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, 1996
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, 1996 0-12716
Novitron International, Inc.
(Exact Name of Registrant as Specified in its Charter)
Delaware 04-2573920
(State of incorporation) (IRS Employer 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,
1996 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, 1996 and
March 31, 1996 1
Unaudited consolidated statements of operations
for the three months ended June 30, 1996 and 1995 3
Consolidated statements of stockholders' investment
for the years ended March 31, 1995 and 1996 and the
three months ended June 30, 1996 (unaudited) 4
Unaudited consolidated statements of cash flows for
the three months ended June 30, 1996 and 1995 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, 1996 March 31,1996
CURRENT ASSETS:
Cash and cash equivalents $ 1,325,074 $ 1,018,501
Marketable securities 249,398 349,043
Accounts receivable, less
reserves of $110,000 at June
30, 1996 and $119,000 at
March 31, 1996, respectively 4,480,809 4,760,880
Inventories 3,604,761 4,615,179
Prepaid expenses 196,581 186,530
Other current assets 117,192 142,073
Total current assets 9,973,815 11,072,206
EQUIPMENT, at cost:
Manufacturing and computer
equipment 2,907,140 2,999,413
Furniture and fixtures 839,566 866,606
Leasehold improvements 253,582 261,565
Vehicles 110,967 109,854
4,111,255 4,237,438
Less- Accumulated depreciation
and amortization 3,347,741 3,387,058
763,514 850,380
OTHER ASSETS, net 347,265 371,380
$ 11,084,594 $ 12,293,966
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
Novitron International, Inc. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' INVESTMENT
June 30, 1996 March 31, 1996
CURRENT LIABILITIES:
Short-term notes payable and
current portion of long-term
debt $ 612,534 $ 589,410
Accounts payable 1,983,414 3,068,839
Accrued expenses 1,517,457 1,566,139
Customer advances 213,444 220,115
Accrued income taxes 389,361 350,820
Total current liabilities 4,716,210 5,795,323
LONG-TERM DEBT, net of current
portion 57,617 53,363
MINORITY INTEREST 258,944 252,935
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--3,965,940 shares at
June 30, and March 31, 1996 39,660 39,660
Capital in excess of par value 4,855,950 4,855,950
Cumulative translation
adjustment 694,720 785,223
Retained earnings 461,493 511,312
Total stockholders' investment 6,051,823 6,192,145
$ 11,084,594 $ 12,293,966
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
Novitron International, Inc. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30,
1996 1995
REVENUES $ 4,655,552 $ 3,549,905
COST OF REVENUES 3,479,990 2,385,320
Gross profit 1,175,562 1,164,585
OPERATING EXPENSES:
Sales and marketing 307,294 293,038
Research and development 349,131 335,162
General and administrative 453,919 579,449
1,110,344 1,207,649
Income (loss) from operations 65,218 (43,064)
Interest expense (27,705) (15,857)
Interest income 11,426 17,601
Other income 3,270 31,137
52,209 (10,183)
Provision for income taxes 96,019 70,265
(43,810) (80,448)
Minority interest (6,009) (5,750)
Net loss $ (49,819) $ (86,198)
Net loss per share $ (0.01) $ (0.02)
Weighted average common
shares outstanding 3,965,940 3,965,940
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
Novitron International, Inc. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT
FOR THE YEARS ENDED MARCH 31, 1995, AND 1996
AND FOR THE THREE MONTHS ENDED JUNE 30, 1996
Common Stock Capital in Cumulative Treasury
Number Par Excess of Translation Stock Retained
of Shares Value Par Value Adjustment at Cost Earnings
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
Translation
adjustment - - - (90,503) - -
Net loss - - - - - (49,819)
BALANCE at
June 30, 1996 3,965,940 $39,660 $4,855,950 $ 694,721 - $ 461,493
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
Novitron International, Inc. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED JUNE 30,
1996 1995
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net loss $ (49,819) $ (86,198)
Adjustments to reconcile net
loss to net cash provided
by (used in) operating activities-
Depreciation and amortization 75,418 109,637
Minority interest 6,009 5,750
Accounts receivable 127,043 146,459
Inventories 863,969 (802,952)
Prepaid expenses (15,821) 254,514
Other current assets 20,362 499
Accounts payable (845,501) (931,155)
Accrued expenses (786) (154,313)
Customer advances 420 93
Accrued income taxes 51,997 (90,533)
Net cash provided by
(used in) operating activities 233,291 (1,548,199)
CASH FLOWS FROM
INVESTING ACTIVITIES:
Marketable securities 99,645 -
Other assets 227 310
Purchases of equipment (1,896) (546)
Other, including foreign
exchange effects on cash (72,705) (87,702)
Net cash provided by
(used in) investing activities $ 25,271 $ (87,938)
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
Novitron International, Inc. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED JUNE 30,
(Continued)
1996 1995
CASH FLOWS FROM
FINANCING ACTIVITIES:
Proceeds from short-
term notes payable $ 42,217 $ 708,905
Proceeds from (payments on)
long-term debt 5,794 (3,383)
Net cash provided by
financing activities 48,011 705,522
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVLENTS 306,573 (930,615)
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 1,018,501 2,508,345
CASH AND CASH EQUIVALENTS
AT June 30, 1996 and 1995 $1,325,074 $1,577,730
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
Novitron International, Inc. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1996
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, 1996 and June 30, 1995. 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, 1996.
(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, 1996.
June 30, 1996 March 31, 1996
Cash and money market investments $ 1,321,412 $ 914,874
Certificate of deposit - 100,000
Time deposits 3,662 3,627
$ 1,325,074 $ 1,018,501
Novitron International, Inc. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1996
(Continued)
(c) Marketable Securities
The Company accounts for marketable securities under
Statement of Financial Accounting Standards No. 115, "Accounting
for Certain Investments in Debt and Equity Securities" ("SFAS No.
115"). 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. For the periods ending June 30, and 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 June 30, and March 31,
1996:
June 30, 1996 March 31, 1996
Raw materials $ 614,739 $ 686,723
Work-in-process 2,249,276 2,536,392
Finished goods 740,746 1,392,064
$ 4,615,179 $ 3,604,761
(e) Revenue Recognition
The Company recognizes revenue from the sale of products and
supplies at the time of shipment.
(f) Net Loss per Share
Net loss per share for the three month periods ended June
30, 1996 and 1995 is based on the weighted average number of
common shares outstanding during the respective fiscal period.
(g) 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.
Novitron International, Inc. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1996
(Continued)
(h) 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.
(i) Depreciation and Amortization of Equipment and
Intangibles
The Company adopted Statement of Financial Accounting
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 those 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 of the asset. At March 31, 1996, the Company's remaining
goodwill relates to its investment in Vital Scientific, NV.
(j) 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.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
First Quarter ended June 30, 1996 compared to the First Quarter
ended June 30, 1995
Revenues for the first quarter of fiscal year 1996 increased
thirty-one percent (31%) as compared to the prior year. This is
due from increased sales by Vital Scientific to E. Merck,
increased sales by Clinical Data (Australia) to the People's
Republic to China and increased sales from newly represented
product lines by Clinical Data (Australia) within Australia. The
results are offset by a nine percent (9%) strengthening of the
Dutch Guilder against the United States Dollar.
The decrease in the gross margin between years, from 32.8% to
25.3% for the quarters ended June 30, 1995 and 1996,
respectively, is largely due to a change in the product mix
coupled with the continued pricing pressure of Vital Scientific
products.
Sales and marketing expenses increased five percent (5%) when
contrasted with the quarter ending June 30, 1995. This is
primarily because of an increase in commission expenses at
Clinical Data (Australia) reflecting their increased sales
volume.
Research and development expense increased four percent (4%)
for the three months ending June 30, 1996 versus the same period
last year; the timing of projects affects the expenditure of
money for research.
General and administrative expenses decreased twenty-two
percent (22%) from the comparable period in fiscal 1996 primarily
from the continuation of cost containment procedures.
Interest expense increased due to the longer term use of the
Company's bank line, while interest income has decreased from
fewer funds being available for investment. Other income declined
between years and is substantially due to currency translation
effects. The tax provision increased because of increased income
at Vital Scientific
For the quarters ended June 30, 1996 and 1995, the minority
interest is attributable to the six percent (6%) of Vital
Scientific NV not held by the Company.
Financial Condition and Liquidity
The increase in working capital since the Company's fiscal
year ended March 31, 1996, was primarily accounted for by a
decrease in marketable securities, accounts receivable, and
inventory levels. This result was offset by a decrease in
accounts payable.
The Company believes that its available funds will continue
to provide for working capital requirements. Approximately
$600,000 of the $1.3 million of cash and cash equivalents and
short-term investments is denominated in U.S. dollars; $700,000
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 $694,721 at June 30, 1996 and
$785,223 at March 31, 1996.
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 6, 1996 Israel M. Stein MD
President