FORM 10-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIESEXCHANGE ACT OF 1934**for the fiscal year ended March 31, 2000**
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIESEXCHANGE 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 reportsrequired to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 duringthe preceding 12 months (or for such shorter period that the registrant was required tofile such reports), and (2) has been subject to such filing requirement for the past 90days. Yes x No __
Indicate by check mark if disclosure of delinquent filers pursuant toItem 405 of Regulation S-K is not contained herein, and will not be contained, to the bestof registrant’s knowledge, in definitive proxy or information statements incorporatedby 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 bynon-affiliates of the registrant was approximately $4,335,681 based on the average priceof the Common Stock as reported by NASDAQ on June 20, 2000.

As of June 14, 2000, there were 1,445,227sharesof the Registrant’s Common Stock issued and outstanding.

Documents Incorporated by Reference: Portions of the Company’sProxy Statement for its 2000 Annual Meeting into Part III of Form 10-K.

 

 

Novitron International, Inc**.**
ANNUAL REPORT ON FORM 10-K

For the Year Ended March 31, 2000

                                  Table of Contents                                    

**PART I**Page
Item 1 Business   
1
Item 2 Properties   
10
Item 3 Legal Proceedings   
10
Item 4 Submission of Matters to a Vote of Security    Holders 10
**PART II**
Item 5 Market Price for Registrant’s Common Equity    and
Related Stockholder Matters   
11
Item 6 Selected Financial Data   
12
Item 7 Management’s Discussion and Analysis of    Financial
Condition and Results of Operations   
13
Item 8 Financial Statements and Supplementary Data       
16
Item 9 Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure   
16
**PART III**
Item 10 Directors and Executive Officers of the    Registrant   
17
Item 11 Executive Compensation   
17
Item 12 Security Ownership of Certain Beneficial Owners
and Management   
17
Item 13 Certain Relationships and Related Transactions       
17
**PART IV**
Item 14 Exhibits, Financial Statement Schedules and
Reports on Form 8-K   
17
**Signatures**  
18**PART I

Item 1. Business**
Novitron International, Inc. (the "Company") is amultinational corporation focusing on scientific instrumentation used in medical,veterinary, and analytical laboratories and in industrial process monitoring.**TheCompany’s Dutch subsidiary, Vital Scientific NV ("Vital Scientific"),designs and manufactures scientific and clinical laboratory instrumentation marketedworldwide through distributors and strategic partnerships which include Dade Behring,Hycor Biomedical, AVL List, and Landmark Scientific.**The Company’s Australiansubsidiary, Clinical Data (Australia) Pty. Ltd. ("Clinical Data Australia"),distributes diagnostic instruments and assays in the South Pacific and has entered into astrategic alliance with Medical Innovations Limited for the development of immunoassaydiagnostics. The Company’s Dutch subsidiary, NovaChem BV ("NovaChem"),develops and markets process monitors with applications in petrochemical andpharmaceutical 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 researchapplications. In the 1980’s, through a series of strategic acquisitions, the Companygrew to over $14 million in revenue. As the Company believed that future growth waslimited, these businesses were divested in the early 1990’s.

In 1984, the Company acquired a thirty-three percent (33%) equityinterest in Vital Scientific. From 1985 to 1991, the Company increased its equity positionin this Dutch company to ninety-four percent (94%); in October 1997, Vital Scientificbecame a wholly owned subsidiary.

In June 1992, the Company invested in NovaChem, a Dutch company formedto develop and market spectrophotometric process monitoring technology. In March 1995,NovaChem became a wholly owned subsidiary of the Company.

In July 1992, the Company established Clinical Data (Australia) Pty.Ltd. to distribute diagnostic products in Australia and the South Pacific. As described inNote 3 of the Notes to the Consolidated Financial Statements, the Company has sold 5% ofthis subsidiary to an officer of the Company on May 19, 1999.

In April 1994, to better reflect the Company’s international scopeand diversification, the Company’s name was changed from Clinical Data, Inc. toNovitron International, Inc.

 
**VITAL SCIENTIFIC NV**
Established in 1956 and now headquartered in Spankeren/Dieren, TheNetherlands, Vital Scientific is the nucleus of the Company’s operations. VitalScientific designs, develops, manufactures, and distributes scientific instrumentation formedical, veterinary and industrial applications.

The subsidiary’s principal products, marketed under the"Vitalab" tradename, are automated and semi-automated analytical instrumentsused in medical and veterinary laboratories and sold directly and under private labels.These instruments include:
- The Vitalab Selectra E, Selectra II and Vitalab Flexor "walk-away" clinical    chemistry analyzers, capable of performing over 70 different diagnostic tests using    reagents from almost all manufacturers.
- The Vitalab Viva, a dedicated system designed for therapeutic drug monitoring    ("TDM") and for the detection of drugs of abuse ("DOA"), marketed by    Dade Behring in over thirty countries worldwide. The distribution agreement originally    signed in 1997, was expanded in March 2000 for an additional four years. This Viva    analyzer is dedicated specifically for use with the Dade Behring Emit line of diagnostic    assays for TDM and DOA.
- The HY-TEC 288 is a fully automated enzyme immunoassay system, which was developed and    is manufactured for Hycor Biomedical, Inc. of Garden Grove, California. Hycor announced in    April 2000 that it will begin shipping the HY-TEC 288 with a reagent system that permits    the testing of up to eight (8) different autoimmune tests or over nine hundred (900)    specific allergies in a single run. Autoimmune disease, which is frequently misdiagnosed    in medical practice, is the underlying cause of more than 80 chronic illnesses. An    estimated 50 million Americans suffer from autoimmune diseases. In addition, allergy    symptoms are responsible for more visits domestically to doctors than any other single    disease, with more than 40 million Americans suffering from allergies.

Hycor Biomedical has publicly stated that "The allergy andautoimmunity disease-testing segments of the in-vitro diagnostics market, potentially a$675 million opportunity, are currently not being served by a single major company. Withthe launch of the HY-TEC 288, Hycor has significantly expanded its market opportunitiesworldwide. Hycor's allergy test menu is the largest in the world and our autoimmunedisease test menu is one of the broadest available in the U.S., so the laboratory can domore fully automated allergy and autoimmune testing on the HY-TEC 288 than on any otherinstrument. With the launch of the HY-TEC 288, we believe that Hycor is well-positionedfor an alliance or partnership with a major diagnostics company."

In March 1998,Vital Scientific received FDA approval, under Section510(k) of the Food, Drug and Cosmetic Act, to market the Vitalab Viva and Vitalab Flexorinstruments in the United States.

During fiscal 1998, Vital Scientific was awarded and continues to becertified as an ISO 9001 facility.
** 

Marketing and Distribution**
In 1997, a major customer, E. Merck, restructured its diagnosticdivision and presented a major challenge to the profitability of the Company. Sales to E.Merck represented approximately seventy-five percent (75%) of the Company’s revenuesduring fiscal 1997 versus only eleven percent (11%) of sales revenue in fiscal 2000.

During the past three years, Vital Scientific has reconfigured thedistribution network for its technology. Vital Scientific expanded its direct dealernetwork for marketing certain of the company’s products in Europe, the Far East,Latin America and China.

In December 1997, Vital Scientific entered into an agreement with AVLList GmbH of Graz, Austria for the exclusive distribution of certain of the Company’sproducts in the medical markets of Eastern Europe, Scandinavia, and the countries of theformer Soviet Union. Privately held AVL is a leading supplier of Blood Gas and IonSelective Electrode technology. In March 2000 AVL announced a merger with RocheDiagnostics; the impact to the Company is unknown at this time, but alternative strategiesare being developed to protect the company's market share.

In June 1998, Vital Scientific signed an agreement with the WienerLaboratorios SAIC of Rosario, Argentina for the exclusive distribution for Latin Americaof the Vitalab series of clinical chemistry analyzers. Established in 1960, Wiener Lab isthe leading independent manufacturer of reagents in South America and is a major marketerof clinical chemistry instrumentation and reagents in the region. Wiener Lab isresponsible for both the sales and service of Vital Scientific instrumentation in theterritory.

In January 2000, the Company signed an agreement with LandmarkScientific, Inc. of Greensboro, North Carolina for the distribution of the VitalabSelectra in the United States. Landmark Scientific intends to offer Vital Scientific'sautomated clinical chemistry analyzer to the "point-of-care" market. The Companyis also planning for the first time to attend the American Association of ClinicalChemistry exhibition in San Francisco in July 2000, the largest domestic meeting devotedto the Company's market. 

During fiscal 2000 and 1999, the market for the Company’s productswas expanded to North African and the Middle East through a growing relationship with aLondon-based company. 

A complete description of the products can be found at thecompany’s website, www.vitalscientific.com.**Product Development**
To develop new products, Vital Scientific maintains a research team offourteen (14) professionals augmented by contract personnel, and further supported by thestaff of the TNO Product Centre, the Netherlands organization for applied scientificresearch. The Company has in-house expertise in the disciplines of mechanical design,electronic engineering and systems programming. Its mechanical prototyping and assemblyoperations are highly automated.

During fiscal 2000, 1999, and 1998, the Company spent approximately$1,985,000, $1,825,000, and $1,482,000, respectively, on research and development at VitalScientific.

In the past three years the company has introduced two analyzers: theVitalab Selectra-E and the HY-TEC 288. The top-of-the-line Vitalab Selectra-E is a patientselective, high throughput clinical chemistry analyzer, capable of a wide range ofroutine, immunologic and esoteric testing. This instrument, designed for use with reagentdiagnostics from different sources, targets the hospital and point-of-care markets. VitalScientific believes that the unique robotic features, the user-friendly interface and thewide range of applicable reagents available from several manufacturers for this instrumentprovides its target markets with state-of-the-art affordable "walk-away" testingcapability.

The HY-TEC 288 is a fully automated Enzyme Immunoassay system designedfor allergy and autoimmune disease testing. The HY-TEC 288 is manufactured for HycorBiomedical, Inc. As noted above, Hycor announced in April 2000 that it will begin shippingthe HY-TEC 288, with a reagent system that permits the testing of up to eight (8)different autoimmune tests or over nine hundred (900) specific allergies in a single run. 

In January 1999, Vital Scientific signed an agreement with ScilDiagnostics GmbH (formerly Scil Animal Care Company, GmbH) of Viernheim, Germany todevelop and manufacture a fully automated clinical chemistry and immunodiagnosticlaboratory instrument designed primarily for the veterinary market. The OEM analyzer,introduced at the Medica Exhibition in November 1999, was intended to be distributedworldwide by Scil and is being designed to run the Scil brand of diagnostic assays. Theagreement, which covers the cost of development, also provides a purchase commitmentvalued at approximately 20 million Deutsche Marks ($10 million) for the first two years ofproduction. As recently announced, a dispute arose between the parties with respect tothis development. If not resolved amicably, the agreement requires binding arbitration. Inthe event that Vital Scientific is not successful in resolving the outstanding issues,Vital Scientific intends to vigorously pursue the remedies contained in the contract. TheCompany feels that its position is meritorious and it will prevail if any action isundertaken. If the dispute is settled Vital has every intention of completing developmentand delivering analyzers to Scil in the near future. The impact of the delay resultingfrom the present dispute is, however, unknown at this time. Regardless of the outcome,this development has permitted Vital Scientific to gain expertise in a new generation oftechnology, which the Company intends to actively employ in other projects.

Research and development efforts at Vital Scientific are expected to bemaintained at a constant level during fiscal 2001. The Company intends to develop newproducts where the Company perceives a demand and believes the product may be effectivelymarketed. There is no assurance that any developments or enhancements will be successfullycompleted or that, if developed, any of the products will be successfully marketed.
**Competition**
In developing instruments for dual-label and private label sales bythird parties, and in marketing directly to distributors, the Company competes withnumerous other companies. These include the direct marketers as Bayer, Roche Diagnostics,and Kone Instruments, and in the OEM field with Sequa Corporation, Integrated TechnologiesLtd., Medical Innovations, Inc. 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 and immuno-assay analyzers, theCompany experiences intense competition in the marketplace. Worldwide there are overfifteen companies, many of which have substantially greater resources than VitalScientific. The Company competes on the basis of specialized features of its technology,added value, simplicity of operation, high performance-to-cost ratio, compatibility ofinstruments with reagents of various manufacturers, and strategic marketing alliances.
**Clinical Data (Australia) Pty. Ltd.**
Clinical Data Australia was formed in July 1992 to distributediagnostic products in Australia, New Zealand and the South Pacific. In addition, ClinicalData Australia provides the Company with strategic access to the diagnostics market formarket research purposes. Australian medicine provides an ideal blend of thecharacteristics found in Europe and the United States and is, therefore, an excellent siteto develop and test product concepts. 

Although initially established to support the strategic marketingactivities, the Company has aggressively expanded its product line and has cultivated agrowing third party diagnostics distribution business that is ideally positioned torepresent European, American, and Australian companies. 

Clinical Data Australia currently represents the following companies:
Hycor Biomedical - Urinalysis systems and consumables
Axis-Shield - QC sera and cell biology products
R&R Mechatronics - ESR analyzers
Vital Scientific - Clinical chemistry analyzers
E. Merck - Clinical chemistry reagents
AI Analysinstrument AB – Closed tube ESR products
ABX Hematologie – Cell counters and related reagents
Medical Innovations Ltd. – Tumor markers and autoimmune assays
Trinity Biotech - Autoimmune and infectious disease diagnostics
Biochem Immunosystems – ELISA processors
Cogent – Autoimmune Reagents
Eurospital – Tissue transglutaminase reagents
Polymedco – IFA accessories

 

The HycorTM Biomedical line was launched in 1995 and has provenhighly successful. The product is the leading urinalysis system in Australia with a marketshare of over 90 per cent (90%). A detailed review of the product offerings of ClinicalData Australia may be found on their website, www.clinicaldata.com.au.

In March 1999, Clinical Data Australia and Medical Innovations Limited("MIL") of Sydney, Australia, entered into a global strategic alliance for thedistribution of MIL’s current immunoassay diagnostics and for the development of andiagnostic system based on instrumentation to be developed by Vital Scientific. MIL hasdeveloped a range of unique tumor marker assays used in the management of breast andovarian cancers and in the diagnosis of autoimmune diseases. Clinical Data Australia hasused its strategic alliance with MIL to build a growing presence in the Australian and NewZealand immunodiagnostic market. The company is progressively expanding its product rangeto further this objective. 

During the current fiscal year the company has commenced promotion ofits own brand of infectious disease reagents under the trademark, Vital Diagnostics. Thisproduct line was launched at Medica ‘99 held in Dusseldorf, Germany and has attractedconsiderable interest from potential distributors.
**NOVACHEM BV**
Established in 1992, NovaChem has developed and markets the IPM-Mark IIProcess Analyzer. This solid state instrument, which employs fiber-optic and diode-arrayspectroscopic technology, was specifically designed for the on-line and continuous processmonitoring of gases and liquids.

Using the IPM-Mark II, NovaChem has developed a series of applicationswhich include: the monitoring of Claus Plant sulfur recovery, color analysis, and themeasurement of sulfur dioxide, oxides of nitrogen, and ammonia in stack emissions. Thetechnology has also been proven effective in controlling ethylene glycol manufacture, andin monitoring the production of pharmaceuticals. NovaChem’s products are productionengineered and manufactured by Vital Scientific.

A complete description of the products may be found on thecompany’s website www.novachembv.com.

During fiscal 2000, NovaChem completed installations in the UnitedStates in the monitoring of ethylene dichloride production in a major company in Louisianaand in the catalytic conversion of oxides of nitrogen for a chemical company.
**Marketing and Distribution**
The market for process monitoring instrumentation has evolved from ademand for on-line, real-time analytical techniques similar to those employed in theindustrial laboratory. The market, international in scope, is driven by solving specificprocessing application problems. The market is characterized by many small niches withspecialized vendors. Success factors in this market include an in-depth knowledge ofend-user processing, active product development, international market targeting, areputation for stability and service, and strategic planning.

NovaChem’s technology is primarily marketed from NovaChem’sInternet website and links from technical exposition web services and through establisheddealers and manufacturer’s representatives worldwide. Additional dealers were addedthis past year in the United States, Germany, Canada, and South Africa. A marketingcooperation has also been secured with Teledyne Analytical Instruments for certainapplications of the technology.
**Product Development**
During fiscal 2000, 1999 and 1998, NovaChem spent approximately$74,000, $54,000, and $107,000 respectively, on research and development. Resources werealso employed for the development of related sampling systems necessary for the couplingof 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 includeAmetek, Applied Automation, Zeiss and numerous others which have greater financial andmarketing resources than NovaChem. The Company believes that it competes on the basis ofspecialized features of its technology, simplicity of operation, high performance-to-costratio, and quality of its products. 
**OTHER BUSINESS MATTERS

Government Regulation**
Where necessary, the Company has obtained government approval to marketits products and may have to obtain prior approval of certain European regulatory bodies("EN46001") or the Food and Drug Administration ("FDA") to marketproducts that it may develop. Domestically, certain of the Company’s products areclassified as medical devices under the Federal Food, Drug and Cosmetics Act. As such, ifand when these products are offered for sale in the United States, these products aresubject to regulation by the FDA. The cost of obtaining such approvals may be high and theprocess lengthy, with no assurance that such approvals will be obtained.

To date, neither the FDA nor the European medical regulatory bodieshave developed industry-wide performance standards with respect to the safety andeffectiveness of the products presently marketed by the Company. Although the Companyintends to use reasonable efforts to comply with international standards, when and ifdeveloped, 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 noncompliancewith any international performance standards promulgated in the future, could have amaterial adverse effect on the Company. Furthermore, any material change in the existingrules and regulations or any new regulations developed might adversely affect the Company.

The Company’s subsidiaries comply with European CE regulations andVital Scientific is ISO 9001 approved.

The instruments developed by NovaChem for the environmental market maynow or in the future require certification by governmental authorities. Any failure toreceive approvals for such products could have a material adverse effect on thisinvestment.
**Patents**
The Company or its subsidiaries either**own or have applied forpatents and trademarks on certain of their products. However, the Company does not believethat its business as a whole is or will be materially dependent upon the protectionafforded by such patents or trademarks, and a substantial majority of the Company’srevenues are attributable to products without patent protection. 
**Warranty and Product Liability**
Warranty expenses were approximately one-tenth of one percent (0.10%)during fiscal 2000 and four-tenths of one percent (0.40%) for fiscal 1999.

Vital Scientific maintains product liability insurance in the amount ofNLG10 million ($4.3 million) for the international sales of its laboratoryinstrumentation. The Company believes that this level of coverage is adequate, given itspast sales levels and its anticipated sales levels for the fiscal year ending March 31,2001. The Company will reevaluate the adequacy of this coverage when and if its saleslevel substantially increases. No product liability claims have been brought against theCompany to date. However, there can be no assurance that product liability insurance willcontinue to be available to the Company on acceptable terms, or that product liabilityclaims in excess of the Company’s insurance coverage, if any, will not besuccessfully asserted against the Company.
**Year 2000**
The Company has completed the process of evaluating its product linesand information technology infrastructure to assess its exposure to the "Year 2000compliance" issue. "Year 2000 compliance" means that the date-basedperformance and functionality of the product or system so identified will be the same fordates prior to, during, and after the year 2000, including the recognition of the year2000 as a leap-year.

The financial reporting systems currently used by the Company are"Year 2000 compliant". The "Year 2000" issue did not have a materialimpact on the Company’s business operations or financial condition. 
**Production and Availability of Raw Materials**
The Company’s manufacturing operations require a variety ofpurchased components. The Company purchases these components in sufficient quantities totake advantage of price discounts and currently has an adequate inventory. Most of thecomponents are available from multiple sources and the Company anticipates that they willcontinue to be readily available. Certain components and supplies are available fromsingle sources only. If such suppliers should fail in deliveries, delays in productioncould result. However, these components and supplies are generally not manufactured to theCompany’s specifications, but are produced for other applications, and the Companybelieves 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 asufficient number of such components in inventory, or has provided vendors with greaterlead time for filling orders for such components.
**Backlog**
At the close of the fiscal year ended March 31, 2000, the Company had abacklog of approximately $2,625,000 as compared to $1,589,000 in 1999. It is anticipatedthat all of the existing backlog will be filled by shipments during fiscal 2001.Deliveries are generally made within 30 days after the receipt of an order.
**Seasonality**
The Company does not believe that its business has any significantseasonal factors.
**Employees**
The Company had eighty-nine (89) full, part-time, and contractemployees as of March 31, 2000. Seventy-seven (77) of these employees are employed byVital Scientific, one (1) by NovaChem, ten (10) by Clinical Data Australia and one (1) byNovitron International, Inc.
**Environmental matters**
The Company does not believe that compliance with Federal, State orLocal regulations relating to the protection of the environment have any material effecton the Company’s financial or competitive position.
**Significant Customers**
The loss of any of the Company’s major customers would have asignificant material adverse impact on the Company.
**Industry Segments**
The information required by this section is specified in Note 14 in theaccompanying notes to consolidated financial statements.
**Executive Officers of the Registrant**
Subject to the discretion of the Board of Directors, officers serve fora one (1) year term expiring with the meeting of the Board of Directors following the nextAnnual Meeting of Stockholders and until their respective successors are elected andqualified.

Israel M. Stein, M.D., 57, has served as Chairman of the Board since1972 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 OmegaAlpha, and is a Salk Scholar of the City University of New York. Before joining theCompany, Dr. Stein served as Senior Assistant Surgeon at the National Institutes of Healthand as a resident at Harvard Medical School.

Adrian Tennyenhuis, 49, Senior Vice President of the Company iscurrently 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 withBehring Diagnostics.

Emile Hugen, 55, has been the Managing Director of Vital Scientific NVsince October 1991. With over 25 years of increasing management responsibility inmanufacturing and operations at Vital Scientific, Mr. Hugen is an experienced operatingofficer of the Company.
**Item 2. Properties**
The Company leases approximately 500 square feet of office space inNewton, Massachusetts under a series of short-term leases.

Vital Scientific leases approximately 35,000 square feet in Dieren, TheNetherlands. The facility was designed specifically for the Company’s needs, but wasfinanced entirely by an unrelated third party. The facility is leased until the year 2008with renewal and expansion options. 

NovaChem occupies approximately 500 square feet of office space inNewton and in Dieren, The Netherlands under a series of short-term leases.

Clinical Data Australia occupies approximately 3,000 square feet ofoffice and warehousing space in Castle Hill, New South Wales under a lease expiring inDecember 2000.

The Company believes its current facilities are adequate for itsplanned 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 SecurityHolder Matters**
a) Market information: The Company’s Common Stock trades on theNASDAQ Stock Market under the symbol NOVI. The following table sets forth the range ofhigh and low sale prices per share of Common Stock for each quarter in fiscal 2000 and1999 as reported by the NASDAQ Stock Market.

                                                                                                                                     Prices
Fiscal Year Ended March 31, 2000  
High
Low
              First Quarter   
$ 1.75   
$ 0.81
              Second Quarter   
$ 2.38   
$ 1.06
              Third Quarter   
$ 3.50   
$ 1.75
              Fourth Quarter   
$ 4.22   
$ 1.50
Fiscal Year Ended March 31, 1999   
High   
Low
             First Quarter   
$ 4.00   
$ 1.12
             Second Quarter   
$ 3.00   
$ 1.75
             Third Quarter   
$ 3.12   
$ 0.50
             Fourth Quarter   
$ 2.75   
$ 1.12
b) The approximate number of holders of record and beneficial owners ofthe Company’s Common Stock at March 31, 2000 and March 31, 1999 were 226 and 600 and236 and 598 , respectively.

c) The Company presently intends to reinvest earnings, if any, for usein its business and therefore does not expect to pay any cash dividends in the foreseeablefuture.
**Item 6. Selected Financial Data**
The following table summarizes certain selected consolidated data andshould be read in conjunction with the consolidated financial statements and related notesappearing elsewhere in this Form 10-K. No cash dividends have been declared during theperiods presented below.

**Fiscal Year Ended March 31**
(In thousands, except per share amounts)
 **2000**1999**1998**1997**1996a**Income Statement Data     
Revenues
$14,183
$15,418
$11,802
$13,845
$17,908      
Gross profit
$4,830
$4,153
$3,277
$3,713
$5,002      
Net income (loss)
$108
$(470)
$104
(583)
$(1,506)      
Basic net income (loss) per    share
$0.07
$(.32)
$0.08
$(0.44)
$(1.14)      
Diluted net income (loss)    per share
$0.07
$(.32)
$0.08
$(0.44)
$(1.14)      
Basic weighted average    common shares outstanding
1,442
1,453
1,323
1,322
1,322      
Weighted average common    shares outstanding
1,531
1,453
1,323
1,322
1,322**a**Per    share amounts have been retroactively adjusted to reflect the 1:3 reverse stock split on    December 4, 1996. **Balance Sheet Data     
Working Capital
$2,555
$2,595
$3,099
$4,206
$5,277
Total Assets
$8,279
$9,659
$9,405
$8,568
$12,294
Long-Term Debt Obligations 
$0
$23
$30
$41
$54
Stockholders’    Investment 
$3,999
$4,300
$4,641
$4,973
$6,192**Item 7. Management’s Discussion and Analysis of Financial Conditionand Results of Operations

Liquidity and Capital Resources

The Company has cash and cash equivalents of approximately $1.3 millionand working capital of approximately $2.6 million at March 31, 2000. The Company generatedapproximately $407,000 of cash from operations during the fiscal year ended March 31,2000. The increase in funds generated comes from net income, the decrease in inventorylevels and prepaid expenses offset by a decrease in accounts payable and accrued expenses.During fiscal year 2000, approximately $352,000 was used in investing activities chieflyfor the purchase of fixed assets. Approximately $16,000 was used in financing activities.The funds were used to purchase treasury stock and to pay down long-term debt and offsetby the increase in short-term borrowings.

In April 1998, the Company entered a new relationship with a majorDutch bank, which provides for a 4,000,000 Dutch Guilder (approximately $1,729,000) lineof credit. Interest on this facility is set at 1.25% above the base rate as reported bythe Netherlands Central Bank, presently 4.5%. Trade receivables and inventory of VitalScientific are provided as security for this facility. The line continues as long ascertain capital covenants are met. As of March 31, 2000, the Company is in full compliancewith all capital covenants of the credit line and no amounts are outstanding.

In May 1999, Clinical Data Australia entered into an agreement for a450,000 Australian dollar (approximately $273,000) line of credit with an Australian bank.Interest on this facility is set at prime plus 3.0%; the prime rate is presently 9.75%.Trade receivables and inventory of Clinical Data Australia are provided as security forthis facility; the line also requires the maintenance of certain capital ratios. As ofMarch 31, 2000, the Company is in full compliance with all capital covenants of the creditline and no amounts are outstanding.

The Company’s sources of cash include cash balances and theaforementioned lines of credit from Dutch and Australian banks. The Company believes thatavailable funds will provide it with sufficient working capital through fiscal year 2001.

The effect of foreign currency transaction exchange on the results ofoperations is included in other income (expense) and is not material to the financialstatements. (See Note 11 in Notes to the Consolidated Financial Statements.) Any impact onthe Company’s liquidity is largely dependent on the exchange rates in effect at thetime the Company’s predominant foreign functional currency, the Dutch Guilder, istranslated into U.S. dollars. Approximately $217,000 of the March 31, 2000 balance of$1,326,000 of cash and cash equivalents is denominated in U.S. dollars. The effect oftranslation into U.S. dollars of the amounts held in local currencies is reflected as aseparate component of stockholders’ investment on the balance sheet. The cumulativetranslation adjustment in stockholders’ investment is approximately 6.6% of totalassets on the March 31, 2000 consolidated balance sheet. The effects of currency exchangerates on future quarterly or fiscal periods on the results of operations are difficult toestimate.

There are no formal hedging procedures employed by the Company. Theprimary risk is to monetary assets and liabilities denominated in currencies other thanthe U.S. dollar. Approximately $6.64 million of $6.69 million of current assets reside inthe Company’s foreign subsidiaries.
**Results of Operations***Forward-looking statements, within the meaning of the SecuritiesExchange Act of 1934 (Section 21E), may be made throughout this Discussion and Analysis.For this purpose, any statements contained herein that are not statements of historicalfact may be deemed to be forward-looking statements. Without limiting the foregoing, suchwords as, "anticipates," "plans," "expects, "believes","estimates," and similar expressions are intended to identify suchforward-looking statements. Such statements involve risk and uncertainties, including butnot limited to competitive, governmental, economic, and technological factors that mayaffect the Company's operations, products, markets, and services. Actual results coulddiffer materially from those expressed in such statements and readers are referred to theCompany’s other SEC reports and filings.***Fiscal Year Ended March 31, 2000 Compared to Fiscal Year Ended March 31,1999**
When analyzing the comparative revenue and expense figures presentedbelow for the fiscal years ended March 31, 2000 and 1999, consideration should be given tothe 8.9% weakening of the Company’s functional currency, the Dutch Guilder, againstthe United States dollar.

Consolidated revenues for fiscal year 2000 decreased 8.0% as comparedto fiscal year 1999. Revenues, when expressed in the Company’s functional currency,the Dutch Guilder, were approximately the same as in fiscal year 1999. As expressed inDutch Guilders, sales at Vital Scientific decreased 8.5% between years because of lowerunit sales of certain products. This was offset by an increase in sales at Clinical Data(Australia) of 71.2% when expressed in Australian dollars and impacted by a decrease of18.4 % in revenues at NovaChem.

The gross margin increased from 26.9% for the year ended March 31, 1999to 34.1% for the year ended March 31, 2000. The increased margin is the consolidatedresult of improved performance at each of the operating subsidiaries as a result of  improved product pricing, reduced product costs, and the effect of a sponsored researchand development contract.

Sales and marketing expenses decreased 15.3% on a consolidated basis ascompared to the prior year. The decrease is primarily the result of a cost containmentprogram at Vital Scientific and NovaChem offset by an increase in sales expenses atClinical Data (Australia) commensurate with their increase in revenues.

Research and development expenses increased 9.0% as compared to fiscalyear 1999. This increase is principally due to the aforementioned sponsored research anddevelopment contract at Vital Scientific.

General and administrative expenses decreased 1.5% from last year.

During the fourth quarter of fiscal year 1999, the Company beganimplementation of a restructuring plan at the Company’s subsidiary, Vital Scientific.As of March 31, 2000, the restructuring plan was completed and all amounts charged againstthe profit and loss statements have been paid out.

Interest expense decreased 79.6% from fiscal year 1999. The decrease isprincipally due to fewer unit sales of the HYTEC-288 that was financed under agovernmental development subsidy. This loan is repaid as units of the product are sold.Interest income decreased, as fewer funds were available during the year for investment.

Other income and expense in fiscal year 2000 results principally froman adjustment for interest in a subsidy. In fiscal year 1999 the amount for other incomeand expense was principally due to the effect of foreign currency transaction gains andlosses on the results of operations.

The minority interest as shown on the fiscal year 2000 financialstatements is the 5% of Clinical Data Australia sold to an officer of the Company on May19, 1999. The details of this transaction are disclosed in Note 3 in the Notes toConsolidated Financial Statements. In fiscal year 1998, the minority interest wasattributable to the 6% of Vital Scientific that was not owned by the Company. On October21, 1997, Vital Scientific became a wholly owned subsidiary.
**Fiscal Year Ended March 31, 1999 Compared to Fiscal Year Ended March 31,1998**
Consolidated revenues for fiscal year 1999 were $15,418,000 versus$11,802,000 for fiscal year 1998, an increase of approximately 30.6%. The increase is dueto an aggregate 28.3% increase in sales at each of the Company’s operatingsubsidiaries coupled with a 1.8% strengthening of the Company’s primary functionalcurrency, the Dutch Guilder, against the United States dollar.

For the entire year, the gross margin declined from 27.8% in fiscalyear 1998 to 26.9% in fiscal year 1999. The decrease principally results from competitivepricing pressure combined with a product mix of instruments with lower margins.

Sales and marketing expenses increased $273,000 or 37.5% from fiscalyear 1998. $115,000 of the increase is because of a one-time release of certain reservesduring fiscal year 1998 related to the settlement of a dispute with a customer that isdescribed in Note 11 to the Consolidated Financial Statements. The remainder is primarilyattributable to expenses associated with the training of new distributors and a newproduct introduction.

Research and development expenses, as shown on the fiscal year 1999consolidated statements of operations, increased $510,000 or 38.1% from fiscal year 1998.During fiscal years 1999 and 1998, the Company spent an additional $32,000 and $242,000,respectively, which were capitalized onto the balance sheet pursuant to the precepts ofStatement of Financial Accounting Standards No. 86 (See Note 1(m) in the Notes to theConsolidated Financial Statements). The overall increase in research and developmentexpenses is, therefore, $300,000 or 18.9% when compared to the prior year. This increasein R&D expense is primarily related to new product concept and development activities.

General and administrative expenses increased $70,000 or 3.9% fromfiscal year 1998. The increase is primarily due to exchange rate fluctuations.

In the fourth quarter of fiscal 1999, the Company began implementationof a restructuring plan at its Vital Scientific subsidiary. As of March 31, 1999, theCompany had terminated three employees, one in sales and two in research and developmentand planned to complete the restructuring in the first half of fiscal year 2000.Management anticipated the future amount of the restructuring charge to approximate$81,000. At March 31, 1999, the entire amount of the accrual remained and was comprisedentirely of severance related costs. The total cash impact of the restructuring related tofiscal year 1999 was $50,946, which was paid during fiscal year 2000.

Interest expense increased primarily from expenses related to thecredit financing grant received by Vital Scientific from the Dutch government for newproduct development. The grant is repaid from product sales with interest accruing on theunpaid balance. 

Interest income decreased from fiscal year 1998 because funds were usedto payoff the deficit balance in cash at the Company’s former bank before opening arelationship with a new bank. For fiscal year 1999, other income and expense, asillustrated in Note 11 in the Notes to Consolidated Financial Statements, is largelycomprised of foreign currency transaction gains and losses on the results of operations.In fiscal year 1998, the account was predominantly consisted of the gains from thesettlement of a dispute with a customer and from the sale of certain assets at VitalScientific.
**Item 7A. Quantitative and Qualitative Disclosure about Market Risk***Foreign Exchange The accounts of the Company’s foreignsubsidiaries are translated in accordance with SFAS No. 52, Foreign Currency Translation.In translating the accounts of the foreign subsidiaries into U.S. dollars, assets andliabilities are translated at the rate of exchange in effect at year-end, whilestockholders’ equity is translated at historical rates. Revenue and expense accountsare translated using the weighted average exchange rate in effect during the year. Gainsand losses from translating assets and liabilities that are denominated in currenciesother than the subsidiaries’ respective functional currency are included in otherexpense in the consolidated statements of operations. The translation adjustment requiredto report those subsidiaries whose functional currency is other than the United Statesdollar into U.S. dollars is credited or charged to cumulative translation adjustment,included as a separate component of stockholders’ investment in the accompanyingconsolidated balance sheets. Substantially all of the Company’s sales weredenominated in foreign currencies during fiscal 2000. The Company recognized a loss ofapproximately $400,000 related to such foreign currency transactions and translations in2000 which is included in cumulative translation adjustment in the accompanyingconsolidated statements of stockholders’ investment.
*Investment Portfolio The Company does not invest in derivativefinancial instruments that meet the high quality standards, as specified in theCompany’s investment policy guidelines; the policy also limits the amount of creditexposure of any issue, issuer, and type of investment. See Note 1 – Summary ofSignificant Accounting Policies – in the Notes to Consolidated Financial Statements.
**Item 8. Financial Statements and Supplementary Data**
See Index to the Company’s Financial Statements filed as part ofthis Form 10-K.
**Item 9. Changes in and Disagreements with Accountants on Accounting andFinancial Disclosure**
None.
** 

PART III

Item 10. Directors and Executive Officers of the Registrant**
The information required by this item is contained in part under thecaption "Executive Officers of the Registrant" in Part I hereof and theremainder is incorporated herein by reference to the table appearing under the caption"Election of Directors" in the Company’s definitive 2000 Proxy Statementfor its Annual Meeting of Stockholders to be held on September 12, 2000.
**Item 11. Executive Compensation**
The information required by this item is incorporated herein byreference to the section entitled "Compensation of Executive Officers" in theCompany’s definitive 2000 Proxy Statement for its Annual Meeting of Stockholders tobe held on September 12, 2000.
**Item 12. Security Ownership of Certain Beneficial Owners and Management**
The information required by this item is incorporated herein byreference to the tables appearing under the captions "Principal and ManagementStockholders" in the Company’s definitive 2000 Proxy Statement for its AnnualMeeting of Stockholders to be held on September 12, 2000.
**Item 13. Certain Relationships and Related Transactions**
The information required by this item is incorporated herein byreference to the section entitled "Certain Transactions and Relationships" inthe Company’s definitive 2000 Proxy Statement for its Annual Meeting of Stockholdersto be held on September 12, 2000.
**PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form8-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
None.
**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 23,2000                          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 inthe capacities and on the dates indicated.

 

 

Date: June 23, 2000                                Israel M. Stein, M.D.
                                                               Israel M. Stein, M.D                                                               Chairman of the Board                                                               Principal Executive Officer

 

Date: June 23, 2000                               Arthur B. Malman
                                                               Arthur B. Malman                                                               Director

 

Date: June 23, 2000                                Alexander Sherman
                                                               Alexander Sherman                                                               Director

 

 

Novitron International, Inc.AND SUBSIDIARIES
 

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

 

**Consolidated Financial Statements**Page
Report of Independent Public Accountants   
20
Consolidated Balance Sheets at March 31, 2000 and 1999       
21
Consolidated Statements of Operations for the Years    Ended March 31, 2000, 1999, and 1998   
23
Consolidated Statements of Stockholders’    Investment for the Years Ended March 31, 2000, 1999, and 1998   
24
Consolidated Statements of    Cash Flows for the Years Ended March 31, 2000, 1999, and 1998   
25
Notes to Consolidated Financial Statements   
27
**Consolidated Financial Statement Schedule**
Schedule II - Valuation and Qualifying Accounts       
41
 

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Novitron International, Inc.:

We have audited the accompanying consolidated balance sheets ofNovitron International, Inc. (a Delaware corporation) and subsidiaries as of March 31,2000 and 1999, and the related consolidated statements of operations, stockholders’investment and cash flows for each of the three years in the period ended March 31, 2000.These financial statements and the accompanying schedule are the responsibility of theCompany’s management. Our responsibility is to express an opinion on these financialstatements based on our audits. 

We conducted our audits in accordance with auditing standards generallyaccepted in the United States. Those standards require that we plan and perform the auditto obtain reasonable assurance about whether the financial statements are free of materialmisstatement. An audit includes examining, on a test basis, evidence supporting theamounts and disclosures in the financial statements. An audit also includes assessing theaccounting principles used and significant estimates made by management, as well asevaluating the overall financial statement presentation. We believe that our auditsprovide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above presentfairly, in all material respects, the financial position of Novitron International, Inc.and subsidiaries as of March 31, 2000 and 1999, and the results of their operations andtheir cash flows for each of the three years in the period ended March 31, 2000, inconformity with accounting principles generally accepted in the United States.

Our audits were made for the purpose of forming an opinion on the basicconsolidated financial statements taken as a whole. The schedule listed in the index tothe consolidated financial statements is presented for purposes of complying with theSecurities and Exchange Commission’s rules and is not part of the basic financialstatements. The schedule has been subjected to the auditing procedures applied in theaudits of the basic financial statements and, in our opinion, fairly states, in allmaterial respects, the financial data required to be set forth therein in relation to thebasic financial statements taken as a whole.

/s/ ARTHUR ANDERSEN LLP

Boston, Massachusetts

June 20, 2000
** 

 

CONSOLIDATED BALANCE SHEETS

MARCH 31, 2000 AND 1999**
 

**                   ASSETS**
  
**2000**
**1999****CURRENT ASSETS:
Cash and cash equivalents
$1,326,513
$ 1,287,073
Accounts receivable, less    reserves of $99,127 and $78,999 in 2000 and 1999, respectively
2,601,814
2,883,384
Inventories 
2,360,177
3,018,573
Prepaid expenses 
276,911
408,479
Other current assets
127,653
163,275
Total current assets
6,693,068
7,760,784**EQUIPMENT, at cost: 
Manufacturing and computer    equipment
2,356,535
2,440,124
Furniture and fixtures
352,399
388,471
Leasehold improvements
371,538
338,380
Vehicles
61,896
63,503
3,142,368
3,230,478
Less: Accumulated depreciation
and amortization
2,226,638
2,262,255
915,730
968,223**OTHER ASSETS, net
670,618
929,803
$ 8,279,416
$ 9,658,810*The accompanying notes are an integral part of these consolidatedfinancial statements.*
 

 
**CONSOLIDATED BALANCE SHEETS

MARCH 31, 2000 AND 1999**
(Continued)
** 

 

                 LIABILITIES AND STOCKHOLDERS’ INVESTMENT**
**2000**
**1999****CURRENT LIABILITIES:
Short-term notes payable and    current
portion of long-term debt
$ 16,825
$ 3,735
Accounts payable
2,425,514
2,842,104
Accrued expenses
1,573,527
2,205,531
Customer advances
65,886
114,913
Accrued income taxes
56,457
- 
Total current liabilities
4,138,209
5,166,283**MINORITY INTEREST
17,463
- **LONG-TERM DEBT, net of    current portion
- 
23,272**DEFERRED TAXES
124,774
169,000**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: 1,445,227 and       1,454,425 in 2000 and 1999, respectively  
14,452 
14,544
Capital in excess of par value
4,862,481
4,881,066
Cumulative translation    adjustment
(548,100)
(147,736)
Retained deficit 
(329,863)
(437,442)
Treasury stock, 0 and 5,500    shares at cost in 2000 and 1999, respectively
- 
(10,177)
Total stockholders’    investment
3,998,970
4,300,255
$ 8,279,416
$ 9,658,810*The accompanying notes are an integral part of these consolidatedfinancial statements.

 

 

 
**CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED MARCH 31, 2000, 1999 AND 1998**
 
 
**2000**
**1999**
**1998**    
REVENUES
$14,182,636
$15,417,896
$11,802,250
COST OF REVENUES 
9,352,611
11,265,352
8,525,040
Gross profit
4,830,025
4,152,544
3,277,210
OPERATING EXPENSES:   
Sales and marketing
848,818
1,002,107
728,996
Research and development
2,012,237
1,845,813
1,336,306
General and administrative
1,823,131
1,851,910
1,781,378
Restructuring
74,876
50,946
-  
4,759,062
4,750,776
3,846,680
Income/(loss) from operations 
70,963
(598,232)
(569,470)
Interest expense
(25,779)
(126,280)
(75,409)
Interest income 
11,823
22,327
57,317
Other income (expense), net
113,711
(3,969)
711,009 
170,718
(706,154)
123,447
Provision for (benefit from) income taxes
53,000
(236,000)
26,000 
117,718
(470,154)
97,447
Minority interest
(10,139)
-
6,503
Net income (loss)
$107,579
$ (470,154)
$ 103,950Basic net income (loss) per share
$ 0.07
$ (0.32)
$ 0.08Diluted net income (loss) per share$ 0.07$ (0.32)$ 0.08Basic  weighted average common shares outstanding1,442,0461,453,0911,323,092Diluted weighted average common shares outstanding1,511,6851,453,0911,323,092*The accompanying notes are an integral part of these consolidatedfinancial statements.
** 

 

 

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ INVESTMENT

FOR THE YEARS ENDED MARCH 31, 2000, 1999 AND 1998** 
**Cumulative    Translation Adjustment**     
**Comprehensive Income (Loss)**
**Common    Stock**
**Capital    in Excess of Par Value**
**Treasury    Stock**
**Retained    Earnings    (Deficit)**
**Number of    Shares**
**Par Value**
BALANCE at March    31, 1997
1,322,005
$13,220
$4,882,390
$                        - 
$(71,238)
$148,696
$               -
Issuance of common    stock in connection with a 10% stock dividend of March 27, 1998
 

132,206 
1,322
 

(1,322)
-  
-  
-  
-
Translation    adjustment
- 
- 
- 
- 
- 
(436,080)
(436,080)
Net income
- 
- 
- 
- 
103,950
- 
103,950    
Total    comprehensive loss  
$(332,130)
BALANCE at March    31, 1998
1,454,211
14,542
4,881,068
- 
32,712
(287,384)
Further    issuance of common stock in connection with a 10% stock dividend of March 27, 1998 
214 
2 
(2) 
-  
-  
-  
-
Purchase of    treasury stock
- 
- 
- 
(10,177)
- 
- 
-
Translation    adjustment
- 
- 
- 
- 
- 
139,648
139,648
Net loss
- 
- 
- 
- 
(470,154)
- 
(470,154)
Total    comprehensive loss
$(330,506)
BALANCE at March    31, 1999
1,454,425
14,544
4,881,066
(10,177)
(437,442)
(147,736)
Further    issuance of common stock in connection with a 10% stock dividend of March 27, 1998 
302 
3 
(3) 
-  
-     
- 
   
Sale of common    stock
5,000
50
3,126
- 
- 
-    
Purchase of    treasury stock
- 
- 
-
(11,676)
- 
-    
Retirement of    treasury stock
(14,500)
(145)
(21,708)
21,853
- 
-    
Translation    adjustment
- 
- 
- 
- 
- 
(400,364)
(400,364)
Net income
- 
- 
- 
- 
107,579
- 
107,579
Total    comprehensive loss
$(292,785)
BALANCE at March    31, 2000
1,445,227
$14,452
$4,862,481
$                    - 
$(329,863)
$(548,100)    *The accompanying notes are an integral part of these consolidatedfinancial statements.*** 

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED MARCH 31, 2000, 1999 AND 1998** 
**2000**
**1999**
**1998****CASH FLOWS FROM OPERATING ACTIVITIES:   
Net income (loss) 
$ 107,579
$ (470,154)
$ 103,950
Adjustments to reconcile net income (loss)    to   net cash provided by operating activities-   
Depreciation and amortization
416,708
451,227
329,726
Capitalization of research costs
- 
(33,115)
(241,730)
Gain on sale of equipment
- 
(1,045)
(111,243)
Release of certain indebtedness
- 
- 
(113,522)
Deferred income taxes
(27,408)
(3,657)
(230,995)
Minority interest 
10,139
- 
(6,503)
Changes in Current Assets and Liabilities   
Accounts receivable
(44,489)
(457,278)
(109,265)
Inventories
347,122
788,504
(1,490,514)
Prepaid expenses
93,638
(58,848)
(95,983)
Other current assets
25,505
(140,518)
48,493
Accounts payable
(107,304)
217,587
1,324,810
Accrued expenses
(428,618)
308,526
804,576
Customer advances
(39,158)
120,288
(69,390)
Accrued income taxes
53,717
(176,170)
84,007
   Net cash provided by operating    activities
407,431
545,347
226,417    **CASH FLOWS FROM INVESTING ACTIVITIES:   
Marketable securities
- 
- 
99,472
Decrease (increase) in other assets 
73,120
36,906
(37,664)
Purchase of equipment
(321,792)
(500,336)
(576,460)
Proceeds from sale of equipment
15,560
- 
151,360
Purchase of minority interest
- 
- 
(200,140)
Sale of minority interest
7,324
- 
- 
Other, including foreign exchange effects on    cash
(125,951)
44,334
(62,820)
       Net cash    used in investing activities
(351,739)
(419,096)
(626,252)*Continues on page 26*
 
**CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED MARCH 31, 2000, 1999 AND 1998**
(Continued)

 
** 
**2000**
**1999**
**1998****CASH FLOWS FROM FINANCING ACTIVITIES:   
Proceeds from (payments on)short-term    notes payable
$14,625
$ (51,406)
$ 2,948
Payments on long-term debt
(22,377)
(7,513)
(7,465)
Sale of common stock
3,176
- 
- 
Purchase of treasury stock
(11,676)
(10,177)
-
    
     Net cash used in    financing activities
(16,252)
(69,096)
(4,517)
NET INCREASE (DECREASE) IN CASH AND CASH    EQUIVALENTS
39,440
57,155
(404,352)    
CASH AND CASH EQUIVALENTS,BEGINNING OF YEAR
1,287,073
1,229,918
1,634,270
CASH AND CASH EQUIVALENTS, END OF YEAR
$ 1,326,513
$ 1,287,073
$ 1,229,918
 

Supplemental disclosure of cash flow    information:   
    Cash paid during the year    for:   
       Interest
$ 27,524
$ 271,683
$ 124,722
       Income    taxes
$ 983
$ 2,551
$ 38,171*The accompanying notes are an integral part of these consolidatedfinancial statements.*
 

 

 
**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2000**
 
**(1) Operations and Accounting Policies**
Novitron International, Inc. ("the Company") is amultinational company which, through its subsidiaries, designs, manufactures and marketsinstrumentation used in clinical and analytical laboratories and in process monitoring inindustry. The Company’s Dutch subsidiary, Vital Scientific NV, designs andmanufactures scientific instrumentation, including blood chemistry analyzers. NovaChem BV,another Dutch subsidiary, develops and markets process analyzers used in the production ofpetrochemicals and pharmaceuticals and in environmental monitoring.

The accompanying consolidated financial statements reflect theapplication of certain accounting policies described in this and other notes to theconsolidated financial statements.

(a) Principles of Consolidation

The consolidated financial statements include the accounts of theCompany and its subsidiaries: Clinical Data BV, Clinical Data (Australia), Pty. Ltd. (95%owned subsidiary – see Note 3), NovaChem BV, Spectronetics NV, and Vital ScientificNV (see Note 4). All significant intercompany accounts and transactions have beeneliminated in consolidation.

(b) Cash and Cash Equivalents

Cash and cash equivalents are stated at cost, which approximatesmarket, and consist of cash and marketable financial instruments with original maturitiesof 90 days or less.

(c) Inventories

Inventories are stated at the lower of cost (first-in, first-out) ormarket, include material, labor and manufacturing overhead, and consist of the followingat March 31, 2000 and 1999:
 
**2000**
**1999**
Raw materials
$1,290,048
$ 1,774,146
Work-in-process
335,875
421,680
Finished goods
734,254
822,747 
$2,360,177
$3,018,573
(d) Revenue Recognition

The Company generally recognizes revenue from the sale of products andsupplies at the time of shipment.

(**1) Operations and Accounting Policies**(continued)

(e) Depreciation and Amortization of Equipment and    Intangibles

The Company provides for depreciation and amortization using thestraight-line method by charges to operations in amounts that allocate the cost ofequipment and intangibles over their estimated useful lives. The estimated useful lives,by asset classification, are as follows:

Asset Classification
Useful Lives
Manufacturing and computer equipment
3-7 years
Furniture and fixtures
3-7 years
Leasehold improvements
Life of lease
Vehicles
3-5 years
Goodwill
7-20 years
Statement of Financial Accounting Standards ("SFAS") No. 121,"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to BeDisposed Of," requires the Company to continually evaluate whether events andcircumstances have occurred which indicate that the estimated remaining useful life oflong-lived assets and such intangibles as goodwill may warrant revision or that thecarrying value of these assets may be impaired. To compute whether assets have beenimpaired, the estimated gross cash flows for the estimated remaining useful life of theasset are compared to the carrying value. If the gross cash flows are less than thecarrying value, the assets are written down to the estimated fair value of the asset. AtMarch 31, 2000 and 1999, the Company’s remaining goodwill relates to its investmentin Vital Scientific NV. Based on an analysis of other assets at March 31, 2000, theCompany does not believe impairment exists.

(f) Net income (loss) Per Share 

The Company applies the provisions of SFAS No. 128, "Earnings perShare," for computing and presenting earnings per share. Basic net income (loss) pershare is determined by dividing net income (loss) by the weighted average shares of commonstock outstanding during the year. Diluted earnings per share was determined by dividingnet income by diluted weighted average shares outstanding. Diluted weighted average sharesreflects the dilutive effect, if any, of potentially dilutive common shares, such ascommon stock options and warrants based on the treasury stock method. In fiscal years 1999and 1998, 118,035 and 104,818 weighted average potentially dilutive shares, respectively,were not included in the diluted weighted average shares outstanding, as they wereantidilutive.

The calculation of basic and diluted weighted average sharesoutstanding are as follows:
**2000****1999****1998**Basic weighted average common shares    outstanding1,442,0461,453,0911,323,092Weighted average potential common shares69,639--Diluted weighted average shares outstanding1,511,6851,453,0911,323,092
(**1) Operations and Accounting Policies**(continued)

(g) Foreign Currency Translation

The Company accounts for foreign currency transaction and translationgains and losses in accordance with SFAS No. 52, "Foreign Currency Translation."The functional currency of Clinical Data BV, Vital Scientific NV and Spectronetics NV isthe Dutch Guilder. The functional currency of Clinical Data Australia is the Australiandollar and NovaChem BV uses the United States dollar as its functional currency. Gains andlosses from translating assets and liabilities that are denominated in currencies otherthan the respective functional currency are included in other expense in the consolidatedstatements of operations. The translation adjustment required to report those subsidiarieswhose functional currency is other than the United States dollar into U.S. dollars iscredited or charged to cumulative translation adjustment, included as a separate componentof stockholders’ investment in the accompanying consolidated balance sheets.

Foreign currency transaction gains and losses are included in otherexpense in the consolidated statements of operations.

(h) Postretirement Benefits

The Company has no obligations for postretirement benefits.

(i) Management’s Use of Estimates

The preparation of financial statements in conformity with generallyaccepted accounting principles requires management to make estimates and assumptions thataffect the reported amounts of assets and liabilities and disclosure of contingent assetsand liabilities at the date of the financial statements and the reported amounts ofrevenues and expenses during the reporting period. Actual results could differ from thoseestimates.

(j) 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 ofsale.

(k) Financial Instruments

The estimated fair value of the Company’s financial instruments,which include cash equivalents, accounts receivable and accounts payable, approximatestheir carrying value.

(l) Concentration of Credit Risk

SFAS No. 105, "Disclosure of Information about FinancialInstruments with Off-Balance-Sheet Risk and Financial Instruments with Concentrations ofCredit Risk," requires disclosure of any significant off-balance-sheet and creditrisk concentrations. The Company has no significant off-balance-sheet credit risk such asforeign exchange contracts, option contracts or other foreign hedging arrangements. TheCompany maintains the majority of its cash balances with large financial institutions. SeeNotes 10 and 14 for significant customers and financial information by segment,respectively.

 

(**1) Operations and Accounting Policies**(continued)

                       (m) Software Development Costs
In connection with the development of software included as asignificant component of a new analysis product, the Company has applied the provisions ofSFAS No. 86, "Accounting for the Costs of Computer Software to be Sold, Leased orOtherwise Marketed." SFAS No. 86 requires the Company to capitalize those costsincurred for the development of computer software that will be sold, leased or otherwisemarketed once technological feasibility has been established up to the time at which theproduct is available for sale to the customer. These capitalized costs are subject to anongoing assessment of the recoverability based on anticipated future revenues and changesin hardware and software technologies.

During the years ended March 31, 1999 and 1998, the Company capitalizedapproximately $32,000 and $242,000, respectively, under SFAS No. 86, which is included asa component of other assets in the accompanying consolidated balance sheet. There were noamounts capitalized for the year ended March 31, 2000.

Amortization of the capitalized software development costs begins whenthe product is available for general release. Amortization is provided on aproduct-by-product basis on either the straight-line method over periods not exceedingfive years or the sales ratio method. Unamortized capitalized software development costsdetermined to be in excess of net realizable value of the product are expensedimmediately. The Company began to amortize the software costs capitalized during fiscalyears 1998 and 1997 over the sales ratio method during the year ended March 31, 1998.During fiscal year 1999, the Company began to amortize the software costs capitalizedduring 1999 over three years using the straight-line method. Total amortization recordedduring fiscal years 2000, 1999, and 1998 was approximately $39,000, $141,000 and $11,000,respectively, which is included in cost of revenues in the accompanying consolidatedstatements of operations.

(n) Comprehensive Income

Effective April 1, 1998, the Company adopted SFAS No. 130,"Reporting Comprehensive Income." SFAS No. 130 requires disclosure of allcomponents of comprehensive income on an annual and interim basis. Comprehensive income isdefined as the change in equity of a business enterprise during a period from transactionsand other events and circumstances from non-owner sources. 

(o) Segment Information

Effective for the year ended March 31, 1999, the Company adopted SFASNo. 131, "Disclosures about Segments of an Enterprise and Related Information."The requirements of this standard are presented in Note 14 of the Consolidated FinancialStatements.

(p) New Pronouncements

In March 2000, the Financial Accounting Standards Board (FASB) issuedinterpretation No. 44, "Accounting for Certain Transactions Involving StockCompensation – an Interpretation of APB Opinion No. 25." The interpretationclarifies the application of the Accounting Principles Board (APB) Opinion No. 25 inspecified events, as defined. The interpretation is effective July 1, 2000, but coverscertain events occurring during the period after December 15, 1998, but before theeffective date. To the extent that events covered by this interpretation occur during theperiod after December 15, 1998, but before the effective date, the effects of applyingthis interpretation would be recognized on a prospective basis from the effective date.Accordingly, upon initial application of the final interpretation, (a) no adjustmentswould be made to the financial statements for the periods before the effective date and(b) no expense would be recognized for any additional compensation cost measured that isattributable to periods before the effective date. The Company expects that the adoptionof this interpretation would not have any effect on the accompanying financial statements.

The Securities and Exchange Commission issued SAB No. 101,"Revenue Recognition," in December 1999. The Company is required to adopt thisnew accounting guidance through a cumulative charge to operations, in accordance with APBNo. 20, "Accounting Changes," no later than the second quarter of fiscal 2001.The Company believes that the adoption of the guidance provided in SAB No. 101 will nothave a material impact on future operating results.

In June 1998, the FASB issued SFAS No. 133, "Accounting forDerivative Instruments and Hedging Activities," which establishes accounting andreporting standards for derivative instruments, including derivative instruments embeddedin other contracts, and for hedging activities. The Company does not engage in tradingmarket risk sensitive instruments or purchasing hedging instruments or "other thantrading" instruments that are likely to expose us to market risk, whether interestrate, foreign currency exchange, commodity price or equity price risk. The Company may doso in the future as operations expand domestically and abroad. The Company will evaluatethe impact of foreign currency exchange risk and other derivative instrument risk on theresults of operations when appropriate. The Company will adopt SFAS No. 133 as required bySFAS No. 137, "Deferral of the effective date of the FASB Statement No. 133," infiscal year 2002. The adoption of SFAS No. 133 is not expected to have a material impacton the Company’s financial condition or results of operations.
**(2) Restructuring**
In the fourth quarter of fiscal 1999, the Company began implementationof a restructuring plan at its Vital Scientific subsidiary. As of September 30,1999, theCompany had notified all affected employees about termination under the restructuring. AtMarch 31, 2000, a total of $126,000 has been charged against earnings and paid out. Ofthis amount, $75,000 and $51,000 was charged during fiscal year 2000 and 1999,respectively. All cash payments under the plan were paid during fiscal year 2000.
**(3) Clinical Data (Australia) Pty. Ltd.**
The Company, as part of an incentive program, entered into a restrictedstock purchase agreement whereby a Company officer may purchase up to 7.5% (16,575 sharesof common stock) of the Company’s wholly-owned subsidiary, Clinical Data Australia.The sale of such shares is at par value. On May 19, 1999, the officer purchased 7.5% ofClinical Data Australia, of which 5% vested on such date. The minority interest as shownin the financial statements for fiscal year 2000 reflects such vested equity. 

Pursuant to the terms of the restricted stock purchase agreement, theofficer will vest in the remaining 2.5% of Clinical Data Australia as of April 1, 2001.
**(4) Vital Scientific NV**
On October 21, 1997, the Company purchased the remaining 6% percent ofVital Scientific NV from the minority shareholder for approximately $200,000. Thetransaction 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 ofgoodwill relating to past purchases of prior investments in Vital Scientific. Theremaining goodwill is being amortized over seven years on a straight-line basis.
**(5) Short-Term Notes Payable and Long-Term Debt**
The Company’s debt obligations are as follows at March 31, 2000and 1999:
 
**2000**
**1999**
Short-term notes payable
$       16,825
$                       -    
Long-term debt -  
  Notes payable, interest ranging from      11.35% - 11.55%
- 
27,007 
16,825
27,007
Less: short-term notes payable and current    portion of long-term debt
16,825
3,735 
$                       - 
$       23,272
 

In April 1998, the Company entered a new relationship with a majorDutch bank, which provides for a 4,000,000 Dutch Guilder (approximately $1,729,000) lineof credit. Interest on this facility is set at 1.25% above the base rate as reported bythe Netherlands Central Bank (4.5% at March 31, 2000). Trade receivables and inventory ofVital Scientific are provided as security for this facility. As of March 31, 2000, theCompany is in full compliance with all capital covenants of the credit line and no amountsare outstanding.

In May 1999, Clinical Data Australia entered into an agreement for a450,000 Australian dollar (approximately $273,000) line of credit. Interest on thisfacility is set at prime plus 3.0%; the prime rate is presently 9.75%. Trade receivablesand inventory of Clinical Data Australia are provided as security for this facility; theline also requires the maintenance of certain capital ratios. As of March 31, 2000, theCompany is in full compliance with all capital covenants of the credit line and no amountsare outstanding.

 
**(6) Lease Commitments**
The Company leases facilities, vehicles and computer equipmentprincipally under operating leases. Future minimum lease payments under these operatingleases as of March 31, 2000 are approximately as follows:

Year Ending March 31,
Amount
2001
$318,000
2002
299,000
2003
278,000
2004
277,000
2005
277,000
Thereafter
1,063,000 
$2,512,000
Rent expense of approximately $326,000, $353,000 and $329,000 wasincurred during fiscal 2000, 1999, and 1998, respectively.
**(7) Stock Option Plans**
The Company has established a 1991 Stock Option Plan ("thePlan") and a 1991 Directors’ Stock Option Plan ("the Directors’Plan") under which an aggregate of 120,000 shares and 60,000 shares of common stockare reserved, respectively, for the purpose of granting incentive and nonstatutory stockoptions.

Under the terms of the Plan and the Directors’ Plan, all optionsare granted at not less than the fair value of the stock on the date of grant. Options areexercisable over various periods not exceeding four years; the options under the Planexpire no later than seven years after the date of grant whereas the options granted underthe Directors’ Plan expire no later than ten years after the date of grant.

In October 1998, the Company’s Board of Directors authorized therepricing of certain options outstanding under the Plan and the Directors’ Plan.Options for a total of 83,783 shares were surrendered under the repricing by employees anddirectors and exchanged for options to purchase 97,000 shares at the new option exerciseprice and vesting schedule. The exercise price is equal to the fair market value of theCompany’s common stock on October 21, 1998, $0.62 ($0.69 for options repriced to anofficer at 110% of the fair market value as of the grant date). These repriced options arereflected as grants and cancellations in the stock activity below.
**(7) Stock Option Plans (continued)

The following table summarizes stock option activity.
 
 
Option Price  
Number of    Shares
Per Share
Total
Weighted Average Price
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
Options granted
97,000
0.62-0.69
62,812
0.65
Options canceled or expired
(83,783)
2.73–13.30
(350,136)
(4.18)
Outstanding at March 31, 1999
109,834
$0.62-2.73
$ 97,811
$0.89
Options granted
5,000
$1.88
9,375
$1.88
Options exercised
(5,000)
$0.62
(3,125)
$0.62
Options exchanged for minority interest    (Note 3)
(11,062)
$0.62
(6,910)
$0.62
Options canceled or expired
(10,000)
$0.62
(6,250)
$0.62
Outstanding at March 31, 2000
88,772
$0.62-2.73
$90,901
$1.02     
Exercisable at March 31, 2000
86,272
$0.62-2.73
$ 86,556
$1.00
Exercisable at March 31, 1999
59,501
$0.62-2.73
$ 61,406
$1.03
Exercisable at March 31, 1998
36,485
$2.73 – 13.30
$184,260
$5.05
The range of exercise prices for options outstanding and optionsexercisable at March 31, 2000 is as follows:

 
OutstandingExercisablePrice RangeNumber of SharesWeighted Average Remaining Contractual Life
Weighted Average Exercise    PriceNumber of Shares
Weighted Average Exercise    Price
$0.62 - $0.68
70,938
4.56 years
$ 0.66
70,938
$ 0.66
$1.88
5,000
5.83 years
$ 1.88
2,500
$ 1.88
$2.73
12,834
3.47 years
$ 2.73
12,834
$ 2.73 
88,772
4.40 years
$ 1.02
86,272
$ 1.00
In October 1995, the FASB released SFAS No. 123, "Accounting forStock-Based Compensation," which is effective for fiscal years beginning afterDecember 31, 1995. SFAS No. 123 encourages companies to adopt a fair value based method ofaccounting for employee stock options, but allows companies to continue to account forthose plans using the accounting prescribed by APB Opinion No. 25, "Accounting forStock Issued to Employees" ("APB No. 25"). The Company has adopted thedisclosure-only requirements of SFAS No. 123 and will continue to account for employeestock options using APB Opinion No. 25, making pro forma disclosures of net income andearnings per share as if the fair value based method had been applied.
**(7) Stock Option Plans (continued)

The Company has computed the pro forma disclosures required under SFASNo. 123 for all stock options granted to employees of the Company and its subsidiaries inthe fiscal years ended March 31, 2000, 1999, and 1998 using the Black-Scholes optionpricing model prescribed by SFAS No. 123. 

The assumptions used to calculate the SFAS No. 123 pro forma disclosureand weighted average information for the fiscal years ended March 31, 2000, 1999, and 1998are as follows:
 
**2000**
**1999**
**1998**
Risk-free interest rate
4.18% - 6.73%
4.18% - 6.73%
6.30% - 6.73%
Expected dividend yield
0
0
0
Expected lives
6.15 years
6.12 years
4.39 years
Expected volatility
50.93% - 110.50%
50.93% - 110.50%
50.93%-51.33%
Weighted average grant date fair      value per share of options granted      during the period
 

$1.88
 

$0.65
 

-
The pro forma effect on the Company of applying SFAS No. 123 torecognize certain compensation expense for the years ended March 31, 2000, 1999, and 1998would be as follows:
 
**2000**
**1999**
**1998**
Pro forma net income (loss)
$94,821
$(499,113)
$45,812
Pro forma net income (loss) per share
$0.06
$(0.33)
$0.03**(8) Income Taxes**
The Company accounts for income taxes in accordance with SFAS No. 109,"Accounting for Income Taxes." Deferred tax assets and liabilities arerecognized for the future tax consequences attributable to differences between thefinancial statement carrying amounts of existing assets and liabilities and theirrespective tax bases. Deferred tax assets and liabilities are measured using enacted taxrates expected to apply to taxable income in the years in which those temporarydifferences are expected to be recovered or settled. The effect on deferred tax assets andliabilities of a change in tax rates is recognized in income in the period that includesthe enactment date.

 

(**8) Income Taxes** (continued)

The provision for (benefit from) income taxes shown in the accompanyingconsolidated statements of operations consists of the following:
 
For the Year    Ended March 31, 
2000
1999
1998
Current:   
   Domestic
$              -
$               -
$ 2,000
   Foreign
33,000
(232,000)
278,000
Total Current
33,000
(232,000)
280,000    
Deferred:   
  Domestic
- 
- 
- 
  Foreign
20,000
(4,000)
(254,000)
Total Deferred
20,000
(4,000)
(254,000) 
$ 53,000
$ (236,000)
$ 26,000
The provision for (benefit from) income taxes differs from the amountcomputed by applying the statutory federal income tax rate to income before taxes due tothe following:

                                           For the Year Ended March 31,           
2000
1999
1998
Provision for (benefit from) taxes at    statutory rate
$60,000
$ (247,000)
$ 43,000
Utilization of domestic net operating loss      carryforward
-
-
(166,000)
Utilization of foreign net operating loss    carryforward
(240,000)
(38,000)
- 
Domestic operating loss not benefited
202,000
10,000
- 
Foreign operating loss not benefited
42,000
9,000
144,000
Taxes resulting from higher incremental    foreign rate
1,000
36,000
4,000
Tax benefit resulting from lower statutory    foreign rate
(29,000)
(1,000)
(15,000)
Other 
17,000
(5,000)
16,000 
$53,000
$ (236,000)
$ 26,000** 

**(8) Income Taxes**(continued)

The approximate income tax effect of each type of temporary differencecomprising the net deferred tax asset at March 31, 2000 and 1999 is as follows:

**2000**
**1999**
Net operating loss carryforwards
$2,630,525
$2,662,764
General business tax credit    carryforwards
31,331
46,428
Other, net
3,848
71,081
2,665,704
2,780,273
Less: valuation allowance
2,641,403
2,702,940
$ 24,301
$ 77,333
SFAS No. 109 requires the Company to assess whether it is more likelythan not that the Company will realize its deferred tax assets. The Company has determinedthat, except for the net operating loss carryforward at Vital Scientific NV generatedduring fiscal year 1999, it does not meet the "more likely than not" standard.Accordingly, the Company has provided a valuation allowance against the deferred taxassets for all items except for the aforementioned net operating loss carryforward in1999.

The tax effect on the components of the deferred tax liability at March31, 2000 and 1999 is as follows:
 
**2000**
**1999**
Prior pension service costs
$               - 
$ 15,905
Depreciation
95,138
114,403
Restructuring
- 
27,255
Temporary differences
28,841
17,450
Other
795
(6,013) 
$124,774
$169,000
The Company has net operating loss carryforwards for U.S. federal andstate tax purposes of approximately $4,324,000 and $1,450,000, respectively; thesecarryforwards will expire from 2001 to 2020. In addition, the Company has available U.S.federal tax credit carryforwards of approximately $31,000. These carryforwards may be usedto offset future taxable income, if any. The federal tax credit carryforwards will expirefrom 2001 to 2012 and are subject to review and possible adjustment by the InternalRevenue Service. There are approximately $4,510,000 in U.S. alternative minimum tax netoperating loss carryforwards that between 2008 and 2020.

The Company has foreign net operating loss carryforwards ofapproximately $2,798,000 of which $348,000 are not subject to expiration and $2,450,000which expire from 2001 to 2010.

 
**(9) Pension Plan**
The Company’s subsidiary, Vital Scientific NV, participates in amultiemployer defined benefit pension plan. Contributions and expenses incurred by theCompany amounted to approximately $221,000, $119,000, and $97,000 during fiscal 2000,1999, and 1998, respectively.
**(10) Significant Customers**
During fiscal 2000 and 1998, the Company had sales of scientific andprocess monitoring instrumentation to one significant customer amounting to approximately11% and 56% of consolidated revenues, respectively; approximately 6% of accountsreceivable at March 31, 2000 was from this customer. During fiscal 1999, the Company hadsales of scientific and process monitoring instrumentation to two significant customersamounting to approximately 38% of consolidated revenues; at March 31, 1999, approximately51% of accounts receivable were from these customers. 
**(11) Other Income (Expense), net**
Other income (expense), net, consists of the following:
 
**For the Years Ended    March 31,** 
**2000**
**1999**
**1998**
Foreign exchange loss
$(10,278)
$(12,824)
$(48,039)
Settlement of a dispute
-
-
625,741
Gain on sale of certain assets
-
-
111,243
Subsidy adjustment
97,001
-
-
Other income, net
26,988
8,855
22,064 
$113,711
$ (3,969)
$711,009
 
**(12) Accrued Expenses**
Accrued expenses consist of the following:
 
**2000**
**1999**
Payroll and payroll-related expenses 
$421,881
$ 593,623
Warranty reserves
123,929
162,376
Development credits
785,680
1,171,195
Other
242,037
278,337 
$ 1,573,527
$ 2,205,531
 
**(12) Accrued Expenses (continued)

The Company has entered into a credit financing arrangement with aNetherlands governmental agency in connection with the development of a new product. Thegrant is to be repaid as a percentage (13.6%) of the product’s gross revenues as longas the product is a commercial success. The Company began to ship this product duringfiscal year 1998, evidencing its commercial success. The Company has accrued all fundingreceived as development credits in the table above.
**(13) Other Assets**
Other assets consist of the following:
 
**2000**
**1999**
Goodwill, net of accumulated amortization    of $391,000 and $411,000 at March 31, 2000 and 1999, respectively 
$96,337 
$ 142,260
Capitalized software development costs,net    of accumulated amortization of $165,000 and $152,000 at March 31, 2000 and 1999,    respectively 
491,554 
594,104
Other
82,727
193,439 
$670,618
$929,803
 
**(14) Segment Information**
Effective for the fiscal year ended March 31, 1999, the Company hasadopted SFAS No. 131, "Disclosures About Segments of an Enterprise and RelatedInformation." SFAS No. 131 establishes standards for reporting information regardingoperating segments in annual financial statements and requires selected information forthose segments to be presented in interim financial reports issued to stockholders. SFASNo. 131 also establishes standards for related disclosures about products and services andgeographic areas. Operating segments are identified as components of an enterprise aboutwhich separate discrete financial information is available for evaluation by the chiefoperating decision maker, or decision making group, in making decisions how to allocateresources and assess performance. The Company’s chief decision-maker, as definedunder SFAS No. 131, is the Chief Executive Officer. To date, the Company has viewed itsoperations and manages its business as principally three operating segments: themanufacture and sale of scientific instrumentation (Vital Scientific), the design andmarketing of process monitoring instrumentation (NovaChem) and the sale of instruments andconsumables in Australia (Clinical Data Australia). The Company evaluates the performanceof its operating segments based on net income, accounting changes, and nonrecurring items.Intersegment sales and transfers are not significant. The "All Other" columnincludes corporate related items, results of insignificant operations and, as it relatesto segment profit (loss), income and expense not allocated to reportable segments. 

The accounting policies of the segments are the same as those describedin the summary of significant accounting policies. The Company evaluates performance basedon the revenues, operating costs, net income and total assets. Revenues are attributed tothe subsidiary from which derived. Segment information for the years ended March 31, 2000,1999 and 1998 is as follows: 

Instrument    Manufacture
Sales Distribution
Process Monitoring
All OtherConsolidatedRevenues
March 31, 2000
$11,598,093
$2,358,162
226,381
$               -
$14,182,636
March 31, 1999
13,800,115
1,340,880
276,901
                -
15,417,896
March 31, 1998
10,626,944
1,107,523
67,783
                -
11,802,250
Operating Costs
March 31, 2000
$ 11,601,194
$2,170,925
$ 213,192
$ 126,362
$14,111,673
March 31, 1999
14,296,470
1,291,628
338,333
89,697
16,016,128
March 31, 1998
10,878,674
1,111,001
252,683
129,362
12,371,720
Net Income (Loss)  
March 31, 2000
$ 145,452 
$ 231,046
$ 328,047
$(596,966)
$    107,579
March 31, 1999
(360,802)
10,917
61,121
(181,390)
(470,154)
March 31, 1998
35,491
(37,039)
(308,326)
413,824
103,950
Total Assets
March 31, 2000
$ 7,231,455
$ 810,469
$ 33,487
$ 204,005
$    8,279,416
March 31, 1999
8,841,020
443,778
75,238
298,774
9,658,810
March 31, 1998
8,537,780
600,323
(75,269)
341,890
9,404,724
 

 

SCHEDULE II

 
**VALUATION AND QUALIFYING ACCOUNTS

MARCH 31, 2000**
 

**Item**
**Balance at Beginning of Period**
 

**Additions**
 

**Deductions**
**Balance at End of Period**     
Allowance for Doubtful Accounts         
**2000**
$ 78,999
$ 22,586
$ 2,458
$ 99,127      
**1999**
$ 49,457
$ 29,542
$     -   
$ 78,999     
**1998**
$101,634
$    -          
$ 52,177
$ 49,457          
Restructuring Charge         
2000
$ 50,946
$      -         
$ 50,946
$     -                
1999
$       -        
$ 50,946
$    -          
$ 50,946
 

 
**EXHIBIT INDEX**Exhibit Number
Description
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 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 statementsof which are included in the consolidated financial statements of the Registrant:

 

**Name**
**Country of Incorporation**
**Percentage    Owned**
Clinical Data (Australia) Pty. Ltd.
Australia
95%
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 incorporationof our report included in this Form 10-K into the Company’s previously filedRegistration Statements on Form S-8 (File Nos. 33-25938, 33-25939, 33-46233 and 33-46234).

 

ARTHUR ANDERSEN LLP

Boston, MassachusettsJune 21, 2000************************************************************