<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
/X/ Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended January 31, 1997
or
/ / Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Commission file number 0-26670
NORTH AMERICAN SCIENTIFIC, INC.
(Name of small business as specified in its charter)
Delaware 51-0366422
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
7435 Greenbush Avenue
North Hollywood, CA 91605
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code:
(818) 503-9201
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days. Yes X
No __ --
At March 12, 1997 there were 3,028,201 shares of the registrant's common
stock outstanding.
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NORTH AMERICAN SCIENTIFIC, INC.
QUARTER ENDED JANUARY 31, 1997
DESCRIPTION PAGE
PART I FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
CONSOLIDATED BALANCE SHEET
January 31, 1997 and October 31, 1996 1
CONSOLIDATED STATEMENT OF OPERATIONS
January 31, 1997 and January 31, 1996 2
CONSOLIDATED STATEMENTS OF CASH FLOWS
January 31, 1997 and January 31, 1996 3
NOTES TO FINANCIAL STATEMENTS 4
Item 2. Management's Discussion and Analysis of Financial 5
Condition and Results of Operations
PART II OTHER INFORMATION 6
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NORTH AMERICAN SCIENTIFIC, INC.
CONSOLIDATED BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
October 31, January 31,
1996 1997
----------- -----------
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 866,000 $ 893,000
Investments 26,200 26,200
Accounts receivable, less allowance for doubtful
accounts of $2,100 and $0 respectively 683,200 549,000
Inventories 144,800 157,400
Prepaid expenses and other current assets 22,500 29,100
----------- -----------
Total current assets 1,742,700 1,654,700
Equipment and leasehold improvements, net 215,900 218,900
Deposits and other assets 41,600 43,700
----------- -----------
$ 2,000,200 $ 1,917,300
----------- -----------
----------- -----------
</TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<S> <C> <C>
Current liabilities:
Accounts payable $ 177,300 $ 123,300
Accrued expenses 139,100 111,300
Income taxes payable 155,400 32,800
----------- -----------
Total current liabilities 471,800 267,400
Stockholders' equity:
Preferred stock, par value $.01 per share;
authorized 2,000,000 shares, no shares issued - -
Common stock, par value $.01 per share; authorized
10,000,000 shares; 1997 - 3,028,201 shares issued
and outstanding, 1996 - 2,983,201 shares issued
and outstanding 29,800 30,300
Additional paid-in capital 2,105,100 2,154,600
Accumulated deficit (597,100) (519,700)
Cumulative translation adjustment (9,400) (15,300)
----------- -----------
Total stockholders' equity 1,528,400 1,649,900
----------- -----------
$ 2,000,200 $ 1,917,300
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to financial statements.
1
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NORTH AMERICAN SCIENTIFIC, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited)
Three Months
Ended January 31,
-----------------
1997 1996
---- ----
Net sales $ 838,900 $ 613,500
Cost of goods sold 438,500 343,600
---------- ---------
Gross profit 400,400 269,900
Research and development expenses 9,900 7,900
General and administrative expenses 288,800 148,000
---------- ---------
Income from operations 101,700 114,000
Interest and other income 8,000 4,800
---------- ---------
Income from continuing operations
before income taxes 109,700 118,800
Income taxes 32,300 36,300
Net income for period $ 77,400 $ 82,500
---------- ---------
---------- ---------
Earnings per share:
Net earnings per share $ .03 $ .03
---------- ---------
---------- ---------
Weighted average number of shares outstanding 3,013,201 2,983,201
---------- ---------
---------- ---------
See accompanying notes to financial statements.
2
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NORTH AMERICAN SCIENTIFIC, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Three Months
Ended January 31,
-----------------
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 77,400 $ 82,500
Adjustments to reconcile net income to
net cash used in operating activities:
Depreciation and amortization 12,600 13,200
Changes in assets and liabilities:
Accounts receivable 134,300 44,700
Inventories (12,600) 25,400
Prepaid expenses and other current assets (6,600) 7,200
Deposits and other assets (2,100) 2,000
Accounts payable (54,000) 50,600
Accrued expenses (27,800) (21,700)
Income taxes payable (122,600) (17,200)
---------- ---------
Total adjustments (78,800) 104,200
---------- ---------
Net cash provided (used) by operating activities (1,400) 186,700
Cash flows from investing activities:
Purchase of fixed assets (14,900) (37,400)
---------- ---------
Net cash used for investing activities (14,900) (37,400)
Cash flows from financing activities:
Issuance of common shares for cash 49,900 _
Effect of foreign exchange on cash (6,600) (13,700)
---------- ---------
Net increase (decrease) in cash and cash equivalents 27,000 135,600
Cash and cash equivalents, beginning of period 866,000 491,000
---------- ---------
Cash and cash equivalents, end of period $ 893,000 $ 626,600
---------- ---------
---------- ---------
Supplemental disclosure of cash flow information:
Interest paid $ - $ -
---------- ---------
---------- ---------
Income taxes paid $ 155,200 $ 54,400
---------- ---------
---------- ---------
</TABLE>
See accompanying notes to financial statements.
3
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NORTH AMERICAN SCIENTIFIC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES:
North American Scientific, Inc. manufactures and distributes a line of
low-level radiation sources and standards. References to the "Company" include
both the parent company and its subsidiary.
BASIS OF PRESENTATION
The consolidated financial statements have been prepared by North American
Scientific, Inc. (the "Company"), without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations, although the Company believes
that the disclosures are adequate to make the information not misleading.
These financial statements should be read in conjunction with the financial
statements and related notes contained in the Company's 1996 Annual Report.
Other than as indicated herein, there have been no significant changes from the
data presented in said Report.
In the opinion of management, the financial statements contain all adjustments
necessary to present fairly the financial position of the Company as of the
dates set forth therein, and the results of operations and cash flows for the
same periods covered thereby.
INVENTORIES
Inventories are valued at the lower-of-cost or market. Cost is determined
using the first-in-first-out method.
4
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION
The following discussion should be read in conjunction with the
consolidated financial statements contained herein and the notes thereto.
Certain matters discussed in the Report on Form 10-QSB 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.
FIRST QUARTER ENDED JANUARY 31, 1997 COMPARED WITH FIRST QUARTER ENDED
JANUARY 31, 1996
Net sales increased to $838,900 for the 1997 period from $613,500 for the
1996 period, an increase of approximately 37%, as a result of the Company's
continued sales efforts in both domestic and foreign markets. Net income
decreased from $82,500, or $0.03 per share, in the 1996 period, to a net income
of $77,400, or $0.03 per share, in the 1997 fiscal period. The decrease can be
attributed primarily to certain increases in general and administrative
expenses described below.
Cost of goods sold increased to $438,500 in 1997 from $343,600 in the 1996
fiscal period, an increase of approximately 28%. This increase was generally
consistent with the increase in net sales during such period but also reflected
a slight reduction in cost of goods as a function of net sales resulting from
certain manufacturing efficiencies implemented during the 1996 fiscal year.
General and administrative expenses increased from $148,000 in 1996 to
$288,800 in the 1997 fiscal period, an increase of approximately 95%. The
increase in general and administrative expenses can be attributed primarily to
a combined 518% increase in legal, promotional and other professional fees.
Legal fees associated with the Company's defense against the case brought by
Best Industries during 1996 continued in the period under review. Promotional
fees associated with the retention of M.H. Meyerson & Company as the Company's
investment banker along with other public relations efforts resulted in
increased promotional expenses during the first quarter when compared to the
comparable 1996 period. Other professional expenses associated with the
Company's sales and marketing efforts also resulted in a significant cost
increase in comparative quarterly calculations. Management believes the
expenses incurred during the first quarter to be either extraordinary or one
time costs and expects general and administrative expenses during the remainder
of the 1997 fiscal year to be more in line with past ratios.
LIQUIDITY AND CAPITAL RESOURCES
At January 31, 1997, the Company had cash and short-term deposits
aggregating approximately $893,000, compared to $626,600 at January 31, 1996.
To date, the Company's short-term liquidity needs have generally consisted of
operating capital to finance growth in trade accounts receivable and
inventories. The Company has satisfied these needs primarily through a
combination of private and public equity financings and from cash generated by
operations. The Company has no long-term debt and has not had, or had the need
for, a line of credit or similar arrangement with a bank. Management
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 three month period ended January 31, 1997, cash flow from operations
used approximately $1,400 compared to generating $186,700 for the comparable
1996 period. Cash flow in investing activities used approximately $14,900 in
the 1997 fiscal year compared to $37,400 in the 1996 fiscal year.
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.
5
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PART II OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
As of December 11, 1996 the Registrant entered into a letter agreement (the
"Agreement") with M.H. Meyerson & Co., Inc. ("Meyerson"), pursuant to which
Meyerson shall provide certain investment banking services. In partial
consideration thereof, the Registrant issued to Meyerson warrants to purchase
an aggregate of 150,000 shares of the Registrant's common stock at $1.625 per
share (the mean between the closing offer and bid prices on the Nasdaq OTC
bulletin board on December 11, 1996). The warrants vest and become exercisable
in three installments, i.e. 50,000 on the date of the Agreement, 50,000
warrants 180 days thereafter, and the remaining 50,000 warrants 547 days after
the date of the Agreement, in each case vesting being subject to the Agreement
then being in effect. The warrants and the common stock underlying the
warrants were exempt from registration under the Securities Act of 1933, as
amended (the "Securities Act"), pursuant to Section 4(2) thereof.
In addition, during the quarter ended January 31, 1997, the Company
issued an aggregate of 45,000 shares pursuant to the exercise of stock
options. Such issuances were exempt from registration pursuant to Section
4(2) of the Securities Act.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits.
(10) Agreement dated as of December 11, 1996 between the Registrant and
M.H. Meyerson & Co., Inc., incorporated by reference to Exhibit
10.4 of the Registrant's annual report on Form 10-KSB for the
fiscal year ended October 31, 1996, filed January 21, 1997.
(27) Financial Data Schedule (EDGAR only)
b) Reports on Form 8-K: None
6
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NORTH AMERICAN SCIENTIFIC, INC.
--------------------------------
(Registrant)
Date March 14, 1997 By: /s/ L. Michael Cutrer
--------------- -----------------------
L. Michael Cutrer
President and Chief Executive Officer
(Principal Executive, Accounting and Financial Officer)
7
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> JAN-31-1997
<CASH> 893,000
<SECURITIES> 0
<RECEIVABLES> 551,100
<ALLOWANCES> (2,100)
<INVENTORY> 157,400
<CURRENT-ASSETS> 1,654,700
<PP&E> 469,800
<DEPRECIATION> (250,900)
<TOTAL-ASSETS> 1,917,300
<CURRENT-LIABILITIES> 267,400
<BONDS> 0
0
0
<COMMON> 30,300
<OTHER-SE> 2,154,600
<TOTAL-LIABILITY-AND-EQUITY> 1,917,300
<SALES> 838,900
<TOTAL-REVENUES> 838,900
<CGS> 438,500
<TOTAL-COSTS> 288,800
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 109,700
<INCOME-TAX> 32,300
<INCOME-CONTINUING> 77,400
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 77,400
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
</TABLE>
