-11-
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 September 30, 1995
or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
For Quarter Ended Commission File Number
September 30, 1995 0-12716
Novitron International, Inc.
(Exact Name of Registrant as Specified in its Charter)
Delaware 04-2573920
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
One Gateway Center, Suite 411, Newton, MA. 02158
(Address of principal executive offices) (Zip Code)
Registrant's Telephone number, including area code: (617) 527-9933
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or such shorter period that the registrant was required to file
such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No __
The number of shares of common stock outstanding, as of November
8, 1995 is 3,965,940.
<PAGE>
Novitron International, Inc. AND SUBSIDIARIES
FORM 10-Q
Index
Page
Part I: FINANCIAL INFORMATION
Item 1: Consolidated Financial Statements
Unaudited consolidated balance sheets at September
30, 1995 and March 31, 1995 3
Unaudited consolidated statements of operations
for the three and six months ended September 30,
1995 and 1994 5
Unaudited consolidated statements of stockholders'
investment for the years ended March 31, 1995 and
1994 and the six months ended September 30, 1995 6
Unaudited consolidated statements of cash flows for
the six months ended September 30, 1995 and 1994 7
Notes to unaudited consolidated financial statements 9
Item 2:
Management's Discussion and Analysis of
Financial Condition and Results of Operations 12
Part II: OTHER INFORMATION 14
SIGNATURE 15
<PAGE>
<TABLE>
Novitron International, Inc. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
ASSETS
<CAPTION>
September 30, 1995 March 31, 1995
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 907,681 $ 2,508,345
Marketable securities 499,416 -
Accounts receivable, less
reserves of $ 139,000 at
September 30, 1995 and $112,000
at March 31, 1995, respectively 4,123,050 4,046,517
Inventories 5,581,748 5,266,981
Prepaid expenses 207,833 490,277
Other current assets 2,295 5,764
Total current assets 11,322,023 12,317,884
EQUIPMENT, at cost:
Manufacturing and computer equipment 3,089,654 3,098,212
Furniture and fixtures 847,310 852,240
Leasehold improvements 274,860 278,297
Vehicles 79,135 100,946
4,290,959 4,329,695
Less- Accumulated depreciation
and amortization 3,306,073 3,153,830
984,886 1,175,865
OTHER ASSETS 1,491,582 1,580,997
$ 13,798,491 $ 15,074,746
<FN>
The accompanying notes are an integral part of these
consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
Novitron International, Inc. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' INVESTMENT
<CAPTION>
September 30, 1995 March 31, 1995
<S> <C> <C>
CURRENT LIABILITIES:
Short-term notes payable and
current portion of long-term debt $ 1,855,347 $ 533,951
Accounts payable 2,581,214 3,810,884
Accrued expenses 548,659 1,444,255
Customer advances 228,870 235,471
Accrued income taxes 607,582 718,640
Total current liabilities 5,821,672 6,743,201
LONG-TERM DEBT, net of current portion 80,554 97,766
MINORITY INTEREST 242,266 252,734
COMMITMENTS AND CONTINGENCIES
(Notes 4 and 7)
STOCKHOLDERS' INVESTMENT:
Preferred stock, $.01 par value,
Authorized--1,000,000 shares
Issued and outstanding--none
Common stock, $.01 par value,
Authorized--6,000,000 shares
Issued--3,965,940 shares at
September 30, 1995 and March 31, 1995 39,660 39,660
Capital in excess of par value 4,855,950 4,855,950
Cumulative translation adjustment 921,853 1,068,490
Retained earnings 1,836,536 2,016,945
Total stockholders' investment 7,653,999 7,981,045
$ 13,798,491 $ 15,074,746
<FN>
The accompanying notes are an integral part of these consolidated
financial statements
</TABLE>
<PAGE>
<TABLE>
Novitron International, Inc. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
For Three Months For the Six Months
Ended September 30, Ended September 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
REVENUES $4,291,915 $4,734,940 $ 7,841,820 $ 9,152,969
COST OF REVENUES 3,100,444 3,277,784 5,485,764 6,199,458
Gross profit 1,191,471 1,457,156 2,356,056 2,953,511
OPERATING EXPENSES:
Sales & marketing 341,626 264,085 634,664 540,097
Research and development 310,934 251,218 646,096 608,827
General and administrative 514,208 699,415 1,093,657 1,346,192
1,166,768 1,214,718 2,374,417 2,495,116
Income (loss) from
operations 24,703 242,438 (18,361) 458,395
Interest Expense (28,198) 387 (44,055) (4,339)
Interest Income 22,338 6,398 39,940 25,649
Other Income (Expense) (112,765) 22,702 (81,628) 34,153
(93,922) 271,925 (104,104) 513,858
Provision for (Benefit
from) Income Taxes 2,581 78,384 72,846 86,056
(96,503) 193,541 (176,950) 427,802
Minority Interest 2,291 (6,082) (3,459) (6,937)
Net income (loss) $ (94,212) $ 187,459 $ (180,409) $ 420,865
Net income (loss) per share $ (0.02) $ 0.05 $ (0.05) $ 0.11
Weighted Average Common
Shares Outstanding 3,965,940 3,957,012 3,965,940 3,991,448
<FN>
The accompanying notes are an integral part of these consolidated
financial statements
</TABLE>
<PAGE>
<TABLE>
Novitron International, Inc. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT
FOR THE YEARS ENDED MARCH 31, 1995 AND 1994
AND THE SIX MONTHS ENDED SEPTEMBER 30, 1995 (unaudited)
<CAPTION>
Capital in Cumulative Treasury
Common Stock Excess of Translation Stock, Retained
Number Par Value Par Value Adjustment at Cost Stock Earnings
<S> <C> <C> <C> <C> <C> <C>
BALANCE at March 31, 1993 3,966,039 $ 39,660 $4,896,280 $ 248,499 - $ 3,366,324
Sale of common stock 12,500 126 2,918 - - -
Issuance of common stock
in connection with the
acquisition of additional
interest in NovaChem 46,500 465 214,597 - - -
Purchase of treasury stock - - - - (330,550) -
Translation adjustment - - - (277,094) - -
Net loss - - - - - (1,121,144)
BALANCE at March 31, 1994 4,025,039 $ 40,251 $5,113,795 $ (28,595) $ (330,550) $ 2,245,180
Sale of common stock 15,201 152 17,212 - - -
Issuance of common stock
in connection with the
acquisition of additional
interest in NovaChem 11,000 110 56,140 - - -
Retirement of treasury
stock (85,000) (850) (329,700) - 330,550 -
Retirement of common stock (300) (3) (1,497) - - -
Translation adjustment - - - 1,097,085 - -
Net loss - - - - - (228,235)
BALANCE at March 31, 1995 3,965,940 $ 39,660 $4,855,950 $ 1,068,490 - $2,016,945
Translation adjustment - - - (146,637) - -
Net loss - - - - - (180,409)
BALANCE at September
30, 1995 3,965,940 $ 39,660 $4,855,950 $ 921,853 - 1,836,536
<FN>
The accompanying notes are an integral part of these consolidated financial statements
</TABLE>
<PAGE>
<TABLE>
Novitron International, Inc. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED SEPTEMBER 30,
<CAPTION>
1995 1994
<S> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net income (loss) $ (180,409) $ 420,865
Adjustments to
reconcile net income
(loss)to net cash
provided by (used
in) operating activities -
Depreciation and amortization 294,111 282,024
Minority interest 3,459 6,937
Accounts receivable (190,467) (682,097)
Inventories (463,834) (214,525)
Prepaid expenses 270,066 (356,772)
Other current assets 3,466 10,884
Accounts payable (1,128,043) 557,093
Accrued expenses (860,972) (225,523)
Customer advances (11) (99,579)
Accrued income taxes (89,524) (756,025)
Net cash provided by
(used in) operating activities $(2,342,158) $(1,056,718)
CASH FLOWS FROM
INVESTING ACTIVITIES:
Marketable securities $ (499,416) $ 278,126
Other assets 523 (4,825)
Purchases of equipment (97,042) (226,663)
Sales of equipment 11,580 17,614
Other, including foreign
exchange effects on cash (757) 121,989
Net cash provided by (used in)
investing activities $ (585,112) $ 186,241
<FN>
Continues on next page
</TABLE>
<PAGE>
Novitron International, Inc. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED SEPTEMBER 30,
(Continued)
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
CASH FLOWS FROM
FINANCING ACTIVITIES:
Proceeds from (payments on)
short-term debt $ 1,341,134 $ 118,704
Proceeds from (payments on)
long-term debt (14,528) 7,537
Sale of common shares - 12,198
Net cash provided by (used in)
financing activities $ 1,326,606 $ 138,439
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS $ (1,600,664) $ (732,038)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR 2,508,345 3,407,537
CASH AND CASH EQUIVALENTS
AT September 30, 1995 and 1994 $ 907,681 $2,675,499
<FN>
The accompanying notes are an integral part of
these consolidated financial statements.
</TABLE>
<PAGE>
Novitron International, Inc. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1995
Basis of Presentation
The consolidated financial statements included herein were prepared by
Novitron International, Inc. ("the Company") pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information
normally included in footnote disclosures in financial statements prepared
in accordance with generally accepted accounting principles was condensed
or omitted pursuant to such rules and regulations. In management's
opinion, the consolidated financial statements and footnotes reflect all
adjustments necessary to disclose adequately the Company's financial
position at September 30, 1995 and September 30, 1994. Management suggests
these condensed consolidated financial statements be read in conjunction
with the financial statements and the notes thereto included in the
Company's Annual Report on Form 10-K for the fiscal year ended March 31,
1995.
(1) Operations and Accounting Policies
(a) Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its subsidiaries: Clinical Data BV, Clinical Data (Australia), Pty.
Ltd., NovaChem BV, Spectronetics NV, and Vital Scientific NV (94% owned
subsidiary). All significant intercompany accounts and transactions have
been eliminated in consolidation.
(b) Cash and Cash Equivalents
Cash and cash equivalents are stated at cost, which approximates
market, and consist of cash and marketable financial instruments with
original maturities of 90 days or less. Cash and cash equivalents consist
of the following at September 30 and March 31, 1995:
<TABLE>
<CAPTION>
September 30, 1995 March 31, 1995
<S> <C> <C>
Cash and money market
investments $ 628,853 $ 1,782,470
Certificate of deposit 278,828 408,757
U.S. Treasury securities - 295,828
Time deposits - 21,290
$ 907,681 $ 2,508,345
</TABLE>
<PAGE>
Novitron International, Inc. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1995
(Continued)
(c) Marketable Securities
The Company adopted Statement of Financial Accounting Standards No.
115, "Accounting for Certain Investments in Debt and Equity Securities"
("SFAS No. 115") effective April 1, 1994. Under SFAS No. 115, marketable
securities which the Company has the ability and positive intent to hold to
maturity are recorded at amortized cost and classified as "held to
maturity" securities. The adoption of SFAS No. 115 did not have a material
effect on the Company's financial position or results of operations.
(d) Inventories
Inventories are stated at the lower of cost (first-in, first-out) or
market, include material, labor and manufacturing overhead, and consist of
the following at:
<TABLE>
<CAPTION>
September 30, 1995 March 31, 1995
<S> <C> <C>
Raw materials $ 989,674 $ 1,072,724
Work-in-process 3,656,024 3,439,258
Finished goods 936,050 754,999
$ 5,581,748 $ 5,266,981
</TABLE>
(e) Revenue Recognition
The Company recognizes revenue from the sale of products and supplies
at the time of shipment.
(f) Net Income (Loss) per Share
Net income or (loss) per share for the three and six month periods
ended September 30, 1995 and 1994 is based on the weighted average number
of common shares outstanding during the respective fiscal period. Common
stock equivalents are not used in the computation of net income per share
for the periods ended September 30, 1994 as the resulting dilution is less
than 3%.
<PAGE>
Novitron International, Inc. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1995
(Continued)
(g) Foreign Currency Translation
The Company accounts for foreign currency transaction and translation
gains and losses in accordance with SFAS No. 52, "Foreign Currency
Translation." The functional currency of the Company's foreign
subsidiaries is the Dutch Guilder. The translation adjustment required to
report these subsidiaries' financial statements in U.S. dollars is credited
or charged to cumulative translation adjustment, included as a separate
component of stockholders' investment in the accompanying consolidated
balance sheets. Gains and losses resulting from translating asset and
liability accounts which are denominated in currencies other than the
functional currency are included in other income. Foreign currency
transaction gains and losses are included in other income in the
consolidated statements of operations.
(2) Investment in NovaChem BV
From June 1992 through March 1995, the Company made investments in
certain securities of NovaChem BV. As of March 31, 1995, the Company owns
all of the outstanding stock of NovaChem BV. In connection with the
Company's purchase of NovaChem BV's stock, the Company has recorded
goodwill of $981,250, which represents the excess of the consideration paid
over the fair value of the net assets acquired. The Company has agreed to
pay the former shareholders of NovaChem BV additional consideration in the
form of the Company's common stock, based on a formula over the next three
years.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
Second Quarter ended September 30, 1995 compared to the Second Quarter ended
September 30, 1994
Revenues decreased for the three and six month periods ended September
30, 1995 by 9.4% and 14.3%, respectively, from the same periods the year
before. The decrease is primarily due to the completion during fiscal year
1995 of a major contract with Russia's Gazprom for NovaChem technology. The
decline was offset by an increase of twelve percent (12%) in revenues at
Vital Scientific and seventy-one percent (71%) in revenues at Clinical Data
(Australia); coupled with a fourteen percent (14%) strengthening of the
Dutch Guilder (the Company's functional currency) against the United States
Dollar. Clinical Data (Australia)'s significant increase over the prior
year is primarily attributable to increased unit sales to the People's
Republic of China.
The decrease in gross margin between years from 32.3% at September 30,
1994 to 30.0% at September 30, 1995 is due to a favorable inventory
revaluation at Vital Scientific.
Sales and marketing expenses have increased 29.4% for the three month
period and 17.5% for the six month period ending September 30, 1995 as
compared with the same periods the year before. The increase is primarily
attributable to increased commissions on sales at Clinical Data
(Australia).
Research and development expenses increased 23.8% and 6.1% for the
quarter and year to date periods, respectively, from the same periods in
fiscal year 1995. The increase reflects primarily the fourteen percent
(14%) strengthening of the functional currency against the dollar, coupled
with additional expenses for the development of new applications for the
NovaChem technology and offset by a reduction of research expenses incurred
at Vital Scientific.
General and administrative expenses have declined 26.5% for the quarter
and 18.8% for the year to date when measured against the same reporting
periods last year. The declines are due to the completion of a major
contract from Russia's Gazprom and a reduction of administrative expenses
at NovaChem.
Interest expense increased for the period and year-to-date as compared
to the same periods last year reflecting the use of increased borrowings.
Interest income has also increased for the same reporting periods because
the rates of return on invested funds have increased since fiscal year
1995. Other income and expense consists primarily of the effect of foreign
currency transaction gains and losses on the results of operations.
<PAGE>
For the quarters ended September 30, 1995 and 1994, minority interest
is attributable to the six percent (6%) of Vital Scientific NV not held by
the Company. From October 1993 through October 1994, the Company owned
fifty-two percent (52%) of NovaChem BV. In October 1994, the Company
increased its ownership of NovaChem BV to sixty percent (60%) and acquired
the remaining forty percent (40%) at March 31, 1995. In accordance with APB
No. 18 and Accounting Research Bulletin No. 51, the Company has recorded
one hundred percent (100%) of the losses incurred during fiscal year 1995,
approximately $32,000 for the first six months of fiscal year 1995, because
the minority interests were unable to fund their portion of the losses of
NovaChem BV.
Financial Condition and Liquidity
The decrease in working capital since the Company's fiscal year ended
March 31, 1995 was primarily accounted for by (i) an increase in inventory
levels, (ii) an increase in marketable securities, (iii) a decrease in
accounts payable, and (iv) a decrease in accrued liabilities. This result
was offset by an increase in the level of short-term debt.
The Company believes that its available funds will continue to provide
for working capital requirements. Approximately $1.3 million of the $1.4
million of cash and cash equivalents and marketable securities is
denominated in U.S. Dollars. The effect of translation into U.S. Dollars is
reflected as a separate component of stockholders' investment in the
balance sheet. The cumulative translation exchange adjustment in
stockholders' investment is $921,853 at September 30, 1995 and $1,068,490
at March 31, 1995. Any impact on the Company's liquidity is largely
dependent on the exchange rates in effect at the time the functional
currency (Dutch Guilder) is translated to U.S. Dollars. The effects of
currency exchange rates on future quarterly or fiscal periods on the
results of operations and liquidity are difficult to estimate.
There are no formal hedging procedures employed by the Company. The
primary risk is to monetary assets and liabilities denominated in
currencies other than the U.S. Dollar. Approximately $10.2 million of the
$11.3 million of current assets reside in the Company's foreign
subsidiaries.
<PAGE>
Part II. OTHER INFORMATION
Item 1. Legal proceedings:
None
Item 4. Submission of Matters to a Vote of Security Holders
At the Annual Meeting for the fiscal year ended March 31, 1995, held
on September 12, 1995, the following matters were submitted to a vote of
the security holders:
(a) Directors elected as follows:
Israel M. Stein
Gordon B. Baty
Arthur B. Malman
(b) Matters voted on as follows:
Election of directors:
3,717,917 voted for
39,900 withheld authority to vote
Ratification of auditors:
3,739,817 voted for
6,650 voted against
11,350 abstained
Items 2-3 and 5-6:
None
<PAGE>
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: November 10, 1995 Israel M. Stein MD
President
<TABLE> <S> <C>
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<ALLOWANCES> 139
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