Form 10-Q IsoRay, Inc. For: Mar 31

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May 15, 2015 4:19 PM EDT

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY Report PURSUANT TO Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended March 31, 2015

Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from __________ to ____________

Commission File No. 001-33407

ISORAY, INC.

(Exact name of registrant as specified in its charter)

Minnesota		41-1458152
(State or other jurisdiction of incorporation or		(I.R.S. Employer
organization)		Identification No.)

350 Hills St., Suite 106, Richland, Washington		99354
(Address of principal executive offices)		(Zip Code)

Registrant's telephone number, including area code: (509) 375-1202

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 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 ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ¨ Accelerated filer ¨ Non-accelerated filer ¨

Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ¨ No x

Number of shares outstanding of each of the issuer's classes of common equity as of the latest practicable date:

Class		Outstanding as of May 8, 2015
Common stock, $0.001 par value		54,907,185

ISORAY, INC.

Table of Contents

PART I	FINANCIAL INFORMATION

Item 1	Consolidated Unaudited Financial Statements

	Consolidated Balance Sheets	1

	Consolidated Statements of Operations (Unaudited)	2

	Consolidated Statements of Cash Flows (Unaudited)	3

	Notes to Unaudited Consolidated Financial Statements	4

Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	11

Item 3	Quantitative and Qualitative Disclosures About Market Risk	23

Item 4	Controls and Procedures	23

PART II	OTHER INFORMATION

Item 1A	Risk Factors	23

Item 5	Other Information	24

Item 6	Exhibits	24

Signatures		25

PART I – FINANCIAL INFORMATION

IsoRay, Inc. and Subsidiaries

Consolidated Balance Sheets

	(Unaudited) March 31, 2015			June 30, 2014
Assets

Current assets:
Cash and cash equivalents	$	1,077,526		$	7,680,073
Certificates of deposit (Note 3)		9,081,827			10,002,912
Accounts receivable, net of allowance for doubtful accounts of $30,000 and $38,607, respectively		1,038,473			913,049
Inventory		464,555			359,737
Other receivables		9,928			53,082
Prepaid expenses and other current assets		215,218			206,047

Total current assets		11,887,527			19,214,900

Fixed assets, net of accumulated depreciation		656,655			1,017,915
Certificates of deposit, non-current (Note 3)		10,145,978			5,401,398
Restricted cash		181,248			181,208
Inventory, non-current		469,758			469,758
Other assets, net of accumulated amortization		243,169			264,076

Total assets	$	23,584,335		$	26,549,255

Liabilities and Shareholders' Equity

Current liabilities:
Accounts payable and accrued expenses	$	439,657		$	574,855
Accrued protocol expense		118,464			80,433
Accrued radioactive waste disposal		118,123			141,592
Accrued payroll and related taxes		89,536			236,282
Accrued vacation		115,132			120,765

Total current liabilities		880,912			1,153,927

Warrant derivative liability		180,000			573,000
Asset retirement obligation		926,838			866,560

Total liabilities		1,987,750			2,593,487

Commitments and contingencies (Note 7)

Shareholders' equity:
Preferred stock, $0.001 par value; 7,001,671 shares authorized
Series A: 1,000,000 shares allocated; no shares issued and outstanding		-			-
Series B: 5,000,000 shares allocated; 59,065 shares issued and outstanding		59			59
Series C: 1,000,000 shares allocated; no shares issued and outstanding		-			-
Series D: 1,671 shares allocated, no shares issued and outstanding		-			-
Common stock, $.001 par value; 192,998,329 shares authorized; 54,883,845 and 54,701,708 shares issued and outstanding		54,884			54,702
Treasury stock, at cost, 13,200 shares		(8,390	)		(8,390	)
Additional paid-in capital		82,246,857			81,959,853
Accumulated deficit		(60,696,825	)		(58,050,456	)

Total shareholders' equity		21,596,585			23,955,768

Total liabilities and shareholders' equity	$	23,584,335		$	26,549,255

The accompanying notes are an integral part of these consolidated financial statements.

IsoRay, Inc. and Subsidiaries

Consolidated Statement of Operations

(Unaudited)

	Three months ended March 31,						Nine months ended March 31,
	2015			2014			2015			2014
Product sales, net		1,158,109			1,134,319			3,265,795			3,269,642
Cost of product sales		1,102,912			1,083,413			3,303,364			3,329,950

Gross profit / (loss)		55,197			50,906			(37,569	)		(60,308	)

Operating expenses:
Research and development expenses		141,399			153,611			458,636			470,631
Sales and marketing expenses		374,876			245,558			1,032,402			931,210
General and administrative expenses		589,934			640,732			1,703,825			1,805,732

Total operating expenses		1,106,209			1,039,901			3,194,863			3,207,573

Operating loss		(1,051,012	)		(988,995	)		(3,232,432	)		(3,267,881	)

Non-operating income (expense):
Interest income		68,954			556			214,009			1,391
Change in fair value of warrant derivative liability		28,605			(1,095,000	)		375,605			(1,014,000	)
Financing and interest expense		(100	)		-			(3,551	)		(827	)

Non-operating income (expense), net		97,459			(1,094,444	)		586,063			(1,013,436	)

Net loss		(953,553	)		(2,083,439	)		(2,646,369	)		(4,281,317	)
Preferred stock deemed dividends (Note 10)		-			-			-			(726,378	)
Preferred stock dividends		2,658			(2,658	)		(2,658	)		(7,974	)

Net loss applicable to common shareholders	$	(950,895	)	$	(2,086,097	)	$	(2,649,027	)	$	(5,015,669	)

Basic and diluted loss per share	$	(0.02	)	$	(0.05	)	$	(0.05	)	$	(0.13	)

Weighted average shares used in computing net loss per share:
Basic and diluted		54,883,551			42,506,077			54,878,297			38,852,980

The accompanying notes are an integral part of these consolidated financial statements.

IsoRay, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)

	Nine months ended March 31,
	2015			2014

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(2,646,369	)	$	(4,281,317	)
Adjustment to reconcile net loss to net cash used by operating activities:
Allowance for doubtful accounts		(8,607	)		18,779
Depreciation of fixed assets		439,223			517,548
Amortization of other assets		34,923			23,056
Change in fair value of warrant derivative liability		(375,605	)		1,014,000
Accretion of asset retirement obligation		60,278			55,109
Share-based compensation		64,360			65,217
Changes in operating activities and liabilities:
Accounts receivable, gross		(116,817	)		99,675
Inventory		(104,818	)		18,551
Other receivables		43,154			4,516
Prepaid expenses and other current assets		(9,171	)		(2,213	)
Accounts payable and accrued expenses		(135,198	)		177,195
Accrued protocol expense		38,031			49,752
Accrued radioactive waste disposal		(23,469	)		30,301
Accrued payroll and related tax		(146,746	)		(39,759	)
Accrued vacation		(5,633	)		10,393

Net cash used by operating activities		(2,892,464	)		(2,239,197	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of fixed assets		(77,963	)		(16,333	)
Additions to licenses and other assets		(14,016	)		(5,168	)
Change in restricted cash		(40	)		(45	)
Proceeds from the maturity of certificates of deposit		10,031,758			-
Purchases of certificates of deposit		(9,110,673	)		-
Purchases of certificates of deposit - non-current		(4,744,580	)		-

Net cash used by investing activities		(3,915,514	)		(21,546	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Preferred dividends paid		(10,632	)		(10,632	)
Proceeds from the sale of preferred stock, pursuant to underwritten offering, net		-			1,478,703
Proceeds from the sale of common stock, pursuant to underwritten offering, net		-			1,800,589
Proceeds from the sale of common stock, pursuant to registered direct offering, net		-			13,818,927
Proceeds from the sale of common stock, pursuant to the exercise of warrants		70,789			5,961,001
Proceeds from the sale of common stock, pursuant to the exercise of options		145,274			15,129

Net cash provided by financing activities		205,431			23,063,717

Net increase (decrease) in cash and cash equivalents		(6,602,547	)		20,802,974
Cash and cash equivalents, beginning of period		7,680,073			2,899,927

CASH AND CASH EQUIVALENTS, END OF PERIOD	$	1,077,526		$	23,702,901

Non-cash investing and financing activities:
Reclassification of warrant derivative liability to equity upon exercise	$	17,395		$	(440,000	)
Reclassification of convertible preferred stock to common stock upon conversion		-			(1,478,703	)

The accompanying notes are an integral part of these consolidated financial statements.

IsoRay, Inc.

Notes to the Unaudited Consolidated Financial Statements

For the three and nine months ended March 31, 2015 and 2014

Basis of Presentation

The accompanying consolidated financial statements are those of IsoRay, Inc., and its wholly-owned subsidiaries (IsoRay or the Company). All significant intercompany accounts and transactions have been eliminated in consolidation. Certain amounts in the prior-year financial statements have been reclassified to conform to the current year presentation.

In the opinion of management, the accompanying unaudited interim consolidated financial statements and notes to the interim consolidated financial statements contain all adjustments, consisting of normal recurring items, necessary to present fairly, in all material respects, the financial position of IsoRay, Inc. and its wholly-owned subsidiaries. These unaudited interim consolidated financial statements should be read in conjunction with our audited consolidated financial statements and related footnotes as set forth in the Company’s annual report filed on Form 10-K for the year ended June 30, 2014, as it may be amended from time to time.

The results of operations for the periods presented may not be indicative of those which may be expected for a full year. The unaudited consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States (GAAP) have been condensed or omitted pursuant to those rules and regulations, although we believe that the disclosures are adequate for the information not to be misleading.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements, the reported amounts of revenues and expenses during the reporting period and the disclosures of contingent liabilities. Accordingly, ultimate results could differ materially from those estimates.

New Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-09, "Revenue from Contracts with Customers" (ASU 2014-09), which supersedes the revenue recognition requirements in FASB Accounting Standards Codification (ASC) Topic 605, "Revenue Recognition". The guidance requires that an entity recognize revenue in a way that depicts the transfer of promised goods or services to customers in the amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods and services. The guidance will be effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period and is to be applied retrospectively, with early application not permitted. The Company is currently evaluating the new standard and its impact on the Company's consolidated financial statements.

In August 2014, the FASB issued ASU No. 2014-15—Presentation of Financial Statements—Going Concern. The guidance requires an entity’s management to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued (or within one year after the date that the financial statements are available to be issued when applicable). If conditions or events exist that raise substantial doubt about an entity’s ability to continue as a going concern, the guidance requires disclosure in the financial statements. The guidance will be effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. The Company is currently evaluating the new standard and its impact on the Company’s consolidated financial statements.

Certificates of Deposit

Remaining time	Under 90		91 days to		Six months to
to maturity	days		six months		1 year		1 to 3 years
Certificates of Deposit¹	$	5,563,126	$	3,518,701	$	-	$	10,145,978

¹ - Certificate of Deposit Account Registry Service (CDARS), which is a system method by which the Company may access multi-million-dollar Certificates of Deposit (CDs) deposits in principal and interest amounts that are fully insured by the Federal Deposit Insurance Corporation (FDIC) with original maturities that were greater than three months and up to three years at the time of purchase.

Loss per Share

Basic earnings per share is calculated by dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding, and does not include the impact of any potentially dilutive common stock equivalents. At March 31, 2015 and 2014, the calculation of diluted weighted average shares did not include preferred stock, common stock warrants, or options that are potentially convertible into common stock as those would be antidilutive due to the Company’s net loss position.

Securities not considered in the calculation of diluted weighted average shares, but that could be dilutive in the future, as of March 31, 2015 and 2014, were as follows:

	March 31,
	2015		2014
Series B preferred stock		59,065		59,065
Common stock warrants		396,174		646,811
Common stock options		2,057,620		2,324,072

Total potential dilutive securities		2,512,859		3,029,948

Inventory

Inventory consisted of the following at March 31, 2015 and June 30, 2014:

	March 31,		June 30,
	2015		2014
Raw materials	$	240,247	$	173,417
Work in process		196,976		151,321
Finished goods		27,332		34,999

	$	464,555	$	359,737

Share-Based Compensation

The following table presents the share-based compensation expense recognized during the three and nine months ended March 31, 2015 and 2014:

	Three months				Nine months
	ended March 31,				ended March 31,
	2015		2014		2015		2014
Cost of product sales	$	7,972	$	4,500	$	23,917	$	13,421
Research and development expenses		3,117		3,482		9,352		10,447
Sales and marketing expenses		2,158		879		6,475		2,636
General and administrative expenses		8,206		4,572		24,616		38,713
Total share-based compensation	$	21,453	$	13,433	$	64,360	$	65,217

As of March 31, 2015, total unrecognized compensation expense related to stock-based options was $276,138 and the related weighted-average period over which it is expected to be recognized is approximately 1.94 years.

The Company currently provides stock-based compensation under four equity incentive plans approved by the Board of Directors. Options granted under each of the plans have a ten year maximum term, an exercise price equal to at least the fair market value of the Company’s common stock on the date of the grant, and varying vesting periods as determined by the Board. For stock options with graded vesting terms, the Company recognizes compensation cost on a straight-line basis over the requisite service period for the entire award.

A summary of stock options within the Company’s share-based compensation plans as of March 31, 2015 was as follows:

					Weighted
			Weighted		Average
			Average		Remaining
	Number of		Exercise		Contractual		Aggregate
	Options		Price		Term Value		Intrinsic Value

Outstanding at March 31, 2015		2,057,620	$	1.98		4.19	$	788,107
Vested and expected to vest at March 31, 2015		1,988,995	$	2.00		4.10	$	756,657
Vested and exercisable at March 31, 2015		1,821,504	$	1.96		3.58	$	755,364

There were 133,564 options exercised during the nine months ended March 31, 2015 and 26,333 options exercised during the nine months ended March 31, 2014. The Company’s current policy is to issue new shares to satisfy option exercises. The intrinsic value of the employee options exercised during the nine months ended March 31, 2015 was $145,275 and the nine months ended March 31, 2014 was $15,130.

There were no stock option awards granted and 65,000 stock option awards granted during the nine months ended March 31, 2015 and 2014, respectively.

Of the 65,000 options, 50,000 were director stock options issued to the Chief Executive Officer and Chairman on September 5, 2013 with an exercise price of $0.58 per share which was the closing price of the Company common stock on the day of issuance. The fair value of the stock options issued on September 5, 2013 using a Black- Scholes model was $25,150 utilizing the closing price on the day of grant of $0.58 per share as the grant and exercise price, a five year term, volatility of 132.31% and a discount rate of 1.85%.

The remaining 15,000 were employee stock options issued to three members of management on September 6, 2013 with an exercise price of $0.59 per share which was the closing price of the Company common stock on the day of issuance. The fair value of the stock options issued on September 6, 2013 using a Black-Scholes model was $6,906 utilizing the closing price on the day of grant of $0.59 per share as the grant and exercise price, a five year term, volatility of 132.31% and a discount rate of 1.77%.

Commitments and Contingencies

Patent and Know-How Royalty License Agreement

The Company is the holder of an exclusive license to use certain “know-how” developed by one of the founders of a predecessor to the Company and licensed to the Company by the Lawrence Family Trust, a Company shareholder. The terms of this license agreement require the payment of a royalty based on the Net Factory Sales Price, as defined in the agreement, of licensed product sales. Because the licensor’s patent application was ultimately abandoned, only a 1% “know-how” royalty based on Net Factory Sales Price, as defined in the agreement, remains applicable. To date, management believes that there have been no product sales incorporating the “know-how” and therefore no royalty is due pursuant to the terms of the agreement. Management believes that ultimately no royalties should be paid under this agreement as there is no intent to use this “know-how” in the future.

The licensor of the “know-how” has disputed management’s contention that it is not using this “know-how”. On September 25, 2007 and again on October 31, 2007, the Company participated in nonbinding mediation regarding this matter; however, no settlement was reached with the Lawrence Family Trust. After additional settlement discussions, which ended in April 2008, the parties failed to reach a settlement. The parties may demand binding arbitration at any time.

Fair Value Measurements

The table below sets forth the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis as of March 31, 2015 and June 30, 2014, respectively, and the fair value calculation input hierarchy level the Company has determined applies to each asset and liability category.

	Balance at		Balance at		Input
Description	March 31, 2015		June 30, 2014		Hierarchy Level
Assets:
Cash and cash equivalents	$	1,077,526	$	7,680,073	Level 1
Restricted cash		181,248		181,208	Level 1

Liabilities:
Warrant liability	$	180,000	$	573,000	Level 2

Preferred Dividends

On December 17, 2014, the Board of Directors declared a dividend on the Series B Preferred Stock of all currently payable and accrued outstanding and cumulative dividends through December 31, 2014 in the amount of $10,632. Dividends on the Series B Preferred Stock were last declared by the Board of Directors on December 19, 2013 in the amount of $10,632. The dividends outstanding and cumulative through December 31, 2014 of $10,632 and through December 31, 2013 of $10,632 were paid as of those dates.

10.

Shareholders’ Equity

Common and preferred stock transactions

Series D

On August 29, 2013, the Company entered into an agreement to sell 3,800,985 common units, each consisting of 1 share of common stock and a warrant to purchase 0.816 shares of common stock (the Common Units), and 1,670 preferred units, each consisting of 1 share of Series D Convertible Preferred Stock and a warrant to purchase 1,525.23 shares of common stock (the Preferred Units) on a firm commitment underwritten basis. The Common Units were sold at an initial per unit purchase price of $0.535 and the Preferred Units were sold at an initial per unit purchase price of $1,000. The warrants were all exercisable at $0.72 per share and had a twenty-four month term. Each share of the Series D Convertible Preferred Stock was convertible into 1,869.15 shares of common stock at any time at the option of the holder, subject to adjustment and certain ownership percentage restrictions. The preferred shares which were convertible into shares of common stock contained a beneficial conversion feature of $726,378 which was recognized as a deemed dividend to the Series D preferred shareholders on the date of issuance. This public offering resulted in gross proceeds of $3.7 million. The offering yielded approximately $3,279,292 in cash after expenses.

During January 2014, the holder of the 1,670 shares of Series D convertible preferred stock fully exercised its right to convert the 1,670 shares of Series D convertible preferred stock into 3,121,480 shares of common stock which at the time of conversion resulted in an increase in shares of common stock outstanding from 38,419,502 to 41,540,982. Subsequent to the conversion, no shares of Series D convertible preferred stock remain outstanding.

Common Stock

On March 21, 2014, the Company entered into a Securities Purchase Agreement with certain investors providing for the sale of a total of 5,644,300 shares of common stock for an aggregate purchase price of $14,675,180 at a price per share of $2.60 (the Registered Direct Offering). The Company received net proceeds of approximately $13,818,927 from the Registered Direct Offering which will be used to meet the Company’s working capital needs and general corporate purposes.

Warrant exercises

During March 2014, the holder of the Series D warrants issued in November 2010 exercised its right to purchase 1,050,000 shares of common stock. Each warrant had an exercise price of $1.56 per share of Company common stock and the exercise contributed $1,638,000 in total additional cash and equity.

During March 2014, certain holders of the warrants to purchase Company common stock issued in the October and December 2011 equity transaction exercised their right to purchase 37,574 shares of common stock. Each warrant had an original exercise price of $1.053 that was reduced in accordance with the terms of the warrant for dilution as the result of subsequent offerings to a revised exercise price of $0.944 per share of Company common stock. This created a liability of $35,470 as the stock had not been issued by the transfer agent as of the end of March 2014, however, shares of common stock were issued during April in compliance with the contractual terms of the warrant.

During March 2014, certain holders of the warrants to purchase Company common stock issued in the October and December 2011 equity transaction exercised their right to purchase 271,091 shares of common stock. Each warrant had an original exercise price of $1.053 that was reduced in accordance with the terms of the warrant for dilution as the result of subsequent offerings to an exercise price of $0.944 per share of Company common stock and the exercise contributed $255,910 in total additional cash and equity.

During March 2014, the holders of the warrants to purchase Company common stock issued in the August 2013 equity transaction exercised their right to purchase 5,648,738 shares of common stock. Each warrant had an exercise price of $0.72 per share of Company common stock and the exercise contributed $4,067,091 in total additional cash and equity.

The gross proceeds from all of the common stock warrants exercised were $70,789 during the nine months ended March 31, 2015 and $5,961,001 during the nine months ended March 31, 2014, net of the $35,470 liability for the shares of common stock which were not issued until April 2014.

Warrant derivative liability and related offering cost deferral

Based on the guidance contained in ASC 815 “Derivatives and Hedging”, management has concluded that the warrants issued in the October 13, 2011 underwritten registered offering of 2,500,000 shares of common stock should be classified as a warrant derivative liability and has recorded a liability at fair value. The Company determined the fair value of the warrants using the Black-Scholes fair value model. The Company determined the fair value of the warrants on the date of the offering to be as disclosed in the tables below. The Company has recognized a change in fair value as described in the tables below:

Change in fair value of the warrant derivative liability for the three months ended March 31, 2015 and 2014, respectively.

	Three months ended
	March 31, 2015			March 31, 2014
Change in fair value of the warrant derivative liability	$	(28,605	)	$	1,095,000

Change in fair value of the warrant derivative liability for purchaser warrants and underwriter warrants contained in an equity transaction on October 19, 2011 and December 7, 2011.

	Three months ended
	March 31, 2015						March 31, 2014
	Quantity¹			Amount			Quantity¹			Amount
Balance, beginning of the period		229,861		$	209,000			713,601		$	23,000
Change in fair value					(28,605	)					1,095,000
Warrants corrected		-			-			10,469			-
Warrants exercised		(400	)		(395	)		(271,091	)		(440,000	)
Balance, end of the period		229,461		$	180,000			452,979		$	678,000

Change in fair value of the warrant derivative liability for the nine months ended March 31, 2015 and 2014, respectively.

	Nine months ended
	March 31, 2015			March 31, 2014
Change in fair value	$	(375,605	)	$	1,014,000

Change in fair value of the derivative warrant liability for purchaser warrants and underwriter warrants contained in an equity transaction on October 19, 2011 and December 7, 2011.

	Nine months ended
	March 31, 2015						March 31, 2014
	Quantity¹			Amount			Quantity¹			Amount
Balance, beginning of the period		238,296		$	573,000			713,601		$	104,000
Change in fair value					(375,605	)					999,000
Warrants corrected					-			10,469			15,000
Warrants exercised		(8,835	)		(17,395	)		(271,091	)		(440,000	)
Balance, end of the period		229,461		$	180,000			452,979		$	678,000

¹ The quantity of warrants either issued or outstanding as of the date of valuation.

Warrants

The following table summarizes the warrants outstanding as of the beginning of the fiscal year and warrants exercised during the period and weighted average prices for each category. No warrants were issued or expired during the period.

				Weighted average
	Warrants			exercise price
Outstanding as of June 30, 2014		444,747		$	1.43
Warrants exercised		(48,573	)		1.45
Outstanding as of March 31, 2015		396,174		$	1.22

Warrants outstanding as of March 31, 2015

Quantity		Expiration date	Exercise price¹
	6,000	June 8, 2015	$	1.18
	25,000	July 27, 2015		2.00
	130,713	November 21, 2015		1.56
	203,811	October 19, 2016		0.94
	25,650	December 7, 2016		0.94
	5,000	June 27, 2017		0.98
	396,174		$	1.22

¹ – Amounts are rounded to the nearest whole cent

11.

Related Party Transaction

During the nine months ended March 31, 2015 and 2014, the Company continued to engage the services of APEX Data Systems, Inc., owned by Dwight Babcock, the Company’s Chairman and Chief Executive Officer, to modify and maintain the Company’s web interfaced data collection application to aggregate patient data in a controlled environment. The Audit Committee and Board of Directors approved the use of the ongoing services of APEX Data Systems. Mr. Babcock recused himself from the Board vote due to his conflict of interest. The cost recorded during nine months ended March 31, 2015 and 2014 from APEX Data Systems, Inc. for the maintenance of the web interfaced data collection application was $9,000 and $12,720. An additional $9,000 was spent on the implementation maintenance of Customer Relationship Management software in the nine months ended March 31, 2015 and 2014, respectively.

ITEM 2 – MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Caution Regarding Forward-Looking Information

In addition to historical information, this Form 10-Q contains certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (“PSLRA”). This statement is included for the express purpose of availing IsoRay, Inc. of the protections of the safe harbor provisions of the PSLRA.

All statements contained in this Form 10-Q, other than statements of historical facts, that address future activities, events or developments are forward-looking statements, including, but not limited to, statements containing the words "believe," "expect," "anticipate," "intends," "estimate," "forecast," "project," and similar expressions. All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including any statements of the plans, strategies and objectives of management for future operations; any statements concerning proposed new products, services, developments or industry rankings; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing. These statements are based on certain assumptions and analyses made by us in light of our experience and our assessment of historical trends, current conditions and expected future developments as well as other factors we believe are appropriate under the circumstances. However, whether actual results will conform to the expectations and predictions of management is subject to a number of risks and uncertainties described under “Risk Factors” under Part II, Item 1A below and in the “Risk Factors” section of our Form 10-K for the fiscal year ended June 30, 2014 that may cause actual results to differ materially.

Consequently, all of the forward-looking statements made in this Form 10-Q are qualified by these cautionary statements and there can be no assurance that the actual results anticipated by management will be realized or, even if substantially realized, that they will have the expected consequences to or effects on our business operations. Readers are cautioned not to place undue reliance on such forward-looking statements as they speak only of the Company's views as of the date the statement was made. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Critical Accounting Policies and Estimates

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, 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 29, 2014 are those that depend most heavily on these judgments and estimates. As of March 31, 2015, there had been no material changes to any of the critical accounting policies contained therein.

Results of Operations

Three months ended March 31, 2015 compared to three months ended March 31, 2014.

Revenues. During the three months ended March 31, 2015, total revenue increased approximately 2% when compared to the three months ended March 31, 2014. Revenue produced by prostate brachytherapy increased in the three months ended March 31, 2015 by approximately 7%. Prostate seed brachytherapy contributed 86% of the overall product sales during the three months ended March 31, 2015 compared to 82% of overall product sales during the three months ended March 31, 2014. Management continues to work with physicians to utilize the Company’s FDA cleared products, sometimes in tandem with other FDA cleared devices or application methods, to develop innovative methods to provide treatment alternatives for cancers in various other body sites. These other body sites contributed the balance of product sales, or 14% of product sales during the three months ended March 31, 2015 compared to 18% of product sales during the three months ended March 31, 2014. During the three months ended March 31, 2015, the Company primarily treated five body sites - brain, gynecological, head and neck, lung and prostate cancers. The Company provides two methods of treating brain cancer, using its brachytherapy seeds and the GliaSite^® Radiation Therapy System (GliaSite^® RTS) in combination with Iotrex™ (liquid ¹²⁵I)or Cesitrex™ (liquid ¹³¹Cs) as a radiation source. Management believes that the overall market for prostate brachytherapy has continued to receive increased pressure from other treatment options with higher reimbursement rates such as Intensity–Modulated Radiation Therapy (IMRT) and Robotics. Management also believes that the treatment strategy of combining treatments that incorporate brachytherapy with other modalities in the prostate, the addition of new treatment facilities, treatment of additional other body sites with brachytherapy and the demands of the healthcare system to reduce costs as highlighted in recent industry publications, all make brachytherapy an increasingly attractive treatment option, which, if adopted, has the potential to increase revenue.

Key operating factor

	Three months ended
Description	Mar 31, 2015		Mar 31, 2014		Variance ($)		Variance (%)
Product sales, net	$	1,158,109	$	1,134,319	$	23,790		2	%

Cost of product sales.

Cost of product sales nominally increased during the three months ended March 31, 2015 compared to the three months ended March 31, 2014.

The two key operating factors that changed significantly in the three months ended March 31, 2015 as compared to the three months ended March 31, 2014 were the decrease in depreciation expense as fixed assets continued to reach the end of their depreciable lives during the three months ended March 31, 2015 when compared to the three months ended March 31, 2014, and a decrease in production costs of the GliaSite^® RTS which was the result of the reduced number of cases during the three months ended March 31, 2015. There were nominal cost increases in several other categories related to seed production expenses that are summarized as other cost of product sales (Seeds), which individually were insignificant but when combined were enough to exceed the decreases in depreciation and decreases in production costs related to the GliaSite^® RTS.

Key operating factors

	Three months ended
Description	Mar 31, 2015		Mar 31, 2014		Variance ($)			Variance (%)
Depreciation expense	$	131,097	$	164,460	$	(33,363	)		(20	)%
Other cost of product sales (Seeds)		959,204		893,812		65,392			7	%
GliaSite^® RTS		12,611		25,141		(12,530	)		(50	)%
Total cost of product sales	$	1,102,912	$	1,083,413	$	19,499			2	%

Gross profit. Gross profit for the three months ended March 31, 2015 increased compared to the three month period ended March 31, 2014 as a result of increased revenue from product sales, which was partially reduced by the nominal increase in total cost of product sales.

Key operating factor

	Three months ended
Description	Mar 31, 2015			Mar 31, 2014			Variance ($)		Variance (%)
Gross profit	$	55,197		$	50,906		$	4,291		8	%

Gross profit percentage		5	%		5	%

Research and development. Research and development costs decreased during the three months ended March 31, 2015 compared to the three months ended March 31, 2014. This decrease was primarily the result of reduced cost related to protocol expense, which was the result of the accrual of three months cost at a facility which did not reoccur during the three months ended March 31, 2015 when compared to the three months ended March 31, 2014.

Key operating factors

	Three months ended
Description	Mar 31, 2015		Mar 31, 2015		Variance ($)			Variance (%)
Protocol expense	$	28,504	$	42,709	$	(14,205	)		(33	)%
Other research and development expense		112,895		110,902		1,993			2	%
Total research and development	$	141,399	$	153,611	$	(12,212	)		(8	)%

Sales and marketing expenses. Sales and marketing expenses increased in the three months ended March 31, 2015 compared to the three months ended March 31, 2014. The three categories that changed significantly were conventions and tradeshows expense as the result of attending new meetings; payroll, benefits and share-based compensation expense as the result of a 50% increase in the number of sales people in the field; and travel expense also as a direct result of the increased number of sales people in the field.

Key operating factors

	Three months ended
Description	Mar 31, 2015		Mar 31, 2014		Variance ($)			Variance (%)
Conventions and tradeshow expense	$	34,131	$	1,409	$	32,722			2,322	%
Payroll, benefits and share-based compensation expense		252,357		173,533		78,824			45	%
Travel expense		66,969		46,430		20,539			44	%
Other sales-marketing expense		21,419		24,186		(2,767	)		(11	)%
Total sales and marketing	$	374,876	$	245,558	$	129,318			53	%

General and administrative expenses. General and administrative expenses decreased in the three months ended March 31, 2015 compared to the three months ended March 31, 2014. This decrease was the direct result of a decrease in bad debt expense as the customer base and the timing of their payments become more predictable, a decrease in legal expense as a direct result of equity related expenses that did not re-occur from the prior year, an increase in audit, Sarbanes-Oxley and tax preparation expense which resulted from the timing difference in tax compliance work being completed, and an increase in insurance expense as the result of increased premiums related to directors and officers coverage.

Key operating factors

	Three months ended
Description	Mar 31, 2015		Mar 31, 2014		Variance ($)			Variance (%)
Audit, Sarbanes-Oxley and tax preparation expense	$	17,488	$	5,623		11,865			211	%
Bad debt expense		-		38,861		(38,861	)		(100	)%
Insurance expense		35,898		22,120		13,778			62	%
Legal expense		28,625		83,835		(55,210	)		(66	)%
General and administrative (Other)		507,923		490,293		17,630			4	%
Total general and administrative	$	589,934	$	640,732	$	(50,798	)		(8	)%

Operating loss. Operating loss for the three months ended March 31, 2015 increased compared to the three months ended March 31, 2014 primarily from increased operating expenses which offset the increased gross margin. There was a significant increase in sales and marketing expenses as the headcount increased which resulted in additional costs of payroll, benefits and share-based compensation combined with the resulting increase in travel expense, partially offset by decreased cost of general and administrative expenses as both bad debt expense and legal expenses decreased.

Key operating factor

	Three months ended
Description	Mar 31, 2015			Mar 31, 2014			Variance ($)			Variance (%)
Operating loss	$	(1,051,012	)	$	(988,995	)	$	(62,017	)		6	%

Change in fair value of warrant derivative liability. During the three months ended December 31, 2011, there was a warrant derivative liability established upon issuance of warrants during October 2011 to December 2011 to the purchasers in the Company’s registered offering. The warrant liability requires periodic evaluation for changes in fair value. As required at March 31, 2015 and March 31, 2014, 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, 2015 and March 31, 2014. The change in valuation of the warrant derivative liability as calculated using the Black-Scholes option pricing model is not reflective of Company operations which is why these changes are included in the consolidated statement of operations in the non-operating income/(expense) section and an adjusting item to reconcile net loss to net cash used by operating activities in the consolidated statement of cash flows.

The Black-Scholes option pricing model utilizes multiple inputs over which management exerts little control. The model uses stock price (market driven), exercise price (contractual), expected life of the contractual life (estimate made by management when the warrant derivative liability is established and reduced by the life expended), volatility of the Company stock (market driven) and a risk-free rate. During the three months ended March 31, 2014, the Company’s stock experienced a significant increase in share price which increased the warrant derivative liability, resulting in a material increase to the loss in that quarter. During the three months ended March 31, 2015, the Company’s stock did not experience significant changes in the share price.

Key operating factor

	Three months ended
Description	Mar 31, 2015		Mar 31, 2014			Variance ($)		Variance (%)
Change in fair value of warrant derivative liability	$	28,605	$	(1,095,000	)	$	1,123,605		103	%

Nine months ended March 31, 2015 compared to nine months ended March 31, 2014.

Revenues. During the nine months ended March 31, 2015, total revenue decreased nominally when compared to the nine months ended March 31, 2014. Revenue produced by prostate brachytherapy increased in the nine months ended March 31, 2015 when compared to the nine months ended March 31, 2014. Prostate seed brachytherapy contributed 87% of the overall product sales during the nine months ended March 31, 2015 compared to 83% of overall product sales during the nine months ended March 31, 2014. Management continues to work with physicians to utilize the Company’s FDA cleared products, sometimes in tandem with other FDA cleared devices or application methods, to develop innovative methods to provide treatment alternatives for cancers in various other body sites. These other body sites contributed the balance of product sales of 13% and 17% during the nine months ended March 31, 2015 and 2014, respectively. During the nine months ended March 31, 2015, the Company primarily treated five body sites - brain, gynecological, head and neck, lung and prostate cancers. Management believes that the overall market for prostate brachytherapy has continued to receive increased pressure from other treatment options with higher reimbursement rates such as Intensity–Modulated Radiation Therapy (IMRT) and Robotics. Management also believes that the treatment strategy of combining treatments that incorporate brachytherapy with other modalities in the prostate, the addition of new treatment facilities, treatment of additional other body sites with brachytherapy and the demands of the healthcare system to reduce costs as highlighted in recent industry publications, all make brachytherapy an increasingly attractive treatment option with the potential to increase revenue.

Key operating factor

	Nine months ended
Description	Mar 31, 2015		Mar 31, 2014		Variance ($)			Variance (%)
Product sales, net	$	3,265,795	$	3,269,642	$	(3,847	)		0	%

Cost of product sales. Cost of product sales related to brachytherapy seed sales decreased by a nominal amount during the nine months ended March 31, 2015 compared to the nine months ended March 31, 2014. The overall decrease in cost of product sales is the combination of decreased depreciation expense as fixed assets continue to reach the end of their depreciable lives without requiring replacement, decreased cost of product sales related to the GliaSite^® RTS which is primarily the decreased cost of materials resulting from fewer cases being ordered, coupled with the lack of an inventory impairment cost from expired inventory in the prior year, which was partially offset by increased cost of pre-loading brachytherapy seeds based on the configurations ordered by physicians, coupled with an immaterial change in other cost of product sales classifications.

Key operating factors

	Nine months ended
Description	Mar 31, 2015		Mar 31, 2014		Variance ($)			Variance (%)
Depreciation and amortization Expense	$	429,062	$	505,829	$	(76,767	)		(15	)%
Pre-loading expense		263,576		219,277		44,299			20	%
GliaSite^® RTS		35,225		106,212		(70,987	)		(67	)%
Other cost of product sales (Seeds)		2,575,501		2,498,632		76,869			3	%
Total cost of product sales	$	3,303,364	$	3,329,950	$	(26,586	)		(1	)%

Gross loss. Gross loss for the nine month period ended March 31, 2015 decreased compared to the nine month period ended March 31, 2014 primarily as a result of the decreased cost of product sales.

Key operating factor

	Nine months ended
Description	Mar 31, 2015			Mar 31, 2014				Variance ($)		Variance (%)
Gross loss	$	(37,569	)	$	(60,308	)		$	22,739		(38	)%

Gross loss percentage		(1	)%		(2	)	%

Research and development. Research and development costs decreased during the nine months ended March 31, 2015 compared to the nine months ended March 31, 2014 primarily as a net result of an increase in legal expense related to the protection of intellectual property, offset by a decrease in protocol expense related to the completion of a protocol during the prior fiscal year.

Key operating factors

	Nine months ended
Description	Mar 31, 2015		Mar 31, 2014		Variance ($)			Variance (%)
Legal expense	$	33,132	$	1,726	$	31,406			1,820	%
Protocol expense		87,392		130,322		(42,930	)		(33	)%
Research and development (Other)		338,112		338,583		(471	)		0	%
Total research and development	$	458,636	$	470,631	$	(11,995	)		(3	)%

Sales and marketing expenses. Sales and marketing expenses increased during the nine months ended March 31, 2015 compared to the nine months ended March 31, 2014. Conventions and tradeshow expense increased from attendance at new events, increased investment at existing events and the addition of a national sales meeting to update the sales team with the latest research. Payroll, benefits and share-based compensation and travel expenses increased as a function of the increased number of sales people in the field. These increases were partially offset by immaterial changes in other classifications.

Key operating factors

	Nine months ended
Description	Mar 31, 2015		Mar 31, 2014		Variance ($)			Variance (%)
Conventions and tradeshow expense	$	92,769	$	47,901	$	44,868			94	%
Payroll, benefits and share-based
compensation expense		673,611		625,670		47,941			8	%
Travel expense		188,790		160,057		28,733			18	%
Sales and marketing (Other)		77,232		97,582		(20,350	)		(21	)%
Total sales and marketing	$	1,032,402	$	931,210	$	101,192			11	%

General and administrative expenses. General and administrative expenses decreased in the nine months ended March 31, 2015 compared to the nine months ended March 31, 2014 primarily as a result of four operating factors. Bad debt (recovery)/expense decreased as the result of improved understanding of the timing of customers’ payments. Insurance expense increased as the result of increased premiums related to directors and officers coverage, legal expense decreased as the result of decreased cost resulting from SEC filings, compliance review, contract revisions and general corporate legal services, while public company expense decreased related to having two independent board members during the nine months ended March 31, 2015 compared to three independent board members during the majority of the nine months ended March 31, 2014.

Key operating factors

	Nine months ended
Description	Mar 31, 2015			Mar 31, 2014		Variance ($)			Variance (%)
Bad debt (recovery)/expense	$	(8,607	)	$	18,879	$	(27,486	)		(146	)%
Insurance expense		103,247			66,587		36,660			55	%
Legal expense		105,344			150,475		(45,131	)		(30	)%
Public company expense		195,851			230,495		(34,644	)		(15	)%
General and administrative (Other)		1,307,990			1,339,296		(31,306	)		(2	)%
Total general and administrative	$	1,703,825		$	1,805,732	$	(101,907	)		(6	)%

Operating loss. Operating loss for the nine months ended March 31, 2015 decreased compared to the nine months ended March 31, 2014 primarily as a result of a decrease in revenue from product sales and a decrease in both cost of product sales and operating expenses.

Key operating factor

	Nine months ended
Description	Mar 31, 2015			Mar 31, 2014			Variance ($)			Variance (%)
Operating loss	$	(3,232,432	)	$	(3,267,881	)	$	(35,449	)		(1	)%

Change in fair value of warrant derivative liability. During the three months ended December 31, 2011, there were warrant liabilities established upon issuance of warrants to the purchasers and underwriters in the Company’s registered offering during October 2011 to December 2011. Per ASC 820, the warrant derivative liability requires periodic evaluation for changes in fair value. As required at March 31, 2015 and March 31, 2014, the Company evaluated the fair value of the warrant derivative liability using the Black-Scholes option pricing model on which the original warrant derivative liability was based and applied updated inputs as of those dates. The resulting change in fair value was recorded as of March 31, 2015 and March 31, 2014. The change in valuation of the warrant derivative liability as calculated using the Black-Scholes option pricing model is not reflective of Company operations which is why these changes are included in the consolidated statement of operations in the non-operating income/(expense) section and an adjusting item to reconcile net loss to net cash used by operating activities in the consolidated statement of cash flows.

The Black-Scholes option pricing model utilizes multiple inputs over which management exerts little control. The model uses stock price (market driven), exercise price (contractual), expected life of the contractual life (estimate made by management when the warrant derivative liability is established and reduced by the life expended), volatility of the Company stock (market driven) and a risk-free rate. During the nine months ended March 31, 2014, the Company’s stock experienced a significant increase in share price which increased the warrant derivative liability, resulting in a material increase to the loss in that period. During the nine months ended March 31, 2015, the Company’s stock did not experience significant changes in the share price.

Key operating factor

	Nine months ended
Description	Mar 31, 2015		Mar 31, 2014			Variance ($)		Variance (%)
Change in fair value of warrant derivative liability	$	375,605	$	(1,014,000	)	$	1,389,605		137	%

Liquidity and capital resources. The Company has historically financed its operations through cash investments from shareholders. During the nine months ended March 31, 2015 and March 31, 2014, the Company primarily used existing cash reserves to fund its operations and capital expenditures.

Cash flows from operating activities

Cash used by operating activities is the net loss adjusted for non-cash items and changes in operating assets and liabilities.

Management continued to manage cash used in operating activities, however, the cash used during the nine months ended March 31, 2015 increased when compared to the nine months ended March 31, 2014 as the result of the increase in cash used to reduce the operating liabilities, to increase operating assets and the decreased impact of the change in fair value of derivative warrant liability.

Key operating factors

	Nine months ended
Description	Mar 31, 2015			Mar 31, 2014			Variance ($)			Variance (%)
Net loss	$	(2,646,369	)	$	(4,281,317	)	$	1,634,948			(38	)%
Non-cash items		197,572			1,693,709			(1,496,137	)		(88	)%
Non-cash changes in operating assets and liabilities		(460,667	)		348,411			(809,078	)		(232	)%
Net cash used by operating activities	$	(2,909,464	)	$	(2,239,197	)	$	(670,267	)		30	%

Cash flows from investing activities

Cash used by investing activities during the nine months ended March 31, 2015 was primarily related to the addition of capitalized equipment, purchases of certificates of deposit and purchases of certificates of deposit – non-current and was partially reduced by the proceeds from the maturity of certificates of deposit. During the nine months ended March 31, 2014, cash used by investing activities was primarily related to the addition of capitalized equipment. The amounts recorded as change in restricted cash in both periods are the accrual of interest earned on certificates of deposit with two financial institutions that are a requirement of the Washington State Department of Health.

Key operating factors

	Nine months ended
Description	Mar 31, 2015			Mar 31, 2014			Variance ($)			Variance (%)
Purchases of fixed assets	$	(77,963	)	$	(16,333	)	$	(61,630	)		377	%
Additions to licenses and other assets		(14,016	)		(5,168	)		(8,848	)		171	%
Change in restricted cash		(40	)		(45	)		5			(11	)%
Proceeds from the maturity of certificates of deposit		(9,110,673	)		-			(9,110,673	)		(100	)%
Purchases of certificates of deposit		(4,744,580	)		-			(4,744,580	)		(100	)%
Purchases of certificates of deposit - non-current		10,031,758			-			10,031,758			100	%
Net cash used by
investing activities	$	(3,915,514	)	$	(21,546	)	$	(3,893,968	)		18,073	%

Cash flows from financing activities

Cash provided by financing activities in the nine months ended March 31, 2015 and March 31, 2014 was the result of the sales of common stock and Series D Convertible Preferred Stock through registered direct and underwritten offerings, common stock warrant exercises and non-qualified stock option exercises by both current and former employees. Cash used during the nine months ended March 31, 2015 and 2014 was the result of dividend payments to the Series B preferred shareholders.

Key operating factors

	Nine months ended
Description	Mar 31, 2015			Mar 31, 2014			Variance ($)			Variance (%)
Preferred dividend payments	$	(10,632	)	$	(10,632	)	$	-			0	%
Proceeds from sale of preferred stock, Pursuant to underwritten offering, net		-			1,478,703			(1,478,703	)		(100	)%
Proceeds from sale of common stock, pursuant to underwritten offering, net		-			1,800,589			(1,800,589	)		(100	)%
Proceeds from sale of common stock, net		-			13,818,927			(13,818,927	)		(100	)%
Proceeds from exercise of common stock warrants		87,789			5,961,001			(5,873,212	)		(99	)%
Proceeds from exercise of employee stock options		145,274			15,129			130,145			860	%
Net cash provided by financing activities	$	222,431		$	23,063,717		$	(22,841,286	)		(99	)%

Projected Fiscal Year 2015 Liquidity and Capital Resources

At March 31, 2015, the Company held cash and cash equivalents of $1,077,526, certificates of deposit¹ of $9,081,827 and certificates of deposit, non-current¹ of $10,145,978 for a total of $20,305,331 as compared to $7,680,073 of cash and cash equivalents, certificates of deposit¹ of $10,002,912 and certificates of deposit, non-current¹ of $5,401,398 for a total of $23,084,383 at June 30, 2014.

¹ – See the table below for the maturity dates of the certificates of deposit and certificates of deposit, non-current.

At April 30, 2015, the Company had the following capital resources with the following liquidities. All of the certificates of deposit are interest bearing and fully FDIC insured.

Description			Amount
Cash and cash equivalents		$	1,140,000

Description	Amount		Maturity Date
Certificates of deposit¹	$	265,114	May 15, 2015
Certificates of deposit³		5,053,201	June 18, 2015
Certificates of deposit²		3,520,173	September 17, 2015
Certificates of deposit	$	8,838,488

Description	Amount		Maturity Date
Certificates of deposit, non-current ⁴	$	3,806,117	June 23, 2016
Certificates of deposit, non-current ⁴		1,268,279	June 30, 2016
Certificates of deposit, non-current ⁵		1,680,958	June 22, 2017
Certificates of deposit, non-current ⁵		509,167	June 29, 2017
Certificates of deposit, non-current ⁵		508,738	July 13, 2017
Certificates of deposit, non-current ⁵		1,017,048	July 20, 2017
Certificates of deposit, non-current ⁵		711,634	July 27, 2017
Certificates of deposit, non-current ⁵		660,525	August 3, 2017
Certificates of deposit, non-current	$	10,162,466

Total certificates of deposit		19,000,954

Total cash and cash equivalents and CDs	$	20,140,954

¹– These CDs mature four weeks from the original date of investment.

² – These CDs mature 26 weeks from the original date of investment.

³ – These CDs mature 52 weeks from the original date of investment.

⁴ – These CDs mature 104 weeks from the original date of investment.

⁵ – These CDs mature 156 weeks from the original date of investment.

The Company’s monthly required cash operating expenditures were approximately $323,000 in the nine months ended March 31, 2015, which represents a 30% increase or approximately $74,000 from average monthly cash operating expenditures of $249,000 in the nine months ended March 31, 2014. The increased use of cash is the result of cash required to reduce current liabilities, including the payment of accounts payable and accrued expenses, accrued payroll and related taxes, for the purchase of inventory and the reduction in cash provided by accounts receivable. Management believes that the reduction in cash provided by accounts receivable is of a temporary nature. Management believes that there will not be a significant requirement for capital equipment beyond the planned information technology equipment upgrade, which is designed to reduce risks which may impact the Company’s ability to conduct business and is expected to not exceed fifty thousand dollars. There is no assurance that unanticipated needs for capital equipment may not arise for other needs.

Management intends to continue its existing protocol studies and to begin new protocol studies on lung and inter-cranial cancer treatments using Cesium-131 brachytherapy seeds and the GliaSite^® RTS. The Company continues to believe that approximately $180,000 in expense will be incurred during fiscal year 2015 related to protocol expenses relating to lung cancer, intra-cranial cancer and both dual therapy and mono therapy prostate cancer 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 $1.14 million as of April 27, 2015, certificates of deposit in the amount of $265 thousand which mature on May 15, 2015, $5.05 million that mature on June 18, 2015 and certificates of deposit in the amount of $3.52 million that mature on September 17, 2015, and certificates of deposit, non-current of $10.5 million at March 31, 2015 which mature between June 23, 2016 and August 3, 2017 will be sufficient to meet our anticipated cash needs, assuming both revenue and expenses remain at current levels, for at least the next five years.

Management plans to attain breakeven and generate additional cash flows by increasing revenues from both new and existing customers (through our direct sales channels and through our distributors), increasing sales of the Company’s GliaSite^® RTS, expanding into other market applications including inter-cranial, 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. Sales in the prostate market have not shown the increases necessary to breakeven during the past seven fiscal years.

For the nine months ended March 31, 2015, revenue from other treatment modalities with brachytherapy seeds increased by 4% when compared to the nine months ended March 31, 2014. When including the revenue from the sale of GliaSite^® RTS, revenue from non-prostate treatments has decreased 20% in the nine months ended March 31, 2015 compared to the nine months ended March 31, 2014. As management is focused on increasing revenue from head and neck, colorectal, lung and brain applications of Cesium-131 brachytherapy seeds in addition to increasing the number of cases treated with of the GliaSite^® RTS, management believes the Company has sufficient cash and cash equivalents to sustain protocols, marketing staff, production staff and production equipment as it works to gain market share.

These non-prostate brachytherapy treatments are in the early stages of application in the clinical setting and the purchasing patterns are subject to the influence of a few key physicians which can significantly influence revenue from quarter to quarter and year to year.

There was no material change in the use of proceeds from our public offerings as described in our final prospectus supplements filed with the SEC pursuant to Rule 424(b) on August 29, 2013 and March 24, 2014. Through March 31, 2015, the Company had used the net proceeds raised through the August 2013 and March 2014 offerings as described in the table below and held the remaining net proceeds in cash and cash equivalents. 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.

				Remaining
Offering description	Period		Net proceeds		net proceeds
Underwritten offering	August 2013		3,279,292		-
Registered direct offering	March 2014		13,814,742		13,818,927
Total		$	17,094,034	$	13,818,927

The Company expects to finance any future cash needs through sales of equity, possible strategic collaborations, debt financing or through other sources that maybe 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 is subject to various local, state, and federal environmental regulations and laws due to the isotopes used to produce the Company’s products. As part of normal operations, amounts are expended to ensure that the Company is in compliance with these laws and regulations. While there have been no reportable incidents or compliance issues, the Company believes that if it relocates its current production facilities then certain decommissioning expenses will be incurred. An asset retirement obligation was established in the first quarter of fiscal year 2008 for the Company’s obligations at its current production facility. This asset retirement obligation will be for obligations to remove any residual radioactive materials and to remove all leasehold improvements.

The industry that the Company operates in is subject to product liability litigation. Through its production and quality assurance procedures, the Company works to mitigate the risk of any lawsuits concerning its products. The Company also carries product liability insurance to help protect it from this risk.

The Company has no off-balance sheet arrangements.

ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a smaller reporting company, the Company is not required to provide Part I, Item 3 disclosure in this Quarterly Report.

ITEM 4 – CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the design and operation of our disclosure controls and procedures, as such term is defined under Rules 13a-14(c) and 15d-14(c) promulgated under the Securities Exchange Act of 1934, as amended (the Exchange Act), as of March 31, 2015. Based on that evaluation, our principal executive officer and our principal financial officer concluded that the design and operation of our disclosure controls and procedures were effective. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote. However, management believes that our system of disclosure controls and procedures is designed to provide a reasonable level of assurance that the objectives of the system will be met.

Changes in Internal Control over Financial Reporting

There have not been any changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1A – RISK FACTORS

There have been no material changes for the risk factors disclosed in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended June 30, 2014.

ITEM 5. OTHER INFORMATION

On January 12, 2015, IsoRay Medical, Inc. ("Medical"), a wholly owned subsidiary of IsoRay, Inc., entered into a supply contract (the "Agreement") with Joint Stock Company ‹‹Institute of Nuclear Materials››, a Russian company ("JSC INM"). With the Agreement, Medical will purchase Cesium-131 from JSC INM within the quality standards and within the time periods specified, through January 31, 2016.

ITEM 6. EXHIBITS

Exhibits:

10.82	Contract, dated January 12, 2015, by and between IsoRay Medical, Inc. and Joint Stock Company “Institute of Nuclear Materials” (confidential treatment requested for redacted portions)

31.1	Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer

31.2	Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer

32*	Section 1350 Certifications

101.INS XBRL	Instance Document

101.SCH XBRL	Taxonomy Extension Document

101.CAL XBRL	Taxonomy Extension Calculation Linkbase Document

101.DEF XBRL	Taxonomy Extension Definition Linkbase Document

101.LAB XBRL	Taxonomy Extension Label Linkbase Document

101.PRE XBRL	Taxonomy Extension Presentation Linkbase Document

* Furnished herewith.

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 thereunto duly authorized.

Dated: May 15, 2015

	ISORAY, INC., a Minnesota corporation

	By	/s/ Dwight Babcock
		Dwight Babcock, Chief Executive Officer
		(Principal Executive Officer)

	By	/s/ Brien Ragle
		Brien Ragle, Chief Financial Officer
		(Principal Financial and Accounting Officer)

Exhibit 10.82

Contract No. 840/08624332/1620-15

Date of signature: 2015/01/12

THE SELLER/THE MANUFACTURER

Joint Stock Company «Institute of Nuclear

Materials» (JSC «INM»)

624250, Russia, Sverdlovsk Region,

Zarechniy, PO Box 29

Phone: 7 (34377) 362 64

FAX: 7 (34377) 733 46

E-mail: [email protected]

THE BUYER

The Company IsoRay Medical Inc.

350 Hills Street, Suite 106

Richland, WA 99354-5411 USA

THE CONSIGNEE

The Company IsoRay Medical Inc.

350 Hills Street, Suite 106

Richland, WA 99354-5411 US

Airport of destination: Seattle or Portland, USA

NOTIFICATION

FedEX Trade Networks 16353 NE Cameron Blvd

Portland, Oregon 97230 USA

Phone: +1503-255 1391 ext. 14

THE END USER

The Company IsoRay Medical Inc.

350 Hills Street, Suite 106

Richland, WA 99354-5411 USA

THE SHIPPER

Joint Stock Company «Institute of Nuclear

Materials» (JSC «INM»)

624250, Russia, Sverdlovsk Region,

Zarechniy, PO Box 29

Phone: 7 (34377) 362 64

FAX: 7 (34377) 733 46

E-mail: [email protected]

TERMS OF DELIVERY

CPT airport Seattle or Portland, USA

(Incoterms 2010)

THE BUYERS and THE SELLERS have mutually agreed that under the present Contract during 2015-2016 the Sellers will deliver to the Buyers the following Goods:

Denomination and Specifications of the Goods	Total activity of the lot on the calibration date, Ci	Quantity of lots, pcs	Price, USD per one lot	Amount, USD
Dehydrated water soluble cesium-131 salt	^[**]	[**]	[**]	[**]

The Goods are to be shipped in non-returnable type A transport packing sets. The value of the packing sets is included into the Goods price.

Total activity of the lot is established in accordance with the calibration date provided in the Buyers written order set to 12:00 p.m. (noon) Pacific Standard Time.

The Amount of the Contract: [**]

End purpose usage: for medical purpose.

The above number of the Goods and total amount of the contract are to be considered as framework value only, whereas the actual number of the Goods and total amount will be based on the Buyer’s written orders, confirmed by the Seller, by means of sending to the Buyer the acceptance of the Buyer’s order.

The present contract comes in force from the date of signing and will be valid till January 31, 2016.

All other terms and conditions of the Contract are nominated in Appendixes 1, 2 and 3 and are the integral parts thereof.

The Contract and any Appendixes and Addenda to it shall be considered legally binding if provided by facsimile transmission.

THE SELLERS:	THE BUYERS:
/s/ Dmitrii Vladimirovich Markov	/s/ Dwight Babcock
Director of Closed Stock Company «Science and Inovation»,	Dwight Babcock
managing company for JSC «INM»	CEO IsoRay Medical

[**]Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

-2-

APPENDIX 1

to Contract No. 840/08624332/1609-14

Date of signing: 2015/01/12

TERMS OF PAYMENT

Payment is to be sent by the Buyer in US dollars within 30 (thirty) calendar days from the date of delivery of the goods.

After the delivery the Seller sends to the Buyer the following documents by Express mail:

Invoices (3 copies),

Transport Waybill (1 copy),

Quality Certificate (2 copies),

Shipping Specification (2 copies).

The payment is to be made by the Buyer by bank wire transfer to the following Seller’s account:

The Joint Stock Company «Institute of Nuclear

Materials», (JSC «INM»)

Acc. No. ^[**]

GAZPROMBANK, MOSCOW

SWIFT CODE: GAZPRUMM

Ekaterinburg branch

(Account No. [**])

Intermediary Bank (correspondent):

Deutche Bank Trust Company Americas, New York

New York, USA

SWIFT CODE: BKTR US 33

The payment is to be received on the account of the Seller not later than in 60 (sixty) calendar days from the date of the delivery of the goods

All expenses and commission fees of the Buyer’s Bank are to be paid by the Buyers, all expenses and commission fees of other Banks, including correspondent Banks, are to be paid by the Seller. The funds due to the Seller from amount of payment are less fees and commissions of the corresponding Banks and all other banks except for the Buyer’s Bank commissions. The Buyer’s payment obligation is considered fulfilled when the payment has entered the above-mentioned Seller’s account.

THE SELLERS:	THE BUYERS:
/s/ Dmitrii Vladimirovich Markov	/s/ Dwight Babcock
Director of Closed Stock Company «Science and Inovation»,	Dwight Babcock
managing company for JSC «INM»	CEO IsoRay Medical

-3-

APPENDIX 2

to Contract No. 840/08624332/1609-14

Date of signing: 2015/01/12

GENERAL CONDITIONS OF DELIVERY

1. Terms of delivery.

1.1. When delivering the goods on terms under CPT (INCOTERMS 2010) the SELLER shall hand over the goods to the selected carrier, bears the transportation expense (air freight) to the agreed destination place.

1.1.2. The title as well as all the risks which the goods may be subject to, shall be transferred from the Seller to the Buyer from the ^[**].

1.1.3. The [**].

1.1.4. The Seller is responsible for delivery of the Goods to the Buyer at 12:00 p.m. local time in the designated airport of delivery on the first Monday following the date of shipment.

1.1.5. The Seller is obligated to provide the Buyer with a [**] notice in the event of a planned interruption of service.

2. Quality of the Goods.

2.1. The quality of the goods should meet the contractual technical requirements and should be confirmed by the Quality Certificate issued by the producer of goods.

3. Quantity of Goods.

3.1. The quantity of sent goods and commodities in specified units should be attested by the Shipping Specification drawn up by the producer of goods and commodities or by the Seller, or by the Certificate of Weight, or by the Packing List depending on the character of goods.

4. Terms of Transportation.

4.1. Not later than [**] prior to the date of delivery the Buyer is obliged to provide shipping instructions to the Seller, advising it on all necessary shipping requisites. In case the Buyer fails to send any information in due time without which the shipment of Goods is impossible, it bears all additional expenses arising out of this and all the risks which the goods may be exposed to, starting from the agreed date of delivery or after the expiry of the agreed time of delivery.

5. Notice of Shipment.

5.1. During [**] after the shipment the Seller is to notify the Buyer by fax of the following data:

- data of shipment;

- denomination of goods;

- quantity of goods;

- Contract number;

- quality characteristics (Quality Certificate);

- flight and Waybill numbers.

-4-

6. Delivery and Acceptance of Goods, Claims.

6.1. The Goods are considered delivered by the Seller or the Shipper and accepted by the Buyer with respect to quality and quantity in accordance with the Certificate of Quality and Shipping Specifications including an invoice.

6.2. In case of nonconformity of the Goods quantity or quality to the documents referenced in Section 6.1 above or any other nonconformity, (e.g. damage or loss in transit), the Buyer shall inform the Seller no later than ^[**] days after the receipt of the defective Goods by the Buyer.

6.3. Claims in respect of the Goods quality and quantity shall be accompanied with a written statement drawn up at the place of destination with the participation of the Seller’s representatives and quality control department.

6.4 The Claim must specify:

-- the numbers and dates of the following documents: the Contract, the Purchase Order, the AWB, the Packing Slip and the Certificate of Quality;

-- information on the integrity of the Type-A Shipping package and its internal contents;

-- detailed results of the analytical measurements including analysis methods used;

-- the Buyer’s conclusions regarding failure to meet the quality and/or quantity requirements of the Goods;

-- the cost calculation of a missing quantity of the Goods or the Quantity that cannot be used in production.

The Claim must be signed by the Buyer.

Each claim shall be provided in English and Russian. One copy of the claim shall be sent to the Seller via express mail and another copy shall be sent via fax or electronic mail.

6.5. Seller shall confirm the Claim receipt via fax or electronic mail and issue a reply no later than 7 (seven) business days after the Claim receipt. The reply must be sent in the same manner as the Claim, as described in Section 6.4 above.

6.6. Other than with respect to Goods which are damaged in transit by the Shipper or delayed beyond the time for delivery as required by Section 1.1.4. as a result of Shipper’s sole actions alone, the Buyer shall pay only for the Goods actually received that can be used in production. Payment amounts shall be based on the corrected invoice provided by the Seller, as adjusted for failures in quantity and quality described in Section 6.2 above. The copy of the corrected invoice shall be sent to the Buyer via fax or electronic mail.

6.7. Seller shall not be liable for the changes in the quality or quantity of the Goods caused by either damages caused by or delays resulting from the third party shipper of the Goods. Buyer shall be solely liable for carrying all insurance for Goods in transit.

6.8. In case of return of the claimed goods the Buyer is to deliver the goods in packing which secure safety of goods during transportation.

7. Penalties

7.1. In case the Buyer does not send the payment in the terms stipulated in the Contract the Buyer is to pay the penalty amounted to [**] for each day of delay but no more than [**] of delivered value.

-5-

7.2. The obligation of the defaulting party to pay the penalty arises upon written demand submitted by the other party. In case of delay in performance the penalty shall accrue form the due date of due performance the party of its obligation hereunder.

8. Licenses.

8.1. The Seller is obliged at its risk and expense to obtain and maintain the Export License, and the Buyer - the Import License.

8.2. The Buyer is obliged to inform the Seller on the obtaining the License for importation of goods under the present Contract, in case of necessity of such License, not later than 30 days prior the month of delivery.

9. Force-majeure.

9.1. Neither Party shall bear responsibility for the complete or partial non-performance of any of its obligations (except for failure to pay any sum which has become due under the provisions hereof), if the non-performance results from such circumstances as flood, fire, earthquake and other acts of God as well as war, military operations, blockade, acts or actions of state authorities or any other circumstances beyond the Party’s control that have arisen after the conclusion of the contract. In this case the time stipulated for the performance of an obligation under the contract is extended correspondingly for the period of time of action of these circumstances and their consequences.

9.2. The Party for which the performance of obligation became impossible shall immediately notify in written form the other Party of the beginning, expected time of duration and cessation of above circumstances. Certificate of a Chamber of Commerce (Commerce and Industry) or other competent authority or organization of the respective country shall be a sufficient proof of commencement and cessation of the above circumstances.

10. Termination

10.1. Buyer may terminate this Contract upon 5 days written notice to Seller, upon failure to deliver the Goods meeting the quality and quantity specifications set forth in Section 6.1 above, requested by Buyer for shipment within 7 days of the date scheduled for delivery to the designated airport (Section 1.1.4.) over any consecutive four (4) week period regardless of the reason delivery has not occurred whether as a result of delays caused by a shipper, closure of reactor facilities, or any other factors outside control of the Buyer causing the delay in receipt of the Goods.

10.2. Seller may terminate this Contract upon 5 days written notice if Buyer fails to pay any Invoice within 10 days of the due date, provided that no invoice involving a shipment subject to a Claim shall be due until after such claim is either mutually resolved by the Parties or settled by Arbitration under Section 11.

11. Arbitration.

11.1. All disputes or differences which may arise out of or in connection with the present Contract (including disputes or differences connected with the non-validity and the conclusion of the Contract) are to be settled by Arbitration in accordance with the Rules of the Arbitration Institute of the Chamber of Commerce of Stockholm as are at present in force. The place of Arbitration shall be Stockholm, Sweden. The appointing authority shall be the Arbitration Institute of the Stockholm Chamber of Commerce.

-6-

11.2. The arbitral tribunal shall be composed of a sole arbitrator, appointed by the Arbitration Institute of the Stockholm Chamber of Commerce.

11.3. The present Contract is governed by the substantive law of Sweden with the exclusion of the provisions of conflict of laws. The language to be used in the arbitration proceeding shall be English. The award of the Arbitration is final and binding upon both parties. All expenses with respect to the Arbitration shall be born by the losing Party except as otherwise set forth by the Arbitration award.

12. Other conditions.

12.1. All taxes, duties, fees and other expenses whatsoever connected with the fulfillment of the Contract in the territory of the Seller’s country are to be paid by the Seller and beyond it — at the expenses of the Buyer.

12.2. Neither of the Parties is entitled to transfer its rights and obligations under the Contract to any third party without the written consent of the other Party.

12.3. Any alterations and/or appendices to the Contract are valid only if they are made out in the written form and signed by the duly authorized representatives of the Parties.

12.5. All Appendixes mentioned in the Contract are its integral parts.

12.6. After the signing of the Contract all preceding negotiations and correspondence connected with it are out of force.

12.7. Zarechny Sverdlovsk region is considered to be the place of the Contract signing.

12.8. Facsimile signature of the Contract and all Appendixes and Addendums is permissible.

12.9. The present Contract is signed in Russian and English, both texts being authentic in duplicate, one original for each party concerned.

THE SELLERS: THE BUYERS:

/s/ Dmitrii Vladimirovich Markov	/s/ Dwight Babcock
Director of Closed Stock Company «Science and Inovation»,	Dwight Babcock
managing company for JSC «INM»	CEO IsoRay Medical

-7-

APPENDIX 3

to Contract No. 840/08624332/1620-15

Date of signing: 2015/01/12

PRODUCT QUALITY REQUEREMENTS

1. Physical form.

1.1. Dried product with solids content of approximately ^[**] per shipment.

2. Chemical form.

2.1. Any soluble salt of Cesium. There are no requirements for the determination of the specific chemical composition of the Cesium salt.

3. Radiochemical purity.

3.1. Cs isotopes activity ratios per calibration (alert levels):

Cs-132/Cs-131: < [**];

Cs-134/Cs-131: < [**];

Cs-136/Cs-131: < [**];

Cs-137/Cs-131: < [**];

3.2. Impurities activity ratios per calibration (alert levels):

Ba-131/Cs-131: < [**];

Ba-133/Cs-131: < [**];

La-140/Cs-131: < [**];

Co-60/Cs-131: < [**];

Sb-122/Cs-131: < [**];

Sb-124/Cs-131: < [**];

Au-198/Cs-131: < [**];

Zn-65/Cs-131: < [**];

Ir-192/Cs-131: < [**];

Sum of all other gamma emitters: <[**].

THE SELLERS:	THE BUYERS:
/s/ Dmitrii Vladimirovich Markov	/s/ Dwight Babcock
Director of Closed Stock Company «Science and Inovation»,	Dwight Babcock
managing company for JSC «INM»	CEO IsoRay Medical

-8-

Exhibit 31.1

CERTIFICATION

I, Dwight Babcock certify that:

1. I have reviewed this quarterly report on Form 10-Q of IsoRay, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: May 15, 2015
	/s/ Dwight Babcock
	Dwight Babcock
	Chief Executive Officer
	(Principal Executive Officer)

Exhibit 31.2

CERTIFICATION

I, Brien L. Ragle certify that:

1. I have reviewed this quarterly report on Form 10-Q of IsoRay, Inc.;

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: May 15, 2015

	/s/ Brien L. Ragle
	Brien L. Ragle
	Chief Financial Officer
	(Principal Financial and Accounting Officer)

Exhibit 32

Section 1350 Certifications

Pursuant to 18 U.S.C. § 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, each of the undersigned officers of IsoRay, Inc., a Minnesota corporation (the "Company"), hereby certify that:

To my knowledge, the Quarterly Report on Form 10-Q of the Company for the quarterly period ended March 31, 2015 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: May 15, 2015

	/s/ Dwight Babcock
	DWIGHT BABCOCK
	CHIEF EXECUTIVE OFFICER
	(Principal Executive Officer)

Dated: May 15, 2015

	/s/ Brien Ragle
	BRIEN RAGLE
	CHIEF FINANCIAL OFFICER
	(Principal Financial and Accounting Officer)

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