United
States Securities And Exchange Commission
Washington,
DC 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the Securities Exchange Act of
1934
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Date
of Report (Date of Earliest Event Reported): May 9, 2006
(March
24, 2006)
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ISORAY,
INC.
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(Exact
name of registrant as specified in its charter)
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Minnesota
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000-14247
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41-1458152
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(State
or other jurisdiction
of
incorporation)
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(Commission
File
Number)
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(IRS
Employer
Identification
No.)
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350
Hills Street, Suite 106, Richland, Washington
99354
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(Address
of principal executive offices) (Zip
Code)
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(Address
of principal executive offices) (Zip
Code)
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ITEM 4.02
Non-Reliance on Previously Issued Financial Statements or a Related Audit Report
or Completed Interim Review.
On
March
24, 2006 the Audit Committee of IsoRay, Inc. (the “Company”), following
discussions with representatives of the Company’s independent registered public
accounting firm and in response to comments received from the Securities and
Exchange Commission (the “SEC”) determined that the previously filed
consolidated financial statements of the Company as of and for the nine months
ended June 30, 2005 and the years ended September 30, 2004 and 2003 need to
be
restated.
In
April
2002, the Financial Accounting Standards Board (“FASB”) issued Statement of
Financial Accounting Standards No. 1485 Rescission of FASB Statements No. 4,
44,
and 64, Amendment of FASB Statement No. 13, and Technical Corrections (“FAS
145”). FAS 145 amended APB Opinion No. 30, Reporting the Results of Operations
-
Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary,
Unusual and Infrequently Occurring Events and Transactions (“APB 30”), by
deleting the phrase, “(1) Classifications of gains or losses from extinguishment
of debt pursuant to paragraph 8 of FASB Statement No. 4, Reporting Gains and
Losses from Extinguishment of Debt.” In deleting this phrase, the FASB obviated
the customary classification of material aggregations of extinguishment of
debt
as extraordinary items. However paragraph four of the FAS 145 Summary, leaves
open the possibility of classifying the extinguishment of debt as an
extraordinary item if these items meet the criteria in APB Option 30.
During
the three-month period ended December, 2003 the Company was in the process
of
converting all outstanding debt into shares of the Company's common stock,
and
had continually attempted to contact specific noteholders. These specific
noteholders were unresponsive to the Company's inquiries related to the
conversion of the debts into common stock, as discussed in detail in the
Company's contemporaneously filed financial statements, and the Board, relying
on legal counsel, at the time, acted to create a “technical forgiveness” of the
notes and accrued interest. It was the then-management's position and
interpretation, after reviewing the requirements of both APB 30 and FAS 145
that
the failure to timely convert or post a timely claim for repayment by these
specific noteholders, with concurrence of the Company's then-legal counsel,
and
auditor, met both of the required criteria of “unusual nature” (it is
extraordinary that a note holder would not respond to numerous requests to
change the nature of an investment), and “infrequency of occurrence” (as no
similar event had occurred previously, and none has occurred subsequently) and
should be stated as an “extraordinary item.”
The
SEC
staff has taken recent exception to former management's interpretation, and
requested reclassification of this item from “extraordinary item” to a component
of operating income, and the Company is complying with that
request.
Additionally,
we have also revised our treatment of the forgiveness of debt owed to our former
CEO in the amount of $304,500 revising it from a reduction of operating expenses
to a contribution of capital.
The
impact to the previously filed financial statements is limited to the
restatement of the officer's compensation from expense to contributed capital.
The change in treatment of the note cancellation has no impact on the Company's
results from operations.
As
a
result of the error and pending restatement, the consolidated financial
statements and related report of independent registered public accounting firm
for the nine months ended June 30, 2005 and the years ended September 30, 2003
and 2004 contained in our 2005 Annual Report on Form 10-KSB should no longer
be
relied upon. In addition, the consolidated financial statements for the quarter
ended March 31, 2005 contained in our 2005 Quarterly Report on Form 10-QSB
should no longer be relied upon.
The
estimates herein are subject to change as the Company’s independent registered
public accounting firm and the SEC complete their review. The Company will
amend
the appropriate filings with the SEC to include the restated financial
statements.
SIGNATURES
In
accordance with the requirements of the Exchange Act, the Registrant caused
this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Dated:
May 9, 2006
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IsoRay,
Inc., a Minnesota corporation
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By: |
/s/ Michael K. Dunlop |
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Michael K. Dunlop, CFO |
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