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, 2003**
( ) 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.(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)    527-9933**
Securities registered pursuant to Section 12(b) of the Exchange Act: None

Securities registered pursuant to Section 12(g) of the Exchange Act:Common Stock, $.01 par 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: $15,869,730

The aggregate market value of the voting Common Stock held bynon-affiliates of the registrant was approximately $2,206,208 based on the average priceof the Common Stock as reported by NASDAQ on June 20, 2003.

As of June 17, 2003, there were 1,880,036 shares of the Registrant'sCommon Stock outstanding.

Documents Incorporated by Reference: Portions of the Company's ProxyStatement for its 2003 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-KSB

For the Year Ended March 31, 2003

Table of Contents

 

Page**PART IItem 1Description of Business
1Item 2Description of Properties
10Item 3Legal Proceedings
10Item 4Submission of Matters to a Vote of Security    Holders
10**PART IIItem 5Market for Common Equity and Related    Stockholder Matters
11Item 6Management's Discussion and Analysis or Plan    of Operation
12Item 7Financial Statements
19Item 8Changes in and Disagreements with Accountants    on Accounting and Financial Statement Disclosure
20**PART IIIItem 9Directors, Executive Officers, Promoters and    Control Persons; Compliance with Section 16(a) of the Exchange Act
20Item 10Executive Compensation
20Item 11Security Ownership of Certain Beneficial    Owners and Management and Related Stockholders' Matters
20Item 12Certain Relationships and Related Transactions
20Item 13Exhibits and Reports on Form 8-K
21Item 14Controls and Procedures
21**Signatures**
22**Certification**
23** **
**PART I**

This annual report on Form 10-KSB contains forward-looking statementswithin the meaning of Section 27A of the Securities Act of 1933, as amended, andSection 21E of the Securities Exchange Act of 1934, as amended. In particular,forward-looking statements regarding the Company's expected performance and financialresults in future periods – which forward-looking statements include words such as"expect(s)", "feel(s)", "believe(s)", "will","would", "may", "anticipate(s)", and similar expressions– are based upon management's current expectations and beliefs and are subject to anumber of known and unknown risks and uncertainties that could cause actual results todiffer materially from those described in the preceding forward-looking statements. Youare cautioned not to place undue reliance on these forward-looking statements which speakonly as of the date of the filing of this 10-KSB. The following factors known tomanagement, among others, could cause actual results to differ materially from thosedescribed in such forward-looking statements: the Company's ability to continue to attractnew customers and obtain new and expanded business opportunities from existing customers;management of the Company's growth; successful integration of the recently acquiredcompanies with the Company's operations; continued growth in demand in the United Statesand abroad for products and consulting services such as those offered by the Company; andthe effect of intensifying competition among a rising number of companies offeringproducts and services similar to those offered by the Company. In addition, the Companyencourages you to review the Company's latest reports filed with the SEC, including theCompany’s Current Report on Form 8-K filed with the SEC on May 12, 2003, whichdescribe a number of additional risks and uncertainties that could cause actual results todiffer materially from those expected in the forward-looking statements made in this Form10-KSB.
**Item 1. Description of Business**
Novitron International, Inc. ("Novitron" or the"Company") is a multinational corporation focusing on scientific instrumentationused in medical, veterinary, and analytical laboratories and in industrial processmonitoring.**The Company has two Dutch subsidiaries, Vital Scientific NV("Vital Scientific") and NovaChem BV ("NovaChem"). Vital Scientificdesigns and manufactures scientific and clinical laboratory instrumentation marketedworldwide through distributors and strategic partnerships.**NovaChem develops andmarkets process monitors with applications in petrochemical and pharmaceutical productionand in environmental monitoring. The Company's Australian subsidiary, Vital DiagnosticsPty. Ltd. ("Vital Diagnostics") distributes diagnostic instruments and assays inthe South Pacific. 

On April 29, 2003, the Company made three major acquisitions which aredescribed in Recent Developments below.
**Company History**
Novitron was established in 1972 as Clinical Data, Inc. to offerambulatory diagnostic physiological monitoring for clinical and research applications. InApril 1994, to better reflect the Company's international scope and diversification, theCompany's name was changed from Clinical Data, Inc. to Novitron International, 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. The Company 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.
**RECENT DEVELOPMENTS**
On April 29, 2003, the Company, Landmark Scientific, Inc.,("Landmark"), a corporation controlled by Randal J. Kirk, a member of the Boardof Directors of the Company ("Mr. Kirk"), and Spectran Holdings, Inc., a whollyowned subsidiary of the Company ("Spectran"), executed an Amended and RestatedAgreement and Plan of Merger (the "Landmark Merger Agreement"), pursuant towhich the Company acquired Landmark by means of a merger (the "Landmark Merger")of Landmark with and into Spectran. The Landmark Merger was consummated on April 29,2003. The Landmark Merger Agreement, which amended and restated the original Agreement andPlan of Merger, dated as of August 21, 2002, in its entirety, was previously filed byNovitron with the Securities and Exchange Commission on May 12, 2003, and such LandmarkMerger Agreement is filed herewith as Exhibit 2.1 and is incorporated herein by reference.

Also on April 29, 2003, the Company, Group Practice ServicesIncorporated, a corporation also controlled by Randal J. Kirk, ("GPSI"),and Clinical Data Inc., a wholly owned subsidiary of the Company ("ClinicalData"), executed an Agreement and Plan of Merger (the "GPSI MergerAgreement") pursuant to which the Company acquired GPSI (the "GPSIMerger"). The GPSI Merger was consummated on April 29, 2003. The GPSI MergerAgreement was previously filed by Novitron with the Securities and Exchange Commission onMay 12, 2003, and such agreement is filed herewith as Exhibit 2.2 and is incorporatedherein by reference. 

Immediately prior to the Landmark Merger and the GPSI Merger, Mr. Kirkand his Affiliates owned approximately 82.8% of the issued and outstanding shares ofcommon stock of GPSI, on an as-converted basis. In addition, Mr. Kirk was the Chairman ofthe Board of each of Landmark and GPSI. Following the Landmark Merger and the GPSI Merger,Mr. Kirk continues to serve on the Board of Directors of each of the survivingcorporations.

GPSI provides of POL management and consulting services in the U.S.Clinical Data designs, implements and manages laboratories to improve quality of care,increase operating efficiencies, and enhance revenue opportunities for physicianpractices. Clinical Data also owns and operates moderately complex reference laboratories,provides sales and support services to Landmark, sells laboratory reagents and supplies,and refurbishes, sells and maintains laboratory equipment. Landmark is a laboratoryequipment distribution company. 

The following summary of certain terms of the Landmark Merger Agreementand the GPSI Merger Agreement is qualified in its entirety by reference to the LandmarkMerger Agreement and the GPSI Merger Agreement, respectively.

Pursuant to the terms of the Landmark Merger Agreement, each holder ofLandmark common stock received 2.5 shares of Series A Nonvoting Convertible PreferredStock, par value $0.01 per share, of the Company (the "Preferred Stock"), foreach share of Landmark common stock held by such holder. Pursuant to the terms of the GPSIMerger Agreement, each holder of common stock and preferred stock of GPSI received 2.42691shares of Preferred Stock for each share of GPSI common stock and preferred stock,respectively, held by that holder. Assuming that no Landmark stockholder or GPSIstockholder exercises appraisal rights, a total of 25,000 shares of Preferred Stock willbe issued to Landmark stockholders as a result of the Landmark Merger and a total of222,250 shares of Preferred Stock will be issued to GPSI stockholders as a result of theGPSI Merger. The Certificate of Designation of the Preferred Stock was previously filed byNovitron with the Securities and Exchange Commission on May 12, 2003, and such Certificateof Designation is filed herewith as Exhibit 4.1 and is incorporated herein byreference. 

Subject to Stockholder Approval at its Special Meeting in lieu ofAnnual Meeting to be held on September 25, 2003, each share of Preferred Stock isconvertible into 10 shares of the Company’s common stock. If such StockholderApproval is obtained, then Mr. Kirk and his Affiliates will beneficially own, in theaggregate, on an as-converted basis, approximately 2,762,627 shares of common stock,representing approximately 71.2% of the approximately 3,881,198 shares of common stockthat would be issued and outstanding (assuming that all shares of Preferred Stock owned byMr. Kirk and his affiliates are converted into common stock but no other shares ofPreferred Stock are converted into common stock). If all of the issued and outstandingshares of Preferred Stock are converted into common stock, then Mr. Kirk and hisAffiliates will beneficially own, in the aggregate, on an as-converted basis,approximately 2,762,627 shares of common stock, representing approximately 63.8% of theapproximately 4,327,048 shares of common stock that would be issued and outstanding.

On April 29, 2003, the Company acquired, through Clinical Data,substantially all of the assets of Elan Diagnostics, Inc. ("EDx"). Theacquisition was made pursuant to an Asset Purchase Agreement, dated as of December 9, 2002(the "Original Asset Purchase Agreement"), as amended on February 10, 2003,March 18, 2003, March 31, 2003 and April 29, 2003, among Elan Pharmaceuticals, Inc., theparent company of EDx ("Parent"), EDx, Clinical Data and the Company (asamended, the "Asset Purchase Agreement"). The Original Asset Purchase Agreementwas previously filed by Novitron with the Securities and Exchange Commission on December9, 2002, and such agreement is filed herewith as Exhibit 2.3 and is incorporated herein byreference. The amendments, dated as of February 10, 2003, March 18, 2003, March 31, 2003and April 29, 2003, were previously filed by the Company with the Securities and ExchangeCommission on May 12, 2003, and such amendments are filed herewith as Exhibits 2.4, 2.5,2.6 and 2.7, respectively, and are incorporated herein by reference. 

EDx supplies clinical chemistry instrumentation, reagents and supportresources to the POL market in the United States. EDx was an indirect, wholly ownedsubsidiary of Elan Corporation, plc, a fully integrated biopharmaceutical companyheadquartered in Dublin, Ireland. 

In accordance with the terms of the Asset Purchase Agreement, theCompany paid approximately $7.5 million in cash and assumed certain liabilities of EDx inexchange for substantially all of the assets of EDx. The Company intends to continue touse the assets acquired from EDx in the manner in which they were previously utilized byEdx.

The Asset Purchase Agreement contains indemnification obligations ofthe Company and Clinical Data as are usual and customary in transactions of this size andtype. In addition, Novitron agreed to indemnification obligations with respect to certainEDx customer and vendor agreements. The Company does not believe these obligations willhave a material adverse effect on its consolidated financial position or results ofoperations.

Financing for the acquisition of the EDx assets was accomplished with$5.5 million of a $10 million line of credit from LaSalle Business Credit, LLC("LaSalle"), a member of the ABN AMRO Group, and from working capital of thecombined companies following the Landmark Merger and the GPSI Merger. 

On April 29, 2003, Clinical Data and BioClinical Concepts, Inc., asubsidiary of Clinical Data as a result of the GPSI Merger ("BCC," and togetherwith Clinical Data, the "Borrowers"), borrowed $5.5 million under the Loan andSecurity Agreement, dated March 31, 2003 (the "Original Loan Agreement"), asamended April 29, 2003, by and among LaSalle and the Borrowers (as amended, the "LoanAgreement"). The Original Loan Agreement and Loan Agreement were previously filedwith the Securities and Exchange Commission on May 12, 2003, and are filed herewith asExhibits 10.1 and 10.2, respectively, and are incorporated herein by reference.

The Loan Agreement provides credit facilities of up to $10 million inloans and letters of credit outstanding at any one time to the Borrowers. All outstandingcredits under the Loan Agreement are payable on demand. The Loan Agreement has an originalterm of three years and automatically renews from year to year if neither LaSalle nor theBorrowers terminate the Loan Agreement.
** 

VITAL SCIENTIFIC NV**
Established in 1956 and headquartered in Spankeren/Dieren, TheNetherlands, Vital Scientific has been the majority of the Company's operations. VitalScientific designs, develops, manufactures, and distributes scientific instrumentation formedical, 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 "private label" or originalequipment manufacturer ("OEM") agreements with major diagnostic companies. Theseinstruments include:

The Vitalab Selectra-XL, a 360 test 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. This product, and each of    the other products listed below, has been cleared for marketing by the U.S. Food and Drug    Administration ("Food and Drug Administration" or "FDA").

The Vitalab Selectra E, Selectra II, and Vitalab Flexor, a    "walk-away" 180 test per hour clinical chemistry analyzer, capable of performing    over 70 different diagnostic tests using reagents from almost all manufacturers. Over four    thousand eight hundred Selectra units have been sold worldwide.

The Vitalab Viva, a dedicated system    designed for TDM and for the detection of DOA, marketed by Dade Behring 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 13,000 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 Europe, Africa, and certain Spanish speaking countries of Latin America. 

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.
**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 andautomated assembly operations.

During fiscal 2003 and 2002, including capitalization of certainsoftware development costs, the Company spent approximately $1,361,000 and $1,462,000,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 Company's Prothrombin Timereagent assay was approved for marketing by the FDA in May 2002 and other applications arepending to allow their introduction into the U.S. market. 

The Company is currently developing the V-Twin for Dade Behring, an OEMversion of the Selectra-XL dedicated for DOA and TDM testing. The Company is alsodeveloping the "Vitalab Junior," a 100 test per hour, "walk-away"clinical chemistry analyzer offering a wide range of testing including clinical chemistry,special proteins, DOA, TDM, and electrolytes, and designed primarily for thephysician’s office laboratories ("POL"), "stat" applications andsmaller laboratories.

Research and development efforts during fiscal 2004 are expected to bemaintained at a level consistent with fiscal 2003. It is anticipated that theCompany’s recently completed acquisitions in the United States (see "RecentDevelopments" above) would not require significant new development investment by theCompany in order to produce products suitable for the U.S. market. 

The Company intends to develop new products where the Company perceivesa demand and believes that the products may be effectively marketed. There is no assurancethat any developments or enhancements will be successfully completed or that, ifdeveloped, any of the products will be successfully marketed.
**Competition**
In developing instruments for private-label sales by third parties, andin marketing directly to distributors, the Company competes with numerous other companies.These include much larger and well-financed companies such as Bayer, Roche Diagnostics,and Kone Instruments, who are direct marketers in this field, and with companies such asIntegrated Technologies Ltd., Medical Innovations, Inc., and many other smaller Europeanand American companies, which are OEM marketers in this field. The Company believes thatit competes favorably on its capabilities, the quality of its products, and its ability tomanufacture and produce its products in a timely fashion.

In the sale of clinical chemistry and immuno-assay analyzers, theCompany is subject to intense competition in the marketplace. Worldwide there are overfifteen companies competing with the Company, many of which have substantially greaterresources. 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 eleventh year, NovaChem has developed and markets theIPM-Mark II 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.
**VITAL DIAGNOSTICS Pty. Ltd.**
Vital Diagnostics distributes diagnostic products in Australia and NewZealand. Vital Diagnostics has aggressively expanded its product line and has cultivated agrowing third-party diagnostics distribution business that is well positioned to representEuropean, 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

Analytica Ltd. - Tumor markers and autoimmune assays

Eurospital – Coeliac Disease Diagnostics

Diagnostic Grifols - ELISA processors

Zeus Scientific - ELISA reagents

DSLabs – ELISA Reagents

bioMerieux (formerly Organon Teknika) - Haemostasis reagents 

PVT – Pre- and Post-analytic automation

Microgen Bioproducts – Niche microbiology kits

On July 1, 2002, Vital Diagnostics commenced the exclusive distributionof bioMerieux haemostasis products in Australia and New Zealand. 

In April 2003, the subsidiary commenced distribution of pre- andpost-analytical laboratory automation developed by PVT Probenverteiltechnik GmbH. Thisaddition to the Vital Diagnostics product line provides a significant opportunity toexpand sales in the diagnostics market.

 
**OTHER BUSINESS MATTERS

Government Regulation**
Where necessary, the Company obtains government approval to market itsproducts and may have to obtain prior approval of certain European regulatory bodies orthe Food and Drug Administration to market products that it may develop. In the U.S.,certain of the Company's products are classified as medical devices under the FederalFood, Drug and Cosmetics Act. As such, if and when these products are offered for sale inthe United States, these products are subject to regulation by the FDA. In Europe, theCompany is also subject to EN13485 and CE (Conformite Europene)****marking andregistration. The cost of obtaining such approvals may be high and the process lengthy,with no assurance that such approvals will be obtained.

To date, neither the FDA nor the European medical regulatory 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 its best efforts to comply with domestic and international standards, whenand if developed, there can be no assurance that all the Company's products will becompliant. Any failure to receive approvals for the Company's future products, ornoncompliance with any international performance standards promulgated in the future couldhave a material adverse effect on the Company and its results of operations. Furthermore,any material change in the existing rules and regulations or any new regulations developedmight adversely affect the Company and its results of operations.

The Company's subsidiaries comply with current European CE regulationsand Vital Scientific is ISO 9001 approved and FDA registered. The Company intends tocomply with the new In-Vitro Diagnostics ("IVD") and CE directives.

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 its 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 for theinternational sales of its laboratory instrumentation in amounts the Company believes areadequate, given its past sales levels and its anticipated sales levels for the fiscal yearending March 31, 2004. The Company will reevaluate the adequacy of this coverage when andif its sales level substantially increases. No product liability claims have been broughtagainst the Company to date. However, there can be no assurance that product liabilityinsurance will continue to be available to the Company on acceptable terms, or thatproduct liability claims in excess of the Company's insurance coverage, if any, will notbe successfully 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 a sufficient number of such components ininventory or has provided vendors with greater lead time for filling orders for suchcomponents.
**Backlog**
At the close of the fiscal year ended March 31, 2003, the Company had abacklog (or order book) of approximately $1,582,000 as compared to $1,546,000 in 2002 Itis anticipated that all of the existing backlog will be filled by shipments during fiscalyear 2004. 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-three (93) full, part-time, and contractemployees as of March 31, 2003. Eighty (80) of these employees are employed by VitalScientific, one (1) by NovaChem, eleven (11) by Vital Diagnostics, and one (1) by NovitronInternational, Inc. As of April 29, 2003, the Company’s workforce now totals twohundred twenty-two (222) full, part-time and contract employees.
**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**
During fiscal year 2003, the Company had sales of scientific andprocess monitoring equipment to one significant customer amounting to approximately 13% ofconsolidated revenues. Approximately 10% of accounts receivable at March 31, 2003 werereceivable from this customer. During fiscal year 2002, the Company had sales ofscientific and process monitoring equipment to two significant customers, each customeramounting to approximately 11% of consolidated revenues.
**Item 2. Description of Properties**
The Company leases approximately 800 square feet of office space inNewton, Massachusetts, under a series of short-term leases.Vital Scientific leases approximately 35,000 square feet in Dieren, The Netherlands. Thefacility is leased until 2008 with renewal and expansion options. NovaChem occupies approximately 300 square feet of office space in Newton, Massachusettsand in Dieren, The Netherlands, under a series of short-term leases.Vital Diagnostics occupies approximately 3,000 square feet of office and warehousing spacein Castle Hill, New South Wales, under a lease expiring in December 2004.The Company believes its current facilities are adequate for its planned needs in the nearfuture.

**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**
Market information: The Company's common stock trades on the NASDAQ    Stock Market under the symbol NOVI. The following table sets forth the range of high and    low sale prices per share of Common Stock for each quarter in fiscal 2003 and 2002 as    reported by the NASDAQ Stock Market.

Prices

Fiscal Year Ended March 31,    2003
High
Low
First Quarter
$7.20
$3.72
Second Quarter
$5.30
$2.40
Third Quarter
$5.50
$3.50
Fourth Quarter
$5.05
$3.60   
Fiscal Year Ended March 31,    2002
High
Low
First Quarter
$3.40
$2.40
Second Quarter
$8.17
$3.18
Third Quarter
$8.01
$4.00
Fourth Quarter
$6.78
$4.41
 

b) As of March 31, 2003, there were approximately 210 holders of recordof 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 paymentof future dividends will be dependent upon financial results and other relevant factors tobe considered by the Board of Directors. In addition, as more fully discussed in the notesto the consolidated financial statements, the new credit facility may restrict theCompany’s ability to pay dividends in the future.

d) On August 14, 2002, the Company announced a 5-for-4 stock split inthe form of a 25% stock dividend with a record date of August 26, 2002 and a distributiondate of September 10, 2002. Share prices in the table above have been restated to reflectthe stock split for all periods presented.

 

e) The Company has authorized common stock for issuance under equity compensation plansas follows as of March 31, 2003: 
**Equity Compensation Plan Information 
 
 

Plan CategoryNumber of securities to be issued upon    exercise of outstanding options, warrants and rightsWeighted average exercise price of outstanding    options, warrants and rightsNumber of securities remaining available for    future issuanceEquity compensation plans approved by security    holders
155,725
$2.66
220,000Equity compensation plans not approved by    security holders
N/A
N/A
N/ATotal
155,725
$2.66
220,000
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 Operation

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 for the estimatedcost of product warranties is made at the time the related revenue is recognized.Historically, product warranties have not been significant. Future changes in warrantycosts could increase or decrease our profitability. Because the majority of theCompany’s sales relate to specific manufactured products with little or nocustomization, the Company has not experienced any significant changes in estimatesrelated to revenue recognition. As discussed below, the Company will be required to adoptEITF 00-21 effective July 1, 2003 and continues to assess the potential impact that thisstandard may have on established revenue recognition policies.

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 our estimatedforecast of product demand for the next twelve months. A significant increase in thedemand for our products could result in a short-term increase in the cost of inventorypurchases while a significant decrease in demand could result in an increase in the amountof excess inventory quantities on hand requiring additional inventory write-downs. TheCompany has not, in recent history, experienced any significant write-downs in inventory. 

The Company maintains allowances for doubtful accounts for estimatedlosses resulting from the inability of its customers to make required payments. Theseestimated allowances are periodically reviewed, analyzing the customers' payment historyand information known to us regarding customers' credit worthiness. If the financialcondition of the Company's customers were to deteriorate, resulting in an impairment oftheir ability to make payments, additional allowances may be required. The Company hasnot, in recent history, experienced any significant uncollectible accounts. 

Because the Company’s operations in the United States have notbeen profitable and the realization of any benefit from these losses was not deemedlikely, no tax benefits have been recorded in respect of U.S. operating losses. As ofMarch 31, 2003, the total U.S. net operating loss carryforwards totaled approximately $4.6million. If the Company were to implement tax planning strategies or obtain sources ofdomestic taxable income, the Company may be able to realize these tax benefits. If andwhen the likelihood of the realization of such tax benefits becomes more likely than not,the valuation allowance that has been provided against these assets will be released,resulting in a tax benefit to the recorded tax provision.
**Liquidity and Capital Resources**
The Company has cash and cash equivalents of approximately $0.8 millionand working capital of approximately $3.3 million at March 31, 2003. The Company usedapproximately $66,000 of cash in operations during the fiscal year ended March 31, 2003.The net cash flows from operations were primarily from net income and non-cash expensesoffset by working capital uses (primarily the increase in accounts receivable andinventory levels). During fiscal 2003, approximately $1,269,000 was used in investingactivities chiefly for the purchase of fixed assets, the payment of software developmentcosts that have been capitalized and costs associated with the recently completedacquisitions. Approximately $2,000 was provided by financing activities, with $70,000being provided by the proceeds from debt and $28,000 from the exercise of stock optionsoffset primarily by $70,000 from the payment of cash dividends and $14,000 of treasurystock purchases.

In April 1998, the Company entered into a relationship with ABN AMRO, amajor Dutch bank and the parent company of LaSalle, that provides for a €1,815,000(approximately $1,976,000) line of credit. The line of credit bears interest at 1.25%above the base rate as reported by the Netherlands Central Bank with a minimum base rateof 3.75%. At March 31, 2003, the base rate was 3.5%, therefore the cost to borrow underthis line of credit would be 5.0%. Outstanding principal is secured by Vital Scientifictrade receivables and inventory. The line of credit requires the Company to comply withcertain financial covenants. As of March 31, 2003, the Company was in compliance with suchcovenants, and there was no principal outstanding.

In March 2003, the Company entered into a line of credit agreement withLaSalle which provides for revolving availability for up to $10,000,000. The line ofcredit bears interest at the rate of either one quarter of one percent in excess of primeor 300 basis points above the LIBOR rate. No principal was outstanding at March 31, 2003.The Loan Agreement has an original term of three years and automatically renews from yearto year if neither LaSalle nor the Borrowers terminate the Loan Agreement. Tradereceivables and inventory of Clinical Data and BCC are provided as collateral for thisfacility. The facility was obtained in connection with the acquisitions described inRecent Developments. Approximately $5,500,000 was drawn on the credit facility to fund thebusiness combinations in April 2003.

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 preferred stock issued in connection with the GPSI and Landmarktransactions discussed under Recent Developments has an annual 10% dividend, first payableon July 1, 2004. In the event the Company does not receive stockholder approval to convertthe preferred stock or the Company receives the approval of the stockholders but is unableto register the common stock, then the Company could be required to pay a preferred stockdividend of up to approximately $1.4 million on July 1, 2004.

A significant portion of the Company’s balance sheet isdenominated in Euros, the functional currency of Vital Scientific, and a minor portion ofour balance sheet is denominated in Australian dollars. The effect of translation of theselocal currencies into U.S. dollars for reporting purposes is reflected as a separatecomponent of stockholders' equity in the balance sheets. The gains or losses from foreigncurrency transactions are included in other income (expense) and have not been material tothe financial statements. The Euro strengthened against the U.S. dollar by 12.5% duringfiscal year 2003 and weakened against the U.S. dollar by 2.6% during fiscal year 2002 fromthe respective prior fiscal year closing rates. The translation of the Company’sresults of operations from the Euro to the U.S. dollar has been significantly impacted bythe changes in these foreign exchange rates.

The Company periodically enters into foreign exchange forward contractsto reduce the exposure to currency fluctuations on customer accounts receivabledenominated in foreign currency. The objective of these contracts is to minimize theimpact of foreign currency exchange rate fluctuations on operating results. Derivativefinancial instruments are not used for speculative or trading purposes. There were noforeign exchange forward contracts outstanding at March 31, 2003. Gains and losses relatedto these instruments for fiscal years 2003 and 2002 were not significant. The Company doesnot anticipate any material adverse effect on our consolidated financial position, resultsof operations, or cash flows resulting from the use of these instruments. However, therecan be no assurance that these strategies will be effective or that transaction losses canbe minimized or forecasted 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, 2003 are approximately as follows:

**Year Ending March 31,**
**Amount**
2004
$ 426,000
2005
417,000
2006
374,000
2007
349,000
2008
289,000 
$1,855,000
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 $444,000related to these development credits which are expected to be repaid over the next 5 yearsfrom a percentage of the revenue derived from the sale of these products. There is noobligation to repay any remaining amounts after 2008.

The Company has approximately $53,000 of outstanding principal oncertain notes payable due through 2007.
**Results of Operations**
The following discussion of our financial condition and results ofoperation should be read in conjunction with our financial statements and the notesthereto. In addition to the historical information presented, there are forward-lookingstatements contained in this discussion and in other parts of this report. Such statementsinvolve risks and uncertainties including, but not limited to, competitive, governmental,economic and technological factors that may affect the Company’s operations,products, markets and services. Our actual results could be materially different fromthose statements anticipated by such forward-looking statements.

Our business will be affected by the three acquisitions completed onApril 29, 2003. Our traditional business was multinational, focusing on scientificinstrumentation used in medical, veterinary and analytical laboratories and in processmonitoring. We wanted to add the capability to serve a growing market of small andmedium-sized medical laboratories in the United States and around the world. Theacquisitions of GPSI, Landmark and substantially all the assets of EDx (described inRecent Developments and in Note 11 in the accompanying notes to consolidated financialstatements) will enable the Company to offer a full range of products and services to thismarket. Our Company can now provide equipment and reagents in addition to laboratorymanagement and consulting services to create a complete solution for our customers.

To acquire this significant component of our business, we have financedthe transactions by using newly-created convertible, non-voting preferred stock, whichupon stockholder approval, may be converted into common stock at a 10-for-1 ratio; and bycash which was, in part, provided under the $10.0 million line of credit referred toabove.

The Company has hired Audrey Ho as Senior Vice President and ChiefOperating Officer, Mark Shooman as Senior Vice President and Chief Financial Officer,Vincent Maietta as Vice President of Manufacturing/Logistics and Caesar Belbel as VicePresident and General Counsel to augment the existing senior management team. In her newposition, Ms. Ho oversees Sales and Marketing and the Customer and Technical Servicesfunctions. Mr. Shooman has the responsibility for the U.S. and international financial andbusiness management and investor relations of the Company. Mr. Maietta is responsible forthe Company’s instrument manufacturing and diagnostic assay production facilities.Mr. Belbel is responsible for all of the Company’s and its subsidiaries’ legaland regulatory affairs.

The following discussion of operating results is of our historicalbusiness.
**Fiscal Year Ended March 31, 2003 Compared to Fiscal Year Ended March31, 2002**
The following table presents our operating results for the years endedMarch 31, 2003 and 2002:
 
**2003**
**2002**REVENUES
$ 15,869,730
$ 13,323,708COST OF REVENUES 
10,928,958
8,936,257Gross profit
4,940,772
4,387,451OPERATING EXPENSES:  Sales and marketing
1,617,934
1,362,133Research and development
1,073,818
1,292,234General and administrative
1,861,685
1,415,934Total operating expenses
4,553,437
4,070,301Income from operations
387,335
317,150Interest expense
(30,838)
(16,773)Interest income 
49,259
60,879Other income (expense), net
(33,220)
48,468Income before provision for income taxes and minority    interest
372,536
409,724Provision for income taxes
(243,000)
(141,000)Minority interest 
(13,858)
(10,690)Net income 
$ 115,678
$ 258,034
Consolidated revenues for fiscal year 2003 increased from $13,324,000to $15,870,000 or 19.1% when compared to fiscal year 2002. 

Before foreign currency effects, sales at Vital Scientific increased by€733,346 ($728,726) or 6.0% for the year and at Vital Diagnostics the increase wasA$948,556 ($536,593) or 23.3%. Sales at Vital Scientific increased from the introductionof new products and improved pricing. The increase at Vital Diagnostics came primarilyfrom the addition of the exclusive distributorship of the bioMerieux haemostasis productline to Vital Diagnostics’ roster of products.

The gross margin as a percentage of revenues declined from 32.9% infiscal 2002 to 31.1% in fiscal 2003. The decrease is principally due from the 12.5%strengthening of the Euro against the US dollar negatively impacted the prices of thoseinventory items which were purchased from suppliers whose invoices were denominated in USdollars.

Sales and marketing expenses increased from $1,362,000 to $1,618,000 or18.8% as compared to fiscal 2002. Before foreign currency effects, sales and marketingexpenses increased by €86,000 ($85,000) or 5.6% which is commensurate with thepercentage increase in sales. The remaining increase is chiefly the effect of thestrengthening of the Euro against the US dollar.

Research and development costs decreased from $1,292,000 in fiscal 2002to $1,074,000 in fiscal 2003 or 16.9%. The decrease is attributable to a continuing trendto use lower cost providers in the research process.

During fiscal years 2003 and 2002, certain software development costs,totaling $287,000 and $170,000, respectively, were capitalized in accordance withStatement of Financial Accounting Standards ("SFAS") No. 86, "Accountingfor the cost of Computer Software to be Sold, Leased or Otherwise Marketed." Thesecapitalized costs are amortized over a period not to exceed 5 years, commencing when theproduct is commercially released. Amortization of these costs is included in cost ofrevenues and totaled $154,000 and $152,000 for fiscal years 2003 and 2002, respectively.

General and administrative expense increased in the current fiscal yearfrom $1,416,000 to $1,862,000 or 31.5%. Approximately $192,000 of the increase is theeffect of the strengthening of the Euro against the US dollar. There was an increase of$70,000 in general and administrative fees for professional fees pertaining to additionalwork related to the April 29, 2003 acquisitions which did not meet the standards forcapitalization and audit related fees. The remainder is commensurate with the increase inthe required support functions for the increase in sales.

Interest income decreased by $11,600 from the prior year while interestexpense increased by $14,000. This reflects the new debt acquired during the year as wellas the reduced cash balances available for investment.

Other income and expense of ($33,200) in fiscal 2003 is principally dueto the loss on foreign currency transactions. In fiscal 2002, a loss on foreign currencytransactions of $45,000 was offset by $80,000 of income recognized from the terminationagreement between AVL Medical Instruments AG and the Company’s subsidiary, VitalScientific.

The provision for income tax increased from $141,000 in fiscal 2002 to$243,000 in fiscal 2003. The effective rate was 34% in 2002 as compared to 65% in 2003.The rate in fiscal year 2002 reflects the use of a foreign net operating loss carryforwardand lower statutory rates. Although the Australian and Dutch tax rates are 30% and 34.5%,respectively, the Company’s provision for income taxes was negatively impacted by thetaxation of foreign dividends (received to partly finance the acquisitions) as Subpart Fincome. It is anticipated in the future that the effective tax rates will return to morehistorical levels.
**Recently Issued Accounting Standards**
In December 2002, the FASB issued SFAS No. 148, "Accounting forStock-Based Compensation – Transition and Disclosure, an amendment of FASB StatementNo. 123", to provide alternative methods of transition for a voluntary change to thefair value based method of accounting for stock-based employee compensation. In additionthis statement amends the disclosure requirements of SFAS No. 123 to require prominentdisclosures in both annual and interim financial statements about the method of accountingfor stock-based employee compensation and the effect of the method used on reportedresults. Management has determined that it will continue to account for stock-basedcompensation to employees under the provisions of APB No. 25 and it will make alldisclosures in its financial reports. The amendments to SFAS No. 148 are effective for theCompany in the financial statements for fiscal years ended March 31, 2003. The disclosurerequirements of SFAS No. 148 have been implemented in Note 1 – Significant AccountingPolicies and the interim disclosure requirements will be adopted by the Company in thefirst quarter of fiscal 2004.

SFAS No. 149, "Amendment of Statement 133 on DerivativeInstruments and Hedging Activities," was issued in April 2003 and amends andclarifies financial accounting and reporting for derivative instruments, including certainderivative instruments embedded in other contracts and for hedging activities under SFASNo. 133. SFAS No. 149 provides greater clarification of the characteristics of aderivative instrument so that contracts with similar characteristics will be accounted forconsistently. In general, SFAS No. 149 is effective for contracts entered into or modifiedafter June 30, 2003, and for hedging relationships designated after June 30, 2003. As theCompany does not currently have any derivative financial instruments, the adoption of SFASNo. 149 is not expected to have any impact on the Company’s consolidated financialstatements. 

In November 2002, the Emerging Issues Task Force reached a consensusopinion on EITF 00-21, "Revenue Arrangements with Multiple Deliverables." Theconsensus provides that revenue arrangements with multiple deliverables should be dividedinto separate units of accounting if certain criteria are met. The consideration for thearrangement should be allocated to the separate units of accounting based on theirrelative fair values, with different provisions if the fair value of all deliverables arenot known of, or if the fair value is contingent on delivery of specified items orperformance conditions. Applicable revenue recognition criteria should be consideredseparately for each separate unit of accounting. EITF 00-21 is effective for the Companyfor revenue arrangements entered into after July 1, 2003. Entities may elect to report thechange as a cumulative effect adjustment in accordance with APB Opinion 20,"Accounting Changes". The Company has not yet determined whether the adoption ofthis standard will have a material impact on the Company’s financial position orresults 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 Accountants (Rotterdam) was subsequently engagedas the Company's independent auditors effective for the audit of the fiscal year endedMarch 31, 2002. Deloitte & Touche LLP (Boston) was subsequently engaged as theCompany’s independent auditors for the audit of the fiscal year ended March 31, 2003.
**PART III

Item 9. Directors, Executive Officers, Promoters and Control Persons;Compliance With Section 16(a) of the Exchange Act.**
The information required by this item is incorporated herein byreference to the table appearing under the caption "Election of Directors" andthe table appearing under the caption "Executive Officers of the Registrant" inthe Company's definitive 2003 Proxy Statement for its Special Meeting in lieu of AnnualMeeting of Stockholders to be held on September 25, 2003.
**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 2003 Proxy Statement for its Special Meeting in lieu of AnnualMeeting of Stockholders to be held on September 25, 2003.
**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 2003 Proxy Statement for its SpecialMeeting in lieu of Annual Meeting of Stockholders to be held on September 25, 2003.
**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 2003 Proxy Statement for its Special Meeting in lieu of AnnualMeeting of Stockholders to be held on September 25, 2003.
**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 Schedule. The Financial    Statement Schedule 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.
Cash Dividend – April 10, 20032.
Press Release announcing the Acquisitions of Group    Practice Services, Inc., Landmark Scientific, Inc. and Elan Diagnostics, Inc. – April    29, 20033.Change in Control of the Registrant and Acquisitions of Group Practice    Services, Inc., Landmark Scientific, Inc. and the assets of Elan Diagnostics, Inc. on    April 29, 2003 – May 12, 2003
 
**Item 14. Controls and Procedures**
The    Company maintains a system of disclosure controls and procedures, including weekly,    monthly and quarterly written reports, that is designed to provide reasonable assurance    that information, which is required to be disclosed, is accumulated and communicated to    management in a timely manner. Management has reviewed this system of disclosure controls    and procedures, and believes that the system is operating in an effective way to ensure    appropriate and timely disclosure. 

There were no significant changes in the Company’s internal    controls or in other factors that could significantly affect these controls subsequent to    the date of management's evaluation.
 

**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 30, 2003 
Chairman of the Board
Principal Financial and Accounting Officer
 

Pursuant to the requirements    of the Securities Exchange Act of 1934, this Report has been signed below by the following    persons on behalf of the Registrant in the capacities and on the dates indicated.Date: June 30, 2003 Israel M. Stein, M.D.
Israel M. Stein, M.D.Chairman of the BoardPrincipal Executive OfficerDate: June 30, 2003 
Larry D. Horner
Larry D. HornerDirectorDate: June 30, 2003Randal J. Kirk
Randal J. KirkDirector Date: June 30, 2003
Arthur B. MalmanArthur B. MalmanDirector
 
**CERTIFICATION** 
I, Israel M. Stein, certify that:

I have reviewed this annual report on Form 10-KSB of Novitron International, Inc.;

Based on my knowledge, this annual report does not contain any untrue statement of a    material fact or omit to state a material fact necessary to make the statements made, in    light of the circumstances under which such statements were made, not misleading with    respect to the period covered by this annual report; 

Based on my knowledge, the financial statements, and other financial information    included in this annual report, fairly present in all material respects the financial    condition, results of operations and cash flows of the registrant as of, and for, the    periods presented in this annual report; 

I am responsible for establishing and maintaining disclosure controls and procedures    (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a. designed such disclosure controls and procedures to ensure that material information      relating to the registrant, including its consolidated subsidiaries, is made known to me      by others within those entities, particularly during the period in which this annual      report is being prepared;

b. evaluated the effectiveness of the registrant's disclosure controls and procedures      as of a date within 90 days prior to the filing date of this annual report (the      "Evaluation Date"); and

c. presented in this annual report my conclusions about the effectiveness of the      disclosure controls and procedures based on my evaluation as of the Evaluation Date;

I have disclosed, based on my most recent evaluation, to the registrant's auditors and    the audit committee of registrant's board of directors (or persons performing the    equivalent functions):

d. all significant deficiencies in the design or operation of internal controls which      could adversely affect the registrant's ability to record, process, summarize and report      financial data and have identified for the registrant's auditors any material weaknesses      in internal controls; and

e. any fraud, whether or not material, that involves management or other employees who      have a significant role in the registrant's internal controls; and

I have indicated in this annual report whether or not there were significant changes in    internal controls or in other factors that could significantly affect internal controls    subsequent to the date of my most recent evaluation, including any corrective actions with    regard to significant deficiencies and material weaknesses./s/ Israel M. Stein MDDate: June 30, 2003Israel M. Stein MDPresident
 

 

 

 

Novitron International, Inc.AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
**Consolidated Financial Statements**
PageIndependent Auditors' Report (Deloitte &    Touche LLP – Boston, Massachusetts)
25Independent Auditors’ Report (Deloitte    & Touche Accountants – Rotterdam, The Netherlands)
26Consolidated Balance Sheets at March 31, 2003    and 2002
27Consolidated Statements of Operations for the    Years Ended March 31, 2003 and 2002
29Consolidated Statements of Stockholders'    Equity for the Years Ended March 31, 2003 and 2002 
30Consolidated Statements of Cash Flows for the    Years Ended March 31, 2003 and 2002 
31Notes to Consolidated Financial Statements
33**Consolidated Financial Statement    Schedule**Schedule II – Valuation and Qualifying    Accounts
48
 

 
 
**INDEPENDENT AUDITORS’ REPORT**

 

To the Stockholders and Board of Directors of Novitron International,    Inc.:

We have audited the accompanying consolidated balance sheet of Novitron    International, Inc. and subsidiaries (the "Company") as of March 31, 2003 and    the related consolidated statements of operations, stockholders' equity and cash flows for    the year then ended. Our audit also included the financial statement schedule for the year    ended March 31, 2003 listed in the Index at Item 13. These financial statements and the    financial statement schedule are the responsibility of the Company's management. Our    responsibility is to express an opinion on these financial statements and the financial    statement schedule based on our audit. 

We conducted our audit in accordance with auditing standards generally    accepted in the United States of America. Those standards require that we plan and perform    the audit to obtain reasonable assurance about whether the financial statements are free    of material misstatement. An audit includes examining, on a test basis, evidence    supporting the amounts and disclosures in the financial statements. An audit also includes    assessing the accounting principles used and significant estimates made by management, as    well as evaluating the overall financial statement presentation. We believe that our audit    provides a reasonable basis for our opinion.

In our opinion, such 2003 consolidated financial statements present    fairly, in all material respects, the financial position of Novitron International, Inc.    and subsidiaries as of March 31, 2003 and the results of their operations and their cash    flows for the year then ended, in conformity with accounting principles generally accepted    in the United States. Also, in our opinion, such 2003 financial statement schedule, when    considered in relation to the basic 2003 consolidated financial statements taken as a    whole, presents fairly in all material respects the information set forth therein.

/s/ DELOITTE & TOUCHE LLP    Boston, Massachusetts    June 13, 2003
 

 

 
**INDEPENDENT AUDITORS’ REPORT**
 

To the Stockholders and Board of Directors of Novitron International,    Inc.:

We have audited the accompanying consolidated balance sheet of Novitron    International, Inc. and subsidiaries (the "Company") as of March 31, 2002 and    the related consolidated statements of operations, stockholders' equity and cash flows for    the year then ended. Our audit also included the financial statement schedule for the year    ended March 31, 2002 listed in the Index at Item 13. These financial statements and the    financial statement schedule are the responsibility of the Company's management. Our    responsibility is to express an opinion on these financial statements and the financial    statement schedule based on our audit. 

We conducted our audit in accordance with auditing standards generally    accepted in the United States of America. Those standards require that we plan and perform    the audit to obtain reasonable assurance about whether the financial statements are free    of material misstatement. An audit includes examining, on a test basis, evidence    supporting the amounts and disclosures in the financial statements. An audit also includes    assessing the accounting principles used and significant estimates made by management, as    well as evaluating the overall financial statement presentation. We believe that our audit    provides a reasonable basis for our opinion.

In our opinion, such 2002 consolidated financial statements present    fairly, in all material respects, the financial position of Novitron International, Inc.    and subsidiaries as of March 31, 2002 and the results of their operations and their cash    flows for the year then ended, in conformity with accounting principles generally accepted    in the United States. Also, in our opinion, such 2002 financial statement schedule, when    considered in relation to the basic 2002 consolidated financial statements taken as a    whole, presents fairly in all material respects the information set forth therein.

/s/ DELOITTE & TOUCHE ACCOUNTANTS    Rotterdam, The Netherlands    July 26, 2002
 

 
 
**CONSOLIDATED BALANCE SHEETS    MARCH 31, 2003 AND 2002****ASSETS**             
**2003**
**2002****CURRENT ASSETS:**             
Cash and cash equivalents
$ 798,918
$1,775,903
Accounts receivable, less    allowances for uncollectible accounts of $97,617       and $194,345 in 2003 and 2002, respectively
3,461,075
2,519,274
Inventories, net 
4,148,273
2,878,620Prepaid expenses and other current assets
479,518
401,640Total current assets
8,887,784
7,575,437                                     **EQUIPMENT, at cost:               
Manufacturing and computer    equipment
3,074,936
2,062,352Leasehold improvements
444,003
334,812
Furniture and fixtures
391,985
299,560Vehicles
88,447
64,258                    
3,999,371
2,760,982Less: Accumulated depreciation and amortization
2,956,147
2,048,825                   
1,043,224
712,157                     **OTHER ASSETS**, net
1,266,759
524,668                       
**$11,197,767**
**$8,812,262*** 
*See notes to the consolidated    financial statements.*

* 
 

 *
 
**CONSOLIDATED BALANCE SHEETS    MARCH 31, 2003 AND 2002(Continued)**LIABILITIES AND STOCKHOLDERS' EQUITY**                                                                     
**2003**
**2002****CURRENT LIABILITIES:**         
Current portion of long-term debt
$ 29,227
$ 6,689
Accounts payable
3,332,395
2,710,373
Accrued expenses
1,902,842
1,321,619
Customer advances
48,617
17,600Accrued income taxes
235,049
220,599Total current liabilities
5,548,130
4,276,880**MINORITY INTEREST**
62,294
48,436**LONG-TERM DEBT**, net of current portion
23,971
15,233**DEFERRED TAXES**
217,383
158,985                         **COMMITMENTS AND CONTINGENCIES:** (Note 3)                                               **STOCKHOLDERS' EQUITY:                 
Preferred stock, $.01 par value,        Authorized: 1,000,000 shares        Issued and outstanding: none 
-  
- 
Common stock, $.01 par value,       Authorized: 6,000,000 shares       Issued: 1,874,974 and 1,488,010 at March 31, 2003 and 2002,          respectively        Outstanding: 1,854,486 and 1,474,010 at March 31, 2003 and 2002,          respectively  
18,750 
14,880
Additional paid-in capital
4,937,890
4,914,015
Retained earnings 
305,251
259,407
Treasury stock, 20,488 and 14,000 shares    at cost March 31, 2003 and         2002, respectively
(55,724)
(41,499)Accumulated other comprehensive income (loss)
139,822
(834,075)Total stockholders' equity
5,345,989
4,312,728                
**$ 11,197,767**
**$ 8,812,262**
*See notes to the consolidated    financial statements.** *
 
** 
CONSOLIDATED STATEMENTS OF OPERATIONS    FOR THE YEARS ENDED MARCH 31, 2003 AND 2002                
**2003**
**2002**REVENUES
$ 15,869,730
$ 13,323,708COST OF REVENUES 
10,928,958
8,936,257  Gross profit
4,940,772
4,387,451OPERATING EXPENSES:                     Sales and marketing
1,617,934
1,362,133  Research and development
1,073,818
1,292,234  General and administrative
1,861,685
1,415,934                         Total operating expenses
4,553,437
4,070,301Income from operations
387,335
317,150Interest expense
(30,838)
(16,773)Interest income 
49,259
60,879Other income (expense), net
(33,220)
48,468Income before provision for income taxes and minority    interest
372,536
409,724Provision for income taxes
(243,000)
(141,000)Minority interest 
(13,858)
(10,690)Net income 
$ 115,678
$ 258,034Basic net income per share
$ 0.06
$ 0.14Diluted net income per share
$ 0.06
$ 0.14                                       
Weighted Average Shares:                    Basic
1,847,288
1,818,250  Diluted 
1,912,794
1,892,930
*See notes to the consolidated    financial statements.*** 

 

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY    FOR THE YEARS ENDED MARCH 31, 2003 AND 2002        **Common Stock **                         **Number    of Shares**Par    Value**Additional    Paid-in Capital**Treasury    Stock**Retained    Earnings**Accumulated Other    Comprehensive Income (loss)****Total**Comprehensive Income    (Loss)**BALANCE at April 1, 2001
1,452,227
$ 14,522
$ 4,866,785
$ (40,326)
$ 58,998
$ (841,241)
$4,058,738 Exercise of stock options
36,692
367
53,471
- 
- 
- 
53,838               Purchase of treasury stock
- 
- 
- 
(1,173)
- 
- 
(1,173)         Retirement of common stock
(909)
(9)
(6,241)
- 
- 
- 
(6,250)        Dividends paid
- 
- 
- 
- 
(57,625)
- 
(57,625)                  Translation adjustment
- 
- 
- 
- 
- 
7,166
7,166
$ 7,166Net income
- 
- 
- 
- 
258,034
- 
258,034
258,034Total comprehensive income                                                              
$265,200BALANCE at March 31, 2002
1,488,010
14,880
4,914,015
(41,499)
259,407
(834,075)
4,312,728    Issuance of common stock in connection with        the 5-for-4 stock split
371,964
3,720
(3,720)
-
-
-
-             Exercise of stock options
15,000
150
27,595
- 
- 
- 
27,745        Purchase of treasury stock
- 
- 
-
(14,225)
- 
- 
(14,225)        Dividends paid
- 
- 
- 
- 
(69,834)
- 
(69,834)         Translation adjustment
- 
- 
- 
- 
- 
973,897
973,897
$ 973,897Net income
- 
- 
- 
- 
115,678
- 
115,678
115,678Total comprehensive income                                                       
$1,089,575BALANCE at March 31, 2003
1,874,974
$18,750
$4,937,890
$ (55,724)
$ 305,251
$ 139,822
$5,345,989             
*See notes to the consolidated    financial statements.*
 

 
**CONSOLIDATED STATEMENTS OF CASH FLOWS    FOR THE YEARS ENDED MARCH 31, 2003 AND 2002     
**2003**
**2002****CASH FLOWS FROM OPERATING    ACTIVITIES:      
Net income 
$115,678
$258,034
Adjustments to reconcile net    income to net cash provided by (used in) operating activities-                       
  Depreciation and    amortization
639,645
493,877  Deferred income taxes
17,507
(71,151)
  Minority interest 
13,858
10,690Changes in current assets and liabilities                                     
  Accounts receivable
(292,425)
(283,381)  Inventories
(510,783)
(129,446)  Prepaid expenses and other current assets
18,676
8,451
  Accounts payable
(36,742)
458,190
  Accrued expenses
(20,933)
(144,925)  Customer advances
24,349
3,415  Accrued income taxes
(35,210)
35,608                                      
           Net cash (used in) provided by operating activities
(66,380)
639,362                                                       **CASH FLOWS FROM INVESTING    ACTIVITIES:                                                  
  (Increase) decrease in    other assets
(160,415)
834
  Acquisition costs    capitalized
(228,836)
(21,544)
  Purchase of equipment
(655,735)
(206,537)
  Capitalization of    software development costs
(287,375)
(170,254)  Other
63,057
27,826
                                                           Net    cash used in investing activities
(1,269,304)
(369,675)
*Continues*
 

 
**CONSOLIDATED STATEMENTS OF CASH FLOWS    FOR THE YEARS ENDED MARCH 31, 2003 AND 2002 (Continued)                        
**2003**
**2002****CASH FLOWS FROM FINANCING ACTIVITIES:**         
  Proceeds from debt
$ 70,350
$ -
  Payments on long-term    debt
(11,749)
(8,870)
  Payment of cash    dividend
(69,834)
(57,625)
  Exercise of stock    options
27,745
53,838
  Retirement of common    stock
-
(6,250)  Purchase of treasury stock
(14,225)
(1,173)
                                               Net cash    provided by (used in) financing activities
2,287
(20,080)                                   
EFFECT OF EXCHANGE RATE CHANGES ON CASH    AND        CASH  EQUIVALENTS
356,412
(11,999)                                   NET (DECREASE) IN CASH AND CASH INCREASE        EQUIVALENTS
(976,985)
237,608                                           CASH AND CASH EQUIVALENTS BEGINNING OF YEAR
1,775,903
1,538,295                                                                           CASH AND CASH EQUIVALENTS END OF YEAR
$798,918
$1,775,903                                                                                              Supplemental disclosure of cash flow information:                                              Cash paid during the year for:                                                    Interest
$30,321
$18,505       Income taxes
$278,874
$180,933    Non-cash transactions -                                                                   Accrued    acquisition costs
$306,572
-
*See notes to the consolidated    financial statements.    Concluded*
 

 
**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2003

 

**(1) Operations and Summary of Significant Accounting Policies**

Novitron International, Inc. ("the Company") is a Delaware    corporation with headquarters in Newton, Massachusetts. The Company’s primary    operations are focused on scientific instrumentation used in clinical and analytical    laboratories and in process monitoring. Substantially all operations are conducted through    three operating subsidiaries located in the Netherlands and Australia. The Company's Dutch    subsidiary, Vital Scientific NV, designs and manufactures scientific instrumentation    marketed worldwide through distributors and strategic partnerships. NovaChem BV, also a    Dutch subsidiary, develops and markets process monitoring technology for petrochemical and    environmental applications. The Company's Australian subsidiary, Vital Diagnostics Pty    Ltd., distributes diagnostic instruments and assays in the South Pacific. 

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

Principles of Consolidation

The consolidated financial statements include the accounts of the    Company and its subsidiaries. All significant intercompany accounts and transactions have    been eliminated in consolidation.

Stock Split

On August 14, 2002, the Company announced a 5-for-4 stock split in the    form of a 25% stock dividend. Share and per share amounts have been restated to reflect    the stock split for all periods presented.
Minority Interest

The minority interest as shown in the March 31, 2003 and 2002 financial    statements reflects the 7.5% of Vital Diagnostics as owned by an officer of Vital    Diagnostics.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash and highly liquid instruments    with original maturities of 90 days or less when purchased.

Inventories

Inventories are stated at the lower of cost (first-in, first-out) or    market. Inventory quantities are periodically reviewed and, where necessary, provisions    for excess and obsolete inventories are recorded. 

**(1) Operations and Summary of Significant Accounting Policies**    (continued)

Inventories consist of the following at March 31, 2003 and 2002:        
**2003**
**2002**
Raw materials
$2,497,047
$1,788,217
Work-in-process
578,284
367,168Finished goods
1,072,942
723,235                        
$4,148,273
$2,878,620 
Revenue Recognition

The Company's product sales are recorded at the time when persuasive    evidence of an arrangement exists, delivery has occurred, the price to the buyer is fixed    or determinable and collectibility is reasonably assured. The Company provides a one-year    product warranty, and a provision is made at the time the related revenue is recognized    for the estimated cost of product warranties. Warranty claims and related warranty expense    have not been significant.

Depreciation and Amortization 

The Company provides for depreciation and amortization using the    straight-line method by charges to operations in amounts that depreciate the cost of    equipment 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
 

The Company reviews long-lived assets for impairment    whenever events or changes in circumstances indicate the carrying amount of such assets    may not be recoverable. Recoverability of these assets is determined by comparing the    forecasted undiscounted net cash flows of the operation to which the assets relate to the    carrying amount. If the operation is determined to be unable to recover the carrying    amount of its assets, then intangible assets are written down first, followed by the other    long-lived assets of the operation, to fair value. Fair value is determined based on    discounted cash flows or appraised values, depending on the nature of the assets. No such    impairments have been recorded. 

Net income Per Share 

Basic net income per share is determined by dividing net income by the    weighted average shares of common stock outstanding during the year. Diluted earnings per    share reflects the dilutive effect, if any, of potentially dilutive common shares, such as    common stock options based on the treasury stock method. In fiscal years 2003 and 2002,    17,080 and 621 potentially dilutive shares, 

 
**(1) Operations and Summary of Significant Accounting    Policies (continued)

Net income Per Share (continued)

respectively, were not included in the diluted weighted average shares    outstanding, as they were antidilutive.

The calculations of basic and diluted weighted average shares    outstanding are as follows:     
**2003**
**2002**Basic weighted average common shares outstanding
1,847,288
1,818,250Dilutive effect of potential common shares
65,506
74,680Diluted weighted average shares outstanding
1,912,794
1,892,930
 

Foreign Currency 

Assets and liabilities of the Company’s foreign subsidiaries are    translated to U.S. dollars at year-end exchange rates, and income statement accounts are    translated at weighted-average rates in effect during the year. For those subsidiaries    whose functional currency is other than the United States dollar, the translation    adjustment into U.S. dollars is credited or charged to accumulated other comprehensive    income (loss), included as a separate component of stockholders' equity in the    accompanying consolidated balance sheets.

Gains and losses from foreign currency transactions that are    denominated in currencies other than the respective functional currency are included in    other income (expense) in the consolidated statements of operations. For fiscal 2003 and    2002, foreign exchange losses were $55,270 and $45,077, respectively.

Income Taxes 

Deferred tax assets and liabilities are recognized for the future tax    consequences of differences between the carrying amounts and tax bases of assets and    liabilities using rates expected to be in effect when those differences reverse. Valuation    allowances are provided against deferred tax assets that based on currently available    evidence are not expected to be realized.

Management's Use of Estimates

The preparation of financial statements in conformity with accounting    principles generally accepted in the United States of America requires management to make    estimates and assumptions that affect the reported amounts of assets and liabilities and    disclosure of contingent assets and liabilities at the date of the financial statements    and the reported amounts of revenues and expenses during the reporting period. Actual    results could differ from those estimates.

**(1) Operations and Summary of Significant Accounting Policies**(continued)
Research and Development Costs

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

                               Fair Value of Financial Instruments

The estimated fair value of the Company's financial instruments,    which include cash equivalents, accounts receivable, accounts payable and long-term debt,    approximates their carrying value.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to credit    risk consist primarily of cash and cash equivalents and accounts receivable. The Company    maintains substantially all of its cash in three financial institutions, believed to be of    high-credit quality. The Company grants credit to customers in the ordinary course of    business and provides a reserve for potential credit losses. Such losses have been within    management’s expectations. See discussion related to significant customers in Note 7    to the consolidated financial statements. 

Software Development Costs

The Company has capitalized certain software development costs incurred    in connection with the software embedded in an analysis product in accordance with the    provisions of Statement of Financial Accounting Standards ("SFAS") No. 86,    "Accounting for the Costs of Computer Software to be Sold, Leased or Otherwise    Marketed." SFAS No. 86 requires the Company to capitalize those costs incurred for    the software development once technological feasibility has been established.    Capitalization ends and amortization begins when the product is available for sale to the    customer. During the years ended March 31, 2003 and 2002, the Company capitalized    approximately $287,000 and $170,000, respectively, under SFAS No. 86, which is included as    a component of other assets in the accompanying consolidated balance sheet. 

Amortization is recognized on a straight-line basis, generally over 5    years. Unamortized capitalized software development costs determined to be in excess of    net realizable value of the product are expensed immediately. Total amortization recorded    during fiscal years 2003 and 2002 was approximately $154,000 and $152,000, respectively,    and is included in the cost of revenues in the accompanying consolidated statements of    operations.

Comprehensive Income

Comprehensive income includes charges and credits to equity that are    not the result of transactions with stockholders. Included in other comprehensive income    for the Company are the cumulative translation adjustments related to the net assets of    the foreign operations. These adjustments are accumulated within the consolidated    statements of stockholders' equity under the caption accumulated other comprehensive    income (loss).
 
**(1) Operations and Summary of Significant    Accounting Policies (continued)
 

Equity-Based Compensation

The Company accounts for equity awards issued to employees under the    recognition and measurement principles of Accounting Principles Board ("APB")    Opinion No. 25, "Accounting for Stock Issued to Employees," and the related    interpretations. No stock-based employee compensation is reflected in net income, all    options granted under the plan had an exercise price equal to the market value of the    underlying common stock on the date of grant (110% of the market value if the options were    granted to a more than 10% stockholder).

The following table illustrates the effect on net income and earnings    per share if the Company had applied the fair value recognition provisions of SFAS No.    123, "Accounting for Stock-Based Compensation," for the years ended March 31,    2003 and 2002:     
**2003**
**2002**
Net income, as reported
$115,678
$258,034
Less: total stock-based employee compensation    expense determined under fair value based method for all awards, net of related tax    effects
(33,626)
(104,722)Pro-forma net income
$82,052
$153,312   
Reported basic net income per share
$0.06
$0.14Pro forma basic net income per share
$0.04
$0.08                                                        Reported diluted net income per share
$0.06
$0.14Pro forma diluted net income per share
$0.04
$0.08
 

The assumptions used to calculate the SFAS No. 123 pro    forma disclosure and weighted average information for the fiscal years ended March 31,    2003 and 2002 are as follows:                
2003
2002Risk-free interest rate
3.25%
3.50% - 4.63%Expected dividend yield
0.25%
0.28%Expected lives
6.00 years
5.95 yearsExpected volatility
63.01%
77.34%Weighted average grant date fair value per share of options    granted during the period 
$4.99
$4.23
 
**(1) Operations and Summary of Significant Accounting Policies**(continued)
 

Derivative Instruments

The Company records its foreign currency exchange contracts at fair    value in its consolidated balance sheet and the related gains or losses on these hedge    contracts related to anticipated transactions are deferred as a component of other    comprehensive income. Any deferred gains and losses are recognized in income in the period    in which the underlying anticipated transaction occurs.

The Company enters into foreign exchange forward contracts to reduce    the exposure to currency fluctuations on customer accounts receivable denominated in    foreign currency. The objective of these contracts is to minimize the impact of foreign    currency exchange rate fluctuations on operating results. Derivative financial instruments    are not used for speculative or trading purposes. There were no foreign exchange forward    contracts outstanding at March 31, 2003 and 2002.

Gains and losses related to these instruments for fiscal years 2003 and    2002 were not significant. 

Reclassifications

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

New Accounting Pronouncements

In December 2002, the FASB issued SFAS No. 148, "Accounting for    Stock-Based Compensation – Transition and Disclosure, an amendment of FASB Statement    No. 123", to provide alternative methods of transition for a voluntary change to the    fair value based method of accounting for stock-based employee compensation. In addition    this statement amends the disclosure requirements of SFAS No. 123 to require prominent    disclosures in both annual and interim financial statements about the method of accounting    for stock-based employee compensation and the effect of the method used on reported    results. Management has determined that it will continue to account for stock-based    compensation to employees under the provisions of APB No. 25 and it will make all    disclosures in its financial reports. The amendments to SFAS No. 148 are effective for the    Company in the financial statements for the fiscal year ended March 31, 2003. The    disclosure requirements of SFAS No. 148 have been implemented above in Note 1 and the    interim disclosure requirements will be adopted by the Company in the first quarter of    fiscal 2004.

SFAS No. 149, "Amendment of Statement 133 on Derivative    Instruments and Hedging Activities," was issued in April 2003 and amends and    clarifies financial accounting and reporting for derivative instruments, including certain    derivative instruments embedded in other contracts and for hedging activities under SFAS    No. 133. SFAS No. 149 provides greater clarification of the characteristics of a    derivative instrument so that contracts with similar characteristics will be accounted for    consistently. In general, SFAS No. 149 is effective for contracts entered into or  
**(1) Operations and Summary of Significant    Accounting Policies**(continued) 
modified after June 30, 2003, and for hedging    relationships designated after June 30, 2003. As the Company does not currently have any    derivative financial instruments, the adoption of SFAS No. 149 is not expected to have any    impact on the Company’s consolidated financial statements. 

In November 2002, the Emerging Issues Task Force reached a consensus    opinion on EITF 00-21, "Revenue Arrangements with Multiple Deliverables." The    consensus provides that revenue arrangements with multiple deliverables should be divided    into separate units of accounting if certain criteria are met. The consideration for the    arrangement should be allocated to the separate units of accounting based on their    relative fair values, with different provisions if the fair value of all deliverables are    not known of, or if the fair value is contingent on delivery of specified items or    performance conditions. Applicable revenue recognition criteria should be considered    separately for each separate unit of accounting. EITF 00-21 is effective for the Company    for revenue arrangements entered into after July 1, 2003. Entities may elect to report the    change as a cumulative effect adjustment in accordance with APB Opinion 20,    "Accounting Changes". The Company has not yet determined whether the adoption of    this standard will have a material impact on the Company’s financial position or    results of operations.
**(2) Long-Term Debt**
The Company's debt obligations are as follows at March 31, 2003 and    2002:        
**2003**
**2002**Notes payable, bearing interest at 6.5%-8.6%, with maturities    between May 2003 and April 2007 and secured by related equipment
$53,198
$21,922
Less: current portion 
(29,227)
(6,689)                
$ 23,971 
$ 15,233 
In April 1998, the Company entered into a line of    credit agreement with a financial institution, which provides for €1,815,000    (approximately $1,976,000) of available credit. The line of credit bears interest at 1.25%    above the base rate as reported by the Netherlands Central Bank with a minimum base rate    of 3.75%. At March 31, 2003, the base rate as reported by the Netherlands Central Bank was    3.5%, therefore the rate on borrowings would be 5.0%. Trade receivables and inventories of    Vital Scientific are provided as collateral for this facility. The line of credit requires    the Company to comply with certain financial covenants, which are not considered    restrictive to the Company's operations. As of March 31, 2003, no amounts were outstanding    under the agreement.

On March 31, 2003, the Company entered into $10.0 million line    revolving credit facility to finance the acquisitions discussed in Note 11. The credit    facility bears 

**(2) Long-Term Debt** (continued)

interest at the rate of either 0.25% in excess of prime or 300 basis    points above the LIBOR rate. No principal was outstanding at March 31, 2003. The credit    facility has an original term of three years and automatically renews from year to year if    neither party terminates the credit facility. The borrowings under the credit facility are    secured by trade receivables and inventories. The credit facility requires the Company to    comply with certain financial covenants, the most restrictive being a debt service ratio.    Additionally, the credit facility restricts the Company’s ability to pay dividends.
**(3) Commitments and Contingencies**
The Company leases facilities, vehicles and computer equipment    principally under operating leases. Future minimum lease payments under these operating    leases as of March 31, 2003 are approximately as follows:
**Year Ending March 31,**
**Amount**
2004
$ 426,000
2005
417,000
2006
374,000
2007
349,000
2008
289,000 
$1,855,000
Rent expense of approximately $359,000 and $315,000    was incurred during fiscal 2003 and 2002, respectively.
**(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 an aggregate of 150,000 shares and 75,000 shares of common stock were    reserved, respectively, for the purpose of granting incentive and nonstatutory stock    options. In September 2002, the stockholders approved the establishment of the 2002    Incentive and Stock Option Plan ("2002 Plan") under which an aggregate of    250,000 shares of common stock were reserved. All options are granted at not less than the    fair market value of the stock on the date of grant.

Under the terms of the Plan and the Directors' Plan, options are    exercisable over various periods not exceeding four years; the options under the Plan    expire no later than seven years after the date of grant whereas the options granted under    the Directors' Plan expire no later than ten years after the date of grant.

Under the terms of the 2002 Plan, options are exercisable at various    periods and expire as set forth in the grant document. In the case where an incentive    stock option is granted, the maximum expiration date is not later than 10 years from the    date of grant unless made to a more 
** 

**(4) Stock Option Plans**(continued)

than 10% stockholder; those incentive stock options expire no later    than 5 years from the date of grant.

The following table summarizes stock option activity:                     **Number of Shares**
**Weighted Average    Price**Outstanding at April 1, 2001
115,965
$ 0.82
Options granted
70,625
3.38Options exercised
(45,865)
1.18Outstanding at March 31, 2002
140,725
2.09
Options granted
30,000
4.99Options exercised
(15,000)
1.85Outstanding at March 31, 2003
155,725
$2.66   Exercisable at March 31, 2003
139,788
$2.40Exercisable at March 31, 2002
133,225
$2.06
 

The range of exercise prices for options outstanding    and options exercisable at March 31, 2003 is as follows: 
OutstandingExercisable 
Price Range
Number of Shares
Weighted Average Remaining Contractual    Life
Weighted Average Exercise Price
Number of Shares
Weighted Average Exercise Price
$0.50 - $0.55
51,975
1.56 years
$ 0.54
51,975
$0.54
$1.55
2,500
1.68 years
1.55
2,500
1.55
$2.18
6,875
0.47 years
2.18
6,875
2.18
$3.09 - $3.40
62,500
4.22 years
3.34
62,500
3.34
$4.99
30,000
5.50 years
4.99
15,000
4.99
$5.28
1,875
2.67 years
5.28
938
5.28 
155,725
3.13 years
$ 2.66
139,788
$2.40
**(5) Income Taxes**

The provision for income taxes shown in the accompanying consolidated    statements of operations consists of the following for the fiscal years ended March 31,    2003 and 2002:                     
**2003**
**2002**
Current:                                    
  Domestic
$                         -
$                         -  Foreign
199,000
212,000
Total Current
199,000
212,000                                                      
Deferred:                                    
  Domestic
(84,000)
(8,000)Foreign
47,000
(58,000)  Change in valuation allowance
81,000
(5,000)Total Deferred
44,000
(71,000)               
$ 243,000
$ 141,000 
The provision for (benefit from) income taxes differs    from the amount computed by applying the statutory federal income tax rate to income    before taxes due to the following for the fiscal years ended March 31, 2003 and 2002:    
**2003**
**2002**
Provision for taxes at statutory rate
$130,000
$143,000
Utilization of foreign net operating      loss carryforward
(55,000)
(15,000)
Utilization of domestic operating loss    carryforward
(41,000)
10,000
Foreign operating loss not benefited
56,000
1,000Taxes resulting from higher incremental foreign rate
11,000
-Tax benefit resulting from lower statutory foreign rate
(3,000)
(29,000)Taxes resulting from taxable dividend
119,000
-Tax benefit resulting from dividend not taxed
(32,000)
-Taxes resulting from nondeductible amortization
21,000
4,000Other 
37,000
27,000                    
$243,000
$141,000
 

**(5) Income Taxes**(continued)

The approximate income tax effect of each type of temporary difference    comprising the net deferred tax asset at March 31, 2003 and 2002 is as follows:                  
**2003**
**2002**Net operating loss carryforwards
$ 2,942,439
$ 2,675,407General business tax credit carryforwards
9,299
9,299Other, net
65,803
12,421                             
3,017,541
2,697,127Less: valuation allowance
2,996,299
2,690,615                                       
$ 21,242
$ 6,512 
SFAS No. 109 requires the Company to assess whether it    is more likely than not that the Company will realize its deferred tax assets. The Company    has determined, except for the deferred tax asset resulting from the tax temporary    differences with respect to certain accrued liabilities under Australian tax law for Vital    Diagnostics, it does not meet the "more likely than not" standard. Accordingly,    the Company has provided a valuation allowance against the deferred tax assets for all    items except for the aforementioned, which is included in other assets.

The tax effect on the components of the deferred tax liability at March    31, 2003 and 2002 is as follows:          
**2003**
**2002**Capitalized software development costs
$175,047
$ 83,816Depreciation
26,865
42,719Bad debt reserve
24,696
27,737Temporary differences
(9,225)
4,713                          
$217,383
$158,985 
The Company has net operating loss carryforwards for    U.S. federal and state tax purposes of approximately $4,635,000 and $1,443,000,    respectively; these carryforwards will expire from 2004 to 2023. In addition, the Company    has available U.S. federal tax credit carryforwards of approximately $9,300. These    carryforwards may be used to offset future taxable income, if any. The federal tax credit    carryforwards will expire from 2010 to 2012 and are subject to review and possible    adjustment by the Internal Revenue Service. The Company has approximately $4,824,000 in    U.S. alternative minimum tax net operating loss carryforwards that expire between 2008 and    2023.

The Company has foreign net operating loss carryforwards of    approximately $3,430,000 of which $398,000 are not subject to expiration and $3,032,000    that expire between 2004 and 2013.

**(6) Pension Plan**

The Company's subsidiary, Vital Scientific, participates in a    defined-contribution employee pension plan. Contributions and expenses incurred by the    Company amounted to approximately $118,000 and $122,000 during fiscal 2003 and 2002,    respectively.
**(7) Significant Customers**
During fiscal year 2003, the Company had sales of scientific and    process monitoring equipment to one significant customer amounting to approximately 13% of    consolidated revenues. Approximately 10% of accounts receivable at March 31, 2003 were    receivable from this customer. 

During fiscal year 2002, the Company had sales of scientific and    process monitoring equipment to two significant customers, each customer amounting to    approximately 11% of consolidated revenues. 
**(8) Accrued Expenses**
Accrued expenses consist of the following:          
**2003**
**2002**Payroll and payroll-related expenses 
$ 739,888
$ 443,421Development credits
444,450
538,699Accrued acquisition costs
306,572
-Other
289,417
234,545Warranty reserves
122,515
104,954                           
$1,902,842
$1,321,619The Company has entered into a credit financing arrangement with a    Netherlands governmental agency in connection with the development of a new product. The    grant is to be repaid as a percentage (13.6%) of the product's gross revenues as long as    the product is a commercial success. The Company began to ship this product during fiscal    year 1998, evidencing it commercial success. The Company has deferred all funding received    and reported those amounts as development credits included in accrued expenses. When the    Company makes a payment to the Netherlands government, the recorded liability is reduced.**(9) Other Assets**
Other assets consist of the following:               
**2003**
**2002**Capitalized software development costs, net of         accumulated amortization of $853,394 and $550,000         at March 31, 2003 and 2002, respectively
$550,294
$326,942
Deferred acquisition costs
535,408
-Deposits and other
181,057
197,726                                                                           
$1,266,759
$524,668**(10) Segment Information**
SFAS No. 131    establishes standards for reporting information regarding operating segments. The    Company's chief decision-maker, as defined under SFAS No. 131, is the Chief Executive    Officer. To date, the Company has viewed its operations and manages its business as    principally three operating segments: the manufacture and sale of scientific    instrumentation (Vital Scientific), the sale of instruments and consumables in Australia    (Vital Diagnostics) and the design and marketing of process monitoring instrumentation    (NovaChem). 

The accounting policies of the segments are the same as those described    in the summary of significant accounting policies. The Company evaluates performance based    on the revenues, operating costs, net income and total assets. Revenues are attributed to    the segment from which derived. Intersegment sales and transfers are not significant. The    "All Other" column includes corporate related items, results of insignificant    operations and, as it relates to segment profit (loss), income and expense not allocated    to reportable segments.
**(10) Segment Information (continued)

Segment information for the years ended March 31, 2003 and 2002 is as    follows: 

                **Scientific    Instruments****Sales    Distribution****Process    Monitoring****All Other****Consolidated**Revenues                                                                              March 31, 2003
$ 13,013,980
$2,835,306
$20,444
$                           -
$15,869,730March 31, 2002
10,890,554
2,087,329
345,825
-
13,323,708Operating Costs                                           March 31, 2003
12,468,935
2,580,118
129,077
304,265
15,482,395March 31, 2002
10,680,329
1,910,812
218,212
197,205
13,006,558Net Income (Loss)                                                            March 31, 2003
244,396
170,920
(159,551)
(140,087)
115,678March 31, 2002
147,178
131,842
56,946
(77,932)
258,034Capitalized Expenditures                                                                                            March 31, 2003
500,044
110,066
-
45,625
655,735March 31, 2002
177,105
25,455
700
3,277
206,537Total Assets                               
                                    March 31, 2003
9,085,932
1,318,481
77,120
716,234
11,197,767March 31, 2002
7,577,411
882,242
76,178
276,431
8,812,262
 
Geographic information for the years ended March 31, 2003, and 2002 is as    follows:  
**Europe**
**Asia**
**Oceania**
**Latin America**
**All Other**
**Consolidated**Revenues                                      March 31, 2003
$4,517,817
$4,150,685
$2,826,537
$2,232,844
$2,141,847
$15,869,730March 31, 2002
5,378,038
2,417,631
2,752,503
1,531,842
1,243,694
13,323,708Equipment, net                                                      March 31, 2003
788,859
-
209,840
-
44,525
1,043,224March 31, 2002
570,058
-
136,002
-
6,097
712,157
 

**(11) Subsequent Events**

On April 29, 2003, the Company, through its wholly owned subsidiaries    Clinical Data Inc. ("Clinical Data") and Spectran Holdings, Inc., merged with    Group Practice Services, Inc. ("GPSI") and Landmark Scientific, Inc.    ("Landmark"), respectively, and purchased substantially all of the assets of    Elan Diagnostics, Inc. ("EDx"). The Company issued 222,250 and 25,000 shares of    a newly created non-voting convertible preferred stock for all of the stock of GPSI and    Landmark, respectively. Upon the approval of the Company’s stockholders and SEC    registration or the occurrence of certain other events as described in the terms of the    convertible preferred stock, the former GPSI and Landmark stockholders will receive    2,222,500 and 250,000 shares of the Company’s common stock, respectively, from the    conversion of the preferred stock.

**(11) Subsequent Events**(continued)

The Company paid $7,500,000 and assumed certain liabilities for    substantially all of the assets of EDx. To finance the purchase, the Company entered into    a $10.0 million revolving line of credit from a bank. The line of credit bears interest at    the rate of either 0.25% in excess of prime or 300 basis points above the LIBOR rate.    Trade receivables and inventory of Clinical Data (including those of the former GPSI) are    provided as collateral for this facility. 

Randal J. Kirk, a member of the Company’s board of directors and a    holder of approximately 37% of the Company’s common stock before the acquisitions,    was the principal stockholder of GPSI and Landmark. The value of the GPSI transaction is    $10,768,000 based on the average of the Company’s closing stock price two days before    the April 29, 2003 closing and the value of the Landmark acquisition is $1,042,000 based    on the average of the Company’s closing stock price two days before August 21, 2002,    the date the deal was announced.

In connection with the above acquisitions, the Company has capitalized    approximately $535,000 in professional fees and other transaction costs at March 31, 2003.

The Company’s traditional business was multinational, focusing on    scientific instrumentation used in medical, veterinary and analytical laboratories and in    process monitoring. Management wanted to add the capability to serve a growing market of    small and medium-sized medical laboratories in the United States and around the world. The    acquisitions of GPSI, Landmark and substantially all the assets of EDx will enable the    Company to offer a full range of products and services to this market. The Company can now    provide equipment and reagents in addition to laboratory management and consulting    services to create a comprehensive solution for customers.

The Company will account for each transaction in accordance with SFAS    No. 141 and will include the results of operations, for each of the aforementioned    acquisitions, in the Company’s consolidated statements of operations for periods    after April 29, 2003. The Company is in the process of preparing the allocation of the    purchase prices and expects to complete the preliminary purchase price allocation during    the quarter ended September 30, 2003.
**(12) Related Parties**
The Company had sales to Landmark in the amount of $128,000 and    $51,000 for fiscal years 2003 and 2002, respectively.

The law firm of Malman and Goldman, LLP, of which Arthur B. Malman, a    director of the Company, is a partner, provided legal services to the Company during    fiscal years 2003 and 2002. The fees invoiced by Malman and Goldman, LLP amounted to    approximately $55,000 and $22,000, respectively.
 

 

SCHEDULE II
**VALUATION AND QUALIFYING ACCOUNTSYEARS ENDED MARCH 31, 2003 AND 2002**Item
Balance at Beginning of Period
 

Additions
 

Deductions
Balance at End of Period
Allowance for Uncollectible Accounts                                                                 
2003
$ 194,345
$ 22,467$ 119,195
$ 97,617                                                                              
2002
$ 203,845
$               -
$ 9,500
$ 194,345
 

 
**EXHIBIT INDEX**
Exhibit

Number Description
2.1(1)Amended and Restated Agreement and Plan of Merger, dated as of      April 29, 2003, among Novitron, Landmark and Spectran.2.2(1)Agreement and Plan of Merger, dated as of April 29, 2003, among Novitron,      GPSI and Clinical Data.2.3(1)Asset Purchase Agreement, dated as of December 9, 2002, among Parent, EDx,      Clinical Data and Novitron (previously filed as Exhibit 2.1 to the Current Report on Form      8-K, as filed with the Securities and Exchange Commission on December 9, 2002, and      incorporated herein by reference).2.4(1)Amendment No. 1 to Original Asset Purchase Agreement, dated as of February      10, 2003, among Parent, EDx, Clinical Data and Novitron.2.5(1)Amendment No. 2 to Original Asset Purchase Agreement, dated as of March      18, 2003, among Parent, EDx, Clinical Data and Novitron. 2.6(1)Amendment No. 3 to Original Asset Purchase Agreement, dated as of March      31, 2003, among Parent, EDx, Clinical Data and Novitron.2.7(1)Amendment No. 4 to Original Asset Purchase Agreement, dated as of April      29, 2003, among Parent, EDx, Clinical Data and Novitron.3.1(2)Certificate of Incorporation3.2(1)Amended and Restated By-laws of the Company3.3(5)Form 10-C dated June 16, 1994 - Change in Name of Issuer effective April      12, 1994.4.1(1)Certificate of Designation of Series A Nonvoting Convertible Preferred      Stock of Novitron.10.1(1)Loan and Security Agreement, dated March 31, 2003, among LaSalle, as      lender, and Clinical Data, BCC and GSPIA, as Borrowers.10.2(1)Amendment No. 1 to the Loan Agreement, dated April 29, 2003, among      LaSalle, Clinical Data, BCC and GSPIA.10.25(3)1991 Directors' Option Plan and forms of option agreement.10.26(4)Employment Agreement - Israel M. Stein16.1(6)Change in independent accountants22.1(7)Subsidiaries of the Registrant 23.1Consent of Deloitte & Touche LLP - Boston, Massachusetts23.2Consent of Deloitte & Touche Accountants - Rotterdam, The Netherlands99.1Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002(1) Incorporated herein by reference to exhibits to the        Company’s Current Report on Form 8-K filed with the Commission on May 12, 2003.        (2) Incorporated herein by reference to exhibits to the Company's Registration Statement        on Form S-1 (File No. 2-82494).        (3) Incorporated herein by reference to exhibits to the Company’s Registration        Statement on Form S-8 filed with the Commission on March 5, 1992.        (4) Incorporated herein by reference to exhibits to the Company’s Quarterly Report on        Form 10-QSB filed with the Commission on February 13, 2002        (5) Incorporated herein by reference to the Company’s Form 10-C filed with the SEC on        June 16, 1994.        (6) Incorporated herein by reference to the Company’s Current Report on Form 8-K        filed with the SEC on June 26, 2002.        (7) Incorporated herein by reference to the Company’s Annual Report on Form 10-KSB        filed with the SEC on June 25, 2001
 

EXHIBIT 23.1
**INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration    Statement Nos. 33-25938, 33-25939, 33-46233 and 33-46234 on Form S-8 of Novitron    International, Inc. of our report dated June 13, 2003, appearing in this Annual Report on    Form 10-KSB of Novitron International, Inc. for the year ended March 31, 2003.

/s/ Deloitte & Touche LLP    Boston, Massachusetts    June 30, 2003

 

 

EXHIBIT 23.2
**INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation    by reference in Registration Statement Nos. 33-25938, 33-25939, 33-46233 and 33-46234 on    Form S-8 of Novitron International, Inc. of our report dated July 26, 2002, appearing in    this Annual Report on Form 10-KSB of Novitron International, Inc. for the year ended March    31, 2003.

/s/ Deloitte & Touche Accountants    Rotterdam, The Netherlands    June 30, 2003*************************************************************