INIS 10-Q Quarter ended June 30, 2025

( 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 International Isotopes Idaho Inc., a Texas corporation; International Isotopes Fluorine Products, Inc., an Idaho corporation; International Isotopes Transportation Services, Inc., an Idaho corporation; RadQual, LLC, a limited liability company (RadQual); RadVent, LLC, a limited liability company; Radnostix, LLC, a limited liability company; and TI Services, LLC, a limited liability company (TI Services). RadQual is a global supplier of molecular imaging quality control and calibration devices, and is based at INIS headquarters in Idaho Falls, Idaho. TI Services is headquartered in Boardman, Ohio and distributes products for nuclear medicine, nuclear cardiology, and Positron Emission Tomography (PET) imaging. INIS, and its wholly-owned subsidiaries are collectively referred to herein as the “Company,” “we,” “our” or “us.”

( 2 )       Current Developments and Liquidity

Business Condition – Since inception, the Company has incurred substantial losses. During the six months ended June 30, 2025 , the Company reported a net loss of $ 273,479 and net cash provided by operating activities of $ 310,446 . During the six months ended June 30, 2024 , the Company reported net loss of $ 387,496 and net cash provided by operating activities of $ 288,597 .

During the three and six months ended June 30, 2025 , the Company continued its focus on its strongest long-standing core business segments which consist of its Theranostics Products (previously called Radiochemical Products), Cobalt Products, and Nuclear Medicine Standards, and in particular, the pursuit of new business opportunities within those segments. Additionally, the Company has begun to focus on the start-up of its Medical Device segment which includes assets purchased from AMICI, Inc. (AMICI) in 2023 and investing into an EasyFill Automated Iodine Capsule System.

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 ) year operating license and is the first commercial license of this type issued in the United States. On February 8, 2024, the Company entered into a definitive agreement to sell all of its assets related to the Fluorine Products segment and the Planned Uranium De-Conversion Facility, including the Lea County land. The definitive agreement provides that the maximum date for closing is March 31, 2026 ( the "Outside Date"), subject to further extension pursuant to the terms of the agreement. In July 2025, the Buyer requested an extension of the Outside Date, which the Company determined was not in the best interests of the Company, and therefore, the Outside Date remains March 31, 2026. Closing is contingent on various conditions being met, including the Buyer obtaining financing plus approvals and agreements with the NRC and other third parties. Proceeds from this sale if it closes by the Outside Date would be $ 12.5 million in total.

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

For the three and six months ended June 30, 2025 , the Company had 26,662,500 stock options outstanding, 3,000,000 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.

For the three and six months ended June 30, 2024 , the Company had 27,862,500 stock options outstanding, 5,250,000 restricted stock units 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 table below shows the calculation of diluted shares:

The table below summarizes common stock equivalents outstanding at June 30, 2025 and June 30, 2024 :

( 4 )       Investment and Business Consolidation

In June 2023, the Company acquired several medical devices with related assets and intellectual property rights from AMICI and has been working on FDA 510k transfers, and start-up of manufacturing. In January 2025, the parties amended the Asset Purchase Agreement whereby the Company received additional product rights and related assets to make up for a shortfall by AMICI in deliverable assets originally contemplated in the Asset Purchase Agreement.

On June 3, 2024, the Company entered into a Strategic Development and Distribution Agreement with Alpha Nuclide Inc for the rights to manufacture and distribute the Company’s Theranostics Products and Nuclear Medicine Products in mainland China as part of a 50/50 joint Venture between the Company and Alpha Nuclides. The parties will begin with the distribution of the Company’s Nuclear Medicine Products as part of phase I of the strategic alliance, with further planned milestones for the establishment of a joint venture to register the Company’s Theranostics & Nuclear Medicine Products with the CFDA for local manufacturing and distribution. The parties envision commercializing INIS's radiopharmaceutical Iodine- 131, radiochemical API, and theranostics API I- 131 for 3 ^rd party therapeutic applications in China. The parties intend to manufacture and distribute the products from Alpha Nuclide's Jiaxing facility, which Alpha Nuclides is responsible for establishing. The parties also intend to enter into a supply agreement for raw material isotopes to be supplied from Alpha Nuclide to the Company to be used in the Company’s manufacturing process at the Company’s Idaho Falls, Idaho facility.

On August 6, 2024, the Company entered into a joint venture agreement with Phantech LLC to form PhanQual. PhanQual will leverage INIS’s and Phantech’s technologies, facilities, experience, and global network to design, manufacture, and distribute sealed sources, including adapting Phantech's patented and cutting-edge fillable calibration source technology, into sealed source calibration devices to better serve the R&D and theranostics community. Additionally, RadQual will globally distribute Phantech’s entire portfolio of fillable sources through RadQual’s global network of distributors. PhanQual’s revenues and operations will operate through RadQual and will be included in our Nuclear Medicine Standards segment.

( 5 )       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 six months ended June 30, 2025 and 2024 , the Company issued 427,305 and 143,098 shares of common stock, respectively, to employees under the employee stock purchase plan for proceeds of $ 10,896 and $ 4,865 , respectively. As of June 30, 2025 , 1,682,924 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 June 30, 2025 , there were 18,875,685 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.

Option awards outstanding as of June 30, 2025 , and changes during the six months ended June 30, 2025 , were as follows:

The intrinsic value of outstanding and exercisable shares is based on the closing price of the Company’s common stock on the OTCQB of $ 0.05 per share on June 30, 2025 .

As of June 30, 2025 , there was $ 77,805 of unrecognized compensation expense related to stock options that will be recognized over a weighted-average period of 1.72 years.

Total stock-based compensation expense for the six months ended June 30, 2025 and 2024 was $ 65,797 and $ 84,400 , respectively.

During the six months ended June 30, 2025 , the Company granted an aggregate of 700,000 qualified stock options to eight of its employees. These options vest over a five -year period with the first vesting on the first anniversary of the date of grant, with an expiration at the ten -year anniversary for each grant. The exercise price for these granted options was between $ 0.04 and $ 0.06 per share. The options issued during the six months ended June 30, 2025 have a fair value of $ 23,101 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 3.95 % to 4.52 %, expected dividend yield rate of 0 %, expected volatility of 72.53 % to 85.29 % and an expected life between 5 and 7 years.

Restricted Stock Units outstanding as of June 30, 2025 , and changes during the six months ended June 30, 2025 , were as follows:

As of June 30, 2025 , there was $ 31,861 of unrecognized compensation expense related to Restricted Stock Units that will be recognized over a weighted-average period of 0.80 years.

Preferred Stock

At June 30, 2025 , there were 4,063 shares of the Series C Preferred Stock outstanding with a mandatory redemption date of February 28, 2027 at $ 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 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 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 six months ended June 30, 2025 and 2024 , dividends paid to holders of the Series C Preferred Stock totaled $ 243,780 and $ 243,030 respectively. 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 six months ended June 30, 2025 and 2024 , the Company issued an aggregate of 1,743,457 and 1,808,400 shares of common stock in lieu of dividend payments of $ 90,660 and $ 90,420 , respectively, with the remaining dividend payable settled in cash of $ 153,120 and $ 152,610 , respectively.

( 6 )        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 (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 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. In February 2024, the 2013 Promissory Note was modified to extend the maturity date to March 31, 2026, with all remaining terms unchanged. In August 2025, the 2013 Promissory Note was modified to extend the maturity date to March 31, 2028, with all remaining terms unchanged. At June 30, 2025 , accrued interest payable on the 2013 Promissory Note was $ 346,734 .

In April 2018, the Company borrowed $ 120,000 from its then 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. In June 2018, the 2018 Promissory Note was modified to extend the maturity date to March 31, 2019 with all other provisions remaining unchanged. In February 2019, the 2018 Promissory Note was modified to extend the maturity date to July 31, 2019 with all other provisions remaining unchanged. In July 2019, the 2018 Promissory Note was modified to extend the maturity date to January 31, 2020 with 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. In December 2023, the 2018 Promissory Note was modified to extend the maturity date to January 31, 2025, with all remaining terms unchanged. In February 2024, the 2018 Promissory Note was modified to extend the maturity date to March 31, 2026, with all remaining terms unchanged. In August 2025, the 2018 Promissory Note was modified to extend the maturity date to March 31, 2028, with all remaining terms unchanged. At June 30, 2025 , accrued interest on the 2018 Promissory Note totaled $ 51,770 .

In December 2019 and February 2020, the Company borrowed an aggregate of $ 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 % 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 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 per share (the Class O Warrants). The fair value of these Class O Warrants issued totaled $ 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 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. In February 2024, the 2019 Promissory Note was modified to extend the maturity date to March 31, 2026, with all remaining terms unchanged. In August 2025, the 2019 Promissory Note was modified to extend the maturity date to March 31, 2028, with all remaining terms unchanged. At June 30, 2025 , the accrued interest on the 2019 Promissory Note totaled $ 219,131 .

In June 2023, the Company executed an asset purchase agreement with AMICI for the purchase of medical devices and related assets and intellectual property rights. In connection with the asset purchase agreement, the Company entered a promissory note agreement for $ 427,100 with AMICI. According to the terms of the note, the Company is required to pay AMICI a minimum of $ 10,000 per month for a period of 45 months. The amount due is not subject to interest until the 25th month after the anniversary of the closing of the agreement. At June 30, 2025 , the balance of this note was $ 187,100 .

( 7 )       Commitments and Contingencies

Dependence on Third Parties

Sales to the Company’s top three customers for the six months ended June 30, 2025 were approximately 32 % of its total gross revenue. The Company is making efforts to reduce its dependency on a small number of customers by expanding both domestic and foreign. Approximately 18 % of the Company's total gross revenue was from sales from a single customer as part of our Theranostics Products segment.

The production of Cobalt- 60 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. From 2014 to 2024, the Company had a ten -year contract with the DOE for the irradiation of cobalt targets for the production of cobalt- 60. The Company was able to purchase cobalt targets as available for a fixed price per target and with an annual 5 % escalation in price. The contract term was October 1, 2014, through September 30, 2024. The DOE have informed the Company that they have secured additional feed stock and remain committed to production of cobalt- 60, and the Company continues to source cobalt- 60 from the DOE through amendments to the existing contract.

Sales of our most predominant Theranostics 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 Theranostics Products sales until material could be purchased from alternate suppliers including obtaining regulatory approval to use material from alternative suppliers if necessary. In the six -months ended June 30, 2025, we experienced a short supply interruption from our key raw material supplier. In the six -months ended June 30, 2025, the Company received regulatory approval for an additional supplier. The Company has identified other suppliers and continues to search for additional means to produce and procure certain critical isotopes.

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. Beginning in the six months ended June 30, 2024 , there was a global shortage of Cobalt- 57 isotopes, a key isotope for this business segment that resulted in significant lost sales. In the third quarter of 2024 our main supply of Cobalt- 57 was restored, and our global isotope supply chain has normalized. In six months ended June 30, 2025, a global outage of Gadolinium- 153 isotopes, a key isotope for this business segment, resulted in significant lost sales. While the Company continues to work with industry to restart supply of this key isotope, we are uncertain of the timeframe to restore supply.

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 the 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. At June 30, 2025 , the balance of this account was $ 1,462,280 .

As noted in Footnote 2 above, on February 8, 2024, the Company entered into a definitive agreement to sell all of its assets related to the Fluorine Products segment and the Planned Uranium De-Conversion Facility, including the Lea County land. The definitive agreement provides that the maximum date for closing is the Outside Date ( March 31, 2026), subject to further extension pursuant to the terms of the agreement. In July 2025, the buyer requested  an extension of the Outside Date, which the Company determined was not in the best interests of the Company, and therefore, the Outside Date remains March 31, 2026. Closing is contingent on various conditions being met, including the buyer obtaining financing plus approvals and agreements with the NRC and other third parties. Proceeds from this sale if it closes by Outside Date would be $ 12.5 million in total. The Company has not recorded the value of this property as an asset and will not do so until such time that material changes to or sufficient progress on the project has been made to meet the Company’s obligations under the agreements for permanent transfer of the title.

( 8 )      Revenue Recognition

Revenue from Product Sales

The Company’s revenue consists primarily of distribution of theranostics including sodium iodide I- 131 drug product, calibration and reference standards manufactured for use in the nuclear medicine industry, 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 has not taken place 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 six months ended June 30, 2025 , the Company reported current unearned revenue of $ 568,816 . For the period ended December 31, 2024 , the Company reported current unearned revenue of $ 513,317 . 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 June 30, 2025 , and December 31, 2024 , accounts receivable totaled $ 1,732,939 and $ 1,521,380 , respectively.  For the six months ended June 30, 2025 , the Company did not incur material impairment losses with respect to its receivables.

( 9 )      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.

In January 2025, the Company entered into a new operating lease agreement for a second facility across the street from its main headquarters. The initial term of the lease is five years, ending December 2029 and includes the option to extend the lease for two additional terms of five years each. The monthly lease rate increases annually by 3 % each year. The Company has the right of first refusal on this property that allows it to match any offer to purchase this property. The Company recorded an operating lease right-of-use asset and corresponding operating lease right-of-use liability of $ 830,720 for this lease based on a life of 15 years and incremental borrowing rate of 6.75 %.

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

( 10 )        Segment Information

The Company’s reportable segments are reported in a manner consistent with the way management evaluates the businesses. The results of operations are regularly reviewed by the Company's chief operating decision maker ("CODM"), the Chief Executive Officer. The Company identifies its reportable business segments based on differences in products and services. The accounting policies of the business segments are the same as those described in the summary of significant accounting policies. In order to evaluate each reportable segment's performance, the CODM uses income from operations as a measure of profit and loss. The CODM compares operational performance against management expectations when making decisions regarding allocation of operating and capital resources to each segment.

In 2025 , the Company has five reportable segments which include: Theranostics Products, Cobalt Products, Nuclear Medicine Standards, Medical Device Products, and Fluorine Products. Information regarding the operations and assets of these reportable business segments is contained in the following table: