#### ** **

**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

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**FORM 10-Q**

 

**QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934**

 

**For the quarterly period ended January 31,2004**

** **

**Commission File Number 0-26670**

 

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**NORTH AMERICAN SCIENTIFIC, INC.**

(Exact name of registrant as specified in its charter)

 
| **Delaware**                                                    |   | **51-0366422**                        |
|-----------------------------------------------------------------|--------|---------------------------------------|
| (State or other jurisdiction of  incorporation or organization) |   | (I.R.S. Employer  Identification No.) |
|                                                            |   |                                  |
| **20200 Sunburst Street, Chatsworth, CA 91311**                 |
| (Address of principal executive offices)                        |
|                                                            |   |                                  |
| **(818) 734-8600**                                              |
| (Registrant’s telephone number, including  area code)      |

 

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Indicate by check markwhether the registrant (1) has filed all reports required to be filed bySection 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements for thepast 90 days.
|   |   | ý Yes      o No |
|--------|--------|--------------------------------------------------------------|

 

Indicate by check markwhether the Registrant is an accelerated filer (as defined in Rule 12b-2of the Exchange Act).

 
|   |   | o Yes      ý No |
|--------|--------|--------------------------------------------------------------|

 

Thenumber of shares of Registrant’s Common Stock, $.01 par value, outstanding asof March 9, 2004 was 10,341,523 shares.

 

 

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**NORTH AMERICAN SCIENTIFIC, INC.**

 

**Index**

 
| **Part I – Financial Information** |                                                                                            |
|-----------------------------------------|-------------------------------------------------------------------------------------------------|
|                                    |                                                                                            |
| **Item 1.**                             | **Financial Statements**                                                                        |   |
|                                    |                                                                                            |
|                                    | Consolidated Balance Sheets  as of January 31, 2004 and October 31, 2003                        |   |
|                                    |                                                                                            |   |
|                                    | Consolidated  Statements of Operations for the three months ended January 31, 2004 and 2003     |   |
|                                    |                                                                                            |   |
|                                    | Consolidated  Statements of Cash Flows for the three months ended January 31, 2004 and 2003     |   |
|                                    |                                                                                            |   |
|                                    | Condensed  Notes to the Consolidated Financial Statements                                       |   |
|                                    |                                                                                            |
| **Item 2.**                             | **Management’s Discussion and Analysis of  Financial Condition and Results of Operations** |   |
|                                    |                                                                                            |
| **Item 3.**                             | **Quantitative and Qualitative Disclosures about  Market Risk**                                 |   |
|                                    |                                                                                            |
| **Item 4.**                             | **Controls and Procedures**                                                                     |   |
|                                    |                                                                                            |
| **Part II – Other Information**    |                                                                                            |
|                                    |                                                                                            |
| **Item 6.**                             | **Exhibits and Reports on Form 8-K**                                                            |   |
|                                    |                                                                                            |
| **Signatures**                          |                                                                                            |
|                                         |                                                                                                 |  |  |

 

2

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**NORTH AMERICAN SCIENTIFIC, INC.**

** **

**Consolidated Balance Sheets**

 
|                                                                                                                                                                                                           |   | **January  31,  2004** |       | **October  31,  2003** |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------|------------|------------------------|--------|
|                                                                                                                                                                                                           |   | **(Unaudited)**        |       |                   |   |
|                                                                                                                                                                                                           |   |                   |       |                   |   |
| **Assets**                                                                                                                                                                                                     |   |                   |       |                   |   |
|                                                                                                                                                                                                           |   |                   |       |                   |   |
| Current assets                                                                                                                                                                                                 |   |                   |       |                   |   |
| Cash and cash equivalents                                                                                                                                                                                      |   | $                      | 2,366,000  |                   | $      | 1,411,000 |   |
| Cash held in variable interest entity                                                                                                                                                                          |   | 308,000                |       | 350,000                |   |
| Marketable securities                                                                                                                                                                                          |   | 26,821,000             |       | 32,587,000             |   |
| Accounts receivable                                                                                                                                                                                            |   | 2,073,000              |       | 2,167,000              |   |
| Inventories                                                                                                                                                                                                    |   | 774,000                |       | 692,000                |   |
| Income taxes receivable                                                                                                                                                                                        |   | —                 |       | 496,000                |   |
| Prepaid expenses and other current assets                                                                                                                                                                      |   | 1,178,000              |       | 1,053,000              |   |
|                                                                                                                                                                                                           |   |                   |       |                   |   |
| Total  current assets                                                                                                                                                                                          |   | 33,520,000             |       | 38,756,000             |   |
|                                                                                                                                                                                                           |   |                   |       |                   |   |
| Non-current marketable securities                                                                                                                                                                              |   | 15,490,000             |       | 14,767,000             |   |
| Equipment and leasehold improvements                                                                                                                                                                           |   | 3,020,000              |       | 2,996,000              |   |
| Goodwill                                                                                                                                                                                                       |   | 3,866,000              |       | 3,866,000              |   |
| Intangible assets                                                                                                                                                                                              |   | 857,000                |       | 813,000                |   |
| Other assets                                                                                                                                                                                                   |   | 1,756,000              |       | 1,334,000              |   |
|                                                                                                                                                                                                           |   |                   |       |                   |   |
| Total assets                                                                                                                                                                                                   |   | $                      | 58,509,000 |                   | $      | 62,532,000 |   |
|                                                                                                                                                                                                           |   |                   |       |                   |   |
| **Liabilities and Stockholders’ Equity**                                                                                                                                                                  |   |                   |       |                   |   |
|                                                                                                                                                                                                           |   |                   |       |                   |   |
| Current liabilities                                                                                                                                                                                            |   |                   |       |                   |   |
| Accounts payable                                                                                                                                                                                               |   | $                      | 1,036,000  |                   | $      | 1,620,000 |   |
| Accrued expenses                                                                                                                                                                                               |   | 4,850,000              |       | 5,166,000              |   |
|                                                                                                                                                                                                           |   |                   |       |                   |   |
| Total current liabilities                                                                                                                                                                                      |   | 5,886,000              |       | 6,786,000              |   |
|                                                                                                                                                                                                           |   |                   |       |                   |   |
| Commitments and contingencies                                                                                                                                                                                  |   |                   |       |                   |   |
|                                                                                                                                                                                                           |   |                   |       |                   |   |
| Stockholders’ equity                                                                                                                                                                                      |   |                   |       |                   |   |
| Preferred stock, $.01 par value, 2,000,000  shares authorized; no shares issued                                                                                                                                |   | —                 |       | —                 |   |
| Common stock, $.01 par value, 40,000,000  shares authorized; 10,360,523 and 10,298,241 shares issued; 10,341,523 and  10,279,241 shares outstanding as of January 31, 2004 and October 31, 2003,  respectively |   | 103,000                |       | 103,000                |   |
| Additional paid-in capital                                                                                                                                                                                     |   | 75,150,000             |       | 74,343,000             |   |
| Treasury stock, at cost – 19,000 shares                                                                                                                                                                   |   | (129,000               | )          | (129,000               | )      |
| Accumulated deficit                                                                                                                                                                                            |   | (22,501,000            | )          | (18,571,000            | )      |
|                                                                                                                                                                                                           |   |                   |       |                   |   |
| Total stockholders’ equity                                                                                                                                                                                |   | 52,623,000             |       | 55,746,000             |   |
|                                                                                                                                                                                                           |   |                   |       |                   |   |
| Total liabilities and stockholders’ equity                                                                                                                                                                |   | $                      | 58,509,000 |                   | $      | 62,532,000 |   |

 

See condensed notes to the consolidated financial statements.

 

3

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**NORTH AMERICAN SCIENTIFIC, INC.**

** **

**Consolidated Statements of Operations**

 
|                                                             |   | **Three  Months Ended  January 31,** |       |
|------------------------------------------------------------------|--------|--------------------------------------|------------|
|                                                             |   | **2004**                             |       | **2003** |   |
|                                                             |   | **(Unaudited)**                      |       |
|                                                             |   |                                 |       |   |   |
| Net sales                                                        |   | $                                    | 3,363,000  |   | $ | 5,141,000 |   |
|                                                             |   |                                 |       |   |   |
| Cost of goods sold                                               |   | 1,905,000                            |       | 1,843,000 |   |
|                                                             |   |                                 |       |   |   |
| Gross profit                                                     |   | 1,458,000                            |       | 3,298,000 |   |
|                                                             |   |                                 |       |   |   |
| Selling expenses                                                 |   | 785,000                              |       | 606,000 |   |
| General and administrative expenses                              |   | 3,370,000                            |       | 1,809,000 |   |
| Research and development                                         |   | 1,444,000                            |       | 1,957,000 |   |
|                                                             |   |                                 |       |   |   |
| Loss from operations                                             |   | (4,141,000                           | )          | (1,074,000 | ) |
|                                                             |   |                                 |       |   |   |
| Interest and other income, net                                   |   | 211,000                              |       | 358,000 |   |
|                                                             |   |                                 |       |   |   |
| Loss before provision for income taxes                           |   | (3,930,000                           | )          | (716,000 | ) |
|                                                             |   |                                 |       |   |   |
| Provision for income taxes                                       |   | —                               |       | — |   |
|                                                             |   |                                 |       |   |   |
| Loss before cumulative effect of change in  accounting principle |   | (3,930,000                           | )          | (716,000 | ) |
|                                                             |   |                                 |       |   |   |
| Cumulative effect of change in accounting  principle             |   | —                               |       | (311,000 | ) |
|                                                             |   |                                 |       |   |   |
| Net loss                                                         |   | $                                    | (3,930,000 | ) | $ | (1,027,000 | ) |
|                                                             |   |                                 |       |   |   |
| Basic and diluted loss per share                                 |   |                                 |       |   |   |
|                                                             |   |                                 |       |   |   |
| Loss before cumulative effect of change in  accounting principle |   | $                                    | (0.38      | ) | $ | (0.07 | ) |
| Cumulative effect of change in accounting  principle             |   | —                               |       | (0.03 | ) |
|                                                             |   |                                 |       |   |   |
| Net loss                                                         |   | $                                    | (0.38      | ) | $ | (0.10 | ) |
|                                                             |   |                                 |       |   |   |
| Weighted average number of shares  outstanding                   |   | 10,283,237                           |       | 10,256,171 |   |

 

See condensed notes to theconsolidated financial statements.

 

4

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**NORTH AMERICAN SCIENTIFIC, INC.**

** **

**Consolidated Statements of Cash Flows**

 
|                                                                                                |   | **Three  Months Ended  January 31,** |       |
|-----------------------------------------------------------------------------------------------------|--------|--------------------------------------|------------|
|                                                                                                |   | **2004**                             |       | **2003** |   |
|                                                                                                |   | **(Unaudited)**                      |       |
| Cash flows from operating activities:                                                               |   |                                 |       |   |   |
| Net loss                                                                                            |   | $                                    | (3,930,000 | ) | $ | (1,027,000 | ) |
| Adjustments to reconcile net loss to net  cash provided by (used in) operating activities:          |   |                                 |       |   |   |
| Cumulative effect of change in accounting  principle                                                |   | —                               |       | 311,000 |   |
| Depreciation and amortization                                                                       |   | 254,000                              |       | 219,000 |   |
| Provision for doubtful accounts                                                                     |   | 20,000                               |       | — |   |
| Write-off of licenses                                                                               |   | 14,000                               |       | 105,000 |   |
| Non-cash stock compensation expense                                                                 |   | 351,000                              |       | — |   |
| Changes in assets and liabilities                                                                   |   |                                 |       |   |   |
| Accounts receivable                                                                                 |   | 74,000                               |       | 456,000 |   |
| Inventories                                                                                         |   | (82,000                              | )          | (198,000 | ) |
| Prepaid expenses and other assets                                                                   |   | (547,000                             | )          | (551,000 | ) |
| Accounts payable                                                                                    |   | (584,000                             | )          | (169,000 | ) |
| Accrued expenses                                                                                    |   | (316,000                             | )          | 110,000 |   |
| Income taxes receivable                                                                             |   | 496,000                              |       | 1,006,000 |   |
|                                                                                                |   |                                 |       |   |   |
| Net cash provided by (used in) operating  activities                                                |   | (4,250,000                           | )          | 262,000 |   |
|                                                                                                |   |                                 |       |   |   |
| Cash flows from investing activities:                                                               |   |                                 |       |   |   |
| Proceeds from maturities of marketable  securities                                                  |   | 11,033,000                           |       | 7,703,000 |   |
| Purchases of marketable securities                                                                  |   | (5,989,000                           | )          | (7,762,000 | ) |
| Purchases of licenses                                                                               |   | (75,000                              | )          | — |   |
| Capital expenditures                                                                                |   | (262,000                             | )          | (283,000 | ) |
|                                                                                                |   |                                 |       |   |   |
| Net cash provided by (used in) investing  activities                                                |   | 4,707,000                            |       | (342,000 | ) |
|                                                                                                |   |                                 |       |   |   |
| Cash flows from financing activities:                                                               |   |                                 |       |   |   |
| Proceeds from exercise of stock options and  stock purchase plan                                    |   | 456,000                              |       | 85,000 |   |
|                                                                                                |   |                                 |       |   |   |
| Net cash provided by financing activities                                                           |   | 456,000                              |       | 85,000 |   |
|                                                                                                |   |                                 |       |   |   |
| Net increase in cash and cash equivalents                                                           |   | 913,000                              |       | 5,000 |   |
|                                                                                                |   |                                 |       |   |   |
| Cash and cash equivalents at beginning of  period (including cash held in variable interest entity) |   | 1,761,000                            |       | 2,708,000 |   |
|                                                                                                |   |                                 |       |   |   |
| Cash and cash equivalents at end of period  (including cash held in variable interest entity)       |   | $                                    | 2,674,000  |   | $ | 2,713,000 |   |

 

See condensed notes to the consolidatedfinancial statements.

 

5

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**NORTH AMERICAN SCIENTIFIC, INC.**

** **

**Condensed Notes to Consolidated FinancialStatements**

**(Unaudited)**

 

**Note 1 – Consolidated Financial Statements**

 

*Basis of Presentation*

 

The accompanying consolidated financial statementsof North American Scientific, Inc. (the “Company”) are unaudited, other thanthe consolidated balance sheet at October 31, 2003, and reflect all materialadjustments, consisting only of normal recurring adjustments, which managementconsiders necessary for a fair statement of the Company’s financial position,results of operations and cash flows for the interim periods.  The results of operations for the currentinterim period are not necessarily indicative of the results to be expected forthe entire fiscal year.

 

These consolidated financial statements have beenprepared in accordance with the rules and regulations of the Securities andExchange Commission.  Certaininformation and footnotes normally included in financial statements prepared inaccordance with generally accepted accounting principles in the United Statesof America have been condensed or omitted pursuant to these rules andregulations.  These consolidatedfinancial statements should be read in conjunction with the consolidatedfinancial statements and the notes thereto included in the Company’s Form 10-K,as filed with the Securities and Exchange Commission or SEC for the year endedOctober 31, 2003.

 

Certain reclassifications have been made to priorperiod balances in order to conform to the current period presentation.

 

*Use of Estimates*

 

In the normal course of preparing the financialstatements in conformity with generally accepted accounting principles in theUnited States of America, management is required to make estimates andassumptions that affect the reported amounts of assets and liabilities anddisclosure of contingent assets and liabilities at the date of the financialstatements and reported amounts of revenue and expenses during the reportingperiod.  Actual results could differfrom those amounts.

 

*Accounting for Stock-based Compensation*

 

The Company accounts for its stock option awards toemployees and directors using the intrinsic value method of accounting inaccordance with Accounting Principles Board (“APB”) Opinion No. 25, “Accountingfor Stock Issued to Employees,” and related interpretations.  The Company has provided additionaldisclosures required by Statement of Financial Accounting Standards (“SFAS”)No. 123, “Accounting for Stock-Based Compensation.”

 

6

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Had compensation cost for the Company’s stockoptions been recognized based upon the estimated fair value on the grant dateunder the fair value methodology prescribed by SFAS No. 123, as amended by SFASNo. 148, the Company’s net loss and loss per share would have been as follows:

 

 
|                                           |   | **Three  Months Ended  January 31,** |       |
|------------------------------------------------|--------|--------------------------------------|------------|
|                                           |   | **2004**                             |       | **2003** |   |
|                                           |   |                                 |       |   |   |
| Net loss, as reported                          |   | $                                    | (3,930,000 | ) | $ | (1,027,000 | ) |
| Add: stock based compensation recognized       |   | 351,000                              |       | — |   |
| Less: total stock-based compensation (1)       |   | (608,000                             | )          | (621,000 | ) |
|                                           |   |                                 |       |   |   |
| Net loss, adjusted                             |   | $                                    | (4,187,000 | ) | $ | (1,648,000 | ) |
|                                           |   |                                 |       |   |   |
| Basic and diluted loss per share, as  reported |   | $                                    | (0.38      | ) | $ | (0.10 | ) |
| Basic and diluted loss per share, as  adjusted |   | $                                    | (0.41      | ) | $ | (0.16 | ) |

 

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(1)          Asdetermined under the fair value method.

 

TheCompany uses the Black-Scholes option-pricing model for estimating the fairvalue of options granted. The Black-Scholes option-pricing model was developedfor use in estimating the fair value of traded options that have no vestingrestrictions and are fully transferable. In addition, option valuation models require the input of highlysubjective assumptions, including the expected stock price volatility.  The Company uses projected volatility rates,which are based upon historical volatility rates, trended into future years.Because the Company’s employee stock options have characteristics significantlydifferent from those of traded options, and because changes in the subjectiveinput assumptions can materially affect the fair value estimate, inmanagement’s opinion, the existing models do not necessarily provide a reliablesingle measure of the fair value of the Company’s options. For purposes of proforma disclosures, the estimated fair values of the options are amortized overthe options’ vesting periods.

 

*Recent Accounting Pronouncements*

 

In January 2003, FASB issued Interpretation (“FIN”) No. 46,Consolidation of Variable Interest Entities - an Interpretation of ARB No. 51. The Interpretation clarified the application of Accounting ResearchBulletin No. 51,  Consolidated Financial Statements,  to certainentities in which equity investors do not have the characteristics of acontrolling financial interest or do not have sufficient equity at risk for theentity to finance its activities without additional subordinated financialsupport from other parties. The provisions of this Interpretation are effectivefor all enterprises with variable interest entities created after January 31,2003 and are required to be fully implemented no later than the third quarterof 2003. Theadoption of FIN No. 46 resulted in the Company consolidating a third partyentity as a variable interest entity in October 2003.  The Company has determined that it has no other variable interestentity.

 

In December 2003, the SEC issued StaffAccounting Bulletin (“SAB”) No. 104.  SAB No. 104 revises or rescindsportions of the interpretive guidance included in Topic 13 of the codificationof staff accounting bulletins in order to make this interpretive guidanceconsistent with current authoritative accounting and auditing guidance and SECrules and regulations.  It also rescinds the Revenue Recognition inFinancial Statements Frequently Asked Questions and Answers document issued inconjunction with Topic 13.  Selected portions of that document have beenincorporated into Topic 13.  The adoption of SAB No. 104 in the quarterended January 31, 2004 had no material impact on the Company’s financialposition, results of operations or cash flows.

 

7

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**NOTE  2—Cash Held inVariable Interest Entity**

 

OnOctober 27, 2003, the Company advanced $350,000 to a third party pursuantto a Secured Loan Agreement. The secured note bears interest at 6% per annumand is repayable in four installments commencing on December 1, 2004 withall unpaid principal and interest due on September 1, 2005. The Company isobligated to lend up to an additional $850,000 in 2004 subject to the borrowerachieving certain milestones as set forth in the agreement.  No additional funds were advanced in thequarter ended January 31, 2004.  TheCompany has no equity interest in the third party entity.

 

Thefunds will be used for general working capital to provide various brachytherapyservices to ambulatory surgical centers. A distributor who has agreed toprocure all of its brachytherapy seeds exclusively from the Company for aperiod of five years has a majority interest in the third party entity. Basedon the terms of the lending and supply agreements with the above entities, theCompany determined that the third party entity is a variable interest entity(“VIE”) and the Company is the primary beneficiary under Financial AccountingStandards Board Interpretation No. 46, “Consolidation of Variable InterestEntities—an interpretation of ARB No. 51” (“FIN No. 46”). FINNo. 46 is effective for a VIE created after January 31, 2003 and to aVIE in which an enterprise obtains an interest after that date.

 

TheCompany determined that the third party entity was a VIE since it did not havesufficient equity at risk for the entity to finance its activities. FINNo. 46 requires that an enterprise consolidate a VIE if that enterprisehas a variable interest that will absorb a majority of the entity’s expectedlosses if they occur. Accordingly, the Company adopted FIN No. 46 inOctober 2003 and consolidated the third party entity as a VIE, regardlessof the Company not having an equity interest in the third party entity and itscreditors have no recourse against the Company.

 

Consolidationof the VIE as of October 31, 2003 and January 31, 2004 resulted in theconsolidation of cash of $350,000 and $308,000, respectively, which is held bythe VIE.  Other assets, liabilities andresults of operations of the VIE as of October 31, 2003 and January 31,2004 and for the period from October 27, 2003 to October 31,2003  and for the three months endedJanuary 31, 2004 were insignificant.

 

**Note 3 – NOMOS Acquisition**

 

InOctober 2003, the Company entered into an agreement to acquire NOMOSCorporation (“NOMOS”). Under the terms of the merger agreement, the Companywill issue approximately 5.3 million shares of common stock and pay cash ofapproximately $12 million, in exchange for all of the outstanding capital stockof NOMOS.  The acquisition is subject to approval by the stockholders andis expected to close in the second quarter of calendar 2004.  If the merger is not consummated, a partymay become obligated to pay the other party a termination fee.  The agreement provides for the Company topay a termination fee to NOMOS of $1.5 million under certain conditions setforth in the merger agreement. Likewise, NOMOS would have to pay the Company atermination fee of $3.0 million under certain conditions set forth in themerger agreement. The Company has incurred approximately $1.7 million and $1.3million in acquisition related costs which are included in Other Assets on theBalance Sheet at January 31, 2004 and October 31, 2003, respectively.

 

**Note 4 – Marketable Securities**

 

The Company invests excess cash in marketablesecurities consisting primarily of commercial paper, corporate notes and bonds,U.S. Government securities and money market funds.

 

8

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Debt securities that the Company has thepositive intent and ability to hold to maturity are classified as“held-to-maturity” and reported at amortized cost. Debt securities notclassified as held-to-maturity and marketable equity securities are classifiedas either “trading” or “available-for-sale,” and are recorded at fair valuewith unrealized gains and losses included in earnings or stockholders’ equity,respectively. All other equity securities are accounted for using either thecost method or the equity method.

 

The Company continually reviews itsinvestments to determine whether a decline in fair value below the cost basisis other than temporary. If the decline in fair value is judged to be otherthan temporary, the cost basis of the security is written down to fair valueand the amount of the write-down is included in the Consolidated Statements ofOperations.

 

**Note 5 – Inventories**

 

Inventories are valued at the lower of costor market as determined under the first-in, first-out method. Costs includematerials, labor and manufacturing overhead. Inventories are shown net ofapplicable reserves and allowances. Inventories consist of the following:

 
|            |   | **January  31,  2004** |    | **October  31,  2003** |   |
|-----------------|--------|------------------------|---------|------------------------|--------|
|            |   |                   |    |                   |   |
| Raw materials   |   | $                      | 656,000 |                   | $      | 639,000 |   |
| Work in process |   | 62,000                 |    | 25,000                 |   |
| Finished goods  |   | 56,000                 |    | 28,000                 |   |
|            |   |                   |    |                   |   |
|            |   | $                      | 774,000 |                   | $      | 692,000 |   |

 

**Note 6 – Net Loss per Share**

 

Basic earnings (loss) per share is computed by dividing the net income(loss) by the weighted average number of shares outstanding for the period.Diluted earnings (loss) per share is computed by dividing the net income (loss)by the sum of the weighted average number of common shares outstanding for theperiod plus the assumed exercise of all dilutive securities by applying thetreasury stock method unless such assumed exercises are anti-dilutive. Thefollowing table sets forth the computation of basic and diluted loss per share:

 
|                                                |   | **Three  Months Ended  January 31,** |       |
|-----------------------------------------------------|--------|--------------------------------------|------------|
|                                                |   | **2004**                             |       | **2003** |   |
|                                                |   |                                 |       |   |   |
| Net loss                                            |   | $                                    | (3,930,000 | ) | $ | (1,027,000 | ) |
|                                                |   |                                 |       |   |   |
| Weighted average shares outstanding – Basic    |   | 10,283,237                           |       | 10,256,171 |   |
| Dilutive effect of stock options                    |   | —                               |       | — |   |
|                                                |   |                                 |       |   |   |
| Weighted average shares outstanding –  Diluted |   | 10,283,237                           |       | 10,256,171 |   |
|                                                |   |                                 |       |   |   |
| Basic loss per share                                |   | $                                    | (0.38      | ) | $ | (0.10 | ) |
| Diluted loss per share                              |   | $                                    | (0.38      | ) | $ | (0.10 | ) |

 

Stock options to purchase 2,634,322 and 2,315,815 common shares for thethree months ended January 31, 2004 and 2003, respectively, were not includedin the computation of diluted earnings per share because their effect wouldhave been anti-dilutive.

 

9

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**Note 7 – Resignation of Chief FinancialOfficer**

 

The Company’s Senior Vice President and Chief Financial Officer, tookleave from the Company on January 27, 2004 and thereafter resigned to pursueother opportunites.  No services wererequired or rendered subsequent to January 27, 2004.  Pursuant to a mutual agreement, the Company agreed to pay cashseverance in the amount of $600,000, $300,000 of which was paid in February2004, and the remaining $300,000 will be paid in installments through June2005.  In addition, the Company agreedto immediately vest 171,834 stock options held by the former officer inone-time non-cash stock-based compensation charge of approximately $351,000.The Company recorded a charge of $951,000 in the quarter ended January 31, 2004,which is included in general and administrative expenses.

 

###### **Item 2.**  Management’s Discussion and Analysis ofFinancial Condition and Results of Operations

 

Thefollowing discussion and analysis provides information, which our managementbelieves is relevant to an assessment and understanding of our financialcondition and results of operations. The discussion should be read inconjunction with the Consolidated Financial Statements contained herein and thenotes thereto. Certain statements contained in this Form 10-Q, including,without limitation, statements containing the words “believes”, “anticipates”,“estimates”, “expects”, “projections”, and words of similar import are forwardlooking as that term is defined by: (i) the Private Securities LitigationReform Act of 1995 (the “1995 Act”) and (ii) releases issued by theSecurities Exchange Commission or SEC. These statements are being made pursuantto the provisions of the 1995 Act and with the intention of obtaining thebenefits of the “Safe Harbor” provisions of the 1995 Act. We caution that anyforward looking statements made herein are not guarantees of future performanceand that actual results may differ materially from those in such forwardlooking statements as a result of various factors, including, but not limitedto, any risks detailed herein or detailed from time to time in our otherfilings with the SEC including our most recent report on Form 10-K. We arenot undertaking any obligation to update publicly any forward-lookingstatements. Readers should not place undue reliance on these forward-lookingstatements.

 

**Overview**

 

Wedesign, develop and produce innovative radioisotopic products, includingbrachytherapy seeds and radiopharmaceuticals, principally for the treatment anddiagnosis of disease.  Since 1990, wehave applied our expertise in radioisotopes to develop and market products formedical, environmental, research and industrial applications.

 

From1998 to January 2003, our brachytherapy seeds were distributed under anexclusive agreement with a third party distributor.  In January 2003, the agreement terminated and we began to marketand sell our brachytherapy products directly to health care providers.  Future revenues and gross profit relating toour brachytherapy products will depend on several factors, including ourability to successfully directly market and distribute our brachytherapyproducts and to successfully withstand pricing pressure from competition andprice containment pressure and reimbursement limits for brachytherapy procedures.

 

InOctober 2000, we acquired Theseus Imaging Corporation, a developer ofproprietary radiopharmaceuticals to enhance the medical management of patientswith cancer or other medical conditions. Our principal radiopharmaceutical product candidate is Hynic-Annexin V,which is currently in Phase II clinical trials in Europe and the UnitedStates.  We have incurredexpenses related to the project of approximately $1.5 million, and $2.1 millionduring the three months ended January 31 2004, and 2003, respectively.

 

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Our anticipated expenditures in the development of Hynic-Annexin V areexpected to have a continued significant negative impact on our earnings.  Development of this product presents considerablerisks including:

 

•                  The use ofradiopharmaceuticals for imaging cell death is a new and unproven technologyand may not receive acceptance among healthcare providers, payers or patients;

 

•                  The productionof Hynic-Annexin V kits depends on successful manufacturing and testing ofstable Hynic-Annexin V conjugate and other materials by contract manufacturersunder cGMP standards.  Delays in thisprocess could adversely impact the timing of clinical studies;

 

•                  Clinical trialswith respect to these products may not be successful and we may not receivegovernment approvals in a timely manner or at all.  We do not expect to submit our BLA for Hynic-Annexin V to the FDAfor marketing approval for several years. FDA review of a BLA typically takes aminimum of one year.  Our BLA filingdate could be extended for a number of reasons, including changes in theregulatory landscape or changes in our strategic initiatives; and

 

•                  If marketingapproval of Hynic-Annexin V is achieved, there is no assurance that anyproducts resulting from our development of Hynic-Annexin V will achieve marketacceptance or compete successfully against existing or future diagnosticproducts intended for similar purposes.

 

On October 13, 2003, we announced observations from a preliminaryinternal review of data from our European clinical trials of Hynic-AnnexinV.  The data from these observations,which were derived from the first 28 subjects enrolled in these clinicaltrials, were preliminary and to some extent inconclusive.  Hence, further analyses or additionalclinical trials will be required. Further analyses or additional clinical trials may result in negativefindings, may delay the availability of Hynic-Annexin V as a product candidateand may reveal the need for greater expenditures than currently planned tocommercialize Hynic-Annexin V.  Even iffurther clinical trials produce positive results, these results may not predictresults that will be obtained in large-scale clinical trials and there can beno assurance that the clinical trials will demonstrate the safety and efficacyof Hynic-Annexin V or that the clinical trials will lead to any marketableproducts.

 

In view of these risks and uncertainties, we are unable to estimatewith any certainty when, if ever, we will complete the development of ourHynic-Annexin V product candidate or the final cost thereof.  We believe that successful completion andreceipt of required regulatory approvals allowing marketing will not occurearlier than 2007, and additional related costs could be at least $50million.  We estimate that meaningfulrevenues from this product would commence within one year after receipt of therequired marketing approvals.

 

We expect that the costs related to our Hynic-Annexin V developmentprogram will continue to have a significant negative effect on our earnings,and therefore, on our liquidity and financial position.  Most of the costs that we incur inconnection with this project are being expensed as incurred.  We continue to evaluate, on an ongoing basis, strategic alternativesfor our Hynic-Annexin V product development program and are engaged inassessing various options with a view to optimizing stockholder value.

 

In October 2003, we entered into an agreement to acquire NOMOSCorporation (“NOMOS”). NOMOS is a privately held developer, manufacturer, andmarketer of intensity modulated radiation therapy (“IMRT”) products andservices.  IMRT is a rapidly growingcategory of radiation therapy used to treat a variety of cancers.  We believe that this acquisition willfurther complement our current product offerings to radiation oncologists.  The transaction is subject to stockholderapproval and is expected to be completed in the second quarter of calendar2004.

 

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**Results of Operations**

 

**Three Months Ended January 31, 2004 Comparedto Three Months Ended January 31, 2003**

 

**Net sales.**  Net sales decreased $1,778,000, or 35%, to$3,363,000 for the three months ended January 31, 2004, from $5,141,000 for thethree months ended January 31, 2003. The decrease in net sales was principally due to a decline in unit salesof seeds associated with the transition to the direct marketing and sale of ourbrachytherapy products from our prior third party exclusive distributionagreement which terminated in January 2003. Our brachytherapy product sales accounted for approximately 75% and 80%of our net sales for the year three months ended January 31, 2004 and 2003,respectively.

 

**Gross profit.**  Gross profit decreased $1,840,000 or 56%, to$1,458,000 for the three months ended January 31, 2004, from $3,298,000 for thethree months ended January 31, 2003. Gross profit as a percent of sales decreased from 64% to 43% during thisperiod.  The decrease in gross profit,as a percentage of sales, was due to a combination of decreased economies ofscale associated with a decrease in unit volume and to a lesser degree, anincrease in low margin brachytherapy accessories such as pre-loaded needles andstranded seeds.  As our seed volumeincreases we expect our gross margins to increase.

 

**Sellingexpenses. **Sellingexpenses increased $179,000 or 30%, to $785,000 for the three months endedJanuary 31, 2004, from $606,000 for the three months ended January 31, 2003.The increase in selling expenses is primarily due to having only partiallydeveloped our sales force in the three months ended January 31, 2003.

 

**General andadministrative expenses (“G&A”). **G&Aincreased $1,561,000 or 86%, to $3,370,000 for the three months ended January 31,2004, from $1,809,000 for the three months ended January 31, 2003. The increasein G&A is primarily attributed to (i) the $951,000 in severance andnon-cash stock compensation expense associated with the resignation of formerofficer (See Note 7), (ii) increased accounting fees, and (iii) integration andother costs associated with the pending NOMOS acquisition.

 

**Research anddevelopment. **Researchand development costs decreased $513,000 or 26%, to $1,444,000 for the threemonths ended January 31, 2004, from $1,957,000 for the three months endedJanuary 31, 2003. These costs primarily consist of ongoing research expensesassociated with our Hynic-Annexin V program. The decrease in research anddevelopment is due to the timing of manufacturing costs, license payments andcosts associated with clinical trials for our Hynic-Annexin V productcandidate.

 

**Interest and otherincome, net. **Interestand other income, net decreased $147,000, or 41% to $211,000 for the threemonths ended January 31, 2004 from $358,000 for the three months ended January31, 2003.  This decrease reflects lowerinterest income as a result of a lower portfolio balance and a general declinein the effective yield of our portfolio of marketable securities consistentwith the general decline in interest rates.

 

**Provision (benefit)for income taxes.  **Dueto the uncertainty of our ability to fully recognize the future benefit of ourdeferred tax assets, in accordance with the SFAS No. 109, we have recorded avaluation allowance of approximately $5.1 million as of January 31, 2004.

 

**Cumulative effect of change inaccounting principle**.  During the three months ended January31, 2003, we adopted SFAS No. 143, “Accounting for Asset RetirementObligations,” for recording future decommissioning costs related to our leasedmanufacturing and research facilities. Under SFAS No. 143, a future retirement obligation is recorded atpresent value by discounting the Company’s estimated future asset retirementobligation.  In adopting thispronouncement, we recognized a charge of $311,000 which is reported in thecaption “Cumulative effect of change in accounting principle.”

 

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**Critical Accounting Policies**

 

Thepreparation of financial statements and related disclosures in conformity withaccounting principles generally accepted in the United States of Americarequires management to make judgments, assumptions and estimates that affectthe amounts reported in the Consolidated Financial Statements included in theCompany’s Form 10-K for the year ended October 31, 2003 and accompanying notes.Note 1 to the Consolidated Financial Statements describes the significantaccounting policies and methods used in the preparation of the ConsolidatedFinancial Statements. Estimates are used for, but not limited to, theaccounting for revenue recognition, allowance for doubtful accounts, goodwilland long-lived asset impairments, loss contingencies, and taxes. Estimates andassumptions about future events and their effects cannot be determined withcertainty. We base our estimates on historical experience and on various otherassumptions believed to be applicable and reasonable under the circumstances.These estimates may change as new events occur, as additional information isobtained and as our operating environment changes. These changes havehistorically been minor and have been included in the consolidated financialstatements as soon as they became known. The following critical accountingpolicies are impacted significantly by judgments, assumptions and estimatesused in the preparation of the Consolidated Financial Statements and actualresults could differ materially from the amounts reported based on thesepolicies.

 

*Allowance for Doubtful Accountsand Sales Returns*

 

Theallowance for doubtful accounts is based on our assessment of thecollectibility of specific customer accounts and the aging of the accountsreceivable. We regularly review the allowance by considering factors such ashistorical experience, age of the accounts receivable balances and currenteconomic conditions that may affect a customer’s ability to pay.  If there were a deterioration of a majorcustomer’s credit worthiness or actual defaults are higher than our historicalexperience, our estimates of the recoverability of amounts due us could beoverstated which could have an adverse impact on our financial results.

 

Areserve for sales returns is established based on historical trends in productreturn rates and is recorded as a reduction of our accounts receivable. If theactual future returns were to deviate from the historical data on which thereserve had been established, our revenue could be adversely affected. To date,product returns have not been considered material to our results of operations.

 

*Goodwill*

 

Ourmethodology for allocating the purchase price related to purchase acquisitionsis determined through established valuation techniques.  Goodwill is measured as the excess of thecost of the acquisition over the amounts assigned to identifiable assessacquired less assumed liabilities.  Weperform goodwill impairment tests on an annual basis and between annual testsin certain circumstances. In response to changes in industry and marketconditions, we may strategically realign our resources and considerrestructuring, disposing of, or otherwise exiting businesses, which couldresult in an impairment of goodwill.

 

*Impairment of Long-lived Assets*

 

Weassess the impairment of long-lived assets, which include equipment andleasehold improvements and identifiable intangible assets, whenever events andcircumstances indicate that such assets might be impaired.  In the event the expected undiscountedfuture cash flow attributable to the asset is less than the carrying amount ofthe asset, an impairment loss equal to the excess of the asset’s carrying valueover its fair value is recorded.

 

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*Loss Contingencies*

 

Werecord liabilities related to pending litigation when an unfavorable outcome isprobable and we can reasonably estimate the amount of the loss.  We are subject to various legal proceedingsand claims, either asserted or unasserted, that arise in the ordinary course ofbusiness. We evaluate, among other factors, the degree of probability of anunfavorable outcome and an estimate of the amount of the loss. Significantjudgment is required in both the determination of the probability and as towhether an exposure can be reasonably estimated. When we determine that it isprobable that a loss has been incurred and the amount can be reasonablyestimated, the effect is recorded promptly in the consolidated financialstatements. Although the outcome of these claims cannot be predicted withcertainty, we do not believe that any of the existing legal matters will have amaterial adverse effect on our financial condition or results of operations.

 

*Income Taxes*

 

Weaccount for income taxes using the liability method. Deferred taxes aredetermined based on the differences between the financial statement and taxbases of assets and liabilities, using enacted tax rates in effect for the yearin which the differences are expected to reverse. Valuation allowances areestablished when necessary to reduce deferred tax assets to the amountsexpected to be realized.  In addition,we are subject to examination of our income tax returns by the Internal RevenueService and other tax authorities.  Weregularly assess the likelihood of adverse outcomes resulting from theseexaminations.

 

**Liquidityand Capital Resources**

 

To date, our short-term liquidity needs have generally consisted ofoperating capital to finance growth in inventories, trade accounts receivable,new product research and development, capital expenditures, acquisitions andstrategic investments in related businesses. We have satisfied these needs primarily through a combination of cashgenerated by operations, public offerings and from private placements of ourcommon stock.  We do not currently havea line of credit or similar arrangement with a bank.

 

Thefollowing sections discuss the effects of changes in our balance sheets, cashflows, and commitments on our liquidity and capital resources.

 

**Balance Sheet andCash Flows**

 

Cash, cash equivalents, cash held in variable interest entity andinvestments in marketable securities.  At January 31, 2004, we had cash, cashequivalents, cash held in variable interest entity and investments inmarketable securities aggregating approximately $45.0 million, a decrease of approximately $4.1 million or8% from $49.1 million at October 31, 2003. The decrease was primarily a resultof a decrease in net sales as we continue to transition from our distributionagreement with a third party to direct sales of our brachytherapy products anincrease in general and administrative expenses.

 

Weexpect that cash used in operating activities may fluctuate in future periodsas a result of a number of factors, including fluctuations in our operatingresults, accounts receivable collections, inventory management, research anddevelopment expenses, including the costs of clinical trials, the impact ofacquisitions and the timing of payments.

 

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During the quarter ended January 31, 2004, we received $456,000 fromthe exercise of stock options and the purchase of shares related to ouremployee stock purchase plan.  Proceedsfrom the exercise of stock options and the employee stock purchase plan willvary from period to period based upon, among other factors, fluctuations in themarket value of our stock relative to the exercise price of such options.

 

The primary objectives for our investment portfolio are liquidity andsafety of principal.  Investments aremade to achieve the highest rate of return, consistent with these twoobjectives.  We invest excess cash insecurities with varying maturities to meet projected cash needs.

 

Other assets.   At January 31, 2004, other assets were approximately $1,756,000,an increase of approximately $422,000or 32% from $1,334,000 at October 31, 2003. Other assets consist primarily of capitalized acquisition related costsrelated to the NOMOS transaction.

 

Accountspayable and accrued expenses.   Accounts payable and accruedexpenses decreased approximately $0.9 million or 13% to $5.9 million as ofJanuary 31, 2004, from $6.8 million at October 31, 2003. The decrease wasprimarily a result of partial payment of accrued transaction costs inconnection with the NOMOS transaction and the timing of payments to vendors.

 

**Liquidity and CapitalResource Requirements**

 

We have operating lease obligations for facilities and equipment undernon-cancelable operating lease agreements. Future minimum lease payments aresubject to annual adjustment for increases in the Consumer Price Index.  We have also entered into contractualarrangements with third parties for (i) services associated with ourHynic-Annexin V development program ($1,819,000), (ii) services related to ourplanned acquisition of NOMOS ($900,000), (iii) contingent obligations toProstate Centers of America ($850,000), and (iv) installments obligations underseparation agreement to a former officer ($600,000).  The contract obligations associated with the Hynic-Annexin Vprogram contain provision to terminate our payment obligations with 30 to 90day notification.

 
|                        |   | **Payments  Due By Period** |      |
|-----------------------------|--------|-----------------------------|-----------|
| **Contractual Obligations** |   | **Total**                   |      | **Less than  1  year** |   | **1-3 years** |   | **3-5 years** |   | **More than  5 years** |   |
| Operating Leases            |   | $                           | 671,000   |   | $ | 599,000 |   | $ | 72,000 |   | $ | — |   | $ | — |   |
| Other                       |   | 4,169,000                   |      | 4,086,000 |   | 83,000 |   | — |   | — |   |
|                        |   |                        |      |   |   |   |   |   |   |   |   |
|                        |   | $                           | 4,840,000 |   | $ | 4,685,000 |   | $ | 155,000 |   | $ | — |   | $ | — |   |

 

In October 2003, we entered into an agreement to acquire NOMOS. Underthe terms of the agreement, we will issue approximately 5.3 million shares ofcommon stock and pay approximately $12 million in cash in exchange for all theoutstanding capital stock of NOMOS.  Thetransaction is subject to shareholder approval and is expected to be completedin the second calendar quarter of 2004. As of January 31, 2004, we have incurredapproximately $1.7 million in acquisition related expenses. We estimate that wewill incur approximately $1.5 million in additional direct transaction costs inconnection with the merger.

 

We believe our current cash and marketable securities will besufficient to support our operations and planned expansion for the foreseeablefuture.  However, the amount of capitalthat we will need in the future will depend on many factors including:

 

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•                  Costs related toresearch, development, clinical trials, license fees, royalty obligations,regulatory approvals and commercialization of our Hynic-Annexin V productcandidate and other product candidates;

 

•                  Levels of salesand marketing that will be required to launch future products and achieve and maintaina competitive position in the marketplace for both existing and new products;

 

•                  Marketacceptance of our products;

 

•                  Levels ofinventory and accounts receivable that we maintain;

 

•                  Competitors’responses to our products;

 

•                  Level of capitalexpenditures; and

 

•                  Acquisition ofNOMOS and/or acquisition or development of other complementary businesses,technologies or products.

 

We anticipate continuing significant expenses with respect to ourHynic-Annexin V product candidate over the next several years for clinicaltrials and development costs. We are unable to estimate with any certaintywhen, if ever, we will complete the development of our Hynic-Annexin V productcandidate or the final cost thereof. Significant milestone payments to third parties are payable throughoutthe life of the contracts associated with our licenses of patent rights oftechnology related to our Hynic-Annexin V product candidate.  We believe that successful completion andreceipt of required regulatory approvals allowing marketing will not be earlierthan 2007, and additional related costs could be at least $50 million.  We estimate that meaningful revenues fromthis product would commence within one year after our receipt of the requiredmarketing approvals.

 

We expect that the costs related to our Hynic-Annexin V developmentprogram will continue to have a significant negative effect on our earnings,and therefore, on our liquidity and financial position.

 

Wecontinue to evaluate, on an ongoing basis, strategic alternatives for ourHynic-Annexin V product development program and are engaged in assessingvarious options with a view to optimizing stockholder value.

 

Future capital requirements will also depend on the extent to which weacquire or invest in other businesses, products and technologies.  If we should require additional financingdue to unanticipated developments, additional financing may not be availablewhen needed or, if available, we may not be able to obtain this financing onterms favorable to our stockholders or us. Insufficient funds may require us to delay, scale back or eliminate someor all of our research and development programs.  If additional funds are raised by issuing equity securities,dilution to existing stockholders would result.

 

**Recent Accounting Pronouncements**

 

In January 2003, FASB issued Interpretation No. 46 (“FIN 46”),Consolidation of Variable Interest Entities - an Interpretation of ARB No. 51. The Interpretation clarified the application of Accounting ResearchBulletin No. 51,  Consolidated Financial Statements,  to certainentities in which equity investors do not have the characteristics of acontrolling financial interest or do not have sufficient equity at risk for theentity to finance its activities without additional subordinated financialsupport from other parties. The provisions of this Interpretation are effectivefor all enterprises with variable interest entities created after January 31,2003 and are required to be fully implemented no later than the third quarterof

 

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2003. Theadoption of FIN 46 resulted in the Company consolidating a third party entityas a variable interest entity.

 

In December 2003, the SEC issued SAB No. 104. SAB No. 104 revises or rescinds portions of the interpretive guidanceincluded in Topic 13 of the codification of staff accounting bulletins in orderto make this interpretive guidance consistent with current authoritativeaccounting and auditing guidance and SEC rules and regulations.  It alsorescinds the Revenue Recognition in Financial Statements Frequently AskedQuestions and Answers document issued in conjunction with Topic 13. Selected portions of that document have been incorporated into Topic 13. The adoption of SAB No. 104 in the quarter ended January 31, 2004 had nomaterial impact on the Company’s financial position, results of operations orcash flows.

 

###### **Item 3.**  Quantitative and Qualitative Disclosuresabout Market Risk

 

Information about market risks for the three months ended January 31,2004, does not differ materially from that discussed under Item 7A of theregistrant’s Annual Report on Form 10-K for the fiscal year ended October 31,2003.

 

###### **Item 4.**  Controls and Procedures

 

(a)          Evaluation of Disclosure Controls andProcedures

 

As required by Rule 13a-15(b) under the Exchange Act, we havecarried out an evaluation, under the supervision and with the participation ofour management, including our Chief Executive Officer (“CEO”) and our InterimChief Financial Officer (“CFO”), of the effectiveness, as of the end of thefiscal quarter covered by this report, of the design and operation of our“disclosure controls and procedures” as defined in Rule 13a-14 promulgatedby the SEC under the Exchange Act. Based upon that evaluation, our CEO and ourCFO concluded that our disclosure controls and procedures, as of the end ofsuch fiscal quarter, were adequate and effective to ensure that informationrequired to be disclosed by us in the reports that we file or submit under theExchange Act is recorded, processed, summarized and reported within the timeperiods specified in the Commission’s rules and forms.

 

(b)         Changes in Internal Controls

 

There have been no significant changes in our internal controls overfinancial reporting or in other factors that could significantly affect ourinternal controls over financial reporting subsequent to the date of theevaluation referred to above.

 

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**PART II****– OTHERINFORMATION**

 

The Company was not required to report theinformation pursuant to Items 1 through 6 of Part II of Form 10-Q except asfollows:

 

## **Item 6.**  Exhibits and Reports on Form 8-K

 

(a)          Exhibits.

 
| **Exhibits  No.** |   | **Title**                                                                                                                                |
|-------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------|
|              |   |                                                                                                                                     |
| 31.1              |   | Certification  of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act  of 2002                                     |
|              |   |                                                                                                                                     |
| 31.2              |   | Certification  of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act  of 2002                                     |
|              |   |                                                                                                                                     |
| 32                |   | Certification  of Chief Executive Officer and Interim Chief Financial Officer Pursuant to  Section 906 of the Sarbanes-Oxley Act of 2002 |

 

(b) Reports onForm 8-K.

 

On February 6, 2004, we filed a report on Form 8-K to announce theresignation of Alan Edrick, our Senior Vice President and Chief FinancialOfficer and the appointment of Erik L. Johnson as our Chief Accounting Officerand Interim Chief Financial Officer.

 

On February 27, 2004, we furnished a report on Form 8-K for the purposeof furnishing our press release announcing our financial results for thequarter ended January 31, 2004.

 

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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 theundersigned thereunto duly authorized.

 

 
|          |   | NORTH AMERICAN SCIENTIFIC, INC. |
|---------------|--------|---------------------------------|
|          |   |                            |
|          |   |                            |
| March 9, 2004 | By:    | /s/ L. Michael Cutrer           |
|          |   | Name:                           | L. Michael Cutrer |
|          |   | Title:                          | President and  Chief Executive Officer  (Principal Executive Officer) |
|          |   |                            |   |
|          |   |                            |   |
| March 9, 2004 | By:    | /s/ Erik L. Johnson             |
|          |   | Name:                           | Erik L. Johnson |
|          |   | Title:                          | Interim Chief Financial Officer and Chief  Accounting Officer (Principal Financial  and Accounting Officer) |

 

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