FORM 10-KSB

SECURITIES AND EXCHANGE COMMISSIONWashington, 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, 2002**
(  ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THESECURITIES EXCHANGE ACT OF 1934

for the transition period from to Commission File Number: 0-12716

Novitron International, Inc.(Name of small business issuer 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)               
Issuer's telephone number, including area code: **(617) 527-9933Securities registered pursuant to Section 12(b) of the Exchange Act: None**
*This Annual Report on Form 10-K contains unaudited financialstatements for the year ended March 31, 2002 in lieu of audited financial statements for such period because the Company elected not to have Arthur Andersen LLP issue a manuallysigned audit report in respect of the Company's financial statements for the year endedMarch 31, 2002 in reliance on Securities and Exchange Release No. 34-45589. Please seeadditional information regarding the Company's unaudited financial statements for the yearended March 31, 2002 in Item 8 hereto.*Securities registered pursuant to Section 12(g) of the Exchange Act: Common Stock, $.01par value

Check whether the issuer (1) has filed all reports required to be filedby Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for suchshorter period that the registrant was required to file such reports), and (2) has beensubject to such filing requirement for the past 90 days. Yes X  No __
Check if there is no disclosure of delinquent filers in response toItem 405 of Regulation S-B is not contained herein, and no disclosure will be contained,to the best of registrant's knowledge, in definitive proxy or information statementsincorporated by reference in Part III of this Form 10-KSB or any amendment to this Form10-KSB. [ ]

Issuer's revenues for the most recent fiscal year:  $13,312,201The aggregate market value of the voting Common Stock held by non-affiliates of theregistrant was approximately $6,919,256 based on the average price of the Common Stock asreported by NASDAQ on July 11, 2002.

As of July 11, 2002, there were 1,488,012 shares of the Registrant'sCommon Stock outstanding.Documents Incorporated by Reference: Portions of the Company's Proxy Statement for its2002 Annual Meeting into Part III of Form 10-KSB.

Transitional Small Business Disclosure Format: Yes __  No   X 

 

Novitron International, Inc**.**

ANNUAL REPORT ON FORM 10-KSBFor the Year Ended March 31, 2002

Table of Contents

Page         **PART I**
Item 1
Description of Business
1
Item 2Description of Properties
8
Item 3Legal Proceedings 
8
Item 4
Submission of Matters to a Vote    of Security Holders
8
**PART II**
Item 5
Market Price for Common Equity    and Related Stockholder Matters
9
Item 6
Management's Discussion and    Analysis or Plan of Operations
11
Item 7
Financial Statements
15
Item 8Changes in and Disagreements with Accountants    on Accounting and Financial Disclosure
16
**PART III**
Item 9Directors, Executive Officers, Promoters and    Control Persons; Compliance with Section 16(a) of the Exchange Act
17
Item 10
Executive Compensation
17
Item 11Security Ownership of Certain Beneficial Owners    and Management and Related Stockholders' Matters
17
Item 12Certain Relationships and Related Transactions 
17
Item 13
Exhibits and Reports on Form    8-K
17
**Signatures**
18** 

PART I
*Forward-looking statements, within the meaning of the SecuritiesExchange Act of 1934 (Section 21E), may be made throughout this document. For thispurpose, any statements contained herein that are not statements of historical fact may bedeemed to be forward-looking statements. Without limiting the foregoing, such words 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 Securities and Exchange Commission reports and filings.*
Item 1. Description of 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 has two Dutch subsidiaries, Vital Scientific NV ("Vital Scientific") andNovaChem BV ("NovaChem"). Vital Scientific designs and manufactures scientificand clinical laboratory instrumentation marketed worldwide through distributors andstrategic partnerships.**NovaChem develops and markets process monitors withapplications in petrochemical and pharmaceutical production and in environmentalmonitoring. The Company's Australian subsidiary, Vital Diagnostics Pty. Ltd. ("VitalDiagnostics") distributes diagnostic instruments and assays in the South Pacific. 
**Company History**
Novitron International, Inc. was established in 1972 as Clinical Data,Inc. to offer ambulatory diagnostic physiological monitoring for clinical and researchapplications. In April 1994, to better reflect the Company's international scope anddiversification, the Company's name was changed from Clinical Data, Inc. to NovitronInternational, Inc.

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%) and 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.

The Company established Vital Diagnostics in July 1992 as Clinical Data(Australia) Pty. Ltd. to distribute diagnostic products in Australia and the SouthPacific. As described in Note 1 in the accompanying Notes to the Consolidated FinancialStatements, the Company has sold 7.5% of this subsidiary to an officer of the Company. InDecember 2000, the name of the subsidiary was changed to Vital Diagnostics Pty. Ltd.
**VITAL SCIENTIFIC NV**
Established in 1956 and headquartered in Spankeren/Dieren, TheNetherlands, Vital Scientific is the nucleus of the Company's operations. Vital Scientificdesigns, develops, manufactures, and distributes scientific instrumentation for medical,veterinary, and industrial applications.

The subsidiary's principal products are automated and semi-automatedanalytical instruments used in medical and veterinary laboratories, marketed under the"Vitalab" tradename and under strategic OEM agreements with major diagnosticcompanies. These instruments include:
- The Company's recently introduced Vitalab Selectra-XL, a 360 tests per hour    random-access, "walk-away" clinical chemistry analyzer offering a wide range of    testing including clinical chemistry, special proteins, drugs of abuse ("DOA"),    therapeutic drug monitoring ("TDM"), and electrolytes. 
- The Vitalab Selectra E, Selectra II, and Vitalab Flexor, a "walk-away" 180    tests per hour clinical chemistry analyzer, capable of performing over 70 different    diagnostic tests using reagents from almost all manufacturers. Over four thousand five    hundred Selectra units have been sold worldwide.
- The Vitalab Viva, a dedicated system designed for TDM and for the detection of DOA,    marketed by Behring Diagnostics in over thirty countries worldwide. The distribution    agreement, originally signed in 1997, was extended in March 2000. This Viva analyzer was    designed 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 that was developed and is    manufactured for Hycor Biomedical, Inc. of Garden Grove, California. The HY-TEC 288 with a    reagent system that permits the testing of eight (8) autoimmune tests and nine hundred    (900) allergens. 
- The Vitalab 300 semi-automated clinical chemistry analyzer, which permits a full range    of testing including endpoints, kinetic and bichromatic measurements. There is an    installed base of over 12,000 Vitalab semi-automated analyzers worldwide. 
**Marketing and Distribution**
Vital Scientific markets its product line through a direct dealernetwork in Europe, the United States, the Far East, Latin America, Eastern Europe, andChina.

In March 2002, Vital Scientific signed an agreement with Spinreact SAof Sant Esteve d'en Bas, Spain to distribute on an OEM basis certain instrumentationproducts in Spain, Europe, Africa, and certain Spanish speaking countries of LatinAmerica. 

In February 2001, Vital Scientific and AMP Medizintechnik Handels GmbHof Graz, Austria executed an agreement for the distribution of Vital Scientificinstruments in certain Eastern European countries, including Poland and the Balkan States.The territory was formerly covered under an agreement with AVL Medical Instruments AG,Schaffhausen, Switzerland, which was acquired by F. Hoffmann-La Roche AG. Newly formed,AMP Medizintechnik Handels employs many of the sales professionals and service personnelfrom AVL Medical Instruments, who have an in-depth knowledge of the clinical laboratorymarket in Eastern Europe.

In June 1998, Vital Scientific signed an agreement with the WienerLaboratorios SAIC of Rosario, Argentina, for the distribution for Latin America of theVitalab series of clinical chemistry analyzers. Established in 1960, Wiener Lab is theleading independent manufacturer of reagents in South America and is a major marketer ofclinical chemistry instrumentation and reagents in the region. Wiener Lab is responsiblefor both the sales and service of Vital Scientific instrumentation in the territory. InApril 2001, this agreement was extended for a two (2) year period. 
**Product Development**
To develop new products, Vital Scientific and NovaChem maintain aresearch team of mechanical, electronic and systems engineers, augmented by specializedcontract vendors, and further supported by a staff of professionals from acentral-European contract software group. The Company maintains mechanical prototyping andassembly operations that are highly automated.

During fiscal 2002, 2001, and 2000, including capitalization of certainsoftware development costs, the Company spent approximately $1,451,000, $1,552,000, and$2,059,000, respectively, on research and development primarily at Vital Scientific.

In August 2000, the Company announced a strategic alliance withBioMedica Diagnostics Inc. of Windsor, Nova Scotia, for the technology transfer of a bloodclotting detection analyzer and related reagents being developed by BioMedica Diagnostics.The instrument and accessories are to be manufactured by Vital Scientific and the reagentsby BioMedica Diagnostics, and the product jointly distributed by the two companies. Theinstrument and reagents are designed for use in the doctor's office, clinics, for nearpatient testing, and for use in developing countries. The first deliveries are expected inJuly 2002. The Company's Prothrombin Time reagent assay was approved for marketing by theFDA in May 2002 and the other applications are pending to allow the introduction into theU.S. market. 

In July 2001, at the American Association of Clinical Chemistrymeetings in Chicago, the Company introduced the Selectra-XL, a new 360 tests per hour (660tests per hour with ISE electrolytes) patient selective, clinical chemistry analyzer,capable of a wide range of routine, immunologic, and esoteric testing. This instrument,with twice the throughput of the Selectra-E, is designed for use with reagent diagnosticsfrom different sources, and targets larger medical facilities. Vital Scientific believesthat the unique robotic features, the user-friendly, windows-based interface and the widerange of applicable reagents available from several manufacturers will provide its targetmarket with state-of-the-art affordable "walk-away" testing capability. Theproduct is scheduled to be released in the summer of 2002. Aside from our own distributionnetwork, discussions are being held with several potential OEM partners. 

In April 2001, the Company executed an agreement with Boston InnovationInc. of Cambridge, Massachusetts, for the collaborative development and distribution of anon-contacting, micro-volume fluid dispenser. Opportunities to commercialize thisdevelopment are being sought. 

Research and development efforts during fiscal 2003 are expected to bemaintained at a level consistent with fiscal 2002. 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 such as Bayer, Roche Diagnostics, andKone Instruments, and in the OEM field with Integrated Technologies Ltd., MedicalInnovations, Inc., and many other smaller European and American companies. The Companybelieves that it competes on its capabilities, the quality of its products, and itsability 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.
** 

NOVACHEM BV**
Now in its tenth year, NovaChem has developed and markets the IPM-MarkII Process Analyzer. This solid-state instrument, which employs fiber-optic anddiode-array spectroscopic technology, was specifically designed for the on-line andcontinuous process monitoring of gases and liquids.

Using the IPM-Mark II, NovaChem has developed a series of applicationsthat include the monitoring of Claus Plant sulfur recovery; color analysis of petroleumproducts; and the measurement of sulfur dioxide, oxides of nitrogen, and ammonia in stackemissions. The technology has also been proven effective in controlling ethylene glycolmanufacture and in monitoring the production of pharmaceuticals. NovaChem's products areproduction engineered and manufactured by Vital Scientific.

In fiscal 2001, a NovaChem sulfur recovery monitoring system underwenta successful factory acceptance test conducted by a major U.K. engineering company. Theunit was purchased for the Malampaya Deep Water Gas-to-Power project. The US$4.5 billionMalampaya project is being developed by Shell Philippines Exploration B.V. (SPEX), andrepresents the most significant industrial investment in the history of the Philippines.

During fiscal 2002, a system was commissioned at Williams Energy inCanada for the monitoring of ammonia in a polypropylene plant. This is the Company's firstinstallation in Canada.
** 

VITAL DIAGNOSTICS Pty. Ltd.**
Vital Diagnostics was formed in July 1992 under the name Clinical Data(Australia) Pty. Ltd. to distribute diagnostic products in Australia, New Zealand. Inaddition, Vital Diagnostics provides the Company with strategic access to the diagnosticsmarket for market 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 strategic marketingactivities, Vital Diagnostics has aggressively expanded its product line and hascultivated a growing third-party diagnostics distribution business that is ideallypositioned to represent European, American, and Australian companies. 

Vital Diagnostics currently represents the following companies:
- Hycor Biomedical - Urinalysis systems and consumables
- Axis-Shield – Density Gradient Media
- R&R Mechatronics - ESR analyzers
- Vital Scientific - Clinical chemistry analyzers
- AI Analysinstrument AB - Closed tube ESR products
- ABX Hematologie - Cell counters and related reagents
- Psiron Ltd. - Tumor markers and autoimmune assays
- Eurospital – Coeliac Disease Diagnostics
- Diagnostic Grifols - ELISA processors
- Zeus Scientific - ELISA reagents
- DSLabs – ELISA Reagents
- Medicult – ART products

Vital Diagnostics has grown to become one of the leading independentdistributors of diagnostics in Australia through its aggressive growth strategy based onits strong commitment to application support and its "project selling"strategies. During fiscal 2001, Vital Diagnostics launched the Triturus Immunoassay systemin Australia and New Zealand with immediate success with 7 sales being achieved in thefirst year making it the most successful system in the Australasian market. Also during2001, Vital Diagnostics was appointed as a non-exclusive distributor for DSLabs andexpects this product range to provide an excellent fit with the Triturus system. 

On July 1, 2002 the Company will commence the exclusive distribution ofbioMerieux haemostasis products (formerly Organon Teknika) in Australia and New Zealand. 

 
**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 bodiesor the Food and Drug Administration ("FDA") to market products that it maydevelop. Domestically, certain of the Company's products are classified as medical devicesunder the Federal Food, Drug and Cosmetics Act. As such, if and when these products areoffered for sale in the United States, these products are subject to regulation by theFDA. The cost of obtaining such approvals may be high and the process lengthy, with noassurance 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. Anyfailure to receive approvals for the Company's future products, or noncompliance with anyinternational performance standards promulgated in the future, could have a materialadverse effect on the Company. Furthermore, any material change in the existing rules andregulations 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 owns or has applied for patents and trademarks on certainof their products. However, the Company does not believe that its business as a whole isor will be materially dependent upon the protection afforded by such patents ortrademarks, and a substantial majority of the Company's revenues are attributable toproducts without patent protection. 
**Warranty and Product Liability**
Substantially all products are covered by a warranty for workmanshipwhich is the earlier of 12 months from first installation or 15 months from delivery.Warranty claims and related warranty expenses have not been significant.

Vital Scientific maintains product liability insurance in the amount of€4.5 million (or approximately $4.0 million) for the international sales of itslaboratory instrumentation. The Company believes that this level of coverage is adequate,given its past sales levels and its anticipated sales levels for the fiscal year endingMarch 31, 2003. The Company will reevaluate the adequacy of this coverage when and if itssales level substantially increases. No product liability claims have been brought againstthe Company to date. However, there can be no assurance that product liability insurancewill continue to be available to the Company on acceptable terms, or that productliability claims in excess of the Company's insurance coverage, if any, will not besuccessfully asserted against the Company.
**Production and Availability of Raw Materials**
The Company's manufacturing operations require a variety of purchasedcomponents. The Company purchases these components in sufficient quantities to takeadvantage 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, 2002, the Company had abacklog of approximately $1,546,000 as compared to $1,449,000 in 2001. It is anticipatedthat all of the existing backlog will be filled by shipments during fiscal 2003.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 ninety-one (91) full, part-time, and contract employeesas of March 31, 2002. Seventy-eight (78) of these employees are employed by VitalScientific, one (1) by NovaChem, eleven (11) by Vital Diagnostics, and one (1) by NovitronInternational, 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.
**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., 59, 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, 51, Senior Vice President of the Company, iscurrently also the Managing Director of Vital Diagnostics Pty. Ltd. Mr. Tennyenhuis wasformerly the Managing Director of Vital Scientific NV from 1989 to 1991. Before joiningthe Company, he held senior sales and marketing positions with Behring Diagnostics.

Emile Hugen, 57, 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. Description of 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 2008 withrenewal 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.

Vital Diagnostics occupies approximately 3,000 square feet of officeand warehousing space in Castle Hill, New South Wales, under a lease expiring in December2003.

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 Common Equity and Related Stockholder Matters**
a) Market information: The Company's common stock trades on the NASDAQStock Market under the symbol NOVI. The following table sets forth the range of high andlow sale prices per share of Common Stock for each quarter in fiscal 2002 and 2001 asreported by the NASDAQ Stock Market.
       
**Prices**
**Fiscal Year Ended March 31, 2002****High ****Low **First Quarter $   4.25$  3.00Second Quarter$ 10.21$  3.97Third Quarter$ 10.00$  5.00Fourth Quarter$   8.48$  5.51                             
**Fiscal Year Ended March 31, 2001****High ****Low **
First Quarter $   3.50$  2.50
Second Quarter$   3.00$  1.94Third Quarter $   2.38$  1.50
Fourth Quarter $   3.75$  2.06
b) As of March 31, 2002, there were approximately 229 of holders ofrecord of the Company's common stock.

c) The Company has paid a quarterly dividend of $0.01 per share in eachquarter since March 2001, resulting in an annual dividend of $0.04 per share. The    payment of future dividends will be dependent upon financial resultsand other relevant factors to be considered by the Board of Directors.

d) The Company has authorized common stock for issuance under equitycompensation plans as follows: 

 

 

 

Plan Category
**Number of securities to be    issued upon exercise of outstanding options, warrants and rights**
**Weighted average exercise price    of outstanding options, warrants and rights**
**Number of securities remaining    available for future issuance**
Equity compensation plans approved by    security holders
112,580
$2.61
0
Equity compensation plans not approved by    security holders
N/A
N/A
N/A
Total
112,580
$2.61
0
The authorized plans are more fully described in Note 4 in the    accompanying consolidated financial statements. 

 
**Item 6. Management's Discussion and Analysis or Plan of Operations

Critical Accounting Policies and Estimates
The preparation of consolidated financial statements requiresmanagement to make estimates and judgments that affect the reported amounts of assets,liabilities, revenues and expenses, and related disclosure of contingent assets andliabilities. On an ongoing basis, the Company evaluates its estimates, including thoserelated to uncollectible accounts, inventories, product warranty, income taxes, andcontingencies and litigation. The Company bases its estimates on historical experience andon various other assumptions that are believed to be reasonable under the circumstances,the results of which form the basis for making judgments about the carrying values ofassets and liabilities that are not readily apparent from other sources. Actual resultsmay differ from these estimates under different assumptions or conditions.

The Company believes the following critical accounting policies affectits more significant judgments and estimates used in preparation of its consolidatedfinancial statements.

The Company's product sales are recorded at the time when persuasiveevidence of an arrangement exists, delivery has occurred, the price to the buyer is fixedor determinable and collectibility is reasonably assured. A provision is made at the timethe related revenue is recognized for the cost of the estimated cost of productwarranties.

The Company values inventory at the lower of the actual cost topurchase and/or manufacture the inventory or the current estimated market value of theinventory. Inventory quantities on hand are regularly reviewed, and where necessary,provisions for excess and obsolete inventory are recorded based primarily on either ourestimated forecast of product demand and production requirements for the next twelvemonths. A significant increase in the demand for our products could result in a short-termincrease in the cost of inventory purchases while a significant decrease in demand couldresult in an increase in the amount of excess inventory quantities on hand requiringadditional inventory write-downs. The Company has not, in recent history, experienced anysignificant write-downs in inventory. 

The Company maintains allowances for doubtful accounts for estimatedlosses resulting from the inability of its customers to make required payments. If thefinancial condition of the Company's customers were to deteriorate, resulting in animpairment of their ability to make payments, additional allowances may be required. TheCompany has not, in recent history, experienced any significant uncollectible accounts. 
**Liquidity and Capital Resources

The Company has cash and cash equivalents of approximately $1.8 millionand working capital of approximately $3.3 million at March 31, 2002. The Company generatedapproximately $639,000 of cash from operations during the fiscal year ended March 31,2002. The increase was primarily from net income and non-cash expenses offset by workingcapital uses. During fiscal 2002, approximately $381,000 was used in investing activitieschiefly for the purchase of fixed assets and software capitalization. Approximately$21,000 was used in financing activities, including the payment of $58,000 in dividendsoffset by $53,000 received from the exercise of stock options.

In April 1998, the Company entered into a relationship with a majorDutch bank that provides for a €1,815,000 (approximately $1,585,000) line of credit.The line of credit bears interest at 1.25% above the base rate as reported by theNetherlands Central Bank, (or 6.25% at March 31, 2002). Outstanding principal is securedby Vital Scientific trade receivables and inventory. The line of credit requires theCompany to comply with certain financial covenants. As of March 31, 2002, the Company wasin full compliance with such covenants, and there was no principal outstanding.

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 long asthe product is a commercial success. The Company began to ship this product during fiscalyear 1998, evidencing its commercial success. The Company has accrued a total of $538,000related to these development credits which are expected to be repaid over the next 6years. 

The Company's sources of cash include cash balances and theaforementioned lines of credit. The Company believes that available funds will provide itwith sufficient liquidity for the next 12 months.

The effect of foreign currency transaction exchange on the results ofoperations is included in other income (expense) and has not been material to thefinancial statements. The Euro weakened against the U.S. dollar by 2.6% during fiscal year2002 and by 13.6% during fiscal year 2001 from the respective prior fiscal year closingrates.

A significant portion of our balance sheet is denominated in Euros anda minor portion is of balance sheet is denominated in Australian dollars. The effect oftranslation of these local currencies into U.S. dollars for reporting purposes isreflected as a separate component of stockholders' investment on the balance sheet. 

The Company enters into foreign exchange forward contracts to reducethe exposure to currency fluctuations on customer accounts receivable denominated inforeign currency. The objective of these contracts is to minimize the impact of foreigncurrency exchange rate fluctuations on operating results. Derivative financial instrumentsare not used for speculative or trading purposes. There were no foreign exchange forwardcontracts outstanding at March 31, 2002. Gains and losses related to these instruments forfiscal years 2002 and 2001 were not significant. The Company does not anticipate anymaterial adverse effect on our consolidated financial position, results of operations, orcash flows resulting from the use of these instruments. However, there can be no assurancethat these strategies will be effective or that transaction losses can be minimized orforecasted accurately.
**Contractual Commitments and Commercial Obligations
The Company leases facilities, vehicles and computer equipmentprincipally under operating leases. Future minimum lease payments under these operatingleases as of March 31, 2002 are approximately as follows:

**Year Ending March 31,**
**Amount **
2003
$ 317,000
2004
313,000
2005
300,000
2006
289,000
2007
269,000
Thereafter
223,000 
$1,711,000
 

**Results of Operations**
**Fiscal Year Ended March 31, 2002 Compared to Fiscal Year Ended March 31,2001**
Consolidated revenues for fiscal year 2002 increased from $12,927,000to $13,324,000, or 3.1%, as compared to fiscal year 2001. Before foreign currency effects,sales at Vital Scientific increased 6.0% for the year and sales at Vital Diagnosticsincreased 3.5%. The increase was primarily due to improved pricing and a more efficientdistribution network.

The gross margin as a percentage of revenues improved from 29.7% forthe fiscal year ended March 31, 2001 to 32.9% for the year ended March 31, 2002. Theimproved margins were primarily the result of improved efficiencies in productmanufacturing and product mix.

Sales and marketing expenses increased from $1,067,000 to $1,071,000,or less than 1% during 2002.

Total research and development expenses for fiscal year 2002 were$1,292,000 compared to $1,442,000 in fiscal 2001. This decrease reflects efficiencies inthe product development process.

During fiscal 2002 and fiscal 2001, certain software development costs,totaling $170,000 and $111,000, respectively, were capitalized in accordance withStatement of Financial Accounting Standards No. 86, "Accounting for the cost ofComputer Software to be Sold, Leased or Otherwise Marketed." These capitalized costsare amortized over a period not to exceed 5 years, commencing when the product iscommercially released. Amortization of these costs is included in cost of revenues andtotaled $152,000 in fiscal 2002 and $257,000 in fiscal 2001.

General and administrative expenses decreased from $1,886,000 to$1,707,000, or approximately 9.5%, as compared to the previous year. The decrease isprimarily due to the effects of a $121,000 provision for bad debts in fiscal 2001. 

Interest income increased $21,000 and interest expense decreased$10,000 from the prior year due to the increase in invested cash balances.

Other income and expense decreased from $1,284,000 in fiscal 2001 to$49,000 in fiscal 2002. This fluctuation is chiefly due to approximately $1,244,000 inother income recognized from the termination agreements between AVL Medical Instruments AGand the Company's subsidiaries, Vital Scientific and Vital Diagnostics. 

The provision for income taxes decreased from $321,000 in fiscal 2001to $141,000 in fiscal 2002. The effective rate in fiscal 2002 was 34%, as compared to 43%in 2001. The rate in fiscal year 2002 reflects the use of a foreign net operating losscarryforward and lower statutory rates. The effective rate in fiscal year 2001 increasedbecause there were foreign net operating losses which were not benefited and nondeductibleamortization offset by lower statutory rates and an untaxed dividend from a group company.
**Fiscal Year Ended March 31, 2001 Compared to Fiscal Year Ended March 31,2000**
Consolidated revenues for fiscal year 2001 decreased from $14,183,000to $12,927,000, or 8.8%, as compared to fiscal year 2000. For the year, before foreigncurrency effects, sales at Vital Scientific increased 3.1%; sales at Vital Diagnosticsincreased 7.0% and sales at NovaChem increased 6.8%. The increase was primarily due toimproved pricing and a more efficient distribution network.

The gross margin as a percentage of revenues decreased from 34.1% forthe year ended March 31, 2000 to 29.7% for the year ended March 31, 2001. The decreasedmargin resulted from (i) a reduction in contract research revenues, the associated costsof which were not included in cost of revenues, from fiscal 2000 to fiscal 2001, (ii) awrite-down of inventory related to a terminated research and development project, and(iii) an adjustment of amortization of capitalized software development costs.

Sales and marketing expenses increased from $849,000 to $1,067,000, or25.7%, during fiscal year 2001. The increase is primarily the result of increasing salesactivities at Vital Scientific and NovaChem offset by a decrease in sales expenses atVital Diagnostics.

Research and development expenses were $1,442,000 and $2,012,000, forthe years ended March 31, 2001 and 2000, respectively. The decrease is principally due tocost savings from contracting certain software development activities to lower costproviders and a realignment of development spending consistent with revenues.

During fiscal 2001, certain software development costs, totaling$111,000 were capitalized in accordance with Statement of Financial Accounting StandardsNo. 86, "Accounting for the cost of Computer Software to be Sold, Leased or OtherwiseMarketed." These capitalized costs are amortized over a period not to exceed 5 years,commencing when the product is commercially released. No costs were capitalized duringfiscal year 2000. Amortization of these costs is included in cost of revenues and totaled$257,000 in fiscal 2001 and $39,000 in fiscal 2000.

General and administrative expenses increased from $1,823,000 to$1,886,000 from fiscal year 2000 to fiscal year 2001. The increase is primarily from thewrite-off of a receivable.

Interest income increased $28,000 as a result of increased fundsavailable for investment. Interest expense increased $1,300. 

Other income increased from $114,000 to $1,284,000 in fiscal 2000 and2001, respectively. The increase is principally from due to approximately $1,244,000 inpayments received for the termination of distribution agreements between AVL MedicalInstruments AG and the Company's subsidiaries, Vital Diagnostics and Vital Scientific.

The provision for income taxes increased from $53,000 in fiscal 2000 to$321,000 in fiscal 2001. The effective rate in fiscal year 2001 was 43% as compared to 31%in fiscal year 2000. The effective rate in fiscal year 2001 increased because there wereforeign net operating losses which were not benefited and nondeductible amortizationoffset by lower statutory rates and an untaxed dividend from a group company. Theeffective rate in fiscal year 2000 reflects the use of foreign net operating losscarryforwards and lower statutory tax rates offset by domestic and foreign net operatinglosses which were not benefited.
**Recently Issued Accounting Standards**
In August 2001, the FASB issued SFAS No. 144, "Accounting for theImpairment or Disposal of Long-Lived Assets," which addresses financial accountingand reporting for the impairment or disposal of long-lived assets. This Statementsupersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and forLong-Lived Assets to Be Disposed Of," and the accounting and reporting provisions ofAPB Opinion No. 30, "Reporting the Results of Operations-Reporting the Effects ofDisposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently OccurringEvents and Transactions," for the disposal of a segment of a business. This statementis effective for the Company on April 1, 2002. SFAS No. 144 is not expected to have asignificant impact on the Company’s financial position and results of operations.
**Item 7. Financial Statements**
See Index to the Company's Financial Statements filed as part of thisForm 10-KSB.
**Item 8. Changes in and Disagreements with Accountants on Accounting andFinancial Disclosure**
On June 26, 2002, the Company dismissed Arthur Andersen LLP as itsindependent accountant, an action approved by the Board of Directors. The audit opinionfor the fiscal year ended March 31, 2001 did not contain either an adverse opinion or adisclaimer nor was the opinion modified. There were no disagreements with Arthur AndersenLLP.

Deloitte & Touche has been engaged as the Company's independentauditors effective for the audit of the fiscal year ended March 31, 2002. There have beenno disagreements with Deloitte & Touche.

In reliance on the Securities and Exchange Commission Release No.34-45589, the Company intends to file audited financial statements for the year endedMarch 31, 2002 by August 29, 2002.
**PART III

Item 9. Directors, Executive Officers, Promoters and ControlPersons; Compliance With Section 16(a) of the Exchange Act.

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 2002 Proxy Statement for itsAnnual Meeting of Stockholders to be held on September 27, 2002.
**Item 10. Executive Compensation**
The information required by this item is incorporated herein byreference to the section entitled "Compensation of Executive Officers" in theCompany's definitive 2002 Proxy Statement for its Annual Meeting of Stockholders to beheld on September 27, 2002.
**Item 11. 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 2002 Proxy Statement for its Annual Meetingof Stockholders to be held on September 27, 2002.
**Item 12. 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 2002 Proxy Statement for its Annual Meeting of Stockholders to beheld on September 27, 2002.
**Item 13. Exhibits, Financial Statement Schedules and Reports on Form8-K
(a) Documents filed as part of this Form 10-KSB 
1. Financial Statements. The Financial Statements listed in        the Index to Consolidated Financial Statements are filed as part of this Form 10-KSB.

2. Financial Statement Schedules. The Financial Statement        Schedules listed in the Index to Consolidated Financial Statements are filed as part of        this Form 10-KSB.

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-KSB.

(b) Reports on Form 8-K
1. Change in outside auditors 
** 

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.

                       NOVITRONINTERNATIONAL, INC.
Dated: July 15, 2002
/s/ Israel M. Stein, M.D.Israel M. Stein, M.D.
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: July 15, 2002 /s/ Israel M. Stein, M.D.Israel M. Stein, M.DChairman of the Board, Principal Executive Officer
Date: July 15, 2002 /s/ Arthur B. Malman
Arthur B. Malman    DirectorDate: July 15, 2002 /s/ Alexander ShermanAlexander Sherman    Director
 
 

Novitron International, Inc.ANDSUBSIDIARIES

 

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
**Consolidated Financial Statements
Page
Previously Issued Report of Independent Public    Accountants (Arthur Andersen LLP) 
20Consolidated Balance Sheets at March 31, 2002 (unaudited) and 2001
21Consolidated Statements of Operations for the Years Ended March 31, 2002    (unaudited), 2001, and 2000 23
Consolidated Statements of Stockholders' Equity for the    Years Ended March 31, 2002 (unaudited), 2001, and 200024
Consolidated Statements of Cash Flows for the Years    Ended March 31, 2002 (unaudited), 2001, and 200025Notes to Consolidated Financial Statements27**Consolidated Financial Statement Schedule**
Schedule II -Valuation and Qualifying Accounts
41** **
 

***This Annual Report on Form 10-K contains unaudited financialstatements for the year ended March 31, 2002 in lieu of audited financial statements forsuch period because the Company elected not to have Arthur Andersen LLP issue a manuallysigned audit report in respect of the Company's financial statements for the year endedMarch 31, 2002 in reliance on Securities and Exchange Commission Release No. 34-45589. TheCompany intends to file financial statements for the year ended March 31, 2002 audited byfiling an amendment to this Annual Report on Form 10-K by August 29, 2002.***

 

 

**The following report is a copy of a previously issued report,issued by Arthur Andersen LLP. The report has not been reissued by Arthur Andersen LLP.****Thereport has not been reissued by Arthur Andersen LLP. Reference is made in this report tothe consolidated balance sheet as of March 31, 2000 and to the consolidated statements ofoperations, stockholders' investment and cash flows for the year ended March 31, 1999;such statements do not appear in this Annual Report.**

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Novitron International, Inc.:

We have audited the accompanying consolidated balance sheet of NovitronInternational, Inc. (a Delaware corporation) and subsidiaries as of March 31, 2001 and2000, and the related consolidated statements of operations, stockholders' investment andcash flows for each of the three years in the period ended March 31, 2001. These financialstatements and the accompanying schedule are the responsibility of the Company'smanagement. Our responsibility is to express an opinion on these financial statementsbased 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, 2001 and 2000, and the results of their operations andtheir cash flows for each of the three years in the period ended March 31, 2001, 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 LLPBoston, Massachusetts

June 20, 2001
** 

 

** 
CONSOLIDATED BALANCE SHEETSMARCH 31, 2002 AND 2001****ASSETS                                                       
**2002**(unaudited)
**2001****CURRENT ASSETS:               
Cash and cash equivalents
$1,775,903
$1,538,295
Accounts receivable, less    allowances for uncollectible accounts of $194,345 and $203,845 in 2002 and 2001,    respectively
2,519,274
2,259,115
Inventories, net 
2,878,620
2,775,196
Prepaid expenses and other    current assets
401,640
413,623
Total current assets
7,575,437
6,986,229                                                         **EQUIPMENT, at cost:                                   
Manufacturing and computer    equipment
2,062,352
2,406,497
Leasehold improvements
334,812
373,882
Furniture and fixtures
299,560
365,179
Vehicles
64,258
60,639                     
2,760,982
3,206,197
Less: Accumulated depreciation    and amortization
2,048,825
2,375,637         
712,157
830,560**OTHER ASSETS, net
524,668
498,091                              
**$8,812,262**
**$ 8,314,880***See notes to the consolidated financial statements.*** **
 

**CONSOLIDATED BALANCE SHEETSMARCH 31, 2002 AND 2001**

(Continued)
**LIABILITIES AND STOCKHOLDERS' EQUITY** 
**2002**    (unaudited)
**2001****CURRENT LIABILITIES:                      
Current portion of long-term debt
$ 6,689
$ 11,701
Accounts payable
2,710,373
2,277,399
Accrued expenses
1,321,619
1,477,301
Customer advances
17,600
14,351
Accrued income taxes
220,599
187,012
Total current liabilities
4,276,880
3,967,764**MINORITY INTEREST
48,436
37,747**LONG-TERM DEBT, net of current portion
15,233
19,263**DEFERRED TAXES
158,985
231,368                                             **COMMITMENTS AND CONTINGENCIES: (Note    3)                                            **STOCKHOLDERS' EQUITY:                   
Preferred stock, $.01 par value,      Authorized: 1,000,000 shares      Issued and outstanding: none    Common stock, $.01 par value,      Authorized: 6,000,000 shares      Issued: 1,488,010 and 1,452,277 in 2002 and 2001,        respectively       Outstanding: 1,474,010 and 1,438,427 in 2002 and 2001,        respectively  
14,880 
14,522
Additional paid-in capital
4,914,015
4,866,785
Accumulated other comprehensive loss
(834,075)
(841,241)
Retained earnings 
259,407
58,998
Treasury stock, 14,000 and 13,800 shares at    cost in 2002 and      2001, respectively
(41,499)
(40,326)
Total stockholders' equity
4,312,728
4,058,738 
**$ 8,812,262**
**$ 8,314,880***See notes to the consolidated financial statements.*
 

 
**CONSOLIDATED STATEMENTS OF OPERATIONSFOR THE YEARS ENDED MARCH 31, 2002, 2001 AND 2000** 
**2002     (unaudited)**
**2001**
**2000**
REVENUES
$ 13,323,708
$12,927,493
$14,182,636
COST OF REVENUES 
8,936,257
9,087,066
9,352,611
Gross profit
4,387,451
3,840,427
4,830,025
OPERATING EXPENSES:                       
Sales and marketing
1,071,470
1,067,269
848,818
Research and development
1,292,234
1,441,762
2,012,237
General and administrative
1,706,597
1,886,475
1,823,131
Restructuring
-
- 
74,876           
4,070,301
4,395,506
4,759,062
Income (loss) from operations
317,150
(555,079)
70,963
Interest expense
(16,773)
(27,138)
(25,779)
Interest income 
60,879
39,381
11,823
Other income (expense), net
48,468
1,283,860
113,711          
409,724
741,024
170,718                             
Provision for income taxes
141,000
321,000
53,000 
268,724
420,024
117,718
Minority interest expense
(10,690)
(16,930)
(10,139)
Net income 
$ 258,034
$ 403,094
$ 107,579
Basic net income per share
$ 0.18
$ 0.28
$0.07
Diluted net income per share
$ 0.17
$ 0.27
$ 0.07    
Weighted Average Shares:       Basic
1,454,600
1,443,061
1,442,046  
  Diluted 
1,514,344
1,493,463
1,511,685*See notes to the consolidated financial statements.*** 

 

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITYFOR THE YEARS ENDED MARCH 31, 2002, 2001 AND 2000**   **Common    Stock**Additional    Paid-in Capital**Treasury    Stock**Retained    Earnings (Deficit)**Accumulated    Other Comprehensive Income (loss)**Comprehensive    Income (Loss)**Number    of Shares**Par    Value
BALANCE at April 1, 1999
1,454,425
$ 14,544
$ 4,881,066
$ (10,177)
$ (437,442)
$ (147,736) 
Issuance of common stock in    connection    with a 10% stock dividend of March 27,    1998
302
3
(3)
- 
- 
- 
-
Exercise of stock options
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)  
Exercise of stock options
7,000
70
4,304
- 
- 
-   
Purchase of treasury stock
- 
- 
- 
(40,326)
- 
-   
Common stock dividend
- 
- 
- 
- 
(14,233)
-   
Translation adjustment
- 
- 
- 
- 
- 
(293,141)
$(293,141)
Net income
- 
- 
- 
- 
403,094
- 
403,094
Total comprehensive income                                                                        
$109,953
BALANCE at March 31, 2001
1,452,227
14,522
4,866,785
(40,326)
58,998
(841,241)        
Exercise of stock options
36,692
367
53,471
- 
- 
-                 
Purchase of treasury stock
- 
- 
- 
(1,173)
- 
-                 
Retirement of common stock
(909)
(9)
(6,241)
- 
- 
-           
Common stock dividend
- 
- 
- 
- 
(57,625)
-                    
Translation adjustment
- 
- 
- 
- 
- 
7,166
$ 7,166
Net income
- 
- 
- 
- 
258,034
- 
258,034
Total comprehensive income                                                          
$265,200
BALANCE at March 31, 2002    (unaudited)
1,488,010
$14,880
$4,914,015
$ (41,499)
$ 259,407
$ (834,075)               *See notes to the consolidated financial statements.*
 
**CONSOLIDATED STATEMENTS OF CASH FLOWSFOR THE YEARS ENDED MARCH 31, 2002, 2001 AND 2000**                   ****2002**    (unaudited)
**2001**
**2000****CASH FLOWS FROM OPERATING ACTIVITIES:                                        
Net income 
$258,034
$ 403,094
$ 107,579
Adjustments to reconcile net income      to net cash provided    by operating activities-                                   
   Depreciation and amortization
493,877
627,090
416,708
   Loss (gain) on sale of    equipment
-
326
-
   Deferred income taxes
(71,151)
119,263
(27,408)
   Minority interest 
10,690
16,930
10,139
Changes in current assets and Liabilities                      
   Accounts receivable
(283,381)
151,555
(44,489)
   Inventories
(129,446)
(609,074)
347,122
   Prepaid expenses and other    current assets
8,451
(40,330)
119,143
   Accounts payable
458,190
34,707
(107,304)
   Accrued expenses
(144,925)
14,619
(428,618)
   Customer advances
3,415
(47,915)
(39,158)
   Accrued income taxes
35,608
138,189
53,717
      Net cash    provided by operating activities
639,362
808,454
407,431                             **CASH FLOWS FROM INVESTING ACTIVITIES:                              
(Increase) decrease in other assets
(20,710)
(69,741)
73,120
Purchase of equipment
(206,537)
(352,014)
(321,792)
Capitalization of software development    costs
(170,254)
(110,690)
-
Proceeds from sale of equipment
-
69,019
15,560
Sale of minority interest
-
3,354
7,324
Other
27,826
(14,881)
(10,186)
      Net cash used    in investing activities
(369,675)
(474,953)
(235,974)*Continues on page 27*
 

 
**CONSOLIDATED STATEMENTS OF CASH FLOWSFOR THE YEARS ENDED MARCH 31, 2002, 2001 AND 2000**
(Continued)
    
**2002**    (unaudited)
**2001**
**2000****CASH FLOWS FROM FINANCING ACTIVITIES:   
(Payments on) proceeds from short-term    notes payable
$(4,966)
$(3,971)
$14,625
(Payments on) proceeds from long-term debt
(3,904)
19,811
(22,377)
Payment of cash dividend
(57,625)
(14,233)
-
Exercise of stock options
53,838
4,374
3,176
Purchase of common stock
(6,250)
-
-
Purchase of treasury stock
(1,173)
(44,389)
(11,676)
      Net cash used    in financing activities
(20,080)
(38,408)
(16,252)                                        
EFFECT OF EXCHANGE RATE CHANGES ON CASH    AND CASH EQUIVALENTS
(11,999)
(83,311)
(115,765)
                                        
NET INCREASE IN CASH AND CASH EQUIVALENTS
249,607
295,093
155,205
                                  
CASH AND CASH EQUIVALENTS BEGINNING OF YEAR
1,538,295
1,326,513
1,287,073                                 
CASH AND CASH EQUIVALENTS END OF YEAR
$1,775,903
$1,538,295
$ 1,326,513                                          Supplemental disclosure of cash flow information:          Cash paid during the year for:                               
             Interest
$ 18,505
$ 25,274 
$ 27,524
              Income taxes
$ 180,933
$ 62,752 
$ 983*See notes to the consolidated financial statements.

Concluded

 ***NOTES TO CONSOLIDATED FINANCIAL STATEMENTSMARCH 31, 2002**
 
**(1) Operations and Accounting Policies**
Novitron International, Inc. ("the Company") is a Delawarecorporation with headquarters in Newton, Massachusetts. The Company’s primaryoperations are focused on scientific instrumentation used in clinical and analyticallaboratories and in process monitoring. Substantially all operations are conducted throughthree operating subsidiaries located in the Netherlands and Australia. The Company's Dutchsubsidiary, Vital Scientific NV, designs and manufactures scientific instrumentationmarketed worldwide through distributors and strategic partnerships. NovaChem BV, also aDutch subsidiary, develops and markets process monitoring technology for petrochemical andenvironmental applications. The Company's Australian subsidiary, Vital Diagnostics PtyLtd., distributes diagnostic instruments and assays in the South Pacific. 

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

Principles of Consolidation

The consolidated financial statements include the accounts of theCompany and its subsidiaries: Vital Scientific NV, NovaChem BV, Clinical Data BV, Spectronetics NV, and Vital Diagnostics, Pty. Ltd. All significant intercompany accountsand transactions have been eliminated in consolidation.

Minority Interest

On May 19, 1999, an officer of Vital Diagnostics purchased 7.5% ofVital Diagnostics, of which 5% vested on such date. The minority interest as shown in thefinancial statements for fiscal year 2000 reflects such vested equity. Pursuant to theterms of the restricted stock purchase agreement, the officer vested in the remaining 2.5%of Vital Diagnostics as of April 1, 2001. The minority interest as shown in the financialstatements as of March 31, 2002 and 2001 reflects the7.5% of Vital Diagnostics as owned by the officer.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash and highly liquid instrumentswith original maturities of 90 days or less.

Inventories

Inventories are stated at the lower of cost (first-in, first-out) ormarket. Inventory quantities are periodically reviewed and, where necessary, provisionsfor excess and obsolete inventories are recorded. 
**(1) Operations and Accounting Policies (continued)

Inventories consist of the following at March 31, 2002 and 2001:
 
**2002**
**2001**
Raw materials
$1,788,217
$1,624,904
Work-in-process
367,168
484,648
Finished goods
723,235
665,644 
$2,878,620
$2,775,196
Revenue Recognition

The Company's product sales are recorded at the time when persuasiveevidence of an arrangement exists, delivery has occurred, the price to the buyer is fixedor determinable and collectibility is reasonably assured. The Company provides a one-yearproduct warranty, and a provision is made at the time the related revenue is recognizedfor the estimated cost of product warranties.

Other income

During the year ended March 31, 2001, the Company recognized $1,244,000of other income related to penalties and settlements received from a former distributor asa result of the termination of the distributor agreement. 

Depreciation and Amortization of Equipment 

The Company provides for depreciation and amortization using thestraight-line method by charges to operations in amounts that amortize 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
Leasehold improvements
Lesser of useful life or life of lease
Furniture and fixtures
3-7 years
Vehicles
3-5 years
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assetsto Be Disposed Of," and SFAS No. 142, "Goodwill and Other IntangibleAssets" require the Company to evaluate whether events and circumstances haveoccurred which indicate that the estimated remaining useful life of long-lived assets maywarrant revision or that the carrying value of these assets may be impaired. No suchimpairments have been recorded. 
**(1) Operations and Accounting Policies (continued)

The Company adopted SFAS No. 142 for its fiscal year beginning April 1,2001. Under SFAS No. 142, goodwill is no longer subject to amortization, but instead issubject to an annual assessment for impairment, or more frequent if circumstances indicatea possible impairment. At March 31, 2002 and 2001, the Company's goodwill relates to itsinvestment in Vital Scientific NV. The Company has determined that the fair value of thereporting unit exceeds the carrying value of the goodwill and, therefore, the Companybelieves no impairment existed at April 1, 2001, the date of adoption, or at March 31,2002. The amount of goodwill that would have been amortized for the year ended March 31,2002 is approximately $24,000.

Net income Per Share 

Basic net income per share is determined by dividing net income by theweighted average shares of common stock outstanding during the year. Diluted earnings pershare reflects the dilutive effect, if any, of potentially dilutive common shares, such ascommon stock options based on the treasury stock method. In fiscal years 2002 and 2001,497 and 12,834 potentially dilutive shares, respectively, were not included in the dilutedweighted average shares outstanding, as they were antidilutive.

The calculations of basic and diluted weighted average sharesoutstanding are as follows:
             
**2002**
**2001**
**2000**
Basic weighted average common shares    outstanding
1,454,600
1,443,061
1,442,046
Dilutive effect of potential common shares
59,744
50,402
69,639
Diluted weighted average shares    outstanding
1,514,344
1,493,463
1,511,685
    Foreign Currency Translation

Assets and liabilities of the Company’s foreign subsidiaries aretranslated to U.S. dollars at year-end exchange rates, and income statement accounts aretranslated at weighted-average rates in effect during the year. Gains and losses fromtranslating assets and liabilities that are denominated in currencies other than therespective functional currency are included in other income (expense) in the consolidatedstatements of operations. For those subsidiaries whose functional currency is other thanthe United States dollar, the translation adjustment into U.S. dollars is credited orcharged to other comprehensive loss, included as a separate component of stockholders'equity in the accompanying consolidated balance sheets.
**(1) Operations and Accounting Policies (continued)

Foreign currency transaction gains and losses are included in otherexpense in the consolidated statements of operations. For fiscal 2002, 2001, and 2000,foreign exchange gain (loss) was $(45,077), $560, and ($10,278), respectively.

Income Taxes 

The Company accounts for income taxes under the provisions of SFAS No.109, "Accounting for Income Taxes." Deferred tax assets and liabilities arerecognized for the future tax consequences of temporary differences between the carryingamounts and tax bases of assets and liabilities and net operating loss carry-forwardsusing rates expected to be in effect when those differences reverse. Valuation allowancesare provided against deferred tax assets that are not expected to be realized.

Management's Use of Estimates

The preparation of financial statements in conformity with accountingprinciples generally accepted in the United States of America requires management to makeestimates and assumptions that affect the reported amounts of assets and liabilities anddisclosure of contingent assets and liabilities at the date of the financial statementsand the reported amounts of revenues and expenses during the reporting period. Actualresults could differ from those estimates.

Research and Development Costs

The Company charges research and development costs for Company-fundedprojects to operations as incurred.

                          Fair Value of Financial Instruments
The estimated fair value of the Company's financial instruments, whichinclude cash equivalents, accounts receivable, accounts payable and long-term debt,approximates their carrying value.

Concentration of Credit Risk

Financial instruments that potentiallysubject the Company to credit risk consist primarily of cash and cash equivalents andaccounts receivable. The Company maintains substantially all of its cash in threefinancial institutions, believed to be of high-credit quality. The Company grants creditto customers in the ordinary course of business and provides a reserve for potentialcredit losses. Such losses have been within management’s expectations. See discussionrelated to significant customers in Note 7 to the combined consolidated financialstatements. **(1) Operations and Accounting Policies (continued)

                        Software Development Costs
The Company has capitalized certain software developmentcosts incurred in connection with the software embedded in an analysis product inaccordance with the provisions of SFAS No. 86, "Accounting for the Costs of ComputerSoftware to be Sold, Leased or Otherwise Marketed." SFAS No. 86 requires the Companyto capitalize those costs incurred for the software development once technologicalfeasibility has been established. Capitalization ends and amortization begins when theproduct is available for sale to the customer. During the years ended March 31, 2002 and2001, the Company capitalized approximately $170,000 and $111,000, respectively, underSFAS No. 86, which is included as a component of other assets in the accompanyingconsolidated balance sheet. There were no amounts capitalized for the year ended March 31,2000.

Amortization is generally recognized on a straight-line basis,generally over 5 years. Unamortized capitalized software development costs determined tobe in excess of net realizable value of the product are expensed immediately. Totalamortization recorded during fiscal years 2002, 2001, and 2000 was approximately $152,000,$257,000 and $39,000, respectively, and is included in the cost of revenues in theaccompanying consolidated statements of operations.

                       Comprehensive Income
Comprehensive income includes charges and credits to equity that arenot the result of transactions with shareholders. Included in other comprehensive incomefor the Company are the cumulative translation adjustments related to the net assets ofthe foreign operations. These adjustments are accumulated within the combined consolidatedstatements of shareholders' equity under the caption accumulated other comprehensive loss.

                       Equity-Based Compensation
SFAS No. 123, "Accounting for Stock-Based Compensation,"encourages but does not require companies to record compensation cost for stock-basedemployee compensation plans at fair value. As permitted by SFAS No. 123, the Company haselected to account for stock-based compensation awarded to employees using theintrinsic-value method prescribed in Accounting Principles Board ("APB") OpinionNo. 25, "Accounting for Stock Issued to Employees," and related interpretationsincluding Financial Accounting Standards Board ("FASB") Interpretation No. 44,"Accounting for Certain Transactions Involving Stock Compensation - Interpretation ofAPB Opinion No. 25," and has adopted the disclosure-only provisions of SFAS No. 123.Accordingly, for financial reporting purposes, compensation cost for stock options grantedto employees is measured as the excess, if any, of the estimated fair market value of theCompany's stock at the date of the grant over the amount an employee must pay to acquirethe stock.
**(1) Operations and Accounting Policies (continued)

Derivative Instruments

The Company adopted SFAS No. 133, "Accounting for DerivativeInstruments and Hedging Activities," effective April 1, 2001, and there was no impacton the Company's consolidated financial position, results of operations or cash flows. Inaccordance with SFAS No. 133, the Company records its foreign currency exchange contractsat fair value in its consolidated balance sheet and the related gains or losses on thesehedge contracts related to anticipated transactions are deferred as a component of othercomprehensive income. Any deferred gains and losses are recognized in income in the periodin which the underlying anticipated transaction occurs.

The Company enters into foreign exchange forward contracts to reducethe exposure to currency fluctuations on customer accounts receivable denominated inforeign currency. The objective of these contracts is to minimize the impact of foreigncurrency exchange rate fluctuations on operating results. Derivative financial instrumentsare not used for speculative or trading purposes. There were no foreign exchange forwardcontracts outstanding at March 31, 2002.Gains and losses related to these instruments for fiscal years 2002 and 2001 were notsignificant. 

Restructuring

In the fourth quarter of fiscal 1999, the Company implemented arestructuring plan at Vital Scientific. During the year ended March 31, 2000, a total of$75,000 was charged against earnings and paid. 

Reclassifications

Certain amounts in the prior year financial statements have beenreclassified to conform to the current year presentation. 

New Accounting Pronouncements

In August 2001, the FASB issued SFAS No. 144, "Accounting for theImpairment or Disposal of Long-Lived Assets." This statement supercedes No. 121,"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to BeDisposed Of," and the accounting and reporting provisions of APB Opinion No. 30,"Reporting the Results of Operations – Reporting the Effects of Disposal of aSegment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events andTransactions." Under this statement it is required that one accounting model be usedfor long-lived assets to be disposed of by sale, whether previously held and used or newlyacquired, and it broadens the presentation of discontinued operations to include moredisposal transactions. The provisions of this statement are effective for the Companybeginning April 1, 2002. The Company does not expect the adoption of this statement tohave a material impact on its financial statements.

 
**(2) Short-Term Notes Payable and Long-Term Debt**
The Company's debt obligations are as follows at March 31, 2002 and2001:
                                   
**2002**
**2001**
Notes payable, bearing interest at 8.5%-8.6%,    with maturities on May 2003 and November 2004 and secured by related equipment
$21,922
$30,964
Less: current portion 
6,689
11,701                                               
$ 15,233
$ 19,263
In April 1998, the Company entered into a line of credit agreement witha financial institution, which provides for €1,815,000 (approximately $1,585,000) ofavailable credit. The line of credit bears interest at 1.25% above the base rate asreported by the Netherlands Central Bank (5.0% at March 31, 2002). Trade receivables andinventories of Vital Scientific are provided as collateral for this facility. The line ofcredit requires the Company to comply with certain financial covenants, which are notconsidered restrictive to the Company's operations. As of March 31, 2002, no amounts wereoutstanding under the agreement.
**(3) Commitments and Contingencies**
The Company leases facilities, vehicles and computer equipmentprincipally under operating leases. Future minimum lease payments under these operatingleases as of March 31, 2002 are approximately as follows:

**Year Ending March 31,**
**Amount**
2003
$ 317,000
2004
313,000
2005
300,000
2006
289,000
2007
269,000
Thereafter
223,000                  
$1,711,000
Rent expense of approximately $315,000, $304,000, and $326,000 wasincurred during fiscal 2002, 2001, and 2000, respectively.

During fiscal year 2002, the Company entered into an agreement withthird party for the development of a fluid handling device. To date, the Company'sinvestment consists of a approximately $27,000, which is included in other long-termassets. The future development and success of this venture is dependent upon finding acommercial partner. The Company is not obligated for any further funding. 
**(4) Stock Option Plans**
The Company established a 1991 Stock Option Plan ("the Plan")and a 1991 Directors' Stock Option Plan ("the Directors' Plan") under which anaggregate of 120,000 shares and 60,000 shares of common stock were reserved, respectively,for the purpose of granting incentive and nonstatutory stock options.

Under the terms of the Plan and the Directors' Plan, all options aregranted 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.

The following table summarizes stock option activity.
                                        
**Weighted Number of Shares**
**Option Price Per Share**
**Average Price**
Outstanding at April 1, 1999
109,834
$0.62-$2.73
$ 0.89
Options granted
5,000
1.88
1.88
Options exercised
(5,000)
0.62
0.62
Options exchanged for minority interest    (Note 1)
(11,062)
0.62
0.62
Options canceled or expired
(10,000)
0.62
0.62
Outstanding at March 31, 2000
88,772
0.62-2.73
1.02
Options granted
11,000
1.94-2.06
1.96
Options exercised
(7,000)
0.62
0.62
Outstanding at March 31, 2001
92,772
0.62-2.73
1.16
Options granted
56,500
3.86-6.60
4.23
Options exercised
(36,692)
0.62-4.25
1.47
Outstanding at March 31, 2002
112,580
$0.62-$6.60
$ 2.61                                            
Exercisable at March 31, 2002
106,580
$0.62-4.25
$2.58
Exercisable at March 31, 2001
82,772
$0.62-2.73
$1.07
Exercisable at March 31, 2000
86,272
$0.62-2.73
$1.00** 

(4) Stock Option Plans (continued)

The range of exercise prices for options outstanding and optionsexercisable at March 31, 2002 is as follows:
 
**Outstanding****Exercisable**
**Price Range**
**Number of Shares**
**Weighted Average Remaining    Contractual Life**
**Weighted Average Exercise Price**
**Number of Shares**
**Weighted Average Exercise Price**
$0.62 - $0.68
41,580
2.56 years
$ 0.68
41,580
$ 0.68
$1.88
5,000
3.83 years
1.88
5,000
1.88
$1.94
6,500
2.68 years
1.94
2,000
1.94
$2.73
5,500
1.47 years
2.73
5,500
2.73
$3.86 - $4.25
52,500
5.22 years
4.16
52,500
4.16
$6.60
1,500
3.67 years
6.60
0
6.60 
112,580
3.83 years
$ 2.61
106,580
$ 2.58
 

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, 2002, 2001, and 2000 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, 2002, 2001,and 2000 are as follows:
                      
**2002**
**2001**
**2000**
Risk-free interest rate
3.50% - 4.63%
5.12% - 5.75%
5.88%
Expected dividend yield
0.28%
0
0
Expected lives
5.95 years
3.82 years
6.00 years
Expected volatility
77.34%
56.69%
101.41%
Weighted average grant date fair value per      share of options granted during the period 
$4.23
$1.96
$1.88
The pro forma effect on the Company of applying SFAS No. 123 torecognize certain compensation expense for the years ended March 31, 2002, 2001, and 2000would be as follows:

**2002**
**2001**
**2000**
Pro forma net income 
$153,312
$397,564
$94,821
Pro forma basic net income per    share
$0.11
$0.28
$0.07
Pro forma diluted net income per    share
$0.10
$0.27
$0.06**(5) Income Taxes**
The provision for income taxes shown in the accompanying consolidatedstatements of operations consists of the following:
                            
**For    the Year Ended March 31,**                                       
**2002**
**2001**
**2000**
**Current:****               ****                    ****                              **
  Domestic
$                -
$                -
$               -
  Foreign
174,000
202,000
33,000
**Total Current**
174,000
202,000
33,000                                                                                                      
**Deferred:**                                               
  Domestic
(8,000)
(34,000)
(247,000)  Foreign
(20,000)
99,000
329,000
  Change in valuation allowance
(5,000)
54,000
(62,000)
**Total Deferred**
(33,000)
119,000
20,000           
$ 141,000
$ 321,000
$ 53,000
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,**    
**2002**
**2001**
**2000**
Provision for taxes at statutory rate
$143,000
$259,000
$60,000
Utilization of foreign net operating    operating loss carryforward
(15,000)
(12,000)
(240,000)
Domestic operating loss not benefited
10,000
5,000
202,000
Foreign operating loss not benefited
1,000
50,000
42,000
Taxes resulting from higher incremental    foreign rate
-
-
1,000
Tax benefit resulting from lower statutory    foreign rate
(29,000)
(35,000)
(29,000)
Tax benefit resulting from dividend not taxed
-
(26,000)
-
Taxes resulting from nondeductible    amortization
4,000
58,000
-
Other 
27,000
22,000
17,000                      
$141,000
$321,000
$53,000** 

(5) Income Taxes (continued)

The approximate income tax effect of each type of temporary differencecomprising the net deferred tax asset at March 31, 2002 and 2001 is as follows: 

    
**2002**
**2001**
Net operating loss carryforwards
$2,675,407
$2,673,979
General business tax credit    carryforwards
9,299
9,299
Other, net
12,421
25,781                     
2,697,127
2,709,059
Less: valuation allowance
2,690,615
2,695,265                         
$ 6,512
$ 13,794
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 hasdetermined, except for the deferred tax asset resulting from the tax temporary differenceswith respect to certain accrued liabilities under Australian tax law for VitalDiagnostics, it does not meet the "more likely than not" standard. Accordingly,the Company has provided a valuation allowance against the deferred tax assets for allitems except for the aforementioned, which is included in other assets.

The tax effect on the components of the deferred tax liability at March31, 2002 and 2001 is as follows:

    
**2002**
**2001**
Capitalized software development    costs
$83,816
$37,669
Depreciation
42,719
65,498
Bad debt reserve
27,737
27,984
Reserves for marketing expense
2,292
53,170
Temporary differences
2,421
47,047        
$158,985
$231,368
The Company has net operating loss carryforwards for U.S. federal andstate tax purposes of approximately $4,478,000 and $1,537,000, respectively; thesecarryforwards will expire from 2003 to 2022. In addition, the Company has available U.S.federal tax credit carryforwards of approximately $9,000. These carryforwards may be usedto offset future taxable income, if any. The federal tax credit carryforwards will expirefrom 2010 to 2012 and are subject to review and possible adjustment by the InternalRevenue Service. There are approximately $4,671,000 in U.S. alternative minimum tax netoperating loss carryforwards that expire between 2008 and 2022.

The Company has foreign net operating loss carryforwards ofapproximately $2,749,000 of which $319,000 are not subject to expiration and $2,430,000that expire between 2003 and 2012.

**(6) Pension Plan**

The Company's subsidiary, Vital Scientific, participates in an employeepension plan. Contributions and expenses incurred by the Company amounted to approximately$122,000, $126,000, and $221,000 during fiscal 2002, 2001, and 2000, respectively.

**(7) Significant Customers**

During fiscal year 2002, the Company had sales of scientific andprocess monitoring equipment to two significant customers amounting to approximately 11%and 11%, respectively of consolidated revenues. Approximately 22% of accounts receivableat March 31, 2002 were receivable from these customers. 

During fiscal year 2001, the Company had sales of scientific andprocess monitoring equipment to one significant customer amounting to approximately 14% ofconsolidated revenues. During fiscal 2000, the Company had sales of scientific and processmonitoring instrumentation to a different significant customer amounting to approximately11% of consolidated revenues. 

**(8) Accrued Expenses**

Accrued expenses consist of the following: **                                       
**2002**
**2001**
Payroll and payroll-related    expenses 
$ 443,421
$ 538,415**Warranty reserves
104,954
110,495**Development credits
538,699
651,983**Other
234,545
176,408**                                                      
$1,321,619
$ 1,477,301**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 long asthe product is a commercial success. The Company began to ship this product during fiscalyear 1998, evidencing its commercial success. The Company has accrued all funding receivedas development credits in the table above.

**(9) Other Assets**

Other assets consist of the following:**                     **2002**2001
Goodwill related to acquisition of    Vital Scientific 
$61,500
$62,367**Capitalized software development    costs, net of accumulated amortization of $550,000 and $402,000 at March 31, 2002 and    2001, respectively 
326,942 
312,457**Other
136,226
123,267**                       
$524,668
$498,091******(10) Segment Information**

SFAS No. 131 establishes standards for reporting information regardingoperating segments. The Company's chief decision-maker, as defined under SFAS No. 131, isthe Chief Executive Officer. To date, the Company has viewed its operations and managesits business as principally three operating segments: the manufacture and sale ofscientific instrumentation (Vital Scientific), the sale of instruments and consumables inAustralia (Vital Diagnostics) and the design and marketing of process monitoringinstrumentation (NovaChem). 

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. Intersegment sales and transfers are not significant.The "All Other" column includes corporate related items, results ofinsignificant operations and, as it relates to segment profit (loss), income and expensenot allocated to reportable segments.

**(10) Segment Information (continued)**

Segment information for the years ended March 31, 2002, 2001, and 2000is as follows: 

**Scientific Instruments**
**Sales Distribution**
**Process Monitoring**
**All Other**
**Consolidated**
**Revenues**                                                                                         
March 31, 2002
$ 10,833,139
$2,087,329
$345,825
$57,415
13,323,708**March 31,    2001
10,504,764
2,180,917
241,812
-
12,927,493**March 31,    2000
11,598,093
2,358,162
226,381
-
14,182,636****Operating    Costs**                                                                   
March 31,    2002
$10,680,329
$1,910,812
$218,212
$197,205
$13,006,558**March 31,    2001
10,998,428
2,072,822
249,046
162,276
13,482,572**March 31,    2000
11,601,194
2,170,925
213,192
126,362
14,111,673****Net    Income (Loss)**                                                                               
March 31, 2002
$147,178
$131,842
$56,946
$(77,932)
$258,034
March 31, 2001
364,117 
208,803
(102,421)
(67,405)
403,094
March 31, 2000
145,452 
231,046
328,047
(596,966)
107,579
**Total    Assets**                                            **March 31, 2002
$7,577,411
$882,242
$76,178
$276,431
$8,812,262**March 31, 2001
7,206,373
767,227
111,864
229,416
8,314,880**March 31, 2000
7,231,455
810,469
33,487
204,005
8,279,416**Geographic information for the years ended March 31, 2002, 2001,and 2000 is as follows: 
**                  **
**Europe**
**Australasia**
**Latin America**
**All Other**
**Consolidated**
**Revenues**              
March 31, 2002$5,370,520$5,181,068
$1,531,842
$1,240,278
$13,323,708**March 31, 2001
7,875,547
2,996,144
1,865,235
190,567
12,927,493**March 31, 2000
9,560,179
3,333,447
963,545
325,465
14,182,636** 

 

SCHEDULE II
**VALUATION AND QUALIFYING ACCOUNTS

MARCH 31, 2002**
 

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

**Additions**
 

**Deductions**
**Balance at End of    Period**
Allowance for Uncollectible    Accounts                                                              
2002 (unaudited)
$ 203,845
$      -
$ 9,500
$ 194,345**2001
$ 99,127
$ 121,689
$ 16,971
$ 203,845**2000
$ 78,999
$ 22,586
$ 2,458
$ 99,127**                                                                                     
Restructuring Charge                                                                                  
2002 (unaudited)
$     - 
$     - 
$     - 
$     - **2001
$     - 
$     - 
$     - 
$     - **2000
$ 50,946
$     - 
$ 50,946
$     - ** 

 
****EXHIBIT INDEX**

ExhibitNumber Description3.1(1)Certificate of Incorporation
3.2(1) Bylaws
3.3(4) Form 10-C dated June 16, 1994 - Change in Name of Issuer effective April    12, 1994.
4.1(1) Article Fourth of the Certificate of Incorporation, as amended (included    in Exhibit 3.1)
10.25(2) 1991 Stock Option Plan and 1991 Directors' Option Plan and forms of option    agreement.
10.26(3) Employment Agreement - Israel M. Stein
16.1(5) Change in independent accountants
22.1(6)Subsidiaries of the Registran
(1) Incorporated by reference to exhibits to the    Registrant's Registration Statement on Form S-1 (File No. 2-82494).    (2) Incorporated by reference to exhibits to the Registration Statement on Form S-8 filed    with the Commission on March 5, 1992.    (3) Incorporated by reference to exhibits to the Registration Statement on Form 10-QSB    filed with the Commission on February 13, 2002.    (4) Incorporated by reference to Form 10-C filed with the SEC on June 16, 1994.    (5) Incorporated by reference to Form 8-K filed with the SEC on June 26, 2002.    (6) Incorporated by reference to Form 10-KSB filed with the SEC on June 25, 2001** ************************************************************************************************************************************************