<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(Mark One)
/X/ Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
(NO FEE REQUIRED)
For the fiscal year ended October 31, 1996
or
/ / Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
(NO FEE REQUIRED)
Commission file number 0-26670
NORTH AMERICAN SCIENTIFIC, INC.
(Name of small business issuer 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 91605
North Hollywood, CA (Zip Code)
(Address of principal executive offices)
Issuer's telephone number, including area code:
(818) 503-9201
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, PAR VALUE $0.01 PER SHARE
- --------------------------------------------------------------------------------
(Title of Class)
- --------------------------------------------------------------------------------
(Title of Class)
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
--- ---
Check if disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. X
----
Issuer's revenues for its most recent fisal year were $3,063,300
At January 15, 1997, there were 3,028,201 shares of the registrant's common
stock outstanding. As of said date the aggregate market value of the voting
stock held by non-affiliates of the registrant (computed by reference to the
closing sale price on such date) was approximately $3,725,776.
Documents incorporated by reference: None
Transitional Small Business Disclosure Format: Yes No X
--- ---
<PAGE>
TABLE OF CONTENTS
PART I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Item 1. DESCRIPTION OF BUSINESS . . . . . . . . . . . . . . . . 2
Item 2. DESCRIPTION OF PROPERTY . . . . . . . . . . . . . . . . 4
Item 3. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . 4
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS . . 4
PART II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Item 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS . . . . . . . . . . . . . . . . . . . . . . . . 5
Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION . . . . . . . . . . . . . . . . . . . . . . . 5
Item 7. FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . 7
Item 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE . . . . . . . . . . 18
PART III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Item 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE
EXCHANGE ACT. . . . . . . . . . . . . . . . . . . . . . 18
Item 10. EXECUTIVE COMPENSATION. . . . . . . . . . . . . . . . . 19
Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT. . . . . . . . . . . . . . . . . . . . . . . 20
Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. . . . . 21
Item 13. EXHIBITS AND REPORTS ON FORM 8-K. . . . . . . . . . . . 21
1
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PART I
Item 1. DESCRIPTION OF BUSINESS
Through its wholly-owned subsidiary North American Scientific, Inc., a
California corporation, North American Scientific, Inc., a Delaware corporation
(the "Company"), manufactures and markets a broad line of low-level radiation
sources and standards. The Company's products are used in the field of nuclear
medicine by hospitals, medical centers and universities in connection with
imaging examinations and disease detection, and also are utilized by nuclear
utility companies, U.S. government facilities and industrial users to assist in
the monitoring of effluents being released from their respective facilities to
ensure the safety of personnel and the surrounding communities. The Company was
originally incorporated under the Company Act of British Columbia, Canada in
1987 as Triple R Resources Corp. The corporate name was changed to Uptown
Industries Corp. in 1989, and to its current name in 1990. The Company was
continued as a Canadian federal corporation under the Canadian Business
Corporation Act in 1994, and became a Delaware corporation on April 20, 1995.
RADIATION CALIBRATION AND REFERENCE SOURCE INDUSTRY
Radioactivity is a natural physical property. Each radioactive isotope
("radioisotope") radiates energy characteristic to that specific isotope.
Radiation detection instrumentation monitors the emitted radiation from a given
sample (i.e., soil, air, water, etc.) to identify and quantify the radioisotopes
present in that sample. In order to determine a particular instrument's
efficiency, an accurately measured and contained amount of a radioactive isotope
is required to serve as a calibration reference standard. Each type of sample
being monitored by an instrument typically requires a radiation source standard
of identical form and geometry to the sample. The fact that a radiation
standard and sample geometry preferably must be identical, combined with the
existence of several hundred radioisotopes, results in the need for a great many
different radiation standards.
PRODUCTS
The Company's principal products are its radiation sources and standards,
which are used in a variety of areas for calibration, measurement and control.
STANDARDS FOR NUCLEAR MEDICINE
Nuclear medicine is practiced at over 5,000 U.S. hospitals. Consistent
performance of imaging and calibration instrumentation is crucial to successful
diagnostics and patient management and cannot be maintained without extensive
calibration programs. The Company supplies many of the required types of
sources and standards.
STANDARDS FOR ENVIRONMENTAL MONITORING AND ANALYSIS
The Company manufactures both uniform products and customized products for
commercial laboratories serving the environmental sector. Calibration standards
are critical for accurate environmental analysis of unknown samples collected in
the field.
STANDARDS FOR INDUSTRIAL APPLICATIONS
The Company's products have a variety of industrial uses, ranging from
measuring the thickness of materials and gauging fluid levels to electronics
stabilization and calibration.
STANDARDS FOR GOVERNMENT AGENCIES AND RESEARCH FACILITIES
The Company makes standards available to various organizations including
certain government agency contractors and laboratories. These standards are
often designed to meet special requirements, customized configurations or
special processing services.
2
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RESEARCH AND DEVELOPMENT
The Company's research and development expenses were $15,000 and $0 for the
fiscal years ended October 31, 1996 and 1995, respectively. During the 1995
fiscal year, the Company focused upon production and administration activities.
The Company began to re-focus on research and development during 1996 and
expects to continue to do so.
MARKETING AND SALES
The Company's products are sold through a select group of representatives
and distributors in North America, Europe and the Far East. The Company
supports its products with a full product catalog, advertising and telemarketing
and through trade shows. The Company engages in direct selling to end users and
also sells to equipment manufacturers for inclusion in their product lines. In
June 1995, the Company entered into an agreement with CIS-US, a Massachusetts
based division of CIS-Biointernational, a French company, pursuant to which the
Company serves as the manufacturer of CIS's nuclear medicine source product line
and CIS acts as the exclusive distributor in the U.S. and Canada for some of
the Company's nuclear medicine product line.
The Company's customers are governmental and private organizations. During
the 1996 fiscal year, revenues from two customers accounted for 65% of total
revenues. During the 1995 fiscal year two customers accounted for 35% of the
Company's revenues.
MANUFACTURING
Radioisotopes are purchased primarily from government facilities around the
world or are manufactured by irradiation of target materials in third-party
commercial facilities. The Company radiochemically processes and purifies these
isotopes in its laboratories. Once purified, these materials are further
processed and contained and calibrated by the Company.
The Company is dependent upon a limited number of outside unaffiliated
suppliers for its radioisotopes, the principal of which are Nordion
International, Inc. and The Los Alamos National Laboratories. To date, the
Company has generally been able to obtain required radioisotopes for its
products as needed. The Company believes that it will be able to continue to
obtain required radioisotopes from these or other sources, although there can be
no assurance thereof. The delay or unavailability of radioisotopes would have a
material adverse effect on the Company's production and sales levels.
As stated under "Marketing and Sales," above, in addition to manufacturing
its own products, the Company manufactures certain products for CIS-US.
The Company considers compliance with environment laws a normal business
practice and therefore does not consider the costs of compliance to be material.
COMPETITION
The radiation reference source industry is subject to intense competition.
Most of the Company's major competitors are substantially larger in size and
have greater financial resources than the Company. Foremost among its
competitors is Amersham International, a public company headquartered in
England, which the Company believes has the dominant position in the market for
non-medical related products, and Dupont, which the Company believes has the
dominant position in the medical related product market. The Company believes,
however, that it competes favorably with these and its other competitors on the
basis of price, a diverse product line, customer service, quality and delivery
time. There can be no assurance, however, that the Company will be able to
continue to successfully compete with its competitors.
3
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PATENTS AND TRADEMARKS
The Company has no patents or trademarks, although it has one patent
application pending with the U.S. Patent Office covering a radioisotope-based
imaging device.
GOVERNMENT REGULATION
The research and development, manufacturing and marketing of the Company's
products are subject to regulation by the California Department of Health, the
federal Nuclear Regulatory Commission ("NRC") and certain so-called "Agreement
States" (which have chosen to regulate radioactive products on a state basis by
promulgating standards at least equal to the standards imposed by the NRC at the
federal level) in the United States, and by comparable authorities in other
countries. The Company operates under a license issued by the California
Department of Health, which regulates, among other things, the manufacture,
labeling, record keeping and storage of the Company's products and inventories.
EMPLOYEES
As of January 15, 1997, the Company had 13 full-time employees and one
part-time employee, none of whom are represented by a labor union. Management
believes its relations with the Company's employees to be good.
ACCUMULATED DEFICIT
At October 31, 1996, the Company's balance sheet reflected an accumulated
deficit of approximately $597,100, approximately $624,000 of which is directly
attributable to a non-cash charge to income incurred in connection with the
release of certain escrowed shares during the 1994 fiscal year, and
approximately $300,000 of which represented a deficit incurred by the Company's
predecessor.
Item 2. DESCRIPTION OF PROPERTY
The principal executive offices and manufacturing facilities of the Company
are located in a 16,200 square foot facility in North Hollywood, California.
This facility is leased from an unaffiliated lessor under a three-year lease,
which was renewed in November 1995, with the addition of 7,500 square feet of
space. The Company believes these facilities to be adequate to meet anticipated
production levels.
Item 3. 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 sought equitable relief,
ordinary damages of $50 million and punitive damages of up to $10 million, on
the basis of various allegations with the respect to the 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 filed an answer to the complaint denying any
liability to the plaintiff with respect to any of the allegations contained in
the complaint. The plaintiff filed a motion to voluntarily dismiss the case,
without prejudice, which motion was granted on December 13, 1996, subject to
payment of certain costs and attorneys' fees to the Company. The Company
believes the allegations contained in the original complaint were without merit
and, if the action is re-filed by the plaintiff, the Company intends to
vigorously defend such action.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
4
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PART II
Item 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is traded on the Nasdaq OTC bulletin board
under the symbol "NASI". Prior to December 31, 1996, the Company's Common Stock
was traded on the Vancouver Stock Exchange ("VSE") under the symbol "NSX.V".
The Company sought and received voluntary delisting from the VSE effective
December 31, 1996. The following table sets forth the high and low bid
quotations for the Common Stock for the fiscal periods indicated. The
quotations reflect inter-dealer prices, without retail mark-up, mark-down or
commission and may not represent actual transactions.
Fiscal 1995(1) High Low
----------- ---- ---
First Quarter $1.60 $1.00
Second Quarter $2.19 $1.60
Third Quarter $2.14 $1.55
Fourth Quarter $2.02 $1.14
Fiscal 1996(1)
-----------
First Quarter $1.64 $1.28
Second Quarter $1.68 $1.04
Third Quarter $1.27 $0.75
Fourth Quarter $1.38 $0.56
- ---------------
(1) All amounts are stated in U.S. Dollars and have been translated
on the basis of the noon buying rate in New York City for cable
transfers in foreign currencies as certified for customs purposes
by the Federal Reserve Bank of New York.
The approximate number of holders of record of Common Stock of the Company
as of January 15, 1997 was 33. The Company is unable to determine the number
of beneficial owners of Common Stock as of such date.
The Company has never paid cash dividends on its Common Stock. The Company
presently intends to retain future earnings, if any, to finance the expansion of
its business and does not anticipate that any cash dividends will be paid in the
foreseeable future. The Company's future dividend policy will depend on the
Company's earnings, capital requirements, expansion plans, financial condition
and other relevant factors.
Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion should be read in conjunction with the
consolidated financial statements contained herein and the notes thereto.
Certain matters discussed in the Report on Form 10-KSB are forward looking as
that term is defined by: (i) the Private Securities Litigation Reform Act of
1995 (the "Act") and (ii) in releases made by the Securities and Exchange
Commission (the "Commission"). These statements are being made pursuant to the
provisions of the Act and with the intention of obtaining the benefits of the
"safe harbor" provisions of the Act. The Company cautions investors that any
forward looking statements made by the Company are not guarantees of future
performance and that actual results may differ materially from those in such
forward looking statements as a result of various factors, including but not
limited to the following: changing market conditions; the availability and cost
of raw materials; the timely development and market acceptance of the Company's
products; the impact of competitive products and pricing; and other risks
detailed herein or detailed from time to time in the Company's filings with the
Commission.
5
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FISCAL YEAR ENDING OCTOBER 31, 1996 COMPARED WITH FISCAL YEAR ENDING
OCTOBER 31, 1995.
Net sales increased to $3,063,300 for the 1996 fiscal year from $1,843,100
for the 1995 fiscal year, an increase of approximately 66%, as a result of the
Company's continued sales efforts in both domestic and foreign markets. Net
income increased to $413,100, or $0.14 per share, in the 1996 fiscal year, from
net income of $131,700, or $0.04 per share, in the 1995 fiscal year, an increase
of approximately 214%.
Cost of goods sold increased to $1,534,200 in the 1996 fiscal year from
$929,000 in the 1995 fiscal year, an increase of approximately 65%. This
increase was generally consistent with the increase in net sales during the
period. During the 1996 fiscal year, gross margins remained at approximately
50%.
General and administrative expenses increased to $870,100 in the 1996
fiscal year, from $722,800 in the 1995 fiscal year, an increase of approximately
20%. This increase in general and administrative expenses was primarily a
result of necessary staff additions and professional fees.
FISCAL YEAR ENDING OCTOBER 31, 1995 COMPARED WITH FISCAL YEAR ENDING
OCTOBER 31, 1994
Net sales increased to $1,843,100 for the 1995 fiscal year from $1,397,500
for the 1994 fiscal year, an increase of approximately 32%, as a result of the
continued expansion in all sectors of the Company's product lines in both
domestic and foreign markets. Net income increased to $131,700, or $0.04 per
share, in the 1995 fiscal year, from a net loss of $357,000, or $0.12 per
share, in the 1994 fiscal year. The reported 1994 loss was the result of a
non-cash compensation charge incurred in connection with the release of escrow
shares.
Cost of goods sold increased to $929,000 in the 1995 fiscal year from
$597,200 in the 1994 fiscal year, an increase of approximately 56%. This
increase is partially the result of the increase in net sales as well as
necessary staff additions and also reflects an increase in the costs of certain
raw components. Gross margin was approximately 50% during the 1995 fiscal year.
General and administrative expenses increased to $722,800 in the 1995
fiscal year from $517,400 in the 1994 fiscal year, an increase of approximately
40%. This increase in general and administrative expenses was primarily a
result of necessary staff additions related to the Company's revenue growth, as
well as professional expenses.
LIQUIDITY AND CAPITAL RESOURCES
At October 31, 1996, the Company had cash and short-term deposits
aggregating approximately $866,000, compared with $491,000 at October 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, in recent years, satisfied these needs through
cash generated by operations. The Company has no long-term debt and has not
had, nor had the need for, a line of credit or similar arrangement with a bank.
Management anticipates that the Company's continued growth will be funded from
operations and believes that it will continue to have sufficient cash resources
from operations to fund its cash needs.
For the fiscal year ended October 31, 1996, cash flow from operations
generated approximately $555,100 compared to using $61,300 for the comparable
1995 period. Cash flow in investing activities used approximately $175,100 in
the 1996 fiscal year compared to $74,800 in the 1995 fiscal year. The increased
use of cash for investing activities in the current period resulted from
equipment purchases, building expansion and the purchase of certain
interest-bearing investments. There were no financing activities during the
1996 fiscal year compared to those generating $23,900 during the 1995 fiscal
year.
6
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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.
Item 7. FINANCIAL STATEMENTS
Page
----
Report of Independent Accountants. . . . . . . . . . . . . . . . . . . . . . 8
Consolidated Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . 9
Consolidated Statement of Operations . . . . . . . . . . . . . . . . . . . .10
Consolidated Statement of Changes in Stockholders' Equity. . . . . . . . . .11
Consolidated Statement of Cash Flows . . . . . . . . . . . . . . . . . . . .12
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . .13
7
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Stockholders of
North American Scientific, Inc.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, of changes in stockholders' equity and of
cash flows present fairly, in all material respects, the financial position of
North American Scientific, Inc. at October 31, 1996 and 1995, and the results of
their operations and their cash flows for the years then ended, in conformity
with generally accepted accounting principles. These financial statements are
the responsibility of the Company's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Costa Mesa, California
January 6, 1997
8
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NORTH AMERICAN SCIENTIFIC, INC.
CONSOLIDATED BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
October 31,
--------------------
1996 1995
---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents (Note 1) $ 866,000 $ 491,000
Investments (Note 1) 26,200 25,000
Accounts receivable, less allowance for doubtful
accounts of $0 and $1,700, respectively 683,200 488,300
Inventories (Notes 1 and 2) 144,800 148,100
Prepaid expenses and other current assets 22,500 13,400
----------- -----------
Total current assets 1,742,700 1,165,800
Equipment and leasehold improvements, net (Notes 1 and 3) 215,900 86,100
Deposits and other assets 41,600 39,300
----------- -----------
Total assets $ 2,000,200 $ 1,291,200
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 177,300 $ 42,200
Accrued expenses 139,100 78,100
Income taxes payable 155,400 54,400
----------- -----------
Total current liabilities 471,800 174,700
----------- -----------
Commitments (Note 4)
Stockholders' equity (Note 5):
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; 1996 and 1995 - 2,983,201 shares
issued and outstanding 29,800 29,800
Additional paid-in capital 2,105,100 2,105,100
Accumulated deficit (597,100) (1,010,200)
Cumulative translation adjustment (9,400) (8,200)
----------- -----------
Total stockholders' equity 1,528,400 1,116,500
----------- -----------
Total liabilities and stockholders' equity $2,000,200 $1,291,200
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
NORTH AMERICAN SCIENTIFIC, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
Year Ended
Ended October 31,
-----------------
1996 1995
---- ----
Net sales $3,063,300 $1,843,100
Cost of goods sold 1,534,200 929,000
---------- ----------
Gross profit 1,529,100 914,100
Research and development expenses 15,000 -
General and administrative expenses 870,100 722,800
---------- ----------
Income from operations 644,000 191,300
Interest and other income 20,100 35,400
---------- ----------
Income before provision for income taxes 664,100 226,700
Provision for income taxes (Note 7) 251,000 95,000
---------- ----------
Net income for year $ 413,100 $ 131,700
---------- ----------
---------- ----------
Earnings per share:
Net income per share $ .14 $ .04
---------- ----------
---------- ----------
Weighted average number of shares outstanding (Note 1) 2,983,201 2,970,703
---------- ----------
---------- ----------
See accompanying notes to financial statements.
10
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NORTH AMERICAN SCIENTIFIC, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Additional Cumulative Total
Number Common Paid-in Accumulated Translation Stockholders'
of Shares Stock Capital Deficit Adjustment Equity
--------- ----- ------- ------- ---------- ------
<S> <C> <C> <C> <C> <C> <C>
Balance at October 31, 1994 2,962,701 $ 29,600 $2,081,400 ($1,141,900) ($ 9,600) $ 959,500
Common stock issued upon
exercise of stock options 20,500 200 23,700 - - 23,900
Net income - - - 131,700 - 131,700
Foreign currency translation
adjustment - - - - 1,400 1,400
--------- --------- ---------- ----------- ---------- ----------
Balance at October 31, 1995 2,983,201 29,800 2,105,100 (1,010,200) (8,200) 1,116,500
Net income - - - 413,100 - 413,100
Foreign currency translation
adjustment - - - - (1,200) (1,200)
--------- --------- ---------- ----------- ---------- ----------
Balance at October 31, 1996 2,983,201 $ 29,800 $2,105,100 ($ 597,100) ($ 9,400) $1,528,400
--------- --------- ---------- ----------- ---------- ----------
--------- --------- ---------- ----------- ---------- ----------
</TABLE>
See accompanying notes to financial statements.
11
<PAGE>
NORTH AMERICAN SCIENTIFIC, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
Year Ended
October 31,
-----------------
1996 1995
---- ----
Cash flows from operating activities:
Net income $413,100 $131,700
Adjustments to reconcile net income to
net cash provided by (used in) operating activities:
Depreciation and amortization 47,800 49,400
Changes in assets and liabilities:
Accounts receivable (194,900) (118,100)
Inventories 3,300 (41,600)
Prepaid expenses and other current assets (9,100) (3,000)
Deposits and other assets (2,300) (26,600)
Accounts payable 135,100 (61,000)
Accrued expenses 61,000 1,400
Income taxes payable 101,000 6,500
-------- --------
Total adjustments 141,900 (193,000)
-------- --------
Net cash provided by (used for) operating activities 555,000 (61,300)
-------- --------
Cash flows used in investing activities:
Purchase of fixed assets (175,000) (49,800)
Purchase of investments - (25,000)
-------- --------
Net cash used for investing activities (175,000) (74,800)
-------- --------
Cash flows from financing activities:
Issuance of common shares for cash - 23,900
Effect of foreign exchange on cash (5,000) 1,400
-------- --------
Net increase (decrease) in cash and cash equivalents 375,000 (110,800)
Cash and cash equivalents, beginning of year 491,000 601,800
-------- --------
Cash and cash equivalents, end of year $866,000 $491,000
-------- --------
Supplemental disclosure of cash flow information:
Interest paid $1,000 $1,700
-------- --------
-------- --------
Income taxes paid $150,000 $78,500
-------- --------
-------- --------
See accompanying notes to financial statements.
12
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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., primarily manufactures and distributes a line
of low-level radiation sources and reference standards which are used in medical
imaging, environmental measurement and instrument calibration procedures. They
are routinely utilized by a variety of fields, including environmental study and
control, medical research and nuclear medicine, biotechnology, industrial
research and manufacturing, aerospace and nuclear plant monitoring. References
to the "Company" include both the parent company and its subsidiary.
In April 1995, the Company moved its corporate domicile from British Colombia
and reincorporated under the laws of the State of Delaware. The Certificate of
Incorporation of the Delaware Corporation authorizes up to 10,000,000 shares of
Common Stock, $.01 par value, and 2,000,000 shares of Preferred Stock, $.01 par
value.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiary. All significant intercompany accounts and
transactions have been eliminated.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
effect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the reporting period. Actual
results could differ from those estimates.
REVENUE RECOGNITION
Revenue from product sales is recognized upon shipment.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid financial instruments with an original
maturity of three months or less to be cash equivalents.
INVENTORIES
Inventories are valued at the lower-of-cost or market. Cost is determined using
the first-in first-out method.
13
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NOTE 1: (Continued)
INVESTMENTS
Investments consist of highly liquid interest bearing deposits having maturities
in excess of three months and are carried at cost which approximates market.
EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Equipment and leasehold improvements are stated at cost. Depreciation is
computed using the straight-line method as follows:
Furniture, fixtures and equipment 3-7 years
Leasehold improvements Term of the lease
Maintenance and repair costs are expensed as incurred, while improvements are
capitalized. Gains or losses resulting from the disposition of assets are
included in income.
FOREIGN CURRENCY TRANSLATION
The functional currency for the Company's operations is United States dollars.
The gain or loss resulting from translation is included as a component of
stockholders' equity.
NET INCOME PER COMMON SHARE
Net income per common share is computed using the weighted average number of
common and common equivalent shares outstanding during each year.
INCOME TAXES
The Company accounts for income taxes utilizing an asset and liability approach
that requires the recognition of deferred tax assets and liabilities for the
expected future tax consequences of events that have been recognized in the
Company's financial statements or tax returns. In estimating future tax
consequences, the Company generally considers all expected future events other
than enactments of changes in the tax law or rates.
NOTE 2 - INVENTORIES:
Inventories consist principally of raw materials at October 31, 1996 and 1995.
14
<PAGE>
NOTE 3 - EQUIPMENT AND LEASEHOLD IMPROVEMENTS:
Equipment and leasehold improvements consist of the following:
October 31,
----------------
1996 1995
---- ----
Furniture, fixtures and equipment $292,200 $168,700
Leasehold improvements 162,700 111,200
-------- --------
454,900 279,900
Less: Accumulated depreciation and amortization (239,000) (193,800)
-------- --------
$215,900 $ 86,100
-------- --------
-------- --------
NOTE 4 - COMMITMENTS:
The Company leases office space under a non-cancelable operating lease
agreement. Future minimum lease payments are subject to annual adjustment for
increases in the Consumer Price Index. In fiscal year 1996, the Company
expanded their leased facilities and extended their lease through December 31,
1998.
At October 31, 1996, future minimum rental payments under all operating leases
are as follows:
1997 $ 97,200
1998 97,200
1999 16,200
--------
$210,600
--------
--------
Total rent expense for the years ended October 31, 1996 and 1995 was $89,800 and
$64,100, respectively.
NOTE 5 - STOCKHOLDERS' EQUITY:
COMMON STOCK
The holders of shares of common stock are entitled to one vote for each share
held of record on all matters on which stockholders are entitled or permitted to
vote and are entitled to receive such dividends as may lawfully be declared by
the Board of Directors out of funds legally available therefor and to share pro
rata in any other distributions to the holders of common stock. The holders of
common stock are entitled to share ratably in the assets of the Company
remaining after payment of liabilities in the event of any liquidation,
dissolution or winding up the affairs of the Company. There are no conversion
rights, redemption or sinking fund provisions or fixed dividend rights with
respect to the common stock and the holders have no preemptive rights.
15
<PAGE>
NOTE 5: (Continued)
PREFERRED STOCK
The Company has authorized the issuance of 2,000,000 shares of preferred stock;
however, no shares have been issued. The designations, rights, and preferences
of any preferred stock that may be issued will be established by the Board of
Directors at or before the time of such issuance.
STOCK OPTIONS
Options to purchase shares of the Company's common stock have been granted to
certain employees and non-employee directors. These options were granted at an
exercise price equivalent to their fair market value at the date of grant.
Certain options are immediately exercisable while other options vest over a
period ranging from two to four years. The options expire between two and ten
years from the date of grant. Certain options are subject to cancellation in
the event of termination of employment. Options for 120,000 shares were
exercisable as of October 31, 1996.
In October 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation". FAS 123 is effective for the Company's fiscal year beginning
November 1, 1996. The impact of the adoption of FAS 123 has not yet been
determined.
The following table summarizes option activity through October 31, 1996:
Exercise price
(expressed In
Options U.S. dollars)
------- -------------
Balance at October 31, 1994 99,000 1.02 - 1.47
Granted 237,000 1.07 - 1.68
Cancelled or expired (46,100) 1.02 - 1.47
Exercised (20,500) 1.13 - 1.38
------- -----------
Balance at October 31, 1995 269,400 1.07 - 1.68
Granted 300,500 1.00 - 1.42
Cancelled or expired (202,400) 1.29 - 1.49
Exercised - -
------- -----------
Balance at October 31, 1996 367,500 1.00 - 1.42
------- -----------
------- -----------
ESCROW SHARES
Certain shareholders placed 750,000 shares of common stock in an escrow account
of which 493,500 of these shares were released from escrow effective February
28, 1995 on the basis of the financial performance of the Company to October 31,
1994. The shares remaining in escrow at October 31, 1995 were released from
escrow in fiscal year 1996. The Company recognized as a non-cash charge to
income $623,800 of compensation expense in 1994 related to these shares.
16
<PAGE>
NOTE 6 - SALES TO MAJOR CUSTOMERS:
Revenues from two customers each accounted for more than 10% of the Company's
consolidated revenues, as follows:
1996 1995
---- ----
Customer A - 20%
Customer B 42% 15%
Customer C 23% -
--- ---
65% 35%
--- ---
--- ---
NOTE 7 - INCOME TAXES:
The provision for income taxes is as follows:
1996 1995
---- ----
Federal $ 210,400 $ 79,200
State/Provincial income taxes 40,600 15,800
--------- --------
$ 251,000 $ 95,000
--------- --------
--------- --------
There are no significant temporary differences that would give rise to the
recognition of a deferred tax asset or liability. Accordingly, the Company has
not recorded a deferred tax provision.
A reconciliation of tax expense computed at the U.S. federal statutory rate is
as follows:
1996 1995
------------- -----------
Amount % Amount %
------ - ------ -
Federal tax provision at U.S. statutory rate $ 225,800 34% $ 77,100 34%
State taxes, net of federal benefit 26,800 4 10,400 5
Other, net (1,600) - 7,500 3
--------- --- -------- ---
$ 251,000 38% $ 95,000 42%
--------- --- -------- ---
--------- --- -------- ---
17
<PAGE>
Item 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
Item 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
The directors and executive officers of the Company are as follows:
Name Age Position
---- --- --------
Irwin J. Gruverman 63 Chairman and Director
L. Michael Cutrer 40 Chief Executive Officer,
President and Director
Larry Berkin 60 Director
Dr. Allan M. Green 52 Director
Michael C. Lee 46 Director
Irwin J. Gruverman has been the Chairman and a Director of the Company
since December 31, 1989. Mr. Gruverman has been a Partner in G&G Diagnostics
Limited Partnership, a venture capital limited partnership, since 1990. Mr.
Gruverman founded and has been the Chief Executive Officer, President and a
director of Microfluidics International Corporation, a company that manufactures
process devices for pharmaceutical and other manufacturing uses and conducts
drug delivery testing, since 1982. Mr. Gruverman founded and served as the
Executive Vice President of New England Nuclear, a radioactive materials
business, from 1961 to 1981. Mr. Gruverman also serves as a director of InVitro
International, Inc., Fiberchem International, Inc., and Endogen, Inc.
L. Michael Cutrer has been the President and Chief Executive Officer and a
Director of the Company since November 27, 1989. Prior thereto, Mr. Cutrer was
a Manager of Isotope Products Laboratory, Inc., a radioisotope manufacturing
company, where he managed industrial product manufacturing, research and
development, from 1982 to 1990.
Larry Berkin has been a certified public accountant with Berkin Accountancy
Corporation, a company he founded, since 1968. His practice focuses primarily
on management and taxation, including providing advice on operations, finances,
investments, negotiations, real estate and taxes.
Dr. Allan Mr. Green has been Vice President, Pharmaceutical/Biomedical
Products for ML Strategies, Inc since 1990. ML Strategies, Inc. Is the
consulting affiliate of the law firm of Mintz Levin Cohn Ferris Glovsky and
Popeo PC, of which Dr. Green is of counsel. Dr. Green has formerly served as
President of the Biotechnology Data Group in Cambridge, Massachusetts and as a
consultant to many major pharmaceutical companies and investors in the
pharmaceutical industry. Dr. Green is the author of many scientific papers in
biochemistry and drug development and is well known for his Issues and
Commentary series, which analyzes the competitive commercial aspects and
potential markets for emerging pharmaceutical technologies. Dr. Green is a
director of Sheffield Medical Technologies, Inc.
Michael C. Lee has been the President and Chief Executive Officer of East
Coast Food Products, Inc., a wholesale food distributor, since 1976. Mr. Lee is
a director of Prime Spot Media, Inc.
18
<PAGE>
All directors and officers of the Company are elected annually to serve for
a term of one year and until their successors are elected and qualified.
Item 10. EXECUTIVE COMPENSATION
The following table sets forth the compensation paid to the Company's Chief
Executive Officer for the three fiscal years ended October 31, 1996. No other
officer of the Company received total annual salary and bonus in excess of
$100,000 for such period.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Compensation
Annual Compensation Awards
------------------------------------------------------ -------------
Securities
Name and Other Annual Underlying All Other
Principal Position Year Salary ($) Bonus ($) Compensation ($)(1) Options (#) Compensation ($)
------------------ ---- ---------- --------- ------------------ ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
L. Michael Cutrer, 1996 $91,404 $2,500 $0 0 $0
Chief Executive Officer 1995 $75,673 $4,000 $0 0 $0
1994 $69,225 $4,300 $0 0 $0
</TABLE>
- ------------------------
(1) Mr. Cutrer did not receive other compensation in aggregate exceeding
$50,000 or 10% of the total of annual salary and bonus reported in the
table in any of the fiscal years ended October 31, 1996, 1995 or 1994.
STOCK OPTIONS
There were no options granted to the Chief Executive Officer during the
fiscal year ended October 31, 1996. The following table sets forth information
concerning options held by the Company's Chief Executive Officer at
October 31, 1996:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
Number of
Securities
Underlying Value of
Unexercised Unexercised In-the-
Options at Money Options at
Shares FY-End (#) FY-($)(1)
Acquired on Value Exercisable/ Exercisable/
Name Exercise (#) Realized ($) Unexercisable Unexercisable
---- ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
L. Michael Cutrer 0 0 40,000/0 $0/0
- -------------------------
</TABLE>
(1) Calculated upon the difference between the exercise price and the fair
market value at fiscal year-end.
Effective November 1, 1996, L. Michael Cutrer was granted options
exercisable for 100,000 shares of the Company's Common Stock at an exercise
price of $ 1.05, the fair market value at the time of grant. The terms of the
option grant provide for sixty percent (60%) of such options to vest immediately
with the balance vesting 50% per year over 2 years.
19
<PAGE>
COMPENSATION OF DIRECTORS
All directors and officers of the Company are elected annually to serve for
a term of one year and until their successors are elected and qualified. Upon
their election in 1996, Messrs. Berkin, Green and Lee were granted stock options
exercisable for 40,000 shares of Common Stock of the Company at an exercise
price equal to the fair market value of the Company's Common Stock on the date
such directors were elected. Fifty percent (50%) of such stock options vest on
the first anniversary date of the grant, with the remaining options vesting on
the second anniversary date of the grant.
During the 1996 fiscal year, the Board resolved that subject to, and
effective on the date of, stockholder approval of their election as a director
of the Company at each Annual Meeting of the Stockholders of the Company, each
of the non-employee directors of the Company be granted options for 10,000
shares of the Company's Common Stock, exercisable at the fair market value on
the business day prior to the date of such election, fifty percent (50%) of
which options shall vest one year after the date of the grant, and the
remaining fifty percent (50%) shall vest two years after the date of the grant.
All directors are reimbursed for some of the expenses incurred in
connection with attending Board meetings. Mr. Gruverman does not receive a
salary as Chairman.
Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the information regarding the beneficial
ownership of the Company's Common Stock as of January 15, 1997 by (i) each
person who is known by the Company to own more than 5% of the Company's
outstanding Common Stock, (ii) each of the Company's directors; and (iii) all
directors and officers of the Company as a group:
Amount and Nature of Percent of
Name and Address (1) Beneficial Ownership Ownership
- -------------------- -------------------- ---------
Irwin J. Gruverman 324,000(2) 10.6%
L. Michael Cutrer 322,500(3) 10.4%
Irwin A. Olian 215,000 7.1%
Larry Berkin 192,800 6.4%
Dr. Allan M. Green 0 0.0%
Michael C. Lee 84,300 2.8%
All directors and executive officers 923,600(2)(3) 29.5%
as a group (5 persons)
- -----------------------------
(1) Addresses of all individuals listed are c/o North American Scientific 7435
Greenbush Ave., North Hollywood, CA 91605 except for Mr. Olian
whose address is 415 Caroll Canal, Venice, CA 90291.
(2) Includes 40,000 shares subject to outstanding options which are immediately
exercisable.
(3) Includes 60,000 shares subject to outstanding options which are immediately
exercisable; also includes 12,500 shares owned by the reporting person's
spouse over which the reporting person disclaims beneficial ownership.
20
<PAGE>
Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None
Item 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
EXHIBITS DESCRIPTION OF DOCUMENTS
3(i) Certificate of Incorporation of the Registrant, incorporated by
reference to Exhibit 3(i) of the Registrant's Registration
Statement on Form 10-SB, filed August 22, 1995.
3(i)(a) Certificate of Domestication of the Registrant, incorporated by
reference to Exhibit 3(i)(a) of the Registrant's Registration
Statement on Form 10-SB, filed August 22, 1995.
3(ii) Bylaws of the Registrant, incorporated by reference to Exhibit
3(ii) of the Registrant's Registration Statement on Form 10-SB,
filed August 22, 1995.
4.1 Certificate of Incorporation of the Registrant, incorporated by
reference to Exhibit 4.1 of the Registrant's Registration
Statement on Form 10-SB, filed August 22, 1995.
10.1 Agreement dated June 9, 1995 between the Registrant and CIS-US,
incorporated by reference to Exhibit 10.1 of the Registrant's
Registration Statement on Form 10-SB, filed August 22, 1995.
10.2 Lease Agreement dated November 30, 1995 between Registrant and
Abraham Stricks, incorporated by reference to Exhibit 10.2 of
the Registrant's Registration Statement on Form 10-SB, filed
August 22, 1995.
10.3 North American Scientific, Inc. Amended and Restated 1996 Stock
Option Plan
10.4 Agreement dated as of December 11, 1996 between the Registrant
and M.H. Meyerson & Co., Inc.
21 Subsidiaries of the Registrant, incorporated by reference to
Exhibit 21 of the Registrant's Registration Statement on Form
10-SB, filed August 22, 1995.
23.1 Consent of Price Waterhouse LLP
(b) Reports on Form 8-K: None.
21
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
NORTH AMERICAN SCIENTIFIC, INC.
(Registrant)
Date: January 20 , 1997
By: /s/ L. Michael Cutrer
----------------------------------
L. Michael Cutrer
Its: President and Chief Executive Officer
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.
NAME TITLE DATE
---- ----- ----
/s/ Irwin J. Gruverman Chairman of the Board January 20, 1997
- ----------------------------- and Director
(Irwin J. Gruverman)
/s/ L. Michael Cutrer President, Chief Executive January 20, 1997
- ----------------------------- Officer and Director
(L. Michael Cutrer) (Principal Executive, Financial
and Accounting Officer)
/s/ Larry Berkin Director January 20, 1997
- -----------------------------
(Larry Berkin)
/s/ Dr. Allan M. Green Director January 20, 1997
- -----------------------------
(Dr. Allan M. Green)
/s/ Michael C. Lee Director January 20, 1997
- -----------------------------
(Michael C. Lee)
22
<PAGE>
INDEX TO EXHIBITS
Exhibits Description of Documents Sequential Page Number
- -------- ------------------------ ----------------------
3(i) Certificate of Incorporation of
the Registrant, incorporated by
reference to Exhibit 3(i) of the
Registrant's Registration
Statement on Form 10-SB, filed
August 22, 1995.
3(i)(a) Certificate of Domestication of
the Registrant, incorporated by
reference to Exhibit 3(i)(a) of
the Registrant's Registration
Statement on Form 10-SB, filed
August 22, 1995.
3(ii) Bylaws of the Registrant,
incorporated by reference to
Exhibit 3(ii) of the Registrant's
Registration Statement on Form
10-SB, filed August 22, 1995.
4.1 Certificate of Incorporation of
the Registrant, incorporated by
reference to Exhibit 4.1 of the
Registrant's Registration
Statement on Form 10-SB, filed
August 22, 1995.
10.1 Agreement dated June 9, 1995
between the Registrant and
CIS-US, incorporated by reference
to Exhibit 10.1 of the
Registrant's Registration
Statement on Form 10-SB, filed
August 22, 1995.
10.2 Lease Agreement dated November
30, 1995 between Registrant and
Abraham Stricks, incorporated by
reference to Exhibit 10.2 of the
Registrant's Registration
Statement on Form 10-SB, filed
August 22, 1995.
10.3 North American Scientific, Inc.
Amended and Restated 1996 Stock
Option Plan
10.4 Agreement dated as of December 11,
1996 between the Registrant and
M.H. Meyerson & Co., Inc.
21 Subsidiaries of the Registrant,
incorporated by reference to
Exhibit 21 of the Registrant's
Registration Statement on Form
10-SB, filed August 22, 1995.
23.1 Consent of Price Waterhouse LLP
<PAGE>
NORTH AMERICAN SCIENTIFIC, INC.
AMENDED AND RESTATED
1996 STOCK OPTION PLAN
1. PURPOSE OF THE PLAN. Under this 1996 Stock Option Plan (the "Plan") of
North American Scientific, Inc. (the "Company") options may be granted to
eligible employees, directors and consultants to purchase shares of the
Company's capital stock. The Plan is designed to enable the Company to attract,
retain, and motivate its employees, directors and consultants by providing for
or increasing the proprietary interests of such individuals in the Company. The
Plan provides for options which qualify as incentive stock options ("Incentive
Options") under Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code"), as well as options which do not so qualify ("Nonstatutory
Options"). Any option granted under this Plan shall be clearly identified as
either an Incentive Option or a Nonstatutory Option.
2. STOCK SUBJECT TO PLAN. The aggregate number of shares which may be
issued under options is 500,000 shares of the Company's Common Stock, $0.01 par
value ("Common Stock"), subject to the adjustments hereinafter provided. Such
number of shares shall be reserved by the Company for options granted under this
Plan. The shares which may be issued or delivered under the Plan may be either
authorized but unissued shares or treasury shares or partly each. Shares of
stock subject to the unexercised portions of any options granted under this Plan
which expire or terminate or are canceled may again be subject to options under
the Plan.
3. ELIGIBILITY. The employees eligible to be considered for the grant of
Incentive Options hereunder are all employees (including directors) regularly
employed by the Company. All such employees and all nonemployed directors or
consultants to the Company shall also be eligible to receive Nonstatutory
Options hereunder.
4. $100,000 INCENTIVE OPTION EXERCISE LIMITATION. The aggregate fair
market value of the stock for which Incentive Options granted to any one
eligible employee under this Plan and under all incentive stock option plans of
the Company, its parent(s) and any subsidiaries, may by their terms first become
exercisable during any calendar year shall not exceed $100,000, determining fair
market value of the stock subject to any option as of the time that option is
granted. If the date on which one or more Incentive Options could be first
exercised would be accelerated pursuant to any other provision of the Plan or
any stock option agreement referred to in Section 10, or an amendment thereto,
and the acceleration of such exercise date would result in a violation of the
restriction set forth in the preceding sentence, then notwithstanding any such
other provision the exercise date of such Incentive Options shall be accelerated
only to the extent, if any, that is permitted under Section 422 of the Code and
the exercise date of the Incentive Options with the lowest option prices shall
be accelerated first. Any exercise date which cannot be accelerated without
violating the $100,000
<PAGE>
restriction of this section shall nevertheless be accelerated, and the portion
of the option becoming exercisable thereby shall be treated as a nonstatutory
option.
5. OPTION PRICE. The purchase price at which each stock option may be
exercised (the "Option Price") shall be such price as the Board of Directors, in
its discretion, shall determine, and, in the case of Incentive Options, shall
not be less than one hundred percent (100%) of the fair market value per share
of the Common Stock covered by the Incentive Option on the date of grant, except
that in the case of an Incentive Option granted to an employee who, immediately
prior to such grant, owns stock possessing more than ten percent (10%) of the
total combined voting power of all classes of stock of the Company or any
subsidiary (a "Ten Percent Employee"), the Option Price shall not be less than
one hundred ten percent (110%) of such fair market value on the date of grant.
For purposes of this Section 5, the fair market value of the Common Stock shall
be determined as provided in Section 11. For purposes of this Section 5, an
individual (a) shall be considered as owning not only shares of the Common Stock
owned individually but also all shares that are at the time owned, directly or
indirectly, by or for the spouse, ancestors, lineal descendants and brothers and
sisters (whether by the whole or half blood) of such individual, and (b) shall
be considered as owning proportionately any shares owned, directly or indirectly
by or for any corporation, partnership, estate or trust in which such individual
shall be a shareholder, partner or beneficiary.
6. EXERCISE OF OPTION. The option agreement may provide for partial
exercise in installments. Exercisable options may be exercisable in full or in
part. The period of time in which an option may be exercised shall be the period
designated in the option. In the case of an Incentive Option such period shall
not exceed ten (10) years from the date the option is granted and with respect
to a Ten Percent Employee, such period of time shall not exceed five (5) years
from the date the Incentive Option is granted. No Nonstatutory Option shall be
exercisable after the expiration of ten years from the date of grant. An option
to the extent exercisable at any time may be exercised in whole or in part.
7. PAYMENT OF OPTION PRICE. Payment for stock purchased under any
exercise of an option granted under this Plan shall be made in full in cash
concurrently with such exercise. Alternatively, such payment may be made in
whole or in part with shares of the same class of stock as that then subject to
the option, delivered in lieu of cash concurrently with such exercise, the
shares so delivered to be valued on the basis of the fair market value of stock
(determined in a manner provided in Section 11 hereof) provided that the Company
is not then prohibited from purchasing or acquiring shares of such stock.
Notwithstanding the foregoing, the Company shall not be obligated to accept
payment of the exercise price pursuant to this Section 7 unless the stock
tendered as payment for the exercise price has been held by the optionee for at
least six months. The Company also has the discretion to refuse any other method
of payment that would cause the Plan or the option agreements issued thereunder
to be treated for accounting purposes as creating stock appreciation rights or
other "variable stock plan" characteristics which would cause the Company to
recognize a charge to earnings.
-2-
<PAGE>
8. NONTRANSFERABILITY. Any option granted under this Plan shall by its
terms be nontransferable by the optionee other than by will or the laws of
descent and distribution and is exercisable during the optionee's lifetime only
by him or by his guardian or legal representative.
9. TERMINATION OF OPTION. In the case of Incentive Options:
a. If the employment or other service to the Company or a subsidiary
of an optionee (whether employee, nonemployed director, or consultant) who
is not disabled within the meaning of Section 422(c)(6) of the Code (a
"Disabled Optionee") is terminated without cause, quits or retires under
any retirement plan of the Company or a subsidiary, any then outstanding
and exercisable stock option held by such an optionee shall be exercisable,
in accordance with the provisions of the stock option agreement referred to
in Section 10, by such optionee at any time prior to the expiration date of
such stock option or within three months after the date of termination of
employment or service, whichever is the shorter period;
b. If the employment of an optionee who is a Disabled Optionee is
terminated without cause or if the service of a nonemployed director or
consultant terminates because such individual becomes a Disabled Optionee,
any then outstanding and exercisable stock option held by such an optionee
shall be exercisable, in accordance with the provisions of the stock option
agreement referred to in Section 10, by such an optionee at any time prior
to the expiration date of such stock option or within one year after the
date of such termination of employment or service, whichever is the shorter
period;
c. Following the death of an optionee during employment or of a
nonemployed director or consultant while serving as a director or
consultant of the Company or a subsidiary, any outstanding and exercisable
stock option held by such an optionee at the time of death shall be
exercisable, in accordance with the provisions of the stock option
agreement referred to in Section 10, by the person or persons entitled to
do so under the will of the optionee, or, if the optionee shall fail to
make testamentary disposition of the stock option or shall die intestate,
by the legal representative of the optionee at any time prior to the
expiration date of such stock option or within one year after the date of
death, whichever is the shorter period.
For all options issued hereunder, if the Company terminates the employment
of an optionee for cause, all outstanding stock options held by the optionee at
the time of such termination shall automatically terminate unless the Board of
Directors notifies the optionee that his options will not terminate. A
termination "for cause" shall be defined under each written option agreement
issued pursuant to Section 10.
Whether termination of employment or other service is a termination "for
cause" and whether an optionee is disabled within the meaning of Section
422(c)(6) of the Code shall be determined in each case, in its discretion, by
the Board of Directors and any such determination by the Board of Directors
shall be final and binding.
-3-
<PAGE>
10. WRITTEN OPTION AGREEMENT. All options granted pursuant to the Plan
shall be evidenced by written option agreements. Such option agreements shall
comply with and be subject to all of the terms, conditions, and limitations set
forth in this Plan and such further provisions, not inconsistent with this Plan,
as the Board of Directors shall deem appropriate.
11. DETERMINATION OF FAIR MARKET VALUE. Fair market value of the Common
Stock shall be the closing price of the Common Stock on the Vancouver Stock
Exchange (or such successor exchange or automated quotation system upon which
the Common Stock becomes listed) on the day prior to the grant.
12. ADJUSTMENTS. If the outstanding shares of stock of the class then
subject to this Plan are increased or decreased, or are changed into or
exchanged for a different number or kind of shares or securities, as a result of
one or more reorganizations, recapitalization, stock splits, reverse stock
splits, stock dividends or the like, appropriate adjustments shall be made in
the number and/or kind of shares or securities for which options may thereafter
be granted under this Plan and for which options then outstanding under this
Plan may thereafter be exercised. The Board of Directors shall make such
adjustments as it may deem fair, just and equitable to prevent substantial
dilution or enlargement of the rights granted to or available for optionees. No
adjustment provided for in this Section 12 shall require the Company to issue or
sell a fraction of a share or other security.
If any such adjustment provided for in this Section 12 requires the
approval of stockholders in order to enable the Company to grant Incentive
Options, then no such adjustment shall be made without the required stockholder
approval. Notwithstanding the foregoing, in the case of Incentive Options, if
the effect of any such adjustment would be to cause the stock option to fail to
continue to qualify as an Incentive Option or to cause a modification, extension
or renewal of such stock option within the meaning of Section 424 of the Code,
the Board of Directors may elect that such adjustment not be made but rather
shall use reasonable efforts to effect such other adjustment of each then
outstanding stock option as the Board of Directors, in its sole discretion,
shall deem equitable and which will not result in any disqualification,
modification, extension or renewal (within the meaning of Section 424 of the
Code) of such Incentive Option.
13. ADMINISTRATION. The Plan shall be administered by the Board of
Directors. The Board of Directors may interpret the Plan, prescribe, amend and
rescind any rules or regulations necessary or appropriate for the administration
of the Plan, and make all determinations, in its discretion, as to which
eligible employees will receive options, the number of shares subject to the
options and the exercise price. In addition, the Board of Directors may make
such other determinations and take such other action it deems necessary or
advisable. Without limiting the generality of the foregoing, the Board of
Directors may, in its discretion, treat all or any portion of any period during
which a participant is on military or other approved leave of absence from the
Company or a subsidiary as a period of employment of such participant by the
Company or such subsidiary, as the case may be, for purposes of accrual of his
rights under his awards; provided, however, that no Incentive Option may be
awarded to an employee while he is on leave of absence.
-4-
<PAGE>
14. LIMITATIONS RESPECTING INCENTIVE OPTIONS. It is the intent of the
Company to conform strictly to the requirements of Code Section 422 with regard
to Incentive Options granted pursuant to this Plan. Therefore, notwithstanding
any other provision of this Plan, nothing herein with regard to Incentive
Options shall contravene any requirement set forth in Code Section 422 and if
inconsistent provisions are otherwise found herein, they shall be deemed void
and unenforceable or automatically amended to conform, as the case may be.
15. RIGHTS AS A STOCKHOLDER. An optionee, or his executor, administrator
or legatee if he be deceased, shall have no rights as a stockholder with respect
to any stock covered by his option under the date of issuance of the stock
certificate to him or such stock after receipt of the consideration in full set
forth in the option agreement or as may be approved by the Board of Directors.
Except as provided in Section 12 hereof, no adjustments shall be made for
dividends, whether ordinary or extraordinary, whether in cash, securities, or
other property, for distributions in which the record date is prior to the date
for which the stock certificate is issued.
16. MODIFICATION. EXTENSION AND RENEWAL. Subject to the conditions of, and
within the limitations prescribed in, Section 14, hereof, the Board of Directors
may modify, extend or renew options which are outstanding as granted under the
Plan if otherwise consistent herewith. Notwithstanding the foregoing, no
modification shall, without the prior written consent of the optionee, alter,
impair or waive any rights or obligations of any option theretofore granted
under the Plan.
17. INVESTMENT PURPOSES, ETC. Prior to the issuance or delivery of any
shares of the common stock under the Plan, the person exercising the stock
option may be required to (a) represent and warrant that the shares of the
Common Stock to be acquired upon exercise of the stock option are being acquired
for investment for the account of such person and not with a view to resale or
other distribution thereof, (b) represent and warrant that such person will not,
directly or indirectly, transfer, sell, assign, pledge, hypothecate or otherwise
dispose of any such shares unless the transfer, sale, assignment, pledge,
hypothecation or other disposition of the shares is pursuant to effective
registrations under the 1933 Act and applicable state or foreign securities laws
or pursuant to appropriate exemptions from any such registrations, (c) execute
such further documents as may be reasonably required by the Board of Directors
upon exercise of the option or any part thereof, including but not limited to
stock transfer restrictions. The certificate or certificates representing the
shares of the common stock to be issued or delivered upon exercise of a stock
option may bear a legend evidencing the foregoing and other legends required by
any applicable securities laws. Furthermore, nothing herein or any option
granted hereunder shall require the Company or any subsidiary to issue any stock
upon exercise of any option if the issuance would, in the opinion of counsel for
the Company, constitute a violation of the Securities Act of 1933, as amended,
the California securities laws, or any other applicable rule or regulation then
in effect.
18. NO RIGHT TO CONTINUED EMPLOYMENT. This Plan, and any option granted
under this Plan, shall not confer upon any optionee any right with respect to
continued employment by or service to the Company or any subsidiary, nor shall
they alter, modify, limit or interfere with any right or privilege of the
Company or any subsidiary under any employment or service contract heretofore or
-5-
<PAGE>
hereinafter executed with any optionee, including the right to terminate any
optionee's employment, directorship, or consultancy service, at any time for or
without cause.
19. DISPOSITION OF INCENTIVE OPTION SHARES. Except (a) as provided in
options to the Company and other holders of the stock contained in stock
transfer restriction agreements to which the Company is a party, or (b) in
connection with reorganizations or other transactions described in Section 12
hereof, no stock acquired by the exercise of an Incentive Option granted under
the Plan shall be transferable, otherwise than by will or the laws of descent
and distribution, within two (2) years after the date the option was granted or
within one (1) year after the transfer of such share of stock to the optionee
pursuant to the exercise of the option. Each certificate representing the
acquired shares shall bear a legend to this effect.
20. COMPLIANCE WITH OTHER LAWS AND REGULATIONS. The Plan, the options
granted hereunder and the obligation of the Company to sell and deliver stock
under such options, shall be subject to all applicable federal and state laws,
rules, regulations and to such approvals by any government or regulatory
authority or investigative agency as may be required. The Company shall not be
required to issue or deliver any certificates for shares of stock prior to (a)
the listing of any such stock to be acquired pursuant to the exercise of any
option on any stock exchange on which the stock may then be listed, and (b) the
compliance with any registration requirements or qualification of such shares
under any federal or state securities laws, or obtaining any ruling or waiver
from any government body which the Company or it subsidiaries shall, in their
sole discretion, determine to be necessary or advisable, or which, in the
opinion of counsel to the Company or its subsidiaries, is otherwise required.
21. CORPORATE REORGANIZATIONS. Upon the dissolution or liquidation of the
Company, or upon a reorganization, merger or consolidation of the Company as a
result of which the outstanding securities of the class then subject to options
hereunder are changed into or exchanged for cash or property or securities not
of the Company's issue, or upon a sale of substantially all the property of the
Company to, or the acquisition of stock representing more than eighty percent
(80%) of the voting power of the stock of the Company then outstanding by
another corporation or person, the Plan shall terminate, and all options
theretofore granted hereunder shall terminate, unless provision be made in
writing in connection with such transaction for the continuance of the Plan
and/or for the assumption of options theretofore granted, or the substitution
for such options of options covering the stock of a successor employer
corporation, or a parent or a subsidiary thereof, with appropriate adjustments
as to the number and kind of shares and prices, in which event the Plan and
options theretofore granted shall continue in the manner and under the terms so
provided. If the Plan and unexercised options shall terminate pursuant to the
foregoing sentence, all persons entitled to exercise any unexercised portions of
options then outstanding shall have the right, at such time prior to the
consummation of the transaction causing such termination as the Company shall
designate, to exercise the unexercised portions of their options, including the
portions thereof which would, but for this Section 21, not yet be exercisable.
-6-
<PAGE>
22. WITHHOLDING. If, upon exercise of any Nonstatutory Option (or any
Incentive Option which is treated as a Nonstatutory Option because it fails to
meet the requirements set forth herein for Incentive Options), the optionee
fails to tender payment to the Company for any federal income tax withholding,
the Board of Directors shall withhold from the optionee sufficient shares or
fractional shares having a fair market value (determined under Section 11) equal
to any amount which the Company is required to withhold under the Code.
23. AMENDMENT AND TERMINATION. The Company may alter, amend, suspend or
terminate this Plan, provided that no such action shall deprive an optionee,
without his consent, of any option granted to the optionee pursuant to this Plan
or of any of such optionee's rights under such option. Except as herein provided
no such action of the Company, unless approved by the shareholders of the
Company within twelve months prior or twelve months after such action, may:
a. increase the maximum number of shares for which options granted
under this plan may be exercised;
b. reduce the minimum permissible exercise price;
c. extend the ten-year duration of this Plan set forth herein; or
d. alter the class of employees eligible to receive options under the
Plan.
24. PLAN DATE AND DURATION. The Plan shall take effect on the date it is
adopted by the Board of Directors of the Company. Options may not be granted
under this Plan more than ten years after the date of the adoption of this Plan,
or of shareholder approval thereof, whichever is earlier.
-7-
<PAGE>
M.H. MEYERSON & CO., INC.
FOUNDED 1960
BROKERS 8( DEALERS IN SECURITIES UNDERWRITERS
NEWPORT OFFICE TOWER
525 WASHINGTON BLVD. - P.O. BOX 260 - JERSEY CITY. NJ 07303-0260
201-459-9500 - 800-888-8118 - FAX 201-459-9510 - www.mhmeyerson.com
December 11, 1996
Mr. L. Michael Cutrer, President
Chief Executive Officer
NORTH AMERICAN SCIENTIFIC, INC.
7435 Greenbush Avenue
North Hollywood, CA 91605
Dear Mr. Cutrer:
THIS AGREEMENT (the "AGREEMENT") is made as of December 11, 1996 between
North American Scientific, Inc. ("NASI") and M.H. Meyerson & Co., Inc.
("MEYERSON").
In consideration of the mutual covenants contained herein and intending to
be legally bound thereby, NASI and MEYERSON hereby agree as follows:
1. MEYERSON will perform investment banking services for NASI on the terms set
forth below for a period of five years from the date hereof. Such services
will be performed on a best efforts basis and will include, without
limitation, assistance to NASI in mergers, acquisitions, and internal
capital structuring and the placement of new debt and equity issues of
NASI, all with the objective of accomplishing NASI's business and financial
goals. In each instance, MEYERSON shall endeavor, subject to market
conditions, to assist NASI in identifying corporate candidates for mergers
and acquisitions and sources of private and institutional funds; to provide
planning, structuring, strategic and other advisory services to NASI; and
to assist in negotiations on behalf of NASI. MEYERSON will have the option
to perform all financings to be done by NASI for as long as this AGREEMENT
is in effect. In each instance, MEYERSON will render such services as to
which NASI and MEYERSON mutually agree and MEYERSON will exert its best
efforts to accomplish the goals agreed to by MEYERSON and NASI.
2. In connection with the performance of this AGREEMENT, MEYERSON and NASI
shall comply with all applicable laws and regulations, including, without
limitation, those of the National Association of Securities Dealers, Inc.
and the Securities and Exchange Commission.
3. In consideration of the services previously rendered and to be rendered by
MEYERSON hereunder, MEYERSON is hereby granted Warrants to purchase, at a
price of $1% per share, a total of 150,000 shares of Common Stock of NASI,
with demand and piggy back
<PAGE>
registration rights as set forth in paragraph 5 below. Such Warrants
("MEYERSON Warrants") may be exercised at any time from NASI to and
including December 11, 2001. The MEYERSON Warrants shall vest and become
irrevocable as follows: 50,000 Warrants upon the signing of this AGREEMENT;
50,000 Warrants 180 days after the signing of this AGREEMENT, and an
additional 50,000 Warrants 547 days after the signing of this AGREEMENT.
Notwithstanding the foregoing, none of such Warrants shall be exercisable
until NASI has received notification from the Vancouver Stock Exchange that
the NASI Common Stock has been delisted from such Exchange. NASI will use
its best efforts to effect the delisting as soon as possible.
4. If NASI should, at any time, or from time to time hereafter, effect a stock
split, a reverse stock split, or a recapitalization, the terms of the
MEYERSON Warrants shall be proportionately adjusted to prevent the dilution
or enlargement of the rights of the holders.
5. During the period from December 11, 1997 to December 11, 2001, the holders
of at least 51% of: (i) the MEYERSON Warrants not then exercised; and (ii)
the shares previously issued upon exercise of any of the MEYERSON Warrants
(hereinafter, collectively, the "MEYERSON EQUITY",) may demand, on one
occasion only, that NASI, at NASI's expense, promptly file a Registration
Statement under the Securities Act of 1933, as amended ("ACT"), to permit a
public offering of the shares of Common Stock issued and then issuable
pursuant to exercise of the MEYERSON Warrants (the "MEYERSON SHARES").
Additionally, if NASI, during the period from December 11, 1996 to December
11, 2001, files a Registration Statement (other than on Form S-8 or any
other form which by its terms is not available for registration of the
MEYERSON SHARES) covering the sale of any of NASI's common stock, then
NASI, on each such occasion, at the request of the holders of at least 51%
of the shares and warrants constituting the MEYERSON EQUITY, shall include
in any such Registration Statement, at NASI's expense, the MEYERSON SHARES,
provided that, if the sale of securities by NASI is being made through an
underwriter and the underwriter objects to inclusion of the MEYERSON SHARES
in the Registration Statement, the MEYERSON SHARES shall not be so included
in the Registration Statement or in any registration statement filed within
120 days after the effective date of the underwritten Registration
Statement.
6. This AGREEMENT constitutes the entire Warrant Agreement between the parties
and when a copy hereof is presented to NASI's transfer agent, together with
a certified check in the proper amount and a request that all or part of
the MEYERSON Warrant be exercised, the certificates for the appropriate
number of shares of Common Stock shall be promptly issued, bearing
appropriate securities laws restrictive legends.
7. Upon the execution of this AGREEMENT, NASI shall include in their next
annual report and filings the highlights and terms of this investment
banking AGREEMENT.
8. Upon the signing of this AGREEMENT, NASI shall pay MEYERSON $15,000.00 as a
non-accountable and non-refundable expense allowance for due diligence and
general compliance review. MEYERSON shall be entitled to additional
compensation, as may
2
<PAGE>
be negotiated between MEYERSON and NASI, arising out of any transactions
that are proposed or executed by MEYERSON and consummated by NASI, or are
executed by MEYERSON at NASI's request, during the term of this AGREEMENT
to the extent that such compensation is normal and ordinary for such
transactions. In addition, MEYERSON shall be reimbursed by NASI for any
reasonable out-of-pocket expenses that MEYERSON may incur in connection
with rendering any service to or on behalf of NASI that is approved, in
writing, in advance by NASI's Chief Executive Officer.
9. NASI agrees to indemnify and hold MEYERSON and its directors, officers and
employees harmless from and against any and all losses, claims, damages,
liabilities, costs or expenses arising out of any action or cause of action
brought against MEYERSON in connection with its rendering services under
this AGREEMENT except for any losses, claims, damages, liabilities, costs
or expenses resulting from any violation by MEYERSON of applicable laws and
regulations including, without limitation, those of the National
Association of Securities Dealers, Inc. and the Securities and Exchange
Commission or any state securities commission or from any act of MEYERSON
involving gross negligence or willful misconduct and except that NASI shall
not be liable for any amount paid in settlement of any claim that is
settled without its prior written consent.
10. MEYERSON agrees to indemnify and hold NASI and its directors, officers and
employees harmless from and against any and all losses claims, damages,
liabilities, costs or expenses resulting from any violation by MEYERSON of
applicable laws and regulations including, without limitation, those of the
National Association of Securities Dealers, Inc., the Securities and
Exchange Commission any state securities commission or from any act of
MEYERSON involving gross negligence or willful misconduct.
11. Within 90 days of the date of this AGREEMENT, a representative of MEYERSON
will visit the corporate headquarters of NASI. NASI will submit to MEYERSON
a current business plan setting forth how NASI plans to proceed over the
next two (2) years.
12. Nothing contained in this AGREEMENT shall be construed to constitute
MEYERSON as a partner, employee, or agent of NASI; nor shall either party
have any authority to bind the other in any respect, it being intended that
MEYERSON is, and shall remain an independent contractor.
13. This AGREEMENT may not be assigned by either party hereto, shall be
interpreted in accordance with the laws of the State of New Jersey, and
shall be binding upon the successors of the parties. Either party may
terminate this investment banking contract at any time, however, legally
vested Warrants will remain with MEYERSON.
14. If any paragraph, sentence, clause or phrase of this AGREEMENT is for any
reason declared to be illegal, invalid, unconstitutional, void or
unenforceable, all other paragraphs, sentences, clauses or phrases hereof
not so held shall be and remain in full force and effect.
3
<PAGE>
15. None of the terms of this AGREEMENT shall be deemed to be waived or
modified except by an express agreement in writing signed by the party
against whom enforcement of such waiver or modification is sought. The
failure of either party at any time to require performance by the other
party of any provision hereof shall, in no way, affect the full right to
require such performance at any time thereafter. Nor shall the waiver by
either party of a breach of any provision hereof be taken or held to be a
waiver of any succeeding breach of such provision or as a waiver of the
provision itself.
16. Any dispute, claim or controversy arising out of or relating to this
AGREEMENT, or the breach thereof, shall be settled by arbitration in Jersey
City, New Jersey, in accordance with the Commercial Arbitration Rules of
the American Arbitration Association. The parties hereto agree that they
will abide by and perform any award rendered by the arbitrator(s) and that
judgement upon any such award may be entered in any Court, state or
federal, having jurisdiction over the party against whom the judgement is
being entered. Any arbitration demand, summons, complaint, other process,
notice of motion, or other application to an arbitration panel, Court or
Judge, and any arbitration award or judgement may be served upon any party
hereto by registered or certified mail, or by personal service, provided a
reasonable time for appearance or answer is allowed.
17. For purposes of compliance with laws pertaining to potential inside
information being distributed unauthorized to anyone, all communications
regarding NASI's confidential information should only be directed to Martin
H. Meyerson, Chairman, Michael Silvestri, President, or Linda Antosiewicz,
Senior Vice President, Compliance. If information is being faxed, our
confidential compliance fax number is (201) 459-9534 for communication use.
IN WITNESS WHEREOF, the parties hereto have executed this AGREEMENT as of
the day and year set forth above.
M.H. MEYERSON & CO., INC. NORTH AMERICAN SCIENTIFIC, INC.
BY: /s/ Michael Silvestri By: /s/ L. Michael Cutrer
------------------------- -------------------------
Michael Silvestri L. Michael Cutrer
President President and
Chief Executive Officer
4
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 35-14373) of North American Scientific, Inc. of
our report dated January 6, 1997 appearing on page 8 of this Annual Report on
Form 10-KSB for the year ended October 31, 1996.
/s/ PRICE WATERHOUSE LLP
Price Waterhouse LLP
Costa Mesa, California
January 21, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> NOV-01-1995
<PERIOD-END> OCT-31-1996
<CASH> 866,000
<SECURITIES> 0
<RECEIVABLES> 683,200
<ALLOWANCES> 0
<INVENTORY> 144,800
<CURRENT-ASSETS> 1,747,700
<PP&E> 494,900
<DEPRECIATION> (239,000)
<TOTAL-ASSETS> 2,000,200
<CURRENT-LIABILITIES> 471,800
<BONDS> 0
0
0
<COMMON> 29,800
<OTHER-SE> 2,105,100
<TOTAL-LIABILITY-AND-EQUITY> 2,000,200
<SALES> 3,063,300
<TOTAL-REVENUES> 3,063,300
<CGS> 1,534,200
<TOTAL-COSTS> 2,419,300
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 664,100
<INCOME-TAX> 251,000
<INCOME-CONTINUING> 413,100
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 413,100
<EPS-PRIMARY> .14
<EPS-DILUTED> .14
</TABLE>
