<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 April 30, 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 June 10, 1997, there were 3,073,201 shares of the registrant's common
stock outstanding.
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NORTH AMERICAN SCIENTIFIC, INC.
SECOND QUARTER ENDED APRIL 30, 1997
DESCRIPTION PAGE
PART I FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
CONSOLIDATED BALANCE SHEET
April 30, 1997 and October 31, 1996 1
CONSOLIDATED STATEMENT OF OPERATIONS 2
6 months and 3 months ended April 30, 1997
and April 30, 1996
CONSOLIDATED STATEMENT OF CASH FLOWS 3
6 months ended April 30, 1997 and April 30, 1996
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 4
Item 2. Managements's Discussion and Analysis of Financial 5
Condition and Results of Operations
PART II OTHER INFORMATION 7
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NORTH AMERICAN SCIENTIFIC, INC.
CONSOLIDATED BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
October 31, April 30,
1996 1997
----------- -----------
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 866,000 $ 873,400
Investments 26,200 26,200
Accounts receivable, less allowance for doubtful
accounts of $0 and $4,500 respectively 683,200 570,300
Inventories 144,800 275,300
Prepaid expenses and other current assets 22,500 45,700
----------- -----------
Total current assets 1,742,700 1,790,900
Equipment and leasehold improvements, net 215,900 278,400
Deposits and other assets 41,600 44,600
----------- -----------
$ 2,000,200 $ 2,113,900
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 272,600 $ 327,500
Accrued expenses 43,800 35,300
Income taxes payable 155,400 --
----------- -----------
Total current liabilities 471,800 362,800
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) (418,100)
Cumulative translation adjustment (9,400) (15,700)
----------- -----------
Total stockholders' equity 1,528,400 1,751,100
----------- -----------
$ 2,000,200 $ 2,113,900
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to consolidated financial statements.
1
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NORTH AMERICAN SCIENTIFIC, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
------------------------------------
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
April 30, April 30,
------------------- -------------------
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Net sales $1,769,100 $1,194,300 $ 930,200 $ 580,800
Cost of goods sold 918,000 606,800 479,500 263,200
---------- ---------- ---------- ----------
Gross profit 851,100 587,500 450,700 317,600
Research and development expenses 15,000 8,900 5,100 1,000
General and administrative expenses 555,000 355,400 266,200 207,400
---------- ---------- ---------- ----------
Income from operations 281,100 223,200 179,400 109,200
Interest and other income 15,800 10,600 7,800 5,800
---------- ---------- ---------- ----------
Income from continuing operations
before income taxes 296,900 233,800 187,200 115,000
Income taxes 117,900 88,100 85,600 51,800
---------- ---------- ---------- ----------
Net income for period $ 179,000 $ 145,700 $ 101,600 $ 63,200
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Earnings per share:
Net earnings per share $ .06 $ .05 $ .03 $ .02
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Weighted average number of shares outstanding 3,020,701 2,983,201 3,028,201 2,983,201
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
2
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NORTH AMERICAN SCIENTIFIC, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
SIX MONTHS
ENDED APRIL 30,
----------------------
1997 1996
---- ----
Cash flows from operating activities:
Net income $ 179,000 $ 145,700
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 24,000 25,200
Changes in assets and liabilities:
Accounts receivable 112,900 101,200
Inventories (130,500) (48,700)
Prepaid expenses and other current assets (23,200) (8,500)
Deposits and other assets (3,000) (1,600)
Accounts payable 54,900 39,500
Accrued expenses (8,500) (11,800)
Income taxes payable (155,400) (14,000)
----------- -----------
Total adjustments (128,800) 81,300
----------- -----------
Net cash provided by operating activities 50,200 227,000
Cash flows from investing activities:
Purchase of fixed assets (86,600) (61,600)
Net cash used for investing activities (86,600) (61,600)
----------- -----------
Cash flows from financing activities:
Issuance of common shares for cash 49,900 --
Effect of foreign exchange on cash (6,100) (9,000)
----------- -----------
Net increase in cash and cash equivalents 7,400 156,400
Cash and cash equivalents, beginning of period 866,000 491,000
----------- -----------
Cash and cash equivalents, end of period $ 873,400 $ 647,400
----------- -----------
----------- -----------
Supplemental disclosure of cash flow information:
Interest paid $ 300 $ 300
----------- -----------
----------- -----------
Income taxes paid $ 280,800 $ 102,200
----------- -----------
----------- -----------
See accompanying notes to consolidated financial statements.
3
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NORTH AMERICAN SCIENTIFIC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES:
North American Scientific, Inc. (the "Company") 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. 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 April 30, 1997 and April 30, 1996, and the results of operations and
cash flows for the same periods.
INVENTORIES
Inventories are valued at the lower-of-cost or market. Cost is determined using
the first-in-first-out method.
RECLASSIFICATION
Certain reclassifications of previously reported amounts have been made to
conform to the current year's presentation.
4
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion should be read in conjunction with the
consolidated financial statements contained herein and the notes thereto.
Certain matters discussed in this 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) 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.
SECOND QUARTER ENDED APRIL 30, 1997 COMPARED WITH SECOND QUARTER ENDED APRIL
30, 1996
Net sales in the second quarter increased from $580,800 for the 1996
period to $930,200 for the 1997 period under review, an increase of
approximately 60%, as a result of the Company's continued sales efforts in
both domestic and foreign markets. Net income increased from $63,200, or
$0.02 per share, in the 1996 period, to a net income of $101,600, or $0.03
per share, in the 1997 fiscal period, an increase of 61%. Net sales for the
first six months increased from $1,194,300 for the 1996 period to $1,769,100
for the 1997 period, an increase of approximately 48%. Net income for the
first six months increased from $145,700, or $0.05 per share, in the 1996
period, to a net income of $179,000, or $0.06 per share, in the 1997 fiscal
period, and increase of 23%.
For the second quarter, cost of goods sold increased from $263,200 in
1996 to $479,500 in the 1997 fiscal period, an increase of approximately 82%.
This increase was partially consistent with the increase in net sales
although an increase in nuclide expenditures of approximately $25,000 was
experienced as a result of procedural improvements to certain product lines.
Management believes these expenditures will result in a reduced cost of goods
for those product lines in the future. For the six month period comparison,
cost of goods sold increased from $606,800 in 1996 to $918,000 in the 1997
fiscal period, an increase of approximately 51%. This increase was generally
consistent with the increase in net sales although, the development efforts
described above also impacted the six month numbers.
For the second quarter, general and administrative expenses increased
from $207,400 in 1996 to $266,200 in the 1997 fiscal period, an increase of
approximately 28%. For the six month comparison, general and administrative
expenses increased from $355,400 in 1996 to $555,000 in the 1997 fiscal
period, an increase of 56%. The increase in general and administrative
expenses from the second quarter and six month fiscal 1996 periods was
primarily a result of one time professional fees associated with new
technical sales literature along with legal expenses associated with the
Company's defense of a lawsuit which was dismissed earlier in this fiscal
year. General and administrative expenses as a percentage of sales decreased
in the second quarter and Management believes the legal and professional
costs experienced during the first six months of fiscal 1997 will begin to
stabilize during the third quarter to a level more consistent with previous
years.
LIQUIDITY AND CAPITAL RESOURCES
At April 30, 1997, the Company had cash and short-term deposits
aggregating approximately $873,400, compared to $647,400 at April 30, 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 or private sales of securities and believes that it will continue
to have sufficient cash resources from such sources to fund its cash needs.
5
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For the six month period ended April 30, 1997, cash flow from operations
generated approximately $50,200 compared to $227,000 for the comparable 1996
period. Cash flow in investing activities used approximately $86,600 in the
1997 fiscal period compared to $61,600 in the comparable 1996 period. The
increased use of cash for investing activities in the current period resulted
primarily from equipment purchases associated with the Company's new I-125
brachytherapy source line for treatment of prostate cancer.
SEASONALITY
The Company's business is not significantly impacted by seasonal
fluctuations. However, the first quarter of each fiscal year has traditionally
seen relatively slower demand associated with the holiday season.
IMPACT OF INFLATION
The impact of inflation on the Company's operations is not significant.
6
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PART II OTHER INFORMATION
The Company was not required to report the information pursuant to Items 1
through 6 of Part II of Form 10-QSB for any of the three months ended April
30, 1997, except as follows:
Item 4. Submission of Matters to a Vote of Security Holders
On March 28, 1997, the company held its 1997 Annual Meeting of Stockholders.
The following persons were elected as directors to hold office until the 1998
Annual Meeting of Stockholders: Irwin J. Gruverman, L. Michael Cutrer, Dr.
Allan M. Green, Larry Berkin and Michael C. Lee. The number of shares cast
for, withheld and abstained with respect to each of the nominees were as
follows:
NOMINEE FOR WITHHELD ABSTAINED
Gruverman 2,246,318 0 0
Cutrer 2,246,318 0 0
Green 2,246,318 0 0
Berkin 2,246,318 0 0
Lee 2,246,318 0 0
The stockholders also voted to adopt an amendment to the 1996 Stock Option
Plan of the Company to increase the number of shares issuable thereunder to
1,000,000. A total of 1,291,685 shares were cast for the adoption of the
proposal, 34,200 shares were cast against this proposal, and 48,450 shares
abstained.
The stockholders also voted to approve the ratification of the selection of
Price Waterhouse LLP as independent auditors for the Company for the fiscal
year ending October 31, 1997. A total of 2,246,318 shares were cast for such
selection, no shares were cast against such selection, and no shares
abstained.
1,324,941 broker nonvotes were received in connection with the vote upon the
amendment to the 1996 Stock Option Plan.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits - The following Exhibits are filed herewith:
Exhibit (27) - financial Data Schedule (EDGAR only)
b) Reports on Form 8-K - No such reports were filed during the quarter for
which this report is filed.
7
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NORTH AMERICAN SCIENTIFIC, INC.
(Registrant)
Date June 13, 1997 By: /s/ L. MICHAEL CUTRER
------------------------ ----------------------------------
L. Michael Cutrer
President and Chief Executive Officer
(Principal Executive, Accounting and
Financial Officer)
8
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> APR-30-1997
<CASH> 873,400
<SECURITIES> 0
<RECEIVABLES> 574,800
<ALLOWANCES> (4,500)
<INVENTORY> 275,300
<CURRENT-ASSETS> 1,790,900
<PP&E> 541,500
<DEPRECIATION> (263,100)
<TOTAL-ASSETS> 2,113,900
<CURRENT-LIABILITIES> 362,800
<BONDS> 0
0
0
<COMMON> 30,300
<OTHER-SE> 2,154,600
<TOTAL-LIABILITY-AND-EQUITY> 2,113,900
<SALES> 1,769,100
<TOTAL-REVENUES> 1,784,900
<CGS> 918,000
<TOTAL-COSTS> 555,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 300
<INCOME-PRETAX> 296,900
<INCOME-TAX> 117,900
<INCOME-CONTINUING> 179,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 179,000
<EPS-PRIMARY> .06
<EPS-DILUTED> .06
</TABLE>
