Perspective Therapeutics, Inc. 10-K

ITEM 9A – CONTROLS AND PROCEDURES Disclosure Controls and Procedures Under the supervision and with the participation of our management, including our principal executive officer and co-principal financial officers, we conducted an evaluation of the design and operation of our disclosure controls and procedures, as such term is defined under Rules 13a-14(c) and 15d-14(c) promulgated under the Securities Exchange Act of 1934, as amended (Exchange Act), as of June 30, 2021. Based on that evaluation, our principal executive officer and our co-principal financial officers concluded that the design and operation of our disclosure controls and procedures were effective. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote. However, management believes that our system of disclosure controls and procedures are designed to provide a reasonable level of assurance that the objectives of the system will be met. Management’s Annual Report on Internal Control over Financial Reporting Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance concerning both the reliability of our financial reporting and the preparation of our financial statements in accordance with generally accepted accounting principles. This control includes policies and procedures that obligate us to maintain reasonably detailed records that accurately and fairly reflect our transactions and the disposition of our assets, provide assurance that our transactions are properly recorded, ensure that our receipts and expenditures are authorized by management and, where applicable, our board of directors, and prevent or allow us to timely detect material unauthorized acquisitions, uses or dispositions of our assets. We have evaluated the effectiveness of our internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control Integrated Framework (2013). This evaluation was performed under the supervision and with the participation of our management, including our chief executive officer and our co-principal financial officers and principal accounting officer, all of whom concluded that our internal control over financial reporting was effective as of June 30, 2021. Our evaluation of the effectiveness of our internal control over financial reporting in future periods may differ due to changing conditions or non-compliance with the policies and procedures we have established. 52 Table of Contents Changes in Internal Control over Financial Reporting There have not been any changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. ITEM 9B – OTHER INFORMATION Not applicable. PART III ITEM 10 – DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE Board Membership and Board Committees The directors serving the Company as of June 30, 2021 were as follows: Audit Compensation Nominations Litigation Name Type Age Committee Committee Committee Committee Michael McCormick, Chairman Independent 58 Member Member Chairman Member Lori Woods, Chief Executive Officer Employee 58 N/A N/A N/A N/A Philip Vitale, MD Independent 75 Member Chairman Member N/A Alan Hoffmann Independent 60 Chairman Member Member 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 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. 53 Table of Contents Michael McCormick – Mr. McCormick has been a Director of the Company since June 2015 and brings over 25 years of senior executive positions in global management, sales, and marketing to the Company. He was appointed Chairman of the Board effective as of June 4, 2018. He serves as a founder and partner of GO Intellectual Capital, which offers marketing services with a focus on the medical and aviation industries, as well as financial services. Previous to his service with GO, Mr. McCormick served as Executive Vice President of Global Sales and Marketing for Columbia Sportswear from 2006-2012, where his team successfully launched several new patented technologies, including Omni-Heat® Reflective and Omni-Freeze® Zero. During Mr. McCormick’s tenure, Columbia built an intellectual property portfolio with over 200 patents. Mr. McCormick started his career with Nike, working in several senior management roles and ultimately becoming the Director of National Sales, U.S., prior to his departure in 1999. He also served as Chief Marketing Officer of Golf Galaxy from 2003-2006 and Executive Vice President of Global Sales and Marketing of Callaway Golf from 2000-2003. Mr. McCormick brings over 26 years of marketing experience in a diverse group of industries to his service on the Company’s Board. 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. Ms. 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. Woods served as a senior consultant to Isoray. Ms. Woods was appointed CEO of the Company on December 12, 2018. From February 16, 2016 to June 3, 2018, Ms. Woods was a founder of Medvio, LLC, a medical device consulting company focused on the urology and oncology space. During her time at Medvio she worked with large public and international medical device companies, supporting the approval process and distribution of products in diverse international markets. Further, she worked with various partners to develop proprietary technologies for the colorectal and liver treatment markets. Previously, from January 2002 to July 2006, Ms. Woods served as Chief Executive Officer of Pro-Qura, Inc., a privately-owned cancer treatment management company focused on the quality delivery of brachytherapy treatments for prostate cancer. She has also served as the Director of Business Development for the Tumor Institute Radiation Oncology Group and the Seattle Prostate Institute (SPI) in Seattle, WA. SPI was an early innovator in prostate brachytherapy treatments and assisted in the training of more than 2,000 physicians in the use of prostate brachytherapy. Ms. Woods served as a board member of the Northwest division of the Juvenile Diabetes Research Foundation, focusing on their digital awareness programs, including their website and SEO strategy, and their public relations efforts. Ms. Woods earned a Bachelor of Science degree in Business Administration – Marketing and Communications from Loma Linda University, CA. Ms. Woods brings to the Board extensive experience and credibility in the brachytherapy industry and strong relationships with suppliers and distributors of brachytherapy products. Philip Vitale, MD – Dr. Vitale has been a Director of the Company since 2014 and is a board certified urologist. He practiced Urology from 1978 to 2005 at Lovelace Health Systems in Albuquerque. He also served on the Board of Governors for 9 years and held various administrative positions including Chief Medical Officer and Senior Vice President at Lovelace. He was a staff urologist at Albuquerque VA Medical Center from 2005 until his retirement in November 2014. He served as Chief of the Urology section from 2008 to November 2013. Dr. Vitale was also an Assistant Professor at the University of New Mexico, Division of Urology. He is a member of the American Urological Association and the South Central Section of the American Urological Association. Prior to his retirement, Dr. Vitale’s clinical trials included: chemotherapy after prostatectomy (cap); a phase III randomized study for high risk prostate carcinoma; RTOG 0415 a phase III randomized study of hypofractionated 3d-crt/IMRT versus conventionally fractionated 3d-crt/IMRT in patients with favorable-risk prostate cancer; RTOG 0815 a phase III prospective randomized trial of dose-escalated radiotherapy with or without short-term androgen deprivation therapy for patients with intermediate-risk prostate cancer; and YP19A1 gene and pharmacogenetics of response to testosterone therapy. Dr. Vitale holds a B.A. in Biology from LaSalle College and obtained his M.D. from the New Jersey College of Medicine and Dentistry. He received his M.S. in Health Services Administration from the College of St. Francis. Dr. Vitale brings to the Board medical expertise in the industries the Company is targeting. Alan Hoffmann – Mr. Hoffmann has been a Director of the Company since January 2016. He is the owner of Alan Hoffmann, CPA, PC, a certified public accounting firm he founded in 1996. The firm performs audits and reviews of private companies. In addition, Mr. Hoffmann currently serves as CFO for Cognitive Research Corporation, a privately-held, full-service contract research organization that specializes in central nervous system product development for pharmaceutical, nutraceutical, biotechnology and medical device companies. In 2011, he served as CFO for an international manufacturing company, Kinematics Manufacturing, Inc. His prior employment included Price Waterhouse from 1985-1989, and local firms in Arizona from 1989 to 1996, where he held multiple positions including Senior Tax Analyst, and Tax Manager. After receiving his undergraduate accounting degree with honors from the University of Wisconsin-Milwaukee in 1985, he became a Certified Public Accountant in 1989. He also served in the United States Marine Corps and was honorably discharged in 1985. He brings over 33 years of public accounting experience to the Company and the Board. Mr. Hoffmann brings to the Board his experience as a public accountant and understanding of oversight and review of financial statements prepared by the Chief Financial Officer. 54 Table of Contents Executive Officers The executive officers serving the Company as of September 24, 2021 were as follows: Name Age Position Held Lori Woods 1 59 Chief Executive Officer, Director Jonathan Hunt 54 Chief Financial Officer, Co-Principal Financial Officer Mark Austin 2 34 Vice President of Finance and Corporate Controller, Co-Principal Financial and Principal Accounting Officer, Corporate Secretary William Cavanagh III 55 Chief Research and Development Officer Jennifer Streeter 52 Chief Operating Officer, Vice President, Human Resources 1. Ms. Woods’ biographical information is incorporated by reference in the board membership section of Part III, Item 10. 2. Effective August 16, 2021, Mr. Austin was appointed Vice President of Finance and Corporate Controller. Jonathan Hunt – Mr. Hunt was appointed as Chief Financial Officer of the Company on December 3, 2018. On February 12, 2019, Mr. Hunt was appointed as Co-Principal Financial Officer. Before joining the Company, Mr. Hunt was Chief Financial Officer at Vivid Learning Systems, an online safety training company, from 2009 to 2018, where he had a central role in its turnaround, including growing revenues and implementing financial policy and process changes that ultimately resulted in the successful sale of the business. Mr. Hunt previously served as Chief Financial Officer of the Company from 2006 to 2009. Prior to that, Mr. Hunt worked at Hypercom Corporation, a global provider of electronic payment solutions and manufacturer of credit card terminals, where he served as Assistant Corporate Controller from 2005 to 2006. Mr. Hunt holds a Bachelor of Science, Accountancy, and a Masters of Accountancy degree from Brigham Young University. Mark Austin – Mr. 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. On August 16, 2021, Mr. Austin was appointed Vice President of Finance and Corporate Controller. Prior to joining the Company, Mr. Austin practiced as a Certified Public Accountant with the accounting firm KPMG where he worked from October 2009 to July 2017. At KPMG, Mr. Austin served as a Senior Manager and before that, as a Manager and Senior Associate in Portland, Oregon, where he served as lead for financial statement and internal control audits within the technology industry, including for software and manufacturing companies. While at KPMG, Mr. Austin served as lead manager for a global public company; supervised, coached, and lead teams and team members; and researched technical accounting issues relevant to the technology industry. Mr. Austin holds a Bachelor of Science in Commerce degree in Accounting from Santa Clara University, in Santa Clara, California. William Cavanagh III – Mr. Cavanagh joined Isoray Medical, Inc. in January 2010 and served as Vice President, Research and Development until March 3, 2016, other than serving as interim Chief Executive Officer for Isoray from January 7, 2016 to February 14, 2016. He was appointed Chief Operating Officer of Isoray effective March 3, 2016 and Chief Scientific Officer effective August 15, 2016 and served in these positions until February 12, 2019. On February 12, 2019, Mr. Cavanagh was appointed to the position of Chief Research and Development Officer. Immediately prior to joining Isoray Medical, Mr. Cavanagh was engaged in the research and development of dendritic cell therapies for cancer and infectious diseases. He served as Chief Scientific Officer for Sangretech Biomedical, LLC for the six years prior to joining Isoray Medical. At Sangretech, he oversaw the design and implementation of a novel cancer therapy. Mr. Cavanagh began his extensive career in cancer treatment technologies in the early 1990s, when he helped lead research and development of a therapy involving the insertion of radioactive sources directly into the prostate for the treatment of prostate cancer (prostate brachytherapy). He has designed several cancer treatment-related studies, is listed as an author on 34 peer-reviewed publications and is the listed inventor on a U.S. patent application detailing a novel treatment for cancer. Mr. Cavanagh has also served as Director of the Haakon Ragde Foundation for Advanced Cancer Studies in Seattle, Washington, where he led the research foundation in the selection of viable research projects directed at treating advanced cancers. Mr. Cavanagh holds a B.S. in Biology from the University of Portland (Oregon) and attended two years of medical school before beginning his career in research management. 55 Table of Contents Jennifer Streeter – Mrs. Streeter brings more than 10 years’ experience of progressive growth in the Human Resources field. She joined Isoray in July 2016 as Vice President of Training. In September 2016, she accepted responsibility as Vice President of Human Resources. 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. Streeter was employed by Supershuttle International as the Vice President of Learning Development, where she led a team of training managers providing overall training and organizational development activities. Mrs. Streeter was employed by Supershuttle International from 2010 to 2016. Previously Mrs. Streeter has facilitated both on ground and online courses at the undergraduate and graduate levels for universities including Grand Canyon University, Ottawa University and Western International University. The courses focused on Human Resource and Organizational Development. Mrs. Streeter received her Bachelor’s Degree in Management/Marketing and her Master’s Degree in Leadership Studies from Baker College, in Michigan. There are no agreements or understandings for any officer or director to resign at the request of another person, and none of the officers or directors is acting on behalf of, or will act at the direction of, any other person. There are no family relationships among our executive officers and directors. Delinquent Section 16(a) Reports Section 16(a) of the Exchange Act requires the Company’s directors and executive officers, and persons who beneficially own more than ten percent of a registered class of our equity securities, to file with the SEC initial reports of beneficial ownership and reports of changes in beneficial ownership of our Common Stock. The rules promulgated by the SEC under Section 16(a) of the Exchange Act require those persons to furnish us with copies of all reports filed with the SEC pursuant to Section 16(a). 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% stockholders timely complied with their filing requirements during the year ended June 30, 2021 except as follows – Lori Woods (one Form 4 with two transactions), Michael McCormick (two Form 4s with three transactions), Alan Hoffmann (two Form 4s with three transactions), Philip Vitale (two Form 4s with three transactions), Jonathan Hunt (one Form 4 with two transactions), Mark Austin (one Form 4 with two transactions), Michael Krachon (one Form 4 with two transactions), and William Cavanagh (one Form 4 with two transactions). Each of these Form 4s was filed late. Code of Ethics We have adopted a Code of Conduct and Ethics that applies to all of our officers, directors and employees and a separate Code of Ethics for Chief Executive Officer and Senior Financial Officers that supplements our Code of Conduct and Ethics. The Code of Conduct and Ethics was previously filed as Exhibit 14.1 to our Form 10-KSB for the period ended June 30, 2005, and the Code of Ethics for Chief Executive Officer and Senior Financial Officers was previously filed as Exhibit 14.2 to that same report. The Code of Ethics for Chief Executive Officer and Senior Financial Officers is also available to the public on our website at http://www.isoray.com/about/investors/. Each of these policies comprises written standards that are reasonably designed to deter wrongdoing and to promote the behavior described in Item 406 of Regulation S-K promulgated by the Securities and Exchange Commission. Any amendments to or waivers of the Codes will be promptly posted on our website at www.isoray.com or in a Report on Form 8-K, as required by applicable laws. 56 Table of Contents Nominating Procedures 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 The Company has a separately designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Exchange Act. The Audit Committee was established on December 8, 2006, the date on which its Charter was adopted. The Audit Committee Charter lists the purposes of the Audit Committee as overseeing the accounting and financial reporting processes of the Company and audits of the financial statements of the Company and providing assistance to the Board of Directors in monitoring (1) the integrity of the Company’s financial statements, (2) the Company’s compliance with legal and regulatory requirements, (3) the independent auditor’s qualifications and independence, and (4) the performance of the Company’s internal audit function, if any, and independent auditor. Dr. Vitale, Mr. Hoffmann, and Mr. McCormick are each members of the Audit Committee. The Board of Directors has determined that Mr. Hoffmann is an “audit committee financial expert” as defined in Item 407(d)(5) of Regulation S-K promulgated by the SEC, and each Audit Committee member is independent under applicable NYSE American standards. The Board’s conclusions regarding the qualifications of Mr. Hoffmann as an audit committee financial expert were based on his service as a chief financial officer, his experience as a certified public accountant and his degree in accounting. ITEM 11 – EXECUTIVE COMPENSATION The following summary compensation table sets forth information concerning compensation for services rendered in all capacities during our past two fiscal years awarded to, earned by or paid to each of the following individuals. Salary and other compensation for these officers are set or recommended to the Board by the Compensation Committee. Summary Compensation Table Non-equity Name and Option incentive plan All other principal Salary awards compensation compensation Total position Year ($) ($) 1 ($) ($) 3 ($) Lori Woods 2021 353,450 - 17,745 - 371,195 CEO and Director 2020 315,612 98,700 77,325 - 491,637 William Cavanagh 2021 244,149 - 9,190 - 253,339 CRDO 2020 220,256 59,220 38,545 - 318,021 Jennifer Streeter 2021 256,672 - 9,677 - 266,349 COO and VP of HR 2020 214,565 59,220 38,500 - 312,285 1. Amounts represent the ASC 718 , Compensation – Stock Compensation valuation for the fiscal years 2020. Options awarded vest in four equal annual installments and expire ten years after the date of grant. All options were granted at the fair market value of the Company’s stock on the date of grant and the Company used a Black-Scholes methodology as discussed in the footnotes to the financial statements to value the options. 57 Table of Contents Outstanding Equity Awards at Fiscal Year-End Option awards Equity Incentive Plan awards: Number of Number of securities securities underlying underlying unexercised unexercised Option options options exercise Option (#) (#) price expiration Name exercisable unexercisable ($) date Lori Woods 62,500 7 125,000 7 0.61 06/23/2030 CEO and Director 62,500 6 62,500 6 0.43 06/18/2029 62,500 4 - 0.46 06/13/2028 William Cavanagh 75,000 7 75,000 7 0.61 06/23/2030 CRDO 112,500 6 37,500 6 0.43 06/18/2029 150,000 5 - 0.46 06/13/2028 225,000 1 - 0.605 06/27/2027 6,660 2 - 0.98 06/27/2022 20,000 3 - 2.46 06/17/2024 Jennifer Streeter 75,000 7 75,000 7 0.61 06/23/2030 COO and VP of HR 112,500 6 37,500 6 0.43 06/18/2029 100,000 5 - 0.46 06/13/2028 100,000 1 - 0.605 06/27/2027 1. Represents a June 27, 2017, grant, all of which are exercisable as of June 27, 2020. 2. Represents a June 27, 2012, grant, all of which were exercisable as of June 27, 2015. 3. Represents a June 17, 2014, grant, all of which were exercisable as of June 17, 2017. 4. 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 became exercisable on June 13, 2021. 5. 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 became exercisable on June 13, 2021. 6. 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 became exercisable on June 18, 2021, and the final fourth will become exercisable on June 18, 2022. 7. Represents a June 23, 2020, grant, one-fourth of which became exercisable on June 23, 2020, one-fourth of which became exercisable on June 23, 2021, one-fourth of which will become exercisable on June 23, 2022, and the final fourth will become exercisable on June 23, 2023. 58 Table of Contents The Company has a 401(k) plan that covers all eligible full-time employees of the Company. Contributions to the 401(k) plan are made by participants to their individual accounts through payroll withholding. Additionally, the 401(k) plan provides for the Company to make contributions to the 401(k) plan in amounts at the discretion of management. 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. Pearl Meyer was not retained in the fiscal 2021 year to update its 2020 compensation analysis. Due to the competitive market demand for executives surging in the initial post-COVID environment, the Compensation Committee determined it needed to institute significant raises as soon as possible before the typical raises slated for June of 2021 to pay compensation in line with its competitors and other companies actively recruiting executive level employees. In May 2021, the Compensation Committee of the Company increased the annual base salary for Lori Woods, our Chief Executive Officer and Director, to $439,810 (26.7% increase), for William Cavanagh, Chief Research and Development Officer, to $300,000 (25.0% increase) and for Jennifer Streeter, our Chief Operating Officer and Vice President of Human Resources, to $337,840 (34.7% increase), effective May 24, 2021. Effective July 1, 2021, options to purchase common stock were allocated to each of the following employees in the following amounts: Lori Woods: 480,000 William Cavanagh: 320,000 Jennifer Streeter: 320,000 Director compensation for fiscal 2021 is set forth below. Fiscal Year 2021 Director Compensation Fees earned or paid in Option cash awards Total Name ($) ($) ($) Alan Hoffmann 46,500 - 46,500 Michael McCormick 45,500 - 45,500 Philip Vitale MD 46,500 - 46,500 Each non-employee director had stock options to purchase shares of the Company’s common stock outstanding as of June 30, 2021 as follows - Mr. Hoffmann had stock options to purchase 145,000 shares of common stock, Mr. McCormick had stock options to purchase 145,000 shares of common stock, and Dr. Vitale had stock options to purchase 145,000 shares of common stock. Each non-employee director was granted options to purchase 135,000 shares of the Company’s common stock on July 1, 2021. During the fiscal year 2021, the independent directors received $3,000 per month for their service. In addition, each non-employee director received $1,000 per Board meeting attended in person or $500 per Board meeting attended via telephone and $500 per committee meeting attended. Beginning in fiscal year 2022, the independent directors now receive $5,000 per month for their service and no per meeting fees. Employee directors do not receive any compensation for their service on the Board. 59 Table of Contents Performance-Based Annual Bonus We provide for an annual cash incentive that reinforces our pay-for-performance approach. This incentive compensation is a short-term incentive program that rewards achievement. 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 2021, the bonus plan was revised so that the Chief Executive Officer had an opportunity to earn a bonus of eight percent (8%) of her annual base salary and each other named officer had 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 would be 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 would be paid if the Company had a gross margin percentage of fifty-five percent (55%) or higher in the applicable quarter; and one quarter of the bonus would be paid if the Company had a net loss margin of negative twenty-five percent (-25%) or less in the applicable quarter. Additionally, the Chief Executive Officer had an opportunity to earn a bonus of eight percent (8%) of her annual base salary and each other named officer had 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 would be paid if the Company had a twenty-five percent (25%) increase in revenue from the prior fiscal year; one quarter of the bonus would be paid if the Company had a gross margin percentage of fifty-five percent (55%) or higher in the fiscal year; and one quarter of the bonus would be paid if the Company had a net loss margin of negative twenty-five percent (-25%) or less in the fiscal year. For fiscal year 2021, twelve and one-half percent (12.5%) of the metrics were achieved for the first, second, third, and fourth quarters as well as for the full fiscal year resulting in the bonuses set forth below. NEO 2021 Bonus ($) Lori Woods – CEO and Director 17,745 William Cavanagh – CRDO 9,190 Jennifer Streeter – COO and VP of HR 9,677 For fiscal year 2022, the bonus plan was revised so that the Chief Executive Officer has an opportunity to earn a bonus of ten percent (10%) of her annual base salary and each other named officer has an opportunity to earn a bonus of eight percent (8%) 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 selling, general and administrative expenses as a percentage of revenue that is less than targets set by the Board of Directors for each quarter. Additionally, the Chief Executive Officer has an opportunity to earn a bonus of ten percent (10%) of her annual base salary and each other named officer has an opportunity to earn a bonus of eight percent (8%) 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 percent (50%) or higher in the fiscal year; and one quarter of the bonus will be paid if the Company has selling, general and administrative expenses as a percentage of revenue that is less than targets set by the Board of Directors for the fiscal year. Risks Related to Compensation Policies and Practices The Compensation Committee has considered whether our overall compensation program for employees in 2022 creates incentives for employees to take excessive or unreasonable risks that could materially harm our Company. We believe that several features of our compensation policies for management employees appropriately mitigate such risks, including a mix of long- and short-term compensation incentives that we believe is properly weighted, our Executive Compensation Clawback Policy and the uniformity of compensation practices across our Company, which the Compensation Committee regards as setting an appropriate level of risk taking for us. We also believe our internal legal and financial controls appropriately mitigate the probability and potential impact of an individual employee committing us to a harmful long-term business transaction in exchange for short-term compensation benefits. 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. The committee may also take any other actions authorized by our Executive Compensation Clawback Policy. 60 Table of Contents ITEM 12 – SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The following tables set forth certain information regarding the beneficial ownership of the Company’s common stock and preferred stock as of September 23, 2021 for (a) each person known by the Company to be a beneficial owner of five percent or more of the outstanding common or preferred stock of the Company, (b) each executive officer, director and nominee for director of the Company, and (c) directors and executive officers of the Company as a group. As of September 23, 2021, the Company had 141,915,266 shares of common stock outstanding. Except as otherwise indicated below, the address for each listed beneficial owner is c/o Isoray, Inc., 350 Hills Street, Suite 106, Richland, Washington 99354. Common Stock Share Ownership Name of Beneficial Owner Common Shares Owned Common Stock Options 1 Common Stock Warrants 3 Percent of Class 2 Lori Woods 895,114 187,500 - 0.76 % Alan Hoffmann 64,230 122,500 9,615 0.14 % Michael McCormick 41,230 122,500 9,615 0.12 % Philip Vitale M.D. 130,000 122,500 10,000 0.18 % William Cavanagh III 27,692 589,160 3,846 0.44 % Jonathan Hunt 67,306 300,000 33,653 0.28 % Jennifer Streeter 5,440 387,500 - 0.28 % Mark Austin 35,230 227,500 9,615 0.19 % Directors and Executive Officers as a group 1,266,242 2,059,160 76,344 2.39 % 1. Only includes those common stock options that could be exercised for common stock within 60 days after September 23, 2021. 2. Percentage ownership is based on 141,915,266 shares of Common Stock outstanding on September 23, 2021. Shares of Common Stock subject to stock options which are currently exercisable or will become exercisable within 60 days after September 23, 2021 are deemed outstanding for computing the percentage ownership of the person or group holding such options but are not deemed outstanding for computing the percentage ownership of any other person or group. 3. Purchased pursuant to public offering that closed on October 22, 2020. Each share of common stock purchased included one-half of a warrant. Each whole warrant is exercisable to purchase one share of common stock at an exercise price of $0.57 per share. Each warrant is immediately exercisable, and will expire October 22, 2025. 61 Table of Contents Series B Preferred Stock Share Ownership There is no preferred stock outstanding as of June 30, 2021. 59,065 shares of Series B preferred stock automatically converted into 59,065 shares of common stock as a result of the October 22, 2020 offering. Securities Authorized for Issuance Under Equity Compensation Plans The “Securities Authorized for Issuance Under Equity Compensation Plans” contained in Item 5 of this Form 10-K is hereby incorporated by reference into this Item 12. ITEM 13 – CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE Transactions with Related Persons None requiring disclosure under Reg. S-K Item 404. Review, Approval or Ratification of Transactions with Related Persons The Company’s Code of Ethics emphasizes the importance of avoiding situations or transactions in which personal interests may interfere with the best interests of the Company or its shareholders. In addition, the Company’s general corporate governance practice includes Board-level discussion and assessment of procedures for discussing and assessing relationships, including business, financial, familial and nonprofit, among the Company and its officers and directors or their immediate family members, to the extent that they may arise. The Board and either the Audit Committee or the Nominations and Corporate Governance Committee review any transaction with an officer or director or their immediate family members to determine, on a case-by-case basis, whether a conflict of interest exists. The Board ensures that all directors voting on such a matter have no interest in the matter and discusses the transaction with counsel as the Board deems necessary. The Board will generally delegate the task of discussing, reviewing and approving transactions between the Company and any related persons to either the Audit Committee or the Nominations and Corporate Governance Committee. As required under SEC rules, transactions that are determined to be directly or indirectly material to the Company or a related party would be disclosed in our Annual Report; however, during our fiscal year ended June 30, 2021, we did not have any related party transactions requiring disclosure under Reg. S-K Item 404. 62 Table of Contents Director Independence Using the standards of the NYSE American, the Company’s Board has determined that Mr. Hoffmann, Mr. McCormick and Dr. Vitale each qualify under such standards as an independent director. Mr. Hoffmann, Mr. McCormick and Dr. Vitale each meet the NYSE American listing standards for independence both as a director and as a member of both the Audit Committee and the Compensation Committee. No other directors are independent under these standards. None of our existing directors were disqualified from independent status under the objective standards of the NYSE American other than Ms. Woods, who did not qualify as she is an employee director. In reviewing the subjective criteria of “any relationship that would interfere with the exercise of independent judgment” in carrying out the responsibilities of a director, the Board determined that all directors other than Ms. Woods met this criteria as well. With respect to Audit Committee independence, the Board determined each member of the Committee qualified as independent for Committee service. The Company did not consider any other relationship or transaction between itself and these independent directors not already disclosed in this Report in making this independence determination. ITEM 14 – PRINCIPAL ACCOUNTANT FEES AND SERVICES The Company paid or accrued the following fees in each of the prior two fiscal years to its principal accountant, Assure CPA, LLC (formerly DeCoria, Maichel & Teague, P.S.) (in thousands): For the Year Ended June 30, 2021 2020 1. Audit Fees $ 67 $ 74 2. Audit-Related Fees - - 3. Tax Fees 11 12 4. All other Fees 26 13 Totals $ 104 $ 99 Audit fees include fees for the audit of our annual financial statements, reviews of our quarterly financial statements, and related consents for documents filed with the SEC. Tax fees include fees for the preparation of our federal and state income tax returns. All other fees are from consulting costs created by the review of documents related to equity offerings. As part of its responsibility for oversight of the independent registered public accountants, the Audit Committee has established a pre-approval policy for engaging audit and permitted non-audit services provided by our independent registered public accountants, Assure CPA, LLC (formerly DeCoria, Maichel & Teague, P.S.). In accordance with this policy, each type of audit, audit-related, tax and other permitted service to be provided by the independent auditors is specifically described and each such service, together with a fee level or budgeted amount for such service, is pre-approved by the Audit Committee. The Audit Committee has delegated authority to its Chairman to pre-approve additional non-audit services (provided such services are not prohibited by applicable law) up to a pre-established aggregate dollar limit. All services pre-approved by the Chairman of the Audit Committee must be presented at the next Audit Committee meeting for review and ratification. All of the services provided by Assure CPA, LLC. described above were approved by our Audit Committee. The Company’s principal accountant, Assure CPA, LLC, did not engage any other persons or firms other than the principal accountant’s full-time, permanent employees. 63 Table of Contents ITEM 15 – EXHIBITS AND FINANCIAL STATEMENT SCHEDULES Isoray, Inc. and Subsidiaries Index to Consolidated Financial Statements Reports of Independent Registered Public Accounting Firm 67 Consolidated Balance Sheets 68 Consolidated Statements of Operations 69 Consolidated Statements of Changes in Stockholders’ Equity 70 Consolidated Statements of Cash Flows 71 Notes to the Consolidated Financial Statements 72 EXHIBIT INDEX (Except as otherwise indicated (a) all exhibits were previously filed, (b) all omitted exhibits are intentionally omitted, and (c) all Reports referenced below were filed under SEC file number 001-33407.) Exhibit # Description 2.1 Plan of Conversion, incorporated by reference to Appendix A of the Form Def 14A filed on November 9, 2018. 3.1 Certificate of Incorporation, incorporated by reference to Exhibit A of the Form Def 14A filed on November 9, 2018. 3.2 Bylaws, incorporated by reference to Exhibit C of the Form Def 14A filed on November 9, 2018. 4.4 Form of Warrant, dated July 11, 2018, incorporated by reference to Exhibit 10.3 of the Form 8-K filed on July 11, 2018. 4.5 Form of Warrant, incorporated by reference to Exhibit A of Exhibit 10.1 of the Form 8-K filed on October 22, 2020. 10.1 Section 510(k) Clearance from the Food and Drug Administration to market Lawrence CSERION Model CS-1, dated March 28, 2003, incorporated by reference to Exhibit 10.5 of the Form SB-2 filed on November 10, 2005 (Reg. No. 333-129646). 10.2 Registry of Radioactive Sealed Sources and Devices Safety Evaluation of Sealed Source, dated September 17, 2004, incorporated by reference to Exhibit 10.10 of the Form SB-2/A2 filed on April 27, 2006 (Reg. No. 333-129646). 10.3 State of Washington Radioactive Materials License dated October 6, 2005, incorporated by reference to Exhibit 10.18 of the Form SB-2 filed on November 10, 2005 (Reg. No. 333-129646). 10.4 Contract Modification, entered into on November 15, 2016 with an effective date of November 1, 2016, to Contract No. X-40403 between Energy Northwest and Isoray Medical, Inc., incorporated by reference to Exhibit 10.2 of the Form 10-Q filed on February 9, 2017. 10.5*** Isoray, Inc. 2017 Equity Incentive Plan (incorporated by reference to Appendix B to Isoray, Inc.’s Definitive Proxy Statement on Schedule 14A, filed on May 17, 2017). 64 Table of Contents 10.6 Rescission and Release Agreement, dated May 2, 2017, between Isoray Medical, Inc., and the Port of Benton, incorporated by reference to Exhibit 10.1 of the Form 8-K filed on June 8, 2017. 10.7*** Form of Isoray, Inc. Stock Option Agreement and Notice of Grant of Stock Option, by and between each grantee thereunder and Isoray, Inc., incorporated by reference to Exhibit 10.1 of the Form 8-K filed on June 30, 2017. 10.8 Consignment Agreement, dated August 25, 2017, between Isoray Medical, Inc. and MedikorPharma-Ural LLC, incorporated by reference to Exhibit 10.1 of the Form 8-K filed on August 31, 2017. 10.9 Service Agreement, dated August 25, 2017, between Isoray Medical, Inc. and MedikorPharma-Ural LLC, incorporated by reference to Exhibit 10.2 of the Form 8-K filed on August 31, 2017. 10.10 Manufacturing and Supply Agreement, dated January 3, 2018, between Isoray Medical, Inc. and GT Medical Technologies, Inc., incorporated by reference to Exhibit 10.1 of the Form 8-K filed on January 8, 2018. 10.11 Collaborative Development Agreement, dated effective as of March 13, 2017, between Isoray Medical, Inc. and GammaTile, LLC, incorporated by reference to Exhibit 10.2 of the Form 8-K filed on January 8, 2018. 10.12 Lease Agreement, dated effective May 2, 2007, between Isoray Medical, Inc. and Energy Northwest, incorporated by reference to Exhibit 10.42 of the Form 8-K filed on May 8, 2007. 10.13*** Isoray, Inc. Stock Option Agreement and Notice of Grant of Stock Option to Lori A. Woods, dated June 13, 2018, incorporated by reference to Exhibit 10.2 of the Form 8-K filed on June 19, 2018. 10.14 Services Agreement, dated August 13, 2018, between Isoray Medical, Inc. and Schultz Public Relations, LLC, incorporated by reference to Exhibit 10.2 of the Form 8-K filed on September 25, 2018. 10.15 Amendment to Exhibit B of Manufacturing and Supply Agreement between Isoray Medical, Inc. 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. 65 Table of Contents 10.16 Amended and Restated Manufacturing and Supply Agreement, dated April 26, 2019, between Isoray Medical, Inc. and GT Medical Technologies, Inc., (confidential treatment granted for redacted portions), incorporated by reference to the Form 8-K filed on May 2, 2019. 10.17 Amendment to Exhibit B of Manufacturing and Supply Agreement between Isoray Medical, Inc. 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. 10.18 Contract Modification, entered into on November 15, 2016 with an effective date of November 1, 2016, to Contract No. X-40403 between Energy Northwest and Isoray Medical, Inc, incorporated by reference to Exhibit 10.2 of the Form 10-Q filed on February 9, 2017. 10.19 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., incorporated by reference to Exhibit 10.45 of the Form 10-K filed on September 27, 2019. 10.20*** 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. 10.21 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). 10.22*** Form of Indemnification Agreement, incorporated by reference to Exhibit 10.1 of the Form 8-K filed on February 19, 2020. 10.23 Equity Distribution Agreement, incorporated by reference to Exhibit 10.1 of the Form 8-K filed on April 6, 2020. 10.24 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) . 10.25 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). 10.26 Amendment to Amended and Restated Manufacturing and Supply Agreement between Isoray Medical, Inc. and GT Medical Technologies, Inc., dated October 16, 2020, incorporated by reference to Exhibit 10.1 of the Form 8-K filed on October 19, 2020. 10.27 Underwriting Agreement between Isoray, Inc. and Oppenheimer & Co. Inc., dated October 20, 2020, incorporated by reference to Exhibit 10.1 of the Form 8-K filed on October 22, 2020. 10.28 Underwriting Agreement between Isoray, Inc. and Oppenheimer & Co. Inc., dated February 4, 2021, incorporated by reference to Exhibit 10.1 of the Form 8-K filed on February 4, 2021. 10.29 Addendum No. 1 to Supply Contract, dated February 10, 2021, by and between Isoray Medical, Inc. and Joint Stock Company. incorporated by reference to Exhibit 10.1 of the Form 8-K filed on February 12, 2021. 10.30 Supply Contract, dated March 18, 2021, between Isoray Medical, Inc., and Joint Stock Company « Isotope » , incorporated by reference to Exhibit 10.1 of the Form 8-K filed on March 23, 2021 (confidential portions of the exhibit have been omitted). 10.31*** Form of Executive Employment Agreement, dated effective May 24, 2021, incorporated by reference to Exhibit 10.1 of the Form 8-K filed on May 28, 2021. 10.32 Lease Modification, dated May 27, 2021, between Energy Northwest and Isoray Medical, Inc. , incorporated by reference to Exhibit 10.1 of the Form 8-K filed on June 3, 2021. 14.1 Code of Conduct and Ethics, incorporated by reference to Exhibit 14.1 of the Form 10-KSB filed on October 11, 2005. (File No. 000-14247) 14.2 Code of Ethics for Chief Executive Officer & Senior Financial Officers, incorporated by reference to Exhibit 14.2 of the Form 10-KSB filed on October 11, 2005. (File No. 000-14247) 21.1* Subsidiaries of the Company. 23.1* Consent of Assure CPA, LLC. 31.1* Rule 13a-14(a)/15d-14(a) Certification - Chief Executive Officer. 31.2* Rule 13a-14(a)/15d-14(a) Certification of Co-Principal Financial Officer 31.3* Rule 13a-14(a)/15d-14(a) Certification of Co-Principal Financial Officer 32** Section 1350 Certifications. 101.INS* XBRL Instance Document. 101.SCH* XBRL Taxonomy Extension Schema Document. 101.CAL* XBRL Taxonomy Extension Calculation Linkbase Document. 101.DEF* XBRL Taxonomy Extension Definition Linkbase Document. 101.LAB* XBRL Taxonomy Extension Label Linkbase Document. 101.PRE* XBRL Taxonomy Extension Presentation Linkbase Document. * Filed Herewith ** Furnished Herewith *** Denotes Management Contract or Compensatory Plan or Arrangement 66 Table of Contents Report of Independent Registered Public Accounting Firm To the shareholders and the board of directors of Isoray, Inc. and Subsidiaries Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of Isoray, Inc. and Subsidiaries (“the Company”) as of June 30, 2021 and 2020, and the related consolidated statements of operations, changes in stockholders’ equity and cash flows for each of the three years in the period ended June 30, 2021, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended June 30, 2021, in conformity with accounting principles generally accepted in the United States of America Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters Critical audit matters are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters. /s/ Assure CPA, LLC (formerly DeCoria, Maichel & Teague, P.S.) We have served as the Company's independent auditor since 2005. Spokane, Washington September 27, 2021 67 Table of Contents Isoray, Inc. and Subsidiaries Consolidated Balance Sheets (In thousands, except shares) June 30, June 30, 2021 2020 ASSETS Current assets: Cash and cash equivalents $ 63,828 $ 2,392 Accounts receivable, net 2,013 2,044 Inventory 980 645 Prepaid expenses and other current assets 481 426 Total current assets 67,302 5,507 Non-current assets: Property and equipment, net 1,958 1,735 Right of use asset, net 768 1,001 Restricted cash 182 181 Inventory, non-current 76 137 Other assets, net 130 138 Total assets $ 70,416 $ 8,699 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses $ 730 $ 654 Lease liability 252 236 Accrued protocol expense 98 35 Accrued radioactive waste disposal 100 94 Accrued payroll and related taxes 362 352 Accrued vacation 259 204 Total current liabilities 1,801 1,575 Non-current liabilities: Lease liability, non-current 524 769 Accrued payroll and related taxes, non-current 77 55 Asset retirement obligation 608 577 Total liabilities 3,010 2,976 Commitments and contingencies (Note 14) Stockholders' equity: Preferred stock, $.001 par value; 7,000,000 shares authorized: Series B: 5,000,000 shares allocated; no and 59,065 shares issued and outstanding - - Common stock, $.001 par value; 200,000,000 shares authorized; 141,915,266 and 68,897,779 shares issued and outstanding 142 69 Additional paid-in capital 158,589 93,592 Accumulated deficit (91,325 ) (87,938 ) Total stockholders' equity 67,406 5,723 Total liabilities and stockholders' equity $ 70,416 $ 8,699 The accompanying notes are an integral part of these consolidated financial statements. 68 Table of Contents Isoray, Inc. and Subsidiaries Consolidated Statements of Operations (Dollars and shares in thousands, except for per-share amounts) Year Ended June 30 2021 2020 2019 Sales, net $ 10,053 $ 9,680 $ 7,314 Cost of sales 4,932 4,556 4,267 Gross profit 5,121 5,124 3,047 Operating expenses: Research and development: Proprietary research and development 1,427 1,126 1,429 Collaboration arrangement, net of reimbursement (Note 14) - - 45 Total research and development 1,427 1,126 1,474 Sales and marketing 2,440 2,976 2,679 General and administrative 4,691 4,571 4,172 (Gain) loss on equipment disposals 9 - (24 ) Change in estimate of asset retirement obligation (Note 8) - (73 ) - Total operating expenses 8,567 8,600 8,301 Operating loss (3,446 ) (3,476 ) (5,254 ) Non-operating income: Interest income 59 30 108 Other income - - 2 Non-operating income, net 59 30 110 Net loss (3,387 ) (3,446 ) (5,144 ) Preferred stock dividends (3 ) (11 ) (11 ) Net loss applicable to common stockholders $ (3,390 ) $ (3,457 ) $ (5,155 ) Basic and diluted loss per share $ (0.03 ) $ (0.05 ) $ (0.08 ) Weighted average shares used in computing net loss per share: Basic and diluted 103,841 67,601 67,042 The accompanying notes are an integral part of these consolidated financial statements. 69 Table of Contents Isoray, Inc. and Subsidiaries Consolidated Statement of Changes in Stockholders' Equity (In thousands, except shares) Series B Preferred Stock Common Stock Shares Amount Shares Amount Additional Paid-in Capital Accumulated Deficit Total Balances at June 30, 2018 59,065 $ - 56,331,147 $ 56 $ 84,322 $ (79,348 ) $ 5,030 Issuance of common stock pursuant to exercise of options 56,900 - 15 15 Issuance of common stock pursuant to registered direct offering, net 11,000,000 11 7,359 7,370 Payment of dividend to preferred stockholders (11 ) (11 ) Share-based compensation 420 420 Net loss - - - - - (5,144 ) (5,144 ) Balances at June 30, 2019 59,065 $ - 67,388,047 $ 67 $ 92,105 $ (84,492 ) $ 7,680 Issuance of common stock pursuant to exercise of options 262,500 1 130 131 Issuance of common stock pursuant to at the market offering, net 1,247,232 1 873 874 Payment of dividend to preferred stockholders (11 ) (11 ) Share-based compensation 495 495 Net loss - - (3,446 ) (3,446 ) Balances at June 30, 2020 59,065 $ - 68,897,779 $ 69 $ 93,592 $ (87,938 ) $ 5,723 Conversion of preferred stock to common stock (59,065 ) - 59,065 - Issuance of common stock pursuant to exercise of options 970,315 1 533 534 Issuance of common stock pursuant to underwritten offering, net 59,669,230 60 56,315 56,375 Issuance of common stock pursuant to exercise of warrants 12,318,877 12 7,772 7,784 Payment of dividend to preferred stockholders (9 ) (9) Share-based compensation 386 386 Net loss (3,387 ) (3,387 ) Balances at June 30, 2021 - $ - 141,915,266 $ 142 $ 158,589 $ (91,325 ) $ 67,406 The accompanying notes are an integral part of these consolidated financial statements. 70 Table of Contents Isoray, Inc. and Subsidiaries Consolidated Statements of Cash Flows (In thousands) Year Ended June 30, 2021 2020 2019 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (3,387 ) $ (3,446 ) $ (5,144 ) Adjustments to reconcile net loss to net cash used by operating activities: Lease expense 4 4 - Depreciation expense 149 147 136 (Gain) loss on equipment disposals 10 - (24 ) Amortization of other assets 37 38 50 Accretion of asset retirement obligation 31 29 31 Change in estimate of asset retirement obligation - (73 ) - Share-based compensation 386 495 420 Changes in operating assets and liabilities: Accounts receivable 31 (890 ) 38 Inventory (274 ) (97 ) 128 Prepaid expenses and other current assets (56 ) (121 ) 30 Accounts payable and accrued expenses 76 (29 ) (708 ) Accrued protocol expense 63 (98 ) 56 Accrued radioactive waste disposal 6 20 37 Accrued payroll and related taxes 32 318 (66 ) Accrued vacation 55 62 (33 ) Net cash used by operating activities (2,837 ) (3,641 ) (5,049 ) CASH FLOWS FROM INVESTING ACTIVITIES: Additions to property and equipment (381 ) (273 ) (444 ) Additions to other assets (30 ) (14 ) (14 ) Proceeds from disposal of equipment 1 - 34 Proceeds from maturity of certificates of deposit - - 5,550 Purchases of and interest from certificates of deposit - - (4,725 ) Net cash provided by (used in) investing activities (410 ) (287 ) 401 CASH FLOWS FROM FINANCING ACTIVITIES: Preferred dividends paid (9 ) (11 ) (11 ) Proceeds from sales of common stock, pursuant to underwritten offering, net 56,375 - - Proceeds from sales of common stock, pursuant to registered direct offering, net - - 7,370 Proceeds from sales of common stock, pursuant to at the market offering, net - 874 - Proceeds from sales of common stock, pursuant to exercise of warrants 7,784 - - Proceeds from sales of common stock, pursuant to exercise of options 534 131 15 Net cash provided by financing activities 64,684 994 7,374 Net increase (decrease) in cash, cash equivalents, and restricted cash 61,437 (2,934 ) 2,726 Cash, cash equivalents, and restricted cash beginning of year 2,573 5,507 2,781 CASH, CASH EQUIVALENTS, AND RESTRICTED CASH END OF YEAR $ 64,010 $ 2,573 $ 5,507 Reconciliation of cash, cash equivalents, and restricted cash to the consolidated balance sheets: Cash and cash equivalents $ 63,828 $ 2,392 $ 5,326 Restricted cash $ 182 $ 181 $ 181 Total cash, cash equivalents, and restricted cash $ 64,010 $ 2,573 $ 5,507 Non-cash investing and financing activities: Recognition of operating lease liability and right of use asset $ - $ 1,228 $ - Warrants issued to placement agent of registered direct offering $ - $ - $ 163 The accompanying notes are an integral part of these consolidated financial statements. 71 Table of Contents Isoray , Inc. Notes to Consolidated Financial Statements For the years ended June 30, 2021, 2020 and 2019 1. Organization Isoray, Inc. was incorporated in Minnesota in 1983. On July 28, 2005, Isoray Medical, Inc. (Medical) became a wholly-owned subsidiary of Isoray, Inc. (formerly known as Century Park Pictures Corporation) pursuant to a merger. In December 2018, upon approval of a majority of stockholders, Isoray, Inc. 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 Isoray, Inc. International has entered into various international distribution agreements. 2. Summary of Significant Accounting Policies Basis of Presentation and Principles of Consolidation The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP), and pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries (collectively the Company). All significant inter-company transactions and balances have been eliminated in consolidation. Cash Equivalents The Company considers currency on hand, demand deposits, time deposits, and all highly liquid investments with an original maturity of three months or less at the date of purchase to be cash and cash equivalents. Cash and cash equivalents are held in various financial institutions in the United States. Investments Investments in debt securities with original maturities greater than three months and remaining maturities less than one year are classified as “Short-term investments” and included in current assets. Investments with remaining maturities greater than one year are classified as “Investments, non-current” and are included in noncurrent assets. These investments are held to maturity and carried at amortized cost. Accounts Receivable Accounts receivable are stated at the amount that management of the Company expects to collect from outstanding balances. Management provides for probable uncollectible amounts through an allowance for doubtful accounts. Additions to the allowance for doubtful accounts are based on management’s judgment, considering historical experience with write-offs, collections and current credit conditions. Balances which remain outstanding after management has used reasonable collection efforts are written off through a charge to the allowance for doubtful accounts and a credit to the applicable accounts receivable. Payments received subsequent to the time that an account is written off are treated as bad debt recoveries. 72 Table of Contents Inventory Inventory is reported at the lower of cost or net realizable value. Cost of raw materials is determined using the weighted average method. Cost of work in process and finished goods is computed using standard cost, which approximates actual cost, on a first-in, first-out basis. The cost of materials and production costs contained in inventory that are not usable due to the passage of time, and resulting loss of bio-effectiveness, are written off to cost of sales at the time it is determined that the product is no longer usable. Property and Equipment Property and Equipment is capitalized and carried at cost less accumulated depreciation. Depreciation expense is recorded to cost of sales and operating expenses. Normal maintenance and repairs are charged to expense as incurred. When any assets are sold or otherwise disposed of, the cost and accumulated depreciation are reversed with any resulting gain or loss being recognized on the consolidated statement of operations. Depreciation is computed using the straight-line method over the following estimated useful lives: Production equipment (in years) 3 to 7 Office equipment (in years) 2 to 10 Furniture and fixtures (in years) 2 to 10 Leasehold improvements are amortized over the shorter of the lease term or the estimated useful life of the asset. P roperty and equipment that is acquired but not yet placed in service is recorded on the balance sheets at cost and no depreciation expense or accumulated depreciation is recognized until the property and equipment is placed in service. Management periodically reviews the net carrying value of all of its long-lived assets on an asset by asset basis. An impairment loss is recognized if the carrying amount of a defined asset group is not recoverable and exceeds its fair value. Although management has made its best estimate of the factors that affect the carrying value based on current conditions, it is reasonably possible that changes could occur which could adversely affect management’s estimate of net cash flows expected to be generated from its assets that could result in an impairment adjustment. Prepaid Expenses and Other Assets Prepaid expenses and other assets, which include website development costs, trademarks, patents and licenses, are stated at cost, less accumulated amortization. For website development, costs incurred in the planning stage are expensed as incurred whereas costs associated with the application and infrastructure development, graphics development, and content development are capitalized. Amortization of website development costs is computed using the straight-line method over the estimated economic useful lives of the asset. Trademarks and patents include costs, primarily legal, incurred in obtaining them. Amortization of trademarks and patents is computed using the straight-line method over the estimated economic useful lives of the assets. Licenses include costs related to licenses pertaining to the use of technology or operational licenses. These licenses are recorded at stated cost, less accumulated amortization. Amortization of licenses is computed using the straight-line method over the estimated economic useful lives of the assets. The Company periodically reviews the carrying values of other assets and evaluates the recorded basis for any impairment. Any impairment is recognized when the expected future operating cash flows to be derived from the licenses are less than their carrying value. Asset Retirement Obligation The estimated fair value of the future retirement costs of the Company’s leased assets and the costs for the decontamination and reclamation of equipment located within the footprint leased asset are recorded as a liability on a discounted basis when a contractual obligation exists; an equivalent amount is capitalized to property and equipment. The initial recorded obligation is discounted using the Company's credit-adjusted risk-free rate and is reviewed periodically for changes in the estimated future costs underlying the obligation. The Company amortizes the initial amount capitalized to property and equipment and recognizes accretion expense in connection with the discounted liability over the estimated remaining useful life of the leased assets. Adjustments and changes to either the timing or amount of the original present value estimate underlying the obligation are made in the period incurred. 73 Table of Contents Financial Instruments The fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties, other than a forced liquidation sale. At June 30, 2021 and 2020, the carrying value of financial instruments, which included restricted cash, approximated fair value. Fair Value Measurement When required to measure assets or liabilities at fair value, the Company uses a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used. The Company determines the level within the fair value hierarchy in which the fair value measurements in their entirety fall. The categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Level 1 uses quoted prices in active markets for identical assets or liabilities, Level 2 uses significant other observable inputs, and Level 3 uses significant unobservable inputs. The amount of the total gains or losses for the period are included in earnings that are attributable to the change in unrealized gains or losses relating to those assets and liabilities still held at the reporting date. The Company has no financial assets or liabilities that are adjusted to fair value on a recurring basis. At June 30, 2021 and 2020, there were no assets or liabilities measured at fair-value on a recurring basis which were measured using Level 3 inputs. Certain assets and liabilities are measured at fair value on a non-recurring basis; 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). 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. 74 Table of Contents Revenue Recognition The Company recognizes revenue based on the five-step model for revenue recognition as prescribed by ASC 606, Revenue from Contracts with Customers , as follows: (1) identify the contract with the customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the prices to the performance obligations; and (5) recognize revenue. The Company has some agreements that contain general commercial terms and product prices but do not contain an obligation to provide goods to the customer. Our performance obligation, which is established when the customer submits a purchase order and the Company accepts the order, is to deliver the product based on the purchase order received. The Company typically recognizes revenue at the time of shipment, at which time the title passes to the customer, and there are no further performance obligations. See Note 17. Shipping and Handling Costs Shipping and handling costs include charges associated with delivery of goods from the Company’s facilities to its customers and are reflected in cost of sales. 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 revenue. Share-Based Compensation The Company measures and recognizes expense for all share-based payments at fair value. The Company uses the Black-Scholes option valuation model to estimate fair value for all stock options and stock warrants on the date of grant. For stock options that vest over time, the Company recognizes compensation cost on a straight-line basis over the requisite service period for the entire award. The Company recognizes forfeitures as they occur. Research and Development Costs Research and Development - Proprietary Research and development costs, including salaries, research materials, administrative expenses and contractor fees, are charged to operations as incurred. The cost of equipment used in research and development activities which has alternative uses is capitalized as part of fixed assets and not treated as an expense in the period acquired. Depreciation of capitalized equipment used to perform research and development is classified as research and development expense in the year recognized. Research and Development - Collaborative Arrangement Research and development costs incurred and shared in connection with a collaborative research and development project are separately stated in the consolidated statements of operation under “Research and development: Collaboration arrangements, net of reimbursement” and are expensed as incurred. Advertising and Marketing Costs Advertising costs are expensed as incurred except for the cost of tradeshows and related marketing materials which are deferred until the tradeshow occurs. (In thousands) For the Years Ended June 30, 2021 2020 2019 Advertising and marketing costs expensed (including tradeshows) $ 84 $ 141 $ 210 At June 30, 2021 2020 Prepaid marketing expenses deferred until event occurs $ 21 $ 14 Legal Contingencies The Company records contingent liabilities resulting from asserted and unasserted claims against it, when it is probable that a liability has been incurred and the amount of the loss is reasonably estimable. Estimating probable losses requires analysis of multiple factors, in some cases including judgments about the potential actions of third-party claimants and courts. Therefore, actual losses in any future period are inherently uncertain. Currently, the Company does not believe any probable legal proceedings or claims will have a material adverse effect on its financial position or results of operations. However, if actual or estimated probable future losses exceed the Company’s recorded liability for such claims, it would record additional charges as other expense during the period in which the actual loss or change in estimate occurred. 75 Table of Contents Income Taxes Income taxes are accounted for under the liability method. Under this method, the Company provides deferred income taxes for temporary differences that will result in taxable or deductible amounts in future years based on the reporting of certain costs in different periods for financial statement and income tax purposes. This method also requires the recognition of future tax benefits such as net operating loss carry-forwards, to the extent that realization of such benefits is not subject to an allowance. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that includes the enactment of the change. 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. Leases 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. 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 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: June 30, 2021 2020 2019 Preferred stock - 59,065 59,065 Common stock warrants 2,645,738 6,080,000 6,080,000 Common stock options 4,514,660 5,497,505 4,645,315 Total potential dilutive securities 7,160,398 11,636,570 10,784,380 Use of Estimates The preparation of consolidated financial statements in accordance with generally accepted accounting principles in the United States of America requires management of the Company to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes of the Company including 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 and other assets; estimated amount and fair value of the asset retirement obligation related to the Company’s production facilities; and inputs to the Black-Scholes calculation used in determining the expense related to share-based compensation including volatility, estimated lives and forfeiture rates of options granted. Accordingly, actual results could differ from those estimates and affect the amounts reported in the financial statements. 76 Table of Contents Recent Accounting Pronouncements Accounting Standards Updates Adopted In November 2018, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction Between Topic 808 and Topic 606, which, among other things, provides guidance on how to assess whether certain collaborative arrangement transactions should be accounted for under Topic 606. The amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted. The update was adopted on July 1, 2020 and had no effect on the consolidated financial statements. Accounting Standards Updates to Become Effective in Future Periods Other accounting standards that have been issued or proposed by 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. 3. Inventory Inventory consisted of the following (in thousands): June 30, Inventory, current 2021 2020 Raw materials $ 645 $ 401 Work in process 286 221 Finished goods 49 23 Total inventory, current $ 980 $ 645 June 30, Inventory, non-current 2021 2020 Enriched barium, non-current $ - $ 117 Raw materials, non-current 76 20 Total inventory, non-current $ 76 $ 137 77 Table of Contents 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. 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 approximately 4,000 curies of Cesium-131. During the year ended June 30, 2021 and 2020, the Company obtained zero and 31 curies, respectively, under this agreement which has been used in production. At June 30, 2021, the Company estimates that the remaining enriched barium will result in 894 curies; approximately all of which will be obtained in the year ended June 30, 2022. 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. 4. Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets consisted of the following (in thousands): June 30, 2021 2020 Prepaid insurance $ 107 $ 95 Other prepaid expenses 315 273 Other current assets 27 27 Other receivables 32 31 Total prepaid expenses and other current assets $ 481 $ 426 5. Property & Equipment Property & equipment consisted of the following (in thousands): June 30, 2021 2020 Land $ 366 $ 366 Equipment 4,202 3,872 Leasehold improvements 4,143 4,143 Other 1 495 871 Property and equipment 9,206 9,252 Less accumulated depreciation (7,248 ) (7,517 ) Property and equipment, net $ 1,958 $ 1,735 1. 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, 2021 and 2020 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 three to five years. 6. Restricted Cash The Washington Department of Health requires the Company to provide collateral for the decommissioning of its facility. To satisfy this requirement, the Company has a bank account with a balance of $182,000. The account is termed restricted cash and classified as a long-term asset as the Company does not anticipate decommissioning the facility until the end of the current lease. The current lease as extended in July 2019 expires April 30, 2026. The cash will become unrestricted following the decommissioning of the facility and the release of the facility by the Washington Department of Health back to the landlord. 78 Table of Contents 7. Other Assets, net Other assets, net of accumulated amortization consisted of the following (in thousands): June 30, 2021 2020 Website development $ 90 $ 90 Licenses 520 516 Patents and trademarks 378 366 Total Other Assets 988 972 Less: Accumulated Amortization (858 ) (834 ) $ 130 $ 138 Year Ended June 30, 2021 2020 2019 Amortization expense on website development $ 7 $ 8 $ 14 Amortization expense on licenses 14 14 18 Amortization expense on patents and trademarks 16 16 18 Total amortization expense $ 37 $ 38 $ 50 Future amortization is expected to be as follows (in thousands): Year ended June 30, 2022 $ 42 2023 24 2024 23 2025 21 2026 10 Thereafter 10 $ 130 8. Leases 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, 2021 was 2.8 years and 6%, respectively. For the fiscal years ended June 30, 2021, 2020, and 2019 our operating lease expense was approximately $304,000, $294,000, and $285,000 respectively, and is recognized in the statement of operations in cost of sales and general and administrative expenses. For the fiscal years ended June 31, 2021, 2020 and 2019 our operating lease expense recognized in cost of sales was approximately $195,000, $187,000 and $184,000 respectively and our lease expense recognized in general and administrative expense was approximately $109,000, $107,000 and $101,000 respectively. 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, 2021 (in thousands): Year Ending June 30, 2022 292 2023 292 2024 264 Total 848 Less: Imputed interest (72 ) Total Lease Liability 776 Less current portion (252 ) Non-current Lease Liability $ 524 79 Table of Contents Asset Retirement Obligation The Company has an asset retirement obligation (ARO) associated with the facility it currently leases. The following table presents the change in the ARO (in thousands): Year ended June 30, 2021 2020 Beginning balance $ 577 $ 621 Accretion of discount 31 29 Gain on change in ARO estimate due to lease modification - (73 ) Ending Balance $ 608 $ 577 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. 9. Share-Based Compensation 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). Options granted prior to fiscal 2017 were made pursuant to plans that have expired or were terminated. 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 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 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. The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions, including the expected stock price volatility. The Company uses the Black-Scholes option valuation model because management believes the model is appropriate for the Company. However, management understands that because changes in the subjective input assumptions can materially affect the fair value estimate, this valuation model does not necessarily provide a reliable single measure of the fair value of its stock options. The risk-free interest rate is based on the U.S. treasury security rate with an equivalent term in effect as of the date of grant. The expected option lives and volatility assumptions are based on historical data of the Company. 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: For the Year Ended June 30, 2021 2020 2019 Weighted average fair value $0.86 $0.39 $0.31 Options issued 400,000 1,330,000 1,252,500 Exercise price $0.64 to $1.66 $0.32 to $0.61 $0.37 to $0.55 Expected term (in years) 5 5 5 Risk-free rate 0.22% to 0.94% 0.33% to 1.80% 1.83% to 2.91% Volatility 83% - 100% 83% - 89% 89% - 105% 80 Table of Contents The following table presents the share-based compensation expense (in thousands): For the Year Ended June 30, 2021 2020 2019 Cost of sales $ 30 $ 21 $ 38 Research and development expense 104 111 84 Sales and marketing expense 49 125 96 General and administrative expense 203 238 202 Total share-based compensation $ 386 $ 495 $ 420 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, 2021, total unrecognized compensation cost related to stock-based options and awards was approximately $519,000 and the weighted-average period over which it is expected to be recognized is approximately 1.13 years. A summary of stock option information within the Company’s share-based compensation plans during the fiscal years is presented below: Options Outstanding Price (a) Life (b) Value (c) Balance at June 30, 2018 3,759,840 $ 0.69 7.75 $ 49 Granted (d) 1,252,500 .44 Expired (242,000 ) .41 Forfeited (68,125 ) .54 Exercised (56,900 ) .26 Balance at June 30, 2019 4,645,315 $ 0.64 7.95 $ 1 Granted (d) 1,330,000 .61 Expired (192,810 ) 1.33 Forfeited (22,500 ) .42 Exercised (262,500 ) .49 Balance at June 30, 2020 5,497,505 $ 0.62 7.85 $ 233 Granted (d) 400,000 1.18 Expired (149,405 ) 1.07 Forfeited (263,125 ) .53 Exercised (970,315 ) .55 Balance at June 30, 2021 4,514,660 $ 0.67 7.27 $ 984 Vested and expected to vest at June 30, 2021 4,514,660 $ 0.67 7.27 $ 984 Exercisable at June 30, 2021 3,443,826 $ 0.66 6.75 $ 793 (a) Weighted average exercise price per share. (b) Weighted average remaining contractual life. (c) Aggregate intrinsic value (in thousands). (d) All options granted had exercise prices equal to or greater than the ending closing market price of the Company’s common stock on the grant date. The options were granted to employees and management by the Compensation Committee and had vesting periods from immediate to five years. For the Year Ended June 30, 2021 2020 2019 Aggregate intrinsic value of options exercised (in thousands) $ 770 $ 83 $ 11 The Company’s current policy is to issue new shares to satisfy option exercises. On July 1, 2021, the Company granted 2,841,600 stock option awards to employees and directors. 81 Table of Contents 10. Stockholders’ Equity The authorized capital structure of the Company consists of $.001 par value preferred stock and $.001 par value common stock. Common Stock On January 23, 2020, the Company filed a Form S-3 registration statement which became effective on February 4, 2020, with the potential to register up to $80 million of equity securities. 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 was distributed at the market prices prevailing at the time of sale. The Agreement provided that Oppenheimer was 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. As of June 30, 2020, the Company had sold an aggregate of 1,247,232 shares under the 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. No shares were sold under this Agreement during fiscal year 2021. On October 19, 2020, the Company terminated the Agreement, effective on the same date. On October 22, 2020, the Company sold 18,269,230 shares of its common stock at a price of $0.52 per share, for aggregate gross proceeds of $9,500,000, pursuant to the registration statement on Form S-3 that became effective on February 4, 2020. The net proceeds from the offering were approximately $8,471,000. Additionally, the Company issued to the purchasers warrants to purchase up to 9,134,615 shares of common stock. The warrants have an exercise price of $0.57 per share of common stock, are exercisable immediately, and expire five years from the date of issuance. If exercised for cash, future exercises of these warrants will provide additional capital to the Company. On February 8, 2021, the Company sold 36,000,000 shares of its common stock at a price of $1.25 per share for aggregate gross proceeds of approximately $45,000,000, pursuant to the registration statement on Form S-3 that became effective on February 4, 2020. Additionally, the Company granted the underwriters an option to purchase an additional 5,400,000 shares of common stock at a purchase price of $1.25 per share for the purpose of covering overallotments, which was exercised on February 8, 2021 and generated gross proceeds of approximately $6,750,000. Total gross proceeds from the offering were approximately $51,750,000 and total net proceeds were approximately $47,904,000. During Fiscal 2021, the Company received approximately $7.8 million as a result of the exercise of 12,318,877 warrants to purchase common stock and $0.5 million as a result of the exercise of 970,315 options to purchase common stock. Preferred Stock 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. There were no shares issued under these Series. Series B is the remaining Series authorized at June 30, 2021 and had no issued and outstanding shares at June 30, 2021. Series B Series B preferred shares are entitled to a cumulative 15% dividend annually on the stated par value per share. 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 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. Pursuant to the terms of the 59,065 shares of Series B preferred stock issued and outstanding they were converted to common stock as a result of the “firm” underwritten offering in October 2020. On December 8 , 2020, the Board of Directors declared a dividend on the Series B Preferred Stock of all outstanding and cumulative dividends through October 22, 2020. The total dividends of $9,000 were paid as of December 31, 2020. 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. The total dividends of $11,000 were paid as of December 31, 2019. At June 30, 2021 and 2020, there were zero and 59,065 Series B preferred shares outstanding and cumulative dividends in arrears were $0 and $5,000 respectively. 82 Table of Contents Warrants During the year ended June 30, 2020 the Company did not issue any warrants. During the year ended June 30, 2021 the Company issued a total of 9,134,615 warrants in connection with the public offering that was completed on October 22, 2020. The key assumptions used in the Black-Scholes valuation model to calculate the fair value of the warrants issued, are as follows: Warrants issued 9,134,615 Exercise price $0.57 Expected term (in years) 5 Risk-free rate 0.38% Volatility 85% The following table summarizes the activity of all stock warrants and weighted average exercise prices. Warrants Price (a) Balance at June 30, 2018 250,000 $ 0.54 Warrants issued 5,830,000 0.76 Balance at June 30, 2019 6,080,000 $ 0.75 Balance at June 30, 2020 6,080,000 $ 0.75 Warrants issued 9,134,615 .57 Warrants exercised (12,318,877 ) .63 Warrants expired (250,000 ) .54 Balance at June 30, 2021 2,645,738 $ 0.70 (a) Weighted average exercise price per share. As of June 30, 2021, the Company had 272,250 common warrants outstanding exercisable on or before July 10, 2023, 1,375,000 common warrants outstanding exercisable on or before January 11, 2024, and 998,488 common warrants outstanding exercisable on or before October 22, 2025 with a weighted average remaining contractual life of 3.15 years. 83 Table of Contents 11. Income Taxes Due to net losses, the Company did not record an income tax provision or benefit for the years ending June 30, 2021, 2020 and 2019. The significant deferred tax components using a federal income tax rate of 21% for the years ended June 30, 2021 and 2020 are as follows (in thousands): As of June 30, 2021 2020 Fixed assets $ 55 $ 124 Share-based compensation 563 682 Other accruals 49 37 Asset retirement obligation 128 121 Research credit carryforwards 277 218 Other 6 6 Net operating loss carryforwards 16,568 15,799 Total deferred tax assets 17,646 16,987 Valuation allowance (17,646 ) (16,987 ) Total $ - $ - As management of the Company cannot determine that it is more likely than not that the Company will realize the benefit of the net deferred tax asset, a valuation allowance equal to 100% of the net deferred tax asset has been recorded at both June 30, 2021 and 2020. The Company has federal net operating loss carryforwards of approximately $67.5 million on June 30, 2021 that can be used to offset future regular taxable income. These net operating loss carryforwards expire at various times through the years 2025 to 2038. Additionally, the Company has federal net operating loss carryforwards of approximately $11.4 million on June 30, 2021 that can be used to offset 80% of future regular taxable income that do not have an expiration date. The Company has a research credit carryforward of approximately $0.3 million on June 30, 2021 that expire at various times through the years 2037 to 2041. 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): For the year ended June 30, 2021 2020 2019 U.S. federal statutory income tax rate 21 % 21 % 21 % Expected income tax benefit $ (711 ) $ (724 ) $ (1,080 ) Meals and entertainment 6 8 12 Non-deductible penalties 22 24 18 Change in estimate 28 (58 ) (178 ) Incentive stock options 48 Research credit (52 ) 11 - Change in valuation allowance 659 739 1,228 Income tax expense (benefit) $ - $ - $ - The Company has reviewed the tax positions taken and concluded that it does not have a potential liability for uncertain tax positions. Currently, tax years 2019-2021 remain open for examination by United States taxing authorities. Net operating losses prior to 2019 could be adjusted during an examination of open years. 12. 401(k) and Profit Sharing Plan The Company has a 401(k) plan, which commenced in fiscal year 2007, covering all eligible full-time employees of the Company. Contributions to the 401(k) plan are made by the participants to their individual accounts through payroll withholding. The 401(k) plan also allows the Company to make contributions at the discretion of management. To date, the Company has not made any contributions to the 401(k) plan. 84 Table of Contents 13. Distribution Agreements 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 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. 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. The agreement expired on August 1, 2019 and was not renewed. As the Company elected to not renew its CE mark in fiscal 2019, distribution will be limited to those countries outside the European Union. 14. Commitments and Contingencies Royalty Agreement for Invention and Patent Application 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. The Company must also pay a royalty of 2% of Gross Sales, as defined, for any sub-assignments of the aforesaid patented process to any third parties. The royalty agreement remained in force until the expiration of the patents on the assigned technology. The patent expired in April 2019 and no royalties were paid on sales after the expiration of the patent. During fiscal years 2021, 2020 and 2019, the Company recorded royalty expenses of $0, $0, and $33,000, respectively. 85 Table of Contents Isotope Purchase Agreement 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. On February 10, 2021, an addendum was signed updating delivery locations. On March 18, 2021, the Company entered into a new supply contract with JSC Isotope pursuant to which the Company will purchase Cesium-131 for a term from March 18, 2021 through March 31, 2023. On July 29, 2021, an addendum was signed that adds a manufacturer, adds a shipper of goods, and increases the amount of Cesium-131 the Company can purchase. On August 19, 2021, an addendum was signed that adds MedikorPharma-Ural LLC, a company incorporated in accordance with the laws of Russia (“Medikor”), as a supplier to supply enriched barium carbonate for the manufacture of Cesium-131 to JSC Isotope on behalf of the Company. 86 Table of Contents Research and Development - Collaborative Arrangement On March 13, 2017, Medical entered into a Collaborative Development Agreement (CDA) with GammaTile, LLC, now known as GT Medical Technologies, Inc. (GT Med Tech), to further develop a brachytherapy medical device for the treatment of cancerous tumors in the brain and to seek regulatory approval for the new product. As the project manager, Medical incurs all costs in connection with the collaboration project which will be shared equally by both parties as of November 8, 2016 when they informally began the collaboration. The arrangement is accounted for as a collaborative arrangement and related costs are incurred, shared, and separately stated in connection with a collaborative research and development project. These costs are reported on the financial statements under “Research and development: Collaboration arrangements, net of reimbursement.” Gross costs incurred in connection with the collaboration agreement during fiscal years 2021, 2020 and 2019 were $0, $0 and $266,000, respectively. As of June 30, 2021 and 2020, 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. Beginning in April 2018 costs were no longer shared equally as had been done historically and GT Med Tech was responsible for more than 50% of the costs. 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. 87 Table of Contents 15. Concentrations of Credit and Other Risks The Company’s financial instruments that were exposed to concentrations of credit risk consist primarily of cash, cash equivalents, restricted cash, and accounts receivable. The Company’s cash and cash equivalents were maintained with high-quality financial institutions at June 30, 2021 and 2020, respectively. At June 30, 2021 and 2020, respectively, all cash balances were guaranteed by the Federal Deposit Insurance Corporation (FDIC) and there were no cash equivalents. The Company routinely assesses the financial strength of its customers and provides an allowance for doubtful accounts as necessary. At both June 30, 2021 and 2020, the allowance was approximately $26,000. 88 Table of Contents Inventories Most components used in the Company’s product are purchased from outside sources. Certain components are purchased from single suppliers. The failure of any such supplier to meet its commitment on schedule could have a material adverse effect on the Company’s business, operating results and financial condition. If a sole-source supplier were to go out of business or otherwise become unable to meet its supply commitments, the process of locating and qualifying alternate sources could require up to several months, during which time the Company’s production could be delayed. 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 material adverse effect on the Company’s business, operating results and financial condition. 16 . Quarterly Financial Data (unaudited) The following table provides the selected quarterly financial data for fiscal years 2021 and 2020 (dollars and shares in thousands, except for per share amounts): Quarters ended September 30, December 31, March 31, June 30, 2020 2020 2021 2021 Net revenue $ 2,384 $ 2,359 $ 2,600 $ 2,710 Gross profit $ 1,246 $ 1,167 $ 1,362 $ 1,346 Net loss $ (713 ) $ (868 ) $ (745 ) $ (1,061 ) Net loss per share – basic and diluted $ (0.01 ) $ (0.01 ) $ (0.01 ) $ (0.01 ) Shares used in basic and diluted per share calculation 68,898 83,047 122,566 141,673 Quarters ended September 30, December 31, March 31, June 30, 2019 2019 2020 2020 Net revenue $ 2,315 $ 2,206 $ 2,880 $ 2,279 Gross profit/(loss) $ 1,236 $ 1,111 $ 1,706 $ 1,071 Net loss $ (816 ) $ (897 ) $ (545 ) $ (1,188 ) Net loss per share – basic and diluted $ (0.01 ) $ (0.01 ) $ (0.01 ) $ (0.02 ) Shares used in basic and diluted per share calculation 67,388 67,388 67,558 68,075 1. Due to rounding, the total of the individual quarters and the year-end calculation on the Consolidated Statement of Operations may be different. 89 Table of Contents 17. Contracts with Customers We routinely enter into agreements with customers that include general commercial terms and conditions, notification requirements for price increases, shipping terms, and in most cases, prices for the products that we offer. However, these agreements do not obligate us to provide goods to the customer and there is no consideration promised to us at the onset of these arrangements. 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 an order for goods, and we accept the order. We identify performance obligations as the sale of our products and services as requested from our customers. We generally recognize revenue upon the satisfaction of these criteria when control of the product has been transferred to the customer at which time we have an unconditional right to receive payment. Our prices are fixed and are not affected by contingent events that could impact the transaction price. We do not offer price concessions and do not accept payment that is less than the price stated when we accept the purchase order, except in rare credit related circumstances. We do not have any material performance obligations where we are acting as an agent for another entity. Revenues for all products are typically recognized at the time the product is shipped, at which time the title passes to the customer, and there are no further performance obligations. Sources of Revenue We have identified the following revenues disaggregated by revenue source: 1. Domestic – direct sales of products and services. 2. International – direct sales of products and services. During the fiscal years 2021, 2020 and 2019, the Company had revenue from both sources. International revenues in all periods was immaterial. For the fiscal year 2021, prostate brachytherapy comprised 78% of our revenue while other revenue, which includes but is not limited to brain, lung, head/neck, gynecological, pelvic treatments, and services, comprised 22% compared to 86% and 14%, respectively, in the fiscal year 2020 and 89% and 11%, respectively, in the fiscal year 2019. Contract Balances We incur obligations on general customer purchase orders and e-mails that have been accepted but unfulfilled. Due to the short duration of time between order acceptance and delivery of the related product, we have determined that the balance related to these obligations is generally immaterial at any point in time. We monitor the value of orders accepted but unfulfilled at the close of each reporting period to determine if disclosure is appropriate. Warranty Our general product warranties do not extend beyond an assurance that the product delivered will be consistent with stated specifications and do not include separate performance obligations. Returns Generally, we allow returns if not implanted and we are notified within a few weeks after satisfying our performance obligations of a return. Returns after shipment may result in a 50% restocking fee. 90 Table of Contents Commissions and Contract Costs We expense commissions on orders to our sales team upon satisfaction of our performance obligations. We generally do not incur incremental charges associated with securing agreements with customers which would require capitalization and recovery over the life of the agreement. Practical Expedients Our payment terms for sales direct to customers and distributors are substantially less than the one year collection period that falls within the practical expedient in determination of whether a significant financing component exists. Shipping and Handling Charges Fees charged to customers for shipping and handling of products are included as revenue and the costs for shipping and handling of products are included as a component of cost of sales. Taxes Collected from Customers As our products are used in another service and are exempt, to this point we have not collected taxes. If we were to collect taxes they would be on the value of transaction revenue and would be excluded from revenues and cost of sales and would be accrued in current liabilities until remitted to governmental authorities. Concentration of Customers The following are the Company’s top customers, facilities or physician practices that utilize multiple surgical facilities shown as a percentage of total sales for the twelve months ended June 30, 2021: Year ended June 30, Facility 2021 % of total revenue 2020 % of total revenue 2019 % of total revenue El Camino, Los Gatos, & other facilities 1 25.3 % 26.8 % 22.1 % GT Medical Technologies 11.3 % <10.0 % <10.0 % 1. The head of the single largest physician practice also serves as the Company’s medical director. As the medical director, this physician advises the Company Board of Directors and management, provides technical advice related to product development and research and development, and provides internal training to the Company sales staff and professional training to our sales staff and to other physicians. None of these facilities individually make up more than 10% of our revenue or accounts receivable. The following is the Company’s top customer shown as a percentage of total accounts receivable for the twelve months ended June 30, 2021: Year ended June 30, Facility 2021 % of total accounts receivable 2020 % of total accounts receivable 2019 % of total accounts receivable GT Medical Technologies 10.2 % <10.0 % <10.0 % 18. Subsequent Events On July 1, 2021, the Company granted 2,841,600 stock option awards to employees and directors. On July 29, 2021, the Company entered into Addendum No. 1 to its supply contract with Joint Stock Company, a Russian company, originally dated March 18, 2021, for the purchase of Cesium-131. The Addendum adds a manufacturer, adds a shipper of goods, and increases the amount of Cesium-131 the Company can purchase. On August 19, 2021, the Company entered into Addendum No. 2 to its supply contract with Joint Stock Company, a Russian company, originally dated March 18, 2021, for the purchase of Cesium-131. The Addendum adds MedikorPharma-Ural LLC, a company incorporated in accordance with the laws of Russia , as a supplier to supply enriched barium carbonate for the manufacture of Cesium-131 to JSC Isotope on behalf of the Company. On September 9, 2021, the Company entered into a Consignment Agreement with MedikorPharma-Ural LLC, a company incorporated in accordance with the laws of Russia. The Company’s source of supply of Cesium-131 is produced using two Russian nuclear reactors which supply the neutron irradiation needed for Cesium-131 production. One of the Russian nuclear reactors will be working at a reduced capacity and be shut down later in calendar year 2021. As a result of the upcoming shutdown, only one of the Company’s historic suppliers of Cesium-131 will be available during these periods. To help mitigate this situation, pursuant to the Consignment Agreement, the Company will purchase 6000 mg of enriched barium carbonate for $720,000, which is needed for the manufacture of Cesium-131, and consign this inventory to Medikor. It is expected that beginning in October 2021, Medikor will use the barium carbonate consigned by the Company and contract with a third-party manufacturer to produce Cesium-131. Pursuant to the Consignment Agreement, Medikor will pay the Company varying US dollar amounts per curie of Cesium-131 the Company purchases. The amount varies based on how many curies of Cesium-131 the Company purchases. It is further expected that a separate third-party contractor will receive the Cesium-131 produced by the third-party manufacturer and will sell the Cesium-131 exclusively to the Company. This arrangement would have the effect of minimizing the impact on the Company of the temporary shutdown of one of the nuclear reactors that serves as its source of Cesium-131 from Russia. The Company anticipates obtaining enough Cesium-131 under this arrangement to obtain over 5,000 curies of Cesium-131 through the end of the term, December 31, 2030, but there is no assurance as to whether the Consignment 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-parties will be executed. ITEM 16 – FORM 10-K SUMMARY None 92 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Dated: September 27, 2021 ISORAY, INC., a Delaware corporation By /s/ Lori A. Woods Lori A. Woods, Chief Executive Officer, Director By /s/ Jonathan Hunt Jonathan Hunt, Chief Financial Officer, Co-Principal Financial Officer By /s/ Mark J. Austin Mark J. Austin, Vice President of Finance and Corporate Controller, 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. Dated: September 27, 2021 /s/ Lori A. Woods Lori A. Woods, Chief Executive Officer, Director /s/ Jonathan Hunt Jonathan Hunt, Chief Financial Officer, Co-Principal Financial Officer /s/ Mark J. Austin Mark J. Austin, Vice President of Finance and Corporate Controller, Co-Principal Financial and Principal Accounting Officer, Corporate Secretary /s/ Michael McCormick Michael McCormick, Chairman /s/ Alan Hoffmann Alan Hoffmann, Director /s/ Philip Vitale Philip Vitale, Director 93 Table of Contents