Filed
pursuant to Rule 424(b)(3)
Registration
No. 333-152373
PROSPECTUS
NORTH
AMERICAN SCIENTIFIC, INC.
13,976,370
Shares of Common Stock
This
prospectus relates to the offer and sale from time to time of up to 13,976,370
shares of our common stock which are held by certain of our stockholders named
in this prospectus, who are referred to herein as the selling stockholders.
Of
this amount, 12,601,628 shares of our common stock are held by certain selling
stockholders and 1,374,742 shares of our common stock are issuable to certain
selling stockholders upon the exercise of warrants to purchase common stock
that
were previously issued by us to certain selling stockholders in a private
placement pursuant to a securities purchase agreement dated as of December
12,
2007.
The
selling stockholders may sell the shares of common stock described in this
prospectus in public or private transactions, on or off the Nasdaq Capital
Market, at prevailing market prices, or at privately negotiated prices. The
selling stockholders may sell shares directly to purchasers or through brokers
or dealers. Brokers or dealers may receive compensation in the form of
discounts, concessions or commissions from the selling stockholders. We will
not
receive any proceeds from the selling stockholders’ sale of the shares of common
stock. We have agreed to bear the expenses in connection with the registration
and sale of the common stock offered by the selling stockholders and to
indemnify the selling stockholders against certain liabilities, including
liabilities under the Securities Act of 1933, as amended. See the section in
this prospectus titled “Plan of Distribution” for additional information on how
the selling stockholders may conduct sales of our common stock.
Our
common stock currently is traded on the Nasdaq Capital Market under the symbol
“NASM.” On July 14, 2008, the closing price of our common stock was $0.81 per
share.
Investing
in our common stock involves risks that are described in the “Risk Factors”
section of this prospectus beginning on page 3 and the risk factors incorporated
herein by reference from our annual and quarterly reports filed with the
Securities and Exchange Commission.
Neither
the Securities and Exchange Commission nor any state securities commission
has
approved or disapproved of these securities or determined if this prospectus
is
truthful or complete. Any representation to the contrary is a criminal offense.
The
date
of this prospectus is July 28, 2008.
TABLE
OF CONTENTS
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SUMMARY
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1
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RISK FACTORS
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2
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SPECIAL NOTE REGARDING
FORWARD-LOOKING STATEMENTS
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14
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USE OF PROCEEDS
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15
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SELLING
STOCKHOLDERS
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15
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PLAN OF
DISTRIBUTION
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17
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LEGAL MATTERS
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19
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EXPERTS
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19
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WHERE YOU CAN FIND MORE
INFORMATION
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You
should rely only on the information contained or incorporated by reference
in
this prospectus and any applicable prospectus supplements. We have not
authorized anyone to provide you with information different from that contained
in this prospectus. Offers to sell, and offers to buy, the shares of common
stock are valid only in jurisdictions where offers and sales are permitted.
The
information contained in this prospectus is accurate only as to the date of
this
prospectus, regardless of the time of delivery of the prospectus or of any
sale
of the common stock.
SUMMARY
This
summary highlights some important information about our business and about
this
offering. It does not include all of the information you should consider before
deciding to purchase any shares of our common stock. Please review this entire
prospectus and the information incorporated herein by reference, including
the
risk factors section and our consolidated financial statements and related
notes, before you decide to purchase any shares of our common stock.
Except
as otherwise indicated in this prospectus or as the context may otherwise
indicate, in this prospectus the words “we,” “our,” “us” and “Company” refer to
North American Scientific, Inc. and its subsidiaries.
Our
Company
We
are a
Delaware corporation, incorporated in 1990, that designs, develops, produces
and
sells innovative products for radiation therapy treatment, including Prospera®
brachytherapy seeds and SurTRAK™ needles and strands used primarily in the
treatment of prostate cancer. In 2006 we introduced our ClearPath™ brachytherapy
device to be used in the treatment of breast cancer. In addition, we develop
and
market products for other medical, environmental, research and industrial
applications.
In
1996,
we began to focus our research and product development activities primarily
on
medical products that are useful in the diagnosis, management and treatment
of
diseases such as cancer. This initiative resulted in the development of our
first two therapeutic products, iodine-based and palladium-based implantable
brachytherapy seeds for the treatment of prostate cancer. We began manufacturing
our Iodine-125 seed for commercial use in 1998, and introduced our Palladium-103
seed the following year, thus becoming the first company to manufacture both
iodine and palladium brachytherapy seeds. We currently market and sell our
Iodine-125 seeds under the trade name Prospera® I-125, and our Palladium-103
sees under the trade name Prospera® Pd-103.
In
August
2003, we acquired substantially all of the assets of Radiation Therapy Products
(“RTP”), a manufacturer and distributor of equipment, including steppers and
stabilizers, used in prostate brachytherapy procedures. We added RTP to our
brachytherapy product portfolio to provide a more complete product offering
to
customers and prospects.
In
May
2004, we acquired NOMOS Corporation (“NOMOS”), a developer, manufacturer and
marketer of products and services for IMRT and IGRT. NOMOS was recognized as
the
pioneer of the IMRT and IGRT fields and its products are used to treat a variety
of cancers at hospitals and free-standing radiation oncology centers. In July
2007, we announced our plan to divest the NOMOS Radiation Oncology business
and
completed the sale of all significant assets, including licenses, trademarks
and
brand-names, and selected liabilities of NOMOS to Best Medical, Inc. for
$500,000 in September 2007.
In
November 2006, we announced the introduction of ClearPath™, our unique
multicatheter breast brachytherapy device for Accelerated Partial Breast
Irradiation (“APBI”). APBI is a standard radiation treatment appropriate for all
women with early stage breast cancer. Typically, patients undergoing radiation
treatment for breast cancer are treated with external beam radiation (“EBR”).
The EBR treatments are delivered daily for a period of six weeks. Women who
receive APBI instead of EBR can be treated in just five days with the same
level
of efficacy and with better control of radiation dose to surrounding tissue.
Management estimates that approximately 250,000 women in the United States
are
diagnosed with breast cancer each year. With early detection on the rise, we
believe the total market for APBI devices in the United States to be as high
as
$500 million per year.
We
were
incorporated as a Delaware corporation in 1990. Our principal executive offices
are located at 20200 Sunburst Street, Chatsworth, California 91311, and our
telephone number is (818) 734-8600. Our internet address is www.nasmedical.com.
Our internet website and the information contained therein or connected thereto
are not intended to be incorporated into this prospectus, and you should not
consider it part of this prospectus.
RISK
FACTORS
You
should carefully consider the following risks and other information included
or
incorporated by reference in this prospectus before deciding to purchase any
shares of our common stock, including those set forth under Item 1A of our
Annual Report on Form 10-K for the fiscal year ended October 31, 2007.
These risks and uncertainties are not the only ones we face. Others that we
do
not know about now, or that we do not now think are important, may also impair
our business. The risks described in this section and included or incorporated
by reference in this prospectus could cause our actual results to differ
materially from those anticipated.
We
have experienced significant losses and expect to incur losses in the future.
As
a result, the amount of our cash, cash equivalents, and investments in
marketable securities has materially declined. We raised additional equity
financing in January 2008 to fund our continuing operations, support the further
development and launch of ClearPath and other activities. If we continue to
incur significant losses and are unable to access sufficient working capital
from our operations or through external financings, we will be unable to fund
future operations and operate as a going concern.
We
have
incurred substantial net losses in each of the last six fiscal years. As
reflected in our financial statements, we have experienced net losses of $8.7
million in the six months ended April 30, 2008, and $21.0 million and $17.1
million in our fiscal years ended October 31, 2007 and 2006, respectively.
In
addition, we have used cash in operations of $7.1 million in the three months
ended April 30, 2008, and $12.3 million and $15.9 million for our fiscal years
ended October 31, 2007 and 2006, respectively. As of April 30, 2008, we
had an accumulated deficit of $156.7 million; cash and cash equivalents of
$3.8
million, and no long-term debt.
To
supplement our available cash, on May 28, 2008, we entered into a Ninth
Amendment to our previously expired borrowing arrangement with Silicon Valley
Bank. The Ninth Amendment provides us with $6.0 million available borrowing
capacity as follows:
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a
$3.0 million Growth Capital term loan, to be funded one half
in June 2008
and one half no later than September 2008. Interest accrues at
the Bank
prime rate plus 2.25% and is payable on the outstanding principal
balance
monthly from the date of the first borrowing. The principal balance
of the
Growth Capital loan is repayable in equal installments of $83,333
over
thirty-six (36) months beginning in the month after the loan
is fully
funded; and
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a
$3.0 million revolving line of credit based upon eligible receivables
balance as defined by the Amendment, which is payable monthly.
Interest on
the revolving line of credit is payable monthly at Bank prime
plus 0.5%
per annum, and may increase to Bank prime plus 1.5% if we fail
to meet the
Quick Ratio Test as defined in the Ninth Amendment. The revolving
line of
credit matures in twenty-four (24) months from the date of the
execution
of the Ninth Amendment. The revolving line of credit is subject
to certain
financial covenants, which cross over to the Growth Capital Loan
in the
event that both facilities have an outstanding balance on any
given
month.
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The
negative cash flow we have sustained has materially reduced our working capital.
Although our working capital has been replenished to some extent by our January
2008 equity financing, continued negative cash flow could materially and
negatively impact our ability to fund future operations and continue to operate
as a going concern. Management has taken and continues to take actions intended
to improve our results. These actions include reducing cash operating expenses,
developing new technologies and products, improving existing technologies and
products, and expanding into new geographical markets. The availability of
necessary working capital, however, is subject to many factors beyond our
control, including our ability to obtain additional financing, our ability
to
increase revenues and to reduce further our losses from operations, economic
cycles, market acceptance of our products, competitors’ responses to our
products, the intensity of competition in our markets, and the level of demand
for our products.
The
amount of working capital that we will need in the future will also depend
on
our efforts and many factors, including:
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Our
ability to successfully develop, market and sell our products,
including
the successful further development and launch of our new ClearPath
device
for treatment of breast
cancer;
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Continued
scientific progress in our discovery and research
programs;
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Levels
of selling and marketing expenditures that will be required to
launch
future products and achieve and maintain a competitive position
in the
marketplace for both existing and new
products;
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Structuring
our businesses in alignment with their revenues to reduce operating
losses;
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Levels
of inventory and accounts receivable that we
maintain;
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Level
of capital expenditures;
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Acquisition
or development of other businesses, technologies or
products;
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The
time and costs involved in obtaining regulatory
approvals;
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The
costs involved in preparing, filing, prosecuting, maintaining,
defending
and enforcing patent claims;
and
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The
potential need to develop, acquire or license new technologies
and
products.
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We
completed a private placement of $15.5 million of our common stock in January
2008, raising a net $14.0 million; however, we may need to raise additional
equity financing, reduce operations and take other steps to achieve positive
cash flow. We also may be required to curtail our expenses or to take steps
that
could hurt our future performance, including but not limited to, the termination
of major portions of our research and development activities, the premature
sale
of some or all of our assets or product lines on undesirable terms, merger
with
or acquisition by another company on unsatisfactory terms or the cessation
of
operations. We cannot assure you that we will be successful in these efforts
or
that any or some of the above factors will not negatively impact us. We believe
that we will have sufficient cash to sustain us at least through the next twelve
months.
Future
financing transactions will likely have dilutive and other negative effects
on
our existing stockholders.
In
January 2008, we completed a private placement of 12,601,628 shares of our
common stock that also included 630,081 shares of common stock issuable upon
exercise of warrants. This financing resulted in significant dilution of our
current stockholders, such that the three participants in the private placement
transaction now control in excess of 70% of our outstanding common stock. If
we
raise additional equity financing in the future, the percentage ownership held
by existing stockholders would be further reduced, and existing stockholders
may
experience further significant dilution. In addition, new investors may demand
rights, preferences or privileges that differ from, or are senior to, those
of
our existing shareholders, such as warrants in addition to the securities
purchased and other protections against future dilutive
transactions.
Our
stock price, at times, has not met the minimum bid price for continued listing
on the Nasdaq Capital Market. Our ability to publicly or privately sell equity
securities and the liquidity of our common stock could be adversely affected
if
we are delisted from the Nasdaq Capital Market or if we are unable to transfer
our listing to another stock market.
At
points
during the past 52 weeks, the minimum bid price for our common stock listed
on
the Nasdaq Capital Market has closed below the $1.00 minimum. On October 5,
2007, we received a notice from Nasdaq, dated October 5, 2007 indicating that
for the last 30 consecutive business days, the bid price of our common stock
had
closed below the minimum $1.00 per share requirement for continued inclusion
under Marketplace Rule 4450(a)(5). We were able to regain compliance with the
$1.00 minimum bid requirement by effecting a 1 share for 5 share reverse stock
split, which was approved by our stockholders on April 29, 2008 and became
effective on May 1, 2008. Our common stock traded at or above the $1.00 minimum
bid price for the period May 1, 2008 through May 14, 2008, which marked 10
consecutive trading days in which the closing bid price exceeded the $1.00
minimum. On May 15, 2008, we were notified by Nasdaq that our common stock
had
regained compliance with the minimum bid price requirements and no further
action was required on our part. However, in July 2008, we again fell below
the
$1.00 minimum bid price and will need to regain the minimum bid price or face
delisting.
If,
in
the future, our common stock is delisted by Nasdaq, our common stock may be
eligible to trade on the American Stock Exchange, the OTC Bulletin Board
maintained by Nasdaq, another over-the-counter quotation system, or on the
pink
sheets where an investor may find it more difficult to dispose of or obtain
accurate quotations as to the market value of our common stock, although there
can be no assurance that our common stock will be eligible for trading on any
alternative exchanges or markets. In addition, delisting from Nasdaq could
adversely affect our ability to raise additional financing through the public
or
private sale of equity securities. We may need to raise additional financing
in
fiscal 2008 to fund our continuing operations, support the launch and further
development of ClearPath, and other activities. Delisting from Nasdaq also
would
make trading our common stock more difficult for investors, potentially leading
to further declines in our share price. It would also make it more difficult
for
us to raise additional capital.
Our
common stock is subject to continued listing requirements of the Nasdaq Capital
Market. Our ability to publicly or privately sell equity securities and the
liquidity of our common stock could be adversely affected if we are delisted
from The Nasdaq Capital Market.
Beyond
the risk of delisting arising from the $1.00 minimum closing bid price
requirement, our common stock is subject to a number of other requirements
under
Maintenance Standards for continued listing on the Nasdaq Capital Market,
including but not limited to, a $2.5 million minimum stockholders’ equity under
Maintenance Standard 1, as set forth in Marketplace Rule 4310(c)(3). Currently,
our $4.5 million of stockholder’s’ equity at April 30, 2008 is sufficient to
meet the minimum required under Maintenance Standard 1. However, continued
losses will erode our Stockholders’ Equity, and cause us to become non-compliant
with this continued listing requirement.
Delisting
from Nasdaq could adversely affect our ability to raise additional financing
through the public or private sale of equity securities. We may need to raise
additional financing in fiscal 2008 to fund our continuing operations, support
the launch and further development of ClearPath, and other activities. Delisting
from Nasdaq also would make trading our common stock more difficult for
investors, potentially leading to further declines in our share price.
Success
of our ClearPath breast brachytherapy device will be dependent upon a variety
of
factors.
We
previously have announced the introduction of ClearPath, a new brachytherapy
device for the treatment of breast cancer. Because we believe that our ClearPath
device has certain technical and market advantages, we expect that this device
may generate significant revenues in the future. There are a number of factors
which could affect our ability to achieve this goal, including:
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The
successful further development of a commercially marketable
device;
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The
successful launch of a marketing and sales program for this
device;
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Our
ability to protect our intellectual property through patents and licenses
and avoid infringement of intellectual property of
others;
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The
successful completion of technical improvements to the
device;
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Our
ability to successfully manufacture production quantities of the
device;
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The
acceptance of the device by physicians and health professionals as
an
alternative to other approaches to delivering radiation to a cancer
patient’s breast tissue or to other products using a similar approach but
employing different competitive technologies;
and
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Our
ability to hire and train a direct sales force to sell the
device.
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We
may encounter insurmountable obstacles or incur substantially greater costs
and
delays than anticipated in the development process.
From
time
to time, we have experienced setbacks and delays in our research and development
efforts and may encounter further obstacles in the course of the development
of
additional technologies, products and services. We may not be able to overcome
these obstacles or may have to expend significant additional funds and time.
Technical obstacles and challenges we encounter in our research and development
process may result in delays in or abandonment of product commercialization,
may
substantially increase the costs of development, and may negatively affect
our
results of operations.
New
product developments in the healthcare industry are inherently risky and
unpredictable. These risks include:
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failure
to prove feasibility;
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time
required from proof of feasibility to routine
production;
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timing
and cost of regulatory approvals and
clearances;
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competitors'
responses to new product
developments;
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manufacturing
cost overruns;
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failure
to obtain customer acceptance and payment;
and
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excess
inventory caused by phase-in of new products and phase-out of old
products.
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The
high
cost of technological innovation is coupled with rapid and significant change
in
the regulations governing the products that compete in our market, by industry
standards that could change on short notice, and by the introduction of new
products and technologies that could render existing products and technologies
uncompetitive. We cannot be sure that we will be able to successfully develop
new products or enhancements to our existing products. Without successful new
product introductions, our revenues likely will continue to suffer, as
competition erodes average selling prices. Even if customers accept new or
enhanced products, the costs associated with making these products available
to
customers, as well as our ability to obtain capital to finance such costs,
could
reduce or prevent us from increasing our operating margins.
All
of our product lines are subject to intense competition. Our most significant
competitors have greater resources than we do. As a result, we cannot be certain
that our competitors will not develop superior technologies, larger more
experienced sales forces or otherwise be able to compete against us more
effectively. If we fail to maintain our competitive position in key product
areas, we may lose or be unable to develop significant sources of
revenue.
We
believe that our Prospera brachytherapy seeds, our SurTRAK strands and needles
and our new ClearPath device can generate substantial revenues in the future.
We
will need to continue to develop enhancements to these products and improvements
on our core technologies in order to compete effectively. Rapid change and
technological innovation characterize the marketplace for medical products,
and
our competitors could develop technologies that are superior to our products
or
that render such products obsolete. We anticipate that expenditures for research
and development will continue to be significant. The domestic and foreign
markets for radiation therapy are highly competitive. Many of our competitors
and potential competitors have substantial installed bases of products and
significantly greater financial, research and development, marketing and other
resources than we do. Competition may increase as emerging and established
companies enter the field. In addition, the marketplace could conclude that
the
tasks our products were designed to perform are no longer elements of a
generally accepted treatment regimen. This could result in us having to reduce
production volumes or discontinue production of one or more of our
products.
Our
primary competitors in the brachytherapy seed business include: C.R.
Bard, Inc. Oncura, and Core Oncology, all of whom manufacture and sell
Iodine-125 brachytherapy seeds, as well as distribute Palladium-103 seeds
manufactured by a third party (in the case of Oncura and Core Oncology, we
currently manufacture a portion of their Palladium-103 seed requirements
pursuant to distribution agreements reached with Oncura in July 2005 and with
Core Oncology in August 2007); and Theragenics Corporation, which manufacturers
Palladium-103 seeds, and sells Palladium-103 and Iodine-125 brachytherapy seeds
directly and its Palladium-103 brachytherapy seeds through marketing
relationships with third parties. Several additional companies currently sell
brachytherapy seeds as well. Our SurTRAK strands and needles are subject to
competition from a number of companies, including Worldwide Medical
Technologies, Inc.
Our
new
ClearPath-HDR device for treatment of breast cancer is, like its competitors,
designed to connect to a source of high-dose-rate (HDR) radiation, which is
administered in a specially shielded room in a hospital. It faces competition
from Hologic, Inc., SenoRx, Inc. and Cianna Medical (previously BioLucent,
Inc.). The MammoSite RTS device from Hologic, Inc., currently the market leader,
uses a balloon and catheter system to place the radiation source directly into
the post-lumpectomy cavity. The Contura MLB device developed by SenoRx, Inc.
also uses a balloon and catheter system to deliver the radiation dose. The
SAVI
device manufactured by Cianna Medical does not use a balloon and is comprised
of
an expandable bundle of 6 catheters.
Our
radiation reference source business also is subject to intense competition.
Competitors in this industry include AEA Technology PLC and Eckert &
Ziegler AG. We believe that these companies have a dominant position in the
market for radiation reference source products.
Because
we are a relatively small company, there is a risk that potential customers
will
purchase products from larger manufacturers, even if our products are
technically superior, based on the perception that a larger, more established
manufacturer may offer greater certainty of continued product improvements,
support and service, which could cause our revenues to decline. In addition,
many of our competitors are substantially larger and have greater sales,
marketing and financial resources than we do. Developments by any of these
or
other companies or advances by medical researchers at universities, government
facilities or private laboratories could render our products obsolete. Moreover,
companies with substantially greater financial resources, as well as more
extensive experience in research and development, the regulatory approval
process, manufacturing and marketing, may be in a better position to seize
market opportunities created by technological advances in our
industry.
We
are highly dependent on our direct sales organization, which is small compared
to many of our competitors. Also, we will need to hire and train additional
sales representatives to sell our ClearPath device. Any failure to build, manage
and maintain our direct sales organization could negatively affect our
revenues.
Our
current domestic direct sales force is small relative to many of our
competitors. There is intense competition for skilled sales and marketing
employees, particularly for people who have experience in the radiation oncology
market. Accordingly, we could find it difficult to hire or retain skilled
individuals to sell our products. Any failure to build our direct sales force
could adversely affect our growth and our ability to meet our revenue
goals.
As
a
result of our relatively small sales force the need to hire and train additional
sales representatives to sell our ClearPath device, and the intense competition
for skilled sales and marketing employees, there can be no assurance that our
direct sales and marketing efforts will be successful. If we are not successful
in our direct sales and marketing, our sales revenue and results of operations
are likely to be materially adversely affected.
We
depend partially on our relationships with distributors and other industry
participants to market some of our products, and if these relationships are
discontinued or if we are unable to develop new relationships, our revenues
could decline.
Our
2005
agreement with Oncura, Inc. and our 2007 agreement with Core Oncology, Inc.
for
distribution of our Palladium-103 brachytherapy seeds are important components
of that business. In addition, we do not have a direct sales force for our
non-therapeutic radiation source products, and rely entirely on the efforts
of
agents and distributors for sales of those non-brachytherapy products. We cannot
assure you that we will be able to maintain our existing relationships with
our
agents and distributors for the sale of our Palladium-103 brachytherapy seeds
and our non-therapeutic radiation source products.
We
depend partially on our relationships with two large customers that each
comprise more than 10% of our revenue. If these relationships are discontinued
or if we are unable to develop new relationships, our revenues could
decline.
Our
sales
to Oncura, Inc. and Pinestar Technology, Inc. each comprised more than 10%
of
our revenue for fiscal 2007. We cannot assure you that we will be able to
maintain our existing relationships with our large customers for the sale of
our
Palladium-103 brachytherapy seeds and our non-therapeutic radiation source
products.
If
we are sued for product-related liabilities, the cost could be prohibitive
to
us.
The
testing, marketing and sale of human healthcare products entail an inherent
exposure to product liability claims. Third parties may successfully assert
product liability claims against us. Although we currently have insurance
covering claims against our products, we may not be able to maintain this
insurance at acceptable cost in the future, if at all. In addition, our
insurance may not be sufficient to cover particularly large claims. Significant
product liability claims could result in large and unexpected expenses as well
as a costly distraction of management resources and potential negative publicity
and reduced demand for our products.
Currently,
our revenues are primarily derived from products predominantly used in the
treatment of tumors of the prostate. If we do not obtain wider acceptance of
our
products to treat other types of cancer, our sales could fail to increase and
we
could fail to achieve our desired growth rate.
Currently,
our brachytherapy products are used almost exclusively for the treatment of
prostate cancer. Further research, clinical data and years of experience will
likely be required before there can be broad acceptance for the use of our
brachytherapy products for additional types of cancer. If our products do not
become more widely accepted in treating other types of cancer, our sales could
fail to increase or could decrease.
We
rely on several sole source suppliers and a limited number of other suppliers
to
provide raw materials and significant components used in our products. A
material interruption in supply could prevent or limit our ability to accept
and
fill orders for our products.
We
depend
upon a limited number of outside unaffiliated suppliers for our radioisotopes.
Our principal suppliers are Nordion International, Inc. and Eckert &
Ziegler AG. We also utilize other commercial isotope manufacturers located
in
the United States and overseas. To date, we have been able to obtain the
required radioisotopes for our products without any significant delays or
interruptions. Currently, we rely exclusively upon Nordion International for
our
supply of the Palladium-103 isotope; if Nordion International ceases to supply
isotopes in sufficient quantity to meet our needs, there may not be adequate
alternative sources of supply. If we lose any of these suppliers (including
any
single-source supplier), we would be required to find and enter into supply
arrangements with one or more replacement suppliers. Obtaining alternative
sources of supply could involve significant delays and other costs and these
supply sources may not be available to us on reasonable terms or at all. Any
disruption of supplies could delay delivery of our products that use
radioisotopes, which could adversely affect our business and financial results
and could result in lost or deferred sales.
If
we are unable to attract and retain qualified employees, we may be unable to
meet our growth and revenue needs.
Our
success is materially dependent on a limited number of key employees, and,
in
particular, the continued services of John B. Rush, our president and chief
executive officer and Troy A. Barring, our chief operating officer. Our future
business and financial results could be adversely affected if the services
of
Messrs. Rush or Barring or other key employees cease to be available. To our
knowledge, none of our key employees have any plans to retire or leave in the
near future.
Our
future success and ability to grow our business will depend in part on the
continued service of our skilled personnel and our ability to identify, hire
and
retain additional qualified personnel. Although some employees are bound by
a
limited non-competition agreement that they sign upon employment, few of our
employees are bound by employment contracts, and it is difficult to find
qualified personnel, particularly medical physicists and customer service
personnel, who are willing to travel extensively. We compete for qualified
personnel with medical equipment manufacturers, universities and research
institutions. Because the competition for these personnel is intense, costs
related to compensation may increase significantly.
Even
when
we are able to hire a qualified medical physicist, engineer or other technical
person, there is a significant training period of up to several months before
that person is fully capable of performing the functions we need. This could
limit our ability to expand our business.
The
medical device industry is characterized by competing intellectual property,
and
we could be sued for violating the intellectual property rights of others,
which
may require us to withdraw certain products from the
market.
The
medical device industry is characterized by a substantial amount of litigation
over patent and other intellectual property rights. Our competitors, like
companies in many high technology businesses, continually review other
companies' products for possible conflicts with their own intellectual property
rights. Determining whether a product infringes a patent involves complex legal
and factual issues, and the outcome of patent litigation actions is often
uncertain. Our competitors could assert that our products and the methods we
employ in the use of our products are covered by United States or foreign patent
rights held by them. In addition, because patent applications can take many
years to issue, there could be applications now pending of which we are unaware,
which could later result in issued patents that our products infringe. There
could also be existing patents that one or more of our products could
inadvertently be infringing of which we are unaware.
While
we
do not believe that any of our products, services or technologies infringe
any
valid intellectual property rights of third parties, we may be unaware of
third-party intellectual property rights that relate to our products, services
or technologies. As the number of competitors in the radiation oncology market
grows, and as the number of patents issued in this area grows, the possibility
of a patent infringement claim against us going forward increases. We could
incur substantial costs and diversion of management resources if we have to
assert our patent rights against others. An unfavorable outcome to any
litigation could harm us. In addition, we may not be able to detect infringement
or may lose competitive position in the market before we do so.
To
address patent infringement or other intellectual property claims, we may have
to enter into license agreements and technology cross-licenses or agree to
pay
royalties at a substantial cost to us. We may be unable to obtain necessary
licenses. A valid claim against us and our failure to obtain a license for
the
technology at issue could prevent us from selling our products and materially
adversely affect our business, financial results and future
prospects.
If
we fail to protect our intellectual property rights or if our intellectual
property rights do not adequately cover the technologies we employ, or if such
rights are declared to be invalid, other companies may take advantage of our
technology ideas and more effectively compete directly against us, or we might
be forced to discontinue selling certain products.
Our
success depends in part on our ability to obtain and enforce patent protections
for our products and operate without infringing on the proprietary rights of
third parties. We rely on U.S. and foreign patents to protect our intellectual
property. We also rely significantly on trade secrets and know-how that we
seek
to protect. We attempt to protect our intellectual property rights by filing
patent applications for new features and products we develop. We enter into
confidentiality or license agreements with our employees, consultants,
independent contractors and corporate partners, and we seek to control access
to
our intellectual property and the distribution of our products, documentation
and other proprietary information. We plan to continue these methods to protect
our intellectual property and our products. These measures may afford only
limited protection. In addition, the laws of some foreign countries may not
protect our intellectual property rights to the same extent as do the laws
of
the United States.
If
a
competitor infringes upon our patent or other intellectual property rights,
enforcing those rights could be difficult, expensive and time-consuming, making
the outcome uncertain. Competitors could also bring actions or counterclaims
attempting to invalidate our patents. Even if we are successful, litigation
to
enforce our intellectual property rights or to defend our patents against
challenge could be costly and could divert our management's
attention.
In
2006,
we licensed intellectual property which was later the subject of litigation
brought by WorldWide Medical Technologies in U.S. District Court against both
us
and our former employee, Richard Terwilliger, who was previously our
Vice-President of New Product Development. This intellectual property relates
to
our brachytherapy business, specifically, certain needle-loading and stranding
technologies. While we do not believe that we have any liability in this matter,
and are vigorously defending ourselves in the litigation, we cannot predict
what
effect an adverse result from this litigation would have on our future sales
of
the products at issue.
We
use radioactive materials which are subject to stringent regulation and which
may subject us to liability if accidents occur.
We
manufacture and process radioactive materials which are subject to stringent
regulation. We operate under licenses issued by the California Department of
Health which are renewable every eight years. We received a renewal of our
licenses for our North Hollywood and Chatsworth facilities in 2007. California
is one of the "Agreement States," which are so named because the Nuclear
Regulatory Commission, or NRC, has granted such states regulatory authority
over
radioactive materials, provided such states have regulatory standards meeting
or
exceeding the standards imposed by the NRC. Most users of our products must
obtain licenses issued by the state in which they reside (if they are Agreement
States) or the NRC. Use licenses are also required by some of the foreign
jurisdictions in which we may seek to market our products.
Although
we believe that our safety procedures for handling and disposing of these
radioactive materials comply with the standards prescribed by state and federal
regulations, the risk of accidental contamination or injury from these materials
cannot be completely eliminated. In the event of such an accident, we could
be
held liable for any damages that result. We believe we carry reasonably adequate
insurance to cover us in the event of any damages resulting from the use of
hazardous materials.
Healthcare
reforms, changes in health-care policies and unfavorable changes to third-party
reimbursements for use of our products could cause declines in the revenues
of
our products, and could hamper the introduction of new
products.
Hospitals
and freestanding clinics may be less likely to purchase our products if they
cannot be assured of receiving favorable reimbursement for treatments using
our
products from third-party payors, such as Medicare, Medicaid and private health
insurance plans. Generally speaking, Medicare pays hospitals, freestanding
clinics and physicians a fixed amount for services using our products,
regardless of the costs incurred by those providers in furnishing the services.
Such providers may perceive the set reimbursement amounts as inadequate to
compensate for the costs incurred and thus may be reluctant to furnish the
services for which our products are designed. Moreover, third-party payors
are
increasingly challenging the pricing of medical procedures or limiting or
prohibiting reimbursement for some services or devices, and we cannot be sure
that they will reimburse our customers at levels sufficient to enable us to
achieve or maintain sales and price levels for our products. There is no uniform
policy on reimbursement among third-party payors, and we can provide no
assurance that procedures using our products will qualify for reimbursement
from
third-party payors or that reimbursement rates will not be reduced or
eliminated. A reduction in or elimination of third-party payor reimbursement
for
treatments using our products would likely have a material adverse effect on
our
revenues.
Furthermore,
any federal and state efforts to reform government and private healthcare
insurance programs could significantly affect the purchase of healthcare
services and products in general and demand for our products in particular.
We
are unable to predict whether potential reforms will be enacted, whether other
healthcare legislation or regulation affecting the business may be proposed
or
enacted in the future or what effect any such legislation or regulation would
have on our business, financial condition or results of operations.
The
federal Medicare program currently reimburses hospitals and freestanding clinics
for brachytherapy treatments. Medicare reimbursement amounts typically are
reviewed and adjusted at least annually. Medicare reimbursement policies are
reviewed and revised on an ad hoc basis. Adjustments could be made to these
reimbursement policies or amounts, which could result in reduced or no
reimbursement for brachytherapy services. Changes in Medicare reimbursement
policies or amounts affecting hospitals and freestanding clinics could
negatively affect market demand for our products.
Medicare
reimbursement amounts for seeding are currently significantly less than for
radical prostatectomy, or RP. Although seeding generally requires less physician
time than RP, lower reimbursement amounts, when combined with physician
familiarity with RP, may create disincentives for urologists to perform
seeding.
Private
third-party payors often adopt Medicare reimbursement policies and payment
amounts. As such, Medicare reimbursement policy and payment amount changes
concerning our products also could be extended to private third-party payor
reimbursement policies and amounts and could affect demand for our products
in
those markets as well.
Acceptance
of our products in foreign markets could be affected by the availability of
adequate reimbursement or funding, as the case may be, within prevailing
healthcare payment systems. Reimbursement, funding and healthcare payment
systems vary significantly by country and include both government-sponsored
healthcare and private insurance. We can provide no assurance that third-party
reimbursement will be made available with respect to treatments using our
products under any foreign reimbursement system.
Problems
with any of these reimbursement systems that adversely affect demand for our
products could cause our revenues from our products to decline and our business
to suffer.
Also,
we,
our distributors and healthcare providers performing radiation therapy
procedures are subject to state and federal fraud and abuse laws prohibiting
kickbacks and, in the case of physicians, patient self-referrals. We may be
subjected to civil and criminal penalties if we or our agents violate any of
these prohibitions.
We
are subject to extensive government regulation applicable to the manufacture
and
distribution of our products. Complying with the Food And Drug Administration
and other domestic and foreign regulatory bodies is an expensive and
time-consuming process, whose outcome can be difficult to predict. If we fail
or
are delayed in obtaining regulatory approvals or fail to comply with applicable
regulations, we may be unable to market and distribute our products or may
be
subject to civil or criminal penalties.
We
and
some of our suppliers and distributors are subject to extensive and rigorous
government regulation of the manufacture and distribution of our products,
both
in the United States and in foreign countries. Compliance with these laws and
regulations is expensive and time-consuming, and changes to or failure to comply
with these laws and regulations, or adoption of new laws and regulations, could
adversely affect our business.
In
the
United States, as a manufacturer and seller of medical devices and devices
utilizing radioactive by-product material, we and some of our suppliers and
distributors are subject to extensive regulation by federal governmental
authorities, such as the United States Food and Drug Administration, or FDA,
and
state and local regulatory agencies, such as the State of California, to ensure
such devices are safe and effective. Such regulations, which include the U.S.
Food, Drug and Cosmetic Act, or the FDC Act, and regulations promulgated by
the
FDA, govern the design, development, testing, manufacturing, packaging,
labeling, distribution, import/export, possession, marketing, disposal, clinical
investigations involving humans, sale and marketing of medical devices,
post-market surveillance, repairs, replacements, recalls and other matters
relating to medical devices, radiation producing devices and devices utilizing
radioactive by-product material. State regulations are extensive and vary from
state to state. Our brachytherapy seeds constitute medical devices subject
to
these regulations. Future products in any of our business segments may
constitute medical devices and be subject to regulation as such. These laws
require that manufacturers adhere to certain standards designed to ensure that
the medical devices are safe and effective. Under the FDC Act, each medical
device manufacturer must comply with requirements applicable to manufacturing
practices.
In
the
United States, medical devices are classified into three different categories,
over which the FDA applies increasing levels of regulation: Class I,
Class II and Class III. The FDA has classified all of our
brachytherapy products as Class I devices. Before a new device can be introduced
into the United States market, the manufacturer must obtain FDA clearance or
approval through either a 510(k) premarket notification or a premarket approval,
unless the product is otherwise exempt from the requirements. Class I
devices are statutorily exempt from the 510(k) process, unless the device is
intended for a use which is of substantial importance in preventing impairment
of human health or it presents a potential unreasonable risk of illness or
injury.
A
510(k)
premarket notification clearance will typically be granted for a device that
is
substantially equivalent to a legally marketed Class I or Class II
medical device or a Class III medical device for which the FDA has not yet
required submission of a premarket approval. A 510(k) premarket notification
must contain information supporting the claim of substantial equivalence, which
may include laboratory results or the results of clinical studies. Following
submission of a 510(k) premarket notification, a company may not market the
device for clinical use until the FDA finds the product is substantially
equivalent for a specific or general intended use. FDA clearance generally
takes
from four to twelve months, but it may take longer, and there is no assurance
that the FDA will ultimately grant a clearance. The FDA may determine that
a
device is not substantially equivalent and require submission and approval
of a
premarket approval or require further information before it is able to make
a
determination regarding substantial equivalence.
Most
of
the products that we are currently marketing have received clearances from
the
FDA through the 510(k) premarket notification process. For any devices already
cleared through the 510(k) process, modifications or enhancements that could
significantly affect safety or effectiveness, or constitute a major change
in
intended use require a new 510(k) submission and a separate FDA determination
of
substantial equivalence. We have made minor modifications to our products and,
using the guidelines established by the FDA, have determined that these
modifications do not require us to file new 510(k) submissions. If the FDA
disagrees with our determinations, we may not be able to sell one or more of
our
products until the FDA has cleared new 510(k) submissions for these
modifications, and there is no assurance that the FDA will ultimately grant
a
clearance. In addition, the FDA may determine that future products require
the
more costly, lengthy and uncertain premarket approval process under
Section 515 of the FDC. The approval process under Section 515
generally takes from one to three years, but in many cases can take even longer,
and there can be no assurance that any approval will be granted on a timely
basis, if at all. Under the premarket approval process, an applicant must
generally conduct at least one clinical investigation and submit extensive
supporting data and clinical information establishing the safety and
effectiveness of the device, as well as extensive manufacturing information.
Clinical investigations themselves are typically lengthy and expensive, closely
regulated and frequently require prior FDA clearance. Even if clinical
investigations are conducted, there is no assurance that they will support
the
claims for the product. If the FDA requires us to submit a new pre-market
notification under Section 510(k) for modifications to our existing
products, or if the FDA requires us to go through the lengthier, more rigorous
Section 515 pre-market approval process, our product introductions or
modifications could be delayed or cancelled, which could cause our revenues
to
be below expectations.
In
addition to FDA-required market clearances and approvals, our manufacturing
operations are required to comply with the FDA's Quality System Regulation,
or
QSR, which addresses the quality program requirements, such as a company's
management responsibility for the company's quality systems, and good
manufacturing practices, product design, controls, methods, facilities and
quality assurance controls used in manufacturing, assembly, packing, storing
and
installing medical devices. Compliance with the QSR is necessary to receive
FDA
clearance or approval to market new products and is necessary for us to be
able
to continue to market cleared or approved product offerings. There can be no
assurance that we will not incur significant costs to comply with these
regulations in the future or that the regulations will not have a material
adverse effect on our business, financial condition and results of operations.
Our compliance and the compliance by some of our suppliers with applicable
regulatory requirements are and will continue to be monitored through periodic
inspections by the FDA. The FDA makes announced and unannounced inspections
to
determine compliance with the QSR's and may issue us 483 reports listing
instances where we have failed to comply with applicable regulations and/or
procedures or Warning Letters which, if not adequately responded to, could
lead
to enforcement actions against us, including fines, the total shutdown of our
production facilities and criminal prosecution.
If
we or
any of our suppliers fail to comply with FDA requirements, the FDA can institute
a wide variety of enforcement actions, ranging from a public warning letter
to
more severe sanctions such as:
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fines,
injunctions and civil penalties;
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the
recall or seizure of our products;
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the
imposition of operating restrictions, partial suspension or total
shutdown
of production;
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the
refusal of our requests for 510(k) clearance or pre-market approval
of new
products;
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the
withdrawal of 510(k) clearance or pre-market approvals already granted;
and
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Similar
consequences could arise from our failure, or the failure by any of our
suppliers, to comply with applicable foreign laws and regulations. Foreign
regulatory requirements vary by country. In general, our products are regulated
outside the United States as medical devices by foreign governmental agencies
similar to the FDA. However, the time and cost required to obtain regulatory
approvals from foreign countries could be longer than that required for FDA
clearance and the requirements for licensing a product in another country may
differ significantly from the FDA requirements. We rely, in part, on our foreign
distributors to assist us in complying with foreign regulatory requirements.
We
may not be able to obtain these approvals without incurring significant expenses
or at all, and the failure to obtain these approvals would prevent us from
selling our products in the applicable countries. This could limit our sales
and
growth.
Our
future growth depends, in part, on our ability to penetrate foreign markets,
particularly in Asia and Europe. However, we have encountered difficulties
in
gaining acceptance of our products in foreign markets, where we have limited
experience marketing, servicing and distributing our products, and where we
will
be subject to additional regulatory burdens and other
risks.
Our
future profitability will depend in part on our ability to establish, grow
and
ultimately maintain our product sales in foreign markets, particularly in Asia
and Europe. However, we have limited experience in marketing, servicing and
distributing our products in other countries. In fiscal 2007 and the first
quarter of fiscal 2008, less than 5% of our product revenues and less than
5% of
our total revenues were derived from sales to customers outside the United
States and Canada. Our foreign operations subject us to additional risks and
uncertainties, including:
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our
customers' ability to obtain reimbursement for procedures using our
products in foreign markets;
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the
burden of complying with complex and changing foreign regulatory
requirements;
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language
barriers and other difficulties in providing long-range customer support
and service;
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longer
accounts receivable collection
times;
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significant
currency fluctuations, which could cause our distributors to reduce
the
number of products they purchase from us because the cost of our products
to them could fluctuate relative to the price they can charge their
customers;
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reduced
protection of intellectual property rights in some foreign countries;
and
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the
interpretation of contractual provisions governed by foreign laws in
the
event of a contract dispute.
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Our
foreign sales of our products could also be adversely affected by export license
requirements, the imposition of governmental controls, political and economic
instability, trade restrictions, changes in tariffs and difficulties in staffing
and managing foreign operations. In addition, we are subject to the Foreign
Corrupt Practices Act, any violation of which could create a substantial
liability for us and also cause a loss of reputation in the market.
As
part of our business strategy, we intend to pursue transactions that may cause
us to experience significant charges to earnings that may adversely affect
our
stock price and financial condition.
We
regularly review potential transactions related to technologies, product
candidates or product rights and businesses complementary to our business.
Such
transactions could include mergers, acquisitions, strategic alliances, licensing
agreements or co-promotion agreements. Our acquisition of Theseus Imaging
Corporation in October 2000 and the acquisition of NOMOS, in May 2004, are
examples of such transactions. In the future, if we have sufficient available
capital, we may choose to enter into such transactions. We may not be able
to
successfully integrate newly acquired organizations, products or technologies
into our business and the process could be expensive and time consuming and
may
strain our resources. Depending upon the nature of any transaction, we may
experience a charge to earnings which could be material.
Operating
results for a particular period may fluctuate and are difficult to
predict.
The
results of operations for any fiscal quarter or fiscal year are not necessarily
indicative of results to be expected in future periods. Our operating results
have in the past been, and will continue to be, subject to quarterly and annual
fluctuations as a result of a number of factors. As a consequence, operating
results for a particular future period are difficult to predict. Such factors
include the following:
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Our
net sales may grow at a slower rate than experienced in previous
periods
and, in particular periods, may decline;
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Our
future sales growth is highly dependent on the successful introduction
of
our ClearPath device;
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Our
brachytherapy product lines may experience some variability in revenue
due
to seasonality. This is primarily due to three major holidays occurring
in
our first fiscal quarter and the apparent reduction in the number
of
procedures performed during summer months, which could affect our
third
fiscal quarter results;
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Estimates
with respect to the useful life and ultimate recoverability of our
carrying basis of assets, including goodwill and purchased intangible
assets, could change as a result of such assessments and
decisions;
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As
a result of our growth in past periods, our fixed costs have increased.
With increased levels of spending and the impact of long-term commitments,
we may not be able to quickly reduce these fixed expenses in response
to
short-term business changes;
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Acquisitions
that result in in-process research and development expenses may be
charged
fully in an individual quarter;
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Changes
or anticipated change in third-party reimbursement amounts or policies
applicable to treatments using our
products;
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Timing
of the announcement, introduction and delivery of new products or
product
enhancements by us and by our
competitors;
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The
possibility that unexpected levels of cancellations of orders or
backlog
may affect certain assumptions upon which we base our forecasts and
predictions of future performance;
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Changes
in the general economic conditions in the regions in which we do
business;
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Unfavorable
outcome of any litigation; and
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Accounting
adjustments such as those relating to reserves for product recalls,
stock
option expensing as required under SFAS No. 123R and changes in
interpretation of accounting
pronouncements
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Being
a public company significantly increases our administrative
costs.
The
Sarbanes-Oxley Act of 2002, as well as rules subsequently implemented by the
SEC
and listing requirements subsequently adopted by NASDAQ in response to
Sarbanes-Oxley, have required changes in corporate governance practices,
internal control policies and audit committee practices of public companies.
These rules, regulations and requirements have significantly increased our
legal, financial, compliance and administrative costs, and have made certain
other activities more time consuming and costly, as well as requiring
substantial time and attention of our senior management. We expect our continued
compliance with these and future rules and regulations to continue to require
significant resources. These new rules and regulations also may make it more
difficult and more expensive for us to obtain director and officer liability
insurance in the future, and could make it more difficult for us to attract
and
retain qualified members for our Board of Directors, particularly to serve
on
our audit committee.
Our
publicly-filed SEC reports are reviewed by the SEC from time to time and any
significant changes required as a result of any such review may result in
material liability to us and have a material adverse impact on the trading
price
of our common stock.
The
reports of publicly-traded companies are subject to review by the SEC from
time
to time for the purpose of assisting companies in complying with applicable
disclosure requirements and to enhance the overall effectiveness of companies
public filings, and comprehensive reviews of such reports are now required
at
least every three years under the Sarbanes-Oxley Act of 2002. While we believe
that our previously-filed SEC reports comply, and while we intend that all
future reports will comply in all material respects with the published rules
and
regulations of the SEC, we could be required to modify or reformulate
information contained in prior filings as a result of an SEC review. Any
modification or reformulation of information contained in such reports could
be
significant and result in material liability to us and have a material adverse
impact on the trading price of our common stock.
Market
volatility and fluctuations in our stock price and trading volume may cause
sudden decreases in the value of an investment in our common
stock.
The
market price of our common stock has historically been, and we expect it to
continue to be, volatile. The price of our common stock has ranged between
$0.15
and $1.75 per share in the fifty-two week period ended April 30, 2008. The
stock
market has from time to time experienced extreme price and volume fluctuations,
particularly in the medical device sector, which have often been unrelated
to
the operating performance of particular companies. Factors such as announcements
of technological innovations or new products by our competitors or disappointing
results by third parties, as well as market conditions in our industry, may
significantly influence the market price of our common stock. Our stock price
has also been affected by our own public announcements regarding such things
as
quarterly sales and earnings. Consequently, events both within and beyond our
control may cause shares of our stock to lose their value rapidly.
In
addition, sales of a substantial number of shares of our common stock by
stockholders could adversely affect the market price of our shares. In
connection with our January 2008 sale of common stock, previous short-term
borrowing transactions, and accompanying warrants, we are filing this resale
registration statement covering an aggregate of up to 12,601,628 shares of
common stock and 1,374,742 shares of common stock issuable upon exercise of
warrants for the benefit of the selling security holders. The actual or
anticipated resale by such investors under these registration statements may
depress the market price of our common stock. Bulk sales of shares of our common
stock in a short period of time could also cause the market price for our shares
to decline.
SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This
prospectus and the information incorporated by reference in this prospectus
include “forward-looking statements” within the meaning of Section 27A of
the Securities Act of 1933, as amended, or the Securities Act, and
Section 21E of the Securities Exchange Act of 1934, as amended, or the
Exchange Act. All statements other than statements of historical fact are
“forward-looking statements” for purposes of this prospectus and the information
incorporated by reference herein, including, without limitation, statements
as
to the product rationalization and reorganization and the other transactions
described herein; any predictions of earnings, revenue, expenses or other
financial items; any statements of the plans, strategies and objectives of
management for future operations; any statements concerning proposed new
products; any statements regarding future economic conditions; any statements
concerning our future operations, financial condition and prospects; and any
statements of assumptions underlying the foregoing. In some cases, you can
identify forward-looking statements by terminology such as “may,” “will,”
“would,” “could,” “should,” “expects,” “intends,” “plans,” “anticipates,”
“believes,” “estimates,” “predicts,” “projects,” “seeks,” “potential,” “likely,”
“continue,” or similar words, or expressions of the negative of these terms.
These forward-looking statements are only predictions and, accordingly, are
subject to substantial risks, uncertainties and assumptions.
We
caution you that any forward-looking statement reflects only our belief at
the
time the statement is made. Although we believe that the expectations reflected
in the forward-looking statements are reasonable, we cannot guarantee our future
results, levels of activity, performance or achievements. Except as required
by
law, we undertake no obligation to update any of the forward-looking statements
to reflect events or developments after the date of this
prospectus.
USE
OF PROCEEDS
The
proceeds from the sale or other disposition of the common stock covered by
this
prospectus are solely for the accounts of the selling stockholders. We will
not
receive any proceeds from the sale or other disposition of these shares of
common stock. However, we may receive proceeds from the exercise of the warrants
if they are exercised. Any funds received from the exercise of the warrants
will
be used for general corporate purposes.
SELLING
STOCKHOLDERS
We
issued
12,601,628 shares of common stock and warrants to purchase an additional 630,081
shares of common stock on January 18, 2007 in a private placement to certain
stockholders set forth below. In addition, we issued warrants to purchase
744,661 shares of common stock in 2007 and 2008 in connection with short-term
borrowing transactions to certain stockholders also set forth below. Pursuant
to
a Securities Purchase Agreement dated December 12, 2007, we agreed to file
a
registration statement of which this prospectus is a part with the Securities
and Exchange Commission to register the resale of the shares of our common
stock
we issued, and which we will issue upon exercise of warrants, to those
stockholders and to keep the registration statement effective until the earlier
of the date on which the shares registered hereunder are sold, the date on
which
the shares registered hereunder can be sold without registration and without
restriction as to the number of shares that may be sold, or the second
anniversary of the closing of the private placement.
The
following table sets forth, as of July 15, 2008: (1) the name of each
selling stockholder for whom we are registering shares under this registration
statement; (2) the number of shares of our common stock owned by each such
selling stockholder prior to this offering; (3) the number of shares of our
common stock being offered pursuant to this prospectus; and (4) the amount
and (if one percent or more) the percentage of the class to be owned by each
such selling stockholder after completion of the offering. The percentage of
outstanding common stock owned upon completion of the offering is calculated
based on 18,465,699 shares of common stock issued and outstanding at June 30,
2008. We prepared this table based on the information supplied to us by the
selling stockholders named in the table and we have not sought to verify such
information.
Since
the
date on which the selling stockholder provided this information, the selling
stockholder may have sold, transferred or otherwise disposed of all or a portion
of the shares of common stock in a transaction exempt from the registration
requirements of the Securities Act. Information concerning the selling
stockholder may change from time to time and any changed information will be
set
forth in supplements to this prospectus to the extent required.
The
selling stockholder may from time to time offer and sell any or all of the
shares of common stock under this prospectus. Because the selling stockholder
is
not obligated to sell the shares of common stock, we cannot estimate how many
shares of common stock that the selling stockholder will hold upon consummation
of any such sales.
|
Selling
Stockholder
|
|
Common
Stock Owned Prior to
Offering
|
|
Common
Stock Being Offered Pursuant to this
Prospectus
|
|
Common
Stock Owned Upon Completion of
Offering
(1)
|
|
Percentage
of Common Stock Owned Upon Completion of
Offering
|
|
|
TAC
Associates, L.P. (2)
|
|
|
278,386
|
|
|
231,214
|
|
|
47,172
|
|
|
1.5
|
%
|
|
Three
Arch Partners IV, L.P. (3)
|
|
|
4,022,468
|
|
|
3,340,868
|
|
|
681,600
|
|
|
21.8
|
%
|
|
Three
Arch Associates IV, L.P. (4)
|
|
|
88,817
|
|
|
73,767
|
|
|
15,050
|
|
|
*
|
|
|
Three
Arch Capital, L.P. (5)
|
|
|
5,888,538
|
|
|
4,890,739
|
|
|
997,799
|
|
|
31.9
|
%
|
|
SF
Capital Partners Ltd. (6)
|
|
|
2,929,128
|
|
|
2,134,146
|
|
|
794,982
|
|
|
15.8
|
%
|
|
CHL
Medical Partners III Side Fund, L.P. (7)
|
|
|
255,311
|
|
|
214,462
|
|
|
40,849
|
|
|
1.4
|
%
|
|
CHL
Medical Partners III, L.P. (8)
|
|
|
2,793,468
|
|
|
2,346,513
|
|
|
446,955
|
|
|
15.1
|
%
|
|
Agility
Capital, LLC (9)
|
|
|
645,324
|
|
|
645,324
|
|
|
--
|
|
|
2.9
|
%
|
|
Silicon
Valley Bank (10)
|
|
|
427,597
|
|
|
99,337
|
|
|
328,260
|
|
|
2.3
|
%
|
|
*
|
Represents
less than 1% of the common stock
outstanding.
|
|
(1)
|
Assumes
the sale by the selling stockholders of all of the shares of common
stock
available for resale under this
prospectus.
|
|
(2)
|
Includes
11,010 shares subject to warrants which are currently
exercisable.
|
|
(3)
|
Includes
159,089 shares subject to warrants which are currently
exercisable.
|
|
(4)
|
Includes
3,513 shares subject to warrants which are currently
exercisable.
|
|
(5)
|
Includes
232,892 shares subject to warrants which are currently
exercisable.
|
|
(6)
|
Includes
101,626 shares subject to warrants which are currently
exercisable.
|
|
(7)
|
Includes
10,212 shares subject to warrants which are currently
exercisable.
|
|
(8)
|
Includes
111,739 shares subject to warrants which are currently
exercisable.
|
|
(9)
|
Includes
645,324 shares subject to warrants which are currently
exercisable.
|
|
(10)
|
Includes
427,597 shares subject to warrants which are currently exercisable,
of
which 99,337 are being offered pursuant to this
prospectus.
|
PLAN
OF DISTRIBUTION
The
selling stockholders, which as used herein includes donees, pledges, transferees
or other successors-in-interest selling shares received after the date of this
prospectus from a selling stockholder as a gift, pledge, partnership
distribution or other transfer, may, from time to time, sell, transfer or
otherwise dispose of any or all of their shares on any stock exchange, market
or
trading facility on which the shares are traded or in private transactions.
These dispositions may be at fixed prices, at prevailing market prices at the
time of sale, at prices related to the prevailing market price, at varying
prices determined at the time of sale, or at negotiated prices.
The
selling stockholders may use any one or more of the following methods when
disposing of shares:
|
|
·
|
ordinary
brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
|
|
|
·
|
block
trades in which the broker-dealer will attempt to sell the shares
as
agent, but may position and resell a portion of the block as principal
to
facilitate the transaction;
|
|
|
·
|
purchases
by a broker-dealer as principal and resale by the broker-dealer for
its
account;
|
|
|
·
|
an
exchange distribution in accordance with the rules of the applicable
exchange;
|
|
|
·
|
privately
negotiated transactions;
|
|
|
·
|
short
sales effected after the date the registration statement of which
this
prospectus is a part is declared effective by the
Commission;
|
|
|
·
|
through
the writing or settlement of options or other hedging transactions,
whether through an options exchange or
otherwise;
|
|
|
·
|
broker-dealers
may agree with the selling stockholders to sell a specified number
of such
shares at a stipulated price per
share;
|
|
|
·
|
a
combination of any such methods of sale;
or
|
|
|
·
|
any
other method permitted pursuant to applicable law.
|
The
selling stockholders may also sell shares under Rule 144 under the Securities
Act, if available, rather than under this prospectus. The selling stockholders
are not obligated to, and there is no assurance that the selling stockholders
will, sell all or any of the shares we are registering. The selling stockholders
may transfer, devise or gift such shares by other means not described in this
prospectus.
In
connection with the sale of our shares, the selling stockholders may enter
into
hedging transactions with broker-dealers or other financial institutions, which
may in turn engage in short sales of the common stock in the course of hedging
the positions they assume. The selling stockholders may also sell shares of
our
common stock short and deliver these securities to close out their short
positions, or loan or pledge the common stock to broker-dealers that in turn
may
sell these securities. The selling stockholders may also enter into option
or
other transactions with broker-dealers or other financial institutions or the
creation of one or more derivative securities which require the delivery to
such
broker-dealer or other financial institution of shares offered under this
prospectus, which shares such broker-dealer or other financial institution
may
resell pursuant to this prospectus (as supplemented or amended to reflect such
transaction).
The
aggregate proceeds to the selling stockholders from the sale of the common
stock
offered by them will be the purchase price of the common stock less discounts
or
commissions, if any. Each of the selling stockholders reserves the right to
accept and, together with their agents from time to time, to reject, in whole
or
in part, any proposed purchase of common stock to be made directly or through
agents. We will not receive any of the proceeds from this offering. Upon any
exercise of the warrants by payment of cash, however, we will receive the
exercise prices of the warrants.
Broker-dealers
engaged by the selling stockholders may arrange for other broker-dealers to
participate in sales. Broker-dealers may receive commissions or discounts from
the selling stockholders (or, if any broker-dealer acts as agent for the
purchaser of shares, from the purchaser) in amounts to be negotiated. The
selling stockholders do not expect these commissions and discounts to exceed
what is customary in the types of transactions involved. Any profits on the
resale of shares by a broker-dealer acting as principal might be deemed to
be
underwriting discounts or commissions under the Securities Act. Discounts,
concessions, commissions and similar selling expenses, if any, attributable
to
the sale of shares will be borne by a selling stockholder. The selling
stockholders may agree to indemnify any agent, dealer or broker-dealer that
participates in transaction involving sales of the shares if liabilities are
imposed on that person under the Securities Act.
We
are
required to pay certain fees and expenses incurred by us incident to the
registration of the shares. We have agreed to indemnify the selling stockholders
against certain losses, claims, damages and liabilities, including liabilities
under the Securities Act.
The
selling stockholders, broker-dealers or agents that participate in the sale
of
the common stock may be “underwriters” within the meaning of Section 2(11) of
the Securities Act. Any discounts, commissions, concessions or profit they
earn
on any resale of the shares may be underwriting discounts or commissions under
the Securities Act. Selling stockholders who are “underwriters” within the
meaning of Section 2(11) of the Securities Act will be subject to the prospectus
delivery requirements of the Securities Act. There is no underwriter or
coordinating broker acting in connection with the proposed sale of the resale
shares by the selling stockholders.
The
selling stockholders may from time to time pledge or grant a security interest
in some or all of the shares owned by them and, if they default in the
performance of any of their secured obligations, the pledges or secured parties
may offer and sell the shares from time to time under this prospectus as it
may
be supplemented from time to time, or under an amendment to this prospectus
under Rule 424(b)(3) or other applicable provision of the Securities Act
amending the list of selling stockholders to include the pledge, transferee
or
other successors in interest as selling stockholders under this
prospectus.
To
the
extent required, the shares to be sold, the names of the selling stockholders,
the respective purchase prices and public offering prices, the names of any
agents, dealer or underwriter, any applicable commissions or discounts with
respect to a particular offer will be set forth in an accompanying prospectus
supplement or, if appropriate, a post-effective amendment to the registration
statement that includes this prospectus.
In
order
to comply with the securities laws of some states, if applicable, the common
stock may be sold in these jurisdictions only through registered or licensed
brokers or dealers. In addition, in some states the common stock may not be
sold
unless it has been registered or qualified for sale or an exemption from
registration or qualification requirements is available and is complied
with.
The
anti-manipulation rules of Regulation M under the Exchange Act may apply to
sales of shares in the market and to the activities of the selling stockholders
and their affiliates. In addition, we will make copies of this prospectus (as
it
may be supplemented or amended from time to time) available to the selling
stockholders for the purposes of satisfying the prospectus delivery requirements
of the Securities Act. The selling stockholders may indemnify any broker-dealer
that participates in transaction involving the sale of the shares against
certain liabilities, including liabilities arising under the Securities
Act.
We
have
agreed with the selling stockholders to keep the registration statement of
which
this prospectus constitutes a part effective until the earlier of (1) the
passage of two years from the closing date of the private placement, (2) such
time as all of the shares covered by this prospectus have been disposed of
pursuant to and in accordance with the registration statement or (3) the date
on
which the shares may be sold pursuant to Rule 144(k) of the Securities
Act.
LEGAL
MATTERS
Certain
legal matters regarding the shares of our common stock offered hereby will
be
passed upon for us by Stradling Yocca Carlson & Rauth, Newport Beach,
California.
EXPERTS
The
consolidated financial statements incorporated herein by reference to the Annual
Report on Form 10-K of North American Scientific, Inc. for the year ended
October 31, 2007 have been so incorporated in reliance on the reports of
SingerLewak LLP, an independent registered public accounting firm, given on
the
authority of said firm as experts in auditing and accounting.
WHERE
YOU CAN FIND MORE INFORMATION
We
file
annual, quarterly and current reports, proxy statements and other information
with the SEC. You may read and copy any document we file at the SEC’s public
reference room in Washington, D.C. Please call the SEC at 1-800-SEC-0330 for
further information on the public reference rooms. Our SEC filings are also
available to the public from the SEC’s website at www.sec.gov.
INCORPORATION
OF CERTAIN INFORMATION BY REFERENCE
In
this
document, we incorporate by reference the information we file with the SEC,
which means that we can disclose important information to you by referring
to
that information. The information incorporated by reference is considered to
be
an important part of this prospectus. Any statement in a document incorporated
by reference in this prospectus will be deemed to be modified or superseded
to
the extent a statement contained in this prospectus or any other subsequently
filed document that is incorporated by reference in this prospectus modifies
or
supersedes such statement. We incorporate by reference the documents listed
below and any future filings made with the SEC under Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act (other than information in such future filings
deemed, under SEC rules, to have been furnished and not filed), after the date
of this prospectus and until all of the shares of common stock to which this
prospectus relates have been sold or this offering is otherwise terminated:
|
|
·
|
our
Annual Report on Form 10-K for the fiscal year ended October 31,
2007, filed on January 29, 2008 and amended on February 28, 2008;
|
|
|
·
|
our
Quarterly Report on Form 10-Q for the quarter ended January 31, 2008,
filed on March 17, 2008, and our Quarterly Report on Form 10-Q for
the
quarter ended April 30, 2008, filed on June 16, 2008;
|
|
|
·
|
all
other reports filed by us pursuant to Section 13(a) or 15(d) of the
Exchange Act since the end of the fiscal year covered by the Annual
Report
referred to in the first bullet above;
and
|
|
|
·
|
our
Registration Statement on Form 10-SB, relating to the description
of our
common stock, filed on August 22, 1995, including any amendment or
report
filed for the purpose of updating such description.
|
You
may
request a copy of these filings, at no cost, by writing or telephoning us at
the
following address:
North
American Scientific, Inc.
20200
Sunburst Street
Chatsworth,
California 91311
Tel.:
(818) 734-8600
Attention:
Chief Financial Officer
Exhibits
to the filings will not be sent, however, unless those exhibits have been
specifically incorporated by reference in this prospectus.
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