Perspective Therapeutics, Inc. - Quarter Report: 2023 September (Form 10-Q)

PERSPECTIVE THERAPEUTICS, INC.

Table of Contents

PART I - FINANCIAL INFORMATION

ITEM 1 - FINANCIAL STATEMENTS

The accompanying notes are an integral part of these condensed consolidated financial statements.

Perspective Therapeutics, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

For the quarter ended September 30, 2023 and 2022

Perspective Therapeutics, Inc. (Perspective Therapeutics or the Company) (formerly known as Isoray, Inc. and Century Park Pictures Corporation) was incorporated in Minnesota in 1983. On July 28, 2005, Isoray Medical, Inc. (Medical) became a wholly-owned subsidiary of Perspective Therapeutics, Inc. pursuant to a merger. In December 2018, upon approval of a majority of stockholders, Perspective Therapeutics was redomiciled to Delaware. Medical was formed under Delaware law on June 15, 2004 and on October 1, 2004 acquired two affiliated predecessor companies which began operations in 1998. Medical, a Delaware corporation, develops, manufactures and sells isotope-based medical products and devices for the treatment of cancer and other malignant diseases. Medical is headquartered in Richland, Washington.

Isoray International LLC (International), a Washington limited liability company, was formed on November 27, 2007 and is a wholly-owned subsidiary of Perspective Therapeutics. International has entered into various international distribution agreements.

On February 3, 2023, the Company completed the merger of Isoray Acquisition Corp., a Delaware corporation and wholly-owned subsidiary of the Company, with Viewpoint Molecular Targeting, Inc. (“Viewpoint”) (such transaction being the “Merger”). Pursuant to the Merger, the Company issued 136,545,075 shares of common stock, representing approximately 49% of its fully-diluted outstanding capital stock. Viewpoint is an alpha-particle radiopharmaceutical company in the alphaemitter market developing oncology therapeutics and complementary imaging agents.

On February 6, 2023, the Company announced that on January 31, 2023, its board of directors approved a change in its fiscal year end from June 30 to December 31, effective as of December 31, 2022.

The accompanying unaudited interim condensed consolidated financial statements are those of Perspective Therapeutics, Inc., and its wholly-owned subsidiaries, referred to herein as “Perspective Therapeutics” or the “Company.” All significant intercompany accounts and transactions have been eliminated in the consolidation. In the opinion of management, all adjustments necessary for the fair statement of the condensed consolidated financial statements have been included. These unaudited interim condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and related notes as set forth in the Company’s transition report filed on Form 10-KT for the period ended December 31, 2022. Viewpoint Molecular Targeting, Inc. (“Viewpoint”) has been consolidated since the close of the Merger (as defined below) (see Note 14).

The unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”). Certain information and note disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures are adequate for the information not to be misleading. The unaudited interim condensed consolidated financial statements reflect, in management’s opinion, all adjustments of a normal, recurring nature that are necessary for the fair statement of the Company’s financial position, results of operations and cash flows for the interim periods, but are not necessarily indicative of the results expected for the full fiscal year or any other period.

The Company anticipates that as the result of continuing operating losses and the significant net operating losses available from prior fiscal years, its effective income tax rate for fiscal year 2023 will be 0%.

Liquidity and Going Concern

The Company assesses its liquidity in terms of its ability to generate cash to fund its operating, investing, and financing activities. The Company has had a history of operating losses and an absence of significant recurring cash inflows from revenue, and at September 30, 2023 the Company had cash and cash equivalents of $18.0 million and total accumulated deficit of $127.8 million. The Company has historically financed its operations primarily through selling equity.

The future success of the Company is dependent on its ability to successfully obtain additional working capital. The Company is working to obtain profitability in its brachytherapy operations and to reduce expenditures in its drug operations. However, the drug operation assets are still in early clinical and pre-clinical phases and will require additional capital to bring the assets to commercialization.

These conditions raise substantial doubt regarding the Company’s ability to continue as a going concern for a period of one year from the date these unaudited condensed consolidated financial statements are issued. Management’s plan to mitigate the conditions that raise substantial doubt includes generating additional revenues in its brachytherapy operations, deferring certain projects and capital expenditures, licensing existing assets, entering into strategic alliances, and obtaining third-party funding for the Company to continue as a going concern. However, there can be no assurance that the Company will be successful in completing any of these options. As a result, management’s plans cannot be considered probable and thus do not alleviate substantial doubt about the Company’s ability to continue as a going concern.

The accompanying unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. The unaudited condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of the uncertainties described above.

Significant Accounting Policies

Segments

Accounting Standards Codification (“ASC”) 280, Segment Reporting, establishes standards for reporting information about operating segments on a basis consistent with the Company’s internal organization structure as well as information about services categories, business segments and major customers in financial statements. The Company has two reportable segments that are based on the following business units: Brachytherapy and Drug Operations. The Company’s chief operating decision maker has been identified as the Chief Executive Officer, who reviews operating results to make decisions about allocating resources and assessing performance for the entire Company. Existing guidance, which is based on a management approach to segment reporting, establishes requirements to report selected segment information quarterly and to report annually entity-wide disclosures about products and services, major customers and the countries in which the entity holds material assets and reports revenue. All material operating units qualify for aggregation under “Segment Reporting” due to their similar customer base and similarities in: economic characteristics; nature of products and services; and procurement, manufacturing and distribution processes.

Use of Estimates

The preparation of condensed consolidated financial statements in accordance with U.S. GAAP requires management of the Company to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes of the Company including: the fair value of net assets acquired in a business combination; the allowance for doubtful accounts receivable; net realizable value of the enriched barium inventory; the estimated useful lives used in calculating depreciation and amortization on the Company’s fixed assets, patents, trademarks, intangible assets and other assets; estimated amount and fair value of the asset retirement obligation related to the Company’s production facilities; equity method investment; and inputs to the Black-Scholes calculation used in determining the expense related to share-based compensation including volatility and estimated lives of options granted and impairment of long-lived assets including intangible assets and goodwill. Accordingly, actual results could differ from those estimates and affect the amounts reported in the financial statements.

Business Acquisition Accounting

The Company applies the acquisition method of accounting for those that meet the criteria of a business combination. The Company allocates the purchase price of its business acquisition based on the fair value of identifiable tangible and intangible assets and liabilities. The difference between the total cost of the acquisition and the sum of the fair values of acquired tangible and identifiable intangible assets less liabilities is recorded as goodwill. Transaction costs are expensed as incurred in general and administrative expenses.

If applicable, the Company records deferred taxes for any differences between the assigned values and tax basis of assets and liabilities. Estimated deferred taxes are based on available information concerning the tax basis of assets acquired and liabilities assumed at the acquisition date, although such estimates may change in the future as additional information becomes known.

Goodwill and In-Process Research and Development (“IPR&D”)

The fair value of acquired intangible assets is determined using an income-based approach referred to as the multi-period excess-earnings approach.

Goodwill is tested at least annually for impairment by assessing qualitative factors in determining whether it is more likely than not that the fair value of net assets is below their carrying amounts.

IPR&D assets represent the fair value of incomplete research and development (“R&D”) projects that had not reached technological feasibility as of the date of the acquisition. Initially, these assets are classified as IPR&D and are not subject to amortization. IPR&D assets that reach commercialization are amortized on a straight-line basis over their estimated useful life. Estimated useful lives are determined considering the period the assets are expected to contribute to future cash flows. IPR&D is tested for impairment at least annually or more frequently if events occur or circumstances change that would indicate a potential reduction in the fair values of the assets below their carrying value. Impairment charges are recognized to the extent the carrying value of IPR&D is determined to exceed its fair value. Post-acquisition R&D expenses related to these projects are expensed as incurred.

Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Any reference in these notes to applicable guidance is meant to refer to U.S. GAAP. The Company views its operations and manages its business in two operating segments. All long-lived assets of the Company reside in the U.S.

Equity Method Investment

Investments in companies for which the Company has the ability to exercise significant influence, but do not control, are accounted for under the equity method. Under the equity method of accounting, the Company’s share of the net earnings or losses of the investee are included in other income (expense) in the consolidated statements of operations. At the end of each reporting period, the Company considers whether impairment indicators exist to evaluate whether an equity method investment is impaired and, if so, record an impairment loss. Investments are accounted for on a one-quarter lag. As changes in ownership percentage of the Company’s investments occur, the Company assesses whether it can exercise significant influence and account for under the equity method. If the Company’s ownership percentage of the company in which it has an investment changes, the Company recognizes a gain or loss on the investment in the period of change. Included in the condensed consolidated financial statements for the nine months ended September 30, 2023 is the Company’s proportional share of losses through June 30, 2023, which were $12,000.

Grant Revenue Recognition

The Company enters into contracts with governmental agencies for services. These contracts are analyzed in order to determine if they should be accounted for under a revenue recognition model pursuant to ASC 606, Revenue from Contracts with Customers, or a grant model pursuant to ASC 958, Not-for-Profit Entities. If accounted for pursuant to a grant model, the Company must determine if the grant is conditional or unconditional, and if conditional any barriers exist which must be overcome. If unconditional, the grant is recognized as revenue immediately, and if conditional, the grant is recognized as revenue as and when the barriers are overcome. The Company concluded that payments received under the current grants represent conditional, nonreciprocal contributions, as described in ASC 958, and that the grants are not within the scope of ASC 606, as the organizations providing the grants do not meet the definition of a customer. The significant barrier to the current conditional grants are that the expenses incurred must meet the qualifications as established by the respective governmental agencies, so that the grant revenue is recognized as the qualified expenses are incurred. Expenses for grants are tracked using a project code specific to the grant, and the employees also track hours worked by using the project code. Under ASC 958, grants related to income are presented as part of the condensed consolidated statements of operations, either separately or under a general heading. Both methods are acceptable under ASC 958. The Company has elected to record grants related to income separately on the condensed consolidated statements of operations as grant revenue. The related expenses are recorded within R&D and general and administrative.

Accounting Standards Updates to Become Effective in Future Periods

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires entities to use a forward-looking approach based on expected losses to estimate credit losses on certain types of financial instruments, including trade receivables. The FASB has subsequently issued updates to the standard to provide additional clarification on specific topics. Topic 326 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022. The standard was adopted on January 1, 2023 and had an immaterial effect on the consolidated financial statements.

Other accounting standards that have been issued or proposed by the FASB that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption. The Company does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to its financial condition, results of operations, cash flows or disclosures.

Basic and diluted earnings (loss) per share are calculated by dividing net income (loss) by the weighted average number of shares of common stock outstanding and does not include the impact of any potentially dilutive common stock equivalents. At September 30, 2023 and 2022, the calculation of diluted weighted average shares did not include 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 September 30, 2023 and 2022, were as follows (in thousands):

Effective upon the closing of the Merger with Viewpoint on February 3, 2023, the Company assumed 3,387,093 warrants to purchase shares of common stock with an exercise price of $0.27 per share and 24,263,424 options to purchase shares of common stock with exercise prices ranging from $0.13 to $0.30 per share.

Inventory consisted of the following at September 30, 2023 and December 31, 2022 (in thousands):

Total inventory, non-current represents raw materials that were ordered in quantities to obtain volume cost discounts, which based on current and anticipated sales volumes will not be consumed within an operating cycle. At September 30, 2023, the Company estimated that the remaining enriched barium would result in 7,757 curies; approximately 1,040 of which would be obtained in the next twelve months and 6,717 would be obtained after September 30, 2024. The 1,040 curies were included in raw materials current inventory and the 6,717 were included in inventory, non-current.

Property and equipment consisted of the following at September 30, 2023 and December 31, 2022 (in thousands):

Goodwill

The carrying amount of goodwill as of September 30, 2023 and December 31, 2022 was $27.3 million and $0, respectively, and has been recorded in connection with the Company’s Merger of Viewpoint in February 2023. The carrying value of goodwill and the change in the balance for the nine months ended September 30, 2023 are as follows (in thousands):

Other intangible assets, net consists of the following (in thousands):

The Company’s IPR&D assets represents the estimated fair value of Viewpoint’s pipeline of radiotherapy product candidates acquired in February 2023. The estimated fair value of the IPR&D assets at the acquisition date was determined using a probability-weighted income approach, which discounts expected future cash flows to present value. The projected cash flow estimates for Viewpoint’s pipeline of radiotherapy product candidates were based on certain key assumptions, including estimates of future revenue and expenses, taking into account the stage of development of the technology at the Merger date and the time and resources needed to complete development.

The following table summarizes the carrying values and fair values of the Company’s financial instruments (in thousands):

The Company has investments in U.S. Treasury Bills, some of which mature over a period greater than 90 days and are classified as short-term investments. The U.S. Treasury Bills are carried at amortized cost and classified as held-to-maturity as the Company has the intent and the ability to hold them until they mature. The carrying value of the U.S. Treasury Bills are adjusted for accretion of discounts over the remaining life of the investment. Income related to the U.S. Treasury Bills is recognized in interest income in the Company’s condensed consolidated statement of operations. The U.S. Treasury Bills are classified within Level 1 of the fair value hierarchy. During the nine months ended September 30, 2023, all of the Company's short-term investments in U.S. Treasury Bills matured. As of September 30, 2023, the Company had no held-to-maturity investments presented in cash and cash equivalents on its condensed consolidated balance sheet.

The following table presents the share-based compensation expense recognized for stock options during the three months ended September 30, 2023, and 2022 (in thousands): 

The following table presents the share-based compensation expense recognized for stock options during the nine months ended September 30, 2023, and 2022 (in thousands): 

As of September 30, 2023, total unrecognized compensation expense related to stock options was approximately $3,896,000 and the related weighted-average period over which it is expected to be recognized is approximately 2.80 years.

A summary of stock options within the Company’s share-based compensation plans as of September 30, 2023 was as follows (in thousands except for exercise prices and terms):

There were 725,000 and 4,235,000 stock option awards granted during the three months ended September 30, 2023, and 2022, respectively, with a fair value of approximately $265,000 and $1,092,000, respectively.

There were 431,250 and 100,000 stock option awards forfeited during the three months ended September 30, 2023, and 2022, respectively.

There were 91,605 and 72,500 options exercised, with approximately $37,000 and $1,000 of intrinsic value associated with these exercises on the date of exercise, during the three months ended September 30, 2023 and 2022, respectively. The Company’s current policy is to issue new shares of common stock to satisfy stock option exercises.

There were 13,830,000 and 4,440,000 option awards granted during the nine months ended September 30, 2023, and 2022, with a fair value of approximately $5,611,000 and $1,139,000 respectively.

There were 1,197,899 and 396,885 stock option awards which expired during the nine months ended September 30, 2023, and 2022, respectively.

There were 1,105,138 and 432,450 stock option awards forfeited during the nine months ended September 30, 2023, and 2022, respectively.

There were 1,913,185 and 72,500 stock options exercised, with approximately $607,000 and $1,000 of intrinsic value associated with these exercises on the date of exercise, during the nine months ended September 30, 2023 and 2022, respectively.

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:

Isotope Purchase Agreement 

On  December 12, 2022, Isoray Medical, Inc. (“Medical”), a wholly owned subsidiary of Perspective Therapeutics, Inc., entered into a supply contract (the “New 2023 Agreement”) with Joint Stock Company «Isotope», a Russian company (“JSC Isotope”). Pursuant to the New 2023 Agreement, Medical will purchase Cesium-131 manufactured by Joint Stock Company ‹‹Institute of Nuclear Materials›› and sold by JSC Isotope, at the quality standards, volume, and pricing indicated in the New 2023 Agreement. The New 2023 Agreement is effective  December 12, 2022 for shipments beginning  January 1, 2023, and terminates  March 31, 2024. Medical and JSC Isotope previously entered into a separate supply contract, dated  March 18, 2021, as subsequently amended by six addenda that modified minor shipping, manufacturing, and payment terms (together, the “Prior Agreement”). Although the Prior Agreement remained in effect until  March 31, 2023, Medical began purchasing Cesium-131 under the New 2023 Agreement beginning January 1, 2023 due to a change in the price.

Additionally, on  December 12, 2022, Medical entered into a supply contract (the “New 2024 Agreement”) with JSC Isotope. Pursuant to the New 2024 Agreement, Medical will purchase Cesium-131 manufactured by Joint Stock Company ‹‹Institute of Nuclear Materials›› and sold by JSC Isotope, at the quality standards, volume, and pricing indicated in the New 2024 Agreement. The New 2024 Agreement is effective  December 12, 2022 for shipments beginning  January 1, 2024, and terminates  March 31, 2025.

Merger Related Contingency

The Company has been in settlement negotiations with a representative for six stockholder plaintiff firms alleging the Company violated Delaware law in its preliminary proxy statement that was disseminated to stockholders in  November 2022 for the Company’s annual meeting held in  December 2022. Based on these settlement negotiations to date, the Company estimates that it will settle for no more than an aggregate of $200,000 and therefore recorded an estimated liability of $200,000 as of  December 31, 2022. There was no change in the estimate as of September 30, 2023. This balance is included in accrued expenses on the unaudited interim condensed consolidated balance sheet.

The Company accounts for its leases under ASC 842, Leases. Upon the adoption of Topic 842 on July 1, 2019, the Company assumed its lease with Energy Northwest for the office and laboratory space in Richland, Washington would terminate in April 2024 and it would incur an early termination penalty of $20,000. In April 2023, the Company determined that it would use the lease through the full term of the current lease, ending April 2026, which would eliminate the aforementioned early termination penalty. Due to the change in the assumption of the lease term, the Company adjusted the right-of-use asset and lease liability during the three months ended June 30, 2023. As of the date of this modification, the operating lease is included on the balance sheet at the present value of the future base payments discounted at an 8% discount rate using the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term and amount equal to the lease payments in a similar economic environment as the lease does not provide an implicit discount rate.

On July 1, 2023, the Company entered into a lease with Unico Properties LLC for office space in Seattle, Washington that terminates October 2028. Upon entering this lease, the Company recognized a right-of-use asset and lease liability of approximately $0.8 million on the balance sheet based upon the present value of the future base payments discounted at an 8% discount rate using the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term and amount equal to the lease payments in a similar economic environment as the lease does not provide an implicit discount rate. The weighted average remaining term and discount rate as of September 30, 2023 was 3.9 years and 8%, respectively.

For the three months ended September 30, 2023 and 2022, the Company’s operating lease expense was approximately $155,000 and $79,000, respectively. For the three months ended September 30, 2023 and 2022, the Company’s operating lease expense recognized in cost of sales was approximately $51,000 and $50,000, respectively, and the Company’s lease expense recognized in general and administrative expense was approximately $104,000 and $29,000, respectively. 

For the nine months ended September 30, 2023 and 2022, the Company’s operating lease expense was approximately $355,000 and $235,000, respectively. For the nine months ended September 30, 2023 and 2022, the Company’s operating lease expense recognized in cost of sales was approximately $142,000 and $149,000, respectively, and the Company’s lease expense recognized in general and administrative expense was approximately $213,000 and $86,000, respectively.

The following table presents the future operating lease payments and lease liability included on the condensed consolidated balance sheet related to the Company’s operating lease as of September 30, 2023 (in thousands):

Asset Retirement Obligation

The Company has an asset retirement obligation (“ARO”) associated with the facility it currently leases located at the Applied Process Engineering Laboratory in Richland, Washington. In connection with no longer assuming early termination in April 2024 and instead assuming the lease will be utilized through the full current term ending April 2026, the ARO changed as follows (in thousands):

The original facility lease was scheduled to expire in April 2016. Upon the end of the original lease term, the initial asset retirement estimate was fully accreted and the related ARO asset was fully amortized. The Company now anticipates using the lease through the full term of the current lease, ending April 2026, thus extending the time before asset retirement costs would be incurred. This resulted in a decrease in the ARO balance to a value of $654,000 and the Company recognized a gain on change in the estimate of $15,000 during the nine months ended September 30, 2023. At the time of the adjustment to the ARO, the undiscounted estimated asset retirement obligation was $765,000 discounted utilizing the original credit-adjusted risk-free interest rate of 5.1%.

Notes payable as of September 30, 2023 and December 31, 2022 (in thousands):

The following table presents the future principal payments included on the condensed consolidated balance sheet related to the Company’s note payable as of September 30, 2023 (in thousands):

Sources of Revenue

We have identified the following revenues disaggregated by revenue source:

During the three months ended September 30, 2023 and 2022, the Company had no international revenue. For the three months ended September 30, 2023, prostate brachytherapy comprised 55% of total revenue, while other revenue, which includes but is not limited to brain, lung, head/neck, gynecological, and pelvic treatments, and services, comprised 45% of total revenue compared to 68% and 32%, respectively, in the three months ended September 30, 2022.

During the nine months ended September 30, 2023 and 2022, the Company had no international revenue. For the nine months ended September 30, 2023, prostate brachytherapy comprised 47% of total revenue, while other revenue, which includes but is not limited to brain, lung, head/neck, gynecological, and pelvic treatments, and services, comprised 53% of total revenue compared to 72% and 28%, respectively, in the nine months ended September 30, 2022.

Concentration of Customers

The following are the Company’s largest customers, facilities, or physician practices that utilize multiple surgical facilities shown as a percentage of total sales:

As of September 30, 2023, no individual customers made up over 10% of the Company’s accounts receivable. As of December 31, 2022, one individual customer, GT Medical Technologies, made up 15.1% of the Company’s accounts receivable.

The Company operates two reportable business segments:

The Company evaluates the performance of its segments and allocates resources based on their respective operating loss and potential market. The Company had no inter-segment sales for the periods presented. Asset information by segment is not included as it is not provided to the chief operating decision maker as the allocation of resources and the evaluation of the performance of segments is not based on asset information by segment. 

Summarized financial information concerning the Company’s reportable segments are as follows (in thousands):

On February 3, 2023, the Company acquired 100% of the issued and outstanding equity and voting shares of Viewpoint Molecular Targeting, Inc. in exchange for 136,545,075 shares of the Company's common stock with a fair value of $54.618 million based on the closing market price of $0.40 per share on the acquisition date (the “Merger”). At the closing of the Merger, the Company forgave the note receivable entered into in November 2022 and the associated accrued interest with Viewpoint that was included in the note receivable. The total amount forgiven was $6.17 million, representing the $6 million loan and $0.17 million accrued interest. The Company also assumed all of Viewpoint’s outstanding stock options and warrants as of the Merger date.

Viewpoint is an alpha-particle radiopharmaceutical company in the alphaemitter market developing oncology therapeutics and complementary imaging agents. The Merger was completed to provide the Company with a new isotope in a larger market.

The Company accounted for the transaction as a business combination in accordance ASC 805, Business Combinations. The Company is in the process of performing an allocation of the purchase price paid for the assets acquired and the liabilities assumed with the assistance of an independent valuation firm. The fair values of the assets acquired, as set forth below, are considered provisional and subject to adjustment as additional information is obtained through the purchase price measurement period (a period of up to one year from the closing date). The provisional allocation of the purchase price is based on management’s preliminary estimates. Once management completes its analysis to finalize the purchase price allocation with assistance from an independent valuation firm, it is reasonably possible that there could be changes to the preliminary values. The primary areas of the purchase price allocation that are not yet finalized relate to identifiable intangible assets and goodwill.

The Viewpoint purchase price consideration and provisional allocation to net assets acquired is presented below (in thousands except for share price):

Goodwill is calculated as the difference between the acquisition date fair value of the consideration and the preliminary values assigned to the assets acquired and liabilities assumed. Goodwill is not amortized and is not currently assumed to be deductible for tax purposes. Goodwill could materially change based on changes in estimates in the fair value of the assets acquired and liabilities assumed. The goodwill is attributable to the workforce of the acquired business and the synergies expected to arise from the acquisition of Viewpoint.

The results of operations for Viewpoint since the closing date have been included in the Company’s condensed consolidated financial statements for the nine months ended September 30, 2023, and include approximately $1.1 million of grant revenue and $18.4 million of operating loss. During the nine months ended September 30, 2023, the Company recognized total transaction costs of approximately $4.6 million, which are included in general and administrative expenses on the condensed consolidated statement of operations.

The pro forma financial information below represents the combined results of operations as if the acquisition had occurred on January 1, 2022, the beginning of the comparable prior year reporting period. The unaudited pro forma financial information is presented for informational purposes only and is neither indicative of the results of operations that would have occurred if the acquisition had taken place at the beginning of the period presented nor indicative of future operating results.

The information below reflects certain nonrecurring pro forma adjustments for the three months ended September 30, 2023 and 2022 that were directly related to the business combination based on available information and certain assumptions that we believe are reasonable:

The information below reflects certain nonrecurring pro forma adjustments for the nine months ended September 30, 2023 and 2022 that were directly related to the business combination based on available information and certain assumptions that the Company believes are reasonable, including the following adjustments:

ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Throughout this Quarterly Report on Form 10-Q (“Form 10-Q”), the “Company,” “Perspective,” “we,” “us,” and “our,” except where the context requires otherwise, refer to Perspective Therapeutics, Inc. and its consolidated subsidiaries.

Cautionary Note Regarding Forward-Looking Statements

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 Perspective Therapeutics, 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, regarding our future financial condition, results of operations, business strategy and plans and objectives of management for future operations, industry trends and other future events are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “believe,” “expect,” “anticipate,” “intend,” “estimate,” “forecast,” “project,” “may,” “could,” “might,” “plan,” “project,” “should,” “will,” “would” or the negative of these terms or and other similar expressions, although not all forward-looking statements contain these identifying terms. Forward-looking statements in this Form 10-Q include, among other things:

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 the heading “Risk Factors” in our most recent Annual Report on Form 10-K (or, if applicable, Transition Report on Form 10-KT) and as updated in this Form 10-Q in Item 1A under the heading “Risk Factors” beginning on page 34 below 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 our views as of the date the statement was made (or any earlier date indicated in such statement). While we may update certain forward-looking statements from time to time, we undertake no obligation to do so, whether as a result of new information, future events or otherwise, except as required by applicable law.

Critical Accounting Policies and Estimates

The discussion and analysis of the Company’s financial condition and results of operations are based upon its condensed consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”). 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, derivative 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. Actual results could therefore differ materially from those estimates if actual conditions differ from our assumptions. The accounting policies and related risks described in Part II, Item 7 of the Company’s transition report on Form 10-KT as filed with the Securities and Exchange Commission (the “SEC”) on May 1, 2023 are those that depend most heavily on these judgments and estimates. As of September 30, 2023, there had been no material changes to any of the critical accounting policies contained therein except as discussed below:

Segments

Accounting Standards Codification (“ASC”) 280, Segment Reporting, establishes standards for reporting information about operating segments on a basis consistent with the Company’s internal organization structure as well as information about services categories, business segments and major customers in financial statements. The Company has two reportable segments that are based on the following business units: Brachytherapy and Drug Operations. The Company’s chief operating decision maker has been identified as the Chief Executive Officer, who reviews operating results to make decisions about allocating resources and assessing performance for the entire Company. Existing guidance, which is based on a management approach to segment reporting, establishes requirements to report selected segment information quarterly and to report annually entity-wide disclosures about products and services, major customers and the countries in which the entity holds material assets and reports revenue. All material operating units qualify for aggregation under “Segment Reporting” due to their similar customer base and similarities in: economic characteristics; nature of products and services; and procurement, manufacturing and distribution processes.

Use of Estimates

The preparation of condensed consolidated financial statements in accordance with U.S. GAAP requires management of the Company to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes of the Company including: the fair value of net assets acquired in a business combination; the allowance for doubtful accounts receivable; net realizable value of the enriched barium inventory; the estimated useful lives used in calculating depreciation and amortization on the Company’s fixed assets, patents, trademarks, intangible assets and other assets; estimated amount and fair value of the asset retirement obligation related to the Company’s production facilities; equity method investment; and inputs to the Black-Scholes calculation used in determining the expense related to share-based compensation including volatility and estimated lives of options granted and impairment of long-lived assets including intangible assets and goodwill. Accordingly, actual results could differ from those estimates and affect the amounts reported in the financial statements.

Business Acquisition Accounting

The Company applies the acquisition method of accounting for those that meet the criteria of a business combination. The Company allocates the purchase price of its business acquisition based on the fair value of identifiable tangible and intangible assets and liabilities. The difference between the total cost of the acquisition and the sum of the fair values of acquired tangible and identifiable intangible assets less liabilities is recorded as goodwill. Transaction costs are expensed as incurred in general and administrative expenses.

If applicable, the Company records deferred taxes for any differences between the assigned values and tax basis of assets and liabilities. Estimated deferred taxes are based on available information concerning the tax basis of assets acquired and liabilities assumed at the acquisition date, although such estimates may change in the future as additional information becomes known.

Goodwill and In-Process Research and Development (“IPR&D”)

The fair value of acquired intangible assets is determined using an income-based approach referred to as the multi-period excess-earnings approach.

Goodwill is tested at least annually for impairment by assessing qualitative factors in determining whether it is more likely than not that the fair value of net assets is below their carrying amounts.

IPR&D assets represent the fair value of incomplete research and development (“R&D”) projects that had not reached technological feasibility as of the date of the acquisition. Initially, these assets are classified as IPR&D and are not subject to amortization. IPR&D assets that reach commercialization are amortized on a straight-line basis over their estimated useful life. Estimated useful lives are determined considering the period the assets are expected to contribute to future cash flows. IPR&D is tested for impairment at least annually or more frequently if events occur or circumstances change that would indicate a potential reduction in the fair values of the assets below their carrying value. Impairment charges are recognized to the extent the carrying value of IPR&D is determined to exceed its fair value. Post-acquisition R&D expenses related to these projects are expensed as incurred.

Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Any reference in these notes to applicable guidance is meant to refer to U.S. GAAP. The Company views its operations and manages its business in two operating segments. All long-lived assets of the Company reside in the U.S.

Equity Method Investment

Investments in companies for which the Company has the ability to exercise significant influence, but do not control, are accounted for under the equity method. Under the equity method of accounting, the Company’s share of the net earnings or losses of the investee are included in other income (expense) in the consolidated statements of operations. At the end of each reporting period, the Company considers whether impairment indicators exist to evaluate whether an equity method investment is impaired and, if so, record an impairment loss. Investments are accounted for on a one-quarter lag. As changes in ownership percentage of the Company’s investments occur, the Company assesses whether it can exercise significant influence and account for under the equity method. If the Company’s ownership percentage of the company in which it has an investment changes, the Company recognizes a gain or loss on the investment in the period of change. Included in the condensed consolidated financial statements for the nine months ended September 30, 2023 is the Company’s proportional share of losses through June 30, 2023, which were $12,000.

Grant Revenue Recognition

The Company enters into contracts with governmental agencies for services. These contracts are analyzed in order to determine if they should be accounted for under a revenue recognition model pursuant to ASC 606, Revenue from Contracts with Customers, or a grant model pursuant to ASC 958, Not-for-Profit Entities. If accounted for pursuant to a grant model, the Company must determine if the grant is conditional or unconditional, and if conditional any barriers exist which must be overcome. If unconditional, the grant is recognized as revenue immediately, and if conditional, the grant is recognized as revenue as and when the barriers are overcome. We concluded that payments received under the current grants represent conditional, nonreciprocal contributions, as described in ASC 958, and that the grants are not within the scope of ASC 606, as the organizations providing the grants do not meet the definition of a customer. The significant barrier to the current conditional grants are that the expenses incurred must meet the qualifications as established by the respective governmental agencies, so that the grant revenue is recognized as the qualified expenses are incurred. Expenses for grants are tracked using a project code specific to the grant, and the employees also track hours worked by using the project code. Under ASC 958, grants related to income are presented as part of the condensed consolidated statements of operations, either separately or under a general heading. Both methods are acceptable under ASC 958. The Company has elected to record grants related to income separately on the condensed consolidated statements of operations as grant revenue. The related expenses are recorded within R&D and general and administrative.

Overview

Perspective Therapeutics has two principal subsidiaries: Viewpoint Molecular Targeting, Inc. (“Viewpoint”), a research and development and clinical-stage precision oncology company focused on developing next-generation alpha therapies related to the use of Lead-203 and Lead-212 as a diagnostic and therapeutic drug respectively; and Isoray Medical, Inc., (“Isoray”), a brachytherapy device manufacturer with the U.S. Food and Drug Administration (“FDA”) clearance for a single medical device that can be delivered to the physician in multiple configurations as prescribed for the treatment of cancers in multiple body sites.

Viewpoint

Viewpoint is developing a pipeline of radiotherapies designed to deliver powerful alpha radiation directly to cancer cells utilizing Lead-212 and specialized targeting peptides. Viewpoint is also developing complementary diagnostics that utilize the same targeting peptide and Lead-203 to provide the opportunity to understand which patients may respond to its targeted therapy.

Viewpoint’s initial product candidate, VMT-α-NET, is in development for the treatment and diagnosis of neuroendocrine tumors (“NETs”). Using a specialized peptide, VMT-α-NET is designed to target and bind to the somatostatin receptor subtype 2 (“SSTR2”) on tumor cells. As a diagnostic, Viewpoint links ²⁰³Pb, a radioactive imaging agent that emits gamma rays, to its SSTR2-targeting peptide. Through the use of imaging scans, Viewpoint is able to characterize the tumor to confirm whether the patient’s cancer expresses SSTR2. This confirms the patient may be a candidate for treatment. As a therapeutic, Viewpoint links ²¹²Pb, its alpha-particle radioactive isotope, to the same SSTR2 targeting peptide which has been shown to bind to the cancerous cell, to treat and potentially kill the tumor. In October 2022, the FDA granted fast track designation (“Fast Track”) for the Company’s VMT- α-NET asset. The FDA Fast Track designation is one of several approaches utilized by the FDA to expedite development and review of potential medicines for serious conditions and that fulfill unmet medical needs. Programs that receive Fast Track designation are entitled to more frequent interactions with the FDA on drug development plan, as well as eligibility for accelerated approval, priority review, and rolling review. While the FDA Fast Track designation accelerates the potential approval process for a new drug, there is no guarantee that the drug will be approved for commercialization.

In September 2023, the Company announced the presentation of encouraging early clinical results from an open-label, single-arm, investigator-initiated study in India investigating the safety and efficacy of [²¹²Pb]VMT-α-NET in patients with NETs and medullary thyroid carcinomas. The early clinical findings were presented at the 36^th Annual Congress of the European Association of Nuclear Medicine (EANM) for the Phase 2a study of [²¹²Pb]VMT-α-NET in pre- and post-Lutathera gastroenteropancreatic (GEP)-NET patients, being conducted at Fortis Healthcare, India. Ten adult patients with histologically confirmed NETs and metastatic medullary thyroid carcinomas who failed at least one prior line of treatment were treated as part of a compassionate use program. All patients were planned to receive [²¹²Pb]VMT-α-NET peptide at intervals of 8 weeks up to 4 doses or until evidence of radiographic progression, unacceptable toxicity or the patient’s decision to discontinue. All patients were to be co-infused with an amino acid solution for renal protection. The primary objective of the study is to evaluate the safety of low doses of [²¹²Pb]VMT-α-NET in this patient population. Secondary assessments will include objective response rate measured by RECIST 1.1 criteria, and the number of patients with treatment-related adverse events as assessed by CTCAE v.4.0. Both will be measured at 24 months after the last administered dose of [²¹²Pb]VMT-α-NET. The isotope was provided using the Company’s proprietary VMT-α-GEN generator.

Highlights of the presented results at EANM include:

Two additional patients were enrolled in the third quarter for a total of 9 GEP-NET patients and 2 medullary thyroid cancer (MTC) patients. All ongoing patients are expected to complete their 4th treatment cycle by end of February 2024. The updated clinical results will be presented at an upcoming scientific meeting in 2024.

Two patients screened in the Phase 1/2a trial in post-Lutathera GEP-NET patients were located at the University of Iowa. A third patient is scheduled for screening mid-November. If eligible, all three patients will receive treatment in December for the completion of the first cohort. The end of fourth cycle of treatment is expected in June 2024.

The end-of-life compassionate use program for patients with advanced NETs and lack of further treatment options is underway at the University Dresden in Germany. Four patients were treated during the third quarter, and investigators are planning additional treatments before the end of the year.

IND submissions are expected in November with subsequent trial activation in the first half of 2024 for NIH-sponsored studies in pre- and post-Lutathera NET patients.

The Company also presented mouse model data highlighting the efficacy of [203/212Pb]VMT-α-NET in treating metastatic neuroblastoma tumors. The study showed successful tumor uptake via sequential SPECT imaging and demonstrated a maximum tolerated dose of [²¹²Pb]VMT-α-NET as 2.22 MBq without acute toxicity, with a 100% overall survival rate at 90-days observed in the group receiving three fractionated doses of 740 kBq of [²¹²Pb]VMT-α-NET.

At the World Molecular Imaging Congress, the Company presented data highlighting the effectiveness of [²¹²Pb]VMT-α-NET in treating neuroendocrine tumors in a tumor xenograft mouse model. The results highlighted the significant therapeutic efficacy of treatment with three fractionated doses of [²¹²Pb]VMT-α-NET, which resulted in a 70% complete response rate and 80% survival at 120 days.

Viewpoint’s second product candidate, VMT01, is in development for the diagnosis and treatment of metastatic melanoma. Using a specialized peptide, VMT01 is designed to target the melanocortin 1 receptor (MC1R) on tumor cells. As a diagnostic, Viewpoint either links ²⁰³Pb or Gallium-68 to its MC1R-targeting peptide. These two imaging tracers are suitable for Single-photon emission computed tomography (“SPECT”) and positron emission tomography (“PET”) imaging, respectively. Through the use of the imaging scans, Viewpoint is able to characterize whether the patient’s cancer expresses MC1R. This confirms whether the patient may be a candidate for treatment. As a therapeutic, Viewpoint links ²¹²Pb to the same MC1R targeting peptide which has been shown to bind to the cancerous cell, to treat and potentially kill the tumor. The melanoma program focuses primarily on development of the therapeutic compound.

VMT01 has recently completed clinical imaging studies at Mayo Clinic, Rochester. Results were presented at the Society of Nuclear Medicine and Molecular Imaging Annual Meeting in Chicago in June 2023. The published preclinical data show its potential to deliver durable complete responses in treatment-resistant models when combined with existing immunotherapy drugs used to treat melanoma. VMT01’s Phase 1 Mono Dose Escalation in Advanced Melanoma preliminary data readout is expected in the fourth quarter of 2023.

VMT-α-NET for neuroendocrine cancers and VMT01 for melanoma are both entering therapeutic trials under IND at US institutions. We believe VMT-α-NET has the potential for FDA Priority Review Voucher as a candidate for pediatric neuroblastoma indication.

In November 2023, the Company announced the first patient had been dosed in the Phase1/2a dose escalation trial for VMT- α-NET for the treatment of patients with unresectable or metastatic SSTR2 expressing NETs at Washington University in St. Louis. This is a multi-center open-label study (clinicaltrials.gov identifier NCT05636618) of [²¹²Pb]VMT-α-NET targeted alpha-particle therapy for patients with advanced SSTR2-positive neuroendocrine tumors. The first part of this Phase 1/2a trial is a dose-escalation phase designed to determine the Maximum Tolerated Dose (“MTD”) or Maximum Feasible Dose (“MFD”) following a single administration of [²¹²Pb]VMT-α-NET. Patients who have not received prior PRRT will be scheduled to receive up to 4 administrations of [²¹²Pb]VMT-α-NET approximately 8 weeks apart. The first patient cohort will receive 111 MBq (3mCi) per dose. The second cohort will receive administered activities of 185 MBq (5mCi), with cohorts 3 and 4 receiving 370 MBq (10 mCi) and 555 MBq (15 mCi), respectively, if the MTD or MFD is not reached during escalation. According to the Modified Toxicity Probability Interval 2 (mTPI-2) study design, intermediate de-escalation doses are also possible to allow selection of the optimal activity dose to take forward into the dose expansion part of the study.

The second part of the study is a dose expansion phase based on the identified MTD/MFD. Patients with positive uptake on FDA approved SSTR2 PET/CT will receive a fixed dose of [²¹²Pb]VMT-α-NET IV administered at the recommended Phase 2 dose and schedule determined in the Phase I dose escalation. [²¹²Pb]VMT-α-NET’s Dose Escalation in PRRT-naïve NETS preliminary data readout is expected in the fourth quarter of 2023.

The Company currently has two active sites for the study and anticipates that two additional study sites will become operational in December. The Company remains on track to launch an additional 14 study sites.

In August 2023, the Company announced the first patient had been dosed in the Phase 1/2a dose escalation trial for VMT01 for the treatment of histologically confirmed MC1R-positive metastatic melanoma and in October 2023 the Company announced completion of recruitment for the first patient cohort. The trial is a first-in-human, non-randomized, multi-center open-label dose escalation, dose expansion trial of ²¹²Pb-VMT01 in up to 52 patients with histologically confirmed melanoma and a positive MC1R imaging scan using ²⁰³Pb-VMT01 or ⁶⁸Ga-VMT02. MC1R is a receptor that is expressed on the surface of melanoma cells. As such MC1R represents a potentially useful means of targeting therapeutics to melanoma.

The first part of the VMT01 trial is a dose-escalation phase designed to determine the MTD or MFD following a single administration of [²¹²Pb]VMT01. The first patient cohort received 111 MBq (3mCi) per dose. The first patient was dosed at the University of Michigan. Three patients have been dosed at 111 MBq (3mCi), closing cohort 1. No serious adverse events or dose-limiting toxicities have been observed. The Company anticipates opening the second patient cohort, which will receive 185 MBq (5mCi) per dose, in December and anticipates the completion of screening in the first quarter of 2024.

Nearing completion of analysis of the dosimetry portion of the Company’s TIMAR-1 study, a first-in-human study evaluating the suitability of [²⁰³Pb]VMT01 for SPECT/CT imaging and [⁶⁸Ga]VMT02 for PET/CT imaging of MC1R-expressing metastatic melanoma. Perspective is actively working on the Clinical Study Report and anticipates it will be released in the first half of 2024.

The second cohort will receive administered activities of 185 MBq (5mCi), with cohorts 3 and 4 receiving 370 MBq (10 mCi) and 555 MBq (15 mCi) respectively, if the MTD or MFD is not reached during escalation. According to the Modified Toxicity Probability Interval 2 (mTPI-2) study design, intermediate de-escalation doses are also possible to allow selection of the optimal activity dose to take forward into the dose expansion part of the study.

The second part of the trial is a dose expansion phase based on the identified MTD/MFD. Patients may be eligible to receive up to 3 administrations of ²¹²Pb-VMT01 approximately 8 weeks apart. A dosimetry sub-study utilizing the SPECT imaging surrogate, ²⁰³Pb-VMT01, has been added to assess normal organ biodistribution, tumor uptake, dosimetry, and correlation of uptake with observed toxicities and efficacy.

²¹²Pb was supplied using Perspective’s proprietary ²¹²Pb-VMT-α-GEN benchtop generator and final manufacturing was performed at Perspective’s facility in Coralville, IA. Additional CDMO manufacturing sites are expected to be brought online in the coming months to enable broader coverage for sites across the US.

Viewpoint is developing complementary diagnostics to its pipeline of radiotherapies that utilize the same targeting peptide and Lead-203 to provide the opportunity to understand which patients may respond to its targeted therapy. At the World Imaging Congress, data was presented on the Company’s novel guest/host platform for effective in vivo image-guided pre-targeted alpha particle therapy. Data showed that the radioligand [²⁰³Pb]PSC-PEG3-Adma demonstrated extended lag times, impressive tumor-to-tissue ratios and has the potential to further reduce radiation toxicity using [²⁰³Pb]PSC-PEG3-Adma as a guide. A pipeline expansion with proof-of-concept human imaging data is expected in the first quarter of 2024.

Isoray

Isoray manufactures and sells its medical device product as the Cesium-131 brachytherapy seed or Cesium Blu. The Company markets the Cesium-131 brachytherapy seed for the treatment of prostate cancer, brain cancer, lung cancer, head and neck cancers, gynecological cancer, pelvic/abdominal cancer, and colorectal cancer. In July 2023, the Centers for Medicare & Medicaid Services published their proposed payment rates for the Hospital Outpatient Prospective Payment System and Ambulatory Surgical Center Payment System for 2024 and the Company noted the proposed Medicare payment rates showed a slight increase for Cesium-131 brachytherapy seed codes which management believes will help further adoption among facilities. The final rule was issued in November 2023 and with the final Medicare payment rates for 2024 being slightly lower than the proposed payment rates that were released in July 2023. Compared to 2023, one of the Cesium-131 brachytherapy seed codes increased while the other code decreased.

Isoray’s brachytherapy seed utilizes Cesium-131, with a 9.7day half-life, as its radiation source. Isoray believes that it is the unique combination of the short half-life and the energy of the Cesium-131 isotope that are yielding the beneficial treatment results that have been published in peer reviewed journal articles and presented in various forms at conferences and tradeshows.

In August 2023, the Company announced a collaborative initiative focused on increasing access of Cesium-131 seeds for the treatment of certain brain cancers in the form of GT Medical Technologies, Inc.’s (“GT Medical”) GammaTile™ Therapy (“GammaTile™”). GammaTile™ is a radiation treatment option implanted during the last five minutes of brain tumor resection surgery. It is composed of bioresorbable collagen tiles embedded with Cesium-131 radiation seeds supplied by Perspective Therapeutics. GammaTile delivers targeted Cesium-131 radiation to help prevent brain tumor cell regrowth in newly diagnosed and recurrent brain tumors, including glioblastomas, metastatic brain tumors, aggressive meningiomas, and other brain tumor types. This expanded access is expected to allow GT Medical to order seeds on a shorter notice in order to fulfill short notice orders received from their customers.

In October 2023, long-term data for Cesium-131 brachytherapy in the treatment of prostate cancer was presented at the American Society for Radiation Oncology's (“ASTRO”) annual conference, describing urinary data collected from 341 patients treated with Cesium-131 between 2006 and 2022. Preliminary long-term data for Cesium-131 utilized in salvage treatment of recurrent cervical and uterine cancers was also presented at the ASTRO annual conference. 

Isoray has distribution agreements outside of the United States for its brachytherapy seed. These distributors are responsible for obtaining regulatory clearance to sell the Company’s products in their territories, with the support of the Company. As of the date of this Report, Isoray has distributors in India with no reported revenues in this location during the three or nine months ended September 30, 2023.

Isoray continues to explore how our proprietary isotope, Cesium-131, may be effective in the treatment of additional cancers. We recently entered into a research grant agreement with a leading cancer center to study the treatment of metastatic melanoma. In this immuno-oncology study, Cesium-131 will be used in combination with an immune checkpoint inhibitor. Metastatic melanoma is the most virulent form of skin cancer, often spreading to lymph nodes, the lungs, liver, brain, and tissue under the skin. We also have an agreement with the University of Cincinnati to study the combination of Cesium-131 with the immunotherapy drug Keytruda® in recurrent head and neck cancers.

Merger

On September 27, 2022, the Company entered into an Agreement and Plan of Merger (the “Original Merger Agreement”) by and among the Company, Isoray Acquisition Corp., a Delaware corporation and wholly-owned subsidiary of the Company (“Merger Sub”), Viewpoint, and Cameron Gray, as the representative of the Owners (as defined in the Original Merger Agreement), as amended by the First Amendment to Agreement and Plan of Merger entered into by the parties on October 21, 2022 (the “Amendment,” and together with the Original Merger Agreement, the “Merger Agreement”). On February 3, 2023 (the “Closing”), the Company completed the merger of Merger Sub with Viewpoint (such transaction being the “Merger”). Viewpoint is an alpha-particle radiopharmaceutical company in the alphaemitter market developing oncology therapeutics and complementary imaging agents. In connection with the Closing, the Company issued 136,545,075 shares of common stock, representing approximately 49% of the fully-diluted outstanding capital stock of the Company, to the stockholders of Viewpoint, with 10% of those shares being held in escrow by U.S. Bank National Association (“U.S. Bank”) for the twelve-month period following the Closing pursuant to the terms of the Merger Agreement and an escrow agreement entered into among the Company, U.S. Bank and Cameron Gray.

For a more detailed summary of the Merger Agreement, see our Forms 8-K filed with the SEC on September 28, 2022 and on February 6, 2023, as well as our Form 8-K/A filed with the SEC on April 21, 2023.

Results of Operations

Three months ended September 30, 2023, and 2022 (in thousands, except for percentages):