Perspective Therapeutics, Inc. - Quarter Report: 2009 December (Form 10-Q)
UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
|
þ
|
QUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
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For the
quarterly period ended December 31, 2009
or
|
¨
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TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
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For the
transition period from __________ to ____________
Commission
File No. 001-33407
ISORAY,
INC.
(Exact
name of registrant as specified in its charter)
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Minnesota
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41-1458152
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|
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(State
or other jurisdiction of incorporation or
organization)
|
|
(I.R.S.
Employer
Identification
No.)
|
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350
Hills St., Suite 106, Richland, Washington
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99354
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|
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(Address
of principal executive offices)
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(Zip
Code)
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Registrant's
telephone number, including area code: (509)
375-1202
Indicate
by check mark whether the registrant: (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period the registrant was required to
file such reports), and (2) has been subject to such filing requirements for the
past 90 days. Yes x No
¨
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this
chapter) during the preceding 12 months (or such shorter period that the
registrant was required to submit and post such files).
Yes x No
¨
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer”,
“accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.
Large
accelerated filer ¨ Accelerated
filer ¨ Non-accelerated
filer ¨
Smaller
reporting company x
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act): Yes ¨ No
x
Number of
shares outstanding of each of the issuer's classes of common equity as of the
latest practicable date:
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Class
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Outstanding as of February 8,
2009
|
|
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Common
stock, $0.001 par value
|
|
22,942,088
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ISORAY,
INC.
Table
of Contents
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PART
I
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FINANCIAL
INFORMATION
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|||
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Item
1
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Consolidated
Unaudited Financial Statements
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1
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||
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Consolidated
Balance Sheets
|
1
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|||
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Consolidated
Statements of Operations (Unaudited)
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2
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|||
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Consolidated
Statements of Cash Flows (Unaudited)
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3
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|||
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Notes
to Unaudited Consolidated Financial Statements
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4
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|||
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Item
2
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Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
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9
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||
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Item
3
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Quantitative
and Qualitative Disclosures About Market Risk
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16
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||
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Item
4
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Controls
and Procedures
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16
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||
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PART
II
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OTHER
INFORMATION
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|||
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Item
1A
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Risk
Factors
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17
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||
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Item
4
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Submission
of Matters to a Vote of Security Holders
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17
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||
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Item
6
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Exhibits
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18
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||
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Signatures
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19
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PART
I – FINANCIAL INFORMATION
Consolidated
Balance Sheets
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(Unaudited)
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||||||||
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December
31,
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June
30,
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|||||||
|
2009
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2009
|
|||||||
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ASSETS
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||||||||
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Current
assets:
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||||||||
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Cash
and cash equivalents
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$ | 3,105,584 | $ | 2,990,744 | ||||
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Short-term
investments
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- | 1,679,820 | ||||||
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Accounts
receivable, net of allowance for doubtful accounts
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||||||||
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of
$130,748 and $86,931, respectively
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921,435 | 746,568 | ||||||
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Inventory
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753,885 | 789,246 | ||||||
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Prepaid
expenses and other current assets
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154,034 | 151,077 | ||||||
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Total
current assets
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4,934,938 | 6,357,455 | ||||||
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Fixed
assets, net of accumulated depreciation and amortization
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4,424,912 | 4,891,484 | ||||||
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Deferred
financing costs, net of accumulated amortization
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14,383 | 28,186 | ||||||
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Restricted
cash
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179,664 | 178,615 | ||||||
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Other
assets, net of accumulated amortization
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271,544 | 285,826 | ||||||
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Total
assets
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$ | 9,825,441 | $ | 11,741,566 | ||||
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LIABILITIES
AND SHAREHOLDERS' EQUITY
|
||||||||
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Current
liabilities:
|
||||||||
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Accounts
payable and accrued liabilities
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$ | 705,636 | $ | 698,882 | ||||
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Accrued
payroll and related taxes
|
187,554 | 188,703 | ||||||
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Notes
payable, due within one year
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47,283 | 161,437 | ||||||
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Total
current liabilities
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940,473 | 1,049,022 | ||||||
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Notes
payable, due after one year
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155,846 | 176,023 | ||||||
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Asset
retirement obligation
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578,849 | 553,471 | ||||||
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Total
liabilities
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1,675,168 | 1,778,516 | ||||||
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Shareholders'
equity:
|
||||||||
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Preferred
stock, $.001 par value; 6,000,000 shares authorized:
|
||||||||
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Series
A: 1,000,000 shares allocated; no shares issued and
outstanding
|
- | - | ||||||
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Series
B: 5,000,000 shares allocated; 59,065 shares issued and
outstanding
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59 | 59 | ||||||
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Common
stock, $.001 par value; 194,000,000 shares authorized;
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||||||||
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22,942,088
shares issued and outstanding
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22,942 | 22,942 | ||||||
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Treasury
stock, at cost, 13,200 shares
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(8,390 | ) | (8,390 | ) | ||||
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Additional
paid-in capital
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47,862,001 | 47,818,203 | ||||||
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Accumulated
deficit
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(39,726,339 | ) | (37,869,764 | ) | ||||
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Total
shareholders' equity
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8,150,273 | 9,963,050 | ||||||
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Total
liabilities and shareholders' equity
|
$ | 9,825,441 | $ | 11,741,566 | ||||
The
accompanying notes are an integral part of these consolidated financial
statements.
1
Consolidated
Statements of Operations
(Unaudited)
|
Three
months ended December 31,
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Six
months ended December 31,
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|||||||||||||||
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2009
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2008
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2009
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2008
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|||||||||||||
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Product
sales
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$ | 1,368,347 | $ | 1,326,703 | $ | 2,747,434 | $ | 2,846,285 | ||||||||
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Cost
of product sales
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1,100,193 | 1,724,225 | 2,260,282 | 3,172,661 | ||||||||||||
|
Gross
income / (loss)
|
268,154 | (397,522 | ) | 487,152 | (326,376 | ) | ||||||||||
|
Operating
expenses:
|
||||||||||||||||
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Research
and development expenses
|
59,078 | 306,056 | 127,960 | 524,606 | ||||||||||||
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Sales
and marketing expenses
|
603,980 | 620,700 | 1,046,879 | 1,351,474 | ||||||||||||
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General
and administrative expenses
|
550,009 | 758,822 | 1,152,440 | 1,538,979 | ||||||||||||
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Total
operating expenses
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1,213,067 | 1,685,578 | 2,327,279 | 3,415,059 | ||||||||||||
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Operating
loss
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(944,913 | ) | (2,083,100 | ) | (1,840,127 | ) | (3,741,435 | ) | ||||||||
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Non-operating
income (expense):
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||||||||||||||||
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Interest
income
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2,944 | 37,562 | 8,811 | 82,348 | ||||||||||||
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Gain
on fair value of short-term investments
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- | 433,200 | - | 274,000 | ||||||||||||
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Financing
and interest expense
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(7,898 | ) | (20,769 | ) | (25,259 | ) | (41,616 | ) | ||||||||
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Non-operating
income (expense), net
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(4,954 | ) | 449,993 | (16,448 | ) | 314,732 | ||||||||||
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Net
loss
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(949,867 | ) | (1,633,107 | ) | (1,856,575 | ) | (3,426,703 | ) | ||||||||
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Preferred
stock dividends
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(36,679 | ) | - | (36,679 | ) | - | ||||||||||
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Net
loss applicable to common shareholders
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$ | (986,546 | ) | $ | (1,633,107 | ) | $ | (1,893,254 | ) | $ | (3,426,703 | ) | ||||
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Basic
and diluted loss per share
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$ | (0.04 | ) | $ | (0.07 | ) | $ | (0.08 | ) | $ | (0.15 | ) | ||||
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Weighted
average shares used in computing net loss per share:
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||||||||||||||||
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Basic
and diluted
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22,942,088 | 22,942,088 | 22,942,088 | 22,942,088 | ||||||||||||
The
accompanying notes are an integral part of these consolidated financial
statements.
2
IsoRay,
Inc. and Subsidiaries
Consolidated
Statements of Cash Flows
(Unaudited)
|
Six
months ended December 31,
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||||||||
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2009
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2008
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|||||||
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CASH
FLOWS FROM OPERATING ACTIVITIES:
|
||||||||
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Net
loss
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$ | (1,856,575 | ) | $ | (3,426,703 | ) | ||
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Adjustments
to reconcile net loss to net cash used by operating
activities:
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||||||||
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Depreciation
and amortization of fixed assets
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484,572 | 604,651 | ||||||
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Impairment
of IBt license (see Note 4)
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- | 425,434 | ||||||
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Amortization
of deferred financing costs and other assets
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29,100 | 44,144 | ||||||
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Gain
on fair value of short-term investments
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- | (274,000 | ) | |||||
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Realized
(gains) / losses on short-term investments
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- | |||||||
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Accretion
of asset retirement obligation
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25,378 | 23,201 | ||||||
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Share-based
compensation
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80,477 | 199,782 | ||||||
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Changes
in operating assets and liabilities:
|
||||||||
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Accounts
receivable, net
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(174,867 | ) | 186,387 | |||||
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Inventory
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35,361 | 11,694 | ||||||
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Prepaid
expenses and other current assets
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(3,972 | ) | 51,443 | |||||
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Accounts
payable and accrued expenses
|
6,754 | (15,529 | ) | |||||
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Accrued
payroll and related taxes
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(1,149 | ) | (75,601 | ) | ||||
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Net
cash used by operating activities
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(1,374,921 | ) | (2,245,097 | ) | ||||
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CASH
FLOWS FROM INVESTING ACTIVITIES:
|
||||||||
|
Purchases
of fixed assets
|
(18,000 | ) | (32,396 | ) | ||||
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Additions
to licenses and other assets
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- | (7,458 | ) | |||||
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Change
in restricted cash
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(1,049 | ) | (1,586 | ) | ||||
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Proceeds
from the sale or maturity of short-term investments
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1,679,820 | - | ||||||
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Net
cash provided (used) by investing activities
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1,660,771 | (41,440 | ) | |||||
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CASH
FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
|
Principal
payments on notes payable
|
(134,331 | ) | (30,102 | ) | ||||
|
Principal
payments on capital lease obligations
|
- | (14,783 | ) | |||||
|
Preferred
dividends paid
|
(36,679 | ) | - | |||||
|
Repurchase
of Company common stock
|
- | (4,735 | ) | |||||
|
Net
cash used by financing activities
|
(171,010 | ) | (49,620 | ) | ||||
|
Net
increase (decrease) in cash and cash equivalents
|
114,840 | (2,336,157 | ) | |||||
|
Cash
and cash equivalents, beginning of period
|
2,990,744 | 4,820,033 | ||||||
|
CASH
AND CASH EQUIVALENTS, END OF PERIOD
|
$ | 3,105,584 | $ | 2,483,876 | ||||
The
accompanying notes are an integral part of these consolidated financial
statements.
3
IsoRay,
Inc.
Notes
to the Unaudited Consolidated Financial Statements
For
the periods ended December 31, 2009 and 2008
|
1.
|
Basis
of Presentation
|
The
accompanying consolidated financial statements are those of IsoRay, Inc., and
its wholly-owned subsidiaries (IsoRay or the Company). All
significant intercompany accounts and transactions have been eliminated in
consolidation.
The
accompanying interim consolidated financial statements have been prepared in
conformity with U.S. generally accepted accounting principles, consistent in all
material respects with those applied in the Company’s Annual Report on Form 10-K
for the fiscal year ended June 30, 2009. The financial information is
unaudited but reflects all adjustments, consisting only of normal recurring
accruals, which are, in the opinion of the Company’s management, necessary for a
fair statement of the results for the interim periods
presented. Interim results are not necessarily indicative of results
for a full year. The information included in this Form 10-Q should be
read in conjunction with the Company’s Annual Report on Form 10-K for the fiscal
year ended June 30, 2009.
|
2.
|
New
Accounting Pronouncements
|
On July
1, 2009, the Company adopted new accounting provisions which establishes the
FASB Accounting Standards Codification™ (the Codification) as the single
official source of authoritative accounting principles recognized by the FASB to
be applied by nongovernmental entities in the preparation of financial
statements in conformity with generally accepted accounting principles (GAAP)
other than rules and interpretive releases issued by the Securities and Exchange
Commission. The Codification reorganized the literature and changed the naming
mechanism by which topics are referenced. The Codification became
effective for interim and annual periods ending after September 15,
2009. The Company’s accounting policies and amounts presented in the
financial statements were not impacted by this change.
On July
1, 2009, the Company adopted new accounting provisions which were delayed from
the effective date of fair value accounting for one year for certain
nonfinancial assets and nonfinancial liabilities, excluding those that are
recognized or disclosed in financial statements at fair value on a recurring
basis (that is, at least annually). For purposes of applying the new provisions,
nonfinancial assets and nonfinancial liabilities include all assets and
liabilities other than those meeting the definition of a financial asset or a
financial liability. The Company had previously adopted new standards for fair
value accounting on July 1, 2008. The adoption of these new
provisions did not have a material effect on the Company but will affect future
calculations of asset retirement obligations and long-lived asset
impairment.
On July
1, 2009, the Company adopted new accounting provisions for business combinations
and for non-controlling interests. The new business combination
provisions require an acquirer to measure the identifiable assets acquired,
the liabilities assumed and any noncontrolling interest in the acquiree at their
fair values on the acquisition date, with goodwill being the excess value over
the net identifiable assets acquired. In addition, the new provisions require
that a noncontrolling interest in a subsidiary be reported as equity in the
consolidated financial statements. The calculation of earnings per share will
continue to be based on income amounts attributable to the
parent. The adoption of these statements did not have a material
effect on the Company’s financial statements.
4
|
3.
|
Loss
per Share
|
Basic
earnings per share is calculated by dividing net income (loss) available to
common shareholders by the weighted average number of common shares outstanding,
and does not include the impact of any potentially dilutive common stock
equivalents. Common stock equivalents, including warrants and options
to purchase the Company's common stock, are excluded from the calculations when
their effect is antidilutive. At December 31, 2009 and 2008, the
calculation of diluted weighted average shares did not include preferred stock,
common stock warrants, or options that are potentially convertible into common
stock as those would be antidilutive due to the Company’s net loss
position.
Securities
not considered in the calculation of diluted weighted average shares, but that
could be dilutive in the future as of December 31, 2009 and 2008 were as
follows:
|
December
31,
|
||||||||
|
2009
|
2008
|
|||||||
|
Preferred
stock
|
59,065 | 59,065 | ||||||
|
Common
stock warrants
|
3,216,644 | 3,245,082 | ||||||
|
Common
stock options
|
2,412,236 | 2,458,708 | ||||||
|
Total
potential dilutive securities
|
5,687,945 | 5,762,855 | ||||||
|
4.
|
Impairment
of IBt License
|
In
December 2008, the Company reevaluated its license agreement with International
Brachytherapy SA (IBt) in connection with an overall review of its present cost
structure and projected market and manufacturing strategies, Management
determined through this review that it does not currently intend to utilize the
IBt license as part of its market strategy due to the cost of revamping its
manufacturing process to incorporate the technology and as there can be no
assurance that physicians would accept this new technology without extensive
education and marketing costs. However, the Company does not intend
to cancel the license agreement at this time; therefore, the license was
reviewed in terms of an “abandoned asset” for purposes of SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. As there are no
anticipated future revenues from the license and the Company cannot sell or
transfer the license, it was determined that the entire value should be written
off. Therefore, the Company recorded an impairment charge of $425,434
that is included in cost of product sales for the three and six months ended
December 31, 2008.
|
5.
|
Short-Term
Investments
|
The
Company’s short-term investments are classified as available-for-sale and
recorded at fair market value. The Company’s short-term investments
consisted entirely of certificates of deposit at various banks as of December
31, 2009 and June 30, 2009. The Company’s short-term investments are
accounted for and reported at fair value using level 1 inputs.
5
|
6.
|
Inventory
|
Inventory
consisted of the following at December 31, 2009 and June 30, 2009:
|
December
31,
|
June
30,
|
|||||||
|
2009
|
2009
|
|||||||
|
Raw
materials
|
$ | 594,378 | $ | 609,932 | ||||
|
Work
in process
|
147,112 | 155,827 | ||||||
|
Finished
goods
|
12,395 | 23,487 | ||||||
| $ | 753,885 | $ | 789,246 | |||||
|
7.
|
Share-Based
Compensation
|
The
following table presents the share-based compensation expense recognized during
the three and six months ended December 31, 2009 and 2008:
|
Three
months
|
Six
months
|
|||||||||||||||
|
ended
December 31,
|
ended
December 31,
|
|||||||||||||||
|
2009
|
2008
|
2009
|
2008
|
|||||||||||||
|
Cost
of product sales
|
$ | 5,375 | $ | 4,780 | $ | 11,272 | $ | 13,910 | ||||||||
|
Research
and development expenses
|
174 | 9,568 | 336 | 19,489 | ||||||||||||
|
Sales
and marketing expenses
|
27,460 | 46,291 | 51,085 | 104,983 | ||||||||||||
|
General
and administrative expenses
|
(10,459 | ) | 30,429 | 17,784 | 61,400 | |||||||||||
|
Total
share-based compensation
|
$ | 22,550 | $ | 91,068 | $ | 80,477 | $ | 199,782 | ||||||||
As of
December 31, 2009, total unrecognized compensation expense related to
stock-based options was $126,100 and the related weighted-average period over
which it is expected to be recognized is approximately 0.97 years.
The
Company currently provides stock-based compensation under three equity incentive
plans approved by the Board of Directors. Options granted under each
of the plans have a ten year maximum term, an exercise price equal to at least
the fair market value of the Company’s common stock on the date of the grant,
and varying vesting periods as determined by the Board. For stock
options with graded vesting terms, the Company recognizes compensation cost on a
straight-line basis over the requisite service period for the entire
award.
6
A summary
of stock options within the Company’s share-based compensation plans as of
December 31, 2009 were as follows:
|
Weighted
|
||||||||||||||||
|
Weighted
|
Average
|
|||||||||||||||
|
Average
|
Remaining
|
Aggregate
|
||||||||||||||
|
Number
of
|
Exercise
|
Contractual
|
Intrinsic
|
|||||||||||||
|
Options
|
Price
|
Term
|
Value
|
|||||||||||||
|
Outstanding
at December 31, 2009
|
2,412,236 | $ | 2.02 | 7.4 | $ | 716,604 | ||||||||||
|
Vested
and expected to vest at
|
||||||||||||||||
|
December
31, 2009
|
2,335,146 | $ | 2.08 | 7.3 | $ | 652,538 | ||||||||||
|
Vested
and exercisable at
|
||||||||||||||||
|
December
31, 2009
|
1,975,157 | $ | 2.39 | 7.0 | $ | 383,925 | ||||||||||
There
were no options exercised during the six months ended December 31, 2009 and
2008, respectively. The Company’s current policy is to issue new
shares to satisfy option exercises.
The
weighted average fair value of stock option awards granted and the key
assumptions used in the Black-Scholes valuation model to calculate the fair
value are as follows:
|
Three
months
|
Six
months
|
|||||||||||||||
|
ended
December 31,
|
ended
December 31,
|
|||||||||||||||
|
2009(a)
|
2008(b)
|
2009(c)
|
2008(b)
|
|||||||||||||
|
Weighted
average fair value of options granted
|
$ | - | $ | 0.25 | $ | 0.51 | $ | 0.37 | ||||||||
|
Key
assumptions used in determining fair value:
|
||||||||||||||||
|
Weighted
average risk-free interest rate
|
- | % | 1.99 | % | 2.50 | % | 2.63 | % | ||||||||
|
Weighted
average life of the option (in years)
|
- | 6.00 | 4.00 | 5.68 | ||||||||||||
|
Weighted
average historical stock price volatility
|
- | % | 252.93 | % | 132.21 | % | 191.04 | % | ||||||||
|
Expected
dividend yield
|
- | % | 0.00 | % | 0.00 | % | 0.00 | % | ||||||||
|
(a)
|
During
the three months ended December 31, 2009, the Company did not grant any
stock options.
|
|
(b)
|
During
the three months ended December 31, 2008, the Company granted 50,000 stock
options.
|
|
(c)
|
During
the six months ended December 31, 2009, the Company granted 10,000 stock
options
|
|
(d)
|
During
the six months ended December 31, 2008, the Company granted 95,000 stock
options
|
The
Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input
of highly subjective assumptions, including the expected stock price
volatility. Although the Company is using the Black-Scholes option
valuation model, management believes that because changes in the subjective
input assumptions can materially affect the fair value estimate, this valuation
model does not necessarily provide a reliable single measure of the fair value
of its stock options. The risk-free interest rate is based on the
U.S. treasury security rate in effect as of the date of grant. The
expected option lives, volatility, and forfeiture assumptions are based on
historical data of the Company.
7
|
8.
|
Commitments
and Contingencies
|
Patent and Know-How Royalty
License Agreement
The
Company is the holder of an exclusive license to use certain “know-how”
developed by one of the founders of a predecessor to the Company and licensed to
the Company by the Lawrence Family Trust, a Company shareholder. The
terms of this license agreement require the payment of a royalty based on the
Net Factory Sales Price, as defined in the agreement, of licensed product
sales. Because the licensor’s patent application was ultimately
abandoned, only a 1% “know-how” royalty based on Net Factory Sales Price, as
defined in the agreement, remains applicable. To date, management
believes that there have been no product sales incorporating the “know-how” and
therefore no royalty is due pursuant to the terms of the
agreement. Management believes that ultimately no royalties should be
paid under this agreement as there is no intent to use this “know-how” in the
future.
The
licensor of the “know-how” has disputed management’s contention that it is not
using this “know-how”. On September 25, 2007 and again on October 31,
2007, the Company participated in nonbinding mediation regarding this matter;
however, no settlement was reached with the Lawrence Family
Trust. After additional settlement discussions, which ended in April
2008, the parties failed to reach a settlement. The parties may
demand binding arbitration at any time.
|
9.
|
Fair
Value Measurements
|
Effective
July 1, 2008, for the financial assets and liabilities of the Company, and
effective July 1, 2009, for the non-financial assets and liabilities of the
Company, disclosure requirements have been expanded to include the following
information for each major category of assets and liabilities that are measured
at fair value on a recurring basis: financial assets of the Company include cash
and cash equivalents, short-term investments, accounts receivable, net of
allowance and restricted cash - these are measured using level 1
inputs. Financial liabilities of the Company include accounts payable
and accrued liabilities, accrued payroll and related taxes, notes payable, due
within one year and notes payable, due after one year - these are measured using
level 1 inputs. Non-financial assets of the Company include
inventory, prepaid and other current assets, fixed assets, deferred financing
costs, licenses and other assets which are measured using level 2
inputs. Non-financial liabilities of the Company include the asset
retirement obligation and this is measured using level 3 inputs. Per
ASC 410, the only change in the valuation of the asset retirement obligation was
the accretion expense in the six months ended December 31, 2009.
|
10.
|
Preferred
Dividends
|
On
December 11, 2009, the Board of Directors declared a dividend on the Series B
Preferred Stock of all currently payable and accrued outstanding and cumulative
dividends through December 31, 2009. Dividends on the Series B
Preferred Stock were last paid on February 15, 2007 for dividends outstanding
and cumulative through December 31, 2006. The dividends outstanding
and cumulative through December 31, 2009 of $36,679 were paid as of that
date.
8
ITEM
2 – MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Caution
Regarding Forward-Looking Information
In
addition to historical information, this Form 10-Q contains certain
“forward-looking statements” within the meaning of the Private Securities
Litigation Reform Act of 1995 (“PSLRA”). This statement is included
for the express purpose of availing IsoRay, Inc. of the protections of the safe
harbor provisions of the PSLRA.
All
statements contained in this Form 10-Q, other than statements of historical
facts, that address future activities, events or developments are
forward-looking statements, including, but not limited to, statements containing
the words "believe," "expect," "anticipate," "intends," "estimate," "forecast,"
"project," and similar expressions . All statements other than statements of
historical fact are statements that could be deemed forward-looking statements,
including any statements of the plans, strategies and objectives of management
for future operations; any statements concerning proposed new products,
services, developments or industry rankings; any statements regarding future
economic conditions or performance; any statements of belief; and any statements
of assumptions underlying any of the foregoing. These statements are
based on certain assumptions and analyses made by us in light of our experience
and our assessment of historical trends, current conditions and expected future
developments as well as other factors we believe are appropriate under the
circumstances. However, whether actual results will conform to the expectations
and predictions of management is subject to a number of risks and uncertainties
described under “Risk Factors” beginning on page 17 below and in the “Risk
Factors” section of our Form 10-K for the fiscal year ended June 30, 2009 that
may cause actual results to differ materially.
Consequently,
all of the forward-looking statements made in this Form 10-Q are qualified by
these cautionary statements and there can be no assurance that the actual
results anticipated by management will be realized or, even if substantially
realized, that they will have the expected consequences to or effects on our
business operations. Readers are cautioned not to place undue
reliance on such forward-looking statements as they speak only of the Company's
views as of the date the statement was made. The Company undertakes no
obligation to publicly update or revise any forward-looking statements, whether
as a result of new information, future events or otherwise.
Critical Accounting Policies
and Estimates
The
discussion and analysis of the Company’s financial condition and results of
operations are based upon its consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States of America. The preparation of these financial
statements requires management to make estimates and judgments that affect the
reported amounts of assets, liabilities, revenues and expenses, and related
disclosure of contingent liabilities. On an on-going basis,
management evaluates past judgments and estimates, including those related to
bad debts, inventories, accrued liabilities, and
contingencies. Management bases its estimates on historical
experience and on various other assumptions that are believed to be reasonable
under the circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from
these estimates under different assumptions or conditions. The
accounting policies and related risks described in the Company’s annual report
on Form 10-K as filed with the Securities and Exchange Commission on September
23, 2009 are those that depend most heavily on these judgments and
estimates. As of December 31, 2009, there have been no material
changes to any of the critical accounting policies contained
therein.
9
Results of
Operations
Three
months ended December 31, 2009 compared to three months ended December 31,
2008
Revenues. The
Company generated revenue of $1,368,347 during the three months ended December
31, 2009 compared to revenue of $1,326,703 during the three months ended
December 31, 2008. The increase of $41,644 or 3% was mainly due to an
overall increase in the quantity of Proxcelan Cs-131 brachytherapy seeds sold
and the addition of new configurations to the product line. The total
number of cases for the three months ended December 31, 2009 as compared to the
three months ended December 31, 2008 remains relatively
unchanged. The nominal revenue increase is primarily related to
orders for the new treatment modalities such as head and neck, lung and
colorectal cancers.
During
the three months ended December 31, 2009, the Company sold its Proxcelan seeds
to 44 different medical centers as compared to 49 different medical centers
during the three months ended December 31, 2008. The Company attributes the
decrease of 5 medical centers ordering seeds in the three months ended December
31, 2009 when compared to the three months ended December 31, 2008 to the
overall decrease of the prostate brachytherapy market. Management
believes that the overall market for prostate brachytherapy has received
increased pressure from other treatment options with higher reimbursement rates
such as IMRT.
Cost of product
sales. Cost of product sales was $1,100,193 for the three
months ended December 31, 2009 compared to cost of product sales of $1,724,225
during the three months ended December 31, 2008. While the Company
continues to streamline manufacturing processes, the reduction of cost of
product sales of $624,032 or 36% for the three months ended December 31, 2009 as
compared to the three months ended December 31, 2008 is primarily due to a
one-time charge for the impairment of the IBt license (note 4) in the amount of
$425,434. The one-time impairment charge represents approximately 68%
of the overall period to period cost reduction of $624,032.
The
remaining approximately 32% of the overall period to period cost reduction of
$624,032 or $198,598 was composed of decreased wages, benefits and
related taxes cost of $60,000, decreased preload expenses of $78,000, decreased
depreciation expense of $55,000, decreased consulting expense of $25,000, and
decreased occupancy costs of $34,000, which was partially offset by increased
material cost of $54,000. The Company has achieved a $199,000
reduction in production costs as a result of a focused effort in analyzing and
improving the efficiencies in all areas of production. These efforts
have resulted in improving production processes, better utilization of labor,
performing functions internally in lieu of using consultants and increased use
of internal seed loading capabilities instead of external seed loading services,
all of which were offset by contractual obligations to purchase some materials
in quantities that exceed the need for those materials at current sales
volumes.
Gross margin. Gross
margin was $268,154 for the three month period ended December 31, 2009 compared
to a gross loss of ($397,522) for the three month period ended December 31,
2008. The improvement of $665,676 was due to the one-time impairment
charge in the three month period ended December 31, 2008, as well as continued
reductions in production costs and more efficient use of manufacturing
resources.
Research and
development. Research and development expenses for the three
month period ended December 31, 2009 were $59,078 which represents a decrease of
$246,978 or approximately 81% over the research and development expenses of
$306,056 for the three month period ended December 31, 2008. The cost
savings of approximately $247,000 were primarily a function of a reduction of
$133,000 in protocol expense as the major cost for the monotherapy protocol has
been completed and consulting costs were reduced by $29,000 as several
production projects were completed related to both production automation and to
bring delivery methods to treat head and neck, lung, and colorectal cancers to
market. There were additional temporary savings of $44,000 achieved
in payroll, benefits, related taxes and share-based compensation during a
transition period between R&D personnel.
10
Sales and marketing
expenses. Sales and marketing expenses were $603,980 for the
three months ended December 31, 2009. This represents a decrease of
$16,720 or 3% compared to expenditures in the three months ended December 31,
2008 of $620,700. The decrease of approximately $17,000 is primarily
the net result of a temporary decrease in wages, benefits, related taxes and
share-based compensation of $77,000 that is related to attrition as a result of
the incentive compensation plan and a temporary increase in conventions and
tradeshow activity of $58,000 due to the scheduling of the same major conference
in the three month period ended December 31, 2009 versus the three month period
ended September 30, 2008.
General and administrative
expenses. General and administrative expenses for the three
months ended December 31, 2009 were $550,009 compared to general and
administrative expenses of $758,822 for the three months ended December 31,
2008. The decrease of $208,813 or 28% is primarily due to decreases
in wages, benefits and related taxes, consulting expense, legal expense and
share-based compensation. Wages, benefits and related taxes decreased
approximately $77,000 mainly due to the reduction in headcount and were
partially offset when our Chief Executive Officer, previously a consultant, was
hired as an employee. Consulting expenses decreased approximately
$24,000 mainly due to the interim CEO becoming an employee. Legal
fees decreased by $66,000 primarily due to costs associated with settling a
lawsuit with a former employee in the three months ended December 31,
2008. Share-based compensation was reduced by approximately $41,000
and this was primarily a function of the reduced headcount and the related
options that were forfeited.
Operating loss. In
the three months ended December 31, 2009, the Company had an operating loss of
$944,913 which is a reduction of $1,138,187 or 55% less than the operating loss
of $2,083,100 for the three months ended December 31, 2008. The
Company’s operating loss reduction of $1.14 million was primarily achieved
through a decrease in cost of product sales of $199,000, research and
development savings of $246,000, a general and administrative decrease of
$209,000 and a non -recurring one-time impairment charge of
$425,000.
Interest
income. Interest income was $2,944 for the three months ended
December 31, 2009. This represents a decrease of $34,618 or 92%
compared to interest income of $37,562 for the three months ended December 31,
2008. The decrease is due to the Company’s lower short-term
investment balances and lower interest rates during the three months ended
December 31, 2009 as compared to the three months ended December 31,
2008. Interest income is mainly derived from excess funds held in
money market accounts and invested in short-term investments.
Gain on fair value of short-term
investments. The was no gain on short-term investments for the
three months ended December 31, 2009 as compared to a gain of $433,820 for the
three months ended December 31, 2008. The gain of $433,200 for the
three months ended December 31, 2008 was due to the receipt of auction rate
security rights (Rights) issued by the Company’s broker in October
2008. The gain was calculated as the fair value amount of the Rights
estimated on the date of receipt plus the changes in their fair value offset by
additional realized losses on the Company’s auction rate securities
(ARS).
Financing and interest
expense. Financing and interest expense for the three months
ended December 31, 2009 was $7,898 or a decrease of $12,871 or 62% from
financing and interest expense of $20,769 for the three months ended December
31, 2008. Interest expense was approximately $4,000 and $12,000 for
the three months ended December 31, 2009 and 2008, respectively. The
remaining balance of financing and interest expense represents the amortization
of deferred financing costs.
11
Six
months ended December 31, 2009 compared to six months ended December 31,
2008
Revenues. The
Company generated revenue of $2,747,434 during the six months ended December 31,
2009 compared to revenue of $2,846,285 during the six months ended December 31,
2008. The decrease of $98,851 or 3.5% was due to a decrease in the
quantity of Proxcelan Cs-131 brachytherapy seeds sold. The total
number of cases for the six months ended December 31, 2009 as compared to the
six months ended December 31, 2008 declined 3.7% while total revenue decreased
3.5%. The total revenue decrease was partially mitigated by the
revenue provided from the growth in orders for the new treatment modalities such
as head and neck, lung and colorectal cancers.
During
the six months ended December 31, 2009, the Company sold its Proxcelan seeds to
55 different medical centers as compared to 60 different medical centers during
the six months ended December 31, 2008. The Company attributes the
overall decrease of 5 medical centers ordering seeds in the six months ended
December 31, 2009 when compared to the six months ended December 31, 2008 to the
overall decrease of the prostate brachytherapy market. Management
believes that the overall market for prostate brachytherapy has received
increased pressure from other treatment options with higher reimbursement rates
such as IMRT.
Cost of product
sales. Cost of product sales was $2,260,282 for the six months
ended December 31, 2009 compared to cost of product sales of $3,172,661 during
the six months ended December 31, 2008. While the Company continues
to streamline manufacturing processes, the reduction of cost of product sales of
$912,379 or 29% for the six months ended December 31, 2009 as compared to the
six months ended December 31, 2008, was substantially impacted by a one-time
impairment charge in the amount of $425,434. The one-time impairment
charge was approximately 47% of the overall period to period cost reduction of
$912,379.
The
remaining approximately 53% of the overall period to period cost reduction of
$912,379 or $486,945 was composed of decreased wages, benefits and
related taxes cost of $139,000, decreased preload expenses of $169,000,
decreased depreciation expense of $111,000, decreased consulting expense of
$20,000, decreased occupancy costs of $47,000. The Company achieved a
$487,000 reduction in production costs as a result of a focused effort in
analyzing and improving the efficiencies in all areas of
production. These efforts have resulted in improving production
processes, better utilization of labor, performing functions internally in lieu
of using consultants and increased use of internal seed loading capabilities
instead of external seed loading services.
Gross margin. Gross
margin was $487,152 for the six month period ended December 31, 2009 compared to
a gross loss of $326,376 for the six month period ended December 31,
2008. The improvement of $813,528 was due to the one-time impairment
charge in the six month period ended December 31, 2008, as well as continued
reductions in production costs and more efficient use of manufacturing
resources.
Research and
development. Research and development expenses for the six
month period ended December 31, 2009 were $127,960 which represents a decrease
of $396,646 or approximately 76% over the research and development expenses of
$524,606 for the six month period ended December 31, 2008.
The cost
savings of approximately $397,000 were primarily a function of a reduction of
$194,000 in protocol expense as the major cost for the monotherapy protocol has
been completed and consulting costs were reduced by $39,000 as several
production projects were completed related to both production automation and to
bring delivery methods to treat head and neck, lung, and colorectal cancers to
market. There were additional temporary savings of $89,000 achieved
in payroll, benefits, related taxes and share-based compensation during a
transition period between R&D personnel.
12
Sales and marketing
expenses. Sales and marketing expenses were $1,046,879 for the
six months ended December 31, 2009. This represents a decrease of
approximately $305,000 or 23% compared to expenditures in the six months ended
December 31, 2008 of $1,351,474 for sales and marketing. The savings
of $305,000 is primarily the net result of a temporary decrease in wages,
benefits, related taxes and share-based compensation of $164,000 that is related
to attrition as a result of the incentive compensation plan and forfeiture of
related stock, and a decrease of $77,000 in travel that is the result of both
the temporary attrition and improved trip planning. Marketing and
advertising expense was reduced by $33,000 by reducing the number of trade
journals that were used for advertising.
General and administrative
expenses. General and administrative expenses for the six
months ended December 31, 2009 were $1,152,440 compared to general and
administrative expenses of $1,538,979 for the six months ended December 31,
2008. The decrease of $386,539 or 25% is primarily due to decreases
in wages, benefits and related taxes, consulting expense, legal expense, public
company expense and share-based compensation. Wages, benefits and
related taxes decreased approximately $101,000 mainly due to the reduction in
headcount and were partially offset when our Chief Executive Officer, previously
a consultant, was hired as an employee. Consulting expenses decreased
approximately $57,000 primarily due to the interim CEO becoming an
employee. Legal fees decreased by $144,000 primarily due to the legal
fees incurred in the six months ended December 31, 2008 related to settling a
lawsuit with a former employee. Public company expense was reduced by
$47,000, due to a decrease in board compensation as a result of the interim CEO
becoming an employee in addition to reduced investor relations
cost. Share-based compensation was reduced by approximately $44,000,
and this was primarily a function of the reduced headcount and the related
options that were forfeited.
Operating loss. In
the six months ended December 31, 2009, the Company had an operating loss of
$1,840,127 which is a decrease of $1,901,308 or 51% less than the operating loss
of $3,741,435 for the six months ended December 31, 2008. . The
Company operating loss reduction of $1.9 million was primarily achieved through
a savings in cost of product sales of $487,000, research and development savings
of $397,000, sales and marketing savings of $305,000 and a general and
administrative decrease of $387,000 in addition to a non -recurring one-time
impairment charge of $425,000.
Interest
income. Interest income was $8,811 for the six months ended
December 31, 2009. This represents a decrease of $73,537 or 89%
compared to interest income of $82,348 for the six months ended December 31,
2008. The decrease is due to the Company’s lower short-term
investment balances and lower interest rates during the six months ended
December 31, 2009 as compared to the six months ended December 31,
2008. Interest income is mainly derived from excess funds held in
money market accounts and invested in short-term investments.
Gain on fair value of short-term
investments. There was no gain on short-term investments for
the six months ended December 31, 2009 as compared to a gain of $274,000 for the
six months ended December 31, 2008. The gain of $274,000 for the six
months ended December 31, 2008 was due to the receipt of Rights issued by the
Company’s broker in October 2008. The gain was calculated as the fair
value amount of the Rights estimated on the date of receipt plus the changes in
their fair value offset by additional realized losses on the Company’s
ARS.
Financing and interest
expense. Financing and interest expense for the six months
ended December 31, 2009 was $25,259 or a decrease of $16,357 or 39% from
financing and interest expense of $41,616 for the six months ended December 31,
2008. Interest expense was approximately $11,000 and $25,000 for the
six months ended December 31, 2009 and 2008, respectively. The
remaining balance of financing and interest expense represents the amortization
of deferred financing costs.
13
Liquidity and capital
resources. The Company has historically financed its
operations through cash investments from shareholders. During the six
months ended December 31, 2009, the Company primarily used existing cash
reserves to fund its operations and capital expenditures.
Cash
flows from operating activities
Cash used
in operating activities was approximately $1.38 million for the six months ended
December 31, 2009 compared to approximately $2.25 million for the six months
ended December 31, 2008. Cash used by operating activities is the net
loss adjusted for non-cash items and changes in operating assets and
liabilities. A significant reduction in cash consumed in operating
activities of $870,000 was achieved through a combination of cost reductions and
operational efficiencies identified in the results of operations that resulted
in a reduction in net loss of $1,570,000 which was reduced by the non-cash items
and changes in operating assets and liabilities of $700,000 for the six months
ended December 31, 2009 when compared to the six months ended December 31,
2008. The reduction in cash consumed by operating activities of
$870,000 was negatively impacted by revenue being generated later in the quarter
for the six months ended December 31, 2009 when compared to the six months ended
December 31, 2008. Since during the quarter ended December 31, 2008,
a larger percentage of the quarter's sales occurred during October and thus were
generally paid by customers before the end of the quarter, the Company had more
cash from revenues available during the quarter to meet operating
expenses. However, in the quarter ended December 31, 2009, a larger
percentage of sales occurred during December, which resulted in less cash being
received from these sales before the end of the quarter and correspondingly
higher accounts receivable at the end of the quarter ended December 31,
2009. The reduced amount of incoming cash payments during the three
months ended December 31, 2009 resulted in additional cash being consumed by
operations and thus increased the negative impact of the change in the operating
assets.
Cash
flows from investing activities
Cash
provided by investing activities was approximately $1.66 million for the six
months ended December 31, 2009 and cash used by investing activities was
approximately $41,000 for the six months ended December 31, 2008. The
increase in cash provided by investing activities was a function of short-term
investments of $1.68 million maturing in the six months ended December 31,
2009. Cash expenditures for fixed assets were approximately $18,000
and $32,000 during the six months ended December 31, 2009 and 2008,
respectively.
Cash
flows from financing activities
Cash used
in financing activities was approximately $171,000 and $50,000 for the quarters
ended December 31, 2009 and 2008, respectively. $134,000 and $45,000
was used mainly for payments of debt and capital leases in the six months ended
December 31, 2009 and 2008 respectively. Approximately, $108,000 of
the $134,000 in cash that was used for payments of debt and capital leases in
the six months ended December 31, 2009 was to retire the loan facility with
Benton-Franklin Council of Governments (BFEDD). The remaining $37,000
in cash consumed in financing activities was related to the payment of preferred
dividends.
Projected
Fiscal Year 2010 Liquidity and Capital Resources
At
December 31, 2009, the Company held cash and cash equivalents amounted to
$3,142,263 and no short-term investments as compared to $2,990,744 of cash and
cash equivalents and $1,679,820 of short-term investments at June 30,
2009.
14
The
Company had approximately $2.9 million of cash and cash equivalents and no
short-term investments as of February 8, 2010. The Company’s monthly
required cash operating expenditures were approximately $230,000 in the six
months ended December 31, 2009, which represents a 39% decrease of approximately
$145,000 from average monthly cash operating expenditures in fiscal year 2009,
which is primarily a result of improved operating performance from fiscal year
2009 to fiscal year 2010. Management believes that less than $100,000
will be spent on capital expenditures for the fiscal year 2010, but there is no
assurance that unanticipated needs for capital equipment may not
arise.
The
Company’s loan facility with BFEDD matured during the six months ended December
31, 2009 and the full amount due of approximately $108,000 was paid on November
13, 2009 to settle the loan facility. The Company has only one
remaining loan facility outstanding with HAEIFC, with a principal balance of
approximately $203,000 of which approximately $47,000 will be due in the next 12
months.
While
management has seen some indication that the proprietary separation process to
manufacture enriched barium may have viability on smaller scale projects to date
there has been no indication that it will work on a larger production
model. Therefore, the Company does not believe that any more payments
will be made to its contractor located in the Ukraine.
The
Company has significantly decreased its protocol studies in the prostate market
as management believes the studies conducted to date are
adequate. Management is in the process of determining whether the
approximately $225,000 originally budgeted for protocol expenses relating to
lung cancer and the ongoing protocols still needed for dual therapy and
monotherapy prostate protocols is adequate.
Based on
the foregoing assumptions, management believes cash, cash equivalents, and
short-term investments on hand at December 31, 2009 will be sufficient to
meet our anticipated cash requirements for operations, debt service, and capital
expenditure requirements through at least the next twelve
months. Management’s plans to attain breakeven and generate
additional cash flows by increasing revenues from both new and existing
customers (through our direct sales channels and through our distributors),
expanding into other market applications which initially will include head and
neck implants, colorectal and lung implants while maintaining the
Company's focus on cost control. However, there can be no assurance
that the Company will attain profitability or that the Company will be able to
attain its revenue targets. Sales in the prostate market have not
shown the increases necessary to breakeven during the past two fiscal years and
did not improve during the six months ended December 31, 2009. As
management is now focused on expanding into head and neck, colorectal and lung
applications, management believes the Company will need to raise additional
capital for protocols, marketing staff, production staff and production
equipment as it attempts to gain market share. Initially, management
plans to seek to sell common stock pursuant to either an “at the market”
underwritten offering or through a direct registered offering at a discount to
the market price of not more than 15% and has an effective Form S-3 shelf
offering registration statement available for this purpose.
If the
underwriting at market or direct offering of common stock below market is
unsuccessful, the Company expects to finance its future cash needs through
solicitation of warrant holders to exercise their warrants, possible strategic
collaborations, debt financing or through other sources that may be dilutive to
existing shareholders. Management anticipates that if it raises
financing that it will be at a discount to the market price of common stock of
not more than 15% and dilutive to shareholders. Of course, funding
may not be available to it on acceptable terms, or at all. If the Company is
unable to raise additional funds, it may not be able to market its products as
planned or continue development and regulatory approval of its future
products.
Long-Term
Debt
IsoRay
has a single loan facility in place as of December 31, 2009 from the Hanford
Area Economic Investment Fund Committee (HAEIFC), which was originated in June
2006. The loan originally had a total facility of $1,400,000 which
was reduced in September 2007 to the amount of the Company’s initial draw of
$418,670. The loan bears interest at nine percent and the principal
balance owed as of December 31, 2009 was $203,129. This loan is
secured by receivables, equipment, materials and inventory, and certain life
insurance policies and also required personal guarantees.
15
Other
Commitments and Contingencies
The
Company is subject to various local, state, and federal environmental
regulations and laws due to the isotopes used to produce the Company’s
product. As part of normal operations, amounts are expended to ensure
that the Company is in compliance with these laws and
regulations. While there have been no reportable incidents or
compliance issues, the Company believes that if it relocates its current
production facilities then certain decommissioning expenses will be
incurred. An asset retirement obligation was established in the first
quarter of fiscal year 2008 for the Company’s obligations at its current
production facility. This asset retirement obligation will be for
obligations to remove any residual radioactive materials and to remove all
leasehold improvements.
The
industry that the Company operates in is subject to product liability
litigation. Through its production and quality assurance procedures,
the Company works to mitigate the risk of any lawsuits concerning its
product. The Company also carries product liability insurance to help
protect it from this risk.
The
Company previously disclosed a contingency related to its research and
development project underway in the Ukraine to develop a proprietary separation
process to manufacture enriched barium. As the prototype has not been
successfully demonstrated and is not expected to be, the Company does not intend
to make the final payment to the contractor, as the final payment was only due
following a successful demonstration of the prototype.
The
Company has no off-balance sheet arrangements.
ITEM
3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a
smaller reporting company, the Company is not required to provide Part I, Item 3
disclosure in this Quarterly Report.
ITEM
4 – CONTROLS AND PROCEDURES
Evaluation
of Disclosure Controls and Procedures
Under the
supervision and with the participation of our management, including our
principal executive officer and principal financial officer, we conducted an
evaluation of the design and operation of our disclosure controls and
procedures, as such term is defined under Rules 13a-14(c) and 15d-14(c)
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), as of December 31, 2009. Based on that evaluation, our
principal executive officer and our principal financial officer concluded that
the design and operation of our disclosure controls and procedures were
effective in timely alerting them to material information required to be
included in the Company's periodic reports filed with the SEC under the Exchange
Act. The design of any system of controls is based in part upon
certain assumptions about the likelihood of future events, and there can be no
assurance that any design will succeed in achieving its stated goals under all
potential future conditions, regardless of how remote. However,
management believes that our system of disclosure controls and procedures is
designed to provide a reasonable level of assurance that the objectives of the
system will be met.
Changes
in Internal Control over Financial Reporting
There
have not been any changes in our internal control over financial reporting (as
such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act)
during the most recent fiscal quarter that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.
16
PART
II - OTHER INFORMATION
ITEM
1A – RISK FACTORS
There
have been no material changes for the risk factors disclosed in the “Risk
Factors” section of our Annual Report on Form 10-K for the year ended June 30,
2009.
ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On
December 11, 2009, the Company held its Annual Meeting of Shareholders at which
our shareholders elected four Directors and ratified the appointment of our
independent registered public accounting firm for the fiscal year ending June
30, 2010. The two other proposals were not approved.
|
(a)
|
Election of
Directors. All nominees for election as Directors were
unopposed and elected as follows:
|
|
Director
|
For
|
Withhold
|
||
|
Dwight
Babcock
|
16,715,177
|
392,436
|
||
|
Robert
R. Kauffman
|
16,540,193
|
567,420
|
||
|
Thomas
C. LaVoy
|
16,980,904
|
126,709
|
||
|
Albert
Smith
|
|
16,235,893
|
872,720
|
|
(b)
|
Appointment of our independent
registered public accounting firm. Proposal to ratify
the appointment of DeCoria, Maichel & Teague, P.S. as independent
registered public accounting firm of the Company for the fiscal year
ending June 30, 2010 was approved as
follows:
|
|
For
|
Against
|
Abstain
|
||
|
16,620,440
|
|
301,467
|
|
185,705
|
|
(c)
|
Approval of the Additional
Share Issuance at a Discount. Proposal to approve, for
purposes of the NYSE Amex Company Guide Sec. 713, the issuance to
investors of not to exceed 10 million to be registered shares of our
common stock, $0.001 par value (the "Common Stock") which may include
shares received upon exercise of warrants, to be sold at a discount that
will not exceed fifteen percent (15%) of the greater of the book value or
market value at the time of issuance, was not approved as
follows:
|
|
For
|
Against
|
Abstain
|
||
|
2,872,591
|
|
452,599
|
|
98,098
|
|
(d)
|
Approval of the Additional
Share Issuance at a Discount. Proposal to approve, for
purposes of the NYSE Amex Company Guide Sec. 713, the issuance of rights
to purchase not to exceed 10 million shares of Common Stock and the
underlying Common Stock issuable upon exercise of shareholder rights which
may be granted to shareholders by the Board of Directors in the future
pursuant to a to be registered offering, at an exercise price per share
that will include a discount of not to exceed fifteen percent (15%) of the
greater of book value or market value at the time of issuance, was not
approved as follows:
|
|
For
|
Against
|
Abstain
|
||
|
2,902,572
|
|
422,618
|
|
98,098
|
17
ITEM
6. EXHIBITS
Exhibits:
|
|
31.1
|
Rule
13a-14(a)/15d-14(a) Certification of Principal Executive
Officer
|
|
|
31.2
|
Rule
13a-14(a)/15d-14(a) Certification of Principal Financial
Officer
|
|
|
32
|
Section
1350 Certifications
|
18
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
|
Dated:
February 15, 2010
|
||
|
ISORAY,
INC., a Minnesota corporation
|
||
|
By
|
/s/ Dwight
Babcock
|
|
|
Dwight
Babcock, Chief Executive Officer
(Principal
Executive Officer)
|
||
|
By
|
/s/ Brien
Ragle
|
|
|
Brien
Ragle, Controller
(Principal
Financial and Accounting
Officer)
|
||
19