Table of Contents



UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31,June 30, 2023

 

OR

 

oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from _____________ to _______________

 

Commission file number:

0-22923

 

INTERNATIONAL ISOTOPES INC.

(Exact name of registrant as specified in its charter)

 

Texas

 

74-2763837

(State or other jurisdiction of

incorporation or organization)

 

(IRS Employer Identification No.)

 

4137 Commerce Circle

Idaho Falls,, Idaho,, 83401

(Address of principal executive offices, including zip code)

 

(208)524-5300

(Registrant’sRegistrants telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act: None

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ýYes¨No

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ýYes¨No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ¨

Accelerated filer ¨

Non-accelerated Filerýfiler ☒

Smaller reporting company x

  
 

Emerging growth company ¨

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards pursuant to Section 13(a) of the Exchange Act. ¨

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ¨Yes ýNo

 

As of May 2,August 10, 2023, the number of shares of common stock, $0.01 par value, outstanding was 517,852,831.518,029,510. 

 

1

 

INTERNATIONAL ISOTOPES INC.

FormFORM 10-Q

For The Quarter Ended March 31,June 30, 2023

 

TABLE OF CONTENTS

 

  

Page No.

PART I  FINANCIAL INFORMATION

 
   

Item 1.

Financial Statements

 
 

Unaudited Condensed Consolidated Balance Sheets at March 31,June 30, 2023 and December 31, 2022

4

3

 

Unaudited Condensed Consolidated Statements of Operations for the Three and Six Months Ended March 31,June 30, 2023 and 2022

5

4

 

Unaudited Condensed Consolidated Statements of Cash Flows for the ThreeSix Months Ended March 31,June 30, 2023 and 2022

6

5

 

Unaudited Condensed Consolidated Statement of Stockholder’s (Deficit) Equity for the Three and Six Months Ended March 31,June 30, 2023 and 2022

7

6

 

Notes to Unaudited Condensed Consolidated Financial Statements

8

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

18

Item 4.

Controls and Procedures

23

25

   

PART II  OTHER INFORMATION

 
   

Item 1.

Legal Proceedings

24

26

Item 1A.

Risk Factors

24

26

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

24

26

Item 6.

Exhibits

25

27

Signatures

26

28

 

2

 

PartPART I Financial InformationFINANCIAL INFORMATION

ItemITEM 1. Financial StatementsFINANCIAL STATEMENTS

 

INTERNATIONAL ISOTOPES INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(unaudited)

 

 March 31, December 31,  

June 30,

 

December 31,

 
 2023 2022  

2023

  

2022

 
Assets          
Current assets         
Cash and cash equivalents $3,281,161  $2,375,817  $3,274,125  $2,375,817 
Accounts receivable  1,555,786   1,596,886  1,289,936  1,596,886 
Inventories  614,498   744,793  701,411  744,793 
Prepaids and other current assets  372,418   1,023,129   220,930   1,023,129 
Total current assets  5,823,863   5,740,625   5,486,402   5,740,625 
         
Long-term assets         
Restricted cash  848,451   840,049  858,268  840,049 
Property, plant and equipment, net  2,036,801   2,024,486  2,010,374  2,024,486 
Capitalized lease disposal costs, net  223,470   228,125  218,814  228,125 
Financing lease right-of-use asset  11,119   12,621  9,616  12,621 
Operating lease right-of-use asset  2,280,134   2,311,082  2,248,642  2,311,082 
Goodwill  1,384,255   1,384,255  1,384,255  1,384,255 
Patents and other intangibles, net  3,662,129   3,703,353   3,620,905   3,703,353 
Total long-term assets  10,446,359   10,503,971   10,350,874   10,503,971 
Total assets $16,270,222  $16,244,596  $15,837,276  $16,244,596 
         
Liabilities and Stockholders' Equity           
Current liabilities         
Accounts payable $420,218  $382,392  $541,874  $382,392 
Accrued liabilities  1,369,325   1,472,504  1,119,693  1,472,504 
Unearned revenue  911,657   879,365  835,854  879,365 
Current portion of operating lease right-of-use liability  133,804   131,572  136,075  131,572 
Current portion of financing lease liability  4,006   5,513  2,996  5,513 
Current portion of related party notes payable, net of debt discount  620,000   620,000  620,000  620,000 
Current installments of notes payable  10,258   23,348   10,415   23,348 
Total current liabilities  3,469,268   3,514,694   3,266,907   3,514,694 
         
Long-term liabilities         
Accrued long-term liabilities  103,125   112,500  93,750  112,500 
Related party notes payable, net of current portion and debt discount  1,000,000   1,000,000  1,000,000  1,000,000 
Notes payable, net of current portion  31,773   34,406  29,100  34,406 
Asset retirement obligation  955,387   942,378  968,577  942,378 
Financing lease liability, net of current portion  2,077   2,832  1,309  2,832 
Operating lease right-of-use liability, net of current portion  2,197,944   2,232,244  2,163,061  2,232,244 
Mandatorily redeemable convertible preferred stock  4,063,000   4,063,000   4,063,000   4,063,000 
Total long-term liabilities  8,353,306   8,387,360   8,318,797   8,387,360 
Total liabilities  11,822,574   11,902,054   11,585,704   11,902,054 
         
Stockholders' equity         
Common stock, $0.01 par value; 750,000,000 shares authorized; 517,852,831 and 514,889,916 shares issued and outstanding respectively  5,178,528   5,148,899 

Common stock, $0.01 par value; 750,000,000 shares authorized; 517,941,366 and 514,889,916 shares issued and outstanding respectively

 5,179,414  5,148,899 
Additional paid in capital  125,878,017   125,654,486  125,944,357  125,654,486 
Accumulated deficit  (126,608,897)  (126,460,843)  (126,872,199)  (126,460,843)
Total equity  4,447,648   4,342,542   4,251,572   4,342,542 
Total liabilities and stockholders' equity $16,270,222  $16,244,596  $15,837,276  $16,244,596 

 

See accompanying notes to condensed consolidated financial statements.

 

3

 

INTERNATIONAL ISOTOPES INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Operations

 

     
 Three months ended March 31,  

Three months ended June 30,

 

Six months ended June 30,

 
 2023 2022  

2023

  

2022

  

2023

  

2022

 
      
Sale of product $3,089,535  $2,807,441  $3,112,165  $2,434,808  $6,201,700  $5,242,249 
Cost of product  1,309,499   1,130,698   1,269,552   1,034,278   2,579,051   2,164,976 
Gross profit  1,780,036   1,676,743   1,842,613   1,400,530   3,622,649   3,077,273 
         
Operating costs and expenses:         
Salaries and contract labor  975,183   933,249  944,179  801,972  1,919,361  1,735,221 
General, administrative and consulting  827,983   913,123  943,870  863,025  1,771,852  1,776,148 
Research and development  124,442   206,414   183,024   87,642   307,468   294,056 
Total operating expenses  1,927,608   2,052,786   2,071,073   1,752,639   3,998,681   3,805,425 
         
Net operating loss  (147,572)  (376,043)  (228,460)  (352,109)  (376,032)  (728,152)
         
Other income (expense):         
Other income  63,412   1,802,800  37,518  225,768  100,930  2,028,568 
Interest income  19,086   45  9,856  680  28,942  725 
Interest expense  (82,980)  (171,757)  (82,216)  (146,387)  (165,196)  (318,144)
Total other income (expense)  (482)  1,631,088   (34,842)  80,061   (35,324)  1,711,149 
Net income (loss) $(148,054) $1,255,045  $(263,302) $(272,048) $(411,356) $982,997 
         
Net income per common share - basic: $    $   
Net income per common share - diluted: $    $   

Net loss per common share - basic:

 $  $  $  $ 

Net loss per common share - diluted:

 $  $  $  $ 
         
Weighted average common shares outstanding - basic  515,566,825   503,472,428   517,926,610   510,499,497   516,746,718   506,985,962 
Weighted average common shares outstanding - diluted  515,566,825   509,768,082   517,926,610   510,499,497   516,746,718   512,569,114 

 

See accompanying notes to condensed consolidated financial statements.

 

4

 

INTERNATIONAL ISOTOPES INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Cash Flows

 

     
 Three months ended March 31  

Six months ended June 30,

 
 2023 2022  

2023

  

2022

 
Cash flows from operating activities         
Net income (loss) $(148,054) $1,255,045  $(411,356) $982,997 
Adjustments to reconcile net income (loss) to net cash used by operating activities         
Depreciation and amortization  87,268   119,118  175,398  203,551 
Accretion of obligation for lease disposal costs  13,009   12,316  26,199  24,801 
Accretion of beneficial conversion feature and discount       82,244    146,311 
Equity based compensation  159,878   181,957  224,846  237,474 
Gain on sale of property, plant and equipment       (1,797,978)   (1,797,978)
Right-of-use asset amortization  (1,120)  829  (2,240) (291)
Changes in operating assets and liabilities:         
Accounts receivable  41,100   (610,652) 306,950  (448,147)
Inventories  130,295   35,620  43,382  (18,870)
Prepaids and other current assets  650,711   211,924  802,199  384,774 
Accounts payable and accrued liabilities  15,932   (394,242) (121,419) (807,805)
Unearned revenues  32,292   45,942   (43,511)  142,131 
Net cash provided by (used in) operating activities  981,311   (857,877)  1,000,448   (951,052)
         
Cash flows from investing activities:         
Proceeds from sale of property, plant and equipment       4,000,000    4,000,000 
Purchase of property, plant and equipment  (52,202)  (51,100)  (66,522)  (55,200)
Net cash provided by (used in) investing activities  (52,202)  3,948,900   (66,522)  3,944,800 
         
Cash flows from financing activities:         
Proceeds from sale of stock and exercise of options and warrants  2,622   66,997  4,880  70,973 
Payments on financing lease  (2,262)  (2,062) (4,040) (4,172)
Principal payments on notes payable  (15,723)  (494,159)  (18,239)  (509,257)
Net cash used in financing activities  (15,363)  (429,224)  (17,399)  (442,456)
         
Net increase in cash, cash equivalents, and restricted cash  913,746   2,661,799  916,527  2,551,292 
Cash, cash equivalents, and restricted cash at beginning of period  3,215,866   1,305,603   3,215,866   1,305,603 
Cash, cash equivalents, and restricted cash at end of period $4,129,612  $3,967,402  $4,132,393  $3,856,895 
         
Supplemental disclosure of cash flow activities:         
Cash paid for interest $113,855  $44,818  $157,826  $46,894 
         
Supplemental disclosure of noncash financing and investing transactions         
Decrease in accrued interest and increase in equity for conversion of dividends to stock $90,660  $204,480  $90,660  $204,480 

Increase in equity and decrease in liability for the conversion of preferred stock

 $ $675,000 

 

Reconciliation of cash, cash equivalents, and restricted cash as shown in the condensed consolidated statements of cash flows is presented in the table below:                

 

  March 31,   March 31,  

June 30,

 

June 30,

 
  2023   2022  

2023

  

2022

 
Cash and cash equivalents $3,281,161  $3,136,639  $3,274,125  $3,025,513 
Restricted cash included in long-term assets  848,451   830,763   858,268   831,382 
Total cash, cash equivalents, and restricted cash shown in statement of cash flows $4,129,612  $3,967,402  $4,132,393  $3,856,895 

 

See accompanying notes to condensed consolidated financial statements.

 

5

 

INTERNATIONAL ISOTOPES INC. AND SUBSIDIARIES

Condensed Consolidated Statement of Stockholders' (Deficit) Equity

Three and Six Months Ended March 31,June 30, 2023

(Unaudited)

 

          

Common stock

         
 Common stock                  

Additional

      
        Additional          

Shares

 

Common

 

Paid-in

 

Accumulated

 

Total

 
 Shares  Common  Paid-in  Accumulated  Total  

Outstanding

  

Stock

  

Capital

  

Deficit

  

(Deficit) Equity

 
 Outstanding  Stock  Capital  Deficit  (Deficit) Equity 
Balance, December 31, 2022 514,889,916  $5,148,899  $125,654,486  $(126,460,843) $4,342,542 
                   

Balance, January 1, 2023

 514,889,916  $5,148,899  $125,654,486  $(126,460,843) $4,342,542 
Shares issued under employee stock purchase plan 102,855   1,028   1,594        2,622  191,390  1,914  2,966    4,880 
                   
Stock grant 343,560   3,436   (3,436)           343,560  3,436  (3,436)    
                   
Stock in lieu of dividends on convertible preferred C 2,266,500   22,665   67,995        90,660  2,266,500  22,665  67,995    90,660 
                   
Shares issued for issuance of RSUs 250,000   2,500   (2,500)           250,000  2,500  (2,500)    
                   
Stock based compensation —          159,878        159,878      224,846    224,846 
                   
Net (loss) income —               (148,054)  (148,054)           (411,356)  (411,356)
Balance, March 31, 2023 517,852,831  $5,178,528  $125,878,017  $(126,608,897) $4,447,648 

Balance, June 30, 2023

  517,941,366  $5,179,414  $125,944,357  $(126,872,199) $4,251,572 

  

Common stock

             
          

Additional

         
  

Shares

  

Common

  

Paid-in

  

Accumulated

  

Total

 
  

Outstanding

  

Stock

  

Capital

  

Deficit

  

(Deficit) Equity

 

Balance, April 1, 2023

  517,852,831  $5,178,528  $125,878,017  $(126,608,897) $4,447,648 

Shares issued under employee stock purchase plan

  88,535   886   1,372      2,258 

Stock based compensation

        64,968      64,968 

Net (loss) income

           (263,302)  (263,302)

Balance, June 30, 2023

  517,941,366  $5,179,414  $125,944,357  $(126,872,199) $4,251,572 

6

 

INTERNATIONAL ISOTOPES INC. AND SUBSIDIARIES

Condensed Consolidated Statement of Stockholders' (Deficit) Equity

Three and Six Months Ended March 31,June 30, 2022

(Unaudited)

 

 Common stock           

Common stock

         
        Additional                

Additional

      
 Shares  Common  Paid-in  Accumulated  Total  

Shares

 

Common

 

Paid-in

 

Accumulated

 

Total

 
 Outstanding  Stock  Capital  Deficit  (Deficit) Equity  

Outstanding

  

Stock

  

Capital

  

Deficit

  

(Deficit) Equity

 
Balance, December 31, 2021 502,584,176  $5,025,842  $124,469,034  $(126,764,081) $2,730,795 
                   

Balance, January 1, 2022

 502,584,176  $5,025,842  $124,469,034  $(126,764,081) $2,730,795 
Shares issued under employee stock purchase plan 67,945   679   4,518        5,197  119,910  1,199  7,974    9,173 
                   
Stock grant 187,231   1,872   (1,872)           187,231  1,872  (1,872)    
                   
Stock in lieu of dividends on convertible preferred C 2,271,980   22,720   181,760        204,480  2,271,980  22,720  181,760    204,480 
                   
Shares issued for exercise of employee stock options 611,111   6,111   (6,111)           611,111  6,111  (6,111)    
                   
Warrant exercise 515,000   5,150   56,650        61,800  515,000  5,150  56,650    61,800 
                   

Conversion of preferred B stock

 8,437,500 84,375 590,625  675,000 
Stock based compensation —          181,957        181,957      237,474    237,474 
                   
Net (loss) income —               1,255,045   1,255,045            982,997   982,997 
Balance, March 31, 2022 506,237,443  $5,062,374  $124,885,936  $(125,509,036) $4,439,274 

Balance, June 30, 2022

  514,726,908  $5,147,269  $125,535,534  $(125,781,084) $4,901,719 

  

Common stock

             
          

Additional

         
  

Shares

  

Common

  

Paid-in

  

Accumulated

  

Total

 
  

Outstanding

  

Stock

  

Capital

  

Deficit

  

(Deficit) Equity

 

Balance, April 1, 2022

  506,237,443  $5,062,374  $124,885,936  $(125,509,036) $4,439,274 

Shares issued under employee stock purchase plan

  51,965   520   3,456      3,976 

Conversion of preferred B stock

  8,437,500   84,375   590,625      675,000 

Stock based compensation

        55,517      55,517 

Net (loss) income

           (272,048)  (272,048)

Balance, June 30, 2022

  514,726,908  $5,147,269  $125,535,534  $(125,781,084) $4,901,719 

 

See accompanying notes to the condensed consolidated financial statements

Common Stock

Additional Paid-in Capital

Accumulated Deficit

7


 

INTERNATIONAL ISOTOPES INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

March 31,June 30, 2023

 

(1)       (1)       The Company and Basis of Presentation

 

International Isotopes Inc. (INIS) was incorporated in Texas in November 1995. The accompanying unaudited condensed consolidated financial statements are presented in conformity with accounting principles generally accepted in the United States of America (GAAP) and include all operations and balances of INIS and its wholly owned subsidiaries, including RadQual, LLC (RadQual) and TI Services, LLC (TI Services). TI Services is headquartered in Youngstown, Ohio and was formed with RadQual in December 2010 to distribute products and services for nuclear medicine, nuclear cardiology, and Positron Emission Tomography (PET) imaging. RadQual is a global supplier of molecular imaging quality control and calibration devices, and is headquartered in Idaho Falls, Idaho. INIS, and its wholly-owned subsidiaries (including RadQual and TI Services) are collectively referred to herein as the “Company,” “we,” “our” or “us.”

 

Nature of Operations – The Company manufactures a full range of nuclear medicine calibration and reference standards, generic sodium iodide I-131I-131 drug product, cobalt teletherapy sources, and a varied selection of radiochemicals for medical research, and clinical applications. For 2023, the Company’s business consists of four business segments: Nuclear Medicine Standards, Cobalt Products, Radiochemical Products, and Fluorine Products. The Company’s headquarters and all operations, with the exception of TI Services, are located in Idaho Falls, Idaho.

 

With the exception of certain unique products, the Company’s normal operating cycle is considered to be one year. Due to the time required to produce some cobalt products, the Company’s operating cycle for those products is considered to be two to three years. Accordingly, preliminary payments received on cobalt contracts, where shipment will not take place for greater than one year, have been recorded as unearned revenue and, depending upon estimated ship dates, classified under either current or long-term liabilities on the Company’s condensed consolidated balance sheets. These unearned revenues are being recognized as revenue in the periods during which the cobalt shipments take place. All assets expected to be realized in cash or sold during the normal operating cycle of business are classified as current assets.

 

Principles of Consolidation

Principles of Consolidation – The accompanying unaudited condensed consolidated financial statements are presented in conformity with GAAP and include all operations and balances of INIS and its wholly-owned subsidiaries including RadQual and TI Services. See Note 4 “Investment and Business Consolidation” for additional information. All significant intercompany accounts and transactions have been eliminated in consolidation.

Interim Financial Information

Interim Financial Information – The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with GAAP for interim financial information and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (SEC). Accordingly, the accompanying unaudited condensed consolidated financial statements do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments and reclassifications considered necessary in order to make the financial statements not misleading and for a fair and comparable presentation have been included and are of a normal recurring nature. Operating results for the three and six months ended March 31,June 30, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023 or any future periods. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K10-K for the year ended December 31, 2022 filed with the SEC on April 6, 2023, as amended on May 3, 2023.

 

Recent Accounting Pronouncements

Recent Accounting Pronouncements In August 2020, the Financial Accounting Standards Board issued ASU 2020-062020-06 Debt – Debt with Conversion and Other Options (Subtopic 470-20)470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40)815-40). The update simplifies accounting related to convertible debt instruments. The standard is effective for fiscal years beginning after December 15, 2023 including interim periods within those fiscal years. The Company is currently evaluating the effect this standard will have on its financial statements.

 

8


(2)       (2)       Current Developments and Liquidity

 

Business Condition – Since inception, the Company has incurred substantial losses. During the threesix months ended March 31,June 30, 2023, the Company reported a net loss of $148,054$411,356 and net cash provided in operating activities of $981,311.$1,000,448. During the threesix months ended March 31,June 30, 2022, the Company reported net income of  $1,255,045$982,997 and net cash used in operating activities of  $857,877.$951,052.

 

During the three and six months ended March 31,June 30, 2023, the Company continued its focus on its strongest long-standing core business segments which consist of its radiochemical products, cobalt products, and nuclear medicine standards, and in particular, the pursuit of new business opportunities within those segments.

 

Additionally, the Company holds a Nuclear Regulatory Commission (NRC) construction and operating license for the depleted uranium facility in, as well as the property agreement with, Lea County, New Mexico, where the plant is intended to be constructed. The NRC license for the de-conversion facility is a forty (40) (40) year operating license and is the first commercial license of this type issued in the United States.  There are no other companies with a similar license application under review by the NRC. Therefore, the NRC license represents a significant competitive barrier, and the Company considers it a valuable asset.

 

The Company expects that cash from operations, equity or debt financing, and its current cash balance will be sufficient to fund operations for the next twelve months. Future liquidity and capital funding requirements will depend on numerous factors, including commercial relationships, technological developments, market factors, available credit, and management of redeemable convertible preferred stock. There is no assurance that additional capital and financing will be available on acceptable terms to the Company or at all.

 

(3)       (3)       Net Income (Loss) Per Common Share - Basic and Diluted

 

For the three and six months ended March 31,June 30, 2023, the Company had 26,037,50026,012,500 stock options outstanding, 7,000,000 restricted stock units outstanding and 4,063 outstanding shares of Series C redeemable convertible preferred stock (Series C Preferred Stock), each of which were not included in the computation of diluted income (loss) per common share because they would be anti-dilutive.

Stock Options

Warrants

For the three months ended March 31, 2022, the Company had 26,567,500 stock options outstanding, 2,925,000 warrants outstanding, 4,063 outstanding shares of Series C Preferred Stock, and 675 outstanding shares of Series B redeemable convertible preferred stock (Series B Preferred Stock), each of which were not included in the computation of diluted income (loss) per common share because they would be anti-dilutive.

 

For the six months ended June 30, 2022, the Company had 12,700,000 stock options outstanding, and 4,063 outstanding shares of Series C Preferred Stock, each of which were not included in the computation of diluted income per common share because they would be anti-dilutive. The Company used the treasury stock method in calculating weighted average common shares diluted.

For the three months ended June 30, 2022, the Company had 26,134,500 stock options outstanding, and 4,063 outstanding shares of Series C Preferred Stock, each of which were not included in the computation of diluted income (loss) per common share because they would be anti-dilutive. The Company used the treasury stock method in calculating weighted average common shares diluted.

The table below shows the calculation of diluted shares:

Net Income (Loss) Per Common Share - Schedule of Weighted Average Number of Shares 

     
 3 Months Ended  

3 Months Ended

  

6 Months Ended

 
 March 31 March 31  

June 30,

 

June 30,

 

June 30,

 

June 30,

 
 2023 2022  

2023

  

2022

  

2023

  

2022

 
Weighted average common shares outstanding - basic  515,566,825   503,472,428  517,926,610  510,499,497  516,746,718  506,985,962 
         
Effects of dilutive shares         
Stock Options  —     6,295,654        5,583,152 
Warrants  —     —   
Series B Preferred Stock Series B Preferred Stock  —     —   
Series C Preferred Stock Series C Preferred Stock  —     —   

Series C Preferred Stock

        
Weighted average common shares outstanding - diluted  515,566,825   509,768,082  517,926,610  510,499,497  516,746,718  512,569,114 

 

The table below summarizes common stock equivalents outstanding at March 31,June 30, 2023 and 2022:2022:

Net Income (Loss) Per Common Share - Basic and Diluted - Schedule of Common Stock Equivalents Outstanding 

     
 March 31,  

June 30,

 
 2023 2022  

2023

  

2022

 
Stock options  26,037,500   26,567,500  26,012,500  26,134,500 
Warrants       2,925,000 
Shares of Series B Preferred Stock       337,500 

Restricted Stock Units

 7,000,000   
Shares of Series C Preferred Stock  40,630,000   40,630,000   40,630,000   40,630,000 
  66,667,500   70,460,000   73,642,500   66,764,500 

 

9


(4)       (4)       Investment and Business Consolidation

 

In 2021, the Company acquired all of the remaining membership interests of RadQual, making RadQual a wholly-owned subsidiary of the Company. As TI Services is a 50/50 joint venture between the Company and RadQual, TI Services is also a wholly-owned subsidiary of the Company.

 

(5)       (5)       Inventories

 

At March 31,June 30, 2023 and December 31, 2022, the Company held inventories of $614,498$701,411 and $744,793,$744,793, respectfully.

 

Inventories consisted of work in process for the following business segments:

Inventories - Schedule of Inventory, Current

 March 31, 2023 December 31, 2022  

June 30, 2023

  

December 31, 2022

 
Radiochemical Products $32,675  $23,011  $77,018  $23,011 
Cobalt Products  188,028   189,255  184,782  189,255 
Nuclear Medicine Products  393,795   532,527   439,611   532,527 
 $614,498  $744,793  $701,411  $744,793 

 

The Company has contracted with several customers for the sale of some of thisthe cobalt product material and has collected advance payments for project management, up-front handling, and other production costs from those customers. The advance payments from customers were recorded as unearned revenue which are recognized in the Company’s condensed consolidated financial statements as cobalt products are completed and shipped. For the threesix months ended March 31,June 30, 2023 and 2022, the Company recognized approximately $1,500$1,500 and $10,600$26,949, respectively, of revenue in its condensed consolidated statements of operations for customer orders filled during the period under these cobalt contracts. For the three months ended June 30, 2023 and 2022, the Company recognized approximately $0 and $16,311, respectively, of revenue in its condensed consolidated statements of operations for customer orders filled during the period under these cobalt contracts.

 

(6)       (6)       Stockholders’ Equity, Options, and Warrants

 

Employee Stock Purchase Plan

 

The Company has an employee stock purchase plan pursuant to which employees of the Company may participate to purchase shares of common stock at a discount. During the threesix months ended March 31,June 30, 2023 and 2022, the Company issued 102,855191,390 and 67,945119,910 shares of common stock, respectively, to employees under the employee stock purchase plan for proceeds of $2,622$4,880 and $5,197,$9,173, respectively. As of March 31,June 30, 20232,438,555, 2,350,020 shares of common stock remain available for issuance under the employee stock purchase plan.

 

Stock-Based Compensation Plans

 

2015 Incentive Plan - In April 2015, the Company’s Board of Directors approved the International Isotopes Inc. 2015 Incentive Plan (as amended, the 2015 Plan), which was subsequently approved by the Company’s shareholders in July 2015. The 2015 Plan was amended and restated in July 2018 to increase the number of shares authorized for issuance under the 2015 Plan by an additional 20,000,000 shares. The 2015 Plan provides for the grant of incentive and non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares and units, and other stock or cash-based awards. At March 31,June 30, 2023, there were 28,016,37420,788,574 shares available for issuance under the 2015 Plan.

 

Employee/Director Grants - The Company accounts for issuances of stock-based compensation to employees by recognizing, as compensation expense, the cost of employee services received in exchange for equity awards. The compensation expense is based on the grant date fair value of the award. Stock option compensation expense is recognized over the period during which an employee is required to provide service in exchange for the award (the vesting period).

 

Non-Employee Grants - The Company accounts for its issuances of stock-based compensation to non-employees by recognizing compensation expense based on the grant date fair value of the award. Stock option compensation expense is recognized over the vesting period for the award.

Employees

10


Option awards outstanding as of March 31,June 30, 2023, and changes during the threesix months ended March 31,June 30, 2023, were as follows:

Stockholders’ Equity, Options and Warrants - Schedule of Share-Based Compensation Stock Option Activity

       

Weighted

   
    

Weighted

 

Average

   
    

Average

 

Remaining

 

Aggregate

 
Fixed Options Shares 

Weighted

Average

Exercise Price

 

Weighted

Average

Remaining

Contractual Life

 

Aggregate

Intrinsic Value

  

Shares

  

Exercise Price

  

Contractual Life

  

Intrinsic Value

 
Outstanding at December 31, 2022  24,993,500  $0.07          24,993,500  $0.05      
Granted 3,000,000 0.04      3,025,000  0.04      
Exercised —   —                
Expired (750,000) 0.07      (1,000,000) 0.09      
Forfeited  (1,206,000)  0.09         (1,006,000)  0.08         
Outstanding at March 31, 2023  26,037,500  0.05  6.3 $—   
Exercisable at March 31, 2023  18,930,000 $0.04  5.3 $—   

Outstanding at June 30, 2023

  26,012,500   0.05   6.1  $860,550 

Exercisable at June 30, 2023

  19,117,500  $0.05   5.1  $686,630 

 

The intrinsic value of outstanding and exercisable shares is based on the closing price of the Company’s common stock on the OTCQB of $0.03$0.08 per share on March 31,June 30, 2023, the last trading day of the three months ended March 31, 2023.June 30, 2023.

 

As of March 31,June 30, 2023, there was $194,297$161,069 of unrecognized compensation expense related to stock options that will be recognized over a weighted-average period of 2.001.87 years.

 

Total stock-based compensation expense for the threesix months ended March 31,June 30, 2023 and 2022 was $159,878$224,846 and $181,957,$237,474, respectively.

MinimumTotal stock-based compensation expense for the three months ended June 30, 2023 and 2022 was $64,968 and $55,517, respectively.

Maximum 

During the threesix months ended March 31,June 30, 2023, the Company granted an aggregate of 3,000,0003,025,000 qualified stock options to 31 of its employees. These options vest over a five-year period with the first vesting at the date of grant and expiration at ten-yearten-year anniversary for all grants. The exercise price for these all granted options was $0.04$0.04 and $0.06 per share. The options issued during the threesix months ended March 31,June 30, 2023 have a fair value of $78,498,$79,532, as estimated on the date of issue using the Black-Scholes options pricing model with the following weighted-average assumptions: risk free interest rate of 4.15%3.94% to 4.26%4.26%, expected dividend yield rate of 0%0%, expected volatility of 68.65%68.65% to 72.83%74.16% and an expected life between 5 and 7 years.

 

On March 3, 2023, the Compensation Committee of our Board of Directors approved the re-pricing of an aggregate of 12,450,000 outstanding stock options held by executive officers and members of the Board, which had original exercise prices of either $0.06, $0.09 or $0.11 per share. The Compensation Committee lowered the exercise price per share to $0.04 for each option, which was the fair market value of the Company’s stock on March 3, 2023.

 

On March 3, 2023, the Compensation Committee of our Board of Directors approved the cancellation of 1,000,000 outstanding stock options held by a member of the Board in exchange for the grant of 750,000 restricted stock units. The restricted stock units vest over a three-yearthree-year period beginning on the grant date.

On May 8, 2023, pursuant to an executive employment agreement entered into with its newly appointed President, the Company granted 6,500,000 restricted stock units (“RSUs”) to its President. 1,500,000 RSUs vest on April 17, 2024, 2,000,000 RSUs vest on April 17, 2025, and 3,000,000 RSUs vest on April 17, 2026. Under the same compensation terms, subject to approval by the Board, a special equity grant of 2,500,000 fully-vested RSUs would be granted upon a promotion of the Company's President to Chief Executive OfficerOfficer.

 

Pursuant to an employment agreement with its Chief Executive Officer, the Company awarded 560,000 fully vested shares of common stock to its Chief Executive Officer in February 2023 under the 2015 Plan. The number of shares awarded was based on a $28,000$28,000 stock award using a price of $0.05$0.05 per share. The employment agreement provides that the number of shares issued will be based on the average closing price of common stock for the 20 trading days prior to issue date but not less than $0.05$0.05 per share. Compensation expense recorded pursuant to this stock grant was $22,400,$22,400, which was determined by multiplying the number of shares awarded by the closing price of the common stock on February 28, 2022, which was $0.04$0.04 per share. The Company withheld 216,440 shares of common stock to satisfy payroll tax obligations in connection with this issuance. The net shares issued on February 28, 2023 totaled 343,560.343,560.

 

Warrants

There were no warrants outstanding at March 31, 2023

11


Warrants outstanding at March 31, 2022 were 2,925,000 Class N Warrants which were immediately exercisable at an exercise price

Preferred Stock

 

At March 31,June 30, 2023, there were no outstanding shares of Series B Preferred Stock.

At March 31, 2023, there were 4,063 shares of the Series C Preferred Stock outstanding with a mandatory redemption date of February 2025at $1,000$1,000 per share in either cash or shares of common stock, at the option of the holder. Holders of the Series C Preferred Stock do not have any voting rights except as required by law and in connection with certain events as set forth in the Statement of Designation of the Series C Preferred Stock. The Series C Preferred Stock accrues dividends at a rate of 6% per annum, payable annually on February 17th of each year. The Series C Preferred Stock are convertible at the option of the holders at any time into shares of the Company'sCompany common stock at an initial conversion price equal to $0.10 per share, subject to adjustment. If the volume-weighted average closing price of the Company’s common stock over a period of 90 consecutive trading days is greater than $0.25$0.25 per share, the Company may redeem all or any portion of the outstanding Series C Preferred Stock at the original purchase price per share plus any accrued and unpaid dividends, payable in shares of common stock.

 

During the threesix months ended March 31,June 30, 2023 and 2022, dividends paid to holders of the Series C Preferred Stock totaled $243,780$243,780 for both years.years. Some holders of the Series C Preferred Stock elected to settle their dividend payments with shares of the Company’s common stock in lieu of cash. For the threesix months ended March 31,June 30, 2023 and 2022, the Company issued an aggregate of 2,266,500 and 2,271,980 shares of common stock, respectively, in lieu of dividend payments in the aggregate of $90,660$90,660 and $204,480,$204,480, respectively, with the remaining dividend payable settled in cash of $153,120$153,120 and $39,300,$39,300, respectively.

 

(7)        (7)        Debt

 

In December 2013, the Company entered into a promissory note agreement with its then Chairman of the Board and one of our major shareholders, pursuant to which we borrowed $500,000$500,000 (the 2013 Promissory Note). The 2013 Promissory Note is secured and bears interest at 6%6% per annum and was originally due June 30, 2014. 2014. According to the terms of the 2013 Promissory Note, at any time, the lenders may settle any or all of the principal and accrued interest with shares of our common stock. In December 2019, the 2013 Promissory Note was modified to extend the maturity date to December 31, 2021,, with all remaining terms unchanged. In January 2022, the 2013 Promissory Note was modified to extend the maturity date to December 31, 2023,, with all remaining terms unchanged. At March 31,June 30, 2023, the principal balance of the 2013 Promissory Note was $500,000$500,000 and accrued interest payable on the 2013 Promissory Note was $279,234.$286,734. Interest expense recorded for the threesix months ended March 31,June 30, 2022, was $7,500.$15,000.

 

In April 2018, we borrowed $120,000$120,000 from our Chief Executive Officer and Chairman of the Board pursuant to a promissory note (the 2018 Promissory Note). The 2018 Promissory Note accrues interest at 6%6% per annum, which is payable upon maturity of the 2018 Promissory Note. The 2018 Promissory Note was originally unsecured and originally matured on August 1, 2018. 2018. At any time, the holder of the 2018 Promissory Note may elect to have any or all of the principal and accrued interest settled with shares of our common stock based on the average price of the shares over the previous 20 trading days. In June 2018, the 2018 Promissory Note was modified to extend the maturity date to March 31, 2019with all other provisions remaining unchanged. In February 2019, the 2018 Promissory Note was modified to extend the maturity date to July 31, 2019with all other provisions remaining unchanged. In July 2019, the 2018 Promissory Note was modified to extend the maturity date to January 31, 2020with all other provisions remaining unchanged. In December 2019, the 2018 Promissory Note was modified to extend the maturity date to December 31, 2021,, the note was also modified to become secured by company assets, with all other provisions remaining unchanged. In December 2021, the 2018 Promissory Note was modified to extend the maturity date to December 31, 2023,, with all remaining terms unchanged. At March 31,June 30, 2023, accrued interest on the 2018 Promissory Note totaled $35,570.$37,370.

 

In December 2019 and February 2020, the Company borrowed an aggregate of $1,000,000$1,000,000 from four of the Company’s major shareholders pursuant to a promissory note (the 2019 Promissory Note). The 2019 Promissory Note bears an interest rate of 4%4% annually and was originally due December 31, 2022. 2022. According to the terms of the 2019 Promissory Note, at any time, the lenders may settle any or all of the principal and accrued interest with shares of the Company’s common stock based on the average closing price of the Company’s common stock for the 20 days preceding the payment. In connection with the 2019 Promissory Note, the lenders were issued warrants totaling 30,000,000 warrants to purchase shares of the Company’s common stock at $0.045$0.045 per share

12 

(the (the Class O Warrants). The fair value of these Class O Warrants issued totaled $446,079$446,079 and was recorded as a debt discount and was amortized over the life of the 2019 Promissory Note. The Company calculated a beneficial conversion feature of $315,643$315,643 which was accreted to interest expense over the life of the 2019 Promissory Note. In December 2022, the 2019 Promissory Note was modified to extend the maturity date to December 31, 2024, with all remaining terms unchanged. At March 31,June 30, 2023, the balance of the 2019 Promissory Note was $1,000,000$1,000,000 and the accrued interest on the 2019 Promissory Note totaled $129,131.$139,131.

 

12

(8)       (8)       Commitments and Contingencies

 

Dependence on Third Parties

 

The production of High Specific Activity Cobalt is dependent upon the U.S. Department of Energy (DOE), and its prime operating contractor, which controls the Advanced Test Reactor (ATR) and laboratory operations at the ATR located outside of Idaho Falls, Idaho. In October 2014, the Company signed a ten-yearten-year contract with the DOE for the irradiation of cobalt targets for the production of cobalt-60.cobalt-60. The Company will be able to purchase cobalt targets for a fixed price per target with an annual 5% escalation in price. The contract term is October 1, 2014 through September 30, 2024, however, the contract may be extended beyond that date. Also, the DOE may end the contract if it determines termination is necessary for the national defense, security or environmental safety of the United States. If this were to occur, all payments made by the Company, for partially irradiated undelivered cobalt material, would be refunded.

 

Sales of our most predominant radiochemical products are dependent upon a few key suppliers. An interruption in production by any of these individual suppliers could have an immediate negative impact upon radiochemical sales until material could be purchased from alternate suppliers including obtaining regulatory approval to use material from alternative suppliers if necessary.

 

The Nuclear Medicine Reference and Calibration Standard products sold by the Company are dependent upon certain radioisotopes that are supplied to the Company through agreements with several suppliers. A loss of any of these suppliers could adversely affect operating results by causing a delay in production or a possible loss of sales.

 

Contingencies

 

Because all the Company’s business segments involve the handling or use of radioactive material, the Company is required to have an operating license from the NRC and specially trained staff to handle these materials. The Company has amended this operating license numerous times to increase the amount of material permitted within the Company’s facility. Although this license does not currently restrict the volume of business operations performed or projected to be performed in the upcoming year, additional processing capabilities and license amendments could be implemented that would permit processing of other reactor-produced radioisotopes by the Company. The financial assurance required by the NRC to support this license has been provided for with a surety bond held with North American Specialty Insurance Company which is supported by a restricted money market account held with Merrill Lynch in the amount of $830,763.$858,268.

 

In August 2011, the Company received land from Lea County, New Mexico, pursuant to a Project Participation Agreement (PPA), whereby the land was deeded to the Company for no monetary consideration. In return, the Company committed to construct a uranium de-conversion and Fluorine Extraction Process facility on the land.  In order to retain title to the property, the Company was to begin construction of the de-conversion facility no later than December 31, 2014, and complete Phase I of the project and have hired at least 75 persons to operate the facility no later than December 31, 2015, although commercial operations need not have begun by that date. In 2015, the Company negotiated a modification to the PPA that extended the start of construction date to December 31, 2015, and the hiring milestone to December 31, 2016. Those dates were also not met. The Company has been in discussions with commercial companies possibly interested in purchasing rights to this project. Should those discussions come to fruition the Company plans to negotiate a second modification to the PPA agreement to further extend the commitment dates. If the Company is not successful in reaching an amendment to extend the performance dates in the PPA., then it may, at its sole option, either purchase or re-convey the property to Lea County, New Mexico.  The purchase price of the property would be $776,078, plus interest at the annual rate of 5.25% from the date of the closing to the date of payment.  The Company has not recorded the value of this property as an asset and will not do so until such time that sufficient progress on the project has been made to meet the Company’s obligations under the agreements for permanent transfer of the title.

 

13


(9)      (9)      Revenue Recognition

 

Revenue from Product Sales

 

The following tables present the Company’s revenue disaggregated by business segment and geography, based on management’s assessment of available data:

Revenue Recognition - Summary of Sales from Contracts with Customers Disaggregated by Business Segment and Geography

  

Three Months Ended June 30, 2023

  

Three Months Ended June 30, 2022

 
      

Outside

  

Total

  

% of Total

      

Outside

  

Total

  

% of Total

 
  

U.S.

  

U.S.

  

Revenues

  

Revenues

  

U.S.

  

U.S.

  

Revenues

  

Revenues

 

Radiochemical Products

 $1,605,313  $130,730  $1,736,043   56% $1,266,249  $113,790  $1,380,039   57%

Cobalt Products

  395,395   52,863   448,258   14%  89,946   9,200   99,146   4%

Nuclear Medicine Products

  732,524   195,340   927,864   30%  744,154   211,469   955,623   39%

Fluorine Products

           0%           0%
  $2,733,232  $378,933  $3,112,165   100% $2,100,349  $334,459  $2,434,808   100%

 

U.S. Three Months Ended March 31, 2023 Three Months Ended March 31, 2022 
Outside U.S. U.S. 

Outside

U.S.

 

Total

Revenues

 

% of Total

Revenues

  U.S. 

Outside

U.S.

 

Total

Revenues

 

% of Total

Revenues

 
 

Six Months Ended June 30, 2023

  

Six Months Ended June 30, 2022

 
    

Outside

 

Total

 

% of Total

    

Outside

 

Total

 

% of Total

 
 

U.S.

  

U.S.

  

Revenues

  

Revenues

  

U.S.

  

U.S.

  

Revenues

  

Revenues

 
Radiochemical Products $1,625,116 $137,280 $1,762,396  57% $1,510,322 $115,601 $1,625,923  58% $3,230,429  $268,010  $3,498,439  56% $2,776,571  $229,391  $3,005,962  57%
Cobalt Products  142,158  16,150  158,308  5%  166,556  5,350  171,906  6% 537,553  69,013  606,566  10% 256,502  14,550  271,052  5%
Nuclear Medicine Products  871,588  297,243  1,168,831  38%  840,382  169,230  1,009,612  36% 1,604,112  492,583  2,096,695  34% 1,584,536  380,699  1,965,235  38%
Fluorine Products  —    —    —    0%  —    —    —    0%           0%           0%
 $2,638,862 $450,673 $3,089,535  100% $2,517,260 $290,181 $2,807,441  100% $5,372,094  $829,606  $6,201,700   100% $4,617,609  $624,640  $5,242,249   100%

 

The Company’s revenue consists primarily of calibration and reference standards manufactured for use in the nuclear medicine industry, distribution of radiochemicals including sodium iodide I-131I-131 drug product, and cobalt source manufacturing. With the exception of certain unique products, the Company’s normal operating cycle is considered to be one year. Due to the time required to produce some cobalt products, the Company’s operating cycle for those products is considered to be two to three years. Accordingly, preliminary payments received on cobalt contracts, where shipment will not take place for greater than one year, have been recorded as unearned revenue on the Company’s condensed consolidated balance sheets and classified under current or long-term liabilities, depending upon estimated ship dates. For the threesix months ended March 31,June 30, 2023, the Company reported current unearned revenue of $911,657.$835,854. For the period ended December 31, 2022, the Company reported current unearned revenue of $879,365. $879,365. These unearned revenues will be recognized as revenue in the periods during which the cobalt shipments take place.

 

Contract Balances

 

The Company records a receivable when it has an unconditional right to receive consideration after the performance obligations are satisfied.  As of March 31,June 30, 2023, and December 31, 2022, accounts receivable totaled $1,555,786$1,289,936 and $1,596,886,$1,596,886, respectively.  For the threesix months ended March 31,June 30, 2023, the Company did not incur material impairment losses with respect to its receivables.

 

(10)      (10)      Leases

 

The Company leases office and warehouse space under operating leases. Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments under the lease. Operating lease, right-of-use assets, and liabilities are recognized at the lease commencement date based on the present value of lease payments over the reasonably certain lease term. The implicit rates with the Company’s operating leases are generally not determinable and the Company uses its incremental borrowing rate at the lease commencement date to determine the present value of its lease payments. The determination of the Company’s incremental borrowing rate requires judgement. The company determines its incremental borrowing rate for each lease using its then-current borrowing rate. Certain of the Company’s leases include options to extend or terminate the lease. The Company establishes the number of renewal options periods used in determining the operating lease term based upon its assessment at the inception of the operating lease. The option to renew the lease may be automatic, at the option of the Company, or mutually agreed to between the landlord and the Company. Once the facility lease term has begun, the present value of the aggregate future minimum lease payments is recorded as a right-of-use asset. Lease expense is recognized on a straight-line basis over the term of the lease.

 

14


         
  Three Months Ended March 31, 
  2023  2022 
Operating lease costs $75,366  $69,828 
Short-term operating lease costs  2,040   3,382 
Financing lease expense:        
Amortization of right-of-use assets  2,249   2,062 
Interest on lease liabilities  161   349 
Total financing lease expense  2,410   2,411 
Total lease expense $79,816  $75,621 
         
Right-of-use assets obtained in exchange for new operating lease liabilities $—    $—   
Right-of-use assets obtained in exchange for new financing lease liabilities $—    $—   
         
Weighted-average remaining lease term (years) - operating leases  11.8   12.8 
Weighted-average remaining lease term (years) - financing leases  1.0   2.0 
Weighted-average discount rate - operating leases  6.75%  6.75%
Weighted-average discount rate - financing leases  7.68%  8.54%
 
  

Six Months Ended June 30,

 
  

2023

  

2022

 

Operating lease costs

 $150,732  $141,605 

Short-term operating lease costs

  3,600   2,713 

Financing lease expense:

        

Amortization of right-of-use assets

  4,550   4,172 

Interest on lease liabilities

  270   649 

Total financing lease expense

  4,820   4,821 

Total lease expense

 $159,152  $149,139 
         

Right-of-use assets obtained in exchange for new operating lease liabilities

 $  $ 

Right-of-use assets obtained in exchange for new financing lease liabilities

 $  $ 
         

Weighted-average remaining lease term (years) - operating leases

  11.6   12.6 

Weighted-average remaining lease term (years) - financing leases

  1.4   1.8 

Weighted-average discount rate - operating leases

  6.75%  6.75%

Weighted-average discount rate - financing leases

  6.75%  8.41%

 

The future minimum payments under these operating lease agreements are as follows:

Leases - Schedule

  

Operating Leases

  

Financing Leases

 

2023 (excluding the six-months ended June 30, 2023)

 $143,554  $1,598 

2024

  287,108   2,929 

2025

  287,108    

2026

  287,108    

2027

  287,108    

Thereafter

  2,025,192    

Total minimum lease obligations

  3,317,178   4,527 

Less-amounts representing interest

  (1,018,042)  (222)

Present value of minimum lease obligations

  2,299,136   4,305 

Current maturities

  (136,075)  (2,996)

Lease obligations, net of current maturities

 $2,163,061  $1,309 

15

15 

(11)        (11)        Segment Information

 

The Company has four reportable segments which include: Nuclear Medicine Standards, Cobalt Products, Radiochemical Products, and Fluorine Products.

 

Information regarding the operations and assets of these reportable business segments is contained in the following table:

Segment Information - Schedule

  

Three months ended June 30,

  

Six months ended June 30,

 

Sale of Product

 

2023

  

2022

  

2023

  

2022

 

Radiochemical Products

 $1,736,043  $1,380,039  $3,498,439  $3,005,962 

Cobalt Products

  448,258   99,146   606,566   271,052 

Nuclear Medicine Standards

  927,864   955,623   2,096,695   1,965,235 

Fluorine Products

            

Total Segments

  3,112,165   2,434,808   6,201,700   5,242,249 

Corporate revenue

            

Total Consolidated

 $3,112,165  $2,434,808  $6,201,700  $5,242,249 

  

Three months ended June 30,

  

Six months ended June 30,

 

Depreciation and Amortization

 

2023

  

2022

  

2023

  

2022

 

Radiochemical Products

 $6,665  $7,415  $13,824  $49,345 

Cobalt Products

  13,142   12,140   25,976   24,281 

Nuclear Medicine Standards

  28,900   28,587   58,109   57,233 

Fluorine Products

  28,970   26,095   57,940   52,190 

Total Segments

  77,677   74,237   155,849   183,049 

Corporate depreciation and amortization

  10,453   10,196   19,549   20,502 

Total Consolidated

 $88,130  $84,433  $175,398  $203,551 

  

Three months ended June 30,

  

Six months ended June 30,

 

Segment Income (Loss)

 

2023

  

2022

  

2023

  

2022

 

Radiochemical Products

 $717,455  $505,630  $1,484,567  $2,976,293 

Cobalt Products

  53,640   (42,332)  27,395   (55,407)

Nuclear Medicine Standards

  9,728   (26,144)  138,513   11,572 

Fluorine Products

  (21,895)  (42,343)  (51,134)  (74,173)

Total Segments

  758,928   394,811   1,599,341   2,858,285 

Corporate loss

  (1,022,230)  (666,859)  (2,010,697)  (1,875,288)

Net Income

 $(263,302) $(272,048) $(411,356) $982,997 

  

Three months ended June 30,

  

Six months ended June 30,

 

Expenditures for Segment Assets

 

2023

  

2022

  

2023

  

2022

 

Radiochemical Products

 $  $  $  $ 

Cobalt Products

  6,165      6,165    

Nuclear Medicine Standards

        3,130   51,100 

Fluorine Products

     4,100      4,100 

Total Segments

  6,165   4,100   9,295   55,200 

Corporate purchases

  8,155      57,227    

Total Consolidated

 $14,320  $4,100  $66,522  $55,200 

  

June 30,

  

December 31,

 

Segment Assets

 

2023

  

2022

 

Radiochemical Products

 $837,771  $1,075,252 

Cobalt Products

  324,755   406,629 

Nuclear Medicine Standards

  2,661,330   2,744,394 

Fluorine Products

  5,032,308   5,147,325 

Total Segments

  8,856,164   9,373,600 

Corporate assets

  6,981,112   6,870,996 

Total Consolidated

 $15,837,276  $16,244,596 

16

16 

(12)      (12)      Subsequent Events

 

TheOn July 12, 2023, Steve T. Laflin gave notice that he is stepping down as Chief Executive Officer of the Company, has evaluated subsequent events fromeffective September 1, 2023 at the balance sheet date throughend of the dateterm of his employment agreement. In addition, on July 12, 2023, Shahe Bagderjian, President of the financial statements were issued and determined that there were no material itemsCompany, was appointed to disclose.replace Mr. Laflin as Chief Executive Officer, effective September 1, 2023.

 

17


ITEM 2. MANAGEMENT’SMANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

This Quarterly Report on Form 10-Q (the “Quarterly Report”Quarterly Report) contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical fact, including statements regarding industry prospects and future results of operations or financial position, made in this Quarterly Report are forward-looking statements. Words such as “anticipates,anticipates, “believes,believes, “should,should, “expects,expects, “future,future, “intends”intends and similar expressions identify forward-looking statements. Forward-looking statements reflect management’smanagements current expectations, plans or projections, and are inherently uncertain. Actual results could differ materially from management's expectations, plans or projections. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Quarterly Report. Certain risks and uncertainties that could cause our actual results to differ significantly from management’smanagements expectations are described in the risk factors set forth in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 filed with the Securities and Exchange Commission (SEC) on April 6, 2023, as amended on May 3, 2023, and in the other reports we file with the SEC. These factors describe some but not all of the factors that could cause actual results to differ significantly from management’smanagements expectations. We undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Readers are urged, however, to review the risks and other factors set forth in the reports that we file from time to time with the SEC.

 

BUSINESS OVERVIEW

 

International Isotopes Inc., its wholly-owned subsidiaries (including RadQual, LLC and TI Services, LLC) (collectively, the Company, we, our,"Company", "we", "our", or us)"us") manufacture a full range of nuclear medicine calibration and reference standards, manufacture a range of cobalt products, and distribute sodium iodide I-131 as a generic drug. We own 100% interest of RadQual, LLC (RadQual), a global supplier of molecular imaging quality control and calibration devices. As TI Services, LLC is a 50/50 joint venture between the Company and RadQual, TI Services, LLC is also a wholly-owned subsidiary of the Company.

 

Our business consists of four business segments:

 

Nuclear Medicine Standards. Our Nuclear Medicine Standards segment consists of the manufacture of sources and standards associated with Single Photon Emission Computed Tomography (SPECT) and Positron Emission Tomography (PET) imaging. These sources are used for indication of patient positioning for SPECT imaging, SPECT camera operational testing, and calibration of dose measurement equipment. Revenue from nuclear medicine products includes consolidated sales from TI Services, LLC (TI Services), a 50/50 joint venture that we formed with RadQual in December 2010 to distribute our products, as well as consolidated sales from RadQual. Our nuclear medicine standards products include a host of specially designed items used in the nuclear medicine industry. In addition to the manufacture of these products, we have developed a complete line of specialty packaging for the safe transport and handling of these products.

 

Cobalt Products. Our Cobalt Products segment includes the production of bulk cobalt (cobalt-60), fabrication of cobalt capsules for radiation therapy and various industrial applications, and recycling of expended cobalt sources. We are the only company in the U.S. that can provide all these unique services. There has been a significant increase in regulation by the Nuclear Regulatory Commission (NRC) in recent years that has created a significant barrier to new entrants into this market. The Company has a contract in place with the U.S. Department of Energy (DOE) for the production of high specific activity cobalt in the Advanced Test Reactor (ATR) in Idaho. This agreement will be in effect until October 2024.

 

Radiochemical Products. Our Radiochemical Products segment includes production and distribution and FDA approved generic sodium iodide I-131 drug product for the treatment of hyperthyroidism and carcinoma of the thyroid. We are the only U.S. Company distributing this generic drug product. This segment also includes distribution of certain other radiochemical products and contract manufacturing of radiopharmaceutical products for our customers.

 

18


 

Fluorine Products. We established the Fluorine Products segment in 2004 to support production and sale of the gases that we expected to produce using our Fluorine Extraction Process (FEP) in conjunction with the operation of the proposed depleted uranium de-conversion facility in Lea County, New Mexico. Near the end of 2013, due to changes in the nuclear industry, we placed further engineering work on this project on hold. We continue to hold discussions with potential future customers seeking this type of service, however, further development activity within this segment will be deferred until market and industry conditions change to justify resuming design and construction of the facility. In the meantime, the Company expects to continue to incur some costs associated with the maintenance of licenses and other necessary project investments, and to continue to keep certain agreements in place that will support resumption of project activities at the appropriate time.

 

RESULTS OF OPERATIONS

 

Three Months Ended March 31,June 30, 2023,Compared to Three Months Ended March 31,June 30, 2022

 

Revenue for the three months ended March 31,June 30, 2023 was $3,089,535$3,112,165 as compared to $2,807,441$2,434,808 for the same period in 2022, an overall increase of $282,094,$677,357, or approximately 10%28%. This increase in revenue was the result of increased revenue in our radiochemical and nuclear medicine standardscobalt products segments offset by decreased revenues in our cobalt productsnuclear medicine standards segment, as discussed in more detail below.

 

The following table presents a period-to-period comparison of total revenue by segment for the three months ended March 31,June 30, 2023 and 2022: 

 

 

For the three-

 

For the three-

      
 

months ended

 

months ended

      
 

For the three-

months ended

March 31,

 

For the three-

months ended

March 31,

      

June 30,

 

June 30,

      
Sale of Product 2023 2022 $ change % change  

2023

  

2022

  

$ change

  

% change

 
Radiochemical Products $1,762,396  $1,625,923  $136,473   8% $1,736,043 $1,380,039 $356,004 26%
Cobalt Products 158,308 171,906 (13,598) -8% 448,258 99,146 349,112 352%
Nuclear Medicine Standards 1,168,831 1,009,612 159,219 16% 927,864 955,623 (27,759) -3%
Fluorine Products  —    —    —    0%          %
Total Consolidated $3,089,535 $2,807,441 $282,094 10% $3,112,165 $2,434,808 $677,357 28%

 

Cost of sales increased to $1,309,499$1,269,552 for the three months ended March 31,June 30, 2023 from $1,130,698$1,034,278 for the same period in 2022. This is an increase of $178,801,$235,274, or approximately 16%23%. The increase in cost of sales in the three-month comparison was primarily due to the increased sales activity in our radiochemical and nuclear medicine standardscobalt products segments, as discussed in detail below. Gross profit for the three months ended March 31,June 30, 2023 was $1,780,036,$1,842,613, compared to $1,676,743$1,400,530 for the same period in 2022. This represents an increase in gross profit of $103,293,$442,083, or approximately 6%32%.

 

The following table presents cost of sales and gross profit data for each of our business segments for the three months ended March 31,June 30, 2023 and 2022:

 

 

For the three-

    

For the three-

   
 

months ended

 

% of

 

months ended

 

% of

 
 

For the three-

months ended

March 31,

 

% of

Total Sales

 

For the three-

months ended

March 31,

 

% of

Total Sales

  

June 30,

 

Total Sales

 

June 30,

 

Total Sales

 
 2023 2023 2022 2022  

2023

  

2023

  

2022

  

2022

 
Total Sales $3,089,535      $2,807,441      $3,112,165     $2,434,808    
Cost of Sales          
Radiochemical Products $630,338 20% $562,365 20% $597,063  19% $506,522  21%
Cobalt Products 90,961 3% 56,511 2% 246,398  8% 26,014  1%
Nuclear Medicine Standards 588,200 19% 511,822 18% 426,091  14% 501,742  21%
Fluorine Products  —    —    —    —        %     %
Total Segments  1,309,499  42%  1,130,698  40%  1,269,552   41%  1,034,278   42%
          
Gross Profit $1,780,036   $1,676,743    $1,842,613     $1,400,530    
Gross Profit % 58%   60%    59%    58%   

 

19


 

Operating expense decreasedincreased approximately 6%18% to $1,927,608$2,071,073 for the three months ended March 31,June 30, 2023, from $2,052,786$1,752,639 for the same period in 2022. This decreaseincrease of $125,178$318,434 is primarily due to an approximate18% increase in Salaries and Contract Labor Expenses, 9% decreaseincrease in General, Administrative, and Consulting Expenses and a 40% decrease109% increase in Research and Development costs. The decreaseincrease in Salaries and Contract Labor Expenses is primarily due to increased costs of salaries and benefits for employees. The increase in General, Administrative, and Consulting Expenses is primarily the result of decreased depreciation expenses andincreased legal and professional expenses during the three months ended March 31,June 30, 2023, as compared to the same period in 2022. The 40% decrease109% increase in Research and Development cost is due to decreasedincreased expenses related to product development during the three months ended March 31,June 30, 2023, as compared to the same period in 2022.

 

The following table presents a comparison of total operating expense for the three months ended March 31,June 30, 2023 and 2022:

 

  

For the three-

months ended

March 31,

  

For the three-

months ended

March 31,

       
Operating Costs and Expenses: 2023  2022  % change  $ change 
Salaries and Contract Labor $975,183  $933,249   4%% $41,934 
General, Administrative and Consulting  827,983   913,123   -9%%  (85,140)
Research and Development  124,442   206,414   -40%%  (81,972)
Total operating expenses $1,927,608  $2,052,786   -6%% $(125,178)

  

For the three-

  

For the three-

         
  

months ended

  

months ended

         
  

June 30,

  

June 30,

         

Operating Costs and Expenses:

 

2023

  

2022

  

% change

  

$ change

 

Salaries and Contract Labor

 $944,179  $801,972   18% $142,207 

General, Administrative and Consulting

  943,870   863,025   9%  80,845 

Research and Development

  183,024   87,642   109%  95,382 

Total operating expenses

 $2,071,073  $1,752,639   18% $318,434 

 

Other income was $63,412$37,518 for the three months ended March 31,June 30, 2023, as compared to $1,802,800$225,768 for the same period in 2022. This is a decrease of $1,739,388,$188,250, or approximately 96%83%, primarily due to $200,000 in income from a $1,797,978 gain on salesublease of assets to Pharmalogic Idaho, LLCour facility in the three months ended March 31,June 30, 2022. In February 2022,As part of this sublease agreement, we entered into an asset purchase agreement with Pharmalogic Idaho, LLC, pursuant to which we sold certain assets for $4.0 million in cash. The sold assets consisted primarily of manufacturing equipmentreceived $200,000 once relocation and a sublease acquired by the Company in connection with the previously announced termination of the manufacturing and supply agreement with another company.build-out costs were completed.

 

Interest expense for the three months ended March 31,June 30, 2023 was $82,980,$82,216, compared to $171,757$146,387 for the same period in 2022. This is a decrease of $88,777,$64,171, or approximately 52%44%. The decrease in interest expense is due to decreased accretion of beneficial conversion feature and discount and decreased interest due for outstanding debt. Interest expense includes dividends accrued on our Series C Preferred Stock. As discussed below, we issued Series C Preferred Stock in February 2017 and May 2017. For the three months ended March 31,June 30, 2023 and 2022, we accrued dividends payable of $61,695 and $60,945 respectively, which have been recorded as interest expense. See Note 7 “Debt” to our unaudited consolidated financial statements in this Quarterly Report for additional information about our indebtedness and the associated interest expense.

 

Our net loss for the three months ended March 31,June 30, 2023, was $148,054,$263,302, compared to net incomeloss of $1,255,045,$272,048, for the same period in 2022. This is a decrease in net incomeloss of $1,403,099$8,746 that is largely the result of the approximate $1.8 million gain on sale of assets for the three months ended March 31, 2022. This decrease in gain on sale of assets is partially offset by the increase in income as a result of the increase in revenue in our radiochemical products and nuclear medicine standardscobalt products segments partially offset andby the decrease in operating expenses for the three months ended March 31,June 30, 2023, as compared to the same period in 2022.

 

Radiochemical Products. Revenue from the sale of radiochemical products for the three months ended March 31,June 30, 2023 was $1,762,396,$1,736,043, compared to $1,625,923$1,380,039 for the same period in 2022. This is an increase of $136,473,$356,004, or approximately 8%26% during the three months ended March 31,June 30, 2023. The increase is the result of continued increased sales of our generic sodium iodide I-131 drug product. We expect continued sales growth for our Radiochemical products going forward, primarily from the sale of our generic sodium iodide I-131 drug product.

 

Gross profit of radiochemical products for the three months ended March 31,June 30, 2023 was $1,132,058,$1,138,980, compared to $1,063,558,$873,517, for the same period in 2022, and gross profit percentages were approximately 64%66% and 65%63% for the three months ended March 31,June 30, 2023 and 2022, respectively. Cost of sales for radiochemical products increased to $630,338$597,063 for the three months ended March 31,June 30, 2023, as compared to $562,365$506,522 for the same period in 2022. This is an increase of $67,973,$90,541, or approximately 12%18%, and was primarily the result of increased sales of product. Operating expense for this segment decreasedincreased to $364,946$421,525 for the three months ended March 31,June 30, 2023, compared to $390,873$367,887 for the same period in 2022. This decreaseincrease in operating expense of $25,927,$53,638, or approximately 7%15%, was primarily due to decreasedincreased costs for advertising expenseresearch and professional services. As discussed above, other income from the radiochemical products segment in the three months ended March 31, 2022 included a $1,797,978 gain on sale of manufacturing equipment and a sublease acquired by the Company in connection with the previously announced termination of the manufacturing and supply agreement with another company. development for this segment. This segment reported net income of $767,112$717,455 for the three months ended March 31,June 30, 2023, as compared to net income of $2,470,663$505,630 for the same

20 

period in 2022. The decreaseincrease in net income of $1,703,551$211,825 is the result of the difference in the gain on sale of assets but somewhat offset by the increases in revenue and decreases in operating expenses.gross profit.

20

 

Cobalt Products. Revenue from the sale of cobalt products for the three months ended March 31,June 30, 2023 was $158,308,$448,258, compared to $171,906,$99,146, for the same period in 2022. This represents a decreasean increase of $13,598,$349,112, or approximately 8%352%. The decreaseincrease was primarily due to the timing of cobalt sealed source manufacturing sales. Large value sales of high activity cobalt sources occur at various times throughout the year. Frequently the timing of these sales can have a significant impact on period comparisons.

 

Cost of sales for the three months ended March 31,June 30, 2023, was $90,961,$246,398, as compared to $56,511,$26,014, for the same period in 2022. Gross profit for cobalt products for the three months ended March 31,June 30, 2023 was $67,347$201,860 compared to $115,395$73,132 for the same period in 2022. This is a decreasean increase of $48,048,$128,728, or approximately 42%176% and is attributable to decreasedincreased source manufacturing for the three months ended March 31,June 30, 2023. Operating expense in this segment decreasedincreased to $93,591$148,220 for the three months ended March 31,June 30, 2023, from $128,470$115,464 for the same period in 2022. This is a decreasean increase of $34,879,$32,756, or approximately 27%28%. This decreaseincrease in operating expenses for the three months ended March 31,June 30, 2023 is due to decreasedincreased equipment and labor expenses. Our net lossincome for cobalt products was $26,245$53,640 for the three months ended March 31,June 30, 2023, as compared to a net loss of $13,075$42,332 for the same period in 2022. The increase in net lossincome of $13,170,$95,972, or approximately 100%227%, was attributable to the decreasedincreased activity in cobalt sealed source manufacturing. We expect increased sales activity in this segment during the remainder of 2023.

Nuclear Medicine Standards. Revenue from nuclear medicine products for the three months ended March 31,June 30, 2023, was $1,168,831,$927,864, compared to $1,009,612$955,623 for the same period in 2022. This represents an increasea decrease in revenue of $159,219,$27,759, or approximately 16%3%.

 

Cost of sales for our nuclear medicine standards segment for the three months ended March 31,June 30, 2023, was $588,200,$426,091, as compared to $511,822$501,742 for the same period in 2022. The increasedecrease in cost of sales in the period-to-period comparison of $76,378,$75,651, or 15%, was due to increaseddecreased sales and improved gross profit during the three-month period ended March 31,June 30, 2023, as compared to the same period in 2022. Gross profit for our nuclear medicine standards segment for the three months ended March 31,June 30, 2023 was $580,631$501,773 compared to $497,790$453,881 for the same period in 2022, and gross profit percentages were approximately 50%54% and 49%47% for the three months ended March 31,June 30, 2023 and 2022, respectively. This is an increase in gross profit of $82,841,$47,892, or approximately 16%11%.

 

Operating expense for this segment for the three months ended March 31,June 30, 2023 decreasedincreased to $451,846,$492,045, from $460,074$480,025 for the same period in 2022. This is a decreasean increase of 8,228,$12,020, or approximately 2%3%, and is the result of a decrease in waste disposal fees.increased labor costs. Net income for this segment for the three months ended March 31,June 30, 2023 was $128,785,$9,728, compared to $37,716a net loss of $26,144 for the same period in 2022. This is an increase in net income of $91,069,$35,872, or approximately 241%137% and is the direct result of increased revenue.gross profit.

 

Fluorine Products. For the three months ended March 31,June 30, 2023 and March 31,June 30, 2022, we had no revenue for our fluorine products segment.

 

During the three months ended March 31,June 30, 2023, we incurred $29,239$21,895 of expense related to items in support of future planning and design for the proposed de-conversion facility, as compared to $31,830$42,343 for the same three-month period in 2022. The decrease in expenses is due to decreased professional costs during the three months ended June 30, 2023

 

We established the Fluorine Products segment in 2004 to support production and sale of the gases produced using our FEP. The project has been placed on hold since 2013 and we will continue to limit our expenditures to essential items such as maintenance of the NRC license, land use agreements, communication with our prospective FEP product customers, and interface with the State of New Mexico and Lea County officials until such time that we decide to resume the project.

 

Six Months Ended June 30, 2023, Compared to Six Months Ended June 30, 2022

Revenue for the six months ended June 30, 2023 was $6,201,700 as compared to $5,242,249 for the same period in 2022, an overall increase of $959,451, or approximately 18%. This increase in revenue was the result of increased revenue in all business segments as discussed in more detail below.

The following table presents a period-to-period comparison of total revenue by segment for the six months ended June 30, 2023 and 2022: 

  

For the six-

  

For the six-

         
  

months ended

  

months ended

         
  

June 30,

  

June 30,

         

Sale of Product

 

2023

  

2022

  

$ change

  

% change

 

Radiochemical Products

 $3,498,439  $3,005,962  $492,477   16%

Cobalt Products

  606,566   271,052   335,514   124%

Nuclear Medicine Standards

  2,096,695   1,965,235   131,460   7%

Fluorine Products

           100%

Total Consolidated

 $6,201,700  $5,242,249  $959,451   18%

Cost of sales increased to $2,579,051 for the six months ended June 30, 2023 from $2,164,976 for the same period in 2022. This is an increase of $414,075, or approximately 19%. The increase in cost of sales in the six-month comparison was primarily due to the increased sales activity in all our business segments, as discussed in detail below. Gross profit for the six months ended June 30, 2023 was $3,622,649, compared to $3,077,273 for the same period in 2022. This represents an increase in gross profit of $545,376, or approximately 18%.

21

The following table presents cost of sales and gross profit data for each of our business segments for the six months ended June 30, 2023 and 2022:

  

For the six-

      

For the six-

     
  

months ended

  

% of

  

months ended

  

% of

 
  

June 30,

  

Total Sales

  

June 30,

  

Total Sales

 
  

2023

  

2023

  

2022

  

2022

 

Total Sales

 $6,201,700      $5,242,249     

Cost of Sales

                

Radiochemical Products

 $1,227,401   20% $1,068,887   20%

Cobalt Products

  337,359   5%  82,525   2%

Nuclear Medicine Standards

  1,014,291   16%  1,013,564   19%

Fluorine Products

     %     %

Total Segments

  2,579,051   42%  2,164,976   41%
                 

Gross Profit

 $3,622,649      $3,077,273     

Gross Profit %

  58%      59%    

Operating expense increased approximately 5% to $3,998,681 for the six months ended June 30, 2023, from $3,805,425 for the same period in 2022. This increase of $193,256 is primarily due to an approximate 11% increase in Salaries and Contract Labor Expenses and a 5% increase in Research and Development costs. The increase in Salaries and Contract Labor Expenses is primarily the result of increased costs of salaries and benefits for employees during the six months ended June 30, 2023, as compared to the same period in 2022. The 5% increase in Research and Development cost is due to increased expenses related to product development during the six months ended June 30, 2023, as compared to the same period in 2022.

The following table presents a comparison of total operating expense for the six months ended June 30, 2023 and 2022:

  

For the six-

  

For the six-

         
  

months ended

  

months ended

         
  

June 30,

  

June 30,

         

Operating Costs and Expenses:

 

2023

  

2022

  

% change

  

$ change

 

Salaries and Contract Labor

 $1,919,361  $1,735,221   11% $184,140 

General, Administrative and Consulting

  1,771,852   1,776,148   0%  (4,296)

Research and Development

  307,468   294,056   5%  13,412 

Total operating expenses

 $3,998,681  $3,805,425   5% $193,256 

Other income was $100,930 for the six months ended June 30, 2023, as compared to $2,028,568 for the same period in 2022. This is a decrease of $1,927,638, or approximately 95%, primarily due to a $1,797,978 gain on sale of assets to Pharmalogic Idaho, LLC in the six months ended June 30, 2022. In February 2022, we entered into an asset purchase agreement with Pharmalogic Idaho, LLC, pursuant to which we sold certain assets for $4.0 million in cash. The sold assets consisted primarily of manufacturing equipment and a sublease acquired by the Company in connection with the previously announced termination of the manufacturing and supply agreement with another company.

Interest expense for the six months ended June 30, 2023 was $165,196, compared to $318,144 for the same period in 2022. This is a decrease of $152,948, or approximately 48%. The decrease in interest expense is due to decreased accretion of beneficial conversion feature and discount and decreased interest due for outstanding debt. Interest expense includes dividends accrued on our Series C Preferred Stock. As discussed below, we issued Series C Preferred Stock in February 2017 and May 2017. For the six months ended June 30, 2023 and 2022, we accrued dividends payable of $122,640 and $121,890 respectively, which have been recorded as interest expense. See Note 7 “Debt” to our unaudited consolidated financial statements in this Quarterly Report for additional information about our indebtedness and the associated interest expense.

Our net loss for the six months ended June 30, 2023, was $411,356, compared to net income of $982,997, for the same period in 2022. This is a decrease in net income of $1,394,353 that is largely the result of the approximate $1.8 million gain on sale of assets for the six months ended June 30, 2022. This decrease in gain on sale of assets is partially offset by the increase in income as a result of the increase in revenue in all our businesses segments for the six months ended June 30, 2023, as compared to the same period in 2022.

22

Radiochemical Products. Revenue from the sale of radiochemical products for the six months ended June 30, 2023 was $3,498,439, compared to $3,005,962 for the same period in 2022. This is an increase of $492,477, or approximately 16% during the six months ended June 30, 2023. The increase is the result of continued increased sales of our generic sodium iodide I-131 drug product. We expect continued sales growth for our Radiochemical products going forward, primarily from the sale of our generic sodium iodide I-131 drug product.

Gross profit of radiochemical products for the six months ended June 30, 2023 was $2,271,038, compared to $1,937,075, for the same period in 2022, and gross profit percentages were approximately 65% and 64% for the six months ended June 30, 2023 and 2022, respectively. Cost of sales for radiochemical products increased to $1,227,401 for the six months ended June 30, 2023, as compared to $1,068,887 for the same period in 2022. This is an increase of $158,514, or approximately 15%, and was primarily the result of increased sales of product. Operating expense for this segment increased to $786,471 for the six months ended June 30, 2023, compared to $758,760 for the same period in 2022. This increase in operating expense of $27,711, or approximately 4%, was primarily due to increased costs for research and development costs within the segment. As discussed above, other income from the radiochemical products segment in the six months ended June 30, 2022 included a $1,797,978 gain on sale of manufacturing equipment and a sublease acquired by the Company in connection with the previously announced termination of the manufacturing and supply agreement with another company. This segment reported net income of $1,484,567 for the six months ended June 30, 2023, as compared to net income of $2,976,293 for the same period in 2022. The decrease in net income of $1,491,726 is the result of the difference in the gain on sale of assets but somewhat offset by the increases in revenue and gross profit.

Cobalt Products. Revenue from the sale of cobalt products for the six months ended June 30, 2023 was $606,566, compared to $271,052, for the same period in 2022. This represents an increase of $335,514, or approximately 124%. The increase was primarily due to the timing of cobalt sealed source manufacturing sales. Large value sales of high activity cobalt sources occur at various times throughout the year. Frequently the timing of these sales can have a significant impact on period comparisons.

Cost of sales for the six months ended June 30, 2023, was $337,359, as compared to $82,525, for the same period in 2022. Gross profit for cobalt products for the six months ended June 30, 2023 was $269,207 compared to $188,527 for the same period in 2022. This is an increase of $80,680, or approximately 43% and is attributable to increased source manufacturing for the six months ended June 30, 2023. Operating expense in this segment decreased to $241,812 for the six months ended June 30, 2023, from $243,934 for the same period in 2022. This is a decrease of $2,122, or approximately 1%. This decrease in operating expenses for the six months ended June 30, 2023 is due to decreased expenses for supplies. Our net income for cobalt products was $27,395 for the six months ended June 30, 2023, as compared to a net loss of $55,407 for the same period in 2022. The increase in net income of $82,802, or approximately 149%, was attributable to the increased activity in cobalt sealed source manufacturing. 

Nuclear Medicine Standards. Revenue from nuclear medicine products for the six months ended June 30, 2023, was $2,096,695, compared to $1,965,235 for the same period in 2022. This represents an increase in revenue of $131,460, or approximately 7%.

Cost of sales for our nuclear medicine standards segment for the six months ended June 30, 2023, was $1,014,291, as compared to $1,013,564 for the same period in 2022. The increase in cost of sales in the period-to-period comparison of $727 was less than 1%. Gross profit for our nuclear medicine standards segment for the six months ended June 30, 2023 was $1,082,404 compared to $951,671 for the same period in 2022, and gross profit percentages were approximately 52% and 48% for the six months ended June 30, 2023 and 2022, respectively. This is an increase in gross profit of $130,733, or approximately 14%.

Operating expense for this segment for the six months ended June 30, 2023 increased to $943,891, from $940,099 for the same period in 2022. This is an increase of $3,792, or less than 1%. Net income for this segment for the six months ended June 30, 2023 was $138,513, compared to $11,572 for the same period in 2022. This is an increase in net income of $126,941, or approximately 1,097% and is the direct result of increased gross profit in the six months ended June 30, 2023.

Fluorine Products. For the six months ended June 30, 2023 and 2022, we had no revenue for our fluorine products segment.

During the six months ended June 30, 2023, we incurred $51,134 of expense related to items in support of future planning and design for the proposed de-conversion facility, as compared to $74,173 for the same six-month period in 2022. The decrease in expenses is due to decreased professional costs during the six months ended June 30, 2023.

LIQUIDITY AND CAPITAL RESOURCES

 

At March 31,June 30, 2023, we had cash and cash equivalents of $3,281,161$3,274,125 as compared to $2,375,817 at December 31, 2022. This is an increase of $905,344$898,308 or approximately 38%. For the threesix months ended March 31,June 30, 2023, net cash provided by operating activities was $981,311$1,000,448 and for the threesix months ended March 31,June 30, 2022, net cash used in operating activities was $857,877.$951,052. The increase in cash provided by operating activities was a result of cash from operations and the receipt of other current assets. The increase in cash and cash equivalents at period end in the period-to-period comparison is the result of cash provided by operating activities.

 

21 

23

 

Inventories at March 31,June 30, 2023 totaled $614,498,$701,411, and inventories at December 31, 2022 totaled $744,793. Our inventory consists of work in process material for our Radiochemical Products, Cobalt Products, and Nuclear Medicine Products segments.

 

Cash used in investing activities was $52,202$66,522 for the threesix months ended March 31,June 30, 2023, and cash provided by investing activities was $3,948,900$3,944,800 for the same period in 2022. The cash used in the threesix months ended March 31,June 30, 2023 was for the purchase of equipment. The cash provided by investing activities in the threesix months ended March 31,June 30, 2022 was for the sale of assets for $4,000,000.$4,000,000 somewhat offset by purchases of equipment.

 

Financing activities used cash of $15,363,$17,399, during the threesix months ended March 31,June 30, 2023, and cash used by financing activities for the same period in 2022 was $429,224.$442,456. During the threesix months ended March 31,June 30, 2023, cash paid for interest was $113,855$157,826 and during the same three-monthsix-month period in 2022, cash paid for interest was $44,818.$46,894. Additionally, during the threesix months ended March 31,June 30, 2023, we received $2,622$4,880 in proceeds from the sale of our common stock through our Employee Stock Purchase Plan, as compared to $5,829$9,805 in proceeds from the sale of our common stock through our Employee Stock Purchase Plan and $61,168 for exercise of warrants for the same period in 2022. During the threesix months ended March 31,June 30, 2023, principal payments on notes payable was $15,723,were $18,239, as compared to $494,159$509,257 for the same period in 2022, primarily as a result of debt repayments in the threesix months ended March 31,June 30, 2022.

 

In February 2023, the Company paid its sixth annual dividend on the Series C Preferred Stock. Dividends payable totaled $243,780 at March 31, 2023.that time. Some holders of the Series C Preferred Stock elected to settle their dividend payments with shares of the Company’s common stock in lieu of cash. The Company issued 2,266,500 shares of common stock in lieu of a dividend payment of $90,660. The remaining $153,120 of dividend payable was settled with cash.

 

Total increase in cash for the three-monthsix-month period ended March 31,June 30, 2023, was $913,746$916,527 compared to a cash increase of $2,661,799$2,551,292 for the same period in 2022.

 

We expect that cash from operations, cash raised via equity financing, and our current cash balance will be sufficient to fund operations for the next twelve months. Our future liquidity and capital funding requirements will depend on numerous factors, including commercial relationships, technological developments, market factors, available credit, and preferred stock shareholders. There is no assurance that additional capital and financing will be available on acceptable terms to the Company or at all.

At March 31, 2023, there were no outstanding warrants to purchase our common stock.

 

Debt

 

In December 2013, we entered into a promissory note agreement with our then Chairman of the Board and one of our major shareholders, pursuant to which we borrowed $500,000 (the 2013 Promissory Note). The 2013 Promissory Note is secured and bears interest at 6% per annum and was originally due June 30, 2014. According to the terms of the 2013 Promissory Note, at any time, the lenders may settle any or all of the principal and accrued interest with shares of our common stock. In June 2014, pursuant to a modification, the maturity date was extended to December 31, 2017. In February 2017, the 2013 Promissory Note was further modified to extend the maturity date to December 31, 2020, with all remaining terms unchanged. In December 2019, the 2013 Promissory Note was further modified to extend the maturity date to December 31, 2021, with all remaining terms unchanged. In January 2022, the 2013 Promissory Note was modified to extend the maturity date to December 31, 2023, with all remaining terms unchanged. At March 31,June 30, 2023, accrued interest payable on the 2013 Promissory Note totaled 279,234.$286,734.

 

In April 2018, we borrowed $120,000 from our Chief Executive Officer and Chairman of the Board pursuant to a promissory note (the 2018 Promissory Note). The 2018 Promissory Note accrues interest at 6% per annum, which is payable upon maturity of the 2018 Promissory Note. The 2018 Promissory Note was originally unsecured and originally matured on August 1, 2018. At any time, the holder of the 2018 Promissory Note may elect to have any or all of the principal and accrued interest settled with shares of our common stock based on the average price of the shares over the previous 20 trading days. Pursuant to an amendment to the 2018 Promissory Note in June 2018, the maturity date was extended to March 31, 2019 with all other provisions remaining unchanged. Pursuant to a second amendment to the 2018 Promissory Note in February 2019, the maturity date was extended to July 31, 2019 with all other provisions remaining unchanged. Pursuant to a third amendment to the 2018 Promissory Note in July 2019, the maturity date was extended to January 31, 2020 with all other provisions remaining unchanged. Pursuant to a fourth amendment to the 2018 Promissory Note in December 2019, the maturity date was extended to December 31, 2021, the note was modified to become secured by company assets, with all other provisions remaining unchanged. In December 2021, the 2018 Promissory Note was modified to extend the maturity date to December 31, 2023,

22 

with all remaining terms unchanged. At March 31,June 30, 2023, accrued interest on the 2018 Promissory Note totaled $35,570.$37,370.

24

 

In December 2019 and February 2020, we borrowed an aggregate of $1,000,000 from our Chief Executive Officer, Chairman of the Board, former Chairman of the Board, and one of our major shareholders pursuant to a promissory note (the 2019 Promissory Note). The 2019 Promissory Note bears an interest rate of 4% annually and was originally due December 31, 2022. According to the terms of the 2019 Promissory Note, at any time, the lenders may settle any or all of the principal and accrued interest with shares of the Company’s common stock based on the average closing price of the Company’s common stock for the 20 days preceding the payment. In December 2022, the 2019 Promissory Note was modified to extend the maturity date to December 31, 2024, with all remaining terms unchanged. At March 31,June 30, 2023, accrued interest on the 2019 Promissory Note totaled $129,131.

In April 2021, we borrowed $250,000 from its Chief Executive Officer and Chairman of the Board pursuant to a promissory note (the 2021 Promissory Note). The 2021 Promissory Note accrued interest at 6% per annum, which was payable upon maturity of the 2021 Promissory Note. The 2021 Promissory Note was originally secured and was to mature on December 31, 2022. At any time, the holders of the 2021 Promissory Note were able to elect to have any or all of the principal and accrued interest settled with shares of our common stock at a conversion price of $0.11 per share. On March 31, 2022, the Company paid in full the 2021 Promissory Note. The payment included $250,000 in principal payments and $14,500 in interest paid.$139,131.

 

CRITICAL ACCOUNTING POLICIES

 

From time-to-time, management reviews and evaluates certain accounting policies that are considered to be significant in determining our results of operations and financial position.

 

A description of the Company’s critical accounting policies that affect the preparation of the Company’s financial statements is set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on April 6, 2023, as amended on May 3, 2023.

 

ITEM 4. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

We maintain disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act), that are designed to ensure that material information relating to us is made known to the officers who certify our financial reports and to other members of senior management and the Board of Directors. These disclosure controls and procedures are designed to ensure that information required to be disclosed in our reports that are filed or submitted under the Exchange Act are recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.

 

Management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness, as of March 31,June 30, 2023, of our disclosure controls and procedures. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of March 31,June 30, 2023.

 

Changes in Internal Control over Financial Reporting

 

There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended March 31,June 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

25

23 

PART II OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

A discussion of legal matters is found in Note 8, “Commitments and Contingencies”, in the accompanying notes to the unaudited condensed consolidated financial statements included in Part I - Item 1. Financial Statements of this Quarterly Report.

 

ITEM 1A. RISK FACTORS

 

There have been no material changes or updates to the risk factors previously disclosed in Item 1A. “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2022.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

None.

 

24 

26

ITEM 6. EXHIBITS

 

Exhibit No.

Description

 

3.1

3.1

Restated Certificate of Formation, as amended (incorporated by reference to Exhibit 3.1 of the Company’s Quarterly Report on Form 10-Q for quarter ended June 30, 2010).

 

3.2

Statement of Designation of the Series C Convertible Redeemable Preferred Stock of International Isotopes Inc. (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed on February 24, 2017).

 

3.3

Certificate of Amendment to Statement of Designation of the Series C Convertible Redeemable Preferred Stock International Isotopes Inc., dated February 16, 2022 (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed on February 22, 2022).

 

3.4

Certificate of Amendment to Statement of Designation of the Series C Convertible Redeemable Preferred Stock International Isotopes Inc., dated December 28, 2022 (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed December 28, 2022).

  

3.5

Bylaws (incorporated by reference to Exhibit 3.2 of the Company's Registration Statement on Form SB-2 filed on May 1, 1997 (Registration No. 333-26269)).

 

10.1 †Modification #3 to the Amended and RestatedExecutive Employment Agreement, dated February 22, 2023,December 23, 2022, between the Company and Stephen LaflinShahe Bagerdjian (as amended) (incorporated(incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed February 28,May 10, 2023).
 

31.1*

Certification by the Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002.

 

31.2*

Certification by the Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002.

 

32.1**

Certification by the Chief Executive Officer furnished pursuant to 18 U.S.C. Section 1350 adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

32.2**

Certification by the Chief Financial Officer furnished pursuant to 18 U.S.C. Section 1350 adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

101.INS*

Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

 

101.SCH*

Inline XBRL Taxonomy Extension Schema Document

 

101.CAL*

Inline XBRL Taxonomy Extension Calculation Linkbase Document

 

101.DEF*

Inline XBRL Taxonomy Extension Definition Linkbase Document

 

101.LAB*

Inline XBRL Taxonomy Extension Label Linkbase Document

 

101.PRE*

Inline XBRL Taxonomy Extension Presentation Linkbase Document

 

104

Cover Page Interactive Data File (embedded within the Inline XBRL document and contained in Exhibit 101).

_______________


* Filed herewith.

** Furnished herewith.

† Constitutes a management contract or compensatory plan or arrangement.

 

27

25 SIGNATURES

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

Date: May 15,August 11, 2023

International Isotopes Inc.

  
   
 

By:

/s/ Steve T. Laflin

  

Steve T. Laflin

  

Chief Executive Officer

   
   
 

By:

/s/ W. Matthew Cox

  

W. Matthew Cox

  

Chief Financial Officer

 

26

28