The discussion and analysis of the Company’s
financial condition and results of operations are based upon its consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements
requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses,
and related disclosure of contingent liabilities. On an on-going basis, management evaluates past judgments and estimates, including
those related to bad debts, inventories, accrued liabilities, derivative liabilities and contingencies. Management bases its estimates
on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results
of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent
from other sources. Actual results may differ from these estimates under different assumptions or conditions. The accounting policies
and related risks described in the Company’s annual report on Form 10-K as filed with the Securities and Exchange Commission
on September 14, 2015 are those that depend most heavily on these judgments and estimates. As of March 31, 2016, there had been
no material changes to any of the critical accounting policies contained therein.
IsoRay, Inc. is a brachytherapy device
manufacturer with FDA clearance and CE marking for a single medical device that can be delivered to the physician in multiple
configurations as prescribed for the treatment of cancers in multiple body sites. The Company manufactures and sells this product
as the Proxcelan® Cesium-131 brachytherapy seed. Each brachytherapy seed order is manufactured to the physician’s specifications
for a named patient on a specific treatment date.
The Proxcelan® brachytherapy seed
utilizes Cesium-131, with a 9.7 day half-life, as its radiation source. The Company believes that it is the unique combination
of the short half-life and the energy of the Cesium-131 isotope that are yielding the beneficial treatment results that have been
published in peer reviewed journal articles and presented in various forms at conferences and tradeshows.
The Company has distribution agreements
outside of the United States through its subsidiary IsoRay International LLC. These distributors are responsible for obtaining
regulatory clearance to sell the Company’s products in their territories, with the support of the Company. As of the date
of this Report, the Company had distributors in Australia and New Zealand, and the Russian Federation, with revenues from all
distributors combined approximating $17,000 in the nine months ended March 31, 2016.
Management is encouraged by the overall
growth in revenue from sales of the Company’s Proxcelan® brachytherapy seeds during the prior four consecutive fiscal
quarters. The growth from the sales of brachytherapy seeds during the prior four fiscal quarters compared to the same quarters
in the prior fiscal year has averaged 20% with minimum revenue growth of 4% and maximum revenue growth of 45%.
Management is encouraged by the growth
trend in our core business of treating prostate cancer, with three of the past four fiscal quarters experiencing increases over
the same quarter in the prior fiscal year. During the prior four fiscal quarters, the prostate segment growth has averaged 18%
growth with a maximum revenue decrease of 1% and maximum revenue growth of 44%. The Company has a very small share of the overall
prostate brachytherapy market; as such management believes there is significant opportunity for expansion.
Net revenue from other treatments utilizing
the Proxcelan® brachytherapy seeds during the prior four fiscal quarters has averaged revenue growth of 36% when compared
to the same quarter in the prior fiscal year with minimum revenue growth of 18% and maximum revenue growth of 49% during that
period. Growth in revenue from treating brain cancer during the preceding four consecutive fiscal quarters compared to the same
quarters during the prior fiscal year has averaged 32% with minimum revenue growth of 9% and maximum revenue growth of 139%. Although
these treatments are still heavily dependent on the purchasing behaviors of key physicians which has created volatility in revenue,
management is encouraged by the upward trend in revenues.
Management believes current revenue growth
is the result of additional peer-reviewed articles that share treatment experiences. These publications are building awareness
in, and communicating the treatment advantages of, our products. Management also believes that as the impact of the Affordable
Care Act’s cost containment measures continue to be felt, the payors will have to react by modifying methods of reimbursement
to encourage facilities to utilize other modalities that offer equal or better results with a lower total cost of treatment. Management
expects cost containment decisions to be favorable to seed brachytherapy as external beam radiation makes up the majority of the
overall treatment market for prostate cancer and a significant portion of the market in other body sites in which the Company
competes for business.
When brachytherapy seeds are implanted
during a surgical procedure for brain cancer, lung cancer and certain other non-prostate cancers, under Medicare, the brachytherapy
seeds are not separately reimbursed when surgery is performed and the patient is admitted to the hospital. Management is developing
a strategy to address this gap in the payment system in consultation with consultants experienced in healthcare reimbursement,
representatives of the facilities utilizing our products and the final payors for our products. External beam radiation treatments
for these same cancers are reimbursed in addition to the cost of surgery as they are administered as separate treatments following
surgery with a significantly greater cost of treatment, increased duration of treatment and decreased convenience for the patient.
While the cost of external beam radiation is significantly greater than the cost of brachytherapy procedures, the separate reimbursement
for external beam radiation treatments results in the hospital receiving a payment in addition to payment for the surgical procedure
itself. With brachytherapy performed concurrent with the surgery, the hospital receives the same reimbursement for the surgical
procedure whether seeds are implanted or not, resulting in brachytherapy treatment being an additional cost for the hospital.
As of April 12 , 2016, management had
provided a notice of termination of all agreements related to the patent license, supply, manufacture and distribution of its
GliaSite® Radiation Therapy System (GliaSite® RTS). The GliaSite® RTS had only resulted in marginal sales but it
was the first delivery system available to the Company to deliver brachytherapy radiation in the treatment of brain cancer. Management
believes that application of the Cesium-131 brachytherapy seed in a braided suture and using other delivery systems which are
being developed by others utilizing the Company's Cesium-131 brachytherapy seed are showing greater success and acceptance in
the treatment of brain cancer.
Results of Operations
Three and nine months ended March 31,
2016 and 2015.
|
|
Three months ended March 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
2016 - 2015
|
|
|
|
Amount
|
|
|
% (a)
|
|
|
Amount
|
|
|
% (a)
|
|
|
% Change
|
|
Product sales, net
|
|
$
|
1,198,701
|
|
|
|
100
|
|
|
$
|
1,158,109
|
|
|
|
100
|
|
|
|
4
|
|
Cost of product sales
|
|
|
1,132,397
|
|
|
|
94
|
|
|
|
1,105,912
|
|
|
|
95
|
|
|
|
3
|
|
Gross profit / (loss)
|
|
|
66,304
|
|
|
|
6
|
|
|
|
55,197
|
|
|
|
5
|
|
|
|
20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development expenses
|
|
|
183,187
|
|
|
|
15
|
|
|
|
141,399
|
|
|
|
12
|
|
|
|
30
|
|
Sales and marketing expenses
|
|
|
300,995
|
|
|
|
25
|
|
|
|
374,876
|
|
|
|
32
|
|
|
|
(20
|
)
|
General and administrative expenses
|
|
|
909,144
|
|
|
|
76
|
|
|
|
589,934
|
|
|
|
51
|
|
|
|
54
|
|
Net loss
|
|
$
|
(1,195,297
|
)
|
|
|
(100
|
)
|
|
$
|
(953,553
|
)
|
|
|
(83
|
)
|
|
|
25
|
|
|
|
Nine months ended March 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
2016 - 2015
|
|
|
|
Amount
|
|
|
% (a)
|
|
|
Amount
|
|
|
% (a)
|
|
|
% Change
|
|
Product sales, net
|
|
$
|
3,649,031
|
|
|
|
100
|
|
|
$
|
3,265,795
|
|
|
|
100
|
|
|
|
12
|
|
Cost of product sales
|
|
|
3,472,357
|
|
|
|
95
|
|
|
|
3,303,364
|
|
|
|
101
|
|
|
|
5
|
|
Gross profit / (loss)
|
|
|
176,674
|
|
|
|
5
|
|
|
|
(37,569
|
)
|
|
|
(1
|
)
|
|
|
570
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development expenses
|
|
|
385,325
|
|
|
|
11
|
|
|
|
458,636
|
|
|
|
14
|
|
|
|
(16
|
)
|
Sales and marketing expenses
|
|
|
833,887
|
|
|
|
23
|
|
|
|
1,032,402
|
|
|
|
32
|
|
|
|
(19
|
)
|
General and administrative expenses
|
|
|
2,785,539
|
|
|
|
76
|
|
|
|
1,703,825
|
|
|
|
51
|
|
|
|
63
|
|
Net loss
|
|
$
|
(3,525,995
|
)
|
|
|
(97
|
)
|
|
$
|
(2,646,369
|
)
|
|
|
(81
|
)
|
|
|
(33
|
)
|
(a) Expressed as a percentage of product sales, net
Revenues.
Product sales consist primarily of Proxcelan®
Cesium-131 brachytherapy seeds manufactured and configured to the physician’s specification. Also included in product sales
are GliaSite® RTS device sales.
Revenue from product sales for the three
months ended March 31, 2016 increased approximately $41,000 or 4% when compared to the three months ended March 31, 2015. Increases
in revenue from product sales were due to an increase in the number of brachytherapy seed treatments. No revenue was derived from
GliaSite® RTS during the three months ended March 31, 2016. During the three months ended March 31, 2016 and 2015, nearly
100% of product sales came from brachytherapy seed treatments.
Revenue from product sales for the nine
months ended March 31, 2016 increased approximately $383,000 or 12% when compared to the nine months ended March 31, 2015. Increases
in revenue from product sales were primarily related to an increase in the number of brachytherapy seed treatments. GliaSite®
RTS revenues for the nine months ended March 31, 2016 were approximately $17,000. During the nine months ended March 31, 2016,
nearly 100% of product sales came from brachytherapy seed treatments compared with 98% during the nine months ended March 31,
2015.
Prostate Brachytherapy.
During the three months ended
March 31, 2016 and 2015, respectively, prostate brachytherapy was 87% and 86% of total revenues. During the nine months ended
March 31, 2016 and 2015, respectively, prostate brachytherapy was 88% and 87% of total revenues. Management believes growth
in the Company’s prostate brachytherapy revenue is the result of physicians, payors, and patients increasingly
considering overall treatment cost in combination with treatment outcomes and quality of life. Management anticipates that
additions in sales and marketing during the three months ended March 31, 2016 will enhance growth in this segment including
the addition of a Vice-President of Sales and Marketing with over 15 years of experience in the prostate cancer treatment
market. Management also believes the data that has been published in peer-reviewed journal articles on treatment outcomes
achieved with low-dose-rate (LDR) prostate brachytherapy with the Company’s Proxcelan® Cesium-131 brachytherapy
seeds, indicating it is more cost effective, has faster resolution of urinary side effects and a reduced impact on the
healthy tissue surrounding the tumor, when compared to competing treatments such as high-dose-rate brachytherapy and
intensity-modulated radiation therapy, is a driver of the recent growth in the Company’s prostate brachytherapy
revenue. There is no assurance this trend will continue.
Other Brachytherapy.
The strategy implemented by management
in diversifying the number of body sites being actively treated with the Proxcelan® Cesium-131 brachytherapy seed has continued
to provide an additional source of revenue. While individually these treatment sites do not represent a significant contribution
to revenue, the sites as a group increased their revenue contribution by 18% during the three months ended March 31, 2016 when
compared to the three months ended March 31, 2015. The largest revenue contributions in this classification came from brain cancer
and gynecological cancer treatments. During the three months ended March 31, 2016 and 2015, respectively, other brachytherapy
represented approximately $139,000 or 12% of total revenue and approximately $118,000 or 11% of total revenue.
These treatment sites as a group increased
their revenue contribution by 30% during the nine months ended March 31, 2016 when compared to the nine months ended March 31,
2015. The largest revenue contributions in this classification came from brain cancer and gynecological cancer treatments. During
the nine months ended March 31, 2016 and 2015, respectively, other brachytherapy represented approximately $285,000 or 12% of
total revenue and approximately $219,000 or 10% of total revenue.
These other brachytherapy treatments continue
to be subject to the influence of a small pool of innovative physicians who are the early adopters of the technology who also
tend to be faculty at teaching hospitals training the next generation of physicians. This causes the revenue created by these
types of treatment applications to be more volatile and vary significantly from quarter to quarter.
Cost of product sales.
Cost of product sales consists primarily
of the costs of manufacturing and distributing the Company’s products.
Cost of product sales for the three months
ended March 31, 2016 increased approximately $30,000 or 3% when compared to the three months ended March 31, 2015.
Cost of product sales for the nine months
ended March 31, 2016 increased approximately $169,000 or 5% when compared to the nine months ended March 31, 2015.
Included in the increase in cost of product
sales for the three and nine months ended March 31, 2016 were increased payroll, benefits and share-based compensation which were
partially offset by a decrease in medical device tax. In addition, for the nine months ended March 31, 2016 material and third-party
seed loading costs increased but were partially offset by decreased occupancy and depreciation expenses.
The Company purchases an excess supply
of isotope to meet not only known customer orders but also enough to fill anticipated orders which may or may not materialize.
Excess isotope is utilized in the production of upcoming orders where possible considering the decay rates of Cesuim-131. Loss
of isotope to decay is also included as a cost of production.
Gross profit / (loss).
Gross profit for the three months ended
March 31, 2016 improved by approximately $11,000 or 20% when compared to the gross profit for the three months ended March 31,
2015.
Gross profit for the nine months ended
March 31, 2016 improved by approximately $214,000 or 570% when compared to the gross loss for the nine months ended March 31,
2015.
Gross profit improvements for the three
and nine months were due primarily to increased product sales that required only minimal increases in labor costs, raw material
consumption and utilized isotope that was already available at current purchasing levels to support growth and other fluctuations
in demand.
Research and development.
Research and development consists primarily
of the costs related to employee and third party research and development activities.
Research and development costs for the
three months ended March 31, 2016 increased approximately $42,000 or 30% when compared to the three months ended March 31, 2015.
Research and development costs for the
nine months ended March 31, 2016 increased approximately $73,000 or 16% when compared to the nine months ended March 31, 2015.
Included in research and development costs
for the three and nine months ended March 31, 2016 were increases in legal expenses related to intellectual property and increased
payroll related to the short-term appointment of the Company Vice-President of Research and Development as interim Chief Executive
Officer. In addition, for the nine months ended March 31, 2016 cost increases were partially offset by an adjustment to protocol
costs.
Sales and marketing expenses.
Sales and marketing expenses consists
primarily of the costs related to the internal and external activities of the Company’s sales, marketing and customer service.
Sales and marketing costs for the three
months ended March 31, 2016 decreased approximately $74,000 or 20% when compared to the three months ended March 31, 2015.
Sales and marketing costs for the nine
months ended March 31, 2016 decreased approximately $199,000 or 19% when compared to the nine months ended March 31, 2015.
Included in sales and marketing
costs for the three and nine months ended March 31, 2016 were decreases in payroll, benefits and travel expenses related to
unfilled positions. The Company filled a senior marketing position in February 2016 and the Vice President of Sales and
Marketing position in March 2016. The open territory manager position remained vacant as of March 31, 2016 but was filled in
April 2016.
General
and administrative expenses.
General and administrative expenses consist
primarily of the costs related to the executive, quality assurance/regulatory affairs departments, finance, and information technology
of the Company.
General and administrative costs for the
three months ended March 31, 2016 increased approximately $319,000 or 54% when compared to the three months ended March 31, 2015.
General and administrative costs for the
nine months ended March 31, 2016 increased approximately $1,082,000 or 63% when compared to the nine months ended March 31, 2015.
Included in general and administrative
costs for the three months ended March 31, 2016 were approximately $60,000 in increased legal expenses related to the retirement
of the Company CEO, the appointment of an interim CEO and the hiring of a new CEO as well as payroll and benefit expenses related
to the retirement of the Company CEO and the hiring of a new CEO; approximately $134,000 in option-based compensation for the
new CEO; and approximately $79,000 in costs associated with discontinuing the GliaSite
®
RTS product.
In addition, for the nine months ended
March 31, 2016, cost increases included approximately $234,000 in legal fees related to the class action shareholder suit; approximately
$300,000 in severance costs related to the retirement of the former CEO; approximately $51,000 in occupancy expense due to a change
in allocation of costs; $27,000 in information technology upgrades including computer hardware, computer software and office supplies
that are below the capitalization threshold; approximately $26,000 in audit and other services from British Standards Institute,
the notified body for the Company related to the quality system; and approximately $21,000 in public company expenses.
Operating
loss.
Operating loss for the three months ended
March 31, 2016 increased approximately $276,000 or 26% when compared to the operating loss for the three months ended March 31,
2015.
Operating loss for the nine months ended
March 31, 2016 increased by approximately $596,000 or 18% when compared to the operating loss for the nine months ended March
31, 2015.
Operating losses for the three and nine
months increased primarily due to general and administrative cost increases as previously discussed.
Interest income.
Interest income for the three months ended
March 31, 2016 decreased approximately $15,000 or 22% when compared to the interest income for the three months ended March 31,
2015.
Interest income for the nine months ended
March 31, 2016 decreased by approximately $47,000 or 22% when compared to the interest income for the nine months ended March
31, 2015.
Interest income decreases for the three
and nine months ending March 31, 2016 were due primarily the excess cash available to invest in laddered CDs in the Certificate
of Deposit Account Registry Service® (CDARS) and in amounts that are fully insured by the Federal Deposit Insurance Corporation
(FDIC).
Change in fair value of warrant derivative
liability.
The warrant derivative liability requires
periodic evaluation for changes in fair value. As required as of March 31, 2016 and March 31, 2015, the Company evaluated the
fair value of the warrant derivative liability using the Black-Scholes option pricing model and applied updated inputs as of those
dates. The resulting change in fair value was recorded as of March 31, 2016 and March 31, 2015.
Liquidity
and capital resources
. The Company assesses its liquidity in terms of its ability to generate cash to fund its operating,
investing and financing activities. The Company has historically financed its operations through selling equity to investors.
During the nine months ended March 31, 2016 and March 31, 2015, the Company used existing cash reserves to fund its operations
and capital expenditures.
Cash flows from operating activities
Net loss was approximately $3.53 million
compared to $2.65 million and net cash used by operating activities was $2.68 million and $2.89 million, for the nine months ended
March 31, 2016 and 2015, respectively. The decrease in net cash used by operating activities was due to several factors including
unfilled positions within the Company and timing of paying operating expenses. Other factors are as follows:
|
·
|
Decrease
in cash used by accounts receivable of approximately $165,000, the result of the increased
collection effectiveness;
|
|
·
|
Increase
in cash used by inventory of approximately $126,000, the result of purchases of inventory,
consisting of raw materials produced to the specifications of the Company, in quantities
to obtain best pricing, pre-loading materials and work in process;
|
|
·
|
Decrease
in cash used by inventory, a significant portion of the change is the result of a $72,000
write-off of GliaSite
®
RTS inventory; and
|
|
·
|
Decrease
in cash used by accounts payable and accrued expenses of approximately $234,000, the
result of the timing of paying operating expenses and the accrual of severance cost of
approximately $300,000 associated with the retirement of the CEO.
|
Cash flows from investing activities
Net cash provided by investing activities
was $3.10 million as compared to net cash used by investing activities of $3.92 million for the nine months ended March 31, 2016
and 2015, respectively. Investing activities primarily consist of transactions related to the purchase and subsequent maturity
of certificates of deposit totaling approximately $3.4 million, with transactional categories showing separately on the statement
of cash flows. Other factors are as follows:
|
·
|
Increase
in cash used in purchases of equipment of approximately $91,000; and
|
|
·
|
Increase
in cash used in purchase of land of approximately $169,000.
|
Cash flows from financing activities
Net cash provided by financing activities
was $40,000 and $205,000 for the nine months ended March 31, 2016 and 2015, respectively. The decrease was primarily due to fewer
warrants and stock option exercises.
Projected Fiscal Year 2016 Liquidity
and Capital Resources
At March 31, 2016, the Company held cash
and cash equivalents of $5,694,339, CDARS of $5,910,756 million that mature in the current operating cycle and CDARS of $5,191,960
million that mature within the next seventeen months.
|
|
Amount
|
|
Cash and cash equivalents
|
|
$
|
5,694,339
|
|
Certificates of deposit maturing in less than 90 days
|
|
|
5,910,756
|
|
Certificates of deposit maturing greater than one year and less than two years
|
|
|
5,191,960
|
|
Cash, cash equivalents and certificates of deposit total
|
|
$
|
16,797,055
|
|
The Company had approximately $4.50 million
of cash and cash equivalents, $6.40 million of certificates of deposit and $5.19 million of certificates of deposit, non-current
as of May 6, 2016. The short-term investments mature in June 2016. At the time of maturity, Company management will assess the
cash requirements of the Company and reinvest excess cash as it deems appropriate.
The Company’s approximate monthly
required cash operating expenditures were $298,000 and $321,000 during the nine months ended March 31, 2016 and 2015, respectively,
which represents a 7% decrease. As we have filled several open positions both in senior management and sales and marketing and
have engaged other third-party experts in marketing and medical reimbursement, our monthly cash operating expenses are expected
to show a long term increase from historical levels.
Management forecasts that fiscal year
2016 cash consumed in production operations will be similar to the prior fiscal year. Company management is early in the design
process of the future facility with the goal of constructing a facility that will have depreciation cost that is less than the
monthly rental of the current facility. Management is reviewing all aspects of production operations, research and development,
sales and marketing, and general and administrative functions to evaluate the most efficient deployment of capital to ensure that
the appropriate materials, systems, and personnel are available to support and drive sales.
Capital expenditures
|
·
|
The
Company has not required significant capital equipment investment despite many of the
significant items of manufacturing equipment having reached or reaching their depreciable
lives this fiscal year. Management believes less than $200,000 will be required to be
invested in manufacturing or other capital equipment related to Company operations during
fiscal year 2016, but there is no assurance that unanticipated needs for capital equipment
or a yet to be determined capital project may not arise; and
|
|
·
|
The
Company placed $25,000 in escrow on raw land as disclosed in financial statement footnote
8 Commitments and Contingencies under the section “Property Transaction between
Medical and The Port of Benton”. On February 5, 2016, an additional amount of $144,000
was paid to close on the real property. Future cash requirements related to the construction
of and moving into the new facility are difficult to project until designs, architectural
drawings and contractor estimates of construction costs have been completed. Prior to
construction, management has contracted to spend approximately $165,000 to receive a
final design, architectural drawings and an estimate of cost to construct the new facility.
If the covenants associated with the raw land are not fully complied with in a timely
manner, the Company would be required to pay the difference between the purchase price
and the appraised value of the property, which management has estimated to be $256,000
as of the date of this Report, but this difference is subject to change with changes
in the appraised value.
|
Management intends to continue its existing
protocol studies and to begin new protocol studies on brain and lung cancer treatment using Cesium-131. Management believes that
approximately $150,000 in expense will be incurred during fiscal year 2016 in protocol expenses relating to lung cancer, inter-cranial
cancer and both dual therapy and monotherapy prostate protocols, but there is no assurance that unanticipated needs for additional
protocols in support of the development of new applications of our existing products may not arise.
Based on the foregoing assumptions, management
believes that the cash and cash equivalents of approximately $4.50 million, short-term investments of $6.40 million and investments
– other of $5.19 million at May 6, 2016 will be sufficient to meet our anticipated cash needs assuming both revenue and
expenses remain at current levels for the next three years.
Management plans to attempt to attain
breakeven and generate additional cash flows by increasing revenues from both new and existing customers in the prostate market
(through our direct sales channels and through our distributors), and expanding sales in other market applications which include
brain, gynecologic, head and neck, and lung implants, while maintaining the Company's focus on cost control. However, there can
be no assurance that the Company will attain profitability or that the Company will be able to attain increases in its revenue.
Total product sales have not shown the increases necessary to breakeven during the past seven fiscal years ended June 30, 2015
or for the nine months ended March 31, 2016.
For the nine months ended March 31, 2016,
revenue from other treatment modalities with brachytherapy seeds increased 30% when compared to the nine months ended March 31,
2015. These newer brachytherapy product sales (including brain, gynecological, head and neck, lung and those reported as other)
remain in the early stages of adoption and application in the clinical setting and their purchasing patterns are subject to the
influence of a few key physicians who can significantly influence revenue from quarter to quarter.
There was no material change in the use
of proceeds from our public offering as described in our final prospectus supplement filed with the SEC pursuant to Rule 424(b)
on March 24, 2014. Through March 31, 2016, the Company had used the net proceeds raised through the March 2014 offering as described
in the table below and held the remaining net proceeds in cash and cash equivalents and certificates of deposit. No offering expenses
were paid directly or indirectly to any of our directors or officers (or their associates) or persons owning ten percent or more
of any class of our equity securities or to any other affiliates.
Offering description
|
|
Period
|
|
Net proceeds
|
|
|
Remaining net proceeds
|
|
Registered direct offering
|
|
March 2014
|
|
$
|
13,814,742
|
|
|
$
|
13,814,742
|
|
The Company expects to finance its future
cash needs through sales of equity, possible strategic collaborations, debt financing or through other sources that may be dilutive
to existing shareholders Management anticipates that if it raises additional financing that it will be at a discount to the market
price and it will be dilutive to shareholders.
Other Commitments and Contingencies
The Company presented its other commitments
and contingencies in our Annual Report on Form 10-K for the fiscal year ended June 30, 2015. There have been no material changes
outside of the ordinary course of business in those obligations during the current quarter.
Off-Balance Sheet Arrangements
The Company has no off-balance sheet arrangements.
Critical Accounting Policies and Estimates
The discussion and analysis of our financial
condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance
with accounting principles generally accepted in the United States of America (GAAP). The preparation of these consolidated financial
statements requires management to make estimates and judgments that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, as well as revenue and
expenses during the reporting periods. The Company evaluates its estimates and judgments on an ongoing basis. The Company bases
its estimates on historical experience and on various other factors the Company believes are reasonable under the circumstances,
the results of which form the basis for making judgments about the carrying value of assets and liabilities. Actual results could
therefore differ materially from those estimates if actual conditions differ from our assumptions.
During the nine months ended March 31,
2016, there have been no changes to the critical accounting policies and estimates, as discussed in Part II, Item 7 of our Form
10-K for the year ended June 30, 2015.