Filed pursuant to Rule 424(b)(3)
Registration No. 333-37341
NORTH AMERICAN SCIENTIFIC, INC.
100,000 SHARES OF COMMON STOCK
(PAR VALUE $ 0.01 PER SHARE)
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This Prospectus relates to the offer and sale by M.H. Meyerson & Co., Inc.
(the "Selling Securityholder") of up to 100,000 shares of Common Stock
underlying Common Stock Purchase Warrants (the "Common Stock") of North American
Scientific, Inc. (the "Company"). The Shares may be offered by the Selling
Securityholder in transactions on the Nasdaq OTC Bulletin Board (the "Bulletin
Board"), in privately negotiated transactions, or by a combination of such
methods of sale, at fixed prices that may be changed, at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices or at negotiated prices. the Company will not receive any of the proceeds
of the sale of such shares of Common Stock in this Offering. the Company will
receive proceeds of up to $162,500 from the exercise of the 100,000 Common Stock
purchase warrants by the Selling Securityholder.
SEE "RISK FACTORS" ON PAGE 4 FOR CERTAIN CONSIDERATIONS RELEVANT TO AN
INVESTMENT IN THESE SECURITIES.
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The shares of Common Stock of the issuer are reported on the Nasdaq OTC
Bulletin Board under the symbol "NASI."
The Selling Securityholder has agreed to pay all of the expenses in
connection with the registration and sale of the Common Stock being offered by
the Selling Securityholder.
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The Securities offered hereby are speculative and involve a high degree of risk
and should not be purchased by investors who cannot afford the loss of their
entire investment. See "risk factors" on page 4.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
The Common stock was offered by the Company pursuant to an exemption from
registration provided by the Securities Act of 1933, as amended.
No dealer, salesman or any other person has been authorized to give any
information or to make any REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED ON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY, BY ANY PERSON
IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL FOR SUCH PERSON TO MAKE SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY OFFER,
SOLICITATION OR SALE MADE HEREUNDER, SHALL UNDER ANY CIRCUMSTANCES CREATE AN
IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
THE DATE OF THE PROSPECTUS.
The date of this prospectus is October 21, 1997
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AVAILABLE INFORMATION
The Company is a reporting company under Section 13 of the Securities and
Exchange Act of 1934 (the "Exchange Act").
The reports and other information filed by the Company may be inspected and
copied at the public reference facilities of the Securities and Exchange
Commission (the "Commission") at 450 Fifth Street, N.W. in Washington, D.C.
20549. Copies may be obtained at the prescribed rates from the Public Reference
Section of the Commission at its principal office in Washington, D.C. The
Commission maintains a website that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission. The address of the website is http://www.sec.gov.
Statements contained in this Prospectus as to the contents of any contract or
other document referred to are not necessarily complete, and, in each instance,
reference is made to the copy of such contract or other document filed as an
exhibit to the registration statement, each such statement being qualified in
all respects by such reference. The Company has filed with the Commission a
registration statement on Form S-3 (together with any and all amendments, the
"Registration Statement") under the Securities Act of 1933, as amended, with
respect to the registration of the Common Stock. This Prospectus does not
contain all of the information set forth in the Registration Statement and the
exhibits thereto, certain portions of which have been omitted as permitted by
the rules and regulations of the Commission. In addition, certain documents
filed by the Company with the Commission have been incorporated herein by
reference. See "Incorporation of Certain Documents by Reference." For further
information regarding the Company and the Common Stock reference is made to the
Registration Statement, including the exhibits and schedules thereto and the
documents incorporated herein by reference.
The securities of the issuer are reported on the Nasdaq OTC Bulletin Board
under the symbol "NASI."
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated herein by reference.
(a) Annual Report on Form 10-KSB for the fiscal year ended October 31,
1996;
(b) Proxy Statement on Schedule 14A as filed on February 24, 1997;
(c) Quarterly Report on Form 10-QSB for the quarter ended July 31, 1997;
(d) Quarterly Report on Form 10-QSB for the quarter ended April 30, 1997;
(e) Quarterly Report on Form 10-QSB for the quarter ended January 31,
1997;
(f) Current Report on Form 8-K as filed on October 9, 1997; and
(g) The description of the Company's Common Stock as contained in the
Company's Form 10-SB dated August 21, 1995 and amended on October 20,
1995 and November 21, 1995.
All reports and other documents filed by the Company pursuant to Section
13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934, as amended
(the "Securities Act"), subsequent to the date of this Prospectus and prior to
the termination of the offering made by the Prospectus shall be deemed to be
incorporated by reference herein. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document which
also is incorporated or deemed to be incorporated by reference herein modifies
or supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
The Company undertakes to provide without charge to each person to whom a
Prospectus is delivered, on the written or oral request of such person, a copy
of any or all of the information incorporated by reference in this Prospectus,
other than exhibits to such information. Requests for such copies should be
directed to John S. Stoppelman, The Stoppelman Law Firm, 1749 Old Meadow Road,
Suite 610, McLean, VA 22102-4310 (telephone: 703-827-7450).
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PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS, INCLUDING NOTES THERETO, APPEARING
ELSEWHERE IN THIS PROSPECTUS OR INCORPORATED BY REFERENCE HEREIN. EACH
PROSPECTIVE INVESTOR IS URGED TO READ THIS PROSPECTUS IN ITS ENTIRETY. UNLESS
OTHERWISE INDICATED ALL PER SHARE DATA AND INFORMATION IN THIS PROSPECTUS
RELATING TO THE NUMBER OF SHARES OF COMMON STOCK OUTSTANDING ASSUMES NO EXERCISE
OF THE OUTSTANDING WARRANTS AND OPTIONS TO PURCHASE AN AGGREGATE OF 640,500
SHARES OF COMMON STOCK.
THE COMPANY
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 for medical, scientific and industrial uses. In June 1997,
the Company entered into agreements with Mentor Corporation, a Delaware
corporation ("Mentor"), pursuant to which Mentor will distribute I-125,
Brachytherapy Sources, which are used in the treatment of prostate cancer. The
I-125 Brachytherapy Sources will be manufactured by the Company. 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.
PRINCIPAL EXECUTIVE OFFICES
The principal executive offices of the Company are located at 7435
Greenbush Avenue, North Hollywood, CA 91605; its telephone number is
(818)-503-9201.
Certain considerations are relevant to an investment in these securities.
See "Risk Factors" for a description of the significant risks associated with
the purchase of these securities.
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RISK FACTORS
THE SECURITIES OFFERED HEREBY ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF
RISK AND SHOULD BE CONSIDERED ONLY BY PERSONS WHO CAN AFFORD THE LOSS OF THEIR
ENTIRE INVESTMENT. EACH PROSPECTIVE INVESTOR SHOULD CAREFULLY CONSIDER THE
FOLLOWING RISK FACTORS INHERENT IN AND AFFECTING THE BUSINESS OF THE COMPANY AND
THIS OFFERING BEFORE MAKING AN INVESTMENT DECISION.
FLUCTUATIONS IN QUARTERLY OPERATING RESULTS.
The Company's results of operations have historically varied from quarter
to quarter and the Company expects that further variability may continue to
occur and may be significant. In the past, operating results have varied as a
result of a number of factors, including the size and timing of customer orders,
seasonality, the timing of the introduction and customer acceptance of new
products or product enhancements by the Company's competitors, the introduction
of new products by the Company, changes in pricing policies by the Company or
its competitors, marketing and promotional expenditures, research and
development expenditures, and changes in general economic conditions.
MARKET PRICE FLUCTUATIONS.
The Company has recently experienced significant variability in the market
price of its Common Stock and the volume of its trading. In addition, the
securities markets from time to time experience significant price and volume
fluctuations that may be unrelated to the operating performance of particular
companies. Announcements of delays in the Company's testing and development
schedules, technological innovations or new products by the Company or its
competitors, developments or disputes concerning patents or proprietary rights,
regulatory developments in the United States and foreign countries, public
concern as to the safety of products containing radioactive compounds and
economic and other external factors, as well as period-to-period fluctuations in
the Company's financial results, may have a significant impact on the market
price of the Common Stock.
EARLY STAGE OF PRODUCT COMMERCIALIZATION.
Certain of the Company's products are in an early stage of
commercialization. The Company expects future revenues to be generated, among
other products, by sales of I-125 Brachytherapy Sources to physicians for the
treatment of prostate cancer. I-125 Brachytherapy Sources have not yet become
commercially available and the success of the product will be dependent, to a
large extent, on the efforts of Mentor Corporation, which will be the exclusive
distributor of the product. The Company's long-term growth may depend on its
ability to manufacture, market and distribute I-125 Brachytherapy Sources to a
significant portion of the medical community. The time frame necessary to
accomplish this objective is long and uncertain. There can be no assurance that
the Company will be able to continue to manufacture I-125 Brachytherapy Sources
at an acceptable cost and appropriate quality, that the Company will be able to
develop new products or attain regulatory approval for such products or that the
Company will be able to increase sales in its target markets. The likelihood of
the Company's future success must be considered in light of these and other
difficulties, expenses and delays frequently encountered in connection with the
commercialization of medical device products.
UNCERTAINTY OF MARKET ACCEPTANCE OF BRACHYTHERAPY SOURCES; RELIANCE ON A LIMITED
NUMBER OF PRODUCTS.
The use of seeds containing radioisotopes is a relatively new treatment
method for prostate cancer with a relatively low level of market penetration.
There can be no assurance that seeding will gain significant market acceptance
among physicians, patients and health care payors. The success of the Company's
I-125 Brachytherapy Sources depends on maintaining and increasing favorable
perceptions by patients, doctors and medical researchers regarding the safety,
efficacy and cost-effectiveness of I-125 Brachytherapy Sources. Management
believes that recommendations by physicians and health care
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payors will be essential to increase market acceptance of seeding, and there can
be no assurance that any such recommendations will be obtained. Physicians will
not recommend seeding unless they conclude, based on clinical data and other
factors, that it is an attractive alternative to other methods of prostate
cancer treatment. Radical Prostatectomy ("RP") has a long history as the
treatment of choice for early-stage, localized prostate cancer, and many
physicians have been trained in this procedure. Moreover, in comparison to
seeding, RP has more extensive long-term outcomes data due to its establishment
in the medical community. The seeding procedure employs sophisticated ultrasound
and computer technology for the precise placement of seeds in the prostate. An
older method of seed placement used as a treatment for prostate cancer was first
developed in the early 1970's, but fell into disfavor because the surgical
technique then employed (the "free-hand" technique) led to suboptimal clinical
results. Some negative perceptions of seeding in general persist as a result of
the failures of the free-hand technique. In addition, negative results from
other radiation treatment methods, particularly External Beam Radiation Therapy
("EBRT") could create an unfavorable public perception of radiation treatment
for prostate cancer in general, which would adversely affect public acceptance
of seeding. Reimbursement levels for seeding relative to other treatment options
will also affect physician acceptance.
Although the Company's strategy includes exploring opportunities for
marketing I-125 Brachytherapy Sources in international markets, physicians in
many countries, including most European countries, do not aggressively treat
prostate cancer. No assurance can be given that I-125 Brachytherapy Sources will
be an accepted method of treatment outside the United States even if physicians
in international markets aggressively treat prostate cancer.
The Company expects that a significant percentage of the Company's future
revenues will be derived from the sale of I-125 Brachytherapy Sources,
consequently, slow market acceptance or a reduction in demand for I-125
Brachytherapy Sources could have a material adverse effect on the Company's
business, operating results and financial condition.
UNCERTAINTY OF FUTURE PRODUCT DEVELOPMENT; RISKS RELATED TO CLINICAL TRIALS.
There can be no assurance that the Company will be successful in developing
and commercializing new products that achieve market acceptance or that the
Company will not experience difficulties that could delay or prevent the
successful development, introduction and marketing of new products. There can be
no assurance that the Company's products in development will prove to be safe
and effective in clinical trials under applicable regulatory guidelines, and
clinical trials may identify significant technical or other obstacles that must
be overcome prior to obtaining necessary regulatory or reimbursement approvals.
Even if a product overcomes these obstacles, the Company's products will not be
used unless they present an attractive alternative to other treatments and the
clinical benefits to the patient and cost savings achieved through use of the
Company's products outweigh the cost of such products. The Company believes that
recommendations and endorsements of physicians and patients and reimbursement by
health care payers will be essential for market acceptance of its products, and
there can be no assurance that any such recommendations, endorsements or
reimbursements will be obtained. Failure of the Company to successfully develop,
commercialize and market new products or the failure of the Company's products
to achieve significant market acceptance could have a material adverse effect on
the Company's business, operating results and financial condition.
EFFECT OF REIMBURSEMENT POLICIES
A substantial percentage of the patients treated for prostate cancer in the
United States are covered by Medicare, and, consequently, the costs for prostate
cancer treatment are subject to Medicare's prescribed rates of reimbursement.
Medicare reimbursement amounts for seeding are currently significantly less than
for RP. Although seeding requires less physician time than RP, reimbursement
amounts, when combined with physician familiarity with RP, provide disincentives
for urologists to perform seeding. There can be no assurance that (i) current or
future limitations or requirements for reimbursement by Medicare or other third
party payors for prostate cancer treatment will not materially adversely affect
the market for I-125 Brachytherapy Sources, (ii) health administration
authorities outside of the United States will provide reimbursement at
acceptable levels or at all or (iii) any such reimbursement will continue at
rates that enable the Company to maintain prices at levels sufficient to realize
an appropriate return.
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COMPETITION
The radiation source industry is highly competitive. The Company competes
with several national and international companies which are substantially larger
and have greater technical, sales, marketing and financial resources than the
Company. Significant developments by any of these companies or advances by
medical researchers at universities, government research facilities or private
research laboratories could render the Company's products obsolete. Furthermore,
if demand for treatment of prostate cancer increases, companies with
substantially greater financial resources than the Company, as well as extensive
experience in research and development, the regulatory approval process and
manufacturing and marketing, may elect to develop seeding treatments and
products that are similar to the Company's I-125 Brachytherapy Sources. There
can be no assurances that future competition will not have a material adverse
effect on the Company's business, operating results and financial condition.
GOVERNMENT REGULATION AND LICENSE REQUIREMENTS.
The manufacture and sale of the Company's products are subject to stringent
government regulation in the United States and other countries. FDA and other
governmental approvals and clearances are subject to continual review, and later
discovery of previously unknown problems may result in restrictions on a
product's marketing or withdrawal of the product from the market. The commercial
distribution in the United States of any new products developed by the Company
will be dependent on obtaining the prior approval or clearance of the FDA, which
can take many years and entail significant costs. No assurances can be made that
any such approval will be obtained on a timely basis or at all. In countries
where the Company's products are not currently approved, the use or sale of the
Company's products will require approval by government agencies comparable to
the FDA. The process of obtaining such approvals is lengthy, expensive and
uncertain. There can be no assurance that the necessary approvals for the
marketing of the Company's products in other markets will be obtained on a
timely basis or at all. The Company is also required to adhere to applicable FDA
regulations for Good Manufacturing Practices ("GMP"), including extensive record
keeping and reporting and periodic inspections of its manufacturing facilities.
Similar requirements are imposed by governmental agencies in other countries.
The Company's manufacturing operations involve the manufacturing and
processing of radioactive materials, which are subject to stringent regulation.
The Company operates under a license from the California Department of Health,
which is renewable every eight years. Such license is subject to renewal on
January 31, 1998. The users of the Company's I-125 Brachytherapy Sources will be
required to possess licenses issued by the state in which they reside or the
U.S. Nuclear Regulatory Commission (the "NRC"). Use licenses are also required
by some of the foreign jurisdictions in which the Company may seek to market its
products. There can be no assurance that current licenses held by the Company
for its manufacturing operations will remain in force or that additional
licenses required for the Company's operations will be issued. There also can be
no assurance that the Company's customers will receive or retain the radioactive
materials licenses required to possess and use the Company's products, including
I-125 Brachytherapy Sources, or that delays in the granting of such licenses
will not hinder the Company's ability to market its products. Furthermore,
regulation of the Company's radioactive materials manufacturing processes
involves the imposition of financial requirements related to public safety and
decommissioning, and there are high costs and regulatory uncertainties
associated with the disposal of radioactive waste generated by the Company's
manufacturing operations. There can be no assurance that the imposition of such
requirements and the costs and regulatory restrictions associated with disposal
of waste will not, in the future, adversely affect the Company's business,
operating results and financial condition and results of operations.
Failure to obtain and maintain regulatory approvals, licenses and permits
could significantly delay the Company's marketing efforts. Furthermore, changes
in or interpretations of existing regulations or the adoption of new restrictive
regulations could adversely affect either the obtaining or timing of future
regulatory approvals. Failure to comply with applicable regulatory requirements
could result in, among other things, significant fines, suspension of approvals,
seizures or recalls of products, operating restrictions or criminal prosecution
and could materially adversely affect the Company's business, operating results
and financial condition.
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DEPENDENCE ON PROPRIETARY TECHNOLOGY; RISK OF TECHNOLOGY LITIGATION.
The Company's future success will depend upon its ability to protect its
proprietary technology. The Company regards certain of the technology as
proprietary and, to date, the Company has relied principally upon patents,
trademarks, trade secrets and contractual restrictions to protect such
proprietary technology. The Company currently has one U.S. patent and one U.S.
patent application pending. However, despite precautions taken by the Company,
it may be possible for unauthorized third parties to copy certain portions of
the Company's technology or to obtain and use information that the Company
regards as proprietary. There can be no assurance that the steps taken by the
Company will be adequate to prevent misappropriation of its technology or to
provide an adequate remedy in the event of a breach by others. Any such
misappropriation could have a materially adverse effect on the Company's
business, operating results and financial condition.
Although the Company is not aware of any infringement by its products of
any patents or proprietary rights of others, the increased visibility of the
Company and its products could provoke claims for infringement from third
parties. In future, litigation may be necessary to enforce and protect patents,
trademarks, trade secrets and other intellectual property rights owned by the
Company. The Company may also be subject to litigation to defend the Company
against claimed infringement of the rights of others or to determine the scope
and validity of the proprietary rights of others. Any such litigation could be
costly and could cause diversion of management's attention, either of which
could have a material adverse effect on the Company's business, operating
results and financial condition. Adverse determinations in any such litigation
could result in the loss of the Company's proprietary rights, subject the
Company to significant liabilities or require the Company to seek licenses from
third parties, any one of which could also have a material adverse effect on the
Company's business, operating results and financial condition. See "--
Litigation."
DEPENDENCE ON KEY CUSTOMERS.
Two of the Company's customers accounted for 65% of the Company's total
revenues in 1996 and significant customers may continue to account for a
substantial percentage of the Company's sales in the future. There can be no
assurance that any of such customers will maintain their volume of business with
the Company. A loss of the Company's sales to such customers could have a
material adverse effect on the Company's results of operations unless other
customers could be found to provide the Company with similar revenues.
DEPENDENCE ON KEY PERSONNEL.
The success of the Company is largely dependent on the personal efforts of
key technical and senior management personnel, principally Michael Cutrer, its
President and Chief Executive Officer. The Company does not have an employment
agreement with Mr. Cutrer, nor does it currently have a key-man life insurance
policy on the life of Mr. Cutrer. The Company believes that its future success
will depend in large part upon its ability to attract and retain highly-skilled
technical, managerial and marketing personnel and is likely to require the
expansion of its management level personnel. Competition for radiation source
industry personnel can be intense and the availability of capable personnel may
be limited; thus, their services could be difficult to obtain or replace. There
can be no assurance that the Company will be successful in attracting and
retaining the personnel it requires to develop and market new and enhanced
products and to conduct its operations successfully. Any inability to attract
and retain such personnel could have a material adverse effect on the Company's
business, operating results and financial condition.
LIMITED NUMBER OF SUPPLIERS.
The Company is dependent upon a limited number of outside unaffiliated
suppliers for its radioisotopes. The Company's principal suppliers are Nordion
International, Inc. and The Los Alamos National Laboratories. To date, the
Company has generally been able to obtain the required radioiso-
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topes 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
could have a material adverse effect on the Company's production and sales
levels and consequently upon its business, operating results and financial
condition.
EFFECT OF CERTAIN STATUTORY, CHARTER AND BYLAW PROVISIONS; AUTHORIZATION AND
DISCRETIONARY ISSUANCE OF PREFERRED STOCK.
Certain provisions of the Company's Certificate of Incorporation and Bylaws
could delay the removal of incumbent directors and could make more difficult a
merger, tender offer or proxy contest involving the Company, even if such events
would be beneficial to the interests of the stockholders. For example, the
Company is currently authorized to issue 2,000,000 shares of Preferred Stock,
par value $.01 per share, without any vote or further action by the Company's
stockholders. The Preferred Stock, no shares of which are currently outstanding,
is issuable in one or more series with such rights, preferences, maturity dates
and similar matters as the Board of Directors of the Company may from time to
time determine. The Company is also subject to Section 203 of the Delaware
General Corporation law which, subject to certain exceptions, prohibits a
Delaware Corporation from engaging in a broad range of business ventures with
any "interested stockholder" for a period of three years from the date such
stockholder became an interested stockholder.
MANAGEMENT OF GROWTH.
The Company's business has grown significantly over the past several years.
However, there can be no assurance that the Company will continue to grow. If
growth does occur, there can be no assurance the Company will be effective in
managing such future growth, in expanding its facilities and operations or in
retaining additional qualified management and other personnel required thereby.
Any failure to manage growth, expand its operations or attract and retain
qualified personnel could have a material adverse effect on the Company's
business, operating results and financial condition.
RAPID TECHNOLOGICAL CHANGE.
The markets for the Company's products are characterized by ongoing
technological developments, evolving industry standards and rapid changes in
customer requirements. The Company's success depends upon its ability to
continue to enhance its existing product lines, to develop and introduce in a
timely manner new products that take advantage of technological advances and to
respond promptly to customers' requirements. There can be no assurance that the
Company's current level of research and development spending and scope will be
adequate, that the Company will be successful in developing and marketing
enhancements to its existing products or new products on a timely basis, or that
its new products will adequately address the changing needs of the marketplace.
Failure by the Company in any of these areas could materially and adversely
affect the Company's business, operating results and financial condition.
PRODUCTS LIABILITY; INSURANCE COVERAGE.
Personal injuries allegedly resulting from the use of products that have
been or may be developed and sold by the Company may expose the Company to
potential liability from claims. The Company is not currently a defendant in any
product liability or personal injury lawsuit; however, there can be no assurance
that such claims will not arise in the future based on past, present or future
services or products offered by the Company. The Company maintains product
liability insurance. However, there can be no assurance that any such insurance
will provide adequate coverage against any potential claims. Moreover, any
successful product liability claims against the Company could materially and
adversely affect the reputation of the Company and consequently have a material
adverse effect on the Company's business, operating results and financial
condition.
UNCERTAINTY RELATED TO HEALTH CARE REFORM.
Political, economic and regulatory influences are subjecting the health
care industry in the United States to fundamental change. The Company
anticipates that Congress, state legislatures and the private sector will
continue to review and assess alternative health care delivery and payment
systems. Potential
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approaches that have been considered include mandated basic health care
benefits, controls on health care spending through limitations on the growth of
private purchasing groups, price controls and other fundamental changes to the
health care delivery system. Legislative debate is expected to continue in the
future, and market forces are expected to demand reduced costs. The Company
cannot predict what impact the adoption of any federal or state health care
reform measures, future private sector reform or market forces may have on its
business, operating results and financial condition.
HAZARDOUS MATERIALS.
The Company's research and development involves the controlled use of
hazardous materials. Although the Company believes that its safety procedures
for handling and disposing of such materials comply with the standards
prescribed by state and federal regulations, the risk of accidental
contamination or injury from these materials cannot be completely eliminated. In
the event of such an accident, the Company could be held liable for any damages
that result and any such liability could exceed the resources available to the
Company.
LITIGATION.
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. 96-737A. 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. Upon the non-payment of the assessed costs and
expenses by the plaintiff, the case was dismissed with prejudice by order dated
January 27, 1997. The plaintiff filed a notice of appeal of the Court's
dismissal on March 7, 1997, requesting various forms of relief including the
reinstatement of the Plaintiff's case. The Company believes the allegations
contained in the original complaint were without merit and, if the action is
reinstated, the Company intends to vigorously defend such action. However,
reinstatement of the lawsuit, particularly if an adverse judgement is rendered
against the Company, could have a material adverse effect on the Company's
business, operating results and financial condition.
DIVIDEND POLICY.
The Company has not paid any cash dividends on its Common Stock and does
not expect to declare or pay any cash dividends in the foreseeable future.
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SELLING SECURITYHOLDER AND PLAN OF DISTRIBUTION
ALL OF THE SHARES OF COMMON STOCK BEING OFFERED HEREBY ARE BEING SOLD BY
THE SELLING SECURITYHOLDER, M.H. Meyerson & Co., Inc. An aggregate of up to
100,000 shares of Common Stock may be offered and sold pursuant to this
Prospectus by the Selling Securityholder. The Company has agreed to register
such shares under the Securities Act and the Selling Securityholder has agreed
to pay all expenses in connection therewith. Such shares have been included in
the Registration Statement of which this Prospectus forms a part.
The following table sets forth certain information regarding the beneficial
ownership of Common Stock as of September 30, 1997, assuming the exercise of all
options exercisable on, or within sixty days of, such date, and as adjusted to
give effect to the Offering, by the Selling Securityholder. The Selling
Securityholder does not hold any position or office, and has not had any other
material relationship with the Company or any of its predecessors or affiliates
within the last three years, other than performing services pursuant to an
Investment Banking Agreement.
<TABLE>
<CAPTION>
NAME SHARES OF COMMON STOCK(1) PERCENTAGE
- ---------------------------------- --------------------------- -----------
<S> <C> <C>
M.H. Meyerson & Co., Inc. ...... 100,000 *
TOTAL ........................... 100,000 *
======= ===
</TABLE>
- ----------
(1) Represents Common Stock underlying Common Stock Purchase Warrants
exercisable as of the date of this Prospectus.
* Less than one percent (1%) of the outstanding Common Stock of the Company.
The 100,000 shares of Common Stock being offered by the Selling
Securityholder pursuant to this Prospectus may be offered and sold from time to
time as market conditions permit on the Nasdaq OTC Bulletin Board, or otherwise,
at prices and terms then prevailing or at prices related to the then current
market price, or in negotiated transactions. The Selling Securityholder's shares
may be sold by one or more of the following methods, without limitation: (a) a
block trade in which a broker or dealer so engaged will attempt to sell the
shares as agent but may position and resell a portion of the block as principal
to facilitate the transaction; (b) purchases by a broker or dealer as principal
and resale by such broker or dealer for its account pursuant to this Prospectus;
(c) ordinary brokerage transactions and transactions in which the broker
solicits purchasers; and (d) face-to-face transactions between sellers and
purchasers without a broker/dealer. In effecting sales, brokers or dealers
engaged by the Selling Securityholder may arrange for other brokers or dealers
to participate. Such brokers or dealers may receive commissions or discounts
from the Selling Securityholder in amounts to be negotiated. Such brokers and
dealers and any other participating brokers and dealers may be deemed to be
"Underwriters" within the meaning of the Securities Act in connection with such
sales.
To comply with certain states' securities laws, if applicable, the shares
of Common Stock registered hereunder will be offered or sold in such
jurisdictions only through registered or licensed brokers or dealers. In
addition, in certain states the shares many not be sold or offered unless they
have been registered or qualified for sale in such states or an exception for
registration or qualification is available and is complied with.
LEGAL MATTERS
The legality of the securities offered hereby will be passed upon for the
Company by D'Ancona & Pflaum. Members of D'Ancona & Pflaum beneficially own an
aggregate of approximately 51,700 shares of Common Stock of the Company.
EXPERTS
The consolidated financial statements of the Company and its subsidiary,
incorporated by reference in this Prospectus and Registration Statement by
reference to the Annual Report on Form 10-KSB for the year ended October 31,
1996 have been so incorporated in reliance on the report of Price Waterhouse
LLP, independent accountants, as set forth in their report thereon, and are
included in reliance upon said report given upon the authority of such firm as
experts in accounting and auditing.
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