Filing identity and reporting period
Material metadata discrepancy: The supplied text is an Isoray, Inc. Form 10-Q for the quarter ended March 31, 2019, not a Perspective Therapeutics, Inc. filing for 2018 Q3. The summary below reflects the filing text provided.
Isoray manufactures and sells Cesium-131 brachytherapy seeds. The report covers the third quarter and first nine months of fiscal 2019, compared with the periods ended March 31, 2018. Financial amounts below are in U.S. dollars, generally in thousands unless stated otherwise.
Financial performance and position
| Metric | Three months ended March 31 | Nine months ended March 31 |
|---|---|---|
| Net sales | $1.924 million, up 22% | $5.390 million, up 25% |
| Gross profit / margin | $879,000 / 46%; prior year $609,000 / 39% | $2.168 million / 40%; prior year $1.405 million / 33% |
| Operating loss | $1.163 million; prior year $1.339 million | $4.110 million; prior year $4.359 million |
| Net loss | $1.127 million; loss applicable to common shareholders $1.130 million | $4.049 million; loss applicable to common shareholders $4.057 million |
| Loss per share | $0.02 | $0.06; prior year $0.08 |
| Operating cash flow | Not stated for the quarter | Cash used of $4.064 million; prior year $4.264 million |
At March 31, 2019, cash and cash equivalents were $4.059 million and short-term U.S. Treasury investments were $2.333 million. Working capital was $7.096 million, with a current ratio of 6.24. Total assets were $10.579 million and total liabilities were $1.968 million, including a $613,000 asset retirement obligation. The balance sheet reports no debt.
For the nine months, investing activities used $1.838 million, including capital expenditures; financing activities provided $7.361 million, primarily from the July 2018 stock offering. Cash, cash equivalents and restricted cash increased by $1.459 million to $4.240 million. The company reported shareholders’ equity of $8.611 million.
Changes versus the prior comparable periods
- Quarterly sales rose 22%; prostate brachytherapy sales increased 30% to $1.690 million, while other sales declined 13% to $234,000.
- Nine-month sales increased 25%, principally from prostate brachytherapy, up 29% to $4.761 million. Prostate products were 88% of sales for both the quarter and nine-month period.
- Gross margin improved in both comparison periods. Management attributed higher cost of sales in dollars to increased materials and labor for production and depreciation on automation projects, while sales growth improved gross profit.
- Quarterly general and administrative expense rose 40% to $1.099 million; nine-month expense rose 22% to $3.173 million. Quarterly operating loss narrowed, and nine-month operating and net losses also improved year over year.
- Common shares outstanding increased from 56.3 million at June 30, 2018 to 67.3 million at March 31, 2019, largely reflecting the 11-million-share offering.
Outlook, risks and notable items
- Management said the company met its target of 25% revenue growth for the first nine months of fiscal 2019. It expects cash-flow break-even in three to five years only if the growth strategy succeeds, annual growth targets are met or exceeded and no extraordinary expenses occur; it cautioned there is no assurance growth will continue.
- The July 2018 registered direct offering generated $8.25 million gross and approximately $7.37 million net proceeds. Related warrants cover up to 5.83 million shares; the company may receive up to approximately $4.43 million gross only if exercised for cash. Management expects future financing may be dilutive.
- Cesium-131 supply is a key risk. The supply agreement with the Russian supplier runs through December 31, 2019, but pricing and volumes are set only through May 31, 2019, with later purchases subject to renegotiation. One historical reactor was offline until August 2018, and the other was scheduled to shut down in the second half of 2019 into 2020.
- Five customers accounted for approximately 45% of nine-month revenue; one customer accounted for approximately 21%. The filing warns that losing a major customer could materially affect revenue. A related group of facilities represented 20.97% of nine-month sales.
- Management accrued approximately $80,000 for a Washington hazardous-substance-tax audit and $50,000 based on negotiations with a former consultant, plus related professional fees, in quarterly general and administrative expense. The filing reports no material pending legal proceedings.
- Management said the company had invested approximately $768,000 in production automation through March 31 and expected to invest about $200,000 more over the next seven months. The project is intended to increase output, reduce labor costs and improve safety.
- Revenue-standard adoption had no material effect. The company was evaluating the impact of the new lease accounting standard. Management reported disclosure controls were effective and no material change in internal control during the quarter.
Important facts for investors to verify
- Confirm the issuer and period: the supplied filing identifies Isoray, Inc. and the quarter ended March 31, 2019, contrary to the request metadata.
- Review customer concentration and the degree to which sales growth depends on a small number of prostate-sector customers and treatment markets.
- Track Russian Cesium-131 supply, post-May 2019 pricing and volumes, and the scheduled reactor shutdown; verify whether alternative supply arrangements are secured.
- Assess cash burn against available cash and investments, the conditional three-to-five-year break-even outlook, and the need for potentially dilutive financing.
- Monitor exercise of the outstanding warrants and resulting cash proceeds, share dilution and capital availability.