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, 1998
( ) 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 02458
(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 $3,999,655 based on the average price of the
Common Stock as reported by NASDAQ on June 23, 1998.
As of June 23, 1998, there were 1,454,420 shares of the Registrant's Common
Stock issued and outstanding.
Documents Incorporated by Reference: Portions of the Company's Proxy Statement
for its 1998 Annual Meeting into Part III of Form 10-K.
Novitron International, Inc.
ANNUAL REPORT ON FORM 10-K
For the Year Ended March 31, 1998
Table of Contents
Page
PART I
Item 1 Business 1
Item 2 Properties 8
Item 3 Legal Proceedings 9
Item 4 Submission of Matters to a Vote of Security Holders 9
PART II
Item 5 Market Price for Registrant's Common Equity and
Related Stockholder Matters 10
Item 6 Selected Financial Data 11
Item 7 Management's Discussion and Analysis of Financial
Condition and Results of Operations 12
Item 8 Financial Statements and Supplementary Data 15
Item 9 Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 15
PART III
Item 10 Directors and Executive Officers of the Registrant 15
Item 11 Executive Compensation 15
Item 12 Security Ownership of Certain Beneficial Owners
and Management 15
Item 13 Certain Relationships and Related Transactions 15
PART IV
Item 14 Exhibits, Financial Statement Schedules and
Reports on Form 8-K 16
Signatures 17
PART I
Item 1. Business
Novitron International, Inc. (the "Company") is a multinational corporation
focusing on the development of 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 and clinical laboratory instrumentation marketed
worldwide through distributors and strategic partnerships which include, Dade
Behring, Hycor Biomedical, AVL List, and the Wiener Lab Group. The Company's
Australian subsidiary, Clinical Data (Australia) Pty. Ltd. ("Clinical Data
Australia"), distributes diagnostic instruments and assays in the South
Pacific. 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.
Company History
Novitron International, Inc. was established in 1972 as Clinical Data, Inc. to
offer ambulatory electrocardiographic monitoring for clinical and research
applications. In the 1980's, through a series of strategic acquisitions, the
Company grew to over $14 million in revenue. As the Company believed that
future growth was limited, these businesses were sold or discontinued in the
early 1990's.
In 1984, the Company acquired a thirty-three percent (33%) equity interest in
Vital Scientific. From 1985 to 1991, the Company increased its equity position
in this Dutch company to ninety-four percent (94%), and in October 1997, Vital
Scientific became a wholly owned subsidiary.
In June 1992, the Company invested in NovaChem, a Dutch company formed to
develop and market spectrophotometric process monitoring technology. In March
1995, NovaChem became a wholly owned subsidiary of the Company.
In April 1994, to better reflect the Company's international scope and
diversification, the Company's name was changed from Clinical Data, Inc. to
Novitron International, Inc.
VITAL SCIENTIFIC NV
Established in 1956 and headquartered in Spankeren/Dieren, The Netherlands,
Vital Scientific 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 automated and semi-automated analytical instruments used in medical
laboratories. These include the Vitalab Selectra II and Vitalab Flexor "walk-
away" clinical chemistry analyzers, and the Vitalab Viva a dedicated system
designed for therapeutic drug monitoring ("TDM") and for the detection of drugs
of abuse ("DOA"). The subsidiary recently began shipping the Hytec-288, an
enzyme immunoassay analyzer used in the allergy testing and in the detection of
autoimmune diseases.
To develop new products, Vital Scientific maintains a research team of fourteen
professionals augmented by contract personnel, and further supported by the
staff of the TNO Product Centre, the Netherlands organization for applied
scientific research. The Company has in-house expertise in the disciplines of
mechanical design, electronic engineering and systems programming. Its
mechanical prototyping and assembly operations are highly automated.
In January 1997, Vital Scientific signed an agreement with Hycor Biomedical,
Inc. of Irvine, California for the development of an automated instrument
tailored for use with Hycor's allergy and autoimmune diagnostic assays. The
collaboration with Hycor Biomedical has resulted in the HYTEC-288, an
instrument that offers the company the opportunity to diversify into new
diagnostic fields. The first production units were delivered to Hycor in March,
1998.
In July 1997, Vital Scientific signed an agreement with Behring Diagnostics,
now Dade Behring, for the distribution of a fully-automated instrument.
Tradenamed the Vitalab Viva, this analyzer is dedicated specifically for use
with the Dade Behring Emitr line of diagnostic assays for TDM and DOA. The
agreement, which covers a two (2) year period, calls for the exclusive
distribution of this dedicated laboratory analyzer. Deliveries commenced in the
third quarter of fiscal 1998.
In March 1998,Vital Scientific received FDA approval, under Section 510(k) of
the Food, Drug, and Cosmetic Act, to market in the United States the Vitalab
Viva and Vitalab Selectra, its fully-automated, random-access clinical
laboratory analyzers for routine clinical chemistries, DOA testing and TDM. A
distribution partner is being sought.
During fiscal 1997, Vital Scientific was awarded ISO 9002 certification, and in
fiscal 1998 underwent an audit for ISO 9001 approval. Certification is expected
in the summer of 1998.
Marketing and Distribution
The restructuring of E. Merck's diagnostic division, announced last year,
presented a major challenge to the Company, considering Merck's position as a
significant customer. In November 1997, the Company amicably settled all
outstanding issues with E. Merck related to the performance by each party under
a series of contractual agreements. The settlement, which included a cash
payment from E. Merck and the release of certain indebtedness of Vital
Scientific, offered the Company complete freedom to pursue new marketing and
distribution arrangements and the diversification of its marketing base.
During the past fiscal year, E. Merck continued to represent the primary
distribution channel for instruments designed and manufactured by Vital
Scientific. Sales to E. Merck, represented approximately fifty-six percent
(56%) of sales revenue in fiscal 1998, as compared to seventy-five percent
(75%) of the Company's revenues during fiscal 1997.
After the settlement with E. Merck Vital Scientific has been actively pursuing
a new distribution network for its technology base. Vital Scientific maintains,
and has during this past fiscal year, expanded its dealer network for marketing
certain of the company's products in Europe, the Far East, Latin America and
China. In December 1997, Vital Scientific signed an agreement with AVL List
GmbH of Graz, Austria for the exclusive distribution of certain of the
Company's products in the medical markets of Eastern Europe, Scandinavia, and
the countries of
the former Soviet Union. Privately held AVL is a leading supplier of Blood Gas
and Ion Selective Electrode technology.
In June 1998, Vital Scientific signed an agreement with the Wiener
Laboratorios SAIC of Rosario, Argentina for the exclusive distribution for
Latin America of a series of clinical chemistry analyzers including the high
successful Vitalab Selectra II. Established in 1960, Wiener Lab is the leading
independent manufacturer of reagents in South America and a major marketer of
clinical chemistry instrumentation and reagents in the region. Wiener Lab will
be responsible for both the sales and service of Vital Scientific
instrumentation in the territory.
Other distribution avenues are actively being sought.
Product Development
During fiscal 1998, 1997, and 1996, the Company spent approximately $1,482,000,
$1,698,000, and $1,110,000, respectively, on research and development at Vital
Scientific.
Seven new models of clinical laboratory analyzers have been developed in the
past nine (9) years. These include the MicroLab 200, the Vitalab Eclipse, the
Vitalab Eclipse Plus, the Vitalab Eclair, the Vitalab Selectra, the Vitalab
Selectra II and the HYTEC-288. 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 reagent diagnostics from different sources, targets the
hospital and alternative care markets. Vital Scientific believes that the
unique robotic features, the user-friendly 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.
The new HYTEC-288 is the latest addition to the product range. The HYTEC-288 is
a fully automated Enzyme Immuno-Assay system designed for allergy and
autoimmune disease testing. This "walk-away" instrument permits the processing
of fifty (50) patient samples and two hundred and eighty-eight (288) test
results in a single run.
Research and development efforts at Vital Scientific are expected to be
maintained at a constant level during fiscal 1999. The Company intends to
develop new products where the Company perceives a demand and believes the
product 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, and in marketing directly to distributors, 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. 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 to distribute diagnostic
products in Australia, New Zealand, and the South Pacific. Most importantly,
Clinical Data Australia provides the Company with strategic access to the
diagnostics market for market research purposes. Australian medicine provides
an ideal blend of the characteristics found in Europe and the United States and
is, therefore, an excellent site to develop and test product concepts.
To support these strategic marketing activities, the Company recognized the
opportunity to establish a diagnostics distribution business that was ideally
positioned to represent smaller European and U.S. companies.
In July 1997, Clinical Data Australia signed an exclusive distribution
agreement with the ABX Hematologie s.a., of Montpellier, France, for the
distribution of a complete line of cell counters and related reagents. This
three (3) year agreement covers the sale and service of ABX's fully automated
cell counters which have an established presence in the Australian market.
In August 1997, Clinical Data Australia finalized an exclusive distribution
agreement with AI Analysinstrument AB, of Stockholm, Sweden for the
distribution of a complete line of closed tube Erythrocyte Sedimentation Rate
("ESR") instruments and consumables.
Clinical Data Australia currently represents the following companies in
Australia:
Hycor Biomedical - Urinalysis systems and consumables
E. Merck - Clinical chemistry reagents
Nycomed Pharma - QC sera and cell biology products
R&R Mechatronics - ESR analyzers
Vital Scientific - Clinical chemistry analyzers
Medical Specialties International - Hematology controls
Sigma Diagnosticsr - Wide range of diagnostics
AI Analysinstrument AB - Closed tube ESR products
ABX Hematologie - Cell counters and related reagents
The Hycor Biomedical line was launched in 1995 and has proven highly
successful. The product is the leading urinalysis system in Australia with a
market share of approximately 65%.
NOVACHEM BV
Established in 1992, NovaChem has developed and markets the IPM-Mark II Process
Analyzer. This instrument employs solid-state, fiber-optic, diode-array, and
spectroscopic technology and was specifically designed for process control
applications.
Using the IPM-Mark II, NovaChem has developed a series of applications which
include the monitoring of Claus Plant sulfur recovery; chlorine production; 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, and in monitoring the production of
pharmaceuticals. 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 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 through established dealers and
manufacturer's representatives representing the process monitoring industry. In
January 1997, NovaChem signed a series of agreements with Houston Atlas, Inc.
for the exclusive distribution of certain petrochemical and refining
applications of the NovaChem proprietary diode-array process monitoring
technology. Houston Atlas, is a subsidiary of Thermo Instrument Systems, Inc. a
leader in the field of process monitoring in the hydrocarbon industry.
Product Development
During fiscal 1998 and 1997, NovaChem spent approximately $107,000 and
$124,000, respectively, on research and development. Resources were also
employed 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, Western Research, Zeiss 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. Many
of its competitors, however, 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 either 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
Warranty expenses during fiscal 1998 were approximately one-quarter percent
(0.25%) of product revenue versus one percent (1.0%) for fiscal 1997.
Vital Scientific maintains product liability insurance in the amount of NLG10
million ($5 million) for the international sales of its laboratory
instrumentation. The Company believes that this level of coverage is adequate,
given its past sales levels and its anticipated sales levels for the fiscal
year ending March 31, 1999. The Company will reevaluate the adequacy of this
coverage when and if its sales level substantially increases. No product
liability claims have been brought against the Company to date. However, there
can be no assurance that product liability insurance will continue to be
available to the Company on acceptable terms, or that
product liability claims in excess of the Company's insurance coverage, if any,
will not be successfully asserted against the Company.
Year 2000
The Company is currently in the process of evaluating its information
technology infrastructure to assess its exposure to the "Year 2000" computer
problem. Based upon its work to date, the Company believes that no critical
software systems will be impacted by this situation. Systems currently used by
the Company are either already "Year 2000" compliant or are scheduled for
replacement during fiscal year 1999. The Company does not currently have
information regarding the "Year 2000" compliance status of its customers or
suppliers, and there can be no assurance that the Company's customers and
suppliers will not be adversely affected by the "Year 2000" problem.
Nonetheless, the Company believes that the "Year 2000" problem will not have a
material impact on the Company's business operations or financial condition.
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, 1998, the Company had a backlog
of approximately $3,792,000, as compared to $1,478,000 in 1997. It is
anticipated that all of the existing backlog will be filled by shipments during
fiscal 1999. Deliveries are generally made within 30 days after the receipt of
an order.
Seasonality
The Company does not believe that its business has any significant seasonal
factors.
Employees
The Company had ninety-four (94) full, part-time, and contract employees as of
March 31, 1998. Eighty-seven (87) of these employees are employed by Vital
Scientific, one (1) by NovaChem, five (5) by Clinical Data Australia, and one
(1) 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 any of the Company's major customers would have a significant
material adverse impact on the Company.
Industry Segments
The information required by this section is specified in Note 14 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., 55, 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.
Before 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, 47, 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. Before joining the Company, he held increasingly senior sales and
marketing positions with Behring Diagnostics.
Emile Hugen, 53, 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,
Massachusetts under a lease expiring in December 1999.
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 is leased
until the year 2008 with renewal and expansion options.
NovaChem occupies approximately 500 square feet of office space in Newton and
in Dieren, The Netherlands under a series of short-term leases.
Clinical Data Australia occupies approximately 3,000 square feet of office and
warehousing space in Castle Hill, New South Wales under a lease expiring in
January 2000.
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 1998
and 1997 as reported by the NASDAQ Stock Market.
Prices
Fiscal Year Ended March 31, 1998 High Low
First Quarter $ 3.52 $ 1.82
Second Quarter $ 3.75 $ 2.16
Third Quarter $ 2.84 $ 1.36
Fourth Quarter $ 3.88 $ 1.48
Fiscal Year Ended March 31, 19971 High Low
First Quarter $ 9.75 $ 4.69
Second Quarter $ 6.00 $ 2.63
Third Quarter $ 4.13 $ 1.69
Fourth Quarter $ 4.75 $ 2.63
<FN>
1 The prices are restated for the effects of a 1 for 3 reverse stock split on
December 4, 1996.
</FN>
b) The approximate number of holders of record and beneficial owners of the
Company's Common Stock at March 31, 1998 and March 31, 1997 were 252 and 1,175,
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)
1998 1997 1996a 1995a 1994a
Income Statement Data
Revenues $ 11,802 $ 13,845 $ 17,908 $ 16,818 $ 11,920
Gross profit $ 3,277 $ 3,713 $ 5,002 $ 5,220 $ 3,602
Net income (loss) $ 104 $ (583) $ (1,506) $ (228) $ (1,121)
Basic and diluted
net income (loss) per
share $ .08 $ (.44) $ (1.14) $ (.17) $ (.85)
Weighted average common
shares outstanding 1,323 1,322 1,322 1,327 1,322
<FN>
a Per share amounts have been retroactively adjusted to reflect
the 1:3 reverse stock split on December 4, 1996.
</FN>
Balance Sheet Data
Working Capital $ 3,099 $ 4,206 $ 5,277 $ 7,334 $ 3,214
Total Assets $ 9,405 $ 8,568 $ 12,294 $ 15,075 $ 12,354
Long-Term Debt Obligations $ 30 $ 41 $ 54 $ 98 $ 104
Stockholders' Investment $ 4,641 $ 4,973 $ 6,192 $ 7,981 $ 7,040
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Liquidity and Capital ResourcesThe Company generated approximately $226,000 of
cash from operations during the fiscal year ended March 31, 1998. The increase
in funds generated comes from the increase in accounts payable and accrued
expenses offset by an increase in the level of inventories and a decrease in
deferred taxes. During fiscal year 1998, approximately $626,000 of cash was
used by the Company in its investing activities, principally the purchase of
equipment and the buyout of the minority shareholder at Vital Scientific. The
sale of certain assets also provided funds for these investing activities.
Financing activities were immaterial during the year ended March 31, 1998.
In April 1998, the Company entered a new relationship with a major Dutch bank,
which provides for a 4,000,000 Dutch Guilder (approximately $1,920,000) line of
credit. Interest on this facility is set at 1.25% above the base rate as
reported by the Netherlands Central Bank, presently 3.75%. Trade receivables
and inventory of Vital Scientific are provided as security for this facility.
The line continues as long as certain capital covenants are met.
The Company's sources of cash include cash balances and the aforementioned
4,000,000 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 1999.
Results of Operations
Fiscal Year Ended March 31, 1998 Compared to Fiscal Year Ended March 31, 1997
Consolidated revenues for fiscal year 1998 were $11,802,000 versus $13,845,000
for fiscal year 1997, a decrease of approximately 14.8%. The decline is
principally due to the 14.8% strengthening of the U.S. dollar against the
Company's primary functional currency, the Dutch Guilder.
The gross margin improved from 26.8% to 27.8% from fiscal year 1997 to fiscal
year 1998. The increase reflects improved material costs, cost containment and
a change in the product mix.
Sales and marketing expenses decreased $424,000 or 36.8 % from fiscal year
1997. A reduction in expenses was responsible for 27.4% of the decline and the
weakening of the Dutch Guilder against the U.S. dollar accounted for the rest.
The decrease in expenses resulted from cost containment, reduced sales
commissions and reduced technical service expenses.
Research and development expenses, as shown on the 1998 consolidated statement
of operations, increased $58,000 or 4.6% from fiscal year 1997. During fiscal
years 1998 and 1997, the Company spent an additional $242,000 and $502,000,
respectively, in research and development which were capitalized onto the
consolidated balance sheet pursuant to the precepts of Statement of Financial
Accounting Standards No. 86 (see Note l(n) in the Notes to Consolidated
Financial Statements). When expressed in the Company's primary functional
currency, the Dutch Guilder, the spending on research and development was
essentially constant for fiscal years 1997 and 1998. The decrease in the
spending, when expressed in U.S. dollars, is wholly attributable to the
strengthening of the U.S. dollar against the Dutch Guilder.
General and administrative expense in fiscal year 1998 decreased $169,000 or
8.7% from fiscal year 1997. The expense increased 4.7% when expressed in the
Company's functional currency; the weakening of the Dutch Guilder against the
U.S. dollar caused the decrease as reported. The increased costs are primarily
attributable to employee recruitment expenses, temporary contract personnel and
one-time consulting expenses.
Interest expense increased primarily from expenses related to the credit
financing grant received by Vital Scientific from the Dutch government for new
product development. The grant is repaid from product sales with interest
accruing on the unpaid balance. Shipments of the new product commenced in the
fourth quarter of fiscal year 1998.
Interest income increased from invested funds. Other income and expense, as
illustrated in Note 11 in the Notes to Consolidated Financial Statements, is
largely comprised of the gain from the settlement with E. Merck and the gain on
the sale of certain assets at Vital Scientific. The remainder of the balance
shows the effect of foreign currency transaction gains and losses on the
results of operations.
As noted above, on October 21, 1997, Vital Scientific became a wholly owned
subsidiary of the Company. The minority interest on the consolidated statement
of operations reflects the 6% of Vital Scientific's operations held by a
minority shareholder until October 21, 1997.
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. (See Note 11 in 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 Company's predominant foreign
functional currency, the Dutch Guilder, is translated into U.S. dollars.
Approximately $191,000 of the March 31, 1998 balance of $1,230,000 of cash and
cash equivalents is denominated in U.S. dollars. The effect of translation into
U.S. dollars is reflected as a separate component of stockholders' investment
on the balance sheet. The cumulative translation adjustment in stockholders'
investment is approximately three percent (3 %) of total assets on the March
31, 1998 consolidated 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 $7.57 million of $7.74 million of current
assets reside in the Company's foreign subsidiaries.
Fiscal Year Ended March 31, 1997 Compared to Fiscal Year Ended March 31, 1996
Consolidated revenues for fiscal year 1997 were $13,845,000 versus $17,908,000
for fiscal year 1996, a decrease of approximately twenty-three percent (23%).
The decline is principally due to the default of a major customer, E. Merck, on
a series of agreements coupled with an eight percent (8%) strengthening of the
Company's primary functional currency, the Dutch Guilder, against the U.S.
dollar.
The gross margin decreased from 28% for fiscal year 1996 to 27% for fiscal year
1997 primarily because of a reduced absorption rate of manufacturing overhead
expenses. In addition, there was continued pricing pressure from a competitive
market at Vital Scientific.
Sales and marketing expenses decreased by $220,000, or sixteen percent (16%)
from fiscal year 1996. A reduction in expenditures was responsible for eight
percent (8%) of the decline while the strengthening of the Dutch Guilder
contributed to the remainder of the decreased expenses between years. The
reduction in expense resulted principally from decreased commissions on export
sales at Clinical Data (Australia) and a decrease in the sales expenses at
NovaChem BV.
Research and development charges, as shown on the income statement, increased
$25,000 or two percent (2%) from fiscal year 1996. During fiscal year 1997, the
Company also spent an additional $502,000, which was capitalized on the
consolidated balance sheet pursuant to the precepts of Statement of Financial
Accounting Standards No. 86 (see Note 1(n) in the Notes to Consolidated
Financial Statements).
General and administrative expenses decreased $336,700 or approximately fifteen
percent (15%) from the similar period in fiscal year 1996. The reduction was
the result of ongoing cost containment procedures implemented by the Company,
including decreased use of outside legal expense, coupled with the eight
percent (8%) strengthening of the Dutch Guilder against the U.S. dollar.
Interest expense decreased for the annual period comparatives because of less
reliance on the line of credit than in the prior year. Correspondingly,
interest income declined as well because there were fewer funds available for
investment. Other income and expense was basically the effect of foreign
currency transaction gains and losses on the results of operations.
For fiscal 1997 and 1996, minority interest is attributable to the six percent
(6%) of Vital Scientific not held by the Company.
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. (See Note 11 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 predominant foreign functional
currency, the Dutch Guilder, is translated into U.S. dollars. Approximately
$354,000 of the March 31, 1997 balance of $1,734,000 of cash, 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 on the balance sheet. The cumulative translation
exchange adjustment in stockholders' investment is approximately two percent
(2%) of total assets on the March 31, 1997 consolidated 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 $7.0 million of $7.2 million of current assets
reside in the Company's foreign subsidiaries.
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 1998 Proxy Statement for
its Annual Meeting of Stockholders to be held on September 15, 1998.
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 1998 Proxy Statement for its Annual Meeting of Stockholders to be
held on September 15, 1998.
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 1998 Proxy Statement for its Annual Meeting of
Stockholders to be held on September 15, 1998.
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 1998 Proxy Statement for its Annual Meeting of Stockholders to be
held on September 15, 1998.
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 26, 1998 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 26, 1998 Israel M. Stein, M.D.
Israel M. Stein, M.D.
Chairman of the Board
Principal Executive Officer
Date: June 26, 1998 Arthur B. Malman
Arthur B. Malman
Director
Date: June 26, 1998 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 19
Consolidated Balance Sheets at March 31, 1998 and 1997 20
Consolidated Statements of Operations for the Years Ended
March 31, 1998, 1997 and 1996 22
Consolidated Statements of Stockholders' Investment for the
Years Ended March 31, 1998, 1997 and 1996 23
Consolidated Statements of Cash Flows for the Years Ended
March 31, 1998, 1997 and 1996 24
Notes to Consolidated Financial Statements 26
Consolidated Financial Statement Schedule
Schedule II - Valuation and Qualifying Accounts 40
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,
1998 and 1997, and the related consolidated statements of operations,
stockholders' investment and cash flows for each of the three years in the
period ended March 31, 1998. 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, 1998 and 1997, and the results of their
operations and their cash flows for each of the three years in the period ended
March 31, 1998, 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 10, 1998
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1998 AND 1997
ASSETS
1 9 9 8 1 9 9 7
CURRENT ASSETS:
Cash and cash equivalents $ 1,229,918 $ 1,634,270
Marketable securities - 99,472
Accounts receivable, less
reserves of $49,000 and $102,000
in 1998 and 1997, respectively 2,412,725 2,546,221
Inventories 3,719,698 2,526,389
Prepaid expenses 347,118 280,915
Other current assets 28,971 83,257
Total current assets 7,738,430 7,170,524
EQUIPMENT, at cost:
Manufacturing and computer equipment 2,010,683 1,896,433
Furniture and fixtures 386,090 403,882
Leasehold improvements 247,868 232,237
Vehicles 65,787 101,818
2,710,428 2,634,370
Less: Accumulated depreciation
and amortization 1,944,063 2,053,108
766,365 581,262
OTHER ASSETS, net 899,929 816,047
$ 9,404,724 $ 8,567,833
<FN>
The accompanying notes are an integral part of these consolidated financial
statements.
</FN>
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1998 AND 1997
(Continued)
LIABILITIES AND STOCKHOLDERS' INVESTMENT
1 9 9 8 1 9 9 7
CURRENT LIABILITIES:
Short-term notes payable and current
portion of long-term debt $ 52,113 $ 54,375
Accounts payable 2,598,755 1,464,128
Accrued expenses 1,884,036 1,219,551
Customer advances - 193,572
Accrued income taxes 105,010 33,287
Total current liabilities 4,639,914 2,964,913
LONG - TERM DEBT, net of current 30,028 41,029
portion
DEFERRED TAXES 93,844 347,993
MINORITY INTEREST - 240,830
COMMITMENTS AND CONTINGENCIES:
(Note 6)
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: 1,454,211
and 1,322,005 in 1998 and 1997,
respectively (Note 2) 14,542 13,220
Capital in excess of par value 4,881,068 4,882,390
Cumulative translation adjustment (287,384) 148,696
Retained earnings (deficit) 32,712 (71,238)
Total stockholders' investment 4,640,938 4,973,068
$ 9,404,724 $ 8,567,833
<FN>
The accompanying notes are an integral part of these consolidated
financial statements.
</FN>
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED MARCH 31, 1998, 1997 AND 1996
1 9 9 8 1 9 9 7 1 9 9 6
REVENUES $11,802,250 $13,845,483 $17,908,364
COST OF REVENUES 8,525,040 10,132,189 12,906,518
Gross profit 3,277,210 3,713,294 5,001,846
OPERATING EXPENSES:
Sales and marketing 728,996 1,153,302 1,373,767
Research and development 1,336,306 1,277,960 1,252,396
General and administrative 1,781,378 1,950,567 2,286,951
Write-down of certain
assets relating to
NovaChem BV (Note 4) - - 1,279,871
3,846,680 4,381,829 6,192,985
Loss from operations (569,470) (668,535) (1,191,139)
Interest expense (75,409) (38,154) (106,622)
Interest income 57,317 52,579 63,979
Other income (expense), net 711,009 (18,545) (61,723)
123,447 (672,655) (1,295,505)
Provision for (benefit
from) income taxes 26,000 (78,000) 196,000
97,447 (594,655) (1,491,505)
Minority interest 6,503 12,105 (14,128)
Net income (loss) $ 103,950 $ (582,550) $(1,505,633)
Basic and diluted
net income (loss) per share $ 0.08 $ (0.44) $ (1.14)
Weighted average common
shares outstanding 1,323,092 1,322,005 1,322,005
<FN>
The accompanying notes are an integral part of these
consolidated financial statements.
</FN>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT
FOR THE YEARS ENDED MARCH 31, 1998, 1997 AND 1996
Common Stock Capital in Cumulative Retained
Number Excess of Translation Earnings
of Shares Par Value Par Value Adjustment (Deficit)
BALANCE at March 31,1995 1,322,005 $ 13,220 $4,882,390 $1,068,490 $2,016,945
Translation adjustment - - - (283,267) -
Net loss - - - - (1,505,633)
BALANCE at March 31,1996 1,322,005 13,220 4,882,390 785,223 511,312
Translation adjustment - - - (636,527) -
Net loss - - - - (582,550)
BALANCE at March 31,1997 1,322,005 13,220 4,882,390 148,696 (71,238)
Translation adjustment - - - (436,080) -
Issuance of common
stock in
connection with a 10%
stock dividend 132,206 1,322 (1,322) - -
Net income - - - - 103,950
BALANCE at March 31,1998 1,454,211 $14,542 $4,881,068 $(287,384) $ 32,712
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MARCH 31, 1998, 1997 AND 1996
1 9 9 8 1 9 9 7 1 9 9 6
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net income (loss) $ 103,950 $ (582,550) $(1,505,633)
Adjustments to reconcile
net income (loss) to net
cash provided by (used in)
operating activities-
Depreciation and amortization 329,726 403,630 529,625
Capitalization of research
costs (241,730) (544,765) -
Gain on sale of equipment (111,243) - -
Release of certain
indebtedness (113,522) - -
Write-off of goodwill
associated with
acquisition of NovaChem BV - - 1,051,682
Deferred income taxes (230,995) 215,673 (24,922)
Minority interest (6,503) (12,105) 14,128
Changes in Current Assets and
Liabilities
Accounts receivable (109,265) 1,756,560 (1,007,016)
Inventories (1,490,514) 1,639,802 320,514
Prepaid expenses (95,983) (126,757) 281,267
Other current assets 48,493 44,540 (140,761)
Accounts payable 1,324,810 (1,184,244) (516,637)
Accrued expenses 804,576 (174,659) 216,140
Customer advances (69,390) 1,045 (112)
Accrued income taxes 84,007 (126,673) (302,292)
Net cash provided by
(used in)
operating activities 226,417 1,309,497 (1,084,017)
CASH FLOWS FROM
INVESTING ACTIVITIES:
Marketable securities 99,472 249,571 (349,043)
(Increase) decrease in other
assets (37,664) (35,119) 1,039
Purchase of equipment (576,460) (226,682) (207,328)
Proceeds from sale of
equipment 151,360 60,528 15,729
Purchase of minority interest (200,140) - -
Other, including foreign
exchange effects on cash (62,820) (208,106) 79,978
Net cash used in
investing activities (626,252) (159,808) (459,625)
<FN>
Continues on page 25
</FN>
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MARCH 31, 1998, 1997 AND 1996
(Continued)
1 9 9 8 1 9 9 7 1 9 9 6
CASH FLOWS FROM
FINANCING ACTIVITIES:
Proceeds from
Short-term notes payable $ 2,948 $ 5,886 $ 65,540
Payments on
Long-term debt (7,465) (6,334) (39,060)
Net cash (used in)
provided by
financing activities (4,517) (448) 26,480
NET (DECREASE) INCREASE IN
CASH AND CASH EQUIVALENTS (404,352) 1,149,241 (1,517,162)
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 1,634,270 485,029 2,002,191
CASH AND CASH EQUIVALENTS,
END OF YEAR $ 1,229,918 $ 1,634,270 $ 485,029
1 9 9 8 1 9 9 7 1 9 9 6
Supplemental disclosure of cash
flow information:
Cash paid during the year for:
Interest $ 124,722 $ 33,417 $ 130,512
Income taxes $ 38,171 $ 459,033 $ 2,180
Supplemental disclosure of
noncash investing and financing
activities:
Write-off of fully depreciated
equipment $ - $1,264,496 $ -
<FN>
The accompanying notes are an integral part of these consolidated financial
statements.
</FN>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
(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.
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 (see Note 3). 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.
(c) Marketable Securities
The Company accounts for marketable securities in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." Under SFAS No. 115, marketable
securities that 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 period ended March 31, 1997, marketable securities
consisted of United States Treasury securities and were stated at cost, which
approximated market value; there were no marketable securities at March 31,
1998.
(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, 1998 and 1997:
1 9 9 8 1 9 9 7
Raw materials $ 788,420 $ 496,248
Work-in-process 1,768,431 1,252,249
Finished goods 1,162,847 777,892
$3,719,698 $ 2,526,389
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
(Continued)
(1) Operations and Accounting Policies (continued)
(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 3-7 years
equipment
Furniture and fixtures 3-7 years
Leasehold improvements Life of lease
Vehicles 3-5 years
Goodwill 20 years
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to Be Disposed Of," requires the Company to continually evaluate
whether events and circumstances have occurred which 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, 1998 and 1997, the Company's remaining goodwill
relates to its investment in Vital Scientific NV. Based on an analysis of
other assets at March 31, 1998, the Company does not believe an impairment
exists.
(g) Net Income (Loss) Per Share
In March 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 128, "Earnings per Share." This statement establishes standards for
computing and presenting earnings per share and applies to entities with
publicly traded common stock or potential common stock. This statement is
effective for fiscal years ending after December 15, 1997. Basic net income
(loss) per share is determined by dividing net income by the weighted average
shares of common stock outstanding during the year. Diluted net income (loss)
per share has been calculated on the same basis as basic earnings per share
because the Company's potentially dilutive securities, stock options, are
antidilutive.
The net income (loss) per share in fiscal 1998, 1997 and 1996 is based on the
weighted average number of common shares outstanding during the respective
fiscal years. The fiscal 1996 shares outstanding have been restated to reflect
the 1-for-3 reverse stock split on December 4, 1996 (see Note 2).
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
(Continued)
(1) Operations and Accounting Policies (continued)
(g) Net Income (Loss) Per Share (continued)
In fiscal years 1998, 1997 and 1996, 104,818, 73,835, and 24,652 weighted
average common equivalent shares, respectively, were not included in the
diluted weighted average shares outstanding, as they were antidilutive.
(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 Clinical Data BV, Vital Scientific NV and Spectronetics
NV is the Dutch Guilder. During fiscal 1997, the functional currency of
Clinical Data Australia became the Australian dollar in recognition of the
shift of its operations to a more domestic focus. Also in fiscal 1997,
NovaChem BV changed its functional currency to the United States dollar
because the majority of its operations are now based in the United States.
Gains and losses from translating assets and liabilities that are denominated
in currencies other than the respective functional currency are included in
other expense in the consolidated statements of operations. The translation
adjustment required to report those subsidiaries whose functional currency is
other than the United States dollar into 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.
Foreign currency transaction gains and losses are included in other expense in
the consolidated statements of operations.
(i) Postretirement Benefits
The Company has no obligations for postretirement benefits.
(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 one year warranty on its manufactured products which
covers parts and materials. The Company reserves for this warranty at the time
of sale.
(l) Financial Instruments
The estimated fair value of the Company's financial instruments, which include
cash equivalents, marketable securities, accounts receivable, accounts payable
and long-term debt, approximates their carrying value.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
(Continued)
(1) Operations and Accounting Policies (continued)
(m) Concentration of Credit Risk
SFAS 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 large financial institutions. See Notes 10 and 14 for significant
customers and financial information by geographic area, respectively.
(n) Software Development Costs
In connection with the development of software included as a significant
component of a new analysis product, the Company has applied the provisions of
SFAS No. 86, "Accounting for the Costs of Computer Software to be Sold, Leased
or Otherwise Marketed." SFAS No. 86 requires the Company to capitalize those
costs incurred for the development of computer software that will be sold,
leased or otherwise marketed once technological feasibility has been
established up to the time at which the product is available for sale to the
customer. These capitalized costs are subject to an ongoing assessment of the
recoverability based on anticipated future revenues and changes in hardware and
software technologies.
Amortization of the capitalized software development costs begins when the
product is available for general release. Amortization is provided on a product-
by-product basis on either the straight-line method over periods not exceeding
five years or the sales ratio method. Unamortized capitalized software
development costs determined to be in excess of net realizable value of the
product are expensed immediately. The Company has begun to amortize the
capitalized software costs over the sales ratio method beginning in the year
ended March 31, 1998. Amortization recorded during fiscal year 1998 was
approximately $11,000.
During the years ended March 31, 1998 and 1997, the Company capitalized
$242,000 and $502,000, respectively, under SFAS No. 86, which is included as a
component of other assets in the accompanying consolidated balance sheet.
(o) New Accounting Standards
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income."
SFAS No. 130 requires disclosure of all components of comprehensive income on
an annual basis and an interim basis. Comprehensive income is defined as the
change in equity of a business enterprise during a period from transactions
and other events and circumstances from nonowner sources. SFAS No. 130 is
effective for fiscal years beginning after December 15, 1997.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
(Continued)
(1) Operations and Accounting Policies (continued)
(o) New Accounting Standards (continued)
In July 1997, the FASB issued SFAS No. 131, "Disclosures About Segments of an
Enterprise and Related Information." SFAS No. 131 requires certain financial
and supplementary information to be disclosed on an annual and an interim
basis for each reportable segment of an enterprise. SFAS No. 131 is effective
for fiscal years beginning after December 31, 1997. Unless impracticable,
companies would be required to restate prior period information upon adoption.
The Company does not expect this accounting pronouncement to materially effect
its financial statements.
(2) Reverse Stock Split and Stock Dividend
On November 12, 1996, the Company declared a 1 for 3 reverse stock split of
the common stock payable on December 4, 1996 to the stockholders of record on
November 25, 1996. No fractional shares were distributed and the common stock
issued to each stockholder was rounded up to the nearest whole number of
shares. All share and per share amounts for fiscal 1996 have been adjusted to
reflect this reverse stock split.
On March 7, 1998, the Company declared a 10% common stock dividend payable on
March 27, 1998 to the shareholders of record on March 13, 1998. No fractional
shares or cash were distributed and the common stock issued to each
stockholder was rounded up to the nearest whole number of shares. All option
shares and prices for fiscal 1998, 1997 and 1996 have been adjusted to reflect
this stock dividend.
(3) Vital Scientific NV
On October 21, 1997, the Company purchased the remaining six (6%) percent of
Vital Scientific NV from the minority shareholder for approximately $200,000.
The transaction has been recorded as a purchase and the resultant gain of
approximately $37,000 on the purchase of the minority interest has been
reflected as a reduction of goodwill relating to past purchases of prior
investments in Vital Scientific. The remaining goodwill is being amortized
over 7 years on a straight-line basis.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
(Continued)
(4) Write-down of Certain Assets Relating to NovaChem BV
In accordance with SFAS No. 121, the Company 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 March 31, 1996.
(5) Short-Term Notes Payable and Long-Term Debt
The Company's foreign debt obligations are as follows at March 31, 1998 and
1997:
1 9 9 8 1 9 9 7
Short-term notes payable $ 47,246 $ 6,521
Long-term debt -
Note payable, interest free for
a period of five years:
principal repayment began
in fiscal 1997 (approximately
$14,000 per year) - 23,431
Other notes payable, interest
ranging from 11.35% - 11.55% 34,895 65,452
82,141 95,404
Less: short-term notes payable
and current portion of long-term
debt 52,113 54,375
$ 30,028 $ 41,029
As of March 31, 1998, Clinical Data BV, Vital Scientific NV, Spectronetics NV
and NovaChem BV have an agreement with a bank that provides consolidated
overdraft protection. In April 1998, the Company entered a new relationship
with a major Dutch bank, which provides for a 4,000,000 Dutch Guilder
(approximately $1,920,000) line of credit. Interest on this facility is set at
1.25% above the base rate as reported by the Netherlands Central Bank (3.75% at
March 31, 1998). Trade receivables and inventory of Vital Scientific are
provided as security for this facility. The line continues as long as certain
capital covenants are met.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
(Continued)
(6) Lease Commitments
The Company leases facilities, vehicles and computer equipment under operating
leases. Future minimum lease payments under these leases as of March 31, 1998
are approximately as follows:
Year Ending March 31, Amount
1999 $ 374,000
2000 372,000
2001 343,000
2002 301,000
2003 278,000
Thereafter 1,340,000
$3,008,000
Rent expense of approximately $329,000, $340,000 and $418,000 was incurred
during fiscal 1998, 1997 and 1996, respectively.
(7) 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 seven years after the date of grant
whereas the options granted under the Directors' Plan expire no later than
ten years after the date of grant.
During fiscal year 1997, options to purchase 33,000 shares of common stock
were granted to an officer at 110% of the fair market value of the stock on
the date of grant.
In October 1995, the FASB released SFAS No. 123, "Accounting for Stock-Based
Compensation," which is effective for fiscal years beginning after December
31, 1995. SFAS No. 123 encourages companies to adopt a fair value based
method of accounting for employee stock options, but allows companies to
continue to account for those plans using the accounting prescribed by
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" ("APB No. 25"). The Company has adopted the disclosure-only
requirements of SFAS No. 123 and plans to continue to account for employee
stock options using APB No. 25, making pro forma disclosures of net income
and earnings per share as if the fair value based method had been applied.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
(Continued)
(7) Stock Option Plans (continued)
The following table summarizes stock option activity during fiscal 1998, 1997
and 1996.
Number of Option Price Weighted-
Shares Per Share Total Average Price
Outstanding at March 31,
1995 23,147 $ 3.41-14.25 $ 291,271 $12.58
Options granted 6,307 12.95-13.30 82,960 13.15
Options canceled or
expired (2,612) 3.41-10.91 (20,250) (7.75)
Outstanding at March 31,
1996 26,842 $10.91-14.25 $ 353,981 $13.19
Options granted 88,550 2.73- 7.50 279,375 3.15
Options canceled or
expired (4,987) 12.95-13.64 (67,111) (13.46)
Outstanding at March 31,
1997 110,405 $ 2.73-14.25 $ 566,245 $ 5.13
Options canceled or
expired (13,788) 10.91-14.25 (181,110) (13.14)
Outstanding at March 31,
1998 96,617 $ 2.73-13.30 385,135 $ 3.99
Exercisable at March 31,
1998 36,485 $ 2.73-13.30 $ 184,260 $ 5.05
The Company has computed the pro forma disclosures required under SFAS No. 123
for all stock options granted to employees of the Company and its subsidiaries
in the fiscal years ended March 31, 1998 and 1997 using the Black-Scholes
option pricing model prescribed by SFAS No. 123.
The assumptions used to calculate the SFAS No. 123 pro forma disclosure and
weighted average information for the fiscal years ended March 31, 1998, 1997
and 1996 are as follows:
1 9 9 8 1 9 9 7 1 9 9 6
Risk-free interest rate 6.30%-6.73% 6.30%-6.73% 6.00%
Expected dividend yield 0 0 0
Expected lives 4.39 years 6.43 years 4.00 years
Expected volatility 50.93%-51.33% 50.93%-51.33% 51.56%
Weighted average grant date
fair value of options
granted during the period - $1.91 $6.76
Weighted average exercise
price of options granted
during the period - $3.47 $14.47
Weighted average remaining
contractual life of
options outstanding 4.43 years 5.87 years 3.49 years
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
(Continued)
(7) Stock Option Plans (continued)
The pro forma effect on the Company of applying SFAS No. 123 to recognize
certain compensation expense for the years ended March 31, 1998, 1997 and 1996
would be as follows:
1 9 9 8 1 9 9 7 1 9 9 6
Pro forma net income (loss) $45,812 $(594,708) $(1,507,914)
Pro forma net income (loss)
per share $ 0.03 $ (0.45) $ (1.14)
The range of exercise prices for options outstanding and options exercisable at
March 31, 1998 is as follows:
Outstanding Exercisable
Weighted Weighted
Number Remaining Average Number Average
of Contractual Exercise of Exercise
Price Range Shares Life Price Shares Price
$2.73-$3.00 82,500 4.67 years $ 2.84 27,501 $ 2.84
$7.50 6,050 2.11 years $ 7.50 2,017 $ 7.50
$12.95-$13.30 8,067 3.70 years $ 13.11 6,967 $ 13.08
96,617 4.43 years $ 3.99 36,485 $ 5.05
(8) Income Taxes
The Company accounts for income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes." 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.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
(Continued)
(8) Income Taxes (continued)
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 8 1 9 9 7 1 9 9 6
Current:
Domestic $ 2,000 $ - $ -
Foreign 278,000 (265,000) 221,000
Total Current 280,000 (265,000) 221,000
Deferred:
Domestic - - -
Foreign (254,000) 187,000 (25,000)
Total Deferred (254,000) 187,000 (25,000)
$ 196,000 $ 26,000 $ (78,000)
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 8 1 9 9 7 1 9 9 6
Provision for (benefit from)
taxes at statutory rate $ 43,000 $ (235,000) $ (454,000)
Utilization of domestic net
operating loss carryforward (166,000) (26,000) (39,000)
Utilization of foreign net
operating loss carryforward - (9,000) -
Foreign operating loss not
benefited 144,000 211,000 672,000
Taxes resulting from higher
incremental foreign rate 4,000 - 38,000
Tax benefit resulting from
lower statutory foreign rate (15,000) (13,000) (3,000)
Other 16,000 (6,000) (18,000)
$ 26,000 $ (78,000) $ 196,000
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
(Continued)
(8) Income Taxes (continued)
The approximate income tax effect of each type of temporary difference
comprising the net deferred tax asset at March 31, 1998 and 1997 is as follows:
1 9 9 8 1 9 9 7
Net operating loss carryforwards 2,422,492 2,422,321
General business tax credit
carryforwards 122,672 136,048
Other, net 12,540 28,308
2,557,704 2,586,677
Less: valuation allowance 2,557,704 2,558,077
$ - $ 28,600
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, except for the net operating loss carryforward at Vital
Scientific NV during fiscal year 1997, it does not meet the "more likely than
not" standard. Accordingly, the Company has provided a valuation allowance
against the deferred tax assets for all items except for the aforementioned net
operating loss carryforward in 1997.
The tax effect on the components of the deferred tax liability at March 31,
1998 and 1997 is as follows:
1 9 9 8 1 9 9 7
Prior pension service costs $ 39,144 $ 107,088
Depreciation 54,700 -
Research and development
liabilities - 240,905
$ 93,844 $ 347,993
The Company has net operating loss carryforwards for U.S. federal and state tax
purposes of approximately $3,449,000 and $751,000, respectively; these
carryforwards will expire from 1999 to 2013. In addition, the Company has
available U.S. federal tax credit carryforwards of approximately $123,000.
These carryforwards may be used to offset future taxable income, if any. The
federal tax credit carryforwards will expire from 1999 to 2012 and are subject
to review and possible adjustment by the Internal Revenue Service. There is
approximately $894,000 in U.S. alternative minimum tax net operating loss
carryforwards which expire between 2008 and 2010.
The Company has foreign net operating loss carryforwards of approximately
$3,269,000 that are not subject to expiration.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
(Continued)
(9) 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 $97,000, $103,000 and $98,000 during fiscal
1998, 1997 and 1996, respectively.
(10) Significant Customers
During fiscal 1998, 1997 and 1996, the Company had sales of scientific and
process monitoring instrumentation to one customer amounting to approximately
56%, 75% and 83% of consolidated revenues, respectively. At March 31, 1998 and
1997, 57% and 75%, respectively, of accounts receivable was from this
customer.
The Company expects that sales to this customer will decrease significantly
during the upcoming fiscal year. The Company is currently pursuing new
customer relationships, which management believes will at least partially
offset the expected decline in sales to this customer.
(11) Other Income (Expense), net
Other income (expense), net, consists of the following:
For the Years Ended March 31,
1 9 9 8 1 9 9 7 1 9 9 6
Foreign exchange loss $ (48,039) $ (22,842) $ (61,947)
Settlement of a dispute 625,741 - -
Gain on sale of certain
assets 111,243 - -
Other income, net 22,064 4,297 224
$711,009 $(18,545) $ (61,723)
In December 1997, the Company amicably settled a dispute with E. Merck of all
outstanding issues related to the performance of each party under a series of
distribution agreements. The settlement, net of legal expenses, included a
cash payment to the Company and the release of certain indebtedness owed by
the Company in the net amount of $625,741.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
(Continued)
(12) Accrued Expenses
Accrued expenses consist of the following:
1 9 9 8 1 9 9 7
Payroll and payroll-related
expenses $ 542,285 $ 478,372
Warranty and retrofit
reserves 129,995 281,991
Development credits 1,035,312 96,208
Other 176,444 362,980
$ 1,884,036 $ 1,219,551
The Company has entered into a credit financing arrangement with a Netherlands
governmental agency in connection with the development of a new product. The
grant is to be repaid as long as the product is a commercial success. As of
March 31, 1998, the Company has begun to ship this product, evidencing its
commercial success. The Company has accrued all funding received as development
credits in the table above.
(13) Other Assets
Other assets consist of the following:
1 9 9 8 1 9 9 7
Goodwill, net of accumulated
amortization of $454,000 and
$381,000 at March 31, 1998
and 1997, respectively $ 85,524 $ 219,324
Capitalized software development
costs, net of accumulated
amortization 687,197 502,331
Other 127,208 94,392
$ 899,929 $ 816,047
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
(Continued)
(14) Segment 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. During fiscal year 1996, the Company's Australian subsidiary
sold scientific instrumentation primarily to customers in the People's Republic
of China. During fiscal years 1997 and 1998, domestic sales of instruments and
consumables provided the majority of the Australian revenues. Revenues, income
(loss) from operations and identifiable assets classified by segment are as
follows (in thousands):
United States Europe
Adminis- Process Scientific Process Australia Consolidated
tration Monitoring Instruments Monitoring
March 31, 1998
Sales to unaffiliated
customers $ - $ 65 $ 10,627 $ 3 $ 1,107 $ 11,802
Sales or transfers
between geographic
areas - - 3 - - -
$ - $ 65 $ 10,630 $ 3 $ 1,107 $ 11,802
Income(loss) from
operations $ (380) $ (142) $ (44) $ (16) $ 13 $ (569)
Identifiable assets $ 145 $ 50 $ 8,507 $ 116 $ 587 $ 9,405
March 31, 1997
Sales to unaffiliated
customers $ - $ 127 $ 11,852 $ 29 $ 1,837 $ 13,845
Sales or transfers
between geographic
areas - - 630 (9) - -
$ - $ 127 $ 12,842 $ 20 $ 1,837 $ 13,485
Income (loss) from
opeartions $ (408) $ (190) $ (7) $ (117) $ 53 $ (669)
Identifiable assets $ 172 $ 150 $ 7,837 $ (132) $ 541 $ 8,568
March 31, 1996
Sales to unaffiliated
customers $ - $ - $ 15,826 $ 186 $ 1,896 $ 17,908
Sales o transfers
between geographic
areas - - 1,280 12 - -
$ - $ - $ 17,106 $ 198 $ 1,896 $ 17,908
Income (loss) from
operations $ (386) $ (497) $ 716 $ (995) $ (29) $ (1,191)
Identifiable assets $ 755 $ 65 $ 10,190 $ 34 $ 716 $ 11,760
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
MARCH 31, 1998
Balance at
Item Beginning of Additions Deductions Balance at
Period End of
Period
Allowance for
Doubtful Accounts
1998 $ 101,634 $ - $ 52,177 $ 49,457
1997 $ 118,707 $ - $ 17,073 $ 101,634
1996 $ 112,055 $ 69,322 $ 62,670 $ 118,707
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 Percentage
Name of 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 100%
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 Statements on Form S-8 (File Nos. 33-25938, 33-25939, 33-46233 and
33-46234).
ARTHUR ANDERSEN LLP
Boston, Massachusetts
June 25, 1998