<PAGE> 1
FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
June 30, 2000
Commission file number:
0-22923
INTERNATIONAL ISOTOPES INC.
(Exact name of registrant as specified in its charter)
Texas 74-2763837
(State of incorporation) (IRS Employer Identification Number)
1500 Spencer Rd
Denton, Texas 76205
(Address of principal executive offices) (zip code)
940-323-2624
(Registrant's telephone number, including area code)
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. YES [x] NO [ ]
As of August 5, 2000 the number of shares of Common Stock, $.01 par value,
outstanding was 9,673,485.
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INTERNATIONAL ISOTOPES INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
<S> <C>
PART I - FINANCIAL INFORMATION:
Item 1 - Financial Statements:
Unaudited Condensed Consolidated Balance Sheets at June 30, 2000 3
and December 31, 1999.
Unaudited Condensed Consolidated Statements of Operations for the 4
Three Months Ended June 30, 2000 and 1999, and for the Six Months
Ended June 30, 2000 and 1999
Unaudited Condensed Consolidated Statements of Cash Flows for the 5
Six Months Ended June 30, 2000 and 1999.
Notes to Unaudited Condensed Consolidated Financial Statements. 7
Item 2 - Management's Discussion and Analysis of Financial 10
Condition and Results of Operations
PART II - OTHER INFORMATION:
Item 2 - Changes in Securities 12
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
</TABLE>
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INTERNATIONAL ISOTOPES INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
June 30, December 31,
Assets 2000 1999
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 5,314,022 $ 2,990,300
Accounts receivable, net 1,237,974 765,367
Inventories 3,103,385 2,421,434
Prepaids and other current assets 1,159,197 1,179,040
------------ ------------
Total current assets 10,814,578 7,356,141
Property, plant and equipment, net 40,782,069 40,734,736
Goodwill, net 1,247,530 1,394,302
Intangibles and other assets 2,006,208 2,063,847
------------ ------------
Total assets $ 54,850,385 $ 51,549,026
============ ============
Liabilities, Redeemable Convertible Preferred Stock, and Stockholders' Equity
Current liabilities
Accounts payable $ 1,940,323 $ 2,077,051
Accrued liabilities 983,943 1,105,273
Current portion of lease obligations 1,458,622 1,346,958
Current installments of mortgage and notes payable to banks 1,089,598 524,843
------------ ------------
Total current liabilities 5,472,486 5,054,125
Non-current portion of lease obligations 2,895,412 3,053,025
Mortgage and notes payable to banks, excluding current installments 13,699,043 13,953,679
------------ ------------
Total liabilities 22,066,941 22,060,829
Redeemable convertible preferred stock, net 15,102,430 8,392,475
(liquidation preference of $20,000,000 at June 30, 2000 and
$10,000,000 at December 31, 1999)
Stockholders' equity
Preferred stock, $0.01 par value; 5,000,000 shares authorized,
20,000 shares issued and outstanding -- --
Common stock, $0.01 par value; 20,000,000 shares authorized,
issued and outstanding 9,643,096 shares at June 30, 2000
and 8,569,074 shares at December 31, 1999 96,430 85,689
Additional paid-in capital 63,496,963 48,828,561
Accumulated deficit (45,272,379) (27,178,528)
Receivable from stockholders (640,000) (640,000)
------------ ------------
Total stockholders' equity 17,681,014 21,095,722
------------ ------------
Total liabilities, redeemable convertible preferred
stock and stockholders' equity $ 54,850,385 $ 51,549,026
============ ============
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
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INTERNATIONAL ISOTOPES INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Operations
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
2000 1999 2000 1999
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
Revenue:
Sales of product 985,709 696,115 $ 2,036,160 1,234,014
Development contract income 237,276 50,632 817,845 58,819
Sale of accelerator components -- 640,000 -- 701,000
------------ ----------- ------------ -----------
Total revenue 1,222,985 1,386,747 2,854,005 1,993,833
Cost of revenue:
Cost of products 2,748,846 874,522 4,568,092 1,073,153
Cost of development contract 103,008 -- 303,282 --
Cost of accelerator components -- 328,467 -- 358,467
------------ ----------- ------------ -----------
Gross profit (loss) (1,628,869) 183,758 (2,017,369) 562,213
------------ ----------- ------------ -----------
Operating costs and expenses:
Salaries and contract labor 385,933 432,261 891,187 839,850
Sales and marketing 104,186 191,391 189,200 503,126
Product development 1,268,886 1,825,252 2,735,519 2,958,880
General, administrative and consulting 1,552,052 739,501 2,954,617 1,961,608
------------ ----------- ------------ -----------
Total operating expenses 3,311,057 3,188,405 6,770,523 6,263,464
------------ ----------- ------------ -----------
Operating loss (4,939,926) (3,004,647) (8,787,892) (5,701,251)
Other income (expense):
Interest income 28,837 52,973 63,882 99,614
Interest expense (518,127) (2,498) (973,045) (2,498)
------------ ----------- ------------ -----------
Net loss (5,429,216) (2,954,172) (9,697,055) (5,604,135)
Preferred stock dividend, deemed dividend
and accretion of discount (8,158,476) (1,743,649) (8,396,796) (1,743,649)
Net loss applicable to common shareholders $(13,587,692) $(4,697,821) $(18,093,851) $(7,347,784)
============ =========== ============ ===========
Net loss per common share - basic and diluted $ (1.41) $ (0.62) $ (1.89) $ (0.95)
============ =========== ============ ===========
Weighted average common shares outstanding -
basic and diluted 9,643,096 7,573,722 9,553,594 7,715,819
============ =========== ============ ===========
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
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INTERNATIONAL ISOTOPES INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Six Months ended June 30,
2000 1999
------------ -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (9,697,055) (5,604,135)
Adjustments to reconcile net loss to net cash used in
operating activities
Depreciation and amortization 1,730,626 822,693
Services compensated by stock issuance 6,033 --
Changes in operating assets and liabilities:
Accounts receivable (472,607) (1,060,169)
Other assets 77,482 32,030
Inventory (681,951) (199,747)
Accounts payable (249,313) 76,053
Accrued liabilities (121,330) (352,029)
------------ -----------
Net cash used in operating activities (9,408,115) (6,285,304)
------------ -----------
Cash flows from investing activities:
Purchase of fixed assets (768,787) (2,807,585)
Proceeds from sale of assets held for sale -- 320,559
------------ -----------
Net cash used in investing activities (768,787) (2,487,026)
------------ -----------
Cash flows from financing activities:
Settlement of contingent consideration - MAC Isotopes, Inc. (1,586,908) (869,559)
Proceeds from issuance of redeemable convertible
preferred stock and warrants 9,320,000 4,700,000
Proceeds from issuance of common stock,
net of issuance costs 5,378,176 9,678,917
Payments on capital leases (795,763) (383,182)
Proceeds from issuance of debt 2,875,048 --
Principal payments on notes payable (2,564,929) (2,381,500)
Payments of preferred stock dividends (125,000) --
------------ -----------
Net cash provided by financing activities 12,500,624 10,747,676
------------ -----------
Net increase in cash and cash equivalents 2,323,722 1,972,346
Cash and cash equivalents at beginning of period 2,990,300 6,371,704
------------ -----------
Cash and cash equivalents at end of period 5,314,022 8,344,050
============ ===========
</TABLE>
(Continued)
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INTERNATIONAL ISOTOPES INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Six Months ended June 30,
2000 1999
--------- ---------
<S> <C> <C>
Supplemental disclosure of cash flow activities:
Cash paid for interest, net of amounts capitalized $ 973,045 2,498
========= =========
Supplemental disclosure of noncash transactions:
Common stock issued for preferred stock dividend $ 125,000 --
========= =========
Common stock issued for stock receivable $ -- 456,917
========= =========
Capital expenditures included in accounts payable $ 112,586 623,482
========= =========
Acquisition of equipment through capital leases $ 749,814 3,680,704
========= =========
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements
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INTERNATIONAL ISOTOPES INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(1) The Company and Basis of Presentation
International Isotopes Inc (the Company) was incorporated in Texas in November
1995. The Company acquired the technology, proprietary designs and intellectual
property for the design and assembly of a proton linear accelerator (LINAC) to
produce radioisotopes used in nuclear medicine for the detection and treatment
of various forms of cancer and other diseases.
Prior to initial production in late 1999, the Company had devoted substantially
all of its efforts, since inception, to the acquisition and construction of the
LINAC project and related assets, pharmaceutical production and to raising
capital and other organizational activities. The operating revenues to date have
been limited to the sales of accelerator components purchased from the State of
Texas, product development income, initial sales of I-125 brachytherapy seeds
and sales of reactor produced products from International Isotopes Idaho Inc.
("I(4)"). Additionally, the Company has derived operating capital from the sales
of equipment. The Company has financed its operations in part through private
placements of its equity securities and its initial public offering (the
"Offering") which occurred on August 19, 1997. The Company utilized funds
obtained from the Offering to increase its capital assets primarily through the
assembly and upgrade of the LINAC for efficient production of radioisotopes and
radiopharmaceuticals, as well as construction and acquisition of manufacturing
facilities, and other production equipment. The Company is actively pursuing
strategic alliances with pharmaceutical companies and universities. The Company
has employed additional key personnel in the area of LINAC manufacturing,
operations, radioisotope and radiopharmaceutical production, quality assurance
and regulatory compliance.
The accompanying unaudited consolidated financial statements include the results
of operations of the Company and its wholly owned subsidiaries, Gazelle Realty
and ("I(4)"). All significant intercompany accounts and transactions have been
eliminated in consolidation. The unaudited consolidated financial statements
included herein have been prepared without audit and in accordance with
generally accepted accounting principles, for interim periods, and have been
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission (SEC). These statements reflect all adjustments which, in the opinion
of management, are necessary for the fair presentation of the Company's
financial position as of June 30, 2000, the results of its operations for the
three and six-month periods ended June 30, 2000 and 1999, and its cash flows for
the six-month periods ended June 30, 2000 and 1999. This information should be
read in conjunction with the Company's audited consolidated financial statements
as set out in the Company's Form 10-K filed March 30, 2000.
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information" establishes standards for public business enterprises to report
information about operating segments in financial reports issued to
shareholders. It also establishes standards for related disclosures about
products and services, geographic areas and major customers. The Company was in
a development stage through most of 1999 and has not begun significant
operations. The Company's management anticipates operating through various
segments later in 2000 as operations for those segments begin. In the periods
presented, management utilized consolidated financial information to make
business decisions and allocate resources.
Certain information in footnote disclosures, normally included in the financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to the rules and regulations of the SEC.
The financial data disclosed in the notes to the condensed consolidated
financial statements are unaudited for these periods.
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<PAGE> 8
(2) Liquidity
The Company has been developing facilities, is initiating operations, and has
experienced accumulated losses of $34,519,473 since inception, and has invested
significant funds in the acquisition of land, facilities, manufacturing
equipment, regulatory approval and personnel. The Company expects losses to
continue for the near term as it ramps up production, marketing and distribution
of products, obtains validation and customer approval of products, and increases
marketing and product development.
The Company's future liquidity and capital funding requirements will depend on
numerous factors, including, but not limited to: contract manufacturing and
marketing relationships; costs relating to commencing production of
radioisotopes, radiochemicals, finished radiopharmaceuticals and medical therapy
devices; continued delays in the federal and state regulatory approval process
for permitting production from the LINAC; expenses in developing the proposed
medical imaging camera; costs involved in filing, prosecuting, enforcing and
defending patent claims and other intellectual property rights; and
technological and market developments.
Although there can be no assurance, the Company expects that revenues will
continue to increase, providing more funds for operations and capital
expenditures. Until such time that sufficient revenues levels are attained,
management will continue to seek additional resources through the sale of its
securities. The Company is currently negotiating additional financing. The
Company recognizes that any additional short-term financing may not be adequate
to meet its currently anticipated working capital and capital expenditure
requirements.
In the event the current negotiations are not completed, management may choose
to raise those funds through other means of financing as appropriate. The
Company cannot guarantee that it will be able to obtain such financing on
acceptable terms. Also, if necessary, the Company can delay certain operations,
capital expenditures and joint ventures until adequate financing is obtained. If
such delays occur, the Company's future operations and business expansion could
be significantly curtailed.
(3) Net Loss Per Common Share - Basic and Diluted
Basic loss per share excludes dilution for potentially dilutive securities and
is computed by dividing loss applicable to common stockholders by the weighted
average number of common shares outstanding during the period. Diluted loss per
share, which is computed on the basis of the weighted average number of common
shares and all potentially dilutive securities outstanding during the period, is
the same as basic loss per share as all potentially dilutive securities were
anti-dilutive.
At June 30, 2000, the Company had 1,094,400 common stock options and 6,537,060
common stock warrants outstanding. Potentially dilutive securities, comprised of
redeemable convertible preferred stock issued in May 1999, October 1999 and
June 2000, stock options and warrants have not been considered in the
computation of diluted net loss per common share since their inclusion would be
anti-dilutive.
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(4) Inventories
Inventories consist of the following at June 30, 2000 and December 31, 1999
<TABLE>
<CAPTION>
June 30, 2000 December 31, 1999
------------- -----------------
<S> <C> <C>
Raw materials $ 849,324 $ 564,354
Work in progress 2,139,958 1,798,718
Finished goods 114,103 58,362
---------- ----------
$3,103,385 $2,421,434
========== ==========
</TABLE>
(5) Common Stock
In February of 2000, the Company completed a private placement of units of its
securities to accredited investors. Each unit consisted of 1 share of common
stock at $5.50 per share and a warrant to purchase one half of an additional
share at $5.50 per share. The Company sold units representing 1,054,652 shares
of common stock and warrants to purchase an additional 527,326 shares to
accredited investors for aggregate consideration of $5,800,586, before issuance
costs of $422,410. The sale of the units was an exempt offering pursuant to
Section 4(2) of the Securities Act of 1933 and Regulation D promulgated
thereunder. The shares of common stock sold and the shares of common stock
issuable upon exercise of the warrants were subsequently registered with the
Securities and Exchange Commission for resale by the purchasing accredited
investors pursuant to a Registration Statement on Form S-3 which became
effective on April 11, 2000.
In January of 2000, the Company elected to issue common stock in payment for the
quarterly dividend on redeemable convertible preferred stock. The Company
satisfied the $125,000 dividend payment by issuing 19,370 shares of common stock
at $6.45 per share, the average closing price of the common stock for the
preceding 10 trading days, discarding the highest and the lowest for the period.
On April 24, 1998, the Company agreed to reimburse MACTEC, Inc ("MACTEC") for
decreases in market value of the Company's common stock issued as part of the
acquisition of International Isotopes Idaho, Inc. from MACTEC. Under the
agreement, one-half of the reimbursement was made at April 24, 1999 and on April
24, 2000 the Company advanced to MACTEC $1,586,908, for final reimbursement for
decreases in the market value of the common stock. William Nicholson, chairman
of the board of directors, made a loan to the Company in the amount of
$1,500,000 with which to fund the reimbursement.
(6) Redeemable Convertible Preferred Stock
On June 15, 2000, the Company completed a private placement of 10,000 shares of
7% cumulative redeemable convertible $0.01 par value $1,000 face value preferred
stock ("Series B Preferred Stock") together with 2,500,000 warrants to purchase
common stock at $4.00 per share, for aggregate proceeds of $10 million, before
issuance costs of $680,000. Dividends are 7% per annum payable in cash or common
stock (at the Company's option) beginning September 1, 2000 and continuing
quarterly thereafter through June 1, 2003. If paid in common stock, the number
of shares is based on the average market price for the 10 trading days
immediately preceding the dividend payment date (the "Average Price").
The Series B Preferred Stock is mandatorily redeemable on May 31, 2003 in cash
or common stock at the then Average Price, at the Company's option. Early
redemption may be required at the option of the holder on December 1, 2000, and
June 1, 2001, and under certain circumstances and may be exercised at the option
of the Company under other circumstances. Mandatory redemption events include
change in control, suspension or delisting from NASDAQ, the BSE or any
subsequent market on which the common stock is listed for five consecutive days,
breach by the Company of any representations, warranties or other conditions in
the preferred stock purchase agreement, and other events. The Series B Preferred
Stock is convertible to common stock at $4.00 per share and the warrants are
exercisable at any time up to June 1, 2003 at $4.00 per share.
The Company assigned an aggregate value of $3,283,582 to the warrants ($1.31 per
share) using an option pricing model with the following assumptions: value of
underlying stock of $4.50, exercise price of $4.00 per share, volatility of 60%,
risk-free interest rate of 6.50%, and contractual term of three years. The
warrant value was recorded to additional paid-in capital and is being accreted
to the Series B Preferred Stock over 5 1/2 months, the earliest redemption
period.
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<PAGE> 10
After consideration of the warrant value and the in-the-money conversion price
at the commitment date, the Series B Preferred Stock has a "beneficial
conversion feature" of $5,213,582 that has been recognized as an additional
return to the holders through a charge to accumulated deficit and an increase to
additional paid-in capital. The beneficial conversion feature is considered an
additional return to the preferred stockholders in the determination of net loss
applicable to the common shareholders.
The conversion price applicable to the Company's Series A Preferred Stock issued
in May and October 1999 was altered, in accordance with its terms, upon the
issuance of the Series B Preferred Stock on June 15, 2000. The Company was
required to alter the price used to calculate the number of common shares
issuable upon the conversion of the Series A Preferred Stock to Common Stock.
The conversion price was reduced to $4.00 from a floor of $7.00 and a ceiling of
$11.86. This change caused an increase in the value of the beneficial conversion
feature in the amount of $1,250,000 that has been recognized as an additional
return to the holders through a charge to accumulated deficit and an increase to
additional paid-in capital. The beneficial conversion feature provided to Series
A preferred stockholders has also been included in the determination of net loss
applicable to common shareholders.
Additionally, with respect to the holders of the Series A Preferred Stock, the
Company was required to increase the number of warrants to purchase common stock
granted to them from 410,000 to 1,215,650 and decrease the warrant exercise
price to $4.00 from $11.86. These changes caused an increase in the value of the
warrants from $1,330,450, calculated at the original issuance of the warrants,
to $2,340,127. The revised value was calculated using an option pricing model
with the value of the underlying stock of $4.50, exercise price of $4.00,
volatility rate of 60%, a risk free interest rate of 6.5% and the contractual
term of the warrants. This increase in warrant value of $1,009,677 has been
recognized as an additional return to the Series A preferred stockholders
through a charge to accumulated deficit and an increase to additional paid-in
capital. The incremental warrant value provided to the Series A preferred
stockholders has also been included in the determination of net loss applicable
to common shareholders.
(7) Subsequent Events
On July 15, 2000, the Company issued 30,389 shares of common stock in payment
of the quarterly dividend requirement of $125,000 on the Series A Preferred
Stock.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Except for historical information contained herein, the following contains
forward-looking information that is subject to certain risks and uncertainties.
The Company's actual results could differ materially from those anticipated in
these forward-looking statements as a result of certain factors including those
set forth in the "Risk Factors" section included in the Company's Form 10-K,
filed with the Securities Exchange Commission (SEC) on March 30, 2000 ("Form
10-K"). The following discussion should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included in the Form 10-K.
RESULTS OF OPERATIONS
Three and six month periods ended June 30, 2000 and 1999. The Company's net loss
for the three and six month periods ended June 30, 2000 were $5,429,216 and
$9,697,055, as compared to net loss of $2,954,172 and $5,604,135 for the
comparable periods of 1999. Net loss per common share for the three and six
month periods ended June 30, 2000 were $1.41 and $1.89, as compared to net loss
per common share of $0.62 and $0.95 for the same periods of 1999.
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<PAGE> 11
The increase in the loss for the three and six month periods ended June 30, 2000
was largely due to expenses relating to materials, manufacturing supplies and
other production-related goods, hiring additional manufacturing personnel,
increased activities, completion of the validation of facilities, equipment and
procedures, regulatory costs and licensing requirements. In addition, FY 2000
depreciation expenses were substantially higher as equipment which was
previously under construction was placed into service in January 2000.
Revenues for the three and six month period ended June 30, 2000 were $1,222,985
and $2,854,005 as compared to $1,386,747 and $1,993,833 for the same periods in
1999. Gross profit (loss) for the three and six month periods ended June 30,
2000 were ($1,628,869) and ($2,017,369) as compared to $183,758 and $562,213 for
the same periods in 1999. The decrease in revenues for the three month period
was attributable to a decrease in sales of accelerator components, while product
sales and development contract income increased. The increase in revenues for
the six month period was attributable to the sales of finished brachytherapy
seeds of $1,080,285 and development contract income of $817,845 which offset
decreases in equipment sales and lower revenues from International Isotopes,
Idaho, Inc. A significant portion of the increase in development contract
revenues is attributable to the $1.3 million contract signed with NeoRx
Corporation (NeoRx) to provide plant development for a manufacturing facility
which will produce NeoRx's Skeletal Radiotherapy product. The Company received a
$600,000 cash payment from NeoRx during the quarter ended March 31, 2000 and had
deferred revenue in the amount of $52,158 at June 30, 2000 related to the
contract. The decrease in gross profit was caused by the Company increasing its
production capacity in anticipation of increased future production levels and
manufacturing activities.
Operating expenses increased to $3,311,057 and $6,770,523 for the three and six
month periods ended June 30, 2000 compared to $3,188,405 and $6,263,464 for the
same periods of 1999. Salaries and contract labor expenses for the three and six
month periods ended June 30, 2000 were $385,933 and $891,187 as compared to
$432,261 and $839,850 for the same periods of 1999, a decrease of $46,328 and an
increases of $51,337 respectively. General, administrative and consulting
expenses totaled $1,552,052 and $2,954,617 for the three and six month periods
ended June 30, 2000 as compared to $739,501 and $1,961,608 for the same periods
of 1999, increases of $812,551 and $993,009 respectively. Sales and marketing
expenses decreased to $104,186 and $189,200 for the three and six month periods
ended June 30, 2000 as compared to $191,391 and $503,126 for the corresponding
periods of 1999. The increase in operating expenses was attributable to
increases in personnel for production, marketing, quality control, environmental
health and safety, and administrative personnel as the Company expanded its
organizational structure and began limited operations. Other increases in
operating expenses included increased insurance for property, general and
product liability, license fees, supplies, materials related to manufacturing
and increased depreciation expense as more equipment and facilities commenced
operations. Product development costs of $1,268,886 and $2,735,519 were incurred
during the three and six month periods ended June 30, 2000 as compared to
$1,825,252 and $2,958,880 for the corresponding periods of 1999.
Interest income during the three and six month periods ended June 30, 2000 was
$28,837 and $63,882 as compared to $52,973 and $99,614 for the comparable
periods of 1999, decreases of $24,136 and $35,732 respectively. The decreases in
interest income for the three and six month periods ended June 30, 2000 compared
to the comparable periods of 1999 were attributable to a reduction in the
invested funds available from various private placements which were used to fund
the Company's facilities construction, equipment purchases and operations.
Interest expense for the three and six month periods ended June 30, 2000 was
$518,127 and $973,045 as compared to $2,498 and $2,498 for the comparable
periods of 1999 during which time the Company had capitalized most of its
interest costs as construction of the Company's facilities was in progress. As
facilities and construction in progress were completed, interest costs no longer
qualified for capitalization and were expensed as incurred.
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<PAGE> 12
Liquidity and Capital Resources
On June 30, 2000 the Company had cash and cash equivalents of $5,314,022
compared to $2,990,300 at December 31, 1999. For the six months ended June 30,
2000, net cash used in operating activities of $9,408,115 and net cash used in
investing activities, for capital expenditures, of $768,787 were provided by
financing activities of $12,500,624. Capital expenditures are expected to remain
relatively constant for the remainder of 2000 as we complete the facilities,
LINAC and equipment purchases necessary for the production of our initial
product lines.
The Company has financed its operations since inception primarily by bank loans,
sales of accelerator components and excess equipment, its initial public
offering, sales of shares of common and preferred stock in private placements to
investors and loans from stockholders and directors.
On February 1, 2000, the Company initiated a private placement of its equity
securities. The securities were offered at $5.50 per unit, which included one
share of common stock and a warrant to purchase one-half an additional share of
common stock at $5.50 per share. A total of 1,054,652 shares of common stock
(plus warrants to purchase an additional 527,326 shares) were issued for gross
proceeds of $5,800,586. Commissions in the amount of $422,410 were paid to the
placement agent, resulting in net proceeds of $5,378,176.
On June 15, 2000, the Company completed a private placement of 10,000 shares of
7% cumulative redeemable convertible $0.01 par value $1,000 face value Series B
preferred stock together with 2,500,000 warrants to purchase common stock at
$4.00 per share, for aggregate proceeds of $10 million, before issuance costs of
$680,000, resulting in net proceeds of $9,320,000. The Series B Preferred Stock
is mandatorily redeemable on May 31, 2002 in cash or common stock, at the
Company's option. Early redemption may be required at the option of the holders
on December 1, 2000 and June 1, 2001, and in the event of other circumstances,
such as change in control, suspension or delisting from NASDAQ or BSE, or other
circumstances.
Although there can be no assurance, the Company expects that revenues will
continue to increase, providing more funds for operations and capital
expenditures. Until such time that sufficient revenues levels are attained,
management will continue to seek additional resources through the sale of its
equity instruments. The Company is currently negotiating additional financing.
Although there can be no assurance, management anticipates closing the financing
in the near future. The Company recognizes that any additional short-term
financing may not be adequate to meet its currently anticipated working capital
and capital expenditure requirements.
In the event the current negotiations are not completed, management may choose
to raise those funds through others means of financing as appropriate. The
Company cannot guarantee that it will be able to obtain such financing on
acceptable terms. Also, if necessary, the Company can delay certain operations,
capital expenditures and joint ventures until adequate financing is obtained. If
such delays occur, the Company's future operations and business expansion could
be significantly curtailed.
PART II. OTHER INFORMATION
Item 2. Changes in Securities
In January of 2000, the Company elected to issue common stock in payment for the
quarterly dividend on its Series A redeemable convertible preferred stock. The
Company satisfied the $125,000 dividend payment by issuing 19,370 shares of
common stock at $6.45 per share, the average closing price of the stock for the
preceding 10 trading days, discarding the highest and the lowest price for the
period.
On February 1, 2000, the Company initiated a private placement of its equity
securities. The securities were offered at $5.50 per unit, which included one
share of common stock and a warrant to purchase one-half an additional share of
common stock at $5.50 per share. A total of 1,054,652 shares of common stock
(plus warrants to purchase an additional 527,326 shares) were issued for gross
proceeds of $5,800,586. Commissions in the amount of $422,410 were paid to the
placement agent, resulting in net proceeds of $5,378,176.
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<PAGE> 13
On June 15, 2000, the Company completed a private placement of 10,000 shares of
7% cumulative redeemable convertible $0.01 par value $1,000 face value preferred
stock ("Series B Preferred Stock") together with 2,500,000 warrants to purchase
common stock at $4.00 per share, for aggregate proceeds of $10 million, before
issuance costs of $680,000. Dividends are 7% per annum payable in cash or common
stock (at the Company's option) beginning September 1, 2000 and continuing
quarterly thereafter through June 1, 2003. The Series B Preferred Stock is
convertible into common stock at a price of $4.00 per share.
The conversion price applicable to the Company's Series A Preferred Stock issued
in May and October 1999 was altered, in accordance with its terms, upon the
issuance of the Series B Preferred Stock on June 15, 2000. The Company was
required to alter the price used to calculate the number of common shares
issuable upon the conversion of the Series A Preferred Stock to Common Stock.
The conversion price was reduced to $4.00 from a floor of $7.00 and a ceiling of
$11.86. Additionally, the Company was required to increase the number of
warrants granted from 410,000 to 1,215,650 and decrease the exercise price to
$4.00 from $11.86.
On July 15, 2000, the Company issued 30,389 shares of common stock in payment
of the quarterly dividend requirement of $125,000 on the Series A Preferred
Stock.
Item 5. Other Information
On April 24, 1998, the Company agreed to reimburse MACTEC, Inc ("MACTEC") for
decreases in market value of the Company's common stock issued as part of the
acquisition of International Isotopes Idaho, Inc. from MACTEC. Under the
agreement, one-half of the reimbursement was made at April 24, 1999 and on April
24, 2000 the Company advanced to MACTEC $1,586,908, for final reimbursement for
decreases in the market value of the common stock. William Nicholson, chairman
of the board of directors, made a loan to the Company in the amount of
$1,500,000 with which to fund the reimbursement.
Item 6. Exhibits and Reports on Form 8-K
Exhibits:
27.1 Financial Data Schedule
Reports on Form 8-K:
The Company filed form 8-K on June 27, 2000 regarding the issuance of Series B
redeemable convertible preferred stock through a private placement and the
resulting adjustments to the Series A redeemable convertible preferred stock
conversion price and warrant exercise price.
The Company filed form 8-K on February 11, 2000 regarding the issuance of equity
securities through a private placement of common stock and warrants.
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<PAGE> 14
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 hereunto duly authorized.
International Isotopes Inc.
(Registrant)
By: /s/ Paul E. Landers
-------------------------------------
Paul E. Landers
Chief Financial Officer
By: /s/ David M. Camp, Ph.D.
-------------------------------------
David M. Camp, Ph.D.
President and Chief Executive Officer
Date: August 14, 2000
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<PAGE> 15
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
<S> <C>
27.1 Financial Data Schedule
</TABLE>
