<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
/x/ Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended July 31, 1996
or
/ / Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Commission file number 0-26670
NORTH AMERICAN SCIENTIFIC, INC.
(Name of small business as specified in its charter)
Delaware 51-0366422
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
7435 Greenbush Avenue
North Hollywood, CA 91605
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code:
(818) 503-9201
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes X No
--- ---
At September 4, 1996, there were 2,983,201 shares of the registrant's
common stock outstanding.
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NORTH AMERICAN SCIENTIFIC, INC.
THIRD QUARTER ENDED JULY 31, 1996
DESCRIPTION PAGE
- ----------- ----
PART I FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
CONSOLIDATED BALANCE SHEET 1
July 31, 1996 and October 31, 1995
CONSOLIDATED STATEMENT OF OPERATIONS 2
9 months and 3 months. ended July 31, 1996
and July 31, 1995
CONSOLIDATED STATEMENTS OF CASH FLOWS 3
9 months ended July 31, 1996 and July 31, 1995
NOTES TO FINANCIAL STATEMENTS 4
Item 2. Managements's Discussion and Analysis of Financial 5
Condition and Results of Operations
PART II OTHER INFORMATION 7
Item 1. Legal Proceedings 7
Item 6. Exhibits and Reports on Form 8-K 7
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NORTH AMERICAN SCIENTIFIC, INC.
CONSOLIDATED BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
October 31, July 31,
1995 1996
---- ----
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 491,000 $ 668,100
Investments 25,000 25,600
Accounts receivable, less allowance for doubtful
accounts of $1,700 and $1,700, respectively 488,300 583,800
Inventories 148,100 174,700
Prepaid expenses and other current assets 13,400 25,600
----------- -----------
Total current assets 1,165,800 1,477,800
Equipment and leasehold improvements, net 86,100 183,000
Deposits and other assets 39,300 41,200
----------- -----------
$ 1,291,200 $ 1,702,000
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable $ 42,200 $ 159,100
Accrued expenses 78,100 69,100
Income taxes payable 54,400 104,600
----------- -----------
Total current liabilities 174,700 332,800
Stockholder's equity:
Preferred stock, par value $.01 per share;
authorized 2,000,000 shares, no shares issued - -
Common stock, par value $.01 per share; authorized
10,000,000 shares; 2,983,201 shares issued and
outstanding at October 31, 1995 and
July 31, 1996 29,800 29,800
Additional paid-in capital 2,105,100 2,105,100
Accumulated deficit (1,010,200) (748,700)
Cumulative translation adjustment (8,200) (17,000)
----------- -----------
Total stockholder's equity 1,116,500 1,369,200
----------- -----------
$ 1,291,200 $ 1,702,000
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to consolidated financial statements.
1
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NORTH AMERICAN SCIENTIFIC, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
July 31, July 31,
-------------------- -------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $2,030,600 $1,226,100 $ 836,300 $ 442,400
Cost of goods sold 1,024,500 608,100 417,700 235,500
---------- ---------- ---------- ----------
Gross profit 1,006,100 618,000 418,600 206,900
Research and development expenses 9,500 - 600 -
General and administrative expenses 574,200 522,600 218,800 209,300
---------- ---------- ---------- ----------
Income from operations 422,400 95,400 199,200 (2,400)
Interest and other income 15,400 5,900 4,800 700
---------- ---------- ---------- ----------
Income from continuing operations
before income taxes 437,800 101,300 204,000 (1,700)
Income taxes 176,300 58,400 88,200 19,600
---------- ---------- ---------- ----------
Net income for period $ 261,500 $ 43,300 $ 115,800 $ (21,300)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Earnings per share:
Net earnings per share $ .09 $ .01 $ .04 $ (.01)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Weighted average number of shares outstanding 2,983,201 2,966,856 2,983,201 2,966,856
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
2
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NORTH AMERICAN SCIENTIFIC, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Nine Months
Ended July 31,
-------------------
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 261,500 $ 43,300
Adjustments to reconcile net income to
net cash used in operating activities:
Depreciation and amortization 35,100 32,400
Changes in assets and liabilities:
Accounts receivable (95,500) 14,400
Inventories (26,600) (107,600)
Prepaid expenses and other current assets (12,200) (6,700)
Deposits and other assets (1,900) (15,100)
Accounts payable 116,900 (24,000)
Accrued expenses (9,000) (32,100)
Income taxes payable 50,200 (20,500)
---------- ----------
Total adjustments 57,000 (159,200)
---------- ----------
Net cash provided (used) by operating activities 318,500 (115,900)
Cash flows from investing activities:
Purchase of fixed assets (131,400) (46,200)
---------- ----------
Net cash used for investing activities (131,400) (46,200)
Cash provided by financing activities:
Issuance of common shares - 23,900
Effect of foreign exchange on cash (10,000) (3,700)
---------- ----------
Net increase (decrease) in cash and cash equivalents 177,100 (141,900)
Cash and cash equivalents, beginning of period 491,000 601,800
---------- ----------
Cash and cash equivalents, end of period $ 668,100 $ 459,900
---------- ----------
---------- ----------
Supplemental disclosure of cash flow information:
Interest paid $ 625 $ 1,400
---------- ----------
---------- ----------
Income taxes paid $ 126,060 $ 78,500
---------- ----------
---------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
3
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NORTH AMERICAN SCIENTIFIC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES:
North American Scientific, Inc. manufactures and distributes a line of low-level
radiation sources and standards. References to the "Company" include both the
parent company and its subsidiary.
BASIS OF PRESENTATION
The consolidated financial statements have been prepared by North American
Scientific, Inc. (the "Company"), without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations, although the Company believes
that the disclosures are adequate to make the information not misleading. These
financial statements should be read in conjunction with the financial statements
and related notes contained in the Company's 1995 Annual Report. Other than as
indicated herein, there have been no significant changes from the data presented
in said Report.
In the opinion of management, the financial statements contain all adjustments
necessary to present fairly the financial position of the Company as of July 31,
1996 and July 31, 1995, and the results of operations and cash flows for the
same periods.
INVENTORIES
Inventories are valued at the lower-of-cost or market. Cost is determined using
the first-in-first-out method.
4
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION
The following discussion should be read in conjunction with the
consolidated financial statements contained herein and the notes thereto.
Dollar amounts specified herein refer to U.S. dollars.
The Company cautions readers that any forward-looking statements which are
included, or which may be deemed to be included, in this report are estimates of
future performance and are highly dependent upon a number of important factors
which could cause actual results to differ materially from such statements or
any other statements made by or on behalf of the Company. Such factors include,
but are not limited to, changing market conditions: the availability and cost
of raw materials; the impact of competitive products and pricing; the timely
development and market acceptance of the Company's products; and other risks
detailed herein and from time-to-time in the Company's Securities and Exchange
Commission filings.
RESULTS OF OPERATIONS
Net sales increased to $836,300 for the three-month period ending July 31,
1996, an increase of approximately 89%, compared to $442,400 for the comparable
1995 period, as a result of the Company's continued sales efforts in both
domestic and foreign markets. Net income increased to $115,800, or $0.04 per
share, in the three-month 1996 fiscal period compared to a loss of $21,300, or
$0.01 per share, in the comparable 1995 period. Net sales for the first nine-
months of 1996 increased to $2,030,600 from $1,226,100 for the comparable 1995
period, an increase of approximately 66%. Net income for the first nine months
increased to $261,400, or $0.09 per share, compared to $43,300, or $0.01 per
share for the comparable 1995, an increase of 504%.
For the third quarter of 1996, cost of goods sold increased to $417,700
compared to $209,300 in the comparable 1995 fiscal period, an increase of
approximately 77%. A portion of the increase is consistent with the increase in
net sales during the period although the Company began to benefit from
economies of scale. For the nine-month period, cost of goods sold increased to
$1,024,500 in the 1996 fiscal period compared to $608,100 in the 1995 period, an
increase of approximately 68%. This increase was generally consistent with the
increase in net sales.
General and administrative expenses increased from $209,300 in 1995 to
$218,800 in the 1996 fiscal year, an increase of approximately 5%. For the nine
month comparison, general and administrative expenses increased from $522,600 in
1995 to $574,200 in the 1996 fiscal period, an increase of approximately 10%.
This increase in general and administrative expenses for the quarter under
review was primarily the result of increased rental expense associated with
facility expansion. The increase for the nine-month period was primarily the
result of increased rental expense and increased travel expenses associated with
sales and promotional activities. As a percentage of net sales, general and
administrative expenses have decreased significantly.
LIQUIDITY AND CAPITAL RESOURCES
At July 31, 1996, the Company had cash and short-term deposits aggregating
approximately $668,100, compared to $459,900 at July 31, 1995. To date, the
Company's short-term liquidity needs have generally consisted of operating
capital to finance growth in trade accounts receivable and inventories. The
Company has satisfied these needs primarily through a combination of private and
public equity financings and from cash generated by operations. The Company has
no long-term debt and has not had, or had the need for, a line of credit or
similar arrangement with a bank. Management believes that it will continue to
have sufficient cash resources from operations to fund its cash needs.
For the nine-month period ended July 31, 1996, cash flow from operations
generated $318,500 compared to using $115,900 for the comparable 1995 period.
Cash flow in investing activities used approximately $131,400 in the 1996 fiscal
year compared to using $46,200 in the 1995 fiscal year. The increased use of
cash for investing activities in the current period resulted primarily from
purchases of quality control and production equipment.
5
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SEASONALITY
The Company's business is not significantly impacted by seasonal
fluctuations. However, the first quarter of each fiscal year has traditionally
seen relatively slower demand associated with the holiday season.
IMPACT OF INFLATION
The impact of inflation on the Company's operations is not significant.
6
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PART II OTHER INFORMATION
The Company was not required to report the information pursuant to Items 2
through 5 of Part II of Form 10-QSB for the three-month period ended July 31,
1996.
ITEM 1. LEGAL PROCEEDINGS
In June 1996, an action was commenced in the United States District Court
for the Eastern District of Virginia entitled BEST INDUSTRIES, INC. V. CIS BIO
INTERNATIONAL, INC. ET. AL, Civil Action No. 96-737-A. In addition to naming
CIS Bio International, its subsidiary CIS-US, Inc. and certain individual
officers and directors of those companies, the complaint also named the Company
and L. Michael Cutrer as defendants. The complaint seeks equitable relief,
ordinary damages of $50 million and punitive damages of up to $10 million, on
the basis of various allegations with respect to alleged misappropriation and
misuse by the defendants of certain purported trade secrets of the plaintiff,
the alleged tortious interference with the plaintiff's business relations and
the alleged defamation of plaintiff's character and professional standing. The
Company has filed an answer to the complaint denying any liability to the
plaintiff with respect to any of the allegations contained in the complaint and
discovery began in August 1996. The Company believes the allegations contained
in the complaint are without merit and intends to vigorously defend this action.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits - The following Exhibits are filed herewith:
Exhibit (27) - financial Data Schedule (EDGAR only)
b) Reports on Form 8-K - No such reports were filed during the quarter for
which this report is filed.
7
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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.
NORTH AMERICAN SCIENTIFIC, INC.
-------------------------------
(Registrant)
Date September 5, 1996 By: /s/ L. Michael Cutrer
------------------- ---------------------------------------------
L. Michael Cutrer
President and Chief Executive Officer
(Principal Executive, Accounting and
Financial Officer)
8
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> NOV-01-1995
<PERIOD-END> JUL-31-1996
<CASH> 668,100
<SECURITIES> 0
<RECEIVABLES> 585,500
<ALLOWANCES> 1,700
<INVENTORY> 174,700
<CURRENT-ASSETS> 1,477,800
<PP&E> 416,000
<DEPRECIATION> 233,000
<TOTAL-ASSETS> 1,702,000
<CURRENT-LIABILITIES> 332,800
<BONDS> 0
0
0
<COMMON> 29,800
<OTHER-SE> 1,339,400
<TOTAL-LIABILITY-AND-EQUITY> 1,702,000
<SALES> 2,030,600
<TOTAL-REVENUES> 2,030,600
<CGS> 1,024,500
<TOTAL-COSTS> 583,700
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 437,800
<INCOME-TAX> 176,300
<INCOME-CONTINUING> 261,500
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 261,500
<EPS-PRIMARY> 0.09
<EPS-DILUTED> 0.00
</TABLE>
