INTERNATIONAL ISOTOPES INC

The SBA Loan contains customary events of default relating to, among other things, payment defaults and breaches of representations and warranties. Subject to certain conditions, the SBA Loan may be forgiven in whole or in part by applying for forgiveness pursuant to the CARES Act and the PPP. The amount of loan proceeds eligible for forgiveness is based on a formula based on a number of factors, including the amount of loan proceeds used by the Company during the eight-week period after the loan origination for certain purposes, including payroll costs, interest on certain mortgage obligations, rent payments on certain leases, and certain qualified utility payments, provided that, among other things, at least 75% of the loan amount is used for eligible payroll costs, the employer maintaining or rehiring employees and maintaining salaries at certain level. In accordance with the requirements of the CARES Act and the PPP, the Company intends to use the proceeds from the SBA Loan primarily for payroll costs. No assurance can be given that the Company will be granted forgiveness of the SBA Loan in whole or in part.

As described under Debt above, on April 23, 2020, the Company, through its wholly-owned subsidiary entered into a Loan Agreement and Promissory Note (collectively the “SBA Loan”) with KeyBank National Association pursuant to the Paycheck Protection Program (the “PPP”) under the recently enacted Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) administered by the U.S. Small Business Administration (the “SBA”). The Company received total proceeds of $495,500 from the SBA Loan. The SBA Loan is scheduled to mature on April 22, 2022 and has a 1.00% interest rate and is subject to the terms and conditions applicable to loans administered by the SBA under the CARES Act. The SBA Loan may be prepaid at any time prior to maturity with no prepayment penalties.

As a result of the COVID-19 pandemic, we experienced a reduction of sales within our nuclear medicine calibration standards segment during the first quarter of 2020.  There was no discernable impact from COVID-19 to our other business segments during the period.  Revenue from nuclear medicine products for the three months ended March 31, 2020, decreased approximately 5% compared to the same period in 2019.  The decrease in sales for the period ended March 31, 2020, for our nuclear medicine calibration standards segment was the result of the closure of many imaging clinics and suspension of elective or non-essential imaging procedures.  We anticipate that our nuclear medicine standards segment through RadQual will recover from the impact of the COVID-19 pandemic as the year progresses.  We believe many procedures have been delayed, not canceled, and that there will be a pent-up demand for these products.  The volume of order flow for nuclear medicine calibration standards has begun to increase from late March levels, and we are hopeful orders will trend back towards normal levels as the year unfolds. 

To-date we have not furloughed or terminated any employees as a result of the financial impact of COVID-19.  The Company has only seen a limited impact in our raw material supply chain related to the COVID-19, primarily some plastics which have been in strong demand for certain types of PPE.  Alternative sources of raw materials have been obtained without any interruption to production.  Travel restrictions related to COVID-19 have also delayed vendor installations of some specialized equipment in our new contract manufacturing facility, but we are still targeting the new facility to be up and running around mid-July.  With the heightened concern about corporate liquidity during the COVID-19 pandemic, the Company believes that it has adequate cash to support continuing operations.

Other income was $23,818 for the three months ended March 31, 2020, as compared to $24,632 for the same period in 2019. This is a decrease of $814, or approximately 3%. Interest expense for the three months ended March 31, 2020 was $194,880, compared to $114,077 for the same period in 2019. This is an increase of $80,803, or approximately 71%. Interest expense includes dividends accrued on our Series C Redeemable Convertible Preferred Stock (Series C Preferred Stock). As discussed below, we issued Series C Preferred Stock in February 2017 and May 2017. For the three months ended March 31, 2020, we accrued dividends payable of $63,195, which have been recorded as interest expense. Additionally, non-cash interest expense in the amount of $32,084 was recorded for this same period for the issuance of warrants related to the preferred stock issuances. As discussed below, in December 2019, we entered into a promissory note agreement with our Chief Executive Officer, Chairman of the Board, former Chairman of the Board, and one of our major shareholders (the 2019 Promissory Note). Interest recorded for the three months ended March 31, 2020 for the 2019 Promissory Note was $8,628 whereas there was no similar interest expense for the same period in 2019. Additionally, non-cash interest expense in the amount of $60,346 for the issuance of warrants in conjunction with the 2019 Promissory Note was recorded for the three months ended March 31, 2020. See Note 7 “Debt” to our unaudited consolidated financial statements in this Quarterly Report for additional information about our indebtedness and the associated interest expense.