioned projects (see Part I,page 2), combined with the
timing of certain projects.
General and administrative expenses also declined from last year. The
decrease of $420,000 or 15.5% was a result of cost containment implemented by
the Company as well as a decreased use of outside consultants.
The write-down of certain assets relating to NovaChem BV reflects the
Company's judgment that the carrying value of goodwill recorded in connection
with its investment in NovaChem BV was impaired at March 31, 1996 due in part to
the fact that the technology acquired with this purchase became technologically
obsolete with the introduction of the Mark II- IPM Process Analyzer. In
addition, the Company wrote off inventory which incorporated technology that was
acquired in this investment.
Interest income decreased and interest expense increased when compared to
fiscal year 1995. The Company had fewer funds for investment and borrowed funds
under its line of credit.
For fiscal 1996 and 1995, minority interest is attributable to the six
percent (6%) of Vital Scientific not held by the Company. Although the Company
owned only 52% of NovaChem as of April 1, 1994, the minority interests were
unable to fund their share of losses so the Company was required to recognize
all of the losses of NovaChem during fiscal year 1995. As of March 31, 1995,
NovaChem became a wholly-owned subsidiary of the Company. See the discussion of
operations comparing fiscal year 1995 to 1994 for further details about the
NovaChem acquisition and the recording of the losses during fiscal year 1995.
The effect of foreign currency transaction exchange on the results of
operations is included in other income (expense) and is not material to the
financial statements. (Please refer to Note 10 in the Notes to the Consolidated
Financial Statements.) Any impact on the Company's liquidity is largely
dependent on the exchange rates in effect at the time the functional currency,
Dutch Guilders, is translated into U.S. Dollars. Approximately $871,000 of the
$1,019,000 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 six
percent (6%) of the total assets as reflected on the balance sheet. The effects
of currency exchange rates on future quarterly or fiscal periods on the results
of operations 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 $10.3 million of the $11.1 million of current
assets reside in the Company's foreign subsidiaries.
Fiscal Year ended March 31, 1995 compared to Fiscal Year ended March 31, 1994
Consolidated revenues for fiscal 1995 of $16,818,000 increased by forty-one
percent (41%) as compared to $11,920,000 reported in fiscal 1994. The prices for
the Company's products remained relatively constant during fiscal 1995. The
increase in revenues resulted primarily from (i) increased unit sales by Vital
Scientific to E. Merck, and (ii) sales by Spectronetics NV of NovaChem's sulfur
recovery monitoring technology to Russia's Gazprom. The results were also
favorably impacted by approximately seven percent (7%) due to the strengthening
of the Dutch Guilder against the U.S. Dollar during the fiscal year.
The increase in the gross margin between years from 30.2% at March 31, 1994
to 31.0% at March 31, 1995 reflected sales of NovaChem technology with higher
margins offset by competitive pricing pressure impacting the pricing of certain
of Vital Scientific's instruments in certain markets.
Sales and marketing expenses increased by $146,000, or 15%, during fiscal
1995. Seventy-five thousand dollars was attributable to currency fluctuation,
while the remainder resulted from the inclusion of NovaChem for a full year in
the consolidated operating results as compared to five months in fiscal 1994,
offset by a decrease in sales and marketing expenses at Clinical Data Australia.
Research and development expenses increased $292,000, or 25%, from fiscal
1994. The increase was largely due to the strengthening of the Dutch Guilder
relative to the U.S. Dollar coupled with the inclusion of twelve months of
NovaChem's research and development expenses into the operating results of
fiscal 1995 as compared to five months during fiscal 1994.
General and administrative expenses increased less than 1% from fiscal
1994.
Interest income decreased between years as the result of a lower level of
investment.
For fiscal 1995 and 1994, minority interest is attributable to the six
percent (6%) of Vital Scientific not held by the Company. From April 1 through
October 31, 1993, the Company beneficially owned thirty-five percent (35%) of
NovaChem and recorded losses equal to thirty-five(35%) of the losses of NovaChem
shown on a separate line on the consolidated income statement. In October 1993,
the Company increased its ownership of NovaChem to fifty-two percent (52%).
Effective October 4, 1994, ownership in NovaChem was increased to 60% and as of
March 31, 1995, NovaChem became a wholly owned subsidiary. In accordance with
APB No. 18 and Accounting Research Bulletin No. 51, the Company recorded one
hundred percent (100%) of the losses of NovaChem since October 31, 1993 because
the minority interests were unable to fund their portion of the losses of
NovaChem. During fiscal 1995 and 1994, these losses approximated $235,000 and
$421,000, respectively.
The effect of foreign currency transaction exchange on the results of
operations is included in other income and is not material to the financial
statements. (Please refer to Note 10 in the notes to consolidated financial
statements.) Any impact on the Company's liquidity is largely dependent on the
exchange rates in effect at the time the functional currency, Dutch Guilders, is
translated into U.S. Dollars. Approximately $1.8 million of the $2.5 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 seven percent(7%)
of the total assets as reflected on the balance sheet. The effects of currency
exchange rates on future quarterly or fiscal periods on the results of
operations and liquidity are difficult to estimate.
Item 8. Financial Statements and Supplementary Data
See Index to the Company's Financial Statements filed as part of this Form
10-K.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
The information required by this item is contained in part under the
caption "Executive Officers of the Registrant" in Part I hereof and the
remainder is incorporated herein by reference to the table appearing under the
caption "Election of Directors" in the Company's definitive 1996 Proxy Statement
for its Annual Meeting of Stockholders to be held on September 10, 1996.
Item 11. Executive Compensation
The information required by this item is incorporated herein by reference
to the section entitled "Compensation of Executive Officers" in the Company's
definitive 1996 Proxy Statement for its Annual Meeting of Stockholders to be
held on September 10, 1996.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required by this item is incorporated herein by reference
to the tables appearing under the captions "Principal and Management
Stockholders" in the Company's definitive 1996 Proxy Statement for its Annual
Meeting of Stockholders to be held on September 10, 1996.
Item 13. Certain Relationships and Related Transactions
The information required by this item is incorporated herein by reference
to the section entitled "Certain Transactions and Relationships" in the
Company's definitive 1996 Proxy Statement for its Annual Meeting of Stockholders
to be held on September 10, 1996.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) Documents filed as part of this Form 10-K
1. Financial Statements. The Financial Statements listed in the Index to
Consolidated Financial Statements are filed as part of this Form 10-K.
2. Financial Statement Schedules. The Financial Statement Schedules listed
in the Index to Consolidated Financial Statements are filed as part of this Form
10-K.
3. Exhibits. The exhibits which are filed with this Report or which are
incorporated herein by reference are listed in the Exhibit Index filed as part
of this Form 10-K.
(b) Reports on Form 8-K
Report on Form 8-K filed during the fourth quarter ended March 31,
1995.
SIGNATURES
Pursuant to the requirements 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.
NOVITRON INTERNATIONAL, INC.
Israel M. Stein, M.D.
Israel M. Stein, M.D.
Dated: June 24, 1996 Chairman of the Board
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 in
the capacities and on the dates indicated.
Date: June 24, 1996 Israel M. Stein, M.D.
Israel M. Stein, M.D.
Chairman of the Board
Principal Executive Officer
Date: June 24, 1996 Arthur B. Malman
Arthur B. Malman
Director
Date: June 24, 1996 Gordon Baty, Ph.D.
Gordon Baty, Ph.D.
Director
Novitron International, Inc. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Financial Statements Page
Report of Independent Public Accountants 22
Consolidated Balance Sheets at March 31, 1996 and 1995 23
Consolidated Statements of Operations for the Years Ended
March 31, 1996, 1995 and 1994 25
Consolidated Statements of Stockholders' Investment for the
Years Ended March 31, 1996, 1995 and 1994 26
Consolidated Statements of Cash Flows for the Years Ended
March 31, 1996, 1995 and 1994 27
Notes to Consolidated Financial Statements 30
Consolidated Financial Statement Schedule
Schedule II- Valuation and Qualifying Accounts 41
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Novitron International, Inc.:
We have audited the accompanying consolidated balance sheets of NOVITRON
INTERNATIONAL, INC. (a Delaware corporation) and subsidiaries as of March 31,
1996 and 1995, and the related consolidated statements of operations,
stockholders' investment and cash flows for each of the three years in the
period ended March 31, 1996. 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 generally accepted auditing
standards. 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 Novitron International, Inc.
and subsidiaries as of March 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
March 31, 1996, in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. The schedule listed in the
index to the consolidated financial statements is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part of
the basic financial statements. The schedule has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, fairly states, in all material respects, the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
June 19, 1996
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1996 AND 1995
ASSETS
1 9 9 6 1 9 9 5
CURRENT ASSETS:
Cash and cash equivalents $ 1,018,501 $ 2,508,345
Marketable securities 349,043 -
Accounts receivable, less
reserves of $119,000 and $112,000
in 1996 and 1995, respectively 4,760,880 4,046,517
Inventories 4,615,179 5,266,981
Prepaid expenses 186,530 490,277
Other current assets 142,073 5,764
Total current assets 11,072,206 12,317,884
EQUIPMENT, at cost:
Manufacturing and computer equipment 2,999,413 3,098,212
Furniture and fixtures 866,606 852,240
Leasehold improvements 261,565 278,297
Vehicles 109,854 100,946
4,237,438 4,329,695
Less: Accumulated depreciation
and amortization 3,387,058 3,153,830
850,380 1,175,865
OTHER ASSETS, net 371,380 1,580,997
$ 12,293,966 $ 15,074,746
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1996 AND 1995
(continued)
LIABILITIES AND STOCKHOLDERS' INVESTMENT
1 9 9 6 1 9 9 5
CURRENT LIABILITIES:
Short-term notes payable and current
portion of long-term debt $ 589,410 $ 533,951
Accounts payable 3,068,839 3,810,884
Accrued expenses 1,566,139 1,444,255
Customer advances 220,115 235,471
Accrued income taxes 350,820 718,640
Total current liabilities 5,795,323 6,743,201
LONG-TERM DEBT, net of current portion 53,563 97,766
MINORITY INTEREST 252,935 252,734
COMMITMENTS AND CONTINGENCIES:
(Note 4)
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 shares in 1996 and 1995 39,660 39,660
Capital in excess of par value 4,855,950 4,855,950
Cumulative translation adjustment 785,223 1,068,490
Retained earnings 511,312 2,016,945
Total stockholders' investment 6,192,145 7,981,045
$12,293,966 $15,074,746
<FN>
The accompanying notes are an integral part of these consolidated
financial statements.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED MARCH 31, 1996, 1995 AND 1994
1 9 9 6 1 9 9 5 1 9 9 4
REVENUES $17,908,364 $16,818,276 $11,920,245
COST OF REVENUES 12,906,518 11,598,567 8,317,994
Gross profit 5,001,846 5,219,709 3,602,251
OPERATING EXPENSES:
Sales and marketing 1,373,767 1,099,988 954,007
Research and development 1,252,396 1,460,443 1,168,727
General and administrative 2,286,951 2,707,526 2,695,928
Write-down of certain assets
relating to NovaChem BV
(Note 2) 1,279,871 - -
6,192,985 5,267,957 4,818,662
Loss from operations (1,191,139) (48,248) (1,216,411)
Interest expense (106,622) (59,511) (34,208)
Interest income 63,979 112,713 163,069
Other income (expense), net (61,723) (13,777) 43,792
(1,295,505) (8,823) (1,043,758)
Provision for (Benefit from)
income taxes 196,000 206,000 (122,000)
(1,491,505) (214,823) (921,758)
Equity in loss of NovaChem BV - - (198,116)
Minority interest (14,128) (13,412) (1,270)
Net loss $(1,505,633) $ (228,235) $(1,121,144)
Net loss per share $ (0.38) $ (0.06) $ (0.28)
Weighted average common
shares outstanding 3,965,940 3,981,571 3,965,397
<FN>
The accompanying notes are an integral part of these consolidated financial
statements.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT
FOR THE YEARS ENDED MARCH 31, 1996, 1995 AND 1994
Common Stock Capital in Cumulative Treasury
Number of Excess of Translation Stock Retained
Shares Par Value Par Value Adjustment at 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 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 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 - - - (283,267) - -
Net loss - - - - - (1,505,633)
BALANCE at March 31, 1996 3,965,940 $39,660 $4,855,950 $785,223 $- $511,312
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MARCH 31, 1996, 1995 AND 1994
1 9 9 6 1 9 9 5 1 9 9 4
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net loss $ (1,505,633) $ (228,235) $ (1,121,144)
Adjustments to reconcile
net loss to net
cash provided by (used in)
operating activities-
Depreciation and amortization 529,625 611,129 496,982
Write-off of goodwill
associated with acquisition
of NovaChem BV 1,051,682 - -
Equity in loss of NovaChem BV - - 198,116
Minority interest 14,128 13,412 1,270
Accounts receivable (1,007,016) (758,852) 2,035,483
Inventories 320,514 (1,660,524) 350,148
Prepaid expenses 281,267 (104,693) (169,544)
Other current assets (140,761) 16,178 133,441
Accounts payable (516,637) 1,169,109 (566,360)
Accrued expenses 216,140 177,217 (490,262)
Customer advances (112) (237,356) 202,120
Accrued income taxes (327,214) (633,248) (61,982)
Net cash provided by
(used in)
operating activities (1,084,017) (1,635,863) 1,008,268
CASH FLOWS FROM
INVESTING ACTIVITIES:
Marketable securities (349,043) 699,607 203,035
Other assets 1,039 298 451,328
Purchase of equipment (207,328) (424,566) (415,601)
Sale of equipment 15,729 82,600 24,639
Investment in NovaChem BV - - (400,000)
Other including foreign exchange
effects on cash 79,978 175,459 116,507
Net cash provided by (used in)
investing activities (459,625) 533,398 (20,092)
<FN>
Continues on page 28
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MARCH 31, 1996, 1995 AND 1994
(Continued)
1 9 9 6 1 9 9 5 1 9 9 4
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from
short-term notes payable $ 92,858 $ 216,521 $ -
Payments on
long-term debt (39,060) (29,112) (24,823)
Sale of common stock - 17,364 3,044
Retirement of common stock - (1,500) -
Purchase of treasury stock - - (330,550)
Net cash provided by(used in)
financing activities 53,798 203,273 (352,329)
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS (1,489,844) (899,192) 635,847
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 2,508,345 3,407,537 2,771,690
CASH AND CASH EQUIVALENTS,
END OF YEAR $ 1,018,501 $ 2,508,345 $ 3,407,537
<FN>
Continues on page 29
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MARCH 31, 1996, 1995 AND 1994
(Continued)
1 9 9 6 1 9 9 5 1 9 9 4
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest $ 130,512 $ 47,675 $ 35,911
Income taxes 459,033 799,134 58,199
Supplemental disclosure of noncash investing and financing activities:
Retirement of treasury stock $ - $ 330,550 $ -
Issuance of common stock in
connection with the acquisition
of additional interest of
NovaChem BV $ - $ (56,250) $ -
Acquisition of majority interest of NovaChem BV
Fair value of assets acquired $ - $ - $ 1,094,000
Less: Cash paid for common stock - - (200,000)
Conversion of notes payable - - (550,000)
Issuance of common stock - - (215,000)
Plus: Previously recorded losses - - 271,000
Liabilities assumed $ - $ - $ 400,000
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
(1) Operations and Accounting Policies
Novitron International, Inc.("the Company") is a multinational company
which, through its subsidiaries, designs, manufactures and markets
instrumentation used in clinical and analytical laboratories and in process
monitoring in industry. The Company's Dutch subsidiary, Vital Scientific NV,
designs and manufactures scientific instrumentation, including blood chemistry
analyzers. NovaChem BV, another Dutch subsidiary, develops and markets process
analyzers used in the production of petrochemicals and pharmaceuticals and in
environmental monitoring. To better reflect this effort at diversification, on
April 12, 1994, the Company's name was changed from Clinical Data, Inc. to
Novitron International, Inc.
The accompanying consolidated financial statements reflect the application
of certain accounting policies described in this and other notes to the
consolidated financial statements.
(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 March 31, 1996 and 1995:
1 9 9 6 1 9 9 5
Cash and money market investments $ 914,874 $ 1,782,470
Certificate of deposit 100,000 408,757
U.S. Treasury securities - 295,828
Time deposits 3,627 21,290
$ 1,018,501 $ 2,508,345
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
(Continued)
(1) Operations and Accounting Policies(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. For the period ended March 31, 1996,
marketable securities consisted of United States Treasury securities and were
stated at cost, which approximated market value.
(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 March 31, 1996 and 1995:
1 9 9 6 1 9 9 5
Raw materials $ 686,723 $ 1,072,724
Work-in-process 2,536,392 3,439,258
Finished goods 1,392,064 754,999
$ 4,615,179 $ 5,266,981
(e) Revenue Recognition
The Company generally recognizes revenue from the sale of products and
supplies at the time of shipment.
(f) Depreciation and Amortization of Equipment and Intangibles
The Company provides for depreciation and amortization using the straight-
line method by charges to operations in amounts that allocate the cost of
equipment and intangibles over their estimated useful lives. The estimated
useful lives, by asset classification, are as follows:
Asset Classification Useful Lives
Manufacturing and computer equipment 3- 7 years
Furniture and fixtures 3- 7 years
Leasehold improvements 5 years
Vehicles 3- 5 years
Goodwill 15-20 years
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
(Continued)
(1) Operations and Accounting Policies (continued)
(f) Depreciation and Amortization of Equipment and Intangibles(continued)
The Company adopted Statement of Financial Standards No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of," ("SFAS No. 121"), effective April 1, 1995. SFAS No. 121 requires
the Company to continually evaluate whether events and circumstances have
occurred that indicate that the estimated remaining useful life of long-lived
assets and such intangibles as goodwill may warrant revision or that the
carrying value of these assets may be impaired. To compute whether assets have
been impaired, the estimated gross cash flows for the estimated remaining
useful life of the asset are compared to the carrying value. To the extent that
the gross cash flows are less than the carrying value, the assets are written
down to the estimated fair value of the asset. At March 31, 1996, the Company's
remaining goodwill relates to its investment in Vital Scientific NV.
(g) Net Loss Per Share
The net loss per share in fiscal 1996, 1995 and 1994 is based on the
weighted average number of common shares outstanding during the respective
fiscal years.
(h) Foreign Currency Translation
The Company accounts for foreign currency transaction and translation gains
and losses in accordance with Statement of Financial Accounting Standards 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 (expense).Foreign currency transaction gains and losses
are included in other income (expense) in the consolidated statements of
operations.
(i) Postretirement Benefits
The Company has no obligations for postretirement benefits.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
(Continued)
(1) Operations and Accounting Policies (continued)
(j) Management's 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.
(k) Warranty Policy
The Company provides a warranty on its manufactured products for one year
which covers parts and materials.
(l) Financial Instruments
The estimated fair value of the Company's financial instruments, which
include cash equivalents, marketable securities, accounts receivable and long-
term debt, approximates their carrying value.
(m) Concentration of Credit Risk
Statement of Financial Accounting Standards No. 105, "Disclosure of
Information about Financial Instruments with Off-Balance Sheet Risk and
Financial Instruments with Concentrations of Credit Risk," requires disclosure
of any significant off-balance sheet and credit risk concentrations. The
Company has no significant off-balance sheet credit risk such as foreign
exchange contracts, option contracts or other foreign hedging arrangements. The
Company maintains the majority of its cash balances with financial
institutions. See Notes 8 and 12 for significant customers and financial
information by geographic area, respectively.
(2) Write-down of Certain Assets Relating to NovaChem BV
In accordance with SFAS No. 121, the Company has determined that the
carrying value of the goodwill recorded in connection with its investment in
NovaChem BV was impaired at March 31, 1996. Accordingly, the Company recorded a
charge of $1,052,000 relating to the write-off of goodwill. In addition, the
Company wrote off $228,000 of related obsolete inventory at year end.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
(Continued)
(3) Short-Term Notes Payable and Long-Term Debt
The Company's foreign debt obligations are as follows at March 31, 1996
and 1995:
1 9 9 6 1 9 9 5
Short-term notes payable $ 533,472 $ 506,154
Long-term debt-
Note payable, interest free for a
period of five years: principal
repayment began in fiscal 1996
(approximately $14,000 per year) 46,802 57,975
Other notes payable, interest
ranging from 11.35%- 11.55% 62,699 67,588
642,973 631,717
Less: short-term notes payable and
current portion of long-term debt 589,410 533,951
$ 53,563 $ 97,766
As of March 31, 1996, Clinical Data BV, Vital Scientific NV and NovaChem BV
have an agreement with a bank which provides overdraft protection to a maximum
of 5,000,000 Dutch Guilders(approximately $3,000,000). Interest on this facility
is based on the official Dutch prime rate(5.00% at March 31, 1996) plus 2.25%.
At March 31, 1996, there is approximately DFl 882,000($533,000) outstanding
under this facility. Trade receivables of Vital Scientific NV and NovaChem BV
are provided as security for this facility. The line continues as long as the
Company conforms to certain capital convenants; these covenants have been met as
of March 31, 1996.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
(Continued)
(4) Lease Commitments
The Company leases facilities, vehicles and computer equipment under
operating leases. Future minimum lease payments under these leases as of March
31, 1996 are as follows:
Year Ending March 31, Amount
1997 $ 438,000
1998 422,000
1999 413,000
2000 385,000
2001 372,000
thereafter 2,330,000
$ 4,360,000
Rent expense of approximately $418,000, $383,000 and $369,000 was
incurred during fiscal 1996, 1995 and 1994, respectively.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
(Continued)
(5) Stock Option Plans
The Company has established a 1991 Stock Option Plan("the Plan") and a
1991 Directors' Stock Option Plan("the Directors' Plan") under which an
aggregate of 120,000 shares and 60,000 shares of common stock are reserved,
respectively, for the purpose of granting incentive and nonstatutory stock
options.
Under the terms of the Plan and the Directors' Plan, all options are
granted at not less than the fair value of the stock on the date of grant.
Options are exercisable over various periods not exceeding four years; the
options under the Plan expire no later than four years after the date of grant
whereas the options granted under the Directors' Plan expire ten years after
the date of grant.
The following table summarizes stock option activity during fiscal 1996,
1995 and 1994.
Number of Option Price
Shares Per Share Total
Outstanding at March 31, 1993 35,575 $1.08- 4.00 $ 53,900
Options granted 46,000 4.00-5.23 221,000
Options exercised (12,500) 1.17-1.25 (15,500)
Options canceled or expired (750) 1.17 (875)
Outstanding at March 31, 1994 68,325 $1.08- 5.23 $ 258,525
Options granted 10,001 5.00 50,001
Options exercised (15,201) 1.08- 1.25 (17,276)
Outstanding at March 31, 1995 63,125 $1.25- 5.23 $ 291,250
Options granted 17,200 4.75- 4.88 82,950
Options canceled or expired (7,125) 1.25- 4.00 (20,250)
Outstanding at March 31, 1996 73,200 $4.00- 5.23 $ 353,950
Exercisable at March 31, 1996 34,000 $4.00- 5.23 $ 164,875
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
(Continued)
(6) Income Taxes
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes"("SFAS No.
109"). Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
The provision for (benefit from) income taxes shown in the accompanying
consolidated statements of operations consists of the following:
For the Years Ended March 31,
1 9 9 6 1 9 9 5 1 9 9 4
Current
Domestic $ - $ - $ -
Foreign 196,000 206,000 (122,000)
$ 196,000 $ 206,000 $ (122,000)
The provision for(benefit from) income taxes differs from the amount computed by
applying the statutory federal income tax rate to income before taxes due to the
following:
For the Years Ended March 31,
1 9 9 6 1 9 9 5 1 9 9 4
Provision for (benefit from)
taxes at statutory rate $ (454,000) $ (3,000) $ (422,000)
Domestic operating loss
not benefited - 74,000 106,000
Utilization of domestic net
operating loss (39,000) - -
Utilization of foreign net
operating loss - (41,000) -
Foreign operating loss not
benefited 672,000 249,000 194,000
Taxes resulting from higher
incremental foreign rate 38,000 41,000 -
Tax benefit resulting from lower
incremental foreign rate (3,000) (132,000) -
Other (18,000) 18,000 -
Provision for(benefit
from) income taxes $196,000 $ 206,000 $ (122,000)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
(Continued)
(6) Income Taxes(Continued)
The approximate income tax effect of each type of temporary difference
comprising the net deferred tax asset at March 31, 1996 and 1995 is as follows:
1 9 9 6 1 9 9 5
Net operating loss carryforwards $ 2,910,820 $ 1,732,948
General business tax credit carryforwards 118,820 132,581
Other, net (1,511) 7,328
3,028,129 1,872,857
Less: valuation allowance 3,028,129 1,872,857
$ - $ -
SFAS No. 109 requires the Company to assess whether it is more likely than
not that the Company will realize its deferred tax assets. The Company has
determined that it does not meet the "more likely than not" standard.
Accordingly, the Company has provided a valuation allowance against the deferred
tax assets.
The Company has net operating loss carryforwards for federal and state tax
purposes of approximately $3,033,000 and $1,838,000, respectively; these
carryforwards will expire from 1997 to 2011. In addition, the Company has
available federal tax credit carryforwards of approximately $119,000. These
carryforwards may be used to offset future taxable income, if any. The federal
tax credit carryforwards will expire from 1998 to 2010 and are subject to review
and possible adjustment by the Internal Revenue Service.
The Company has foreign net operating loss carryforwards of approximately
$4,525,000, of which $878,000 expire between 1997 and 2001; the balance,
$3,647,000, is not subject to expiration.
(7) Pension Plan
The Company's subsidiary, Vital Scientific NV, participates in a
multiemployer defined benefit pension plan. Contributions and expenses incurred
by the Company amounted to approximately $98,000, $75,000 and $61,000 during
fiscal 1996, 1995 and 1994, respectively.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
(Continued)
(8) Significant Customers
During fiscal 1996, 1995 and 1994, the Company had sales of scientific and
process monitoring instrumentation to two customers amounting to approximately
91%, 82% and 87% of consolidated revenues, respectively. At March 31, 1996, 94%
of accounts receivable were from these two customers.
(9) Other Income (Expense), net
Other income (expense), net, consists of the following:
For the Years Ended March 31,
1 9 9 6 1 9 9 5 1 9 9 4
Foreign exchange gain (loss) $ (61,947) $ 23,624 $ 660
Other income (expense), net 224 (37,401) 43,132
$ (61,723) $ (13,777) $ 43,792
(10) Accrued Expenses
Accrued expenses consist of the following:
1 9 9 6 1 9 9 5
Payroll and payroll-related expenses $ 632,754 $ 762,868
Warranty 359,526 270,703
Legal, audit and consulting 177,824 261,678
Other 396,035 149,006
$ 1,566,139 $ 1,444,255
(11) Other Assets
Other assets consist of the following:
1 9 9 6 1 9 9 5
Goodwill, net of accumulated
amortization of $395,000 and
$437,000 at March 31, 1996
and 1995, respectively $ 308,915 $ 1,517,197
Other 62,465 63,800
$ 371,380 $ 1,580,997
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
(Continued)
(12) Segmented Information
The Company's domestic business activities consist of corporate
administration and process monitoring. Vital Scientific NV manufactures and
sells scientific instrumentation. NovaChem BV designs and markets process
monitoring instrumentation. The Company's Australian sales subsidiary sells
scientific instrumentation primarily to customers in the People's Republic of
China. Revenues, income(loss) from operations and identifiable assets classified
by segment are as follows (in thousands):
United States Europe
Admini- Process Scientific Process
stration Monitoring Instruments Monitoring Australia Consolidated
March 31, 1996
Sales to unaffiliated
customers $- $- $15,826 $ 186 $1,896 $17,908
Sales or transfers between
geographic areas - - 1,280 12 - -
$- $- $17,106 $ 198 $1,896 $17,908
Income(loss) from operations $ (387) $(497) $ 716 $ (995) $ (29) $(1,192)
Identifiable assets $ 755 $ 65 $10,190 $ 567 $ 716 $12,293
March 31, 1995
Sales to unaffiliated
customers $- $- $11,423 $4,093 $1,302 $16,818
Sales or transfers between
geographic areas - - 1,249 42 - -
$- $- $12,672 $4,135 $1,302 $16,818
Income(loss) from operations $ (661) $(321) $ 716 $ 288 $ (70) $ (48)
Identifiable assets $1,213 $ 24 $10,961 $2,171 $ 706 $15,075
March 31, 1994
Sales to unaffiliated
customers $- $- $ 9,664 $ 306 $1,950 $11,920
Sales or transfers between
geographic areas - - 1,438 - - -
$- $- $11,102 $ 306 $1,950 $11,920
Income(loss) from operations $ (616) $- $ 98 $ (617) $ (81) $(1,216)
Identifiable assets $1,700 $- $ 8,382 $1,797 $ 475 $12,354
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
MARCH 31, 1996
Balance at Balance at
Beginning End of
Item of Period Additions Deductions Period
Allowance for
Doubtful Accounts
1996 $ 112,055 $ 69,322 $ 62,670 $ 118,707
1995 $ 207,669 $ 54,133 $ 149,747 $ 112,055
1994 $ 172,435 $ 90,426 $ 55,192 $ 207,669
Warranty Reserve
1996 $ 226,363 $ 270,255 $ 137,092 $ 359,526
1995 $ 142,644 $ 321,364 $ 237,645 $ 226,363
1994 $ 147,993 $ 907,351 $ 912,700 $ 142,644
Inventory Obsolescence
Reserve
1996 $ 460,550 $ 416,412 $ 105,663 $ 771,299
1995 $ 327,449 $ 159,293 $ 26,192 $ 460,550
1994 $ 265,052 $ 83,984 $ 21,587 $ 327,449
EXHIBIT INDEX
Exhibit
Number Description
2.1** Purchase agreement dated February 7, 1990 between Clinical Data, Inc.
and CardioData Systems, a division of UM Holding Company.
2.2*** Stock Purchase Agreement dated October 31, 1990 between Merrimack
Valley Medical Services Company, Enviromed, Inc.,
and Clinical Data, Inc.
3.1* Certificate of Incorporation
3.2* Bylaws
3.3***** Form 10-C dated June 16, 1994- Change in Name of Issuer effective
April 12, 1994.
4.1* Article Fourth of the Certificate of Incorporation, as amended
(included in Exhibit 3.1)
10.25**** 1991 Stock Option Plan and 1991 Directors' Option Plan and forms of
option agreement.
22.1 Subsidiaries of the Registrant
24.1 Consent of Arthur Andersen LLP
* Incorporated by reference to exhibits to the Registrant's Registration
Statement on Form S-1(File No. 2-82494).
** Incorporated by reference to exhibits to the Registrant's Notice of
Special Meeting of Stockholders held on February 7, 1990 and mailed to
stockholders on January 18, 1990.
*** Incorporated by reference to exhibits to the Registrant's Form 10-Q
for the period ended December 31, 1990.
**** Incorporated by reference to exhibits to the Registration Statement on
Form S-8 filed with the Commission on March 5, 1992.
***** Incorporated by reference to Form 10-C filed with the SEC on
June 16, 1994.
EXHIBIT 22.1
SUBSIDIARIES OF THE REGISTRANT
The Registrant has the following subsidiaries, the financial statements of
which are included in the consolidated financial statements of the Registrant:
Country of Percentage
Name Incorporation Owned
Clinical Data(Australia) Pty. Ltd. Australia 100%
Clinical Data BV Netherlands 100%
NovaChem BV Netherlands 100%
Spectronetics NV Curacao 100%
Vital Scientific NV Netherlands 94%
EXHIBIT 24.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
report included in this Form 10-K into the Company's previously filed
Registration Statement on Form S-8(File Nos. 33-25938, 33-25939, 33-46233, 33-
46234).
ARTHUR ANDERSEN LLP
Boston, Massachusetts
June 21, 1996