What changed in this filing

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Item 9A. Controls and Procedures

2020-09-25 compared with 2019-09-27 · 220 added, 202 removed, 1010 unchanged (29% of the section changed)

23 unchanged sentences

Michael McCormick, Chairman

Each member of the Board of Directors serves a one-year term and is subject to reelection at the Company’s Annual Meeting of Shareholders held each year.

The Company’s directors, as named above, will serve until the next annual meeting of the Company’s shareholders or until their successors are duly elected and have qualified.

Directors will be elected for one-year terms at the annual shareholders meeting.

There is no arrangement or understanding between any of the directors or officers of the Company and any other person pursuant to which any director or officer was or is to be selected as a director or officer, and there is no arrangement, plan or understanding as to whether non-management shareholders will exercise their voting rights to continue to elect the current directors to the Company's board.

There are also no arrangements, agreements or understandings between non-management shareholders that may directly or indirectly participate in or influence the management of the Company’s affairs.

Each member of the Board of Directors serves a one-year term and is subject to reelection at the Company’s Annual Meeting of Stockholders held each year.

The Company’s directors, as named above, will serve until the next annual meeting of the Company’s stockholders or until their successors are duly elected and have qualified.

Directors will be elected for one-year terms at the annual stockholders meeting.

There is no arrangement or understanding between any of the directors or officers of the Company and any other person pursuant to which any director or officer was or is to be selected as a director or officer, and there is no arrangement, plan or understanding as to whether non-management stockholders will exercise their voting rights to continue to elect the current directors to the Company's board.

There are also no arrangements, agreements or understandings between non-management stockholders that may directly or indirectly participate in or influence the management of the Company’s affairs.

Lori Woods – Ms.

Woods has been a Director of the Company since June 4, 2018 and brings more than 30 years of experience in the healthcare industry and is particularly well-known and respected in the brachytherapy community.

Woods returns to Isoray after previously serving as Vice President from 2006 to February 2008 at which time she was appointed Acting Chief Operating Officer before her appointment to Chief Operating Officer in February 2009, a position she held until January 2010.

Woods returned to Isoray after previously serving as Vice President from 2006 to February 2008, at which time she was appointed Acting Chief Operating Officer before her appointment to Chief Operating Officer in February 2009, a position she held until January 2010.

Beginning in February 2016, and continuing until her appointment as Interim CEO on June 4, 2018, Ms.

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Chief Financial Officer, Co-Principal Financial Officer

Controller, Co-Principal Financial and Principal Accounting Officer

Mark Austin 2

Controller, Co-Principal Financial and Principal Accounting Officer, Corporate Secretary

William Cavanagh III

1 unchanged sentence

Michael Krachon 3

Vice President, Sales and Marketing

Executive Vice President, Sales and Marketing

Jennifer Streeter 4

Vice President, Human Resources, Interim Chief Operating Officer

Director of Operations, Corporate Secretary

The Board of Directors appointed Lori Woods as Interim Chief Executive Officer and Director on June 4, 2018.

On December 12, 2018, the Board of Directors appointed Ms.

Woods as Chief Executive Officer and Director.

Chief Operating Officer, Vice President, Human Resources

Krista Cline 5

Director of Operations

Woods’ biographical information is incorporated by reference in the board membership section of Part III, Item 10.

Effective July 19, 2019, Mrs.

Streeter was appointed Interim Chief Operating Officer.

Effective September 15, 2020, Mr.

Austin was appointed Corporate Secretary.

Effective June 23, 2020, Mr.

Krachon was appointed Executive Vice President of Sales and Marketing.

Effective June 23, 2020, Mrs.

Streeter was appointed Chief Operating Officer.

Cline also served as Corporate Secretary until September 15, 2020.

Jonathan Hunt – Mr.

10 unchanged sentences

Austin has served as Controller, Principal Financial and Accounting Officer, since July 2017 and Co-Principal Financial Officer since February 12, 2019.

On September 15, 2020, Mr.

Austin was appointed Corporate Secretary.

Prior to joining the Company, Mr.

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Krachon brings more than 20 years’ experience of progressive growth in sales and marketing in the medical industry to the Company.

He joined Isoray in March 2016 as Vice President, Sales and Marketing.

He joined Isoray in March 2016 as Vice President, Sales and Marketing and on June 23, 2020, was appointed Executive Vice President of Sales and Marketing.

Prior to joining Isoray, Mr.

17 unchanged sentences

In September 2016, she accepted responsibility as Vice President of Human Resources.

Effective July 19, 2019, she was appointed Interim Chief Operating Officer.

Effective July 19, 2019, she was appointed Interim Chief Operating Officer and on June 23, 2020, was appointed Chief Operating Officer.

Prior to joining Isoray, Mrs.

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Cline was appointed Senior Director of Operations.

She also functions as Isoray’s corporate secretary.

Cline has guided many of Isoray’s operational improvements and milestones including:

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The information in this section is based solely upon a review of Forms 3, Forms 4, and Forms 5 received by us.

We believe that Isoray’s executive officers, directors and 10% shareholders timely complied with their filing requirements during the year ended June 30, 2019, except as follows – Jonathan Hunt (one Form 3 and one Form 4 with one transaction each), Krista Cline (one Form 3 and one Form 4).

These Form 3s and Form 4s were filed late.

We believe that Isoray’s executive officers, directors and 10% stockholders timely complied with their filing requirements during the year ended June 30, 2020.

Code of Ethics

5 unchanged sentences

Nominating Procedures

There have been no material changes to the procedures by which our shareholders may recommend nominees to the Board of Directors during our last fiscal year.

There have been no material changes to the procedures by which our stockholders may recommend nominees to the Board of Directors during our last fiscal year.

Audit Committee

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All options were granted at the fair market value of the Company’s stock on the date of grant and the Company used a Black-Scholes methodology as discussed in the footnotes to the financial statements to value the options.

Effective June 23, 2020, Mr.

Krachon was appointed Executive Vice President of Sales and Marketing.

During fiscal year 2019, the vacation policy was changed for these individuals to an unlimited vacation policy with no accrual.

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Cavanagh’s includes $10,000 to assist with his relocation to Richland, WA.

In June 2019, the Compensation Committee of the Company set the annual base salary for fiscal 2020 for Lori Woods, our Chief Executive Officer and Director, at $315,612 (no increase), for William Cavanagh, Chief Research and Development Officer, at $220,256 (no increase) and for Michael Krachon, our Vice President Sales and Marketing, at $243,337 (no increase).

Outstanding Equity Awards at Fiscal Year-End

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Michael Krachon

Represents a June 27, 2017, grant, one-fourth of which became exercisable on June 27, 2017, one-fourth of which became exercisable on June 27, 2018, one-fourth of which became exercisable on June 27, 2019, and the final fourth will become exercisable on June 27, 2020.

Represents a June 27, 2017, grant, all of which are exercisable as of June 27, 2020.

Represents a June 27, 2012, grant, all of which were exercisable as of June 27, 2015.

Represents a June 17, 2014, grant, all of which were exercisable as of June 17, 2017.

Represents a June 13, 2018, grant, one-fourth of which will become exercisable on December 13, 2018, one-fourth of which became exercisable on June 13, 2019, one-fourth of which will become exercisable on June 13, 2020, and the final fourth will become exercisable on June 13, 2021.

Represents a June 13, 2018, grant, one-fourth of which became exercisable on December 13, 2018, one-fourth of which became exercisable on June 13, 2019, one-fourth of which became exercisable on June 13, 2020, and the final fourth will become exercisable on June 13, 2021.

Represents a June 13, 2018, grant, one-fourth of which became exercisable on June 13, 2018, one-fourth of which became exercisable on June 13, 2019, one-fourth of which became exercisable on June 13, 2020, and the final fourth will become exercisable on June 13, 2021.

Represents a June 18, 2019, grant, one-fourth of which became exercisable on June 18, 2019, one-fourth of which became exercisable on June 18, 2020, one-fourth of which will become exercisable on June 18, 2021, and the final fourth will become exercisable on June 18, 2022.

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The Company has not made any contributions to the 401(k) plan and does not maintain any other retirement plans for its executives or employees.

Role of the Compensation Consultan t

Pursuant to its Charter, the Compensation Committee has the authority to engage independent compensation consultants and other professionals to assist in the design, formulation, analysis, and implementation of compensation programs for our executive officers.

During fiscal 2020, the Committee engaged Pearl Meyer to review various elements of the Company's overall compensation program, including performing reviews of the Company's 2020 executive compensation plans.

Role of Benchmarking and Peer Groups

As part of our pay philosophy, our executive compensation program is designed to attract, motivate and retain our executives in an increasingly competitive market.

To this end, during fiscal 2020 we evaluated industry-specific and general market compensation practices and trends to ensure that our program features and NEO pay opportunities remain appropriately competitive.

When determining salaries, target bonus opportunities and long-term incentive grants for NEOs, the Committee considers the performance of the Company and the individual, the nature of an individual's role within the Company, experience in the officer's current role, as well as input from its independent compensation consultant, among other variables.

In fiscal 2020, to facilitate its review and determination of executive compensation, the Committee engaged Pearl Meyer to conduct a comprehensive competitive review of our executive compensation program.

In connection with this review and in consultation with Pearl Meyer and senior management of the Company, Pearl Meyer identified a peer group comprised of healthcare equipment, pharmaceutical and biotechnology companies roughly similar to the Company in revenue size or market capitalization, and focused on cancer treatments to the extent possible;

the peer group consists of the 16 companies listed below:

AVEO Pharmaceuticals, Inc.

Fortress Biotech, Inc.

Sunesis Pharmaceuticals, Inc.

Cancer Genetics, Inc.

Idera Pharmaceuticals

TRACON Pharmaceuticals, Inc.

Capricor Therapeutics, Inc.

Northwest Biotherapeutics, Inc.

ViewRay, Inc.

Cleveland BioLabs, Inc.

Onconova Therapeutics, Inc.

Cyclacel Pharmaceuticals, Inc.

Pieris Pharmaceuticals, Inc.

Fate Therapeutics, Inc.

Plus Therpeutics, Inc.

The median (50 th percentile) revenue size of the peer group was approximately $4 million, while the median market capitalization was $39 million;

Isoray's revenue and market capitalization were roughly at the 59 th and 52 nd percentiles of the peer group, respectively.

In addition to peer group data, four published or private compensation surveys were also utilized in Pearl Meyer's 2020 report and comparisons to survey benchmark positions were made based on the Company's revenue or employee size.

Pearl Meyer completed its review in May 2020 and presented its analysis of the Company's executive compensation program relative to peer and survey 25 th , 50 th and 75 th percentile levels.

Overall, the study suggested that total direct compensation was below the 25 th percentile market levels.

In June 2020, the Compensation Committee of the Company set the annual base salary for fiscal 2021 for Lori Woods, our Chief Executive Officer and Director, at $347,173 (10% increase), for William Cavanagh, Chief Research and Development Officer, at $240,080 (9% increase) and for Michael Krachon, our Vice President Sales and Marketing, at $267,670 (10% increase).

Fiscal Year 2020 Director Compensation

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Annual incentive awards are awarded at the sole determination of the Compensation Committee (on behalf of the Board) based on the actual and measurable performance of the Company based on a set of corporate objectives for the previous year.

For fiscal year 2019, each named officer had an opportunity to earn a bonus of five percent (5%) of his or her annual base salary for a twenty-five percent (25%) or greater increase in revenue from the prior fiscal year’s comparable quarter.

Also, effective for fiscal year 2019, each named officer has an opportunity to earn a bonus of five percent (5%) of his or her annual base salary for a twenty-five percent (25%) or greater increase in revenue over the prior fiscal year.

For fiscal 2019, the Company achieved 25% revenue growth in one of four fiscal quarters.

As a result, the following bonuses were paid to our NEOs who were serving as officers during that quarter and are reported in the non-equity incentive compensation column of the Summary Compensation Table of this Form 10-K.

In conjunction with Ms.

Woods’ promotion to CEO from Interim CEO and effective January 1, 2019, she had the opportunity to earn a bonus of seven percent (7%) of her annual base salary for a twenty-five percent (25%) or greater increase in revenue from the prior fiscal year’s comparable quarter and an opportunity to earn a bonus of seven percent (7%) of her annual base salary for a twenty-five percent (25%) or greater increase in revenue over the prior fiscal year.

No bonuses were earned at this level in fiscal year 2019.

For fiscal year 2020, the bonus plan was such that the Chief Executive Officer had an opportunity to earn a bonus of seven percent (7%) of his or her annual base salary and each other named officer had an opportunity to earn a bonus of five percent (5%) of his or her annual base salary by meeting the following parameters:

half of the bonus was paid if the Company had a twenty-five percent (25%) increase in revenue from the prior year’s comparable quarter;

one quarter of the bonus was paid if the Company had a gross margin percentage of fifty percent (50%) or higher in the applicable quarter;

and one quarter of the bonus was paid if the Company had a net loss margin of negative forty percent (-40%) or less in the applicable quarter.

Additionally, the Chief Executive Officer had an opportunity to earn a bonus of seven percent (7%) of his or her annual base salary and each other named officer had an opportunity to earn a bonus of five percent (5%) of his or her annual base salary by meeting the following parameters:

half of the bonus was paid if the Company had a twenty-five percent (25%) increase in revenue from the prior fiscal year;

one quarter of the bonus was paid if the Company had a gross margin percentage of fifty percent (50%) or higher in the fiscal year;

and one quarter of the bonus was paid if the Company had a net loss margin of negative forty percent (-40%) or less in the fiscal year.

For fiscal year 2020, all of the metrics were met for the first and third fiscal quarters as well as for the full fiscal year.

During the second fiscal quarter for 2020, fifty percent (50%) of the metrics were acheived.

2020 Bonus ($)

1 unchanged sentence

William Cavanagh – CRDO

Michael Krachon - Vice President Sales and Marketing

For fiscal year 2020, the bonus plan was revised so that the Chief Executive Officer has an opportunity to earn a bonus of seven percent (7%) of his or her annual base salary and each other named officer has an opportunity to earn a bonus of five percent (5%) of his or her annual base salary by meeting the following parameters:

Michael Krachon - Executive Vice President Sales and Marketing

For fiscal year 2021, the bonus plan was revised so that the Chief Executive Officer has an opportunity to earn a bonus of eight percent (8%) of his or her annual base salary and each other named officer has an opportunity to earn a bonus of six percent (6%) of his or her annual base salary by meeting the following parameters:

half of the bonus will be paid if the Company has a twenty-five percent (25%) increase in revenue from the prior year’s comparable quarter;

one quarter of the bonus will be paid if the Company has a gross margin percentage of fifty percent (50%) or higher in the applicable quarter;

and one quarter of the bonus will be paid if the Company has a net loss margin of negative forty percent (-40%) or less in the applicable quarter.

one quarter of the bonus will be paid if the Company has a gross margin percentage of fifty-five percent (55%) or higher in the applicable quarter;

and one quarter of the bonus will be paid if the Company has a net loss margin of negative twenty-five percent (-25%) or less in the applicable quarter.

Additionally, the Chief Executive Officer has an opportunity to earn a bonus of eight percent (8%) of his or her annual base salary and each other named officer has an opportunity to earn a bonus of six percent (6%) of his or her annual base salary by meeting the following parameters:

half of the bonus will be paid if the Company has a twenty-five percent (25%) increase in revenue from the prior fiscal year;

one quarter of the bonus will be paid if the Company has a gross margin percentage of fifty-five percent (55%) or higher in the fiscal year;

and one quarter of the bonus will be paid if the Company has a net loss margin of negative twenty-five percent (-25%) or less in the fiscal year.

On June 23, 2020, the Committee approved stock option grants to our named executive officers outlined in the table below, at an exercise price of $0.61, our closing stock price on June 23, 2020.

2 unchanged sentences

William Cavanagh – CRDO

Michael Krachon - Vice President Sales and Marketing

Michael Krachon - Executive Vice President Sales and Marketing

Risks Related to Compensation Policies and Practices

3 unchanged sentences

Recoupment Policy

In order to align further management’s interests with the interests of our shareholders and to support good corporate governance practices, the Board has adopted a recoupment policy.

In order to align further management’s interests with the interests of our stockholders and to support good corporate governance practices, the Board has adopted a recoupment policy.

Subject to rules of the SEC and NYSE American, in the event that we are required to prepare an accounting restatement due to the material noncompliance with any financial reporting requirement under the federal securities laws, we will form a committee of the independent directors to determine whether we will recover from any of our current or former executive officers, as determined in accordance with such rules, who received performance-based compensation (including stock options awarded as compensation) during the period for which we are required to prepare an accounting restatement, based on the erroneous data, in excess of what would have been paid to the executive officer under the accounting restatement.

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William and Karen Thompson Trust 3

Jamie Granger 4 Hostetler Living Trust 5

Jamie Granger 4

Hostetler Living Trust 5

Leslie Fernandez 6

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ITEM 15 – EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

and Subsidiaries

Index to Consolidated Financial Statements

Reports of Independent Registered Public Accounting Firm

Consolidated Balance Sheets

Consolidated Statements of Operations

Consolidated Statements of Changes in Stockholders’ Equity

Consolidated Statements of Cash Flows

Notes to the Consolidated Financial Statements

EXHIBIT INDEX

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Bylaws, incorporated by reference to Exhibit C of the Form Def 14A filed on November 9, 2018.

Amendment and Termination of Rights Agreement, dated November 7, 2018, by and between Isoray, Inc.

and Computershare Trust Company, N.A., as Rights Agent, incorporated by reference to Exhibit 4.1 of the form 8-K filed on November 8, 2018.

Warrant to Purchase Common Stock, dated May 20, 2018, incorporated by reference to Exhibit 10.2 of the Form 8-K filed on May 21, 2018.

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2 filed on October 13, 2006 (Reg.

Contract, dated December 15, 2015 and effective as of December 7, 2015, by and between Isoray Medical, Inc.

and The Open Joint Stock Company ‹‹ Isotope ›› (confidential treatment granted for redacted portions), incorporated by reference to Exhibit 10.85 of the Form 8-K filed on December 21, 2015.

Stipulation of Settlement, dated September 23, 2016, by and between Isoray, Inc., Dwight Babcock, and the settlement class, incorporated by reference to Exhibit 10.1 of the Form 10-Q filed on November 9, 2016.

1 to contract with The Open Joint Stock Company ‹‹ Isotope ››, dated December 22, 2016 and effective as of December 9, 2016, by and between Isoray Medical, Inc.

and The Open Joint Stock Company ‹‹ Isotope ›› (confidential treatment granted for redacted portions), incorporated by reference to Exhibit 10.1 of the Form 8-K filed on December 28, 2016.

Eighth Amendment, dated July 9, 2018, to the Share Rights Agreement, dated as of February 1, 2007, between Isoray, Inc.

and Computershare Trust Company, N.A., as Rights Agent, incorporated by reference to Exhibit 4.1 of the form 8-K filed on July 12, 2018.

Irradiation Services Agreement, dated November 29, 2016, between The Curators of the University of Missouri and Isoray Medical, Inc.

(confidential treatment requested for redacted portions), incorporated by reference to Exhibit 10.

(confidential treatment granted for redacted portions), incorporated by reference to Exhibit 10.

1 of the Form 10-Q filed on February 9, 2017.

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and MedikorPharma-Ural LLC, incorporated by reference to Exhibit 10.2 of the Form 8-K filed on August 31, 2017.

2 to supply contract by and between Isoray Medical, Inc.

and The Open Joint Stock Company «Isotope» (confidential treatment requested for redacted portions), incorporated by reference to Exhibit 10.1 of the Form 8-K filed on October 27, 2017.

Manufacturing and Supply Agreement, dated January 3, 2018, between Isoray Medical, Inc.

24 unchanged sentences

Woods, dated effective January 1, 2019, incorporated by reference to the Form 8-K filed on December 17, 2018.

Addendum #8 to Contract between Isoray Medical, Inc.

and Joint Stock Company <<Isotope>>, signed December 24, 2018 (confidential treatment requested for redacted portions), incorporated by reference to Exhibit 10.4 of the Form 10-Q filed on February 13, 2019.

Amendment to Exhibit B of Manufacturing and Supply Agreement between Isoray Medical, Inc.

and GT Medical Technologies, Inc., dated December 28, 2018 (confidential treatment requested for redacted portions), incorporated by reference to Exhibit 10.5 of the Form 10-Q filed on February 13, 2019.

and GT Medical Technologies, Inc., dated December 28, 2018 (confidential treatment granted for redacted portions), incorporated by reference to Exhibit 10.5 of the Form 10-Q filed on February 13, 2019.

Employment Agreement between Isoray, Inc.

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Amended and Restated Manufacturing and Supply Agreement, dated April 26, 2019, between Isoray Medical, Inc.

and GT Medical Technologies, Inc., (confidential treatment requested for redacted portions), incorporated by reference to the Form 8-K filed on May 2, 2019.

and GT Medical Technologies, Inc., (confidential treatment granted for redacted portions), incorporated by reference to the Form 8-K filed on May 2, 2019.

Amendment to Exhibit B of Manufacturing and Supply Agreement between Isoray Medical, Inc.

and GT Medical Technologies, Inc., dated December 28, 2018 (confidential treatment requested for redacted portions), incorporated by reference to the Form 8-K filed on May 28, 2019.

and GT Medical Technologies, Inc., dated December 28, 2018 (confidential treatment granted for redacted portions), incorporated by reference to the Form 8-K filed on May 28, 2019.

Revision to Bonus Plan for fiscal year 2020, dated June 18, 2019, incorporated by reference to Item 5.02 of the Form 8-K filed on June 24, 2019.

Addendum #9 to Contract between Isoray Medical, Inc.

and Joint Stock Company <<Isotope>>, signed July 11, 2019 (confidential treatment requested for redacted portions), filed herewith.

Amended and Restated Employment Agreement between Isoray Inc.

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Contract Modification, entered into on August 19, 2019 with an effective date of July 3, 2019, to Contract No.

X-40403 between Energy Northwest and Isoray Medical, Inc.

X-40403 between Energy Northwest and Isoray Medical, Inc., incorporated by reference to Exhibit 10.45 of the Form 10-K filed on September 27, 2019.

2020 Equity Incentive Plan, incorporated by reference to Appendix A to Isoray, Inc.'s Definitive Proxy Statement on Schedule 14A filed on October 25, 2019.

Form of Amendment to Employment Agreement, incorporated by reference to Exhibit 10.1 of the Form 8-K filed on December 17, 2019.

Amendment to Exhibit A and Amendment No.

2 to Exhibit B of Amended and Restated Manufacturing and Supply Agreement, dated effective January 13, 2020, between Isoray Medical, Inc.

and GT Medical Technologies, Inc., incorporated by reference to Exhibit 10.1 of the Form 8-K filed on January 16, 2020 (confidential portions of the exhibit have been omitted).

Form of Indemnification Agreement, incorporated by reference to Exhibit 10.1 of the Form 8-K filed on February 19, 2020.

Equity Distribution Agreement, incorporated by reference to Exhibit 10.1 of the Form 8-K filed on April 6, 2020.

Amendment to Employment Agreement between Isoray, Inc.

and Jennifer Streeter, dated June 25, 2020 , incorporated by reference to Exhibit 10.1 of the Form 8-K filed on June 26, 2020.

Second Amendment to Employment Agreement between Isoray, Inc.

and Michael Krachon, dated June 25, 2020, incorporated by reference to Exhibit 10.2 of the Form 8-K filed on June 26,2020 .

Supply Contract, dated August 26, 2020, between Isoray Medical, Inc., and Joint Stock Company «Isotope», incorporated by reference to Exhibit 10.1 of the Form 8-K filed on August 31, 2020 (confidential portions of the exhibit have been omitted) .

1, dated August 5, 2019, to the Supply Contract dated July 30, 2019, between Isoray Medical, Inc., and Joint Stock Company «Isotope».

2, dated August 14, 2020, to the Supply Contract dated July 30, 2019, between Isoray Medical, Inc., and Joint Stock Company «Isotope» (confidential portions of the exhibit have been omitted).

Code of Conduct and Ethics, incorporated by reference to Exhibit 14.1 of the Form 10-KSB filed on October 11, 2005.

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Section 1350 Certifications.

Addendum #3 to Contract between Isoray Medical, Inc.

and Joint Stock Company <<Isotope>>, dated November 30, 2017 (confidential treatment requested for redacted portions), incorporated by reference to Exhibit 99.1 of the Form 10-Q filed on February 12, 2019.

Addendum #4 to Contract between Isoray Medical, Inc.

and Joint Stock Company <<Isotope>>, dated March 19, 2018 (confidential treatment requested for redacted portions), incorporated by reference to Exhibit 99.2 of the Form 10-Q filed on February 12, 2019.

Addendum #5 to Contract between Isoray Medical, Inc.

and Joint Stock Company <<Isotope>>, dated April 17, 2018 (confidential treatment requested for redacted portions), incorporated by reference to Exhibit 99.3 of the Form 10-Q filed on February 12, 2019.

Addendum #6 to Contract between Isoray Medical, Inc.

and Joint Stock Company <<Isotope>>, dated May 3, 2018 (confidential treatment requested for redacted portions), incorporated by reference to Exhibit 99.4 of the Form 10-Q filed on February 12, 2019.

Addendum #7 to Contract between Isoray Medical, Inc.

and Joint Stock Company <<Isotope>>, dated May 4, 2018 (confidential treatment requested for redacted portions), incorporated by reference to Exhibit 99.5 of the Form 10-Q filed on February 12, 2019.

XBRL Instance Document.

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Cash and cash equivalents

Short-term investments (Note 3)

Accounts receivable, net

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Property and equipment, net

Right of use asset, net

Restricted cash

Inventory, non-current

Other assets, net of accumulated amortization

LIABILITIES AND SHAREHOLDERS' EQUITY

Other assets, net

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable and accrued expenses

Lease liability

Accrued protocol expense

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Non-current liabilities:

Lease liability, non-current

Accrued payroll and related taxes, non-current

Asset retirement obligation

1 unchanged sentence

Commitments and contingencies (Note 14)

Shareholders' equity:

Stockholders' equity:

Preferred stock, $.001 par value;

7,000,000 and 7,001,671shares authorized:

7,000,000 shares authorized:

5,000,000 shares allocated;

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Accumulated deficit

Total shareholders' equity

Total liabilities and shareholders' equity

Total stockholders' equity

Total liabilities and stockholders' equity

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

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General and administrative

Change in estimate of asset retirement obligation (Note 9)

Gain on equipment disposals

Change in estimate of asset retirement obligation (Note 8)

Total operating expenses

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Interest income

Change in fair value of warrant derivative liability

Non-operating income, net

Preferred stock dividends

Net loss applicable to common shareholders

Net loss applicable to common stockholders

Basic and diluted loss per share

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and Subsidiaries

Consolidated Statement of Changes in Shareholders' Equity

Consolidated Statement of Changes in Stockholders' Equity

(In thousands, except shares)

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Issuance of common stock pursuant to exercise of options

Payment of dividend to preferred shareholders

Share-based compensation

Balances at June 30, 2017

Issuance of common stock pursuant to exercise of options

Issuance of common stock pursuant to at the market offering, net

Issuance of common stock pursuant to exercise of warrants

Payment of dividend to preferred shareholders

Payment of dividend to preferred stockholders

Share-based compensation

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Issuance of common stock, pursuant to registered direct offering, net

Payment of dividend to preferred shareholders

Payment of dividend to preferred stockholders

Share-based compensation

Balances at June 30, 2019

Issuance of common stock pursuant to exercise of options

Issuance of common stock pursuant to at the market offering, net

Payment of dividend to preferred stockholders

Share-based compensation

Balances at June 30, 2020

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

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Adjustments to reconcile net loss to net cash used by operating activities:

Allowance for doubtful accounts

Lease expense

Depreciation expense

1 unchanged sentence

Amortization of other assets

Change in fair value of warrant derivative liability

Accretion of asset retirement obligation

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Purchases of and interest from certificates of deposit

Net cash provided by investing activities

Net cash provided by (used in) investing activities

CASH FLOWS FROM FINANCING ACTIVITIES:

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Proceeds from sales of common stock, pursuant to exercise of options

Net cash provided by (used in) financing activities

Net cash provided by financing activities

Net increase (decrease) in cash, cash equivalents, and restricted cash

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Non-cash investing and financing activities:

Recognition of operating lease liability and right of use asset

Warrants issued to placement agent of registered direct offering

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(formerly known as Century Park Pictures Corporation) pursuant to a merger.

In December 2018, upon approval of a majority of shareholders, Isoray, Inc.

In December 2018, upon approval of a majority of stockholders, Isoray, Inc.

was redomiciled to Delaware.

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At June 30, 2020 and 2019, the carrying value of financial instruments, which include U.S.

Treasury Securities, certificates of deposit and restricted cash, approximated fair value.

Treasury Securities and restricted cash, approximated fair value.

Fair Value Measurement

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that is, the instruments are not measured at fair value on an ongoing basis, but are subject to fair value adjustments only in certain circumstances (for example, when there is evidence of impairment).

With the exception of the asset retirement obligation (Note 9), the Company had no assets or liabilities measured at fair value on a nonrecurring basis during the two years ended June 30, 2019.

The following table sets forth the Company’s financial assets and liabilities measured at fair value on a recurring basis by level within the fair value hierarchy.

2 unchanged sentences

Fair value at June 30, 2020

Cash and cash equivalents

Cash, cash equivalents, and restricted cash

Fair value at June 30, 2019

Cash and cash equivalents

Cash, cash equivalents, and restricted cash

The Company’s cash and cash equivalent instruments are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices.

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The Company has elected to account for shipping and handling activities as a fulfillment cost.

Shipping and handling costs paid to the Company by its customers are included in the transaction price.

Shipping and handling costs paid to the Company by its customers are included in revenue.

Share-Based Compensation

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In the event that the Company is assessed penalties and or interest, penalties will be charged to other operating expense and interest will be charged to interest expense in the period that they are assessed.

Effective July 1, 2019, the Company accounts for its leases under ASC 842, Leases .

Under this guidance, arrangements meeting the definition of a lease are classified as operating or financing leases and are recorded on the consolidated balance sheet as both a right-of-use asset and lease liability, calculated by discounting fixed lease payments over the lease term at the rate implicit in the lease or the Company’s incremental borrowing rate.

Lease liabilities are increased by interest and reduced by payments each period, and the right-of-use asset is amortized over the lease term.

For operating leases, interest on the lease liability and the amortization of the right-of-use asset result in straight-line rent expense over the lease term.

For finance leases, interest on the lease liability and the amortization of the right-of-use asset results in front-loaded expense over the lease term.

Variable lease expenses are recorded when incurred.

Income (Loss) Per Common 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, including 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.

Basic earnings per share is calculated by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding, and does not include the impact of any potentially dilutive common stock equivalents, including 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 that could be dilutive in the future are as follows:

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Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2014-09 Revenue Recognition, replacing guidance currently codified in Subtopic 605-10 Revenue Recognition-Overall with various SEC Staff Accounting Bulletins providing interpretive guidance.

The guidance establishes a new five step principle-based framework in an effort to significantly enhance comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets.

The standard became effective for the Company in the first quarter of its fiscal year 2019.

The Company adopted the new standard in the first quarter of fiscal year 2019 and used the modified retrospective method.

The adoption of ASU 2014-09 did not have a material impact on the consolidated financial statements of the Company and did not significantly change the timing of revenue recognition compared to the previous methodology.

In February 2016, the FASB issued ASU 2016-02 Leases (Subtopic 842), which will require lessees to recognize assets and liabilities on the balance sheet for the rights and obligations created by most leases.

The update is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.

Early adoption is permitted.

The modified retrospective transition approach is required.

The ASU will be effective for the Company in the first quarter of fiscal year 2020 and the most significant effects of this ASU relate to the recognition of a new right-of-use asset and corresponding lease liability.

The Company adopted the new standard in the first quarter of fiscal year 2020 and the most significant effects of this ASU relate to the recognition of a new right-of-use asset and corresponding lease liability.

In November 2018, the FASB issued ASU 2018-18, Collaborative Arrangements (Topic 808):

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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.

Short-Term Investments

The Company had no short-term investments at June 30, 2019.

At June 30, 2018 the Company had short-term investments consisting of Certificate of Deposit Account Registry Service (CDARS) accounts.

CDARS is a system that allows the Company to invest in certificates of deposit through a single financial institution that exceed the $250,000 limit to be fully insured by the Federal Deposit Insurance Corporation (FDIC).

That institution utilizes the CDARS system to purchase certificates of deposit at other financial Institutions while keeping the investment at each institution fully insured by the Federal Deposit Insurance Corporation (FDIC).

Short-term investments held by the Company at June 30, 2018 were as follows (in thousands):

Six months to

CDARS, as of June 30, 2018

Inventory consisted of the following (in thousands):

Inventory, current

Raw materials

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Finished goods

Total inventory

Total inventory, current

Inventory, non-current

Enriched barium, non-current

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On August 25, 2017, the Company entered into a Consignment Agreement and related Services Agreement with MedikorPharma-Ural LLC to begin utilizing our enriched barium-130 carbonate inventory.

The Company anticipates obtaining enough Cesium-131 under this arrangement to obtain over 4,000 curies of Cesium-131.

The Company anticipates obtaining enough Cesium-131 under this arrangement to obtain approximately 4,000 curies of Cesium-131.

During the year ended June 30, 2020, the Company obtained 31 curies under this agreement which has been used in production.

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approximately 62 of which will be obtained in the year ended June 30, 2021 and 832 will be obtained after June 30, 2020.

There is no assurance as to whether the agreement will be terminated before this full amount is obtained and other supply sources are used, nor is there assurance that the agreements with the third-party Cesium-131 suppliers will be executed.

There is no assurance as to whether the agreement will be terminated before this full amount is obtained and other supply sources are used, nor is there assurance that the third-party reactor which relies on this Consignment Agreement will be used by the Cesium-131 supplier under contract with the Company.

Prepaid Expenses and Other Current Assets

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Plant and equipment, not placed in service are items that meet the capitalization threshold or which management believes will meet the threshold at the time of completion and which have yet to be placed into service as of the date of the balance sheet, and therefore, no depreciation expense has been recognized.

Also included at June 30, 2019 and 2018 are costs associated with advance planning and design work on the Company’s new production facility of $207,000.

Also included at June 30, 2020 and 2019 are costs associated with advance planning and design work on the Company’s new production facility of approximately $207,000.

The advance planning and design work was primarily incurred in fiscal year 2017.

The new production facility is currently on hold as the Company has sufficient production capacity to meet future demands and while the Company focuses its resources on revenue growth.

It is anticipated that the Company will continue work on the new production facility process in the next four to five years.

Restricted Cash

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Year ended June 30, 2021

Asset Retirement Obligation

The Company maintains a production facility located at Applied Process Engineering Laboratory (APEL) in Richland, Washington.

The APEL facility became operational in September 2007.

The production facility has over 15,000 square feet and includes space for isotope separation, seed production, order dispensing, a clean room for assembly of our product offerings, and a dedicated shipping area.

In 2015, the Company entered into a modification to the production facility lease that modified the requirement to return the facility to ground at the time of exit at Company discretion, exercised an extension in 2017 to increase the lease term to April 30, 2021, and reduced the required notice to terminate the lease early from twelve months to six months.

In July 2019, the Company entered into another modification of the production facility lease that extends the term to April 20, 2026 and provides for an eighteen month termination notice with an early termination penalty of up to $40,000 which decreases in the future beginning May 1, 2022.

Upon the adoption of Topic 842 on July 1, 2019, the Company recognized a right-of-use asset and lease liability of approximately $1.2 million.

In determining the amount of the right-of-use asset and lease liability, we assumed the termination of the lease in April 2024 and incurring a termination penalty of $20,000.

As of the date of adoption, a right of use asset and a corresponding lease liability of approximately $1.2 million were recognized on the balance sheet based upon the present value of the future base payments discounted at a 6% 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 June 30, 2020 was 3.85 years.

For the fiscal year ended June 30, 2020, 2019, and 2018 our operating lease expense was approximately $294,000, $285,000, and $285,000 respectively, and is recognized in the statement of operations in cost of sales and general and administrative expenses.

The following table presents the future operating lease payments and lease liability included on the consolidated balance sheet related to the Company’s operating lease as of June 30, 2020 (in thousands):

Year Ending June 30,

Imputed interest

Total Lease Liability

Less current portion

Non-current Lease Liability

Asse t Retirement Obligation

The Company has an asset retirement obligation (ARO) associated with the facility it currently leases.

The ARO changed as follows (in thousands):

In connection with the lease modification executed in July 2019, and the accretion of the lease liability, the ARO changed as follows (in thousands):

Year ended June 30,

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Accretion of discount

Gain on change in ARO estimate due to lease modification

Ending Balance

In July 2019, the Company extended the lease term an additional five years thus extending the time before asset retirement costs would be incurred.

The Company estimated retirement costs to be $704,000, which was discounted utilizing an interest rate of 5.1% for a new ARO liability of $555,000, a reduction of $73,000.

At the time of extension, the asset retirement asset had been fully amortized, thus the Company recognized a gain on change in the estimate of $73,000.

Share-Based Compensation

The Company currently provides share-based compensation under one equity incentive plan approved by the Board of Directors and the shareholders:

The Company currently provides share-based compensation under two equity incentive plans approved by the Board of Directors and the stockholders:

2017 Equity Incentive Plan (2017 Incentive Plan).

2020 Equity Incentive Plan (2020 Incentive Plan).

The 2006 Director Plan allowed the Board of Directors to grant options to purchase up to 1,000,000 shares of common stock to directors of the Company.

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Options granted prior to fiscal 2017 were made pursuant to plans that have expired or were terminated.

The Company’s shareholders approved the 2017 Incentive Plan (“2017 Plan”) in June 2017.

The Company’s stockholders approved the 2017 Incentive Plan (“2017 Plan”) in June 2017.

The 2017 Plan allows the Board of Directors to grant up to 4,000,000 shares of common stock to directors, officers, employees and consultants in a combination of equity incentive forms including incentive stock options (ISO), non-qualified stock options (NQSO), stock appreciation right (SAR) or restricted shares (RSU) of common stock.

The Company’s stockholders approved the 2020 Incentive Plan (“2020 Plan”) in December 2019 .

The 2020 Plan allows the Board of Directors to grant up to 6,000,000 shares of common stock to directors, officers, employees and consultants in a combination of equity incentive forms including incentive stock options (ISO), non-qualified stock options (NQSO), stock appreciation right (SAR) or restricted shares (RSU) of common stock.

Options granted under all 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 (based on the trading price on the NYSE American) on the date of the grant, and with varying vesting periods as determined by the Board.

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The total value of the stock options awards is expensed ratably over the vesting period of the employees receiving the awards.

As of June 30, 2019, total unrecognized compensation cost related to stock-based options and awards was $632,000 and the weighted-average period over which it is expected to be recognized is approximately 1.08 years.

As of June 30, 2020, total unrecognized compensation cost related to stock-based options and awards was approximately $652,000 and the weighted-average period over which it is expected to be recognized is approximately 1.25 years.

A summary of stock option information within the Company’s share-based compensation plans during the fiscal years is presented below:

Balance at June 30, 2017

Expired/Forfeited

Balance at June 30, 2018

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The Company’s current policy is to issue new shares to satisfy option exercises.

Shareholders’ Equity

Stockholders’ Equity

The authorized capital structure of the Company consists of $.001 par value preferred stock and $.001 par value common stock.

On March 31, 2020, the Company entered into an Equity Distribution Agreement (the “Agreement”) with Oppenheimer & Co., Inc.

(“Oppenheimer”).

The common stock sold pursuant to the Agreement will be distributed at the market prices prevailing at the time of sale.

The Agreement provides that Oppenheimer will be entitled to compensation for its services at a commission rate of 3.0% of the gross sales price per share of common stock sold plus reimbursement of certain expenses.

Net proceeds from the sale of the Shares will be used for general corporate purposes.

As of June 30, 2020, the Company had sold an aggregate of 1,247,232 shares under the distribution agreement at an average price of approximately $0.738 per common share for gross proceeds of approximately $920,000 and net proceeds of approximately $874,000.

On May 8, 2018, the Company entered into a Sales Agreement with H.C.

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Preferred Stock

The Company’s Certificate of Incorporation authorize 7,000,000 shares of $0.001 par value preferred stock available for issuance with such rights and preferences, including liquidation, dividend, conversion, and voting rights, as described below.

The Company’s Certificate of Incorporation authorizes 7,000,000 shares of $0.001 par value preferred stock available for issuance with such rights and preferences, including liquidation, dividend, conversion, and voting rights, as described below.

In connection with redomiciling the Company to Delaware, Preferred Stock Series A, C and D designations were terminated.

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These shares are convertible into shares of common stock at the rate of one share of common stock for each share of Series B preferred stock, and are subject to automatic conversion into common stock upon the closing of an underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933 covering the offer and sale of common stock in which the gross proceeds to the Company are at least $4,000,000.

Series B preferred shareholders have voting rights equal to the voting rights of common stock, except that the vote or written consent of a majority of the outstanding preferred shares is required for any changes to the Company’s Certificate of Incorporation, Bylaws or Certificate of Designation, or for any bankruptcy, insolvency, dissolution or liquidation of the Company.

Upon liquidation of the Company, the Company’s assets are first distributed ratably to the Series B preferred shareholders and then to the holders of the Common Stock.

Series B preferred stockholders have voting rights equal to the voting rights of common stock, except that the vote or written consent of a majority of the outstanding preferred shares is required for any changes to the Company’s Certificate of Incorporation, Bylaws or Certificate of Designation, or for any bankruptcy, insolvency, dissolution or liquidation of the Company.

Upon liquidation of the Company, the Company’s assets are first distributed ratably to the Series B preferred stockholders and then to the holders of the Common Stock.

On December 10 , 2019, the Board of Directors declared a dividend on the Series B Preferred Stock of all outstanding and cumulative dividends through December 31, 2019.

3 unchanged sentences

At June 30, 2020 and 2019, there were 59,065 Series B preferred shares outstanding and cumulative dividends in arrears were $5,000.

During the year ended June 30, 2020 the Company did not issue any warrants.

During the year ended June 30, 2019 the Company issued a total of 5,830,000 warrants in connection with the registered direct offering that was completed on July 11, 2018.

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Balance at June 30, 2017

Warrants expired

Balance at June 30, 2017

Warrants issued

3 unchanged sentences

Balance at June 30, 2019

Balance at June 30, 2020

Weighted average exercise price per share.

As of June 30, 2019, the Company had 6,080,000 common warrants outstanding exercisable on or before January 11, 2024.

As of June 30, 2020, the Company had 6,080,000 common warrants outstanding exercisable on or before January 11, 2024 with a weighted average remaining contractual life of 3.37 years.

Due to net losses, the Company did not record an income tax provision or benefit for the years ending June 30, 2020, 2019 and 2018.

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These net operating loss carryforwards expire at various times through the years 2025 to 2038.

The current year net operating loss carryforward does not have an expiration date.

Additionally, the Company has federal net operating loss carryforwards of approximately $7.7 million on June 30, 2020 that can be used to offset future regular taxable income that do not have an expiration date.

The Company has a research credit carryforward of approximately $0.2 million on June 30, 2020 that expire at various times through the years 2037 to 2040.

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The Company’s net deferred tax asset was reduced by approximately $9.5 million during the year ended June 30, 2018, which consisted primarily of the remeasurement of federal deferred tax assets and liabilities from 35% to 21%.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the "Cares Act") was enacted.

The CARES Act changed net loss carryforward and back provisions and the business interest expense limitation.

The Company has evaluated the impact of the CARES Act and determined that none of the changes would result in a material cash benefit to the Company.

The Company’s statutory rate reconciliation is as follows (in thousands):

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Non-deductible penalties

Warrant derivative liability

Share-based compensation

Impact on the change in income tax rate

Change in estimate

Research credit

Change in valuation allowance

10 unchanged sentences

On July 14, 2017, the Company entered into an agreement with a new distributor in Russia that provides for the ability to sell the entire product line in the Russian Federation.

The agreement has a one-year initial term with two additional one-year terms which automatically renew unless either party invokes their right to terminate earlier under the provisions of the agreement.

The agreement had a one-year initial term with two additional one-year terms which automatically renew unless either party invokes their right to terminate earlier under the provisions of the agreement.

The agreement was automatically renewed through July 2020.

On September 22, 2020, the Company entered into an agreement with the same distributor.

The agreement has a one-year initial term with two additional one-year terms which automatically renew unless either party invoke their right to terminate earlier under the provisions of the agreement.

In fiscal year 2020, the Company entered into a three-year agreement with a distributor in India that provides for the ability to sell Cesium-131 brachytherapy seeds in different configurations within India.

The Company and the distributor for Italy and Switzerland executed the distribution agreement on August 1, 2016.

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As the Company elected to not renew its CE mark in fiscal 2019, distribution will be limited to those countries outside the European Union.

Commitments and Contingencies

Commi tments and Contingencies

Royalty Agreement for Invention and Patent Application

A former employee and shareholder of the Company previously assigned his rights, title and interest in an invention to Isoray Products LLC (a predecessor company) in exchange for a royalty equal to 1% of the Gross Profit, as defined, from the sale of “seeds” incorporating the technology.

A former employee and stockholder of the Company previously assigned his rights, title and interest in an invention to Isoray Products LLC (a predecessor company) in exchange for a royalty equal to 1% of the Gross Profit, as defined, from the sale of “seeds” incorporating the technology.

The patent and associated royalty obligations were transferred to the Company in connection with the merger transaction.

3 unchanged sentences

During fiscal years 2020, 2019 and 2018, the Company recorded royalty expenses of $0, $33,000, and $27,000, respectively.

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 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 sales incorporating the “know-how” and therefore no royalty is due pursuant to the terms of the agreement.

Management believes that the possibility of a negative outcome in this matter is remote.

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.

Irradiation Services Agreement

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On July 30, 2019, a new supply contract was signed with The Open Joint Stock Company for a term of August 2019 to December 2020 as the Company had purchased the maximum amount of Cesium-131 permitted under the prior agreement.

Operating Lease Agreements

The Company leases office and laboratory space under an operating lease.

The lease may be terminated by either party with a six-month written notice.

The lease terms require monthly lease payments and include a contractually permitted annual rent increase based on changes in the CPI index.

Future minimum lease payments under this operating lease are as follows (in thousands):

Year ending June 30,

For the Year Ended June 30,

Rental expense

In July 2019, the Company entered into another modification of the production facility lease that extends the term to April 20, 2026, maintains the current rental rate through April 2020, and provides for an eighteen-month termination notice with an early termination penalty of up to $40,000 which decreases each year.

On August 6, 2019, an addendum was signed adding a manufacturer of Cesium-131.

On August 14, 2020, another addendum was signed modifying the volume of additional shipments of Cesium-131.

On August 26, 2020, a new supply contract was signed with The Open Joint Stock Company for a term of August 2020 to December 2021 as the Company had purchased the maximum amount of Cesium-131 permitted under the prior agreement.

Research and Development - Collaborative Arrangement

6 unchanged sentences

Gross costs incurred in connection with the collaboration agreement during fiscal years 2020, 2019 and 2018 were $0, $266,000 and $769,000, respectively.

As of June 30, 2019 and 2018, the Company had a receivable balance related to this CDA of $0 and $22,000, respectively.

As of June 30, 2020 and 2019, the Company had no receivable balance related to this CDA.

The CDA with GT Med Tech terminated in March 2018 but the Company continued to work collaboratively with GT Med Tech to obtain 510(k) clearance from the FDA and on the design transfer to production without a formal agreement.

1 unchanged sentence

The Company stopped sharing costs with GT Med Tech related to the development of GammaTile™ in December 2018 when the product entered a limited market release.

Class Action Lawsuit Related to Press Release

On May 22, 2015, the first of three lawsuits was filed against Isoray, Inc.

and two of its officers – Dwight Babcock (the Company’s retired CEO) and Brien Ragle (former CFO who was later dismissed from the lawsuits) – related to a press release on May 20, 2015 regarding a May 19 online publication of the peer-reviewed article in the journal Brachytherapy titled “ Analysis of Stereotactic Radiation vs.

Wedge Resection vs.

Wedge Resection Plus Cesium-131 Brachytherapy in Early-Stage Lung Cancer ” by Dr.

Bhupesh Parashar, et al.

The lawsuits were class actions alleging violations of the federal securities laws.

By Order dated August 17, 2015, the three lawsuits were consolidated into one case – In re Isoray, Inc.

Securities Litigation;

4:15-cv-05046-LRS, in the U.S.

District Court for the Eastern District of Washington.

On March 9, 2017, the parties settled this matter and the court entered an order and final judgment that (i) dismissed with prejudice and released the claims asserted in the complaint against the defendants, including Isoray, and (ii) approved the payment of the $3,537,500 settlement fund (paid by Isoray’s insurers), minus the payment of attorneys’ fees and costs to plaintiff’s counsel, to members of the settlement class.

This lawsuit is now concluded.

Derivative Complaint related to Shareholder Value

On September 29, 2016, David M.

Kitley, purportedly on behalf of Isoray, filed a derivative lawsuit in the United States District Court for the District of Minnesota under the case caption Kitley v.

Isoray, Inc., Case No.

0:16-cv-03297-DTS.

The complaint named as defendants current and former Isoray directors Dwight Babcock, Thomas LaVoy, Philip J.

Vitale and Michael W.

McCormick, alleging that they violated their fiduciary duties to Isoray in connection with a press release allegedly containing false and misleading statements concerning the results from a peer reviewed study of its Cesium-131 isotope seeds for the treatment of non-small cell lung cancers, thereby artificially inflating the price of Isoray stock.

The complaint sought unspecified damages, in an amount not presently determinable, among other forms of relief.

On November 17, 2016, Isoray moved to dismiss the complaint, arguing that plaintiff was not entitled to pursue his derivative claims due to his failure to serve a pre-suit demand on Isoray’s board.

Rather than respond to the motion to dismiss, plaintiff filed an amended complaint on January 23, 2017.

The amended complaint alleged the same derivative claims as the original, and added Isoray director Alan Hoffmann as a defendant.

Plaintiff sought an award of damages and an order directing Isoray to undertake reforms of its corporate governance and internal procedures.

Isoray moved to dismiss the amended complaint on March 9, 2017.

Plaintiff responded on April 20, 2017, and Isoray replied on May 17, 2017.

The court heard oral argument on the motion on August 22, 2017, and took the matter under advisement at that time.

On October 19, 2017, the court granted Isoray’s motion to dismiss.

The matter is now resolved.

Class Action Lawsuit re Equity Plans

On January 31, 2017, a putative class action complaint was filed against Isoray and certain current and former directors in the Superior Court of the State of Washington in and for Benton County under the case caption Griffith v.

Isoray, Inc., Case No.

17-2-00194-2.

The complaint alleged that Isoray’s board permitted certain employee compensation plans to be implemented without receiving the requisite percentage of votes by Isoray shareholders.

On May 16, 2017, the parties executed a settlement for $195,000 of the individual Plaintiffs’ claims.

The action was dismissed on July 10, 2017.

Concentrations of Credit and Other Risks

The Company’s financial instruments that were exposed to concentrations of credit risk consist primarily of cash and cash equivalents, U.S.

Treasury securities, certificates of deposit, and accounts receivable.

Treasury securities, and accounts receivable.

The Company’s cash and cash equivalents were maintained with high-quality financial institutions at June 30, 2020 and 2019, respectively.

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Such delays could have a material adverse effect on the Company’s business, operating results and financial condition.

Sanctions placed on financial transactions with Russian banking institutions may interfere with the Company’s ability to transact business in Russia on a temporary or other basis resulting in an interruption of the Cesium-131 supply which could have a temporary material adverse effect on the Company’s business, operating results and financial condition.

Sanctions placed on financial transactions with Russian banking institutions may interfere with the Company’s ability to transact business in Russia on a temporary or other basis resulting in an interruption of the Cesium-131 supply which could have a material adverse effect on the Company’s business, operating results and financial condition.

Quarterly Financial Data (unaudited)

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For customers without separate agreements, we have a standard list price established for all products and our invoices contain standard terms and conditions that are applicable to those customers where a separate agreement is not controlling.

Our performance obligations are established when a customer submits a purchase order or e-mail notification (in writing, electronically or verbally) for goods, and we accept the order.

Our performance obligations are established when a customer submits a purchase order or e-mail notification (in writing or electronically) for goods, and we accept the order.

We identify performance obligations as the sale of our products and services as requested from our customers.

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El Camino, Los Gatos, & other facilities

Subsequent Events

On July 3, 2019 , the Company entered into another modification of the production facility lease that extends the term to April 20, 2026.

This lease modification maintains the current rental rate through April 2020, and provides for an eighteen month termination notice with an early termination penalty of up to $40,000 which decreases each year.

ITEM 16 – FORM 10-K SUMMARY

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Austin, Controller,

Co-Principal Financial and Principal Accounting Officer

Co-Principal Financial and Principal Accounting Officer, Corporate Secretary

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

5 unchanged sentences

Austin, Controller,

Co-Principal Financial and Principal Accounting Officer

/s/ Alan Hoffmann

Alan Hoffmann, Director

Co-Principal Financial and Principal Accounting Officer, Corporate Secretary

/s/ Michael McCormick

Michael McCormick, Chairman

/s/ Alan Hoffmann

Alan Hoffmann, Director

/s/ Philip Vitale

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures