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        States Securities And Exchange Commission</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Washington,
        DC 20549</strong></font></div>
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        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 18pt; FONT-FAMILY: Times New Roman"><strong>FORM
          8-K</strong></font></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>CURRENT
          REPORT</strong></font></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Pursuant
          to Section 13 or 15(d) of the Securities Exchange Act of
          1934</strong></font></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Date
          of
          Report: August 3, 2005</font></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(Date
          of
          earliest event reported: July 28, 2005)</font></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 24pt; FONT-FAMILY: Times New Roman"><strong><u>ISORAY,
          INC.</u></strong></font></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>(Exact
          name of registrant as specified in its charter)</strong></font></div>
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                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Minnesota</u></strong></font></div>
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(State
                    or other jurisdiction </font></div>
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">of
                    incorporation)</font></div>
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                <td valign="middle" width="33%" style="BORDER-BOTTOM: medium none">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>000-14247</u></strong></font></div>
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(Commission
                    </font></div>
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">File
                    Number)</font></div>
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                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>41-1458152</u></strong></font></div>
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(IRS
                    Employer </font></div>
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Identification
                    No.)</font></div>
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        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>350
          Hills Street, Suite 106, Richland, Washington 99354</u></strong></font></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(Address
          of principal executive offices) (Zip Code)</font></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><br></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>(509)
          375-1202</u></strong></font></div>
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          telephone number)</font></div>
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        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>ITEM
        2.01 Completion of Acquisition or Disposition of Assets</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On
        July
        28, 2005, the merger (the "Merger") contemplated by the Merger Agreement
        dated
        as of May 27, 2005 by and among Century Park Pictures Corporation, Century
        Park
        Transitory Subsidiary, Inc., IsoRay Medical, Inc. and certain shareholders
        (the
        "Merger Agreement"), was completed as of the filing of a Certificate of Merger
        with the Secretary of State of Delaware, merging Century Park Transitory
        Subsidiary, Inc. into IsoRay Medical, Inc. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">As
        a
        result of the Merger and pursuant to the Merger Agreement, IsoRay Medical,
        Inc.
        has become a wholly-owned subsidiary of Century Park Pictures Corporation,
        Century Park Pictures Corporation has changed its name to "IsoRay, Inc."
        (hereinafter referred to as the "Registrant"), and the Registrant is issuing
        shares of its common stock and shares of its preferred stock to holders of
        common and preferred stock of IsoRay Medical, Inc. at a rate of 0.842362
        share
        of the Registrant's stock for each share of IsoRay Medical, Inc. stock. Options
        and warrants to purchase common and preferred stock of IsoRay Medical, Inc.
        will
        also be converted at the same rate into options and warrants to purchase
        common
        and preferred stock of the Registrant. At the time of the Merger and following
        its recent 30:1 reverse stock split, the Registrant had approximately 2,498,000
        shares of common stock outstanding. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Following
        the Merger, the Registrant will have 10,237,797 shares of common and preferred
        stock outstanding. The total amount of shares outstanding, on a fully-diluted
        basis, post merger will be 13,880,822, which includes not only shares of
        common
        stock, but also shares of preferred stock, warrants, options and convertible
        debentures that could be exercised or converted into shares of common stock.
        Following the Merger, on a fully diluted basis, the shareholders of IsoRay
        Medical, Inc. own 82% of the Registrant's outstanding securities, and the
        Registrant's shareholders own 18% of the Registrant's outstanding securities.
        </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Among
        the
        conditions to the closing of the Merger, (i) all officers and directors of
        IsoRay Medical, Inc. have agreed to lock-up the shares of the Registrant
        they
        have received as part of the Merger for a period of one year from the closing;
        (ii) a major shareholder of the Registrant has agreed to lock-up 233,333
        shares
        of the Registrant's common stock for a period of one year from the closing;
        (iii) IsoRay Medical, Inc. and the Registrant granted certain piggyback and
        demand registration rights to certain shareholders of the Registrant and
        holders
        of convertible debentures issued by IsoRay Medical, Inc. (for the shares
        of
        common stock into which the debentures are convertible); and (iv) Thomas
        Scallen, the Registrant's former Chief Executive Officer, and a major
        shareholder of the Registrant have each agreed to escrow 50,000 shares of
        the
        Registrant's common stock for a period of three years from the closing as
        collateral for these individuals' possible indemnification obligations pursuant
        to the Merger Agreement. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Business
        of the Registrant and Its Subsidiary</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Cautionary
        Note Regarding Forward-looking Statements and Risk
        Factors</em></strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>The
        Company's Form 10-KSB, any Form 10-QSB or any Form 8-K of the Company or
        any
        other written or oral statements made by or on behalf of the Company may
        contain
        forward-looking statements which reflect the Company's current views with
        respect to future events and financial performance. The words "believe,"
        "expect," "anticipate," "intends," "estimate," "forecast," "project," and
        similar expressions identify forward-looking statements. 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; any statements regarding the validity of our intellectual property
        and patent protection; and any statements of assumptions underlying any of
        the
        foregoing. Such "forward-looking statements" are subject to risks and
        uncertainties set forth from time to time in the Company's SEC reports and
        include, among others, the Risk Factors beginning on page 20
        below.</em></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>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.</em></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
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      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Explanatory
        Note</em></strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Unless
        otherwise indicated or the context otherwise requires, all references below
        in
        this report on Form 8-K to "we," "us" and the "Company" are to IsoRay, Inc.,
        a
        Minnesota corporation and its subsidiary, IsoRay Medical, Inc., a Delaware
        corporation. References to "IsoRay Medical" are to IsoRay Medical, Inc.,
        a
        Delaware corporation. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Business
        of IsoRay, Inc.</em></strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Immediately
        prior to the completion of the Merger, the Registrant did not conduct any
        business operations and had minimal assets and liabilities.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Business
        of IsoRay Medical, Inc.</em></strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">IsoRay
        Medical, Inc. was formed on June 15, 2004 as a corporation in the State of
        Delaware, and in October 2004 it merged with two predecessor companies to
        combine all of the IsoRay operations into one company. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">IsoRay
        Medical intends to utilize its patented radioisotope technology, chemists
        and
        engineers, and management team to create a major therapeutic medical device
        company with a goal of providing improved patient outcomes in the treatment
        of
        prostate cancer and other solid cancer tumors. IsoRay Medical began production
        and sales of its initial Food and Drug Administration ("FDA") approved product,
        the IsoRay Cs</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>131</sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
        brachytherapy seed, in October 2004 for the treatment of prostate cancer.
        Management believes its technology will allow it to capture a leadership
        position in an expanded brachytherapy market. The more clinically beneficial
        characteristics of the Cesium-131 (Cs-131 or Cs</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>131</sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)
        isotope
        are expected to decrease radiation exposure to the patient and reduce the
        severity and duration of side effects, while treating cancer cells as
        effectively, if not more so than I-125 and Pd-103. Cs-131 offers a combination
        of patient benefits management believes are superior to currently available
        brachytherapy isotopes. Cs-131 could also enable meaningful penetration in
        other
        solid tumor applications such as breast cancer, expanding the total available
        market opportunity. The second radioisotope, Yttrium-90 (Y-90 or Y</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>90</sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">),
        is
        currently being used in the treatment of non-Hodgkin's lymphoma and is in
        clinical trials for other applications. Other manufacturers have received
        FDA
        approval for Y</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>90</sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
        and
        IsoRay Medical believes production will not require clinical trials or an
        extensive FDA application process. Production is expected to begin in late
        2005.
</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Management
        believes that the IsoRay Cs</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>131</sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">seed
        represents</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>&#160;</sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">the
        first
        major advancement in brachytherapy technology in over 17 years with attributes
        that management believes could make it the long term "seed of choice" for
        internal radiation procedures. The Cs</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>131</sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">seed
        has
        FDA approval for treatment of malignant disease (e.g. cancers of the head
        and
        neck, brain, breast, prostate, etc.) and may be used in surface, interstitial,
        and intracavity applications for tumors with known
        radiosensitivity.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        Cs</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>131</sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
        isotope
        has specific clinical advantages for treating cancer over Iodine (I-125 or
        I</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>125</sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)
        and
        Palladium (Pd-103 or Pd</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>103</sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">),
        the
        other isotopes commonly used in brachytherapy procedures. IsoRay Medical
        believes that the short half life and high-energy characteristics of
        Cs</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>131</sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
        will
        expand industry applications and facilitate meaningful penetration into the
        treatment of other forms of cancer tumors such as breast cancer. The shorter
        half life of 9.7 days (versus 17.5 days for Pd</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>103</sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
        and 60
        days for I</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>125</sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)
        mitigates negative affects of long radiation periods on healthy tissue and
        is
        believed to reduce the duration of certain side effects. The high energy
        is
        believed to prove more effective on fast growing cancers by aggressively
        attacking cancer cells and disrupting cancer cell re-population cycles. The
        characteristics of Cs</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>131
        </sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">may
        result in the use of 10-30% less seeds per procedure thereby reducing the
        total
        physical radiation dose to the patient and reducing the costs of the procedure
        for both third party payers and the patient. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Brachytherapy
        seeds are small devices used in an internal radiation procedure. In recent
        years
        the procedure has become one of the primary treatments for prostate cancer
        and
        is now used more often than surgical removal of the prostate. The brachytherapy
        procedure places radioactive seeds as close as possible to the cancer tumor
        (the
        word "brachytherapy" means close therapy). The seeds deliver therapeutic
        radiation by</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
        killing
        the immediate tumor cells and cells located in the vicinity of the tumor
        while
        minimizing exposure to adjacent healthy cells.</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
        This
        allows doctors to administer a higher dose of radiation at one time than
        is
        possible with external beam radiation. Each seed contains a radioisotope
        sealed
        within a welded titanium capsule. Approximately 85 to 135 seeds are permanently
        implanted in the prostate in a 45-minute outpatient procedure. The isotope
        decays over time and the seeds become inert. The seeds may be used as a primary
        treatment or in conjunction with other treatment modalities such as external
        beam radiation therapy, chemotherapy, or as treatment for residual disease
        after
        excision of primary tumors. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="left">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="2">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="right">
          </div>
        </div>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">IsoRay
        Medical's second product, Yttrium-90, is also a short-lived (half life of
        64
        hrs) radioisotope that is already used in the treatment of non-Hodgkin's
        lymphoma, leukemia, ovarian cancer, prostate cancer, osteosarcomas, and tumors
        of the breast, lung, kidney, colon and brain. These applications apply primarily
        to metastasized, or spread through the body, cancers. Currently more than
        20
        clinical trials using Y</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>90</sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
        are
        underway in the U.S. Also, Y</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>90
        </sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">is
        used
        extensively at multiple treatment centers in Europe. Several members of the
        current IsoRay Medical team developed a process to produce high-purity
        Y</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>90
        </sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">for
        medical applications during the mid-1990s. Currently over 90 percent of the
        Y</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>90
        </sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">used
        in
        the U.S. is imported. IsoRay Medical's management believes there is an immediate
        market opportunity for a highly purified Y</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>90</sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
        </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">IsoRay
        Medical and its predecessor companies have accomplished the following key
        milestones: </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div>
        <table cellpadding="0" cellspacing="0" id="list" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="right" style="WIDTH: 72pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#168;&#160;&#160;</font></td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Development
                  of treatment protocol by leading oncologist (January
                  2005);</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div>
        <table cellpadding="0" cellspacing="0" id="list" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="right" style="WIDTH: 72pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#168;&#160;&#160;</font></td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Treated
                  the first patient (October 2004);</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div>
        <table cellpadding="0" cellspacing="0" id="list" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="right" style="WIDTH: 72pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#168;&#160;&#160;</font></td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Production
                  of the Cs</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>131</sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">seed
                  commenced (August 2004);</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div>
        <table cellpadding="0" cellspacing="0" id="list" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="right" style="WIDTH: 72pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#168;&#160;&#160;</font></td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Five
                  additional patent applications filed for Cs-131 and Y-90 processes
                  (November 2003 - August 2004);</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div>
        <table cellpadding="0" cellspacing="0" id="list" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="right" style="WIDTH: 72pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#168;&#160;&#160;</font></td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Radioactive
                  Materials License received from Washington State Department of
                  Health
                  (July 2004);</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div>
        <table cellpadding="0" cellspacing="0" id="list" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="right" style="WIDTH: 72pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#168;&#160;&#160;</font></td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Hired
                  first two sales and marketing executives (July 2004);
                  </font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div>
        <table cellpadding="0" cellspacing="0" id="list" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="right" style="WIDTH: 72pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#168;&#160;&#160;</font></td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">ISO-9000
                  Quality Management System and production operating procedures (under
                  continuing development);</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div>
        <table cellpadding="0" cellspacing="0" id="list" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="right" style="WIDTH: 72pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#168;&#160;&#160;</font></td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Completed
                  the Seed Integration Test object required by the Washington State
                  Department of Health and the FDA (October 2004);
                  </font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div>
        <table cellpadding="0" cellspacing="0" id="list" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="right" style="WIDTH: 72pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#168;&#160;&#160;</font></td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Signed
                  the Commercial Work for Others Agreement between Battelle (manager
                  of the
                  Pacific Northwest National Laboratory or PNNL) and IsoRay Medical,
                  allowing initial production of seeds, through 2006, at PNNL (April
                  2004);</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div>
        <table cellpadding="0" cellspacing="0" id="list" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="right" style="WIDTH: 72pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#168;&#160;&#160;</font></td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Raised
                  over $10.3 M in debt and equity funding (September 2003 - July
                  2005);</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div>
        <table cellpadding="0" cellspacing="0" id="list" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="right" style="WIDTH: 72pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#168;&#160;&#160;</font></td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Obtained
                  favorable Medicare reimbursement codes for the Cs-131 brachytherapy
                  seed
                  (November 2003);</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div>
        <table cellpadding="0" cellspacing="0" id="list" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="right" style="WIDTH: 72pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#168;&#160;&#160;</font></td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">FDA
                  approval to market the first product: the Cs-131 brachytherapy
                  seed (March
                  2003);</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div>
        <table cellpadding="0" cellspacing="0" id="list" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="right" style="WIDTH: 72pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#168;&#160;&#160;</font></td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Initial
                  seed production and design verification, computer modeling of the
                  radiation profile, and actual dosimetric data compiled by the National
                  Institute of Standards and Technology and PNNL (October 2002);
                  and</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div>
        <table cellpadding="0" cellspacing="0" id="list" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="right" style="WIDTH: 72pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#168;&#160;&#160;</font></td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Patent
                  obtained for Cs-131 isotope separation and purification (May 2000).
                  </font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Certain
        Defined Terms</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        technical terms defined below are important to understand as they are used
        throughout this discussion of the business of IsoRay Medical. When used in
        this
        report, unless the context requires otherwise:</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>"Brachytherapy"</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
        refers
        to the process of placing therapeutic radiation sources in, or near, diseased
        tissue. Brachytherapy is derived from a Greek term meaning "short distance"
        therapy. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="left">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="2">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="right">
          </div>
        </div>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>"Cesium-131"</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
        or
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>"Cs-131"</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
        is an
        isotope of the element Cesium that gives off low energy, "soft" x-rays as
        it
        decays. Cs-131 decays to 50% of its original activity every 9.7 days, becoming
        essentially inert after 100 days. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>"Chelate"</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
        and
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>"bifunctional
        chelate"</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
        are
        molecules to which an element or radioisotope is chemically bound, typically
        having a biologically active portion that selectively binds to cancerous
        or
        diseased cells. Chelate also refers to the process of attaching an element
        or
        radioisotope to a molecule. A bifunctional chelate is a chelate with two
        functional groups able to form two chemical bonds per molecule. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>"EBRT"</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
        (external beam radiation therapy) is the external treatment of prostate cancer
        using an x-ray-like machine that targets a beam of radiation at the cancer
        site.
        The treatment damages genetic material within the cancer cells, which prevents
        the cells from growing and the affected cells eventually die. Treatments
        are
        generally performed at an outpatient center five days a week for seven or
        eight
        weeks.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>"Half
        life"</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
        means
        the time required for a radioisotope to decay to one-half of its previous
        activity. The amount of radiation emitted thus decreases to 25% of original
        activity in two half-lives, 12.5% in three half-lives, and so on.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>"Isotope"</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
        refers
        to atoms of the same element that have different atomic masses. The word
        "isotope" means "same place," referring to the fact that isotopes of a given
        element have the same atomic number and hence occupy the same place in the
        Periodic Table. Thus, they are very similar in their chemical behavior.
</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>"Cs</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup><strong>131</strong></sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>seed"</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
        is the
        name by which IsoRay Medical's first product, the Cesium-131-based brachytherapy
        seed, is currently known. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>"Pure-beta
        particle emitter"</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
        is a
        radioisotope whose only emissions during radioactive decay are electrons.
        Beta
        particles can travel several millimeters in tissue.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>"RP"</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
        (radical
        prostatectomy or prostatectomy) is the complete surgical removal of the
        prostate, under significant anesthesia. Two main types of surgery have evolved:
        nerve-sparing and non nerve-sparing. The nerve-sparing surgery is designed
        to
        minimize damage to the nerve that controls penile erection.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>"Radiobiologic"</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
        is
        characteristic of the effects of radiation on organisms or tissues, most
        commonly the effectiveness of therapeutic radiation in interrupting cell
        growth
        and replication.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>"Radioisotope"</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
        is a
        natural or man-made isotope of an element that spontaneously decays while
        emitting ionizing radiation.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>"Seed"</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
        is a
        common term for small radiation sources having a radioisotope sealed within
        a
        biocompatible capsule such as gold or titanium, suitable for temporary or
        permanent brachytherapy implantation.</font></div>
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      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>"Therapeutic
        radiation" </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">refers
        to
        ionizing radiation with sufficient energy to disrupt basic biological processes
        of cells.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>"Yttrium-90"</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
        (Y-90)
        is a radioisotope that emits high energy beta particles with a half life
        of 2.67
        days.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>"Zirconium-90"</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
        is a
        stable (non-radioactive) decay product of Yttrium-90. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Industry
        Information</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Incidence
        of Prostate Cancer</em></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Excluding
        skin cancer, prostate cancer is the most common form of cancer, and the second
        leading cause of cancer deaths, in men. The American Cancer Society estimated
        there would be about 230,900 new cases of prostate cancer diagnosed and an
        estimated 29,900 deaths associated with the disease in the United States
        during
        2004. Because of early detection techniques (e.g. PSA) approximately 70%
        (154,700) of these cases are potentially treatable with seed brachytherapy,
        when
        the cancers are still locally confined within the prostate. </font></div>
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      <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
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          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="2">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="right">
          </div>
        </div>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        expanding population of men over age 55 and increased PSA screening leading
        to
        earlier diagnosis of prostate cancer in the U.S. may lead to growth in the
        number of prostate cancer cases treatable with brachytherapy. Also, positive
        changes in Medicare reimbursement for brachytherapy seeds together with a
        decrease in reimbursement rates for competing technologies have created a
        more
        favorable financial environment and stimulated market expansion. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Treatment
        Options and Protocol</em></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
        addition to brachytherapy, localized prostate cancer is most commonly treated
        with radical prostatectomy (RP) and external beam radiation therapy (EBRT).
        Other treatments include cryosurgery, hormone therapy, watchful waiting,
        and
        finasteride, a drug commonly prescribed to treat benign enlargement of the
        prostate and male baldness. Some of these therapies may be combined in special
        cases to address a specific cancer stage or patient need. When the cancerous
        tissue is not completely eliminated, the cancer typically returns to the
        primary
        site, often with metastases to other areas. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Prostate
        cancer patients electing seed therapy first undergo an ultrasound test or
        CT
        scan, which generates a two-dimensional image of the prostate. With the
        assistance of a computer program, a three-dimensional treatment plan is created
        that calculates the number and placement of the seeds required for the best
        possible distribution of radiation to the prostate. Once the implant model
        has
        been constructed, the procedure is scheduled and the seeds are ordered. The
        number of seeds implanted normally ranges from 85 to 135, with the number
        of
        seeds varying with the size of the prostate. The procedure is usually performed
        under local anesthesia in an outpatient setting. The seeds are implanted
        using
        needles inserted into the prostate. When all seeds have been inserted, seed
        placement is verified through an ultrasound image, CT scan, fluoroscope or
        MRI.
        An experienced practitioner typically performs the procedure in approximately
        45
        minutes, with the patient normally returning home the same day. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Brachytherapy
        seeds</em></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">One
        of
        the first reports in the medical literature regarding brachytherapy seeds
        that
        deliver "soft x-ray" radiation directly to tumors by permanent implantation
        appeared in 1965, authored by Donald C. Lawrence and U.K. Henschke. Don Lawrence
        later pioneered development of the titanium-encapsulated I-125 brachytherapy
        seed. His company, Lawrence Soft Ray Inc., provided the world's supply of
        seeds
        from 1967 to 1978 until the 3M Corporation purchased the technology. Eventually
        3M sold the business to Amersham, which spun off this business to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">ONCURA</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
        today
        the market leader in Iodine-125 seeds. All commercially available seeds trace
        their origin to Mr. Lawrence's invention. Don Lawrence was a founder of IsoRay,
        LLC, a predecessor company to IsoRay Medical.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Brachytherapy
        has been used as a treatment for prostate cancer for more than 30 years.
        Formerly, seeds containing the radioactive isotope Iodine-125 or I-125 were
        implanted in prostate tumors through open surgery. However, this technique
        fell
        into disfavor because the seeds were often haphazardly arranged resulting
        in
        radiation not reaching all of the targeted cancerous prostate tissue.
        Compounding this was the fact that often an unintended radiation dose was
        delivered to healthy surrounding tissues, particularly the urethra and rectum.
        Clinical results indicate that the brachytherapy insertion procedure, computer
        modeling, advanced imaging and other techniques used in brachytherapy today
        have
        significantly ameliorated these drawbacks. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        introduction of Palladium-103 or Pd-103 in the mid-1980's represented a major
        technology advance in brachytherapy and played a significant role in the
        dramatic increase in the number of brachytherapy procedures performed. Within
        a
        relatively short time, Pd-103 captured 40% of the growing brachytherapy market.
        </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Cs</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>131
        </sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">represents</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>&#160;</sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">the
        first
        major advancement in brachytherapy technology in over 17 years with attributes
        that management believes could make it the long term "seed of choice" for
        internal radiation procedures. The Cs</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>131</sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">seed
        </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">has
        </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">specific
        clinical advantages </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">for
        treating cancer </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">over
        I-125 and Pd-103. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
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          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">5</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
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          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="right">
          </div>
        </div>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">There
        is
        a large and growing potential market for the Company's products. Several
        significant clinical and market factors are contributing to the increasing
        popularity of the brachytherapy procedure. Brachytherapy has become the
        treatment of choice for early-stage prostate cancer and is now more common
        than
        surgery. Brachytherapy has significant advantages over competing treatments
        including lower cost, better survival data, fewer side effects, a faster
        recovery time and the convenience of a single 30 to 45 minute outpatient
        procedure. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Clinical
        Results</em></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Long
        term
        survival data is now available for brachytherapy with Pd-103 and I-125, which
        support the efficacy of brachytherapy. Clinical data indicates that
        brachytherapy offers success rates for early-stage prostate cancer treatment
        that are comparable to or better than those of RP or EBRT. While clinical
        studies of brachytherapy to date have focused on results from brachytherapy
        with
        Pd-103 and I-125, management believes that this data will be relevant for
        brachytherapy with Cs-131, and Cs-131 may offer improved clinical outcomes
        over
        Pd-103 and I-125, given its shorter half life.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Improved
        patient outcomes.</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
        A number
        of published studies on the use of brachytherapy in the treatment of early-stage
        prostate cancer have been very positive. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div>
        <table cellpadding="0" cellspacing="0" id="list" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="right" style="WIDTH: 90pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">A
                  nine-year clinical study published in the March 2000 issue of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>International
                  Journal of Radiation Oncology, Biology and Physics</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                  reported that 83.5% of patients treated with the Pd-103 device
                  were
                  cancer-free at nine years. The study was conducted by Dr. John
                  Blasko of
                  the Seattle Prostate Institute and included 230 patients with clinical
                  stage T1 and T2 prostate cancer. Only 3% experienced cancer recurrence
                  in
                  the prostate. </font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div>
        <table cellpadding="0" cellspacing="0" id="list" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="right" style="WIDTH: 90pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Results
                  from a 10-year study conducted by Dr. Datolli and Dr. Wallner published
                  in
                  the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>International
                  Journal of Radiation Oncology, Biology and Physics</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                  in
                  September 2002, were presented at the October 2002 American Society
                  for
                  Therapeutic Radiology and Oncology conference confirming the effectiveness
                  of the Pd-103 seed in patients with aggressive cancer who previously
                  were
                  considered poor candidates for brachytherapy. The 10-year study
                  was
                  comprised of 175 patients with Stage T2-T3 prostate cancer treated
                  from
                  1991 through 1995. Of these patients, 79 percent remained completely
                  free
                  of cancer without the use of hormonal therapy or
                  chemotherapy.</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div>
        <table cellpadding="0" cellspacing="0" id="list" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="right" style="WIDTH: 90pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">A
                  study by the Northwest Prostate Institute in Seattle, Washington
                  reported
                  79% disease-free survival at 12 years for brachytherapy in combination
                  with external beam radiation (Ragde, </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>et
                  al</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.,
                  </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Cancer,</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                  July 2000). The chance of cure from brachytherapy is nearly 50%
                  higher
                  than for other therapies for men with large cancers (PSA 10-20)
                  and over
                  twice as high as other therapies for men with the largest cancers
                  (PSA
                  20+) (K. Wallner, </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Prostate
                  Cancer: A Non-Surgical Perspective,</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                  Smart Medicine Press, 2000). </font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        table
        below summarizes published results comparing survival rates 10 years after
        treatment for patients undergoing different types of treatment. Biochemical
        Disease-Free Survival is defined as the percentage of patients with normal
        prostate specific antigen or PSA after treatment and is the most rigorous
        definition of treatment success. Disease-Specific Survival is defined as
        the
        percentage of patients not dying from prostate cancer. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="left">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="2">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="right">
          </div>
        </div>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Comparative
        Survival and Disease-Free States</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div align="left">
        <table border="1" cellpadding="0" cellspacing="0" width="100%">

            <tr bgcolor="#ffffff">
              <td valign="top" width="22%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Treatment</font></div>
              </td>
              <td valign="top" width="16%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 9pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Seed
                  Implants</font></div>
              </td>
              <td valign="top" width="17%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 9pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">External
                  Radiation</font></div>
              </td>
              <td valign="top" width="13%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Prostatectomy</font></div>
              </td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="top" width="22%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Disease-Free
                  Survival</font></div>
              </td>
              <td valign="top" width="16%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">64%
                  - 85%</font></div>
              </td>
              <td valign="top" width="17%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">59%
                  - 78%</font></div>
              </td>
              <td valign="top" width="13%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">65%</font></div>
              </td>
            </tr>
            <tr bgcolor="#ffffff">
              <td align="left" valign="top" width="22%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Disease-Specific
                  Survival</font></div>
              </td>
              <td valign="top" width="16%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">98%
                  - 100%</font></div>
              </td>
              <td valign="top" width="17%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">75%
                  - 97%</font></div>
              </td>
              <td valign="top" width="13%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">84%
                  - 85%</font></div>
              </td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="justify" colspan="4" valign="top" width="68%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Source:
                  Kaiser Brachytherapy Department, Roseville,
                  CA</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Reduced
        Incidence of Side Effects.</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
        Because
        the IsoRay Cs</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>131</sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
        seed
        delivers a highly concentrated and confined dose of radiation directly to
        the
        prostate, healthy surrounding tissues and organs typically experience less
        radiation exposure. Management believes, and initial results appear to support,
        that this should result in fewer incidents of side effects and complications
        than may be incurred with other conventional therapies, and if side effects
        do
        occur, they should be lower in intensity and resolve more rapidly than those
        experienced with competing I-125 and Pd-103 isotopes.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Sexual
        potency and urinary incontinence are two major concerns men face when choosing
        among various forms of treatment for prostate cancer. Kaiser patient education
        information lists the following data from clinical studies that monitored
        rates
        of impotence and incontinence. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Comparative
        Rates of Potency and Incontinence</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div>
        <table border="1" cellpadding="0" cellspacing="0" width="100%">

            <tr bgcolor="#ffffff">
              <td valign="top" width="15%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Treatment</strong></font></div>
              </td>
              <td valign="top" width="13%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Seed
                  implants</strong></font></div>
              </td>
              <td valign="top" width="13%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>External
                  Radiation</strong></font></div>
              </td>
              <td valign="top" width="16%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Prostatectomy
                  (nerve sparing)</strong></font></div>
              </td>
              <td valign="top" width="17%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Prostatectomy
                  (non nerve-sparing)</strong></font></div>
              </td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td valign="top" width="15%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Rate
                  of Impotence</font></div>
              </td>
              <td valign="top" width="13%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">10%
                  - 50%</font></div>
              </td>
              <td valign="top" width="13%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">40%
                  - 60%</font></div>
              </td>
              <td valign="top" width="16%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">14%
                  - 56%</font></div>
              </td>
              <td valign="top" width="17%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">65%
                  - 90%</font></div>
              </td>
            </tr>
            <tr bgcolor="#ffffff">
              <td valign="top" width="15%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Urinary
                  Incontinence</font></div>
              </td>
              <td valign="top" width="13%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1%</font></div>
              </td>
              <td valign="top" width="13%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1%</font></div>
              </td>
              <td valign="top" width="16%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">NR</font></div>
              </td>
              <td valign="top" width="17%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">7%
                  - 8%</font></div>
              </td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="justify" colspan="5" valign="top" width="73%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Source:
                  Kaiser Brachytherapy Department, Roseville,
                  CA</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Favorable
        Market Factors</em></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Lower
        Treatment Cost</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
        The
        total one-time cost of brachytherapy ranges from $13,000 to $17,000 per
        procedure. This is approximately two-thirds the cost of a radical prostatectomy
        or RP, which ranges from $19,000 to $25,000, excluding treatment for side
        effects and post-operative complications that can be quite costly. Brachytherapy
        cost is comparable to the cost of EBRT (external beam radiation), which ranges
        from $13,000 up to $40,000 for a seven to nine week course of treatment.
        </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Favorable
        Demographics</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
        Prostate cancer incidence and mortality increase with age. Prostate cancer
        is
        found most often in men who are over the age of 50. The National Cancer
        Institute has reported that the incidence of prostate cancer increases
        dramatically in men over the age of 55. Currently, one out of every six men
        is
        at lifetime risk of developing prostate cancer. More than seven out of ten
        men
        diagnosed with prostate cancer are over the age of 65. At the age of 70,
        the
        chance of having prostate cancer is 12 times greater than at age 50. According
        to the American Cancer Society, prostate cancer incidence rates increased
        between 1988 and 1992 due to earlier diagnosis in men who otherwise had no
        sign
        of symptoms. Early screening has fostered a decline in the prostate cancer
        death
        rate since 1990. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        number of prostate cancer cases in the U.S. is expected to increase due to
        the
        expanding population of men over the age of 55. The U.S. Census Bureau estimates
        this segment of the population will increase from 25.9 million men in 2000
        to 32
        million men by 2008 - a 24% increase. Extrapolating that data, management
        believes that the U.S. will provide over 180,000 candidates annually for
        prostate brachytherapy by 2008. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Increased
        PSA Screening</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
        Early
        PSA screening and testing leads to early diagnosis. The American Cancer Society
        recommends that men without symptoms or risk factors and who have a life
        expectancy of at least ten years, should begin regular annual medical exams
        at
        the age of 50, and believes that health care providers should offer as part
        of
        the exam the prostate-specific antigen blood test. The PSA blood test determines
        the amount of prostate specific antigen present in the blood. PSA is found
        in a
        protein secreted by the prostate, and elevated levels of PSA can be associated
        with either prostatitis (a noncancerous inflammatory condition) or a
        proliferation of cancer cells in the prostate. Industry studies have shown
        that
        the PSA test can detect prostate cancer up to five years earlier than the
        digital rectal exam. Ultrasound tests and biopsies are typically performed
        on
        patients with elevated PSA readings to confirm the existence of cancer.
</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="left">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">7</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="2">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="right">
          </div>
        </div>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Our
        Strategy</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        key
        elements of IsoRay Medical's strategy include: </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div>
        <table cellpadding="0" cellspacing="0" id="list" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="right" style="WIDTH: 72pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Introduce
                  the IsoRay Cs</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup><em>131</em></sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>seed
                  into the U.S. brachytherapy market</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
                  Utilizing a direct sales organization and selected channel partners,
                  IsoRay Medical intends to capture a leadership position by expanding
                  overall use of the brachytherapy procedure for prostate cancer
                  capturing
                  much of the incremental market growth and taking market share from
                  existing competitors. </font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div>
        <table cellpadding="0" cellspacing="0" id="list" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="right" style="WIDTH: 72pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Create
                  a state-of-the-art manufacturing process</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
                  IsoRay Medical plans to construct a state-of- the-art manufacturing
                  facility in Richland, Washington, or if I-297 presents a strategic
                  roadblock to the Company, in another state, implementing our proprietary
                  manufacturing process designed to improve profit margins, provide
                  adequate
                  manufacturing capacity to support future growth and ensure quality
                  control. Working with leading scientists, IsoRay Medical is in
                  the process
                  of designing a proprietary separation process for the manufacturing
                  of
                  enriched barium, a key source material for Cs</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>131</sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                  to ensure adequate supply and greater manufacturing efficiencies.
                  Also
                  planned is a value-added repackaging service to supply pre-loaded
                  needles,
                  stranded seeds and pre-loaded cartridges used in the implant procedure.
                  IsoRay Medical plans to enter into a long-term program with a leading
                  brachytherapy seed automation design and engineering company to
                  design and
                  build a highly automated manufacturing process to help ensure constant
                  quality and improve profitability. </font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div>
        <table cellpadding="0" cellspacing="0" id="list" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="right" style="WIDTH: 72pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Introduce
                  Cs</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup><em>131</em></sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>
                  therapies for other solid cancer tumors</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
                  IsoRay Medical intends to partner with other companies to develop
                  the
                  appropriate delivery technology and therapeutic delivery systems
                  for
                  treatment of other solid cancer tumors such as breast, neck, and
                  brain
                  cancer. IsoRay Medical's management believes that the first major
                  opportunity may be for the use of Cesium 131 for adjunct therapy
                  for the
                  treatment of breast cancer. </font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div>
        <table cellpadding="0" cellspacing="0" id="list" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="right" style="WIDTH: 72pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Introduce
                  other isotope products to the U.S. market</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
                  IsoRay Medical plans to introduce its Yttrium-90 radioisotope in
                  late
                  2005. Currently, FDA approved Y</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>90</sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                  manufactured by other suppliers is used in the treatment of non-Hodgkin's
                  lymphoma and is in clinical trials for other applications. Other
                  products
                  may be added in the future as they are developed. IsoRay Medical
                  has the
                  ability to make several different isotopes for multiple medical
                  and
                  industrial applications. During 2005 the Company plans to identify
                  and
                  prioritize additional market opportunities for these
                  isotopes.</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div>
        <table cellpadding="0" cellspacing="0" id="list" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="right" style="WIDTH: 72pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Support
                  clinical research and sustained product development</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
                  The Company plans to structure </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">and
                  support clinical studies on the therapeutic benefits of Cs-131
                  for the
                  treatment of solid tumors and other patient benefits. We will support
                  clinical studies with several leading radiation oncologists to
                  clinically
                  document patient outcomes, provide support for our product claims
                  and
                  compare the performance of our seeds to competing seeds. IsoRay
                  Medical
                  plans to sustain long-term growth by implementing research and
                  development
                  programs with leading medical institutions in the U.S. to identify
                  and
                  develop other applications for IsoRay Medical's core radioisotope
                  technology. </font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Management
        believes there is a large and growing addressable market for IsoRay Medical's
        products. Several factors appear to contribute to the increasing popularity
        of
        the brachytherapy procedure. Long-term survival data is now available for
        brachytherapy. Brachytherapy has become the treatment of choice for early-stage
        prostate cancer and is now more common than surgery. Brachytherapy has
        significant advantages over competing treatments including lower cost, better
        survival data, fewer side effects, a faster recovery time and the convenience
        of
        a 45 minute outpatient procedure. Over 50,000 procedures were forecasted
        to
        occur in the U.S. in 2004. This represents a $150 million seed market that
        is
        forecast to grow to $242 million by 2009 according to a recent market survey
        performed by Frost &amp; Sullivan, a nationally recognized market research firm.
        IsoRay Medical's management believes that the Cs</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>131</sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">seed
        will
        add incremental growth to the existing brachytherapy seed market as physicians
        who are currently reluctant to recommend brachytherapy for their prostate
        patients due, in part, to side effects caused by longer-lived isotopes, become
        comfortable with the shorter half life of Cs-131, and the anticipated reduction
        of side effects. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="left">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">8</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="2">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="right">
          </div>
        </div>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Products</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">IsoRay
        Medical markets the Cs</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>131</sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">seed
        and
        intends to market Yttrium-90 and other radioactive isotopes in the future.
        Additionally, it will attempt to create a market, primarily in clinical trials,
        for the liquid Cs-131 isotope, which is created in the production of IsoRay
        Medical's Cs</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>131</sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">seed.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Cs-131
        Seed Product Description and Use in Cancer Treatment</em></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Brachytherapy
        seeds are small devices that deliver therapeutic radiation directly to tumors.
        Each seed contains a radioisotope sealed within a welded titanium case. In
        prostate cancer procedures, approximately 85 to 135 seeds are permanently
        implanted in a 45 minute outpatient procedure. The isotope decays over time,
        and
        the seeds become inert. The seeds may be used as a primary treatment or in
        conjunction with other treatment modalities such as external beam radiation
        therapy, chemotherapy, or as treatment for residual disease after excision
        of
        primary tumors. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Significant
        advantages of brachytherapy over competing treatments include: fewer side
        effects (impotence and incontinence are reduced when seeds are used to treat
        prostate cancer); short, convenient outpatient procedure (typically 30 -
        45
        minutes); faster recovery time (days vs. weeks); lower cost than other treatment
        modalities; higher cure rates for solid tumors; and less pain. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">A
        diagram
        of the IsoRay seed appears in Figure 1. </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        seed
        contains an x-ray opaque marker surrounded by a ceramic substrate to which
        the
        isotope is chemically attached. The seed core is placed in a titanium tube
        and
        precision laser welded to form a hermetically sealed source of therapeutic
        radiation suitable for permanent implantation. The x-ray marker allows the
        physician to accurately determine seed placement within the tumor.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><img src="fig1diagram.jpg" alt=""></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 9pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Figure
        1: Cross section of Cs</em></font><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman, serif"><sup><em>131</em></sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>seed</em></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Competitive
        Advantages of Cs-131</em></font></div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Cs</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>131</sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
        has
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">specific
        clinical advantages </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">for
        treating cancer </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">over
        I-125 and Pd-103, the other isotopes currently used in brachytherapy seeds.
        The
        table below highlights the key differences of the three seeds. The Company
        believes that the short half life, high-energy characteristics of Cs</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>131</sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
        will
        increase industry growth and facilitate meaningful penetration into the
        treatment of other forms of cancer tumors such as breast cancer. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="left">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">9</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="2">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="right">
          </div>
        </div>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Brachytherapy
        Isotope Comparison</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div>
        <table border="1" cellpadding="0" cellspacing="0" width="100%">

            <tr bgcolor="#ffffff">
              <td align="left" valign="top" width="20%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              <td valign="top" width="16%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Cesium-131</strong></font></div>
              </td>
              <td valign="top" width="19%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Palladium-103</strong></font></div>
              </td>
              <td valign="top" width="22%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Iodine-125</strong></font></div>
              </td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="top" width="20%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Half
                  Life</strong></font></div>
              </td>
              <td valign="top" width="16%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">9.7
                  Days</font></div>
              </td>
              <td valign="top" width="19%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">17.5
                  days</font></div>
              </td>
              <td valign="top" width="22%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">60
                  days</font></div>
              </td>
            </tr>
            <tr bgcolor="#ffffff">
              <td align="left" valign="top" width="20%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Energy
                  </strong></font></div>
              </td>
              <td valign="top" width="16%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">29
                  KeV</font></div>
              </td>
              <td valign="top" width="19%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">22
                  KeV</font></div>
              </td>
              <td valign="top" width="22%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">28
                  KeV</font></div>
              </td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="top" width="20%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Dose
                  Delivery</strong></font></div>
              </td>
              <td valign="top" width="16%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">90%
                  in 33 days</font></div>
              </td>
              <td valign="top" width="19%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">90%
                  in 58 days</font></div>
              </td>
              <td valign="top" width="22%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">90%
                  in 204 days</font></div>
              </td>
            </tr>
            <tr bgcolor="#ffffff">
              <td align="left" valign="top" width="20%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Total
                  Dose</strong></font></div>
              </td>
              <td valign="top" width="16%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">110
                  Gy</font></div>
              </td>
              <td valign="top" width="19%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">125
                  Gy</font></div>
              </td>
              <td valign="top" width="22%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">145
                  Gy</font></div>
              </td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="top" width="20%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Anisothrophy
                  Factor*</strong></font></div>
              </td>
              <td valign="top" width="16%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.969</font></div>
              </td>
              <td valign="top" width="19%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.877
                  (TheraSeed 2000)</font></div>
              </td>
              <td valign="top" width="22%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.930
                  (Oncura 6711)</font></div>
              </td>
            </tr>
            <tr bgcolor="#ffffff">
              <td align="left" colspan="4" valign="top" width="79%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">*degree
                  of symmetry of therapeutic dose, a factor of 1 indicates
                  symmetry.</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Shorter
        Half life</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>&#160;</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        Company believes that Cesium-131's shorter half life of 9.7 days will prove
        to
        have greater biological effectiveness by mitigating the negative effects
        of long
        radiation periods on healthy tissue and reducing the duration of any side
        effects. A shorter half life produces more intense therapeutic radiation
        over a
        shorter period of time and may reduce the potential for cancer cell survival
        and
        tumor recurrence. Radiobiological studies indicate that shorter-lived isotopes
        are more effective against faster growing tumors (Dicker, et. al., </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Semin.
        Urol. Onc.</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
        18:2,
        May 2000). Other researchers conclude that "half-lives in the approximate
        range
        4-17 days are likely to be significantly better for a wide range of tumor
        types
        for which the radiobiologic characteristics may not be precisely known in
        advance." (Armpilia CI, et. al., </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Int.
        J. Rad. Oncol. Biol. Phys. </em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">55:2,
        February 2003).</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>High
        Energy</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
        The
        Cs-131 isotope decay energy of 29 to 34 KeV (versus 22 KeV for P-103 and
        28 KeV
        for I-125) generates a therapeutic radiation field that extends beyond the
        current dosimetry reference point of 1 cm. Pd-103 seeds emit radiation that
        does
        not penetrate as far in tissue (up to 40% lower than Cs-131) and therefore
        more
        Pd-103 seeds are required to attain the same therapeutic dose as if Cs-131
        seeds
        were used. This increase in the number of seeds implanted increases the time
        and
        cost required to perform Pd-103-based procedures. </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        h</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">igher
        energy from Cs</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>131</sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
        seeds is
        more effective on fast growing cancers than other isotopes by aggressively
        attacking cancer cells and disrupting cancer cell re-population cycles,
        resulting in reduced side effects.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Reduced
        side effects</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>&#160;</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Because
        the IsoRay Cs</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>131</sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">seed
        device delivers a highly concentrated and confined dose of radiation directly
        to
        the prostate, healthy surrounding tissues and organs are exposed to less
        radiation than with other treatments. This should result in fewer and less
        severe side effects and complications than may be incurred with other
        conventional therapies.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Shape
        of radiation field</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>&#160;</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        shape
        of the radiation field generated by a Cs</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>131</sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">seed
        is
        uniform, and this uniformity may result in better radiation dose coverage
        and
        improved therapeutic effectiveness. The adjacent picture is an autoradiograph
        (film exposed by radiation from the seed itself) of an IsoRay seed, which
        shows
        this uniformity of the radiation field that is expected to result in better
        radiation dose coverage. IsoRay Medical has conducted extensive computer
        modeling and testing of the seed design. The IsoRay seed has passed all Nuclear
        Regulatory Commission ("</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>NRC</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">")
        requirements for sealed radioactive sources. Dose uniformity was tested and
        the
        results compared well to those predicted by industry standard computer modeling
        techniques. In the third quarter of 2002, seeds were sent to the National
        Institute for Standards and Technology for calibration, and have undergone
        dosimetry testing according to American Association of Physicists in Medicine
        ("AAPM") protocols. Data from these tests were compiled in IsoRay Medical's
        510(k) submission to the FDA. The results of these tests showed superior
        dose
        characteristics relative to the leading I-125 and Pd-103 seeds.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><img src="fig2diagram.jpg" alt=""></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup><em>Figure
          2. Cs131 seed Autoradiograph</em></sup></font></div>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Reduced
        Costs</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
        The
        characteristics of Cs</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>131
        </sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">seeds
        described above may result in the use of 10%-30% less seeds per procedure,
        compared to other isotopes, thereby reducing the total physical radiation
        dose
        to the patient and reducing the costs of the procedure for the third party
        payers and the patient. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="left">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">10</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="2">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="right">
          </div>
        </div>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Yttrium-90</em></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Y-90
        and
        Cs-131 are short-lived isotopes that are well suited to treatment of tumors
        by
        cell-directed therapy. The Company plans to introduce its second product,
        Yttrium-90, by the end of 2005. When used in combination with molecular targets,
        Y-90 is proving to be an ideal isotope to provide localized radiation therapy
        for various types of cancer, such as non-Hodgkin's lymphoma, leukemia, ovarian
        and prostate cancers, osteosarcomas, and tumors of the breast, lung, kidney,
        colon, and brain. Y-90's properties of short half life, high specific activity,
        high energy and pure beta-emissions can be chemically attached to targeting
        agents that are highly selective for specific tumors. These targeting agents
        may
        include monoclonal antibodies, molecules derived from antibodies, peptides,
        or
        other tumor-specific molecules. Most Y-90 currently used in the U.S. is imported
        with varying degrees of quality. IsoRay Medical is currently developing a
        proprietary separation process that will produce Y-90 that management believes
        should meet or exceed the purity and quality required for clinical trials
        and
        medical applications. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Y-90
        is a
        significant component of several commercially available products. These products
        use radiopharmaceutical grade Y-90 derived by using manufacturing methods
        and
        techniques that conform to current cGMP (current Good Manufacturing Practices),
        allowing them to be used invasively in commercially available healthcare
        products. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
        will
        initially target the clinical trial market. Currently there are several clinical
        trials and medical applications involving Y-90 underway around the world
        that
        represent a potential market for Y-90. These customers hold significant growth
        potential, as products undergoing successful trials become approved for general
        use. Our strategy will be to attempt to develop exclusive sales arrangements
        with companies that are close to FDA approval or foreign companies authorized
        to
        commercially sell their products in various overseas markets. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Y-90
        is a
        pure-beta particle emitter with a physical half life of 64.1 hours (2.7 days)
        that decays to stable Zirconium-90. The average energy of the beta emissions
        from Y-90 is 2.37 MeV, with an effective path-length in tissue of 5.3 mm.
        This
        means that 90% of the energy is absorbed within a 5.3-mm radius. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Y-90
        is
        manufactured by chemical separation from a long-lived Strontium-90 (Sr-90)
        generator stock. We intend to purchase or lease the Sr-90 feedstock from
        U.S.
        DOE and international suppliers. Due to the radiological characteristics
        of
        Sr-90, initial processing will occur under stringent radiological controls
        in a
        highly shielded isolator or "hot cell" using remote manipulators. Following
        preliminary separation, the Y-90 is further purified and converted to
        pharmaceutical grade material in a shielded environmentally-controlled glove
        box. After completing the separation process every two weeks (e.g., collecting
        or "milking" the therapeutic Y-90), the residual Sr-90 generator is recycled
        for
        subsequent separations. In theory, the Sr-90 generator can continue to generate
        Y-90 for decades. However, the process periodically requires infusion of
        new
        Sr-90. In addition to acquiring Sr-90, we will need to acquire equipment
        and
        develop manufacturing policies and procedures for the Y-90 isotope that will
        meet cGMP criteria. While we initially plan to produce solely radiochemical
        purity Y-90, which does not need to meet the more stringent manufacturing
        standards required for radiopharmaceutical purity Y-90, we intend to develop
        our
        manufacturing methods to this higher level and produce radiopharmaceutical
        purity Y-90 in the future.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">IsoRay
        Medical has identified four principal suppliers of Y-90: MDS Nordion, Inc.,
        Perkin-Elmer Life Sciences, Inc., Amersham PLC and Iso-Tex Diagnostics, Inc.
        </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Cs-131
        Manufacturing Process</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Cs-131
        is
        a radioactive isotope that can be produced by the neutron bombardment of
        Barium-130. When Ba-130 is put into a nuclear reactor it becomes Ba-131,
        the
        radioactive material that is the parent of Cs-131. The process includes the
        following:</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div>
        <table cellpadding="0" cellspacing="0" id="list" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="right" style="WIDTH: 90pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Isotope
                  Generation</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>&#160;</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
                  radioactive isotope Cs-131 is normally produced by placing a quantity
                  of
                  stable non-radioactive barium (ideally pure Ba-130) into the neutron
                  flux
                  of a nuclear reactor. The irradiation process converts a small
                  fraction of
                  this material into a radioactive form of barium (Ba-131). The Ba-131
                  decays by electron capture to the radioactive isotope of interest
                  (Cs-131). IsoRay Medical has evaluated several international nuclear
                  reactors and many potential facilities in the United States. Due
                  to the
                  short half life of both the Ba-131 and Cs-131 isotopes, the isotope
                  generation cycle must occur over several weeks as dictated by the
                  physics
                  of isotope formation and decay and the facilities must be capable
                  of
                  removing irradiated materials from the reactor core on a routine
                  (daily or
                  weekly) basis. Reactor personnel will ship the irradiated barium
                  on a
                  mutually agreed schedule to our facilities for subsequent separation,
                  purification and seed assembly. The Company has identified five
                  reactors
                  in the U.S. and Europe that are capable of meeting these requirements.
                  This routine isotope generation cycle at supplier reactors will
                  allow
                  significant quantities of Ba-131 to be on hand at our facilities
                  for the
                  completion of the rest of the manufacturing process, which can
                  be
                  accomplished in three to five days, following customer orders.
                  To ensure
                  Cesium supply reliability, we intend to seek agreements with multiple
                  facilities to produce Cs-131. As of the date of this report, IsoRay
                  Medical has an agreement in place with its supplier for irradiated
                  Ba-131.
                  The Company is engaged in the development of a barium enrichment
                  device
                  that, if successful, would reduce the cost of Cs-131 while maintaining
                  the
                  purity and consistency needed for expeditious manufacture of Cs-131
                  isotope products.</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="left">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">11</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="2">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="right">
          </div>
        </div>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div>
        <table cellpadding="0" cellspacing="0" id="list" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="right" style="WIDTH: 90pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Isotope
                  Separation and Purification</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>&#160;</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Following
                  the harvesting of Ba-131, the isotope decays, becomes Cs-131, and
                  is moved
                  through a number of proprietary processes until it reaches seed
                  form.
                  After receiving the irradiated barium feedstock from the nuclear
                  reactor
                  facility, the rest of the manufacturing process will occur at our
                  facilities. This includes the isotope purification required prior
                  to
                  insertion in the seed. Due to the high-energy decay of Ba-131,
                  initial
                  processing will occur under stringent radiological controls in
                  a highly
                  shielded isolator or "hot cell" using remote manipulators. After
                  removal
                  of the energetic Ba-131, subsequent seed processing will be completed
                  in
                  locally shielded fume hoods or glove boxes. Isotope purification
                  involves
                  chemically separating the Cs-131 isotope from the irradiated material.
                  Upon completion of the separation process (e.g., collecting or
                  "milking"
                  the therapeutic Cs-131), the residual enriched barium will be recycled
                  back to the reactor facility for subsequent irradiation. This material
                  will be recycled as many times as economically feasible, which
                  should make
                  the process more cost effective.</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div>
        <table cellpadding="0" cellspacing="0" id="list" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="right" style="WIDTH: 90pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif"><strong>&#183;&#160;&#160;</strong></font></td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Internal
                  Seed Core Technology</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>&#160;</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
                  purified Cs-131 isotope will be incorporated into an internal assembly
                  that contains a binder, spacer and X-ray marker. This internal
                  core
                  assembly is subsequently inserted into a titanium case. The dimensional
                  tolerance for each material is extremely important. Several carrier
                  materials and placement methods have been evaluated, and through
                  a process
                  of elimination, we have developed favored materials and methods
                  during our
                  laboratory testing. The equipment necessary to produce the internal
                  core
                  will include accurate cutting and gauging devices, isotope incorporation
                  vessels, reaction condition stabilization and monitoring systems,
                  and
                  tools for placing the core into the titanium tubing prior to seed
                  welding</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>.</em></font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div>
        <table cellpadding="0" cellspacing="0" id="list" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="right" style="WIDTH: 90pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif"><strong><em>&#183;&#160;&#160;</em></strong></font></td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Seed
                  Welding.</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>&#160;</em></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Following
                  production of the internal core and placement into the titanium
                  capsule, a
                  seed is hermetically sealed to produce a sealed radioactive source
                  and
                  biocompatible medical device. This manufacturing technology requires:
                  accurate placement of seed components with respect to the welding
                  head,
                  accurate control of welding parameters to ensure uniform temperature
                  and
                  depth control of the weld, quality control assessment of the weld
                  integrity, and removal of the finished product for downstream processing
                  or rejection of unacceptable materials to waste. Inspection systems
                  will
                  be capable of identifying and classifying these variations for
                  quality
                  control ensuring a minimal amount of material is wasted. Finally,
                  the
                  rapid placement and removal of components from the welding zone
                  will
                  affect overall product throughput. </font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div>
        <table cellpadding="0" cellspacing="0" id="list" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="right" style="WIDTH: 90pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif"><strong><em>&#183;&#160;&#160;</em></strong></font></td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Quality
                  Control</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>&#160;</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
                  expect to establish procedures and controls to meet all FDA and
                  ISO
                  9001;2000 Quality Standards. Product quality and reliability will
                  be
                  secured by utilizing multiple sources of irradiation services,
                  feedstock
                  material, and other seed manufacturing components. An intensive
                  production
                  line preventive maintenance and spare parts program will be implemented.
                  Also, an ongoing training program will be established for customer
                  service
                  to ensure that all regulatory requirements for the FDA, DOT and
                  applicable
                  nuclear radiation and health authorities are fulfilled.
                  </font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="left">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">12</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="2">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="right">
          </div>
        </div>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        Company intends to implement a just-in-time production capability that is
        keenly
        responsive to customer input and orders to ensure that individual customers
        receive a higher level of customer service from us than from existing seed
        suppliers who have the luxury of longer lead times due to longer half life
        products. Time from order to completion of product manufacture can be reduced
        to
        three to five days, including receipt of irradiated barium (from a supplier's
        reactor), separation of Cs-131 (at our facilities), isotope labeling of the
        core, and loading of cores into pre-welded titanium "cans" for final welding,
        testing, quality assurance and shipping.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Automated
        Manufacturing Process</em></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">IsoRay
        Medical has begun discussions with a leading designer and manufacturer of
        automated seed manufacturing equipment that developed an automated line in
        the
        US for manufacturing Iodine-125 that was sold to a competitor in early 2003.
        In
        addition, IsoRay Medical is engaged in preliminary discussions with another
        seed
        manufacturer regarding obtaining an existing automated production line. An
        automated production line would require less labor, reduce costs, and help
        ensure consistent manufacturing quality. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Manufacturing
        Facility</em></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        initial production of the IsoRay Cs-131 brachytherapy seed commenced at PNNL
        in
        2004. IsoRay Medical has signed a lease agreement for a new interim production
        facility that management anticipates will be ready by September of 2005.
        The
        Company is also considering Idaho as a location for a future facility, either
        as
        the Company's sole manufacturing facility or as a secondary facility. No
        agreements have been reached for any possible facilities in Idaho.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Repackaging
        Services</em></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Most
        brachytherapy manufacturers offer their seed product to the end user packaged
        in
        four principal packing configurations provided in a sterile or non-sterile
        package depending on the customer's preference. These include: </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div>
        <table cellpadding="0" cellspacing="0" id="list" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="right" style="WIDTH: 90pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif"><em>&#183;&#160;&#160;</em></font></td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Loose
                  seeds</em></font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div>
        <table cellpadding="0" cellspacing="0" id="list" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="right" style="WIDTH: 90pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Pre-loaded
                  needles</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                  (loaded with 3 to 5 seeds and
                  spacers)</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div>
        <table cellpadding="0" cellspacing="0" id="list" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="right" style="WIDTH: 90pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Strands
                  of seeds</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                  (consists of seeds and spacers in a biocompatible "shrink wrap")
                  </font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div>
        <table cellpadding="0" cellspacing="0" id="list" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="right" style="WIDTH: 90pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Pre-loaded
                  Mick cartridges</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                  (fits the Mick applicator - seed manufacturers usually load and
                  sterilize
                  Mick cartridges in their own manufacturing
                  facilities)</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">No
        single
        package configuration dominates the market at this point. Market share estimates
        for each of the four packaging types are: loose seeds (20% - 30%) Mick
        cartridges (25% - 35%), pre-loaded needles (40% - 55%) and strands (10% -
        20%).
        Market trends indicate some movement to the recently introduced stranded
        configuration, as there is some clinical data suggesting less post implant
        seed
        migration when a stranded configuration is used.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        role
        of the repackaging service is to package, assay and certify the contents
        of the
        final product configuration shipped to the customer. A commonly used method
        of
        providing this service to the customer is through independent radiopharmacies
        such as Advanced Care Pharmacy and Custom Care Pharmacy. Manufacturers send
        loose seeds along with the physician's prescription to the radiopharmacy
        who, in
        turn, loads needles and/or strands the seeds according to the doctor's
        prescription. These pharmacies then assay and certify the final packaging
        prior
        to shipping the product directly to the end user.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="left">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">13</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="2">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="right">
          </div>
        </div>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">IsoRay
        Medical has held discussions with the major independent radiopharmacies and
        determined the shortest achievable turnaround time from delivery of loose
        seeds
        to the radiopharmacy to delivery of the final assayed and packaged seeds
        to the
        end user is 3 - 4 days. Because of the short half life of Cs-131, management
        believes adding 3 - 4 days to the product delivery schedule is prohibitive
        on a
        long-term basis although to boost immediate sales we intend to use these
        services on an interim basis until our value-added repackaging service is
        operational. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Because
        the short half life of the Cs-131 isotope requires fast delivery to the end
        user, the Company intends to establish its own value-added repackaging service
        to provide these services. The Company intends to market its seeds to the
        end
        user in all four of the commonly used packaging configurations, and the Company
        has retained an experienced consultant to assist in the development of the
        value-added repacking service. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Prior
        to
        the establishment of a value-added repackaging service, IsoRay Medical is
        offering loose seeds which will require the implant center to load the seeds
        into their preferred implant configuration. Management has contacted the
        maker
        of Mick cartridges and believes it will be able to load Mick cartridges on
        site
        for those implant centers using the Mick applicator as their method of injecting
        the seeds into the prostate. The Company currently offers non-sterile,
        pre-loaded Mick cartridges. As soon as the Company acquires the proper
        sterilization equipment, loose seeds and pre-loaded Mick cartridges will
        be
        offered in a sterile package. When the value-added repackaging service is
        operational, the Company will add pre-loaded needles and strands in a sterile
        and non-sterile package. Management believes the value-added repacking service
        will be operational by the end of 2005. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Independent
        radiopharmacies usually provide the final packaging of the product delivered
        to
        the end user. This negates an opportunity for reinforcing the "branding"
        of the
        seed product. By providing its own repackaging service, the Company preserves
        the product branding opportunity and eliminates any concerns related to the
        handling of its product by a third party prior to delivery to the end
        user.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Providing
        different packaging configurations adds significant value to the product
        while
        providing additional revenue stream and incremental margins to the Company
        through the pricing premiums that can be charged. The end users of these
        packaging options are willing to pay a premium because of the savings realized
        by eliminating the need for loose seed handling and loading capabilities
        on
        site, eliminating the need for additional staffing to load and sterilize
        seeds
        and needles and eliminating the expense of additional assaying of the seeds.
        </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Management
        estimates the cost of establishing a value-added repackaging service in its
        new,
        leased facility to be $100,000 to $150,000 and adequate space has already
        been
        identified in that facility. One or more technicians will be added to the
        staff
        to handle the seed loading, stranding and assaying operations. Our customer
        service staff will provide assistance with shipping, documentation and tracking
        of all orders from the repackaging service to the end user.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Barium
        Enrichment Device</em></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Barium-130
        is the original source material for Cs-131. When Ba-130 is put into a nuclear
        reactor it becomes Ba-131, the radioactive material that is the parent of
        Cs-131. Barium metal found in nature contains only 0.1% of Ba-130 with six
        other
        isotopes making up the other 99.9%. As part of its manufacturing process
        the
        Company intends to develop a barium enrichment device that should create
        "enriched barium" with a higher concentration of the Ba-130 isotope than
        is
        found in naturally occurring barium. In addition to creating a higher purity
        Ba-130, which translates into higher purity Cs-131, a barium enrichment device
        will result in higher yields of Cs-131. The Company has found sources of
        enriched barium that we believe we can use until the barium enrichment device
        is
        developed. </font></div>
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      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Marketing
        And Sales</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Marketing
        Strategy</em></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        Company intends to position Cs-131 as the isotope of choice based on its
        clinical advantages over Iodine and Palladium. Management believes there
        is no
        apparent clinical reason to use Palladium-103 or Iodine-125 when Cesium-131
        is
        available. The advantages associated with a high energy and short half life
        isotope are generally accepted within the clinical community and the Company
        intends to help educate potential patients about the clinical benefits a
        patient
        would experience from the use of Cs-131 for his brachytherapy seed treatment.
        The potential negative effects of the prolonged radiation times associated
        with
        the long half life of Iodine-125 make this isotope less attractive than
        Cesium-131. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
        intend
        to target these competing isotopes as our principal competition rather than
        the
        various manufacturers and distributors of these products. In this way, the
        choice of brachytherapy isotopes will be less dependent on the name and
        distribution strengths of the various Iodine and Palladium manufacturers
        and
        distributors and more dependent on the therapeutic benefits of Cs-131. The
        Company will focus the purchasing decision on the advantages and functionality
        of the Cs-131 isotope while seeking to educate the prostate cancer patient
        about
        these clinical benefits.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        professional and patient market segments each play a unique and important
        role
        in the ultimate choice of prostate cancer treatment and the specific isotope
        chosen for seed brachytherapy treatment. The Company will tailor its marketing
        message to each audience. IsoRay Medical has retained an advertising agency
        in
        the Seattle area to assist with its marketing communication program. The
        agency
        will coordinate the creation and distribution of all advertising material
        and
        work with the print and visual media. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        clinical advantages of Cs-131's unique combination of high energy and short
        half
        life will be heavily promoted within the clinical market. Because there is
        no
        apparent clinical reason to choose Palladium over Cesium, we have and will
        continue to target those high volume users of Palladium as our first implant
        sites. We will also emphasize the prolonged radiation times and the high
        doses
        of radiation given to the patient by the Iodine isotope and the possible
        negative effects of this prolonged radiation to the adjacent healthy tissues.
        We
        believe that this is an important marketing message because clinicians generally
        agree the radiation given by Iodine has little or no clinical benefit after
        120
        to 150 days. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">To
        promote our products to the clinical and professional audience, we will use
        a
        combination of marketing messages to appear in print and visual media. Planned
        marketing activities include: exhibiting at the major brachytherapy related
        clinical conferences to exhibit our products and provide marketing information
        for annual meetings, conferences and other forums of the various professional
        societies; print advertising in brachytherapy clinical journals; and promoting
        clinical presentations by experts in the field at major
        conferences.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
        today's U.S. health care market patients are more informed and involved in
        the
        management of their health and any treatments required. Many physicians relate
        incidents of their patients coming for consultations armed with articles
        researched on the Internet and other sources describing new treatments and
        medications. In many cases, these patients are demanding a certain therapy
        or
        drug and the physicians are complying when medically appropriate. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Because
        of this market factor, we will also promote its products directly to the
        general
        population. The audience targeted will be the prostate cancer patient, his
        spouse, family and care givers. The marketing message to this segment of
        the
        market will emphasize the specific advantages of Cs-131, including fewer
        side
        effects, less total radiation, and shorter period of radiation. The Company
        plans to reach this market through its website, located at </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>www.isoray.com</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
        advertising in magazines read by prostate cancer patients and their care
        givers,
        and through patient advocacy efforts.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Another
        key element of our strategy will be to validate and support all product claims
        with well designed and executed clinical studies that support the efficacy
        and
        positive patient outcomes of our Cs-131 seed. We intend to sponsor
        physician-directed studies that will compare the performance of our seeds
        to the
        seeds of our competitors. During the remainder of 2005, IsoRay Medical plans
        to
        continue its collaboration with leading physicians to develop clinical data
        on
        the efficacy of Cs-131 seeds. Noted contributors from the medical physics
        community will be consulted regarding the benefits of brachytherapy using
        shorter half life, improved dosimetry, and higher decay energy seeds. Articles
        will be submitted to professional journals such as </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Medical
        Physics</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
        and the
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>International
        Journal of Radiation</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Oncology,
        Biology, and Physics</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
        </font></div>
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      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Sales
        and Distribution</em></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">According
        to a recent industry survey, approximately 2,000 hospitals and free standing
        clinics are currently offering radiation oncology services in the United
        States.
        Not all of these facilities offer seed brachytherapy services. These
        institutions are staffed with radiation oncologists and medical physicists
        who
        provide expertise in radiation therapy treatments and serve as consultants
        for
        urologists and prostate cancer patients. We will target the radiation
        oncologists and the medical physicists as well as urologists as key clinical
        decision makers in the type of radiation therapy offered to prostate cancer
        patients. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">IsoRay
        Medical has already started to build a direct sales organization to introduce
        Cs-131 to radiation oncologists and medical physicists. In August 2004 IsoRay
        Medical hired two highly successful sales professionals from the brachytherapy
        industry that bring well established relationships with key radiation
        oncologists and medical physicists, and in 2005, IsoRay Medical expanded
        its
        sales force to four experienced individuals. By hiring experienced and
        successful brachytherapy sales people, the Company reduces the risk of delay
        in
        penetrating the market due to a lack of knowledge of the industry or
        unfamiliarity of the key members of the brachytherapy community. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        initial response to our new isotope from prominent radiation oncologists,
        medical physicists and urologists in the US has been very positive. The Company
        has begun its implant program by supplying the Cs</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>131</sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">seed
        to 9
        well-known implant centers strategically located throughout the U.S. Implant
        centers are currently located in the states of Arizona, California, Illinois,
        Pennsylvania, Tennessee, Texas and Washington, which have implanted our seed
        into 49 patients as of July 28, 2005. As production increases, additional
        centers will be added. Clinical results from the patients implanted through
        July
        28, 2005, while not a large enough group to draw any statistically significant
        conclusions, have been consistent with the reduced side effects expected
        from
        the shorter half life of Cs-131. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        Company will expand its U.S. sales force as it increases production capacity
        and
        expands the customer base. If the Company expands outside the U.S. market,
        it
        plans to use established distributors in the key markets in these other
        countries. This strategy will eliminate the time and expense required to
        identify, train and penetrate the key implant centers and establish
        relationships with the key opinion leaders in these markets. Using established
        distributors also significantly reduces the time spent acquiring the proper
        radiation handling licenses and other regulatory requirements of these
        markets.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Pricing</em></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Payment
        for IsoRay Medical products comes from third-party payers including
        Medicare/Medicaid and private insurance groups. These payers reimburse the
        hospitals and clinics via well-established payment procedures. On October
        31,
        2003, as a result of IsoRay Medical's predecessor's filing for an Additional
        Device Category, CMS (Centers for Medicare and Medicaid Services) approved
        a
        HCPCS/CPT code for Cs-131 brachytherapy seeds of $44.67 per seed. This is
        the
        same price as awarded to Pd-103 seeds, and compares favorably to the $37.34
        price granted to I-125 seeds. Medicare is the most significant U.S. payer
        for
        prostate brachytherapy services, and is the payer in close to 70% of all
        U.S.
        prostate brachytherapy cases. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Prostate
        brachytherapy is typically performed in the outpatient setting, and as such,
        is
        covered by the CMS Outpatient Prospective Payment System. In January 2004,
        brachytherapy procedure prices were unbundled by CMS, allowing itemized
        invoicing for seeds with no limit on the number of seeds used per procedure,
        and
        CMS currently reimburses hospitals and clinics for their seed purchases on
        a
        cost basis. Other insurance companies have followed these CMS changes. With
        the
        new reimbursement structure and industry consolidation, prices of brachytherapy
        seeds are expected to stabilize and increase marginally during the next few
        years. </font></div>
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      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Management
        believes the Cs</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>131</sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">seed
        will
        command a premium because of its unique characteristics and its clinical
        advantages over Palladium and Iodine. Pricing premiums for pre-loaded needles,
        strands and pre-loaded Mick cartridges will be added as these packaging
        alternatives are offered to our customers. When charges for the seeds are
        correctly submitted in the appropriate format to CMS, 100% of the total cost
        of
        the seeds is reimbursed to the hospital or clinic by CMS. </font></div>
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      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Other
        Information</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Proprietary
        Rights</em></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        Company relies on a combination of patent, copyright and trademark laws,
        trade
        secrets, software security measures, license agreements and nondisclosure
        agreements to protect its proprietary rights. Some of the Company's proprietary
        information may not be patentable.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        Company intends to vigorously defend its proprietary technologies, trademarks,
        and trade secrets. Members of management, employees, and certain equity holders
        have previously signed non-disclosure, non-compete agreements, and future
        employees, consultants, advisors, with whom the Company engages, and who
        are
        privy to this information, will be required to do the same. A patent for
        the
        Cesium separation and purification process has been granted by the U.S. Patent
        and Trademark Office (USPTO) under Patent Number 6,660,302. The process was
        developed by Lane Bray, a shareholder of the Company, and has been assigned
        exclusively to IsoRay Medical. IsoRay's predecessor also filed for patent
        protection in four European countries under the Patent Cooperation Treaty.
        Those
        patents have been assigned to IsoRay Medical.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
        management believes that certain aspects of the IsoRay seed design and
        construction techniques are patentable innovations. These innovations have
        been
        documented in IsoRay laboratory records, and patent applications were filed
        with
        the USPTO on November 12, 2003. Certain methodologies regarding isotope
        production, separation, and seed manufacture are retained as trade secrets
        and
        are embodied in IsoRay Medical's procedures and documentation. In June and
        July
        of 2004, three patent applications were filed relating to methods of deriving
        Cs-131 and Y-90 developed by IsoRay Medical employees. The Company is currently
        working on developing and patenting additional methods of deriving Cs-131
        and
        Y-90, and other isotopes.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">There
        are
        specific conditions attached to the assignment of the Cs-131 patent from
        Lane
        Bray. In particular, the associated Royalty Agreement provides for 1% of
        gross
        profit payment from seed sales (gross seed sales price minus direct production
        cost) to Lane Bray and 1% of gross profit from any use of the Cs-131 process
        patent for non-seed products. If IsoRay Medical reassigns the Royalty Agreement
        to another company, these royalties increase to 2%. The Royalty Agreement
        has an
        anti-shelving clause which requires IsoRay Medical to return the patent if
        IsoRay Medical permanently abandons sales of products using the invention.
        Additionally, when IsoRay Medical attains a 15% domestic market share, it
        will
        pay to the Lawrence Family Trust, a major shareholder of the Company, 1%
        of the
        "Factory Price" with a minimum annual royalty of $4,000, pursuant to an
        agreement with Don Lawrence. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Research
        And Development</em></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">From
        inception (December 17, 2001) through December 31, 2004, IsoRay Medical and
        its
        predecessor companies incurred more than $1.6 million in costs related to
        research and development activities. The Company expects to continue to have
        employees working on activities that will be classified as research or
        development for the foreseeable future. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Government
        Regulation</em></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        Company's present and future intended activities in the development, manufacture
        and sale of cancer therapy products are subject to extensive laws, regulations,
        regulatory approvals and guidelines. Within the United States, the Company's
        therapeutic radiological devices must comply with the U.S. Federal Food,
        Drug
        and Cosmetic Act, which is enforced by the FDA. The Company is also required
        to
        adhere to applicable FDA regulations for Good Manufacturing Practices, including
        extensive record keeping and periodic inspections of manufacturing facilities.
        </font></div>
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      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">IsoRay
        Medical's predecessor obtained FDA 510(k) clearance in March 2003 to market
        the
        IsoRay Cs</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>131</sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">seed
        for
        the treatment of localized solid tumors. A new 510(k) clearance would be
        required for any modifications in the device or its labeling that could
        significantly affect the safety or effectiveness of the original
        product.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Washington
        voters approved Initiative 297 in late 2004, which may impose additional
        restrictions on sites at which mixed radioactive and hazardous wastes are
        generated and stored, including PNNL. The constitutionality of this initiative
        has been challenged, but if it were enforced it could impact our ability
        to
        manufacture our seeds, whether at PNNL or elsewhere in the State of
        Washington.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Seasonality</em></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        Company is aware of a decrease in orders for the Cs</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>131</sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">seed
        during the month of December. This decrease in orders is related to a decrease
        in the number of brachytherapy procedures performed during the month of
        December, as many physicians are on vacation. The Company is not aware of
        any
        other significant seasonal influences on its business. The composition of
        certain products and services changes modestly with shifts in weather with
        no
        material impact on total revenues. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Employees</em></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Currently
        IsoRay, Inc. has no employees, but certain executives of IsoRay Medical will
        likely be employed by IsoRay, Inc. prior to September 30, 2005. IsoRay Medical
        employs twenty-one full-time individuals, two temporary individuals and three
        part-time individuals. The Company's future success will depend, in part,
        on its
        ability to attract, retain, and motivate highly qualified technical and
        management personnel. From time to time, the Company may employ independent
        consultants or contractors to support its research and development, marketing,
        sales and support and administrative organizations. Neither the Company's
        nor
        IsoRay Medical's employees are represented by any collective bargaining unit.
        IsoRay Medical estimates that successful implementation of its growth plan
        would
        result in up to 15 additional employees by the end of 2005. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Plan
        of Operations</em></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        Company has $1,191,545 cash on hand as of July 28, 2005. At the Company's
        current operational burn rate of approximately $500,000 per month, cash on
        hand
        and additional financing currently available would fund the Company's operations
        until November 2005, not including capital expenses. Management believes
        that an
        additional $9.4 million will need to be raised by the end of 2005 to fund
        planned growth and operations through 2006.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">IsoRay
        Medical has four outstanding loans. The first, from TRIDEC, with a principal
        amount of $40,000, was funded in 2001 and requires annual principal only
        payments of $10,000. It is non-interest bearing and unsecured. The second
        loan
        is with the Benton-Franklin Economic Development District in the amount of
        $230,000 and was funded in December 2004. It bears interest at eight percent
        and
        has a sixty month term with a final balloon payment. This loan is secured
        by
        certain equipment, materials and inventory of IsoRay Medical, and also required
        personal guarantees, for which the guarantors were issued 83,640 shares of
        common stock in IsoRay Medical. The third loan is a line of credit, from
        Columbia River Bank in the amount of $395,000. It bears interest at a floating
        prime plus two percent rate, and is secured by certain accounts receivable
        and
        inventory and personal guarantees, for which the guarantors were issued 127,500
        shares of common stock of IsoRay Medical. The fourth loan is with Columbia
        River
        Bank in the amount of $150,000, of which $50,000 was funded as of July 28,
        2005.
        This loan is to be used for equipment purchases only and is secured by the
        equipment purchased with the borrowed funds. It bears interest at seven percent
        for thirty-six months. IsoRay Medical is in negotiations with the Hanford
        Area
        Economic Investment Fund Committee (HAEIFC) for a $1,400,000 loan. There
        can be
        no assurance that this loan will be funded.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On
        April
        4, 2005 a capital lease agreement was executed by IsoRay Medical with Nationwide
        Funding LLC, whereby the lessor will fund the $75,000 acquisition of a glove
        box
        being built to the Company's specifications by Premier Technology, Inc. of
        Pocatello, ID. This is a 48 month agreement with a minimum monthly lease
        payment
        of $2,475.38.</font></div>
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      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On
        May
        16, 2005 a capital lease agreement was executed by IsoRay Medical with Vencore
        Solutions LLC. This is a capital lease for a hot cell with a lease line in
        the
        amount of $430,000. This is a 36 month lease, a provision of which is that
        IsoRay Medical can purchase the hot cell for fair market price, defined in
        the
        lease agreement as not more than 15% of the initial fair value purchase price.
        Based on this amount, for the first five months, the minimum monthly lease
        payment will be $7,589.50. The minimum monthly lease payment increases to
        $15,910 for the remaining 31 months, based on the entire value of the $430,000
        lease line. In connection with the lease agreement, IsoRay Medical granted
        warrants to purchase 6,757 shares of its common stock at $3.50/share. These
        warrants expire after four years from the date of issuance, and were converted
        at the ratio listed above as part of the merger. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Property</em></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        Company's executive offices are located at 350 Hills Street, Suite 106,
        Richland, WA 99354, (509) 375-1202, where it currently leases approximately
        3,100 square feet of office and laboratory space for $4,196 per month. The
        lease
        expires December 31, 2005. Additional office space will be needed as employees
        are hired, and is currently available at this location. The Company believes
        that the current administrative facilities will be adequate until the end
        of
        2005, but it will need additional facilities at that time. In the future,
        due to
        business growth, the Company may elect to combine administrative services
        and
        production in one building which the Company may lease or build depending
        on
        market conditions.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
        April
        2004, IsoRay Medical's predecessor signed a contract with PNNL, permitting
        IsoRay Medical to subcontract certain of its manufacturing needs to PNNL,
        use
        PNNL facilities to produce the Cs-131 brachytherapy seeds, and ship them
        to
        customers from the PNNL facilities. Using PNNL's facilities has reduced the
        immediate need for IsoRay Medical to purchase specialized capital-intensive
        equipment. The contract allows it to manufacture Cs</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>131</sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
        seeds in
        PNNL for up to 18 months subsequent to commencement of production in PNNL.
        The
        PNNL facility has limited capacity and if demand for Cs</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>131</sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
        seeds
        exceeds this capacity the Company may need to shift production to its new
        leased
        facility before the end of the 18 month period. We have entered into a lease,
        to
        commence as of regulatory licensing approval, for an approximately 4300 square
        foot facility located in Richland, Washington that our management believes
        will
        provide adequate space to manufacture the Cs-131 product for the prostate
        cancer
        markets until late 2007. The lease is for a term of twelve months following
        regulatory licensing approval, which management believes will be obtained
        during
        the third quarter of 2005, and payment for the lease term is the issuance
        of
        25,800 shares of IsoRay Medical (pre-merger) common stock. The lease may
        be
        extended on a month-to-month basis by mutual agreement of the parties.
</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Legal
        </em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Proceedings</em></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">There
        are
        no legal actions pending against the Company.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Competition</em></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        Company competes in a market characterized by technological innovation,
        extensive research efforts and significant competition. In general, the IsoRay
        seed competes with conventional methods of treating localized cancer, including,
        but not limited to, radical prostatectomy and external beam radiation therapy
        which includes intensity modulated radiation therapy, as well as competing
        permanent devices. RP currently represents the most common medical treatment
        for
        early-stage, localized prostate cancer. EBRT is also a well-established method
        of treatment and is widely accepted for patients who represent a poor surgical
        risk or whose prostate cancer has advanced beyond the stage for which surgical
        treatment is indicated. Management believes that if general conversion from
        these treatment options (or other established or conventional procedures)
        to the
        IsoRay seed does occur, such conversion will likely be the result of a
        combination of equivalent or better efficacy, reduced incidence of side effects
        and complications, lower cost, quality of life issues and pressure by health
        care providers and patients. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">History
        has shown the advantage of being the first to market a new brachytherapy
        product. For example, ONCURA currently claims nearly 50% of the market with
        the
        original I-125 seed. Theragenics, which introduced the original Pd-103 seed,
        is
        second with a nearly 30% market share. The Company believes it will obtain
        a
        similar and significant advantage by being the first to introduce a Cs-131
        seed.
</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
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      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        Company's patented Cs-131 separation process is likely to provide us a
        sustainable competitive advantage in this area. Production of Cs-131 also
        requires specialized facilities (hot cells) that represent high cost and
        long
        lead time if not readily available. In addition, a competitor would need
        to
        develop a method for isotope attachment and seed assembly, would need to
        conduct
        testing to meet NRC and FDA requirements, and would need to obtain regulatory
        approvals before marketing a competing device.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Because
        the exterior seed dimensions of all seeds are substantially the same, the
        threshold to physician acceptance of the IsoRay seed is not significant.
        Treatment planning systems and seed implantation equipment used worldwide
        all
        rely on seeds of the same length and diameter. Technical costs for users
        to
        switch from I-125 and Pd-103 to the IsoRay Cs-131 seed should be minimal.
        </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Several
        companies have obtained regulatory approval to produce and distribute
        Palladium-103 and Iodine-125 seeds, which compete directly with our seed.
        Ten of
        those companies represent nearly 100% of annual brachytherapy seed sales
        worldwide: </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">ONCURA</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
        Theragenics Corp., North American Scientific, Inc., Mentor Corp., Implant
        Sciences Corp., International Brachytherapy S.A., Cardinal Health, Inc.,
        SourceTech Medical LLC, </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">DRAXIMAGE</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
        (a
        division of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">DRAXIS</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
        Health,
        Inc.) and Best Medical International, Inc. The top three - ONCURA, Theragenics,
        and North American Scientific - currently garner nearly 90% of annual sales.
        </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">It
        is
        possible that three or four of the current I-125 or Pd-103 seed manufacturers
        (i.e., Oncura, Theragenics, North American Scientific, etc.) are capable
        of
        producing and marketing a Cs-131 seed, but none have reported efforts to
        do so.
        Best Medical obtained a seed core patent in 1992 that named 10 different
        isotopes, including Cs-131, for use in their seeds. Best Medical received
        FDA
        510(k) approval to market a Cs-131 seed on June 6, 1993 but has failed to
        produce any products for sale. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
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        Growth Opportunities</em></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        Cs-131 isotope has the performance characteristics to be a technological
        platform for sustained long-term growth. The most immediate opportunities
        are
        introducing Cs-131 to Europe and other international markets, introducing
        Cs-131-based therapies for other forms of solid tumors focusing first on
        breast
        tumors, and through the marketing other radioactive isotopes. These growth
        initiatives are in the early stages of planning and appear to be significant
        incremental opportunities. </font></div>
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      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        Company plans to introduce Cs</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>131
        </sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">initially
        into Europe and later into other international markets through partnerships
        and
        strategic alliances with channel partners for manufacturing and distribution.
        Another advantage of the Cs-131 isotope is its potential applicability to
        other
        cancers and other diseases. Cs-131 has FDA approval to be used for treatments
        for a broad spectrum of cancers including breast, brain, and liver cancer,
        and
        the Company believes that a major opportunity exists as an adjunct therapy
        for
        the treatment of breast cancer. In addition to Y-90, there is the opportunity
        to
        develop and market other radioactive isotopes to the US market, and to market
        the Cs-131 isotope itself, separate from its use in our seeds. </font></div>
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      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Risk
        Factors</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>IsoRay
        Medical Has Begun Generating Revenue But Is Not Yet Profitable</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>.
        </em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">IsoRay
        Medical began generating revenue in October 2004, generated revenue of
        approximately $262,836 through July 28, 2005, and is in the early stages
        of
        marketing its IsoRay Cs</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>131</sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">seed.
        IsoRay Medical and the Company have minimal historical, operating or financial
        information upon which to evaluate its performance. There can be no assurance
        that the Company will obtain profitability. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Our
        Revenues Depend Primarily Upon One Product</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>.</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
        Our
        revenues depend upon the successful production, marketing, and sales of the
        IsoRay Cs</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>131
        </sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">seed.
        A
        number of factors may affect the rate and level of market acceptance of this
        product including: </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
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          </div>
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        <div id="HDR">
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                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">the
                  perception by physicians and other members of the healthcare community
                  of
                  its safety and efficacy as compared to that of competing products,
                  if
                  any;</font></div>
              </td>
            </tr>

        </table>
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                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">the
                  clinical outcomes of the patients
                  treated;</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
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            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="right" style="WIDTH: 72pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#168;&#160;&#160;</font></td>
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                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">the
                  effectiveness of our sales and marketing efforts in the United
                  States;</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div>
        <table cellpadding="0" cellspacing="0" id="list" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="right" style="WIDTH: 72pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#168;&#160;&#160;</font></td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">any
                  unfavorable publicity concerning our product or similar
                  products;</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div>
        <table cellpadding="0" cellspacing="0" id="list" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="right" style="WIDTH: 72pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#168;&#160;&#160;</font></td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">its
                  price relative to other products or competing
                  treatments;</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div>
        <table cellpadding="0" cellspacing="0" id="list" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="right" style="WIDTH: 72pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#168;&#160;&#160;</font></td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">any
                  decrease in current reimbursement rates from Medicare and/or third
                  party
                  payers;</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div>
        <table cellpadding="0" cellspacing="0" id="list" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="right" style="WIDTH: 72pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#168;&#160;&#160;</font></td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">regulatory
                  developments related to the manufacture or continued use of the
                  product;</font></div>
              </td>
            </tr>

        </table>
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            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="right" style="WIDTH: 72pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#168;&#160;&#160;</font></td>
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                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">ability
                  to produce sufficient quantities of this product;
                  and</font></div>
              </td>
            </tr>

        </table>
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      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div>
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            <tr valign="top" style="LINE-HEIGHT: 1.25">
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                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">the
                  ability of physicians to properly utilize the device and avoid
                  excessive
                  levels of radiation to patients.</font></div>
              </td>
            </tr>

        </table>
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      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Because
        of our reliance on this product as the sole source of our revenue, any material
        adverse developments with respect to the commercialization of this product
        may
        cause us to incur losses rather than profits in the future. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>We
        Have Limited Data On The Clinical Performance Of Cs-131</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
        As of
        July 28, 2005, the IsoRay Medical Cs</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>131</sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
        seed has
        been implanted in forty-nine</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>&#160;</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">patients.
        While this limited number of patients prevents us from drawing statistically
        significant conclusions, we can report that the side effects experienced
        by
        these patients were consistent with the types of side effects seen in seed
        brachytherapy with Iodine and Palladium. These early results indicate that
        the
        onset of side effects generally occurs between one and three weeks post-implant,
        and the side effects are resolved between weeks six and eight post-implant,
        indicating that, at least for these initial patients, side effects resolved
        more
        quickly than the side effects that occur with competing seeds. These limited
        findings support management's belief that the Cs</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>131</sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
        seed
        will result in less severe side effects than competing treatments, but we
        will
        have to wait for outcomes from additional patients before we can definitively
        establish the incidence of side effects from our seeds. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Our
        Subsidiary's Independent Accountants Have Expressed Doubt About Its Ability
        To
        Continue As A Going Concern</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
        IsoRay
        Medical's ability to continue as a going concern is an issue raised as a
        result
        of the material operating losses incurred since inception, and its stockholders&#8217;
        deficit. We expect to continue to experience net operating losses. Our ability
        to continue as a going concern is subject to our ability to obtain necessary
        funding from outside sources, including obtaining additional funding from
        the
        sale of our securities or obtaining loans and grants from various financial
        institutions where possible. The going concern increases the difficulty in
        meeting such goals.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>We
        Will Need To Raise Additional Capital</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
        The
        hiring of upper level sales executives, entry into capital lease agreements
        for
        a glove box and a hot cell, and entry into executive contracts requiring
        payments upon reaching certain milestones significantly increased IsoRay
        Medical's monthly cash "burn rate" since August 2004. Ongoing obligations
        to
        meet greater payroll obligations coupled with legal and accounting fees related
        to completing the recent merger with Century Park Pictures Corp. have resulted
        in greater amounts of short term cash demands than ever before in the history
        of
        IsoRay Medical. We have been actively raising capital and will need to continue
        to do so in greater amounts than we have raised in the past.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
        will
        also need substantial funds to complete the development, manufacturing, and
        marketing of our potential future products. Consequently, we will seek to
        raise
        further capital through not only public and private offerings of equity and
        debt
        securities, but also collaborative arrangements, strategic alliances, and
        equity
        and debt financings or from other sources. We will need to raise at least
        $9.4
        million of additional funding by the end of 2005 to fund working capital
        through
        2006 and to acquire additional equipment for the interim production facility
        currently under construction. IsoRay Medical has entered into a lease, to
        commence as of regulatory licensing approval, for an approximately 4300 square
        foot facility located in Richland, Washington that its management believes
        will
        provide adequate space to manufacture the Cs-131 product for the prostate
        cancer
        markets until late 2007. </font></div>
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          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">21</font></div>
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      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
        may be
        unable to raise additional capital on commercially acceptable terms, if at
        all,
        and if we raise capital through additional equity financing, existing
        shareholders may have their ownership interests diluted. Our failure to be
        able
        to generate adequate funds from operations or from additional sources would
        harm
        our business.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
        the
        event of our insolvency, bankruptcy, liquidation, reorganization, or dissolution
        or upon our default in payment with respect to any indebtedness or an event
        of
        default with respect to such indebtedness resulting in the acceleration thereof,
        our assets are not expected to be sufficient to result in any payment to
        holders
        of the Company's preferred or common stock.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>The
        Recent Passage Of Initiative 297 In Washington May Result In The Relocation
        To
        Idaho Of Our Manufacturing Operations</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>.
        </em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Washington
        voters approved Initiative 297 in late 2004, which may impose additional
        restrictions on sites at which mixed radioactive and hazardous wastes are
        generated and stored, including PNNL. The U.S. Secretary of Energy is a party
        to
        litigation challenging the constitutionality of this initiative in U.S. District
        Court. Due to this litigation, the State of Washington and the U.S. Justice
        Department have agreed to delay any implementation of Initiative 297 for
        an
        indefinite period of time. Thus, we have the ability to manufacture seeds
        at
        PNNL for some period of time. If the State of Washington begins enforcement
        of
        the initiative and the protective legislation described above has not been
        enacted, we may be unable to continue to produce seeds at PNNL under our
        Commercial Work For Others contract with the Department of Energy, and if
        we
        cannot continue to produce seeds at PNNL, we would have to move our
        manufacturing operations to an alternate facility that may be outside the
        State
        of Washington. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Management
        believes that we will be able to continue our manufacturing operations in
        the
        State of Washington for the foreseeable future, whether at PNNL or at our
        leased
        interim facility in the State of Washington. In the event Initiative 297
        is
        enforced against us, management has been engaged in discussions with officials
        in Idaho regarding an alternate manufacturing facility in Idaho. Because
        Idaho
        has a business friendly environment and the state has offered an attractive
        incentive package, we would expect to be able to build our own manufacturing
        facility at a cost below that anticipated for a similar facility in the State
        of
        Washington. We may consider moving all or part of our operations to Idaho
        even
        if Initiative 297 is not enforced against us. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>We
        Have Limited Manufacturing Experience And May Not Be Able To Meet
        Demand</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
        Our
        manufacturing experience is limited and existing management team and staff
        of
        IsoRay Medical and the Company have experience primarily in research and
        development of products and not in manufacturing products. IsoRay Medical
        began
        commercial production of the Cs</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>131
        </sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">seed
        in
        the fourth quarter of 2004. IsoRay Medical has not tested commercial production
        of Yttrium-90, although certain members of its management team previously
        produced weekly batches of Y-90 for the research market when they were
        affiliated with another company. Although IsoRay Medical's management team
        has
        significant radiochemistry experience, there is a possibility that
        commercial-scale production may result in challenges that may be too expensive
        or difficult to overcome. IsoRay Medical has procured equipment for a
        semi-automated process of laser welding, but its ability to produce the
        Cs</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>131
        </sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">seed
        in
        very large quantities may be limited by the current lack of a completely
        automated process for welding. IsoRay Medical believes it will find a more
        efficient means of welding the titanium seeds, however, there can be no
        assurance that seeds will not be welded individually by the semi-automated
        process for the foreseeable future. Consequently, we cannot ensure that either
        IsoRay Medical's manufacturing process or its ability to sustain ongoing
        production of its products will be able to meet demand. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>We
        Have Limited Sales And Marketing Experience</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>.
        </em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Some
        members of IsoRay Medical's team have extensive experience in successfully
        establishing and training domestic and international sales forces as well
        as
        successfully introducing new medical devices to the market, but we have limited
        specific experience with the commercial sales and marketing of the Cesium-131
        radioisotope. IsoRay Medical has marketing professionals with extensive
        experience selling medical devices, including radioisotopes for large,
        international companies. Its initial marketing activities have begun, and
        we
        will need to recruit additional employees to assist with these functions.
        We
        cannot be certain that our products will be marketed and distributed in
        accordance with our expectations or that our market research will be accurate.
        We also cannot be certain that we will ever be able to develop our own sales
        and
        marketing capabilities to the extent anticipated by management. We may need
        to
        rely on third-party efforts and distribution channels and may not be able
        to
        maintain satisfactory arrangements with the third parties on whom we rely.
        We
        are currently developing in-house customer service, order entry, shipping,
        billing, customer reimbursement assistance and sales support. We cannot be
        certain that we will successfully develop and coordinate these departments
        and
        may need to find outside contractors to carry out part or all of these
        functions. Even if needed, we cannot be certain that we can successfully
        contract with outside contractors or that they will be available at projected
        prices. </font></div>
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        Operating Results Will Be Subject To Significant Fluctuations</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>.
        </em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
        quarterly revenues, expenses, and operating results are likely to fluctuate
        significantly in the future. Fluctuation may result from a variety of factors,
        including:</font></div>
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                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">our
                  achievement of product development objectives and
                  milestones;</font></div>
              </td>
            </tr>

        </table>
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      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
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                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">demand
                  and pricing for the Company's
                  products;</font></div>
              </td>
            </tr>

        </table>
      </div>
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      <div>
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            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="right" style="WIDTH: 72pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#168;&#160;&#160;</font></td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">effects
                  of aggressive competitors;</font></div>
              </td>
            </tr>

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      </div>
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      <div>
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            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="right" style="WIDTH: 72pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#168;&#160;&#160;</font></td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">hospital
                  and clinic buying decisions;</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div>
        <table cellpadding="0" cellspacing="0" id="list" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="right" style="WIDTH: 72pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#168;&#160;&#160;</font></td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">research
                  and development and manufacturing
                  expenses;</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div>
        <table cellpadding="0" cellspacing="0" id="list" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="right" style="WIDTH: 72pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#168;&#160;&#160;</font></td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">patient
                  outcomes from our therapy;</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div>
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            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="right" style="WIDTH: 72pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#168;&#160;&#160;</font></td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">physician
                  acceptance of our products;</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div>
        <table cellpadding="0" cellspacing="0" id="list" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="right" style="WIDTH: 72pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#168;&#160;&#160;</font></td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">government
                  or private healthcare reimbursement
                  policies;</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div>
        <table cellpadding="0" cellspacing="0" id="list" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="right" style="WIDTH: 72pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#168;&#160;&#160;</font></td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">our
                  manufacturing performance and
                  capacity;</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div>
        <table cellpadding="0" cellspacing="0" id="list" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="right" style="WIDTH: 72pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#168;&#160;&#160;</font></td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">incidents,
                  if any, that could cause temporary
                  shutdown;</font></div>
              </td>
            </tr>

        </table>
      </div>
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      <div>
        <table cellpadding="0" cellspacing="0" id="list" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="right" style="WIDTH: 72pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#168;&#160;&#160;</font></td>
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                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">the
                  amount and timing of sales orders;</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div>
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            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="right" style="WIDTH: 72pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#168;&#160;&#160;</font></td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">rate
                  and success of product approvals;</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div>
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            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="right" style="WIDTH: 72pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#168;&#160;&#160;</font></td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">timing
                  of FDA approval, if any, of competitive products and the rate of
                  market
                  penetration of competing products;</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div>
        <table cellpadding="0" cellspacing="0" id="list" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="right" style="WIDTH: 72pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#168;&#160;&#160;</font></td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">foreign
                  currency exchange rates; </font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div>
        <table cellpadding="0" cellspacing="0" id="list" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="right" style="WIDTH: 72pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#168;&#160;&#160;</font></td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">seasonality
                  of purchasing behavior in our
                  market;</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div>
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            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="right" style="WIDTH: 72pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#168;&#160;&#160;</font></td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">overall
                  economic conditions; and</font></div>
              </td>
            </tr>

        </table>
      </div>
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      <div>
        <table cellpadding="0" cellspacing="0" id="list" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="right" style="WIDTH: 72pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#168;&#160;&#160;</font></td>
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                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">the
                  successful introduction or market penetration of alternative
                  therapies.</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>We
        Rely Heavily On A Limited Number Of Suppliers</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>.
        </em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Some
        materials used in our products are currently available only from a limited
        number of suppliers. Any interruption or delay in the supply of materials
        required to produce our products could harm our business if we were unable
        to
        obtain an alternative supplier for these materials in a cost-effective and
        timely manner. Additional factors that could cause interruptions or delays
        in
        our source of materials include limitations on the availability of raw materials
        or manufacturing performance experienced by our suppliers and a breakdown
        in our
        commercial relations with one or more suppliers. Some of these factors may
        be
        completely out of our control. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>We
        Are Subject To Uncertainties Regarding Healthcare Reimbursement And
        Reform</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>.
        </em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
        2003,
        IsoRay Medical's predecessor applied for, and CMS (Centers for Medicare and
        Medicaid Services) created a classification for reimbursement for our
        Cs</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>131</sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">seed
        (HCPCS code C2633 and APC code 2633) The initial reimbursement under these
        codes
        was $44.67 per seed. However, since January 1, 2004 hospitals and clinics
        ordering our seeds are to be paid on a cost basis instead. On an ongoing
        basis,
        our ability to commercialize products depends in part on the extent to which
        healthcare services and products are paid by governmental agencies, private
        health insurers and other organizations, such as health maintenance
        organizations, for the cost of such products and related treatments. Our
        business could be harmed if healthcare payers and providers implement
        cost-containment measures and governmental agencies implement healthcare
        reform
        measures that reduce payment to our customers for their use of our products.
        </font></div>
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        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="left">
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        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">23</font></div>
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      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Our
        Industry Is Intensely Competitive</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>.
        </em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        medical device industry is intensely competitive. We compete with both public
        and private medical device, biotechnology and pharmaceutical companies that
        have
        been established longer than we have, have a greater number of products on
        the
        market, have greater financial and other resources and have other technological
        or competitive advantages. We also compete in the development of technologies
        and processes and in acquiring personnel and technology from academic
        institutions, government agencies, and other private and public research
        organizations. We cannot be certain that one or more of our competitors will
        not
        receive patent protection that dominates, blocks or adversely affects our
        product development or business; will benefit from significantly greater
        sales
        and marketing capabilities or will not develop products that are accepted
        more
        widely than ours. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>We
        May Be Unable To Adequately Protect Or Enforce Our Intellectual Property
        Rights
        Or Secure Rights To Third-Party Patents</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>.
        </em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
        ability and the abilities of our partners to obtain and maintain patent and
        other protection for our products will affect our success. We are assigned,
        have
        rights to, or have exclusive licenses to patents in the U.S. and four foreign
        countries. The patent positions of medical device companies can be highly
        uncertain and involve complex legal and factual questions. Our patent rights
        may
        not be upheld in a court of law if challenged. Our patent rights may not
        provide
        competitive advantages for our products and may be challenged, infringed
        upon or
        circumvented by our competitors. We cannot patent our products in all countries
        or afford to litigate every potential violation worldwide. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Because
        of the large number of patent filings in the medical device and biotechnology
        field, our competitors may have filed applications or been issued patents
        and
        may obtain additional patents and proprietary rights relating to products
        or
        processes competitive with or similar to ours. We cannot be certain that
        U.S. or
        foreign patents do not exist or will not issue that would harm our ability
        to
        commercialize our products and product candidates.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
        Cs-131 separation patent is essential for production of Cesium-131. The owner
        of
        the patent, Lane Bray, a shareholder of the Company and Chief Chemist of
        IsoRay
        Medical, has the right to terminate the license agreement that allows the
        Company to use this patent if we discontinue production for any consecutive
        18
        month period. The Company has no plans to discontinue production, and management
        considers it highly unlikely that production will be discontinued at any
        significant period at any time in the future.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Failure
        To Comply With Government Regulations Could Harm Our Business</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
        As a
        medical device and medical isotope manufacturer, we, as well as our contract
        manufacturers and suppliers are subject to extensive, complex, costly, and
        evolving governmental rules, regulations and restrictions administered by
        the
        FDA, by other federal and state agencies, and by governmental authorities
        in
        other countries. In the United States, our products cannot be marketed until
        they are approved for market by the FDA. IsoRay Medical has received FDA
        approval for the marketing of the Cs</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>131</sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">seed
        and
        our competitors have received FDA approval for marketing Yttrium-90.
        Accordingly, we believe our application for FDA approval of our Y-90 will
        be
        limited, and require no patient trials.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Obtaining
        FDA market approval involves the submission, among other information, of
        the
        results of preclinical and clinical studies on the product, and requires
        substantial time, effort and financial resources. The FDA, Washington State
        Department of Health, and other federal and state agencies, as well as
        equivalent agencies of other countries with whom we will export our products,
        will also perform pre-licensing inspections of our facility and our contract
        manufacturers' and suppliers' facilities. Our failure or the failure of our
        partners, contract manufacturers, or suppliers to meet FDA or other agencies'
        requirements would delay or preclude our ability to sell our products
        potentially having an adverse material effect on our business.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Even
        with
        FDA market approval, we, as well as our partners, contract manufacturers
        and
        suppliers, are subject to numerous FDA requirements covering, among other
        things, testing, manufacturing, quality control, labeling and continuing
        review
        of medical products, and to permit government inspection at all times. Failure
        to meet or comply with any rules, regulations, or restrictions of the FDA
        or
        other agencies could result in fines, unanticipated expenditures, product
        delays, non-approval or recall, interruption of production, and criminal
        prosecution.</font></div>
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        we have implemented internal compliance programs and will continue to address
        any compliance issues raised from time to time by the FDA and the other
        agencies, we may not be able to meet regulatory agency standards, and any
        lack
        of compliance may harm our business.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Our
        Business Exposes Us To Product Liability Claims</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>.
        </em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
        design, testing, development, manufacture, and marketing of products involve
        an
        inherent risk of exposure to product liability claims and related adverse
        publicity. Insurance coverage is expensive and difficult to obtain, and,
        although we currently have a five million dollar policy, in the future we
        may be
        unable to obtain coverage on acceptable terms, if at all. If we are unable
        to
        obtain sufficient insurance at an acceptable cost or if a successful product
        liability claim is made against us, whether fully covered by insurance or
        not,
        our business could be harmed.</font></div>
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      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Our
        Business Involves Environmental Risks</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>.
        </em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
        business involves the controlled use of hazardous materials, chemicals,
        biologics, and radioactive compounds. Manufacturing is extremely susceptible
        to
        product loss due to radioactive, microbial, or viral contamination; material
        equipment failure; or vendor or operator error; or due to the very nature
        of the
        product's short half life. Although we believe that our safety procedures
        for
        handling and disposing of such materials comply with state and federal standards
        there will always be the risk of accidental contamination or injury. In
        addition, radioactive, microbial, or viral contamination may cause the closure
        of the respective manufacturing facility for an extended period of time.
        By law,
        radioactive materials may only be disposed of at state-approved facilities.
        We
        currently dispose of our radioactive waste through the Battelle managed PNNL
        site under a one year renewable agreement. We intend to open our own facility
        and intend to use commercial disposal contractors. We may incur substantial
        costs related to the disposal of these materials. If we were to become liable
        for an accident, or if we were to suffer an extended facility shutdown, we
        could
        incur significant costs, damages, and penalties that could harm our
        business.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>We
        Rely Upon Key Personnel</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>.
        </em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
        success will depend, to a great extent, upon the experience, abilities and
        continued services of our executive officers and key scientific personnel.
        If we
        lose the services of any of these officers or key scientific personnel, our
        business could be harmed. Our success also will depend upon our ability to
        attract and retain other highly qualified scientific, managerial, sales,
        and
        manufacturing personnel and our ability to develop and maintain relationships
        with key individuals in the industry. Competition for these personnel and
        relationships is intense and we compete with numerous pharmaceutical and
        biotechnology companies as well as with universities and non-profit research
        organizations. We may not be able to continue to attract and retain qualified
        personnel.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>The
        Value Of Our Granted Patent, and Our Patents Pending, Is
        Uncertain</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>.
        </em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Although
        our management strongly believes that our patent on the process for producing
        Cesium-131, our patent pending on the manufacture of the brachytherapy seed,
        our
        patent applications on additional methods for producing Cesium-131 and
        Yttrium-90 which have been filed, and anticipated future patent applications,
        which have not yet been filed, have significant value, we cannot be confident
        that other like-kind processes may not exist or be discovered, or that any
        of
        these patents is enforceable.</font></div>
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      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Our
        Ability To Initiate Operations And Manage Growth Is Uncertain</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>.
        </em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
        efforts to commercialize our medical products will result in new and increased
        responsibilities for management personnel and will place a strain upon our
        management, operating software, financial systems, and resources. To compete
        effectively and to accommodate growth, if any, we may be required to continue
        to
        implement and to improve our management, operating and financial systems,
        procedures and controls on a timely basis and to expand, train, motivate
        and
        manage our employees. There can be no assurance that our personnel, systems,
        procedures, and controls will be adequate to support our future operations.
        If
        Cesium-131 were to become the "seed of choice," explosive sales growth could
        occur, making it unlikely that we could meet demand. This would cause customer
        discontent and invite competition. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Our
        Reporting Obligations As A Public Company Will Be Costly. </em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Operating
        a public company involves substantial costs to comply with reporting obligations
        under federal securities laws that are continuing to increase as provisions
        of
        the Sarbanes Oxley Act of 2002 are implemented. These reporting obligations
        will
        increase our operating costs. We may not reach sufficient size to justify
        our
        public reporting status. </font></div>
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      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>There
        Is A Limited Market For Our Common Stock. </em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Currently
        only a limited trading market exists for our common stock. Our common stock
        trades solely on the Pink Sheets, a market with very limited liquidity and
        minimal listing standards under the symbol "CPPC.PK." This symbol will change
        as
        a result of the Merger. Any broker/dealer that makes a market in our stock
        or
        other person that buys or sells our stock could have a significant influence
        over its price at any given time. We intend to seek a listing on the Over-the
        Counter Bulletin Board, but there can be no assurance that such a listing
        will
        be obtained. We cannot assure our shareholders that a market for our stock
        will
        be sustained. There is no assurance that our shares will have any greater
        liquidity than shares that do not trade on a public market.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Our
        Common Stock Is Subject To Penny Stock Regulation. </em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
        shares are subject to the provisions of Section 15(g) and Rule 15g-9 of the
        Securities Exchange Act of 1934, as amended (the "Exchange Act"), commonly
        referred to as the "penny stock" rule. Section 15(g) sets forth certain
        requirements for transactions in penny stocks and Rule 15g-9(d)(1) incorporates
        the definition of penny stock as that used in Rule 3a51-1 of the Exchange
        Act.
        The SEC generally defines penny stock to be any equity security that has
        a
        market price less than $5.00 per share, subject to certain exceptions. Rule
        3a51-1 provides that any equity security is considered to be penny stock
        unless
        that security is: registered and traded on a national securities exchange
        meeting specified criteria set by the SEC; authorized for quotation on The
        NASDAQ Stock Market; issued by a registered investment company; excluded
        from
        the definition on the basis of price (at least $5.00 per share) or the
        registrant's net tangible assets; or exempted from the definition by the
        SEC.
        Since our shares are deemed to be "penny stocks", trading in the shares will
        be
        subject to additional sales practice requirements on broker-dealers who sell
        penny stocks to persons other than established customers and accredited
        investors.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>ITEM
        3.02 Unregistered Sales of Equity Securities</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Pursuant
        to the Merger, the Registrant will issue 6,401,081 shares of its common stock,
        1,338,167 shares of its Series B preferred stock, options to purchase 2,069,337
        shares of its common stock, warrants to purchase 344,792 shares of its common
        stock, and warrants to purchase 233,014 shares of its preferred stock. These
        securities will be issued by the Registrant in reliance upon an exemption
        from
        registration under Section 4(2) and Regulation D of the Securities Act of
        1933,
        as amended. </font></div>
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      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Market
        for Common Equity and Related Stockholder Matters; Description Of
        Securities</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Overview</em></strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        Company's Articles of Incorporation provide that the Company has the authority
        to issue 200 million shares of capital stock, which are currently divided
        into
        two classes as follows: 194 million shares of common stock, par value of
        $0.001
        per share; and 6 million shares of preferred stock, also with a par value
        of
        $0.001 per share. Immediately prior to the Merger, and following its recent
        30:1
        reverse stock split, the Company had approximately 2,498,000 shares of common
        stock outstanding, and no shares of preferred stock outstanding. As of July
        28,
        2005, the Company had 8,899,630 shares of common stock and 1,338,137 shares
        of
        Series B preferred stock outstanding. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Since
        October 1, 2002 and until their delisting earlier this year, the Company's
        common shares have traded on the Pink Sheets under the symbol "CPPC.PK."
        There
        have been only very limited or sporadic quotations, none exceeded $0.10 per
        share, and there has been no trading activity in our stock since February
        17,
        2005. As of July 28, 2005, there were approximately 676 beneficial holders
        of
        record of the Company's common stock, exclusive of shares held in street
        name.
</font></div>
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      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>The
        Common Stock</em></strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Voting.</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
        Holders
        of the common stock are entitled to one vote per share on all matters to
        be
        voted on by the Company's shareholders. The Company's bylaws provide that
        a
        majority of the outstanding shares of the corporation entitled to vote
        constitute a quorum at a meeting of the shareholders.</font></div>
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        The
        Company's Board of Directors, in its sole discretion, may declare and pay
        dividends on the common stock, payable in cash or other consideration, out
        of
        funds legally available, if all dividends due on the preferred stock have
        been
        declared and paid. The Company has not paid any cash dividends on its common
        stock and does not plan to pay any cash dividends on its common stock for
        the
        foreseeable future.</font></div>
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        Subdivision, or Combination</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
        In the
        event of any liquidation, dissolution or winding up of the Company or upon
        the
        distribution of its assets, all assets and funds remaining after payment
        in full
        of the Company's debts and liabilities, and after the payment to holders
        of any
        then outstanding preferred stock of the full preferential amounts to which
        they
        were entitled, would be divided and distributed among holders of the common
        stock.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>The
        Preferred Stock</em></strong></font></div>
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      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        Company's preferred stock is divided into two series - Series A and Series
        B -
        designated as follows:</font></div>
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                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1,000,000
                  shares of Series A are authorized and 5,000,000 shares of Series
                  B are
                  authorized. There are no shares of Series A issued and outstanding;
                  there
                  are 1,338,167 Series B preferred shares issued and outstanding.
                  The
                  Company has no plans to issue any Series A shares for the foreseeable
                  future.</font></div>
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      <div>
        <table cellpadding="0" cellspacing="0" id="list" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
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              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
                  Series A shares are entitled to a 10% dividend annually on the
                  stated
                  value per share ($1.20) of the Series A, while the Series B shares
                  are
                  entitled to a cumulative 15% dividend annually on the stated value
                  per
                  share ($1.20) of the Series B. Such dividends will be declared
                  and paid at
                  the discretion of the Board to the extent funds are legally available
                  for
                  the payment of dividends.</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div>
        <table cellpadding="0" cellspacing="0" id="list" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="right" style="WIDTH: 90pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Both
                  series of preferred shares vote equally with the common stock,
                  with each
                  share of preferred having the number of votes equal to the voting
                  power of
                  one share of common stock, except that the vote or written consent
                  of a
                  majority of the outstanding preferred shares is required for any
                  changes
                  to the Company's Articles of Incorporation, Bylaws or Certificate
                  of
                  Designation or for any bankruptcy, insolvency, dissolution or liquidation
                  of the company.</font></div>
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            </tr>

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      <div>
        <table cellpadding="0" cellspacing="0" id="list" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="right" style="WIDTH: 90pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Upon
                  the liquidation of the company, the company's assets would be distributed
                  ratably to the holders of Series A preferred stock first, then
                  to the
                  holders of Series B preferred stock and then to the holders of
                  common
                  stock.</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div>
        <table cellpadding="0" cellspacing="0" id="list" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="right" style="WIDTH: 90pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Shares
                  of either series of preferred stock may be converted at the option
                  of the
                  holder into shares of common stock at a rate of one share of common
                  stock
                  for each share of preferred stock being converted, subject to adjustment
                  for certain corporate events.</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div>
        <table cellpadding="0" cellspacing="0" id="list" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="right" style="WIDTH: 90pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Both
                  series of preferred stock are subject to automatic conversion into
                  common
                  stock upon the closing of a firmly underwritten public offering
                  pursuant
                  to an effective registration statement under the Act, covering
                  the offer
                  and sale of common stock in which the gross proceeds to the Company
                  are at
                  least $4 million.</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Equity
        Compensation Plans</em></strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On
        May
        27, 2005, the Company adopted the 2005 Stock Option Plan (the "Option Plan")
        and
        the 2005 Employee Stock Option Plan (the "Employee Plan"), pursuant to which
        it
        may grant equity awards to eligible persons. The Option Plan allows the Board
        of
        Directors to grant options to purchase up to 1,500,000 shares of common stock
        to
        directors, officers, key employees and service providers of the Company,
        and the
        Employee Plan allows the Board of Directors to grant options to purchase
        up to
        1,500,000 shares of common stock to officers and key employees of the Company.
        As of July 28, 2005, options to purchase 1,180,472 shares had been granted
        under
        the Option Plan and options to purchase 888,865 shares had been granted under
        the Employee Plan as part of the Merger.</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="left">
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          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">27</font></div>
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          </div>
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        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="right">
          </div>
        </div>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div>
        <table cellpadding="0" cellspacing="0" width="100%">

            <tr bgcolor="#ffffff">
              <td valign="middle" width="21%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Plan
                  Category</strong></font></div>
              </td>
              <td valign="top" width="2%">&#160;</td>
              <td valign="top" width="17%" style="BORDER-BOTTOM: black thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Number
                  of securities to be issued upon exercise of outstanding options,
                  warrants
                  and rights (#)</font></div>
              </td>
              <td valign="top" width="2%">&#160;</td>
              <td valign="top" width="16%" style="BORDER-BOTTOM: black thin solid">
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                  exercise price of outstanding options, warrants and rights
                  ($)</font></div>
              </td>
              <td valign="top" width="2%">&#160;</td>
              <td valign="top" width="19%" style="BORDER-BOTTOM: black thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Number
                  of securities remaining available for future issuance under equity
                  compensation plans</font></div>
              </td>
            </tr>
            <tr bgcolor="#ccffcc">
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                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Equity
                  compensation plans approved by shareholders</font></div>
              </td>
              <td align="justify" valign="top" width="2%">&#160;</td>
              <td valign="middle" width="17%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">N/A</font></div>
              </td>
              <td align="justify" valign="top" width="2%">&#160;</td>
              <td align="justify" valign="middle" width="16%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">N/A</font></div>
              </td>
              <td align="justify" valign="top" width="2%">&#160;</td>
              <td align="justify" valign="middle" width="19%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">N/A</font></div>
              </td>
            </tr>
            <tr bgcolor="#ffffff">
              <td align="justify" valign="top" width="21%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Equity
                  compensation plans not approved by shareholders</font></div>
              </td>
              <td align="justify" valign="top" width="2%">&#160;</td>
              <td valign="middle" width="17%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2,069,337</font></div>
              </td>
              <td align="justify" valign="top" width="2%">&#160;</td>
              <td align="justify" valign="middle" width="16%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$1.33</font></div>
              </td>
              <td align="justify" valign="top" width="2%">&#160;</td>
              <td align="justify" valign="middle" width="19%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">930,663</font></div>
              </td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="justify" valign="top" width="21%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Total</font></div>
              </td>
              <td align="justify" valign="top" width="2%">&#160;</td>
              <td valign="middle" width="17%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2,069,337</font></div>
              </td>
              <td align="justify" valign="top" width="2%">&#160;</td>
              <td align="justify" valign="top" width="16%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$1.33</font></div>
              </td>
              <td align="justify" valign="top" width="2%">&#160;</td>
              <td align="justify" valign="top" width="19%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">930,663
                  </font></div>
              </td>
            </tr>

        </table>
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      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Recent
        Sales of Unregistered Securities</em></strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
        addition to the securities issued pursuant to the Merger, the Company issued
        an
        aggregate of 2,500,000 shares of common stock in April 2005 (prior to the
        30:1
        reverse stock split) for cash proceeds of $85,000. These securities were
        sold to
        Andrew Eccelstone (1,470,000 shares), Gary Boster (882,000 shares) and Philip
        and Stephanie Rogers (148,000 shares). Mr. Rogers served as the Company's
        President prior to the Merger. The Company relied upon &#167; 4(2) of the Securities
        Act of 1933, as amended, as the exemption from registration for this
        transaction. No underwriters were used in connection with this
        transaction.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>ITEM
        5.01 Changes in Control of Registrant</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Following
        the Merger, the holders of all of the common stock of IsoRay before the Merger
        only own 28.07% of the common stock, and 24.41% of the combined voting stock
        of
        the Company. The former holders of voting stock in IsoRay Medical now own
        71.93%
        of the common stock, and 75.59% of the combined voting stock of the Company.
        </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>ITEM
        5.02 Departure of Directors or Principal Officers; Election of Directors;
        Appointment of Principal Officers</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
        conjunction with the Merger, and effective as of July 28, 2005 (the closing
        date
        of the Merger), Thomas Scallen resigned from his positions as Chief Executive
        Officer and Chairman of the Board, Philip Rogers resigned from his position
        as
        President and a director, and Wally Bietak resigned from his position as
        a
        director of the Registrant. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Effective
        as of July 28, 2005, Roger Girard and David Swanberg were appointed as directors
        by the resigning Board, and, also effective as of July 28, 2005, they appointed
        Robert Kauffman, Thomas LaVoy and Stephen Boatwright to fill the remaining
        three
        vacant Board positions. The Board has not yet determined on which Board
        committees these five directors will serve, although it expects to do so
        at its
        next scheduled meeting after the Board establishes which committees the Company
        will form. Further information about the new Board members may be found below.
        </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Effective
        as of July 28, 2005, Roger Girard was appointed as Chief Executive Officer
        and
        President of the Registrant and Michael Dunlop was appointed as Chief Financial
        Officer and Treasurer of the Company. Also effective July 28, 2005, John
        Hrobsky
        was appointed Vice President, Sales and Marketing and David Swanberg was
        appointed Secretary and Vice President, Operations. The Registrant has not
        entered into employment agreements with any of these officers as of the date
        of
        this filing. Further information about these officers may be found
        below.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Management</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">IsoRay's
        management and directors and their respective ages as of the date of this
        report
        are set forth in the table below. Also provided is a brief description of
        the
        experience of each director and officer during the past five years and
        directorships (if any) held by each director in other companies. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
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          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">28</font></div>
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      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div>
        <table cellpadding="0" cellspacing="0" width="100%">

            <tr>
              <td align="justify" valign="top" width="25%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Name</strong></font></div>
              </td>
              <td valign="top" width="10%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Age</strong></font></div>
              </td>
              <td align="justify" valign="top" width="40%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Position
                  </strong></font></div>
              </td>
            </tr>
            <tr bgcolor="#ffffff">
              <td align="justify" valign="top" width="25%">&#160;</td>
              <td valign="top" width="10%">&#160;</td>
              <td align="justify" valign="top" width="40%">&#160;</td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="top" width="25%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Roger
                  Girard</font></div>
              </td>
              <td valign="top" width="10%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">61</font></div>
              </td>
              <td align="left" valign="top" width="40%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">CEO,
                  President, Chairman</font></div>
              </td>
            </tr>
            <tr bgcolor="#ffffff">
              <td align="left" valign="top" width="25%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">John
                  Hrobsky</font></div>
              </td>
              <td valign="top" width="10%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">55</font></div>
              </td>
              <td align="left" valign="top" width="40%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">VP
                  - Sales and Marketing</font></div>
              </td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="top" width="25%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Michael
                  Dunlop</font></div>
              </td>
              <td valign="top" width="10%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">53</font></div>
              </td>
              <td align="left" valign="top" width="40%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">CFO,
                  Treasurer</font></div>
              </td>
            </tr>
            <tr bgcolor="#ffffff">
              <td align="left" valign="top" width="25%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">David
                  J. Swanberg</font></div>
              </td>
              <td valign="top" width="10%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">48</font></div>
              </td>
              <td align="left" valign="top" width="40%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">VP-Operations,
                  Secretary, Director</font></div>
              </td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="top" width="25%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Robert
                  Kauffman</font></div>
              </td>
              <td valign="top" width="10%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">64</font></div>
              </td>
              <td align="left" valign="top" width="40%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Director</font></div>
              </td>
            </tr>
            <tr bgcolor="#ffffff">
              <td align="left" valign="top" width="25%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Thomas
                  LaVoy</font></div>
              </td>
              <td valign="top" width="10%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">45</font></div>
              </td>
              <td align="left" valign="top" width="40%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Director</font></div>
              </td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="top" width="25%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Stephen
                  Boatwright</font></div>
              </td>
              <td valign="top" width="10%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">41</font></div>
              </td>
              <td align="left" valign="top" width="40%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Director</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Roger
        Girard</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">:
        In
        addition to serving as President, Chairman and CEO for the Registrant, Mr.
        Girard is currently the CEO, President and Chairman of the Board of IsoRay
        Medical, Inc., and has served in these positions since the formation of IsoRay
        Medical, Inc.&#160;&#160; Mr. Girard was CEO and Chairman of IsoRay Medical's
        predecessor company from August of 2003 until October 1, 2004.&#160;&#160;
        Mr.
        Girard has been actively involved in the management and the development of
        the
        management team at IsoRay Medical, and his experienced leadership has helped
        drive IsoRay's development to date.&#160;&#160;&#160; From June 1998
        until
        August of 2003, Mr. Girard served as President of Strategic Financial Services,
        a company designed to help wealthy individuals and companies with strategic
        planning and financial strategy.&#160;&#160;&#160; Mr. Girard also
        served as the
        managing partner for the Northwest office of Capital Consortium during this
        time.&#160;&#160; Mr. Girard has knowledge, experience and connections
        to&#160;private, institutional&#160;and public sources&#160;of capital
        and is
        experienced in managing and designing capital structures for business
        organizations as well as organizing and managing&#160;the manufacturing
        process,
        distribution, sales, and marketing, based on his 35 years of
        experience.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>John
        Hrobsky</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">:
        Prior
        to joining IsoRay's predecessor company as Executive Vice President of Sales
        and
        Marketing in 2004, Mr. Hrobsky was President, CEO and a director of Advanced
        Cochlear Systems, positions he held beginning in 2001. From 1999 to 2001,
        Mr.
        Hrobsky served as President, CEO and a director of Zaxis International, Inc.,
        a
        biotechnology company. Prior to 1999, Mr. Hrobsky served as a senior executive
        or CEO of a number of biotech and medical device companies. IsoRay Medical
        products with which Mr. Hrobsky has experience include a medical device for
        restoring neuro-control after spinal cord injury, the leading cochlear implant
        worldwide, and radiology and imaging equipment. Notably, Mr. Hrobsky served
        as
        Vice President of Sales for Cochlear Corporation, the U.S. subsidiary of
        Cochlear Ltd., an Australian based manufacturer of cochlear implants. Cochlear
        Ltd. is the world's leading provider of cochlear implants commanding
        approximately 60% of the market. Mr. Hrobsky earned a B.S. IsoRay Medical
        Technology in 1971 from the University of Wisconsin - Eau Claire, and has
        earned
        credits toward an MBA from Regis University, Denver, CO. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Michael
        Dunlop: </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Mr.
        Dunlop has been responsible for IsoRay Medical and its predecessor companies'
        financial and accounting operations and administrative services in his position
        as CFO since April 2001. Mr. Dunlop has over 16 years of administrative
        experience in the healthcare industry. As Director of Contracting and Marketing
        for Community Choice, PHCO, an organized healthcare delivery system, from
        October 1997 to December 2003, he assisted in developing the strategic direction
        and business plan of the PHCO, negotiated and maintained contractual relations
        with state-wide major health insurance plans, increased compensation for
        80+
        independent providers and 6 area hospitals, and enhanced PHCO provider
        membership through development of programs that lowered clinic and hospital
        operating costs. He was granted the Pentad Industry Council, Chelan-Douglas
        Counties' 'Employer of the Year' award in 1996, while administrator of Lake
        Chelan Clinic. Mr. Dunlop holds an M.B.A. from California State University
        and
        B.M. Education from Walla Walla College. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>David
        J. Swanberg: </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Mr.
        Swanberg has more than 20 years experience in engineering and materials science,
        nuclear waste and chemical processing, aerospace materials and processes,
        and
        environmental technology development and environmental compliance. During
        the
        past five years, until January 2004, Mr. Swanberg was employed full time
        as Sr.
        Chemical/Environmental Engineer for Science Applications International
        Corporation working on a variety of projects including nuclear waste research
        and development. Mr. Swanberg joined IsoRay Medical's predecessor company
        in
        March of 1999 and has held management positions in the IsoRay companies since
        2000. He has been instrumental in development of IsoRay Medical's initial
        product, the Cs-131 brachytherapy seed, including interfaces with technical,
        regulatory, and quality assurance requirements. With IsoRay Medical and its
        predecessor companies, he has managed the development and production of
        radioactive seeds to support testing to meet NRC and FDA requirements, provided
        technical guidance for characterization of the IsoRay seed to meet AAPM Task
        Group 43 protocols, and coordinated production and testing of non-radioactive
        seeds to conform to ISO standards for brachytherapy devices. He is President
        of
        the Nuclear Medicine Research Council. He holds an MS in Chemical Engineering,
        is a licensed Chemical Engineer, and a certified Level II Radiation Worker.
        </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="left">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">29</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="2">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="right">
          </div>
        </div>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Robert
        Kauffman:</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
        Mr.
        Kauffman has served as Chief Executive Officer and Chairman of the Board
        of
        Alanco Technologies, Inc. (NASDAQ: ALAN), an Arizona-based information
        technology company, since July 1, 1998. Mr. Kauffman was formerly President
        and
        Chief Executive Officer of NASDAQ-listed Photocomm, Inc., from 1988 until
        1997
        (since renamed Kyocera Solar, Inc.). Photocomm was the nation's largest publicly
        owned manufacturer and marketer of wireless solar electric power systems
        with
        annual revenues in excess of $35 million. Prior to Photocomm, Mr. Kauffman
        was a
        senior executive of the Atlantic Richfield Company (ARCO) whose varied
        responsibilities included Senior Vice President of ARCO Solar, Inc., President
        of ARCO Plastics Company and Vice President of ARCO Chemical Company. Mr.
        Kauffman earned an M.B.A. in Finance at the Wharton School of the University
        of
        Pennsylvania, and holds a B.S. in Chemical Engineering from Lafayette College,
        Easton, Pennsylvania.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Thomas
        LaVoy:</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
        Mr.
        LaVoy has served as Chief Financial Officer of SuperShuttle International,
        Inc.,
        since July 1997 and as Secretary since March 1998. He has also served as
        a
        director of Alanco Technologies, Inc. (NASDAQ: ALAN) since 1998. From September
        1987 to February 1997, Mr. LaVoy served as Chief Financial Officer of
        NASDAQ-listed Photocomm, Inc. Mr. LaVoy was a Certified Public Accountant
        with
        the firm of KPMG Peat Marwick from 1980 to 1983. Mr. LaVoy has a Bachelor
        of
        Science degree in Accounting from St. Cloud University, Minnesota, and is
        a
        Certified Public Accountant.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Stephen
        Boatwright:</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
        Mr.
        Boatwright has been a member of Keller Rohrback, PLC in Phoenix, Arizona
        since
        January 2005. From 1997 through January 2005 Mr. Boatwright was a partner
        at
        Gammage &amp; Burnham, PLC, also in Phoenix, Arizona. Throughout his career, he
        has provided legal counsel to both private and public companies in many diverse
        industries. In recent years, Mr. Boatwright's legal practice has focused
        on
        representing technology, biotechnology, life science and medical device
        companies for their securities, corporate and intellectual property licensing
        needs. Mr. Boatwright earned both a J.D. and an M.B.A. from the University
        of
        Texas at Austin, and holds a B.A. in Philosophy from Wheaton College.
</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Significant
        Employees</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Certain
        significant employees of our subsidiary, IsoRay Medical, Inc., and their
        respective ages as of the date of this report are set forth in the table
        below.
        Also provided is a brief description of the experience of each significant
        employee during the past five years. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div>
        <table cellpadding="0" cellspacing="0" width="100%">

            <tr>
              <td align="justify" valign="top" width="25%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Name</strong></font></div>
              </td>
              <td valign="top" width="10%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Age</strong></font></div>
              </td>
              <td align="justify" valign="top" width="40%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Position
                  with IsoRay Medical, Inc.</strong></font></div>
              </td>
            </tr>
            <tr bgcolor="#ffffff">
              <td align="justify" valign="top" width="25%">&#160;</td>
              <td valign="top" width="10%">&#160;</td>
              <td align="justify" valign="top" width="40%">&#160;</td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="top" width="25%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Lane
                  Bray</font></div>
              </td>
              <td valign="top" width="10%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">77</font></div>
              </td>
              <td align="left" valign="top" width="40%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Chief
                  Chemist</font></div>
              </td>
            </tr>
            <tr bgcolor="#ffffff">
              <td align="left" valign="top" width="25%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Garrett
                  Brown</font></div>
              </td>
              <td valign="top" width="10%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">42</font></div>
              </td>
              <td align="left" valign="top" width="40%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Chief
                  Technology Officer</font></div>
              </td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="top" width="25%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Keith
                  Welsch</font></div>
              </td>
              <td valign="top" width="10%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">58</font></div>
              </td>
              <td align="left" valign="top" width="40%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Chief
                  Quality Officer</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Lane
        Bray</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">:
        Mr.
        Bray is known nationally and internationally as a technical expert in
        separations, recovery, and purification of isotopes and is a noted authority
        in
        the use of Cesium and Strontium ion exchange for Department of Energy's West
        Valley and Hanford nuclear waste cleanup efforts. In 2000, Mr. Bray received
        the
        'Radiation Science and Technology' award from the American Nuclear Society.
        Mr.
        Bray has authored or co-authored over 110 research publications, 12 articles
        for
        9 technical books, and holds 24 U.S. and foreign patents. Mr. Bray patented
        the
        USDOE/PNNL process for purifying medical grade Yttrium-90 that was successfully
        commercialized in 1999. Mr. Bray also recently invented and patented the
        proprietary isotope separation and purification process that is assigned
        to
        IsoRay. Mr. Bray was elected 'Tri-Citian of the Year' in 1988, nominated
        for
        'Engineer of the Year' by the American Nuclear Society in 1995, and was elected
        'Chemist of the Year for 1997' by the American Chemical Society, Eastern
        Washington Section. Mr. Bray is retired from the Pacific Northwest National
        Laboratory and currently serves as a part time consultant for medical isotope
        development. Mr. Bray has been a Washington State Legislator, a Richland
        City
        Councilman, and a Mayor of Richland. Mr. Bray has a B.A. in Chemistry from
        Lake
        Forest College.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="left">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">30</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="2">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="right">
          </div>
        </div>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Garrett
        Brown</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">:
        Dr.
        Brown was Manager of Radiochemistry - Hot Cell Operations for International
        Isotopes, Inc., a major radiopharmaceutical and medical device startup company,
        from January 1998 until May 1999 and was instrumental in bringing a new
        brachytherapy seed implant device to commercialization. Dr. Brown&#8217;s
        responsibilities included hands-on radiological work in fume hoods, glove
        boxes
        and remote manipulator hot cells, process definition, research, development,
        installation, optimization, waste minimization, procedure documentation,
        facility design and training. Dr. Brown also served as the technical interface
        to executive management for business development, shipping/receiving, QA/QC,
        facilities and marketing/sales. Dr. Brown, as a Senior Research Scientist
        at the
        Pacific Northwest National Laboratory, was responsible for the weekly production
        of multi-Curie quantities of medical grade Y-90, and research programs to
        develop high tech sorbents for separation of Cs-137, Sr-90 and Tc-99 from
        high-level radioactive wastes stored at the Hanford Nuclear Reservation.
        From
        May 1999 to the present, Dr. Brown has been a technical consultant with GNB
        Technical Consultants. Dr. Brown has co-authored numerous technical publications
        in the field. Dr. Brown has a Ph.D. in Analytical Chemistry and BS in Chemistry,
        cum laude. He has served as IsoRay Medical's Chief Technical Officer since
        May
        of 2000. In March 2004, Dr. Brown was certified as a Radiological Safety
        Officer.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Keith
        Welsch</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">:
        Mr.
        Welsch is a quality control professional with experience in a wide range
        of
        organizations and disciplines including the nuclear, aerospace, environmental
        restoration, construction, tubing, steel and aluminum industries. Mr. Welsch
        managed the registration of a plant to ISO 9002:1994 and subsequently
        transitioned the facility to ISO 9001:2000 and conducted continuous improvement
        actions. These included statistical process control, six sigma, lean
        manufacturing, and total preventive maintenance programs. Mr. Welsch's other
        significant achievements include facilitation of quality improvement and
        stand
        down teams, innovative education training manager, management of records
        review
        for two nuclear sites, management of audit programs and corrective-action
        systems, and teaching safety, technical, and quality courses. He has earned
        the
        Certified Quality Auditor, Certified Quality Technician and Certified Quality
        Improvement Associate certifications from the American Society for Quality.
        Mr.
        Welsch received a BA in Business Administration from Washington State
        University.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Executive
        Compensation</em></strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        following table provides certain summary information concerning the compensation
        earned by IsoRay Medical's Chief Executive Officer or comparable officer
        for
        services rendered in all capacities to IsoRay Medical or its predecessor
        companies for the calendar years ended December 31, 2002, 2003 and 2004.
        No
        other executive officer of IsoRay Medical or its predecessor companies received
        compensation in excess of $100,000 during calendar years 2002, 2003 or 2004.
        The
        following information includes the dollar value of base salaries, bonus awards,
        the number of stock options granted and certain other compensation, if any,
        whether paid or deferred. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="left">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">31</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="2">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="right">
          </div>
        </div>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Summary
        Compensation Table</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div>
        <table border="1" cellpadding="0" cellspacing="0" width="100%">

            <tr>
              <td colspan="2" rowspan="2" valign="top" width="25%" style="BORDER-BOTTOM: #ffffff solid">&#160;</td>
              <td colspan="2" rowspan="2" valign="bottom" width="15%" style="BORDER-BOTTOM: #000000 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Annual
                  Compensation</font></div>
              </td>
              <td colspan="3" valign="top" width="30%" style="BORDER-BOTTOM: #000000 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Long
                  Term Compensation</font></div>
              </td>
              <td rowspan="3" valign="bottom" width="13%" style="BORDER-BOTTOM: #000000 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">All
                  Other Compensation</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">($)</font></div>
              </td>
            </tr>
            <tr>
              <td colspan="2" valign="top" width="25%" style="BORDER-BOTTOM: black thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Awards</font></div>
              </td>
              <td valign="top" width="8%" style="BORDER-BOTTOM: black thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Payouts</font></div>
              </td>
            </tr>
            <tr bgcolor="#ffffff">
              <td align="left" valign="bottom" width="19%" style="BORDER-BOTTOM: black thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -5.75pt" align="left">&#160;</div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -5.75pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Name
                  and Principal Position</font></div>
              </td>
              <td align="left" valign="bottom" width="6%" style="BORDER-BOTTOM: black thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -6.8pt" align="center">&#160;</div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -6.8pt" align="center">&#160;</div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -6.8pt" align="left">&#160;</div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Year</font></div>
              </td>
              <td valign="top" width="8%" style="BORDER-BOTTOM: black thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -5.75pt" align="center">&#160;</div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -5.75pt" align="center">&#160;</div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -5.75pt" align="center">&#160;</div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -5.75pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Salary</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -5.75pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">($)</font></div>
              </td>
              <td valign="top" width="7%" style="BORDER-BOTTOM: black thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -5.75pt" align="center">&#160;</div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -5.75pt" align="center">&#160;</div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -5.75pt" align="center">&#160;</div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -5.75pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Bonus</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -5.75pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">($)</font></div>
              </td>
              <td valign="bottom" width="9%" style="BORDER-BOTTOM: black thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -5.75pt" align="center">&#160;</div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -5.75pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Restricted
                  Stock Awards</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -5.75pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">($)</font></div>
              </td>
              <td valign="bottom" width="12%" style="BORDER-BOTTOM: black thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -5.75pt" align="center">&#160;</div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -5.75pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Securities
                  Underlying Options/ SARs</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -5.75pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(#)</font></div>
              </td>
              <td valign="bottom" width="9%" style="BORDER-BOTTOM: black thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -5.75pt" align="center">&#160;</div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -5.75pt" align="center">&#160;</div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -5.75pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">LTIP
                  Payouts</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -5.75pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">($)</font></div>
              </td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" rowspan="3" valign="top" width="19%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -5.4pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Donald
                  Segna, President, IsoRay Products LLC</font></div>
              </td>
              <td valign="top" width="6%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2002</font></div>
              </td>
              <td align="right" valign="top" width="8%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">0</font></div>
              </td>
              <td align="right" valign="top" width="7%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">0</font></div>
              </td>
              <td valign="top" width="9%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">0</font></div>
              </td>
              <td align="right" valign="top" width="12%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">0</font></div>
              </td>
              <td valign="top" width="9%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">0</font></div>
              </td>
              <td valign="top" width="13%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">0</font></div>
              </td>
            </tr>
            <tr bgcolor="#ffffff">
              <td valign="top" width="19%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2003</font></div>
              </td>
              <td align="right" valign="top" width="6%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">0</font></div>
              </td>
              <td align="right" valign="top" width="8%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">0</font></div>
              </td>
              <td align="right" valign="top" width="7%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">0</font></div>
              </td>
              <td align="right" valign="top" width="9%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">41,580
                  </font></div>
              </td>
              <td valign="top" width="12%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">0</font></div>
              </td>
              <td valign="top" width="9%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">0</font></div>
              </td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td valign="top" width="19%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2004</font></div>
              </td>
              <td align="right" valign="top" width="6%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">24,000</font></div>
              </td>
              <td align="right" valign="top" width="8%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">0</font></div>
              </td>
              <td align="right" valign="top" width="7%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">0</font></div>
              </td>
              <td align="right" valign="top" width="9%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">0</font></div>
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              <td valign="top" width="12%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">0</font></div>
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              <td align="left" rowspan="2" valign="top" width="19%" style="BORDER-BOTTOM: #ffffff">
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              <td valign="top" width="6%" style="BORDER-BOTTOM: #ffffff">
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              <td align="right" valign="top" width="9%" style="BORDER-BOTTOM: #ffffff">
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              <td align="right" valign="top" width="12%" style="BORDER-BOTTOM: #ffffff">
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                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">0</font></div>
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                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">97,258</font></div>
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        Ownership of Certain</em></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>
        Beneficial Owners and Management</em></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>&#160;</em></strong></font></div>
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        following tables set forth certain information regarding the beneficial
        ownership of the Company's common stock and preferred stock as of July 28,
        2005
        for (a) each person known by the Company to be a beneficial owner of five
        percent or more of the outstanding common or preferred stock of the Company,
        (b)
        each executive officer, director and nominee for director of the Company,
        and
        (c) all directors and executive officers of the Company as a group. As of
        July
        28, 2005, the Company had 8,899,629.76 shares of common stock and 1,338,167.05
        shares of preferred stock outstanding.</font></div>
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      <div>
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              <td colspan="5" valign="top" width="75%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">COMMON
                  STOCK SHARE OWNERSHIP AS OF JULY 28, 2005</font></div>
              </td>
            </tr>
            <tr>
              <td colspan="5" valign="top" width="75%">&#160;</td>
            </tr>
            <tr>
              <td valign="top" width="22%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Name
                  and Address of </font></div>
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                  Owner</font><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman, serif"><sup>(1)</sup></font></div>
              </td>
              <td valign="top" width="16%">
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                  of </font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Common
                  Shares Owned</font></div>
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              <td valign="top" width="13%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Options
                  or Warrants Exercisable Within 60 Days of July 28, 2005</font></div>
              </td>
              <td valign="top" width="12%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Total
                  Shares Beneficially Owned</font></div>
              </td>
              <td valign="top" width="10%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Percent
                  of </font></div>
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                  Shares Owned</font><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman, serif"><sup>(2)</sup></font></div>
              </td>
            </tr>
            <tr bgcolor="#ffffff">
              <td align="left" valign="top" width="22%">&#160;</td>
              <td align="left" valign="top" width="16%">&#160;</td>
              <td align="left" valign="top" width="13%">&#160;</td>
              <td align="left" valign="top" width="12%">&#160;</td>
              <td align="left" valign="top" width="10%">&#160;</td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="top" width="22%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Roger
                  Girard, Chief Executive Officer, President and Chairman</font></div>
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              <td align="left" valign="top" width="16%">
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                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">219,014.12</font></div>
              </td>
              <td align="left" valign="top" width="12%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">0</font></div>
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              <td align="left" valign="top" width="10%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6.11%</font></div>
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              <td align="left" valign="top" width="22%">&#160;</td>
              <td align="left" valign="top" width="16%">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
              </td>
              <td align="left" valign="top" width="13%">&#160;</td>
              <td align="left" valign="top" width="12%">&#160;</td>
              <td align="left" valign="top" width="10%">&#160;</td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="top" width="22%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Michael
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              <td align="left" valign="top" width="16%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">136,619.33</font></div>
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              </td>
              <td align="left" valign="top" width="12%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">0</font></div>
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              <td align="left" valign="top" width="10%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.54%</font></div>
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            <tr bgcolor="#ffffff">
              <td align="left" valign="top" width="22%">&#160;</td>
              <td align="left" valign="top" width="16%">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
              </td>
              <td align="left" valign="top" width="13%">&#160;</td>
              <td align="left" valign="top" width="12%">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
              </td>
              <td align="left" valign="top" width="10%">&#160;</td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="top" width="22%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">John
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              <td align="left" valign="top" width="16%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">0</font></div>
              </td>
              <td align="left" valign="top" width="13%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">234,176.64</font></div>
              </td>
              <td align="left" valign="top" width="12%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">0</font></div>
              </td>
              <td align="left" valign="top" width="10%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.56%</font></div>
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            </tr>
            <tr bgcolor="#ffffff">
              <td align="left" valign="top" width="22%">&#160;</td>
              <td align="left" valign="top" width="16%">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
              </td>
              <td align="left" valign="top" width="13%">&#160;</td>
              <td align="left" valign="top" width="12%">&#160;</td>
              <td align="left" valign="top" width="10%">&#160;</td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="top" width="22%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">David
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              </td>
              <td align="left" valign="top" width="16%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">284,609.70</font></div>
              </td>
              <td align="left" valign="top" width="13%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">0</font></div>
              </td>
              <td align="left" valign="top" width="12%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">0</font></div>
              </td>
              <td align="left" valign="top" width="10%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3.20%</font></div>
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            <tr bgcolor="#ffffff">
              <td align="left" valign="top" width="22%">&#160;</td>
              <td align="left" valign="top" width="16%">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
              </td>
              <td align="left" valign="top" width="13%">&#160;</td>
              <td align="left" valign="top" width="12%">&#160;</td>
              <td align="left" valign="top" width="10%">&#160;</td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="top" width="22%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Robert
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              </td>
              <td align="left" valign="top" width="16%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">43,802.83</font></div>
              </td>
              <td align="left" valign="top" width="13%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">0</font></div>
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              <td align="left" valign="top" width="12%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">0</font></div>
              </td>
              <td align="left" valign="top" width="10%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.49%</font></div>
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            <tr bgcolor="#ffffff">
              <td align="left" valign="top" width="22%">&#160;</td>
              <td align="left" valign="top" width="16%">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
              </td>
              <td align="left" valign="top" width="13%">&#160;</td>
              <td align="left" valign="top" width="12%">&#160;</td>
              <td align="left" valign="top" width="10%">&#160;</td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="top" width="22%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Thomas
                  LaVoy, Director</font></div>
              </td>
              <td align="left" valign="top" width="16%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">0</font></div>
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              <td align="left" valign="top" width="13%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">0</font></div>
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              <td align="left" valign="top" width="16%">&#160;</td>
              <td align="left" valign="top" width="13%">&#160;</td>
              <td align="left" valign="top" width="12%">&#160;</td>
              <td align="left" valign="top" width="10%">&#160;</td>
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              <td align="left" valign="top" width="16%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">0</font></div>
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              <td align="left" valign="top" width="13%">
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              <td align="left" valign="top" width="12%">
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              <td align="left" valign="top" width="10%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.94%</font></div>
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            <tr bgcolor="#ffffff">
              <td align="left" valign="top" width="22%">&#160;</td>
              <td align="left" valign="top" width="16%">&#160;</td>
              <td align="left" valign="top" width="13%">&#160;</td>
              <td align="left" valign="top" width="12%">&#160;</td>
              <td align="left" valign="top" width="10%">&#160;</td>
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              <td align="left" valign="top" width="22%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Lawrence
                  Family Trust<sup>(3)</sup></font></div>
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              <td align="left" valign="top" width="16%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">888,530.20</font></div>
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              <td align="left" valign="top" width="13%">
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              <td align="left" valign="top" width="12%">
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              <td align="left" valign="top" width="10%">
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              <td align="left" valign="top" width="22%">&#160;</td>
              <td align="left" valign="top" width="16%">&#160;</td>
              <td align="left" valign="top" width="13%">&#160;</td>
              <td align="left" valign="top" width="12%">&#160;</td>
              <td align="left" valign="top" width="10%">&#160;</td>
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              <td align="left" valign="top" width="22%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Donald
                  Segna</font></div>
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              <td align="left" valign="top" width="16%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">511,214.35</font></div>
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              <td align="left" valign="top" width="13%">
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              <td align="left" valign="top" width="12%">
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              <td align="left" valign="top" width="22%">&#160;</td>
              <td align="left" valign="top" width="16%">&#160;</td>
              <td align="left" valign="top" width="13%">&#160;</td>
              <td align="left" valign="top" width="12%">&#160;</td>
              <td align="left" valign="top" width="10%">&#160;</td>
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            <tr bgcolor="#ccffcc">
              <td align="left" valign="top" width="22%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Anthony
                  Silverman<sup>(4)</sup></font></div>
              </td>
              <td align="left" valign="top" width="16%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">777,020.84</font></div>
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              <td align="left" valign="top" width="13%">
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              </td>
              <td align="left" valign="top" width="12%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">27,376.77</font></div>
              </td>
              <td align="left" valign="top" width="10%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">11.67%</font></div>
              </td>
            </tr>
            <tr bgcolor="#ffffff">
              <td align="left" valign="top" width="22%">&#160;</td>
              <td align="left" valign="top" width="16%">&#160;</td>
              <td align="left" valign="top" width="13%">&#160;</td>
              <td align="left" valign="top" width="12%">&#160;</td>
              <td align="left" valign="top" width="10%">&#160;</td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="top" width="22%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">All
                  Officers and Directors</font></div>
              </td>
              <td align="left" valign="top" width="16%">&#160;</td>
              <td align="left" valign="top" width="13%">&#160;</td>
              <td align="left" valign="top" width="12%">&#160;</td>
              <td align="left" valign="top" width="10%">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
              </td>
            </tr>
            <tr bgcolor="#ffffff">
              <td align="left" valign="top" width="22%" bgcolor="#ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">as
                  a group (7 persons) </font></div>
              </td>
              <td align="left" valign="top" width="16%" bgcolor="#ccffcc">
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              </td>
              <td align="left" valign="top" width="13%" bgcolor="#ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">537,426.96</font></div>
              </td>
              <td align="left" valign="top" width="12%" bgcolor="#ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">0</font></div>
              </td>
              <td align="left" valign="top" width="10%" bgcolor="#ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">14.21%</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman, serif"><sup>(1)</sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Except
        as
        otherwise noted, the address for each of these individuals is c/o IsoRay,
        Inc.,
        350 Hills St., Suite 106, Richland, Washington 99354.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman, serif"><sup>(2)</sup></font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Percentage
        ownership is based on 8,899,629.76 shares of Common Stock outstanding on
        July
        28, 2005. Shares of Common Stock subject to stock options or warrants which
        are
        currently exercisable or will become exercisable within 60 days after July
        28,
        2005 are deemed outstanding for computing the percentage ownership of the
        person
        or group holding such options, but are not deemed outstanding for computing
        the
        percentage ownership of any other person or group.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><sup><font size="2">(3)</font></sup><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        address of the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Lawrence
        Family Trust is 285 Dondero Way, San Jose, California 95119.</font></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><sup><font size="2">(4)</font></sup><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
          address of Mr. </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Silverman
          is 2747 Paradise Road #903, Las Vegas, Nevada 98109.</font></font></font></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      </div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="left">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">32</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="2">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="right">
          </div>
        </div>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">PREFERRED
        STOCK SHARE OWNERSHIP AS OF JULY 28, 2005</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div>
        <table cellpadding="0" cellspacing="0" width="100%">

            <tr>
              <td valign="top" width="22%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Name
                  and Address of </font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Beneficial
                  Owner</font><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman, serif"><sup>(1)</sup></font></div>
              </td>
              <td valign="top" width="16%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Amount
                  of </font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Preferred
                  Shares Owned</font></div>
              </td>
              <td valign="top" width="13%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Options
                  or Warrants Exercisable Within 60 Days of July 28, 2005</font></div>
              </td>
              <td valign="top" width="12%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Total
                  Shares Beneficially Owned</font></div>
              </td>
              <td valign="top" width="10%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Percent
                  of </font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Preferred
                  Shares Owned</font><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman, serif"><sup>(2)</sup></font></div>
              </td>
            </tr>
            <tr bgcolor="#ffffff">
              <td align="left" valign="top" width="22%">&#160;</td>
              <td align="left" valign="top" width="16%">&#160;</td>
              <td align="left" valign="top" width="13%">&#160;</td>
              <td align="left" valign="top" width="12%">&#160;</td>
              <td align="left" valign="top" width="10%">&#160;</td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="top" width="22%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Lebowitz
                  Living Trust<sup>(3)</sup></font></div>
              </td>
              <td align="left" valign="top" width="16%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">142,189.03
                  </font></div>
              </td>
              <td align="left" valign="top" width="13%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">0</font></div>
              </td>
              <td align="left" valign="top" width="12%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">0</font></div>
              </td>
              <td align="left" valign="top" width="10%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">10.63%</font></div>
              </td>
            </tr>
            <tr bgcolor="#ffffff">
              <td align="left" valign="top" width="22%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">David
                  Swanberg, Vice President</font></div>
              </td>
              <td align="left" valign="top" width="16%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">14,218.23
                  </font></div>
              </td>
              <td align="left" valign="top" width="13%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">0</font></div>
              </td>
              <td align="left" valign="top" width="12%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">0</font></div>
              </td>
              <td align="left" valign="top" width="10%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.06%</font></div>
              </td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="top" width="22%">&#160;</td>
              <td align="left" valign="top" width="16%">&#160;</td>
              <td align="left" valign="top" width="13%">&#160;</td>
              <td align="left" valign="top" width="12%">&#160;</td>
              <td align="left" valign="top" width="10%">&#160;</td>
            </tr>
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              <td align="left" valign="top" width="13%">&#160;</td>
              <td align="left" valign="top" width="12%">&#160;</td>
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                  a group (7 persons)</font><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman, serif"><sup>
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        as
        otherwise noted, the address for each of these individuals is c/o IsoRay,
        Inc.,
        350 Hills St., Suite 106, Richland, Washington 99354.</font></div>
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        of
        Preferred Stock outstanding on July 28, 2005. Shares of Preferred Stock subject
        to stock options or warrants which are currently exercisable or will become
        exercisable within 60 days after July 28, 2005 are deemed outstanding for
        computing the percentage ownership of the person or group holding such options,
        but are not deemed outstanding for computing the percentage ownership of
        any
        other person or group.</font></div>
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        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman, serif"><sup>(3)</sup></font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
          address of the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Lebowitz
          Living Trust is 16123 Greenwood Road, Monte Sereno, California
          95030.</font></font></div>
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        officers or directors other than Mr. Swanberg beneficially own shares of
        Preferred Stock.</font></div>
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        Relationships and Related Transactions</em></strong></font></div>
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        Medical's patent rights to its Cesium-131 process were acquired from Lane
        Bray,
        a shareholder of the Company, and are subject to a 1% royalty on gross profits
        and certain contractual restrictions. Additionally, when IsoRay Medical attains
        a 15% domestic market share, it will pay to the Lawrence Family Trust, a
        major
        shareholder of the Company, 1% of the "Factory Price" with a minimum annual
        royalty of $4,000, pursuant to an agreement with Don Lawrence. In exchange
        for
        consulting services, Quatsch Ventures, LLC, an entity controlled by Stephen
        Boatwright, one of the Company's directors, received options to purchase
        84,236</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">shares
        of
        our common stock in 2004. Mr. Boatwright is a member of Keller Rohrback,
        PLC,
        which provides legal services to the Company and IsoRay Medical.</font></div>
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      <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
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          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">33</font></div>
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        of Directors and Officers</em></strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        Company's Articles of Incorporation provides to directors and officers
        indemnification to the full extent provided by law, and provide that, to
        the
        extent permitted by Minnesota law, a director will not be personally liable
        for
        monetary damages to the Company or its shareholders for breach of his or
        her
        fiduciary duty as a director, except for liability for certain actions that
        may
        not be limited under Minnesota law.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Insofar
        as indemnification for liabilities arising under the Securities Act of 1933
        may
        be permitted to directors, officers and controlling persons pursuant to the
        foregoing provisions, or otherwise, in the opinion of the Securities and
        Exchange Commission such indemnification is against public policy as expressed
        in the Act and is, therefore, unenforceable. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>ITEM
        5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal
        Year</strong></font></div>
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      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On
        June
        28, 2005, the Registrant filed a Certificate of Designation with the Minnesota
        Secretary of State to designate the rights, preferences and privileges of
        Series
        A and B Convertible Preferred Stock, as required by the Merger Agreement.
        The
        Registrant is now authorized to issue up to 1 million shares of Series A
        Convertible Preferred Stock and up to 5 million shares of Series B Convertible
        Preferred Stock. The Series A Preferred carries a dividend of ten percent
        per
        year on the stated value per share of $1.20 through March 31, 2007. The Series
        B
        Preferred carries a dividend of fifteen percent per year on the stated value
        per
        shares of $1.20, and accrued but unpaid dividends cumulate. Both series of
        preferred stock vote equally with the common stock, and may be converted
        into
        common stock at a rate of one share of common stock for each one share of
        preferred stock converted. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On
        July
        29, 2005, the Registrant filed a Certificate of Amendment to its Articles
        of
        Incorporation, changing the name of the Registrant from "Century Park Pictures
        Corporation" to "IsoRay, Inc."</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On
        August
        1, 2005, the Registrant determined that it would change its fiscal year end
        from
        September 30 to June 30, and by August 15, 2005 the Registrant will file
        Form
        1128 with the Internal Revenue Service (IRS) to effectuate this change. Pending
        approval from the IRS, the Registrant will file its transition report on
        Form
        10-KSB. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>ITEM&#160;8.01
        Other Events</strong></font></div>
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      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">As
        a
        result of the Merger, IsoRay has moved its principal executive offices to
        350
        Hills Street, Suite 106, Richland, Washington 99354.</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>&#160;</u></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>ITEM
        9.01 Exhibits</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(a)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Financial
        Statements of Business Acquired</u></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 63pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">To
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        filed by amendment.</font></div>
      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25">&#160;</div>
      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(b)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Pro
        Forma Financial Information</u></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 63pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font size="2">To
        be filed by amendment.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="left">
          </div>
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        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">34</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="2">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="right">
          </div>
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      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.1</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 18pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Merger
        Agreement dated as of May 27, 2005, by and among Century Park Pictures
        Corporation, Century Park Transitory Subsidiary, Inc., certain shareholders
        and
        IsoRay Medical, Inc.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.2</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 18pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Certificate
        of Merger, filed with the Delaware Secretary of State on July 28,
        2005</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3.1</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 18pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Certificate
        of Designation of Rights, Preferences and Privileges of Series A and B
        Convertible Preferred Stock, filed with the Minnesota Secretary of State
        on June
        29, 2005</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3.2</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 18pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Amendment
        to Articles of Incorporation, filed with the Minnesota Secretary of State
        on
        July 29, 2005</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.1</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 18pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Form
        of
        Lock-Up Agreement for Certain IsoRay Medical, Inc. Shareholders</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.2</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 18pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Form
        of
        Lock-Up Agreement for Anthony Silverman</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.3</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 18pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Form
        of
        Registration Rights Agreement among IsoRay Medical, Inc., Century Park Pictures
        Corporation and the other signatories thereto</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.4</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 18pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Form
        of
        Escrow Agreement among Century Park Pictures Corporation, IsoRay Medical,
        Inc.
        and Anthony Silverman</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
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        of
        Escrow Agreement among Century Park Pictures Corporation, IsoRay Medical,
        Inc.
        and Thomas Scallen</font></div>
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        report to be signed on its behalf by the undersigned, thereunto duly
        authorized.</font></div>
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              <td colspan="2"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">IsoRay,
                Inc., a Minnesota corporation</font></td>
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              <td><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Dated:&#160;August
                3, 2005</font></td>
              <td><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">By:&#160;&#160;</font></td>
              <td><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">/s/&#160;Roger
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              <td><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Roger
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{"company-data": {"conformed-name": "CENTURY PARK PICTURES CORP", "cik": "0000728387", "assigned-sic": "5812", "irs-number": "411458152", "state-of-incorporation": "MN", "fiscal-year-end": "0930"}, "filing-values": {"form-type": "8-K", "act": "34", "file-number": "000-14247", "film-number": "05996732"}, "business-address": {"street1": "4710 IDS CENTER", "city": "MINNEAPOLIS", "state": "MN", "zip": "55402", "phone": "6123335100"}, "mail-address": {"street1": "5101 IDS CENTER", "city": "MINNEAPOLIS", "state": "MN", "zip": "55402"}}
Unassociated Document
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
Date
          of
          Report: August 3, 2005
(Date
          of
          earliest event reported: July 28, 2005)
ISORAY,
          INC.
(Exact
          name of registrant as specified in its charter)
Minnesota
(State
                    or other jurisdiction
of
                    incorporation)
000-14247
(Commission
File
                    Number)
41-1458152
(IRS
                    Employer
Identification
                    No.)
350
          Hills Street, Suite 106, Richland, Washington 99354
(Address
          of principal executive offices) (Zip Code)
(509)
          375-1202
(Registrant's
          telephone number)
ITEM
        2.01 Completion of Acquisition or Disposition of Assets
On
        July
        28, 2005, the merger (the "Merger") contemplated by the Merger Agreement
        dated
        as of May 27, 2005 by and among Century Park Pictures Corporation, Century
        Park
        Transitory Subsidiary, Inc., IsoRay Medical, Inc. and certain shareholders
        (the
        "Merger Agreement"), was completed as of the filing of a Certificate of Merger
        with the Secretary of State of Delaware, merging Century Park Transitory
        Subsidiary, Inc. into IsoRay Medical, Inc.
As
        a
        result of the Merger and pursuant to the Merger Agreement, IsoRay Medical,
        Inc.
        has become a wholly-owned subsidiary of Century Park Pictures Corporation,
        Century Park Pictures Corporation has changed its name to "IsoRay, Inc."
        (hereinafter referred to as the "Registrant"), and the Registrant is issuing
        shares of its common stock and shares of its preferred stock to holders of
        common and preferred stock of IsoRay Medical, Inc. at a rate of 0.842362
        share
        of the Registrant's stock for each share of IsoRay Medical, Inc. stock. Options
        and warrants to purchase common and preferred stock of IsoRay Medical, Inc.
        will
        also be converted at the same rate into options and warrants to purchase
        common
        and preferred stock of the Registrant. At the time of the Merger and following
        its recent 30:1 reverse stock split, the Registrant had approximately 2,498,000
        shares of common stock outstanding.
Following
        the Merger, the Registrant will have 10,237,797 shares of common and preferred
        stock outstanding. The total amount of shares outstanding, on a fully-diluted
        basis, post merger will be 13,880,822, which includes not only shares of
        common
        stock, but also shares of preferred stock, warrants, options and convertible
        debentures that could be exercised or converted into shares of common stock.
        Following the Merger, on a fully diluted basis, the shareholders of IsoRay
        Medical, Inc. own 82% of the Registrant's outstanding securities, and the
        Registrant's shareholders own 18% of the Registrant's outstanding securities.
Among
        the
        conditions to the closing of the Merger, (i) all officers and directors of
        IsoRay Medical, Inc. have agreed to lock-up the shares of the Registrant
        they
        have received as part of the Merger for a period of one year from the closing;
        (ii) a major shareholder of the Registrant has agreed to lock-up 233,333
        shares
        of the Registrant's common stock for a period of one year from the closing;
        (iii) IsoRay Medical, Inc. and the Registrant granted certain piggyback and
        demand registration rights to certain shareholders of the Registrant and
        holders
        of convertible debentures issued by IsoRay Medical, Inc. (for the shares
        of
        common stock into which the debentures are convertible); and (iv) Thomas
        Scallen, the Registrant's former Chief Executive Officer, and a major
        shareholder of the Registrant have each agreed to escrow 50,000 shares of
        the
        Registrant's common stock for a period of three years from the closing as
        collateral for these individuals' possible indemnification obligations pursuant
        to the Merger Agreement.
Business
        of the Registrant and Its Subsidiary
Cautionary
        Note Regarding Forward-looking Statements and Risk
        Factors
The
        Company's Form 10-KSB, any Form 10-QSB or any Form 8-K of the Company or
        any
        other written or oral statements made by or on behalf of the Company may
        contain
        forward-looking statements which reflect the Company's current views with
        respect to future events and financial performance. The words "believe,"
        "expect," "anticipate," "intends," "estimate," "forecast," "project," and
        similar expressions identify forward-looking statements. 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; any statements regarding the validity of our intellectual property
        and patent protection; and any statements of assumptions underlying any of
        the
        foregoing. Such "forward-looking statements" are subject to risks and
        uncertainties set forth from time to time in the Company's SEC reports and
        include, among others, the Risk Factors beginning on page 20
        below.
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.
Explanatory
        Note
Unless
        otherwise indicated or the context otherwise requires, all references below
        in
        this report on Form 8-K to "we," "us" and the "Company" are to IsoRay, Inc.,
        a
        Minnesota corporation and its subsidiary, IsoRay Medical, Inc., a Delaware
        corporation. References to "IsoRay Medical" are to IsoRay Medical, Inc.,
        a
        Delaware corporation.
Business
        of IsoRay, Inc.
Immediately
        prior to the completion of the Merger, the Registrant did not conduct any
        business operations and had minimal assets and liabilities.
Business
        of IsoRay Medical, Inc.
IsoRay
        Medical, Inc. was formed on June 15, 2004 as a corporation in the State of
        Delaware, and in October 2004 it merged with two predecessor companies to
        combine all of the IsoRay operations into one company.
IsoRay
        Medical intends to utilize its patented radioisotope technology, chemists
        and
        engineers, and management team to create a major therapeutic medical device
        company with a goal of providing improved patient outcomes in the treatment
        of
        prostate cancer and other solid cancer tumors. IsoRay Medical began production
        and sales of its initial Food and Drug Administration ("FDA") approved product,
        the IsoRay Cs
131
brachytherapy seed, in October 2004 for the treatment of prostate cancer.
        Management believes its technology will allow it to capture a leadership
        position in an expanded brachytherapy market. The more clinically beneficial
        characteristics of the Cesium-131 (Cs-131 or Cs
131
)
        isotope
        are expected to decrease radiation exposure to the patient and reduce the
        severity and duration of side effects, while treating cancer cells as
        effectively, if not more so than I-125 and Pd-103. Cs-131 offers a combination
        of patient benefits management believes are superior to currently available
        brachytherapy isotopes. Cs-131 could also enable meaningful penetration in
        other
        solid tumor applications such as breast cancer, expanding the total available
        market opportunity. The second radioisotope, Yttrium-90 (Y-90 or Y
90
),
        is
        currently being used in the treatment of non-Hodgkin's lymphoma and is in
        clinical trials for other applications. Other manufacturers have received
        FDA
        approval for Y
90
and
        IsoRay Medical believes production will not require clinical trials or an
        extensive FDA application process. Production is expected to begin in late
        2005.
Management
        believes that the IsoRay Cs
131
seed
        represents
the
        first
        major advancement in brachytherapy technology in over 17 years with attributes
        that management believes could make it the long term "seed of choice" for
        internal radiation procedures. The Cs
131
seed
        has
        FDA approval for treatment of malignant disease (e.g. cancers of the head
        and
        neck, brain, breast, prostate, etc.) and may be used in surface, interstitial,
        and intracavity applications for tumors with known
        radiosensitivity.
The
        Cs
131
isotope
        has specific clinical advantages for treating cancer over Iodine (I-125 or
        I
125
)
        and
        Palladium (Pd-103 or Pd
103
),
        the
        other isotopes commonly used in brachytherapy procedures. IsoRay Medical
        believes that the short half life and high-energy characteristics of
        Cs
131
will
        expand industry applications and facilitate meaningful penetration into the
        treatment of other forms of cancer tumors such as breast cancer. The shorter
        half life of 9.7 days (versus 17.5 days for Pd
103
and 60
        days for I
125
)
        mitigates negative affects of long radiation periods on healthy tissue and
        is
        believed to reduce the duration of certain side effects. The high energy
        is
        believed to prove more effective on fast growing cancers by aggressively
        attacking cancer cells and disrupting cancer cell re-population cycles. The
        characteristics of Cs
131
may
        result in the use of 10-30% less seeds per procedure thereby reducing the
        total
        physical radiation dose to the patient and reducing the costs of the procedure
        for both third party payers and the patient.
Brachytherapy
        seeds are small devices used in an internal radiation procedure. In recent
        years
        the procedure has become one of the primary treatments for prostate cancer
        and
        is now used more often than surgical removal of the prostate. The brachytherapy
        procedure places radioactive seeds as close as possible to the cancer tumor
        (the
        word "brachytherapy" means close therapy). The seeds deliver therapeutic
        radiation by
killing
        the immediate tumor cells and cells located in the vicinity of the tumor
        while
        minimizing exposure to adjacent healthy cells.
This
        allows doctors to administer a higher dose of radiation at one time than
        is
        possible with external beam radiation. Each seed contains a radioisotope
        sealed
        within a welded titanium capsule. Approximately 85 to 135 seeds are permanently
        implanted in the prostate in a 45-minute outpatient procedure. The isotope
        decays over time and the seeds become inert. The seeds may be used as a primary
        treatment or in conjunction with other treatment modalities such as external
        beam radiation therapy, chemotherapy, or as treatment for residual disease
        after
        excision of primary tumors.
2
IsoRay
        Medical's second product, Yttrium-90, is also a short-lived (half life of
        64
        hrs) radioisotope that is already used in the treatment of non-Hodgkin's
        lymphoma, leukemia, ovarian cancer, prostate cancer, osteosarcomas, and tumors
        of the breast, lung, kidney, colon and brain. These applications apply primarily
        to metastasized, or spread through the body, cancers. Currently more than
        20
        clinical trials using Y
90
are
        underway in the U.S. Also, Y
90
is
        used
        extensively at multiple treatment centers in Europe. Several members of the
        current IsoRay Medical team developed a process to produce high-purity
        Y
90
for
        medical applications during the mid-1990s. Currently over 90 percent of the
        Y
90
used
        in
        the U.S. is imported. IsoRay Medical's management believes there is an immediate
        market opportunity for a highly purified Y
90
.
IsoRay
        Medical and its predecessor companies have accomplished the following key
        milestones:
¨
Development
                  of treatment protocol by leading oncologist (January
                  2005);
¨
Treated
                  the first patient (October 2004);
¨
Production
                  of the Cs
131
seed
                  commenced (August 2004);
¨
Five
                  additional patent applications filed for Cs-131 and Y-90 processes
                  (November 2003 - August 2004);
¨
Radioactive
                  Materials License received from Washington State Department of
                  Health
                  (July 2004);
¨
Hired
                  first two sales and marketing executives (July 2004);
¨
ISO-9000
                  Quality Management System and production operating procedures (under
                  continuing development);
¨
Completed
                  the Seed Integration Test object required by the Washington State
                  Department of Health and the FDA (October 2004);
¨
Signed
                  the Commercial Work for Others Agreement between Battelle (manager
                  of the
                  Pacific Northwest National Laboratory or PNNL) and IsoRay Medical,
                  allowing initial production of seeds, through 2006, at PNNL (April
                  2004);
¨
Raised
                  over $10.3 M in debt and equity funding (September 2003 - July
                  2005);
¨
Obtained
                  favorable Medicare reimbursement codes for the Cs-131 brachytherapy
                  seed
                  (November 2003);
¨
FDA
                  approval to market the first product: the Cs-131 brachytherapy
                  seed (March
                  2003);
¨
Initial
                  seed production and design verification, computer modeling of the
                  radiation profile, and actual dosimetric data compiled by the National
                  Institute of Standards and Technology and PNNL (October 2002);
                  and
¨
Patent
                  obtained for Cs-131 isotope separation and purification (May 2000).
Certain
        Defined Terms
The
        technical terms defined below are important to understand as they are used
        throughout this discussion of the business of IsoRay Medical. When used in
        this
        report, unless the context requires otherwise:
"Brachytherapy"
refers
        to the process of placing therapeutic radiation sources in, or near, diseased
        tissue. Brachytherapy is derived from a Greek term meaning "short distance"
        therapy.
3
"Cesium-131"
or
"Cs-131"
is an
        isotope of the element Cesium that gives off low energy, "soft" x-rays as
        it
        decays. Cs-131 decays to 50% of its original activity every 9.7 days, becoming
        essentially inert after 100 days.
"Chelate"
and
"bifunctional
        chelate"
are
        molecules to which an element or radioisotope is chemically bound, typically
        having a biologically active portion that selectively binds to cancerous
        or
        diseased cells. Chelate also refers to the process of attaching an element
        or
        radioisotope to a molecule. A bifunctional chelate is a chelate with two
        functional groups able to form two chemical bonds per molecule.
"EBRT"
(external beam radiation therapy) is the external treatment of prostate cancer
        using an x-ray-like machine that targets a beam of radiation at the cancer
        site.
        The treatment damages genetic material within the cancer cells, which prevents
        the cells from growing and the affected cells eventually die. Treatments
        are
        generally performed at an outpatient center five days a week for seven or
        eight
        weeks.
"Half
        life"
means
        the time required for a radioisotope to decay to one-half of its previous
        activity. The amount of radiation emitted thus decreases to 25% of original
        activity in two half-lives, 12.5% in three half-lives, and so on.
"Isotope"
refers
        to atoms of the same element that have different atomic masses. The word
        "isotope" means "same place," referring to the fact that isotopes of a given
        element have the same atomic number and hence occupy the same place in the
        Periodic Table. Thus, they are very similar in their chemical behavior.
"Cs
131
seed"
is the
        name by which IsoRay Medical's first product, the Cesium-131-based brachytherapy
        seed, is currently known.
"Pure-beta
        particle emitter"
is a
        radioisotope whose only emissions during radioactive decay are electrons.
        Beta
        particles can travel several millimeters in tissue.
"RP"
(radical
        prostatectomy or prostatectomy) is the complete surgical removal of the
        prostate, under significant anesthesia. Two main types of surgery have evolved:
        nerve-sparing and non nerve-sparing. The nerve-sparing surgery is designed
        to
        minimize damage to the nerve that controls penile erection.
"Radiobiologic"
is
        characteristic of the effects of radiation on organisms or tissues, most
        commonly the effectiveness of therapeutic radiation in interrupting cell
        growth
        and replication.
"Radioisotope"
is a
        natural or man-made isotope of an element that spontaneously decays while
        emitting ionizing radiation.
"Seed"
is a
        common term for small radiation sources having a radioisotope sealed within
        a
        biocompatible capsule such as gold or titanium, suitable for temporary or
        permanent brachytherapy implantation.
"Therapeutic
        radiation"
refers
        to
        ionizing radiation with sufficient energy to disrupt basic biological processes
        of cells.
"Yttrium-90"
(Y-90)
        is a radioisotope that emits high energy beta particles with a half life
        of 2.67
        days.
"Zirconium-90"
is a
        stable (non-radioactive) decay product of Yttrium-90.
Industry
        Information
Incidence
        of Prostate Cancer
Excluding
        skin cancer, prostate cancer is the most common form of cancer, and the second
        leading cause of cancer deaths, in men. The American Cancer Society estimated
        there would be about 230,900 new cases of prostate cancer diagnosed and an
        estimated 29,900 deaths associated with the disease in the United States
        during
        2004. Because of early detection techniques (e.g. PSA) approximately 70%
        (154,700) of these cases are potentially treatable with seed brachytherapy,
        when
        the cancers are still locally confined within the prostate.
4
The
        expanding population of men over age 55 and increased PSA screening leading
        to
        earlier diagnosis of prostate cancer in the U.S. may lead to growth in the
        number of prostate cancer cases treatable with brachytherapy. Also, positive
        changes in Medicare reimbursement for brachytherapy seeds together with a
        decrease in reimbursement rates for competing technologies have created a
        more
        favorable financial environment and stimulated market expansion.
Treatment
        Options and Protocol
In
        addition to brachytherapy, localized prostate cancer is most commonly treated
        with radical prostatectomy (RP) and external beam radiation therapy (EBRT).
        Other treatments include cryosurgery, hormone therapy, watchful waiting,
        and
        finasteride, a drug commonly prescribed to treat benign enlargement of the
        prostate and male baldness. Some of these therapies may be combined in special
        cases to address a specific cancer stage or patient need. When the cancerous
        tissue is not completely eliminated, the cancer typically returns to the
        primary
        site, often with metastases to other areas.
Prostate
        cancer patients electing seed therapy first undergo an ultrasound test or
        CT
        scan, which generates a two-dimensional image of the prostate. With the
        assistance of a computer program, a three-dimensional treatment plan is created
        that calculates the number and placement of the seeds required for the best
        possible distribution of radiation to the prostate. Once the implant model
        has
        been constructed, the procedure is scheduled and the seeds are ordered. The
        number of seeds implanted normally ranges from 85 to 135, with the number
        of
        seeds varying with the size of the prostate. The procedure is usually performed
        under local anesthesia in an outpatient setting. The seeds are implanted
        using
        needles inserted into the prostate. When all seeds have been inserted, seed
        placement is verified through an ultrasound image, CT scan, fluoroscope or
        MRI.
        An experienced practitioner typically performs the procedure in approximately
        45
        minutes, with the patient normally returning home the same day.
Brachytherapy
        seeds
One
        of
        the first reports in the medical literature regarding brachytherapy seeds
        that
        deliver "soft x-ray" radiation directly to tumors by permanent implantation
        appeared in 1965, authored by Donald C. Lawrence and U.K. Henschke. Don Lawrence
        later pioneered development of the titanium-encapsulated I-125 brachytherapy
        seed. His company, Lawrence Soft Ray Inc., provided the world's supply of
        seeds
        from 1967 to 1978 until the 3M Corporation purchased the technology. Eventually
        3M sold the business to Amersham, which spun off this business to
ONCURA
,
        today
        the market leader in Iodine-125 seeds. All commercially available seeds trace
        their origin to Mr. Lawrence's invention. Don Lawrence was a founder of IsoRay,
        LLC, a predecessor company to IsoRay Medical.
Brachytherapy
        has been used as a treatment for prostate cancer for more than 30 years.
        Formerly, seeds containing the radioactive isotope Iodine-125 or I-125 were
        implanted in prostate tumors through open surgery. However, this technique
        fell
        into disfavor because the seeds were often haphazardly arranged resulting
        in
        radiation not reaching all of the targeted cancerous prostate tissue.
        Compounding this was the fact that often an unintended radiation dose was
        delivered to healthy surrounding tissues, particularly the urethra and rectum.
        Clinical results indicate that the brachytherapy insertion procedure, computer
        modeling, advanced imaging and other techniques used in brachytherapy today
        have
        significantly ameliorated these drawbacks.
The
        introduction of Palladium-103 or Pd-103 in the mid-1980's represented a major
        technology advance in brachytherapy and played a significant role in the
        dramatic increase in the number of brachytherapy procedures performed. Within
        a
        relatively short time, Pd-103 captured 40% of the growing brachytherapy market.
Cs
131
represents
the
        first
        major advancement in brachytherapy technology in over 17 years with attributes
        that management believes could make it the long term "seed of choice" for
        internal radiation procedures. The Cs
131
seed
has
specific
        clinical advantages
for
        treating cancer
over
        I-125 and Pd-103.
5
There
        is
        a large and growing potential market for the Company's products. Several
        significant clinical and market factors are contributing to the increasing
        popularity of the brachytherapy procedure. Brachytherapy has become the
        treatment of choice for early-stage prostate cancer and is now more common
        than
        surgery. Brachytherapy has significant advantages over competing treatments
        including lower cost, better survival data, fewer side effects, a faster
        recovery time and the convenience of a single 30 to 45 minute outpatient
        procedure.
Clinical
        Results
Long
        term
        survival data is now available for brachytherapy with Pd-103 and I-125, which
        support the efficacy of brachytherapy. Clinical data indicates that
        brachytherapy offers success rates for early-stage prostate cancer treatment
        that are comparable to or better than those of RP or EBRT. While clinical
        studies of brachytherapy to date have focused on results from brachytherapy
        with
        Pd-103 and I-125, management believes that this data will be relevant for
        brachytherapy with Cs-131, and Cs-131 may offer improved clinical outcomes
        over
        Pd-103 and I-125, given its shorter half life.
Improved
        patient outcomes.
A number
        of published studies on the use of brachytherapy in the treatment of early-stage
        prostate cancer have been very positive.
·
A
                  nine-year clinical study published in the March 2000 issue of
International
                  Journal of Radiation Oncology, Biology and Physics
,
                  reported that 83.5% of patients treated with the Pd-103 device
                  were
                  cancer-free at nine years. The study was conducted by Dr. John
                  Blasko of
                  the Seattle Prostate Institute and included 230 patients with clinical
                  stage T1 and T2 prostate cancer. Only 3% experienced cancer recurrence
                  in
                  the prostate.
·
Results
                  from a 10-year study conducted by Dr. Datolli and Dr. Wallner published
                  in
                  the
International
                  Journal of Radiation Oncology, Biology and Physics
in
                  September 2002, were presented at the October 2002 American Society
                  for
                  Therapeutic Radiology and Oncology conference confirming the effectiveness
                  of the Pd-103 seed in patients with aggressive cancer who previously
                  were
                  considered poor candidates for brachytherapy. The 10-year study
                  was
                  comprised of 175 patients with Stage T2-T3 prostate cancer treated
                  from
                  1991 through 1995. Of these patients, 79 percent remained completely
                  free
                  of cancer without the use of hormonal therapy or
                  chemotherapy.
·
A
                  study by the Northwest Prostate Institute in Seattle, Washington
                  reported
                  79% disease-free survival at 12 years for brachytherapy in combination
                  with external beam radiation (Ragde,
et
                  al
.,
Cancer,
July 2000). The chance of cure from brachytherapy is nearly 50%
                  higher
                  than for other therapies for men with large cancers (PSA 10-20)
                  and over
                  twice as high as other therapies for men with the largest cancers
                  (PSA
                  20+) (K. Wallner,
Prostate
                  Cancer: A Non-Surgical Perspective,
Smart Medicine Press, 2000).
The
        table
        below summarizes published results comparing survival rates 10 years after
        treatment for patients undergoing different types of treatment. Biochemical
        Disease-Free Survival is defined as the percentage of patients with normal
        prostate specific antigen or PSA after treatment and is the most rigorous
        definition of treatment success. Disease-Specific Survival is defined as
        the
        percentage of patients not dying from prostate cancer.
6
Comparative
        Survival and Disease-Free States
Treatment
Seed
                  Implants
External
                  Radiation
Prostatectomy
Disease-Free
                  Survival
64%
                  - 85%
59%
                  - 78%
65%
Disease-Specific
                  Survival
98%
                  - 100%
75%
                  - 97%
84%
                  - 85%
Source:
                  Kaiser Brachytherapy Department, Roseville,
                  CA
Reduced
        Incidence of Side Effects.
Because
        the IsoRay Cs
131
seed
        delivers a highly concentrated and confined dose of radiation directly to
        the
        prostate, healthy surrounding tissues and organs typically experience less
        radiation exposure. Management believes, and initial results appear to support,
        that this should result in fewer incidents of side effects and complications
        than may be incurred with other conventional therapies, and if side effects
        do
        occur, they should be lower in intensity and resolve more rapidly than those
        experienced with competing I-125 and Pd-103 isotopes.
Sexual
        potency and urinary incontinence are two major concerns men face when choosing
        among various forms of treatment for prostate cancer. Kaiser patient education
        information lists the following data from clinical studies that monitored
        rates
        of impotence and incontinence.
Comparative
        Rates of Potency and Incontinence
Treatment
Seed
                  implants
External
                  Radiation
Prostatectomy
                  (nerve sparing)
Prostatectomy
                  (non nerve-sparing)
Rate
                  of Impotence
10%
                  - 50%
40%
                  - 60%
14%
                  - 56%
65%
                  - 90%
Urinary
                  Incontinence
1%
1%
NR
7%
                  - 8%
Source:
                  Kaiser Brachytherapy Department, Roseville,
                  CA
Favorable
        Market Factors
Lower
        Treatment Cost
.
        The
        total one-time cost of brachytherapy ranges from $13,000 to $17,000 per
        procedure. This is approximately two-thirds the cost of a radical prostatectomy
        or RP, which ranges from $19,000 to $25,000, excluding treatment for side
        effects and post-operative complications that can be quite costly. Brachytherapy
        cost is comparable to the cost of EBRT (external beam radiation), which ranges
        from $13,000 up to $40,000 for a seven to nine week course of treatment.
Favorable
        Demographics
.
        Prostate cancer incidence and mortality increase with age. Prostate cancer
        is
        found most often in men who are over the age of 50. The National Cancer
        Institute has reported that the incidence of prostate cancer increases
        dramatically in men over the age of 55. Currently, one out of every six men
        is
        at lifetime risk of developing prostate cancer. More than seven out of ten
        men
        diagnosed with prostate cancer are over the age of 65. At the age of 70,
        the
        chance of having prostate cancer is 12 times greater than at age 50. According
        to the American Cancer Society, prostate cancer incidence rates increased
        between 1988 and 1992 due to earlier diagnosis in men who otherwise had no
        sign
        of symptoms. Early screening has fostered a decline in the prostate cancer
        death
        rate since 1990.
The
        number of prostate cancer cases in the U.S. is expected to increase due to
        the
        expanding population of men over the age of 55. The U.S. Census Bureau estimates
        this segment of the population will increase from 25.9 million men in 2000
        to 32
        million men by 2008 - a 24% increase. Extrapolating that data, management
        believes that the U.S. will provide over 180,000 candidates annually for
        prostate brachytherapy by 2008.
Increased
        PSA Screening
.
        Early
        PSA screening and testing leads to early diagnosis. The American Cancer Society
        recommends that men without symptoms or risk factors and who have a life
        expectancy of at least ten years, should begin regular annual medical exams
        at
        the age of 50, and believes that health care providers should offer as part
        of
        the exam the prostate-specific antigen blood test. The PSA blood test determines
        the amount of prostate specific antigen present in the blood. PSA is found
        in a
        protein secreted by the prostate, and elevated levels of PSA can be associated
        with either prostatitis (a noncancerous inflammatory condition) or a
        proliferation of cancer cells in the prostate. Industry studies have shown
        that
        the PSA test can detect prostate cancer up to five years earlier than the
        digital rectal exam. Ultrasound tests and biopsies are typically performed
        on
        patients with elevated PSA readings to confirm the existence of cancer.
7
Our
        Strategy
The
        key
        elements of IsoRay Medical's strategy include:
·
Introduce
                  the IsoRay Cs
131
seed
                  into the U.S. brachytherapy market
.
                  Utilizing a direct sales organization and selected channel partners,
                  IsoRay Medical intends to capture a leadership position by expanding
                  overall use of the brachytherapy procedure for prostate cancer
                  capturing
                  much of the incremental market growth and taking market share from
                  existing competitors.
·
Create
                  a state-of-the-art manufacturing process
.
                  IsoRay Medical plans to construct a state-of- the-art manufacturing
                  facility in Richland, Washington, or if I-297 presents a strategic
                  roadblock to the Company, in another state, implementing our proprietary
                  manufacturing process designed to improve profit margins, provide
                  adequate
                  manufacturing capacity to support future growth and ensure quality
                  control. Working with leading scientists, IsoRay Medical is in
                  the process
                  of designing a proprietary separation process for the manufacturing
                  of
                  enriched barium, a key source material for Cs
131
,
                  to ensure adequate supply and greater manufacturing efficiencies.
                  Also
                  planned is a value-added repackaging service to supply pre-loaded
                  needles,
                  stranded seeds and pre-loaded cartridges used in the implant procedure.
                  IsoRay Medical plans to enter into a long-term program with a leading
                  brachytherapy seed automation design and engineering company to
                  design and
                  build a highly automated manufacturing process to help ensure constant
                  quality and improve profitability.
·
Introduce
                  Cs
131
therapies for other solid cancer tumors
.
                  IsoRay Medical intends to partner with other companies to develop
                  the
                  appropriate delivery technology and therapeutic delivery systems
                  for
                  treatment of other solid cancer tumors such as breast, neck, and
                  brain
                  cancer. IsoRay Medical's management believes that the first major
                  opportunity may be for the use of Cesium 131 for adjunct therapy
                  for the
                  treatment of breast cancer.
·
Introduce
                  other isotope products to the U.S. market
.
                  IsoRay Medical plans to introduce its Yttrium-90 radioisotope in
                  late
                  2005. Currently, FDA approved Y
90
manufactured by other suppliers is used in the treatment of non-Hodgkin's
                  lymphoma and is in clinical trials for other applications. Other
                  products
                  may be added in the future as they are developed. IsoRay Medical
                  has the
                  ability to make several different isotopes for multiple medical
                  and
                  industrial applications. During 2005 the Company plans to identify
                  and
                  prioritize additional market opportunities for these
                  isotopes.
·
Support
                  clinical research and sustained product development
.
                  The Company plans to structure
and
                  support clinical studies on the therapeutic benefits of Cs-131
                  for the
                  treatment of solid tumors and other patient benefits. We will support
                  clinical studies with several leading radiation oncologists to
                  clinically
                  document patient outcomes, provide support for our product claims
                  and
                  compare the performance of our seeds to competing seeds. IsoRay
                  Medical
                  plans to sustain long-term growth by implementing research and
                  development
                  programs with leading medical institutions in the U.S. to identify
                  and
                  develop other applications for IsoRay Medical's core radioisotope
                  technology.
Management
        believes there is a large and growing addressable market for IsoRay Medical's
        products. Several factors appear to contribute to the increasing popularity
        of
        the brachytherapy procedure. Long-term survival data is now available for
        brachytherapy. Brachytherapy has become the treatment of choice for early-stage
        prostate cancer and is now more common than surgery. Brachytherapy has
        significant advantages over competing treatments including lower cost, better
        survival data, fewer side effects, a faster recovery time and the convenience
        of
        a 45 minute outpatient procedure. Over 50,000 procedures were forecasted
        to
        occur in the U.S. in 2004. This represents a $150 million seed market that
        is
        forecast to grow to $242 million by 2009 according to a recent market survey
        performed by Frost & Sullivan, a nationally recognized market research firm.
        IsoRay Medical's management believes that the Cs
131
seed
        will
        add incremental growth to the existing brachytherapy seed market as physicians
        who are currently reluctant to recommend brachytherapy for their prostate
        patients due, in part, to side effects caused by longer-lived isotopes, become
        comfortable with the shorter half life of Cs-131, and the anticipated reduction
        of side effects.
8
Products
IsoRay
        Medical markets the Cs
131
seed
        and
        intends to market Yttrium-90 and other radioactive isotopes in the future.
        Additionally, it will attempt to create a market, primarily in clinical trials,
        for the liquid Cs-131 isotope, which is created in the production of IsoRay
        Medical's Cs
131
seed.
Cs-131
        Seed Product Description and Use in Cancer Treatment
Brachytherapy
        seeds are small devices that deliver therapeutic radiation directly to tumors.
        Each seed contains a radioisotope sealed within a welded titanium case. In
        prostate cancer procedures, approximately 85 to 135 seeds are permanently
        implanted in a 45 minute outpatient procedure. The isotope decays over time,
        and
        the seeds become inert. The seeds may be used as a primary treatment or in
        conjunction with other treatment modalities such as external beam radiation
        therapy, chemotherapy, or as treatment for residual disease after excision
        of
        primary tumors.
Significant
        advantages of brachytherapy over competing treatments include: fewer side
        effects (impotence and incontinence are reduced when seeds are used to treat
        prostate cancer); short, convenient outpatient procedure (typically 30 -
        45
        minutes); faster recovery time (days vs. weeks); lower cost than other treatment
        modalities; higher cure rates for solid tumors; and less pain.
A
        diagram
        of the IsoRay seed appears in Figure 1.
The
        seed
        contains an x-ray opaque marker surrounded by a ceramic substrate to which
        the
        isotope is chemically attached. The seed core is placed in a titanium tube
        and
        precision laser welded to form a hermetically sealed source of therapeutic
        radiation suitable for permanent implantation. The x-ray marker allows the
        physician to accurately determine seed placement within the tumor.
Figure
        1: Cross section of Cs
131
seed
Competitive
        Advantages of Cs-131
Cs
131
has
specific
        clinical advantages
for
        treating cancer
over
        I-125 and Pd-103, the other isotopes currently used in brachytherapy seeds.
        The
        table below highlights the key differences of the three seeds. The Company
        believes that the short half life, high-energy characteristics of Cs
131
will
        increase industry growth and facilitate meaningful penetration into the
        treatment of other forms of cancer tumors such as breast cancer.
9
Brachytherapy
        Isotope Comparison
Cesium-131
Palladium-103
Iodine-125
Half
                  Life
9.7
                  Days
17.5
                  days
60
                  days
Energy
29
                  KeV
22
                  KeV
28
                  KeV
Dose
                  Delivery
90%
                  in 33 days
90%
                  in 58 days
90%
                  in 204 days
Total
                  Dose
110
                  Gy
125
                  Gy
145
                  Gy
Anisothrophy
                  Factor*
.969
.877
                  (TheraSeed 2000)
.930
                  (Oncura 6711)
*degree
                  of symmetry of therapeutic dose, a factor of 1 indicates
                  symmetry.
Shorter
        Half life
.
The
        Company believes that Cesium-131's shorter half life of 9.7 days will prove
        to
        have greater biological effectiveness by mitigating the negative effects
        of long
        radiation periods on healthy tissue and reducing the duration of any side
        effects. A shorter half life produces more intense therapeutic radiation
        over a
        shorter period of time and may reduce the potential for cancer cell survival
        and
        tumor recurrence. Radiobiological studies indicate that shorter-lived isotopes
        are more effective against faster growing tumors (Dicker, et. al.,
Semin.
        Urol. Onc.
18:2,
        May 2000). Other researchers conclude that "half-lives in the approximate
        range
        4-17 days are likely to be significantly better for a wide range of tumor
        types
        for which the radiobiologic characteristics may not be precisely known in
        advance." (Armpilia CI, et. al.,
Int.
        J. Rad. Oncol. Biol. Phys.
55:2,
        February 2003).
High
        Energy
.
        The
        Cs-131 isotope decay energy of 29 to 34 KeV (versus 22 KeV for P-103 and
        28 KeV
        for I-125) generates a therapeutic radiation field that extends beyond the
        current dosimetry reference point of 1 cm. Pd-103 seeds emit radiation that
        does
        not penetrate as far in tissue (up to 40% lower than Cs-131) and therefore
        more
        Pd-103 seeds are required to attain the same therapeutic dose as if Cs-131
        seeds
        were used. This increase in the number of seeds implanted increases the time
        and
        cost required to perform Pd-103-based procedures.
The
        h
igher
        energy from Cs
131
seeds is
        more effective on fast growing cancers than other isotopes by aggressively
        attacking cancer cells and disrupting cancer cell re-population cycles,
        resulting in reduced side effects.
Reduced
        side effects
.
Because
        the IsoRay Cs
131
seed
        device delivers a highly concentrated and confined dose of radiation directly
        to
        the prostate, healthy surrounding tissues and organs are exposed to less
        radiation than with other treatments. This should result in fewer and less
        severe side effects and complications than may be incurred with other
        conventional therapies.
Shape
        of radiation field
.
The
        shape
        of the radiation field generated by a Cs
131
seed
        is
        uniform, and this uniformity may result in better radiation dose coverage
        and
        improved therapeutic effectiveness. The adjacent picture is an autoradiograph
        (film exposed by radiation from the seed itself) of an IsoRay seed, which
        shows
        this uniformity of the radiation field that is expected to result in better
        radiation dose coverage. IsoRay Medical has conducted extensive computer
        modeling and testing of the seed design. The IsoRay seed has passed all Nuclear
        Regulatory Commission ("
NRC
")
        requirements for sealed radioactive sources. Dose uniformity was tested and
        the
        results compared well to those predicted by industry standard computer modeling
        techniques. In the third quarter of 2002, seeds were sent to the National
        Institute for Standards and Technology for calibration, and have undergone
        dosimetry testing according to American Association of Physicists in Medicine
        ("AAPM") protocols. Data from these tests were compiled in IsoRay Medical's
        510(k) submission to the FDA. The results of these tests showed superior
        dose
        characteristics relative to the leading I-125 and Pd-103 seeds.
Figure
          2. Cs131 seed Autoradiograph
Reduced
        Costs
.
        The
        characteristics of Cs
131
seeds
        described above may result in the use of 10%-30% less seeds per procedure,
        compared to other isotopes, thereby reducing the total physical radiation
        dose
        to the patient and reducing the costs of the procedure for the third party
        payers and the patient.
10
Yttrium-90
Y-90
        and
        Cs-131 are short-lived isotopes that are well suited to treatment of tumors
        by
        cell-directed therapy. The Company plans to introduce its second product,
        Yttrium-90, by the end of 2005. When used in combination with molecular targets,
        Y-90 is proving to be an ideal isotope to provide localized radiation therapy
        for various types of cancer, such as non-Hodgkin's lymphoma, leukemia, ovarian
        and prostate cancers, osteosarcomas, and tumors of the breast, lung, kidney,
        colon, and brain. Y-90's properties of short half life, high specific activity,
        high energy and pure beta-emissions can be chemically attached to targeting
        agents that are highly selective for specific tumors. These targeting agents
        may
        include monoclonal antibodies, molecules derived from antibodies, peptides,
        or
        other tumor-specific molecules. Most Y-90 currently used in the U.S. is imported
        with varying degrees of quality. IsoRay Medical is currently developing a
        proprietary separation process that will produce Y-90 that management believes
        should meet or exceed the purity and quality required for clinical trials
        and
        medical applications.
Y-90
        is a
        significant component of several commercially available products. These products
        use radiopharmaceutical grade Y-90 derived by using manufacturing methods
        and
        techniques that conform to current cGMP (current Good Manufacturing Practices),
        allowing them to be used invasively in commercially available healthcare
        products.
We
        will
        initially target the clinical trial market. Currently there are several clinical
        trials and medical applications involving Y-90 underway around the world
        that
        represent a potential market for Y-90. These customers hold significant growth
        potential, as products undergoing successful trials become approved for general
        use. Our strategy will be to attempt to develop exclusive sales arrangements
        with companies that are close to FDA approval or foreign companies authorized
        to
        commercially sell their products in various overseas markets.
Y-90
        is a
        pure-beta particle emitter with a physical half life of 64.1 hours (2.7 days)
        that decays to stable Zirconium-90. The average energy of the beta emissions
        from Y-90 is 2.37 MeV, with an effective path-length in tissue of 5.3 mm.
        This
        means that 90% of the energy is absorbed within a 5.3-mm radius.
Y-90
        is
        manufactured by chemical separation from a long-lived Strontium-90 (Sr-90)
        generator stock. We intend to purchase or lease the Sr-90 feedstock from
        U.S.
        DOE and international suppliers. Due to the radiological characteristics
        of
        Sr-90, initial processing will occur under stringent radiological controls
        in a
        highly shielded isolator or "hot cell" using remote manipulators. Following
        preliminary separation, the Y-90 is further purified and converted to
        pharmaceutical grade material in a shielded environmentally-controlled glove
        box. After completing the separation process every two weeks (e.g., collecting
        or "milking" the therapeutic Y-90), the residual Sr-90 generator is recycled
        for
        subsequent separations. In theory, the Sr-90 generator can continue to generate
        Y-90 for decades. However, the process periodically requires infusion of
        new
        Sr-90. In addition to acquiring Sr-90, we will need to acquire equipment
        and
        develop manufacturing policies and procedures for the Y-90 isotope that will
        meet cGMP criteria. While we initially plan to produce solely radiochemical
        purity Y-90, which does not need to meet the more stringent manufacturing
        standards required for radiopharmaceutical purity Y-90, we intend to develop
        our
        manufacturing methods to this higher level and produce radiopharmaceutical
        purity Y-90 in the future.
IsoRay
        Medical has identified four principal suppliers of Y-90: MDS Nordion, Inc.,
        Perkin-Elmer Life Sciences, Inc., Amersham PLC and Iso-Tex Diagnostics, Inc.
Cs-131
        Manufacturing Process
Cs-131
        is
        a radioactive isotope that can be produced by the neutron bombardment of
        Barium-130. When Ba-130 is put into a nuclear reactor it becomes Ba-131,
        the
        radioactive material that is the parent of Cs-131. The process includes the
        following:
·
Isotope
                  Generation
.
The
                  radioactive isotope Cs-131 is normally produced by placing a quantity
                  of
                  stable non-radioactive barium (ideally pure Ba-130) into the neutron
                  flux
                  of a nuclear reactor. The irradiation process converts a small
                  fraction of
                  this material into a radioactive form of barium (Ba-131). The Ba-131
                  decays by electron capture to the radioactive isotope of interest
                  (Cs-131). IsoRay Medical has evaluated several international nuclear
                  reactors and many potential facilities in the United States. Due
                  to the
                  short half life of both the Ba-131 and Cs-131 isotopes, the isotope
                  generation cycle must occur over several weeks as dictated by the
                  physics
                  of isotope formation and decay and the facilities must be capable
                  of
                  removing irradiated materials from the reactor core on a routine
                  (daily or
                  weekly) basis. Reactor personnel will ship the irradiated barium
                  on a
                  mutually agreed schedule to our facilities for subsequent separation,
                  purification and seed assembly. The Company has identified five
                  reactors
                  in the U.S. and Europe that are capable of meeting these requirements.
                  This routine isotope generation cycle at supplier reactors will
                  allow
                  significant quantities of Ba-131 to be on hand at our facilities
                  for the
                  completion of the rest of the manufacturing process, which can
                  be
                  accomplished in three to five days, following customer orders.
                  To ensure
                  Cesium supply reliability, we intend to seek agreements with multiple
                  facilities to produce Cs-131. As of the date of this report, IsoRay
                  Medical has an agreement in place with its supplier for irradiated
                  Ba-131.
                  The Company is engaged in the development of a barium enrichment
                  device
                  that, if successful, would reduce the cost of Cs-131 while maintaining
                  the
                  purity and consistency needed for expeditious manufacture of Cs-131
                  isotope products.
11
·
Isotope
                  Separation and Purification
.
Following
                  the harvesting of Ba-131, the isotope decays, becomes Cs-131, and
                  is moved
                  through a number of proprietary processes until it reaches seed
                  form.
                  After receiving the irradiated barium feedstock from the nuclear
                  reactor
                  facility, the rest of the manufacturing process will occur at our
                  facilities. This includes the isotope purification required prior
                  to
                  insertion in the seed. Due to the high-energy decay of Ba-131,
                  initial
                  processing will occur under stringent radiological controls in
                  a highly
                  shielded isolator or "hot cell" using remote manipulators. After
                  removal
                  of the energetic Ba-131, subsequent seed processing will be completed
                  in
                  locally shielded fume hoods or glove boxes. Isotope purification
                  involves
                  chemically separating the Cs-131 isotope from the irradiated material.
                  Upon completion of the separation process (e.g., collecting or
                  "milking"
                  the therapeutic Cs-131), the residual enriched barium will be recycled
                  back to the reactor facility for subsequent irradiation. This material
                  will be recycled as many times as economically feasible, which
                  should make
                  the process more cost effective.
·
Internal
                  Seed Core Technology
.
The
                  purified Cs-131 isotope will be incorporated into an internal assembly
                  that contains a binder, spacer and X-ray marker. This internal
                  core
                  assembly is subsequently inserted into a titanium case. The dimensional
                  tolerance for each material is extremely important. Several carrier
                  materials and placement methods have been evaluated, and through
                  a process
                  of elimination, we have developed favored materials and methods
                  during our
                  laboratory testing. The equipment necessary to produce the internal
                  core
                  will include accurate cutting and gauging devices, isotope incorporation
                  vessels, reaction condition stabilization and monitoring systems,
                  and
                  tools for placing the core into the titanium tubing prior to seed
                  welding
.
·
Seed
                  Welding.
Following
                  production of the internal core and placement into the titanium
                  capsule, a
                  seed is hermetically sealed to produce a sealed radioactive source
                  and
                  biocompatible medical device. This manufacturing technology requires:
                  accurate placement of seed components with respect to the welding
                  head,
                  accurate control of welding parameters to ensure uniform temperature
                  and
                  depth control of the weld, quality control assessment of the weld
                  integrity, and removal of the finished product for downstream processing
                  or rejection of unacceptable materials to waste. Inspection systems
                  will
                  be capable of identifying and classifying these variations for
                  quality
                  control ensuring a minimal amount of material is wasted. Finally,
                  the
                  rapid placement and removal of components from the welding zone
                  will
                  affect overall product throughput.
·
Quality
                  Control
.
We
                  expect to establish procedures and controls to meet all FDA and
                  ISO
                  9001;2000 Quality Standards. Product quality and reliability will
                  be
                  secured by utilizing multiple sources of irradiation services,
                  feedstock
                  material, and other seed manufacturing components. An intensive
                  production
                  line preventive maintenance and spare parts program will be implemented.
                  Also, an ongoing training program will be established for customer
                  service
                  to ensure that all regulatory requirements for the FDA, DOT and
                  applicable
                  nuclear radiation and health authorities are fulfilled.
12
The
        Company intends to implement a just-in-time production capability that is
        keenly
        responsive to customer input and orders to ensure that individual customers
        receive a higher level of customer service from us than from existing seed
        suppliers who have the luxury of longer lead times due to longer half life
        products. Time from order to completion of product manufacture can be reduced
        to
        three to five days, including receipt of irradiated barium (from a supplier's
        reactor), separation of Cs-131 (at our facilities), isotope labeling of the
        core, and loading of cores into pre-welded titanium "cans" for final welding,
        testing, quality assurance and shipping.
Automated
        Manufacturing Process
IsoRay
        Medical has begun discussions with a leading designer and manufacturer of
        automated seed manufacturing equipment that developed an automated line in
        the
        US for manufacturing Iodine-125 that was sold to a competitor in early 2003.
        In
        addition, IsoRay Medical is engaged in preliminary discussions with another
        seed
        manufacturer regarding obtaining an existing automated production line. An
        automated production line would require less labor, reduce costs, and help
        ensure consistent manufacturing quality.
Manufacturing
        Facility
The
        initial production of the IsoRay Cs-131 brachytherapy seed commenced at PNNL
        in
        2004. IsoRay Medical has signed a lease agreement for a new interim production
        facility that management anticipates will be ready by September of 2005.
        The
        Company is also considering Idaho as a location for a future facility, either
        as
        the Company's sole manufacturing facility or as a secondary facility. No
        agreements have been reached for any possible facilities in Idaho.
Repackaging
        Services
Most
        brachytherapy manufacturers offer their seed product to the end user packaged
        in
        four principal packing configurations provided in a sterile or non-sterile
        package depending on the customer's preference. These include:
·
Loose
                  seeds
·
Pre-loaded
                  needles
(loaded with 3 to 5 seeds and
                  spacers)
·
Strands
                  of seeds
(consists of seeds and spacers in a biocompatible "shrink wrap")
·
Pre-loaded
                  Mick cartridges
(fits the Mick applicator - seed manufacturers usually load and
                  sterilize
                  Mick cartridges in their own manufacturing
                  facilities)
No
        single
        package configuration dominates the market at this point. Market share estimates
        for each of the four packaging types are: loose seeds (20% - 30%) Mick
        cartridges (25% - 35%), pre-loaded needles (40% - 55%) and strands (10% -
        20%).
        Market trends indicate some movement to the recently introduced stranded
        configuration, as there is some clinical data suggesting less post implant
        seed
        migration when a stranded configuration is used.
The
        role
        of the repackaging service is to package, assay and certify the contents
        of the
        final product configuration shipped to the customer. A commonly used method
        of
        providing this service to the customer is through independent radiopharmacies
        such as Advanced Care Pharmacy and Custom Care Pharmacy. Manufacturers send
        loose seeds along with the physician's prescription to the radiopharmacy
        who, in
        turn, loads needles and/or strands the seeds according to the doctor's
        prescription. These pharmacies then assay and certify the final packaging
        prior
        to shipping the product directly to the end user.
13
IsoRay
        Medical has held discussions with the major independent radiopharmacies and
        determined the shortest achievable turnaround time from delivery of loose
        seeds
        to the radiopharmacy to delivery of the final assayed and packaged seeds
        to the
        end user is 3 - 4 days. Because of the short half life of Cs-131, management
        believes adding 3 - 4 days to the product delivery schedule is prohibitive
        on a
        long-term basis although to boost immediate sales we intend to use these
        services on an interim basis until our value-added repackaging service is
        operational.
Because
        the short half life of the Cs-131 isotope requires fast delivery to the end
        user, the Company intends to establish its own value-added repackaging service
        to provide these services. The Company intends to market its seeds to the
        end
        user in all four of the commonly used packaging configurations, and the Company
        has retained an experienced consultant to assist in the development of the
        value-added repacking service.
Prior
        to
        the establishment of a value-added repackaging service, IsoRay Medical is
        offering loose seeds which will require the implant center to load the seeds
        into their preferred implant configuration. Management has contacted the
        maker
        of Mick cartridges and believes it will be able to load Mick cartridges on
        site
        for those implant centers using the Mick applicator as their method of injecting
        the seeds into the prostate. The Company currently offers non-sterile,
        pre-loaded Mick cartridges. As soon as the Company acquires the proper
        sterilization equipment, loose seeds and pre-loaded Mick cartridges will
        be
        offered in a sterile package. When the value-added repackaging service is
        operational, the Company will add pre-loaded needles and strands in a sterile
        and non-sterile package. Management believes the value-added repacking service
        will be operational by the end of 2005.
Independent
        radiopharmacies usually provide the final packaging of the product delivered
        to
        the end user. This negates an opportunity for reinforcing the "branding"
        of the
        seed product. By providing its own repackaging service, the Company preserves
        the product branding opportunity and eliminates any concerns related to the
        handling of its product by a third party prior to delivery to the end
        user.
Providing
        different packaging configurations adds significant value to the product
        while
        providing additional revenue stream and incremental margins to the Company
        through the pricing premiums that can be charged. The end users of these
        packaging options are willing to pay a premium because of the savings realized
        by eliminating the need for loose seed handling and loading capabilities
        on
        site, eliminating the need for additional staffing to load and sterilize
        seeds
        and needles and eliminating the expense of additional assaying of the seeds.
Management
        estimates the cost of establishing a value-added repackaging service in its
        new,
        leased facility to be $100,000 to $150,000 and adequate space has already
        been
        identified in that facility. One or more technicians will be added to the
        staff
        to handle the seed loading, stranding and assaying operations. Our customer
        service staff will provide assistance with shipping, documentation and tracking
        of all orders from the repackaging service to the end user.
Barium
        Enrichment Device
Barium-130
        is the original source material for Cs-131. When Ba-130 is put into a nuclear
        reactor it becomes Ba-131, the radioactive material that is the parent of
        Cs-131. Barium metal found in nature contains only 0.1% of Ba-130 with six
        other
        isotopes making up the other 99.9%. As part of its manufacturing process
        the
        Company intends to develop a barium enrichment device that should create
        "enriched barium" with a higher concentration of the Ba-130 isotope than
        is
        found in naturally occurring barium. In addition to creating a higher purity
        Ba-130, which translates into higher purity Cs-131, a barium enrichment device
        will result in higher yields of Cs-131. The Company has found sources of
        enriched barium that we believe we can use until the barium enrichment device
        is
        developed.
14
Marketing
        And Sales
Marketing
        Strategy
The
        Company intends to position Cs-131 as the isotope of choice based on its
        clinical advantages over Iodine and Palladium. Management believes there
        is no
        apparent clinical reason to use Palladium-103 or Iodine-125 when Cesium-131
        is
        available. The advantages associated with a high energy and short half life
        isotope are generally accepted within the clinical community and the Company
        intends to help educate potential patients about the clinical benefits a
        patient
        would experience from the use of Cs-131 for his brachytherapy seed treatment.
        The potential negative effects of the prolonged radiation times associated
        with
        the long half life of Iodine-125 make this isotope less attractive than
        Cesium-131.
We
        intend
        to target these competing isotopes as our principal competition rather than
        the
        various manufacturers and distributors of these products. In this way, the
        choice of brachytherapy isotopes will be less dependent on the name and
        distribution strengths of the various Iodine and Palladium manufacturers
        and
        distributors and more dependent on the therapeutic benefits of Cs-131. The
        Company will focus the purchasing decision on the advantages and functionality
        of the Cs-131 isotope while seeking to educate the prostate cancer patient
        about
        these clinical benefits.
The
        professional and patient market segments each play a unique and important
        role
        in the ultimate choice of prostate cancer treatment and the specific isotope
        chosen for seed brachytherapy treatment. The Company will tailor its marketing
        message to each audience. IsoRay Medical has retained an advertising agency
        in
        the Seattle area to assist with its marketing communication program. The
        agency
        will coordinate the creation and distribution of all advertising material
        and
        work with the print and visual media.
The
        clinical advantages of Cs-131's unique combination of high energy and short
        half
        life will be heavily promoted within the clinical market. Because there is
        no
        apparent clinical reason to choose Palladium over Cesium, we have and will
        continue to target those high volume users of Palladium as our first implant
        sites. We will also emphasize the prolonged radiation times and the high
        doses
        of radiation given to the patient by the Iodine isotope and the possible
        negative effects of this prolonged radiation to the adjacent healthy tissues.
        We
        believe that this is an important marketing message because clinicians generally
        agree the radiation given by Iodine has little or no clinical benefit after
        120
        to 150 days.
To
        promote our products to the clinical and professional audience, we will use
        a
        combination of marketing messages to appear in print and visual media. Planned
        marketing activities include: exhibiting at the major brachytherapy related
        clinical conferences to exhibit our products and provide marketing information
        for annual meetings, conferences and other forums of the various professional
        societies; print advertising in brachytherapy clinical journals; and promoting
        clinical presentations by experts in the field at major
        conferences.
In
        today's U.S. health care market patients are more informed and involved in
        the
        management of their health and any treatments required. Many physicians relate
        incidents of their patients coming for consultations armed with articles
        researched on the Internet and other sources describing new treatments and
        medications. In many cases, these patients are demanding a certain therapy
        or
        drug and the physicians are complying when medically appropriate.
Because
        of this market factor, we will also promote its products directly to the
        general
        population. The audience targeted will be the prostate cancer patient, his
        spouse, family and care givers. The marketing message to this segment of
        the
        market will emphasize the specific advantages of Cs-131, including fewer
        side
        effects, less total radiation, and shorter period of radiation. The Company
        plans to reach this market through its website, located at
www.isoray.com
,
        advertising in magazines read by prostate cancer patients and their care
        givers,
        and through patient advocacy efforts.
Another
        key element of our strategy will be to validate and support all product claims
        with well designed and executed clinical studies that support the efficacy
        and
        positive patient outcomes of our Cs-131 seed. We intend to sponsor
        physician-directed studies that will compare the performance of our seeds
        to the
        seeds of our competitors. During the remainder of 2005, IsoRay Medical plans
        to
        continue its collaboration with leading physicians to develop clinical data
        on
        the efficacy of Cs-131 seeds. Noted contributors from the medical physics
        community will be consulted regarding the benefits of brachytherapy using
        shorter half life, improved dosimetry, and higher decay energy seeds. Articles
        will be submitted to professional journals such as
Medical
        Physics
and the
International
        Journal of Radiation
Oncology,
        Biology, and Physics
.
15
Sales
        and Distribution
According
        to a recent industry survey, approximately 2,000 hospitals and free standing
        clinics are currently offering radiation oncology services in the United
        States.
        Not all of these facilities offer seed brachytherapy services. These
        institutions are staffed with radiation oncologists and medical physicists
        who
        provide expertise in radiation therapy treatments and serve as consultants
        for
        urologists and prostate cancer patients. We will target the radiation
        oncologists and the medical physicists as well as urologists as key clinical
        decision makers in the type of radiation therapy offered to prostate cancer
        patients.
IsoRay
        Medical has already started to build a direct sales organization to introduce
        Cs-131 to radiation oncologists and medical physicists. In August 2004 IsoRay
        Medical hired two highly successful sales professionals from the brachytherapy
        industry that bring well established relationships with key radiation
        oncologists and medical physicists, and in 2005, IsoRay Medical expanded
        its
        sales force to four experienced individuals. By hiring experienced and
        successful brachytherapy sales people, the Company reduces the risk of delay
        in
        penetrating the market due to a lack of knowledge of the industry or
        unfamiliarity of the key members of the brachytherapy community.
The
        initial response to our new isotope from prominent radiation oncologists,
        medical physicists and urologists in the US has been very positive. The Company
        has begun its implant program by supplying the Cs
131
seed
        to 9
        well-known implant centers strategically located throughout the U.S. Implant
        centers are currently located in the states of Arizona, California, Illinois,
        Pennsylvania, Tennessee, Texas and Washington, which have implanted our seed
        into 49 patients as of July 28, 2005. As production increases, additional
        centers will be added. Clinical results from the patients implanted through
        July
        28, 2005, while not a large enough group to draw any statistically significant
        conclusions, have been consistent with the reduced side effects expected
        from
        the shorter half life of Cs-131.
The
        Company will expand its U.S. sales force as it increases production capacity
        and
        expands the customer base. If the Company expands outside the U.S. market,
        it
        plans to use established distributors in the key markets in these other
        countries. This strategy will eliminate the time and expense required to
        identify, train and penetrate the key implant centers and establish
        relationships with the key opinion leaders in these markets. Using established
        distributors also significantly reduces the time spent acquiring the proper
        radiation handling licenses and other regulatory requirements of these
        markets.
Pricing
Payment
        for IsoRay Medical products comes from third-party payers including
        Medicare/Medicaid and private insurance groups. These payers reimburse the
        hospitals and clinics via well-established payment procedures. On October
        31,
        2003, as a result of IsoRay Medical's predecessor's filing for an Additional
        Device Category, CMS (Centers for Medicare and Medicaid Services) approved
        a
        HCPCS/CPT code for Cs-131 brachytherapy seeds of $44.67 per seed. This is
        the
        same price as awarded to Pd-103 seeds, and compares favorably to the $37.34
        price granted to I-125 seeds. Medicare is the most significant U.S. payer
        for
        prostate brachytherapy services, and is the payer in close to 70% of all
        U.S.
        prostate brachytherapy cases.
Prostate
        brachytherapy is typically performed in the outpatient setting, and as such,
        is
        covered by the CMS Outpatient Prospective Payment System. In January 2004,
        brachytherapy procedure prices were unbundled by CMS, allowing itemized
        invoicing for seeds with no limit on the number of seeds used per procedure,
        and
        CMS currently reimburses hospitals and clinics for their seed purchases on
        a
        cost basis. Other insurance companies have followed these CMS changes. With
        the
        new reimbursement structure and industry consolidation, prices of brachytherapy
        seeds are expected to stabilize and increase marginally during the next few
        years.
16
Management
        believes the Cs
131
seed
        will
        command a premium because of its unique characteristics and its clinical
        advantages over Palladium and Iodine. Pricing premiums for pre-loaded needles,
        strands and pre-loaded Mick cartridges will be added as these packaging
        alternatives are offered to our customers. When charges for the seeds are
        correctly submitted in the appropriate format to CMS, 100% of the total cost
        of
        the seeds is reimbursed to the hospital or clinic by CMS.
Other
        Information
Proprietary
        Rights
The
        Company relies on a combination of patent, copyright and trademark laws,
        trade
        secrets, software security measures, license agreements and nondisclosure
        agreements to protect its proprietary rights. Some of the Company's proprietary
        information may not be patentable.
The
        Company intends to vigorously defend its proprietary technologies, trademarks,
        and trade secrets. Members of management, employees, and certain equity holders
        have previously signed non-disclosure, non-compete agreements, and future
        employees, consultants, advisors, with whom the Company engages, and who
        are
        privy to this information, will be required to do the same. A patent for
        the
        Cesium separation and purification process has been granted by the U.S. Patent
        and Trademark Office (USPTO) under Patent Number 6,660,302. The process was
        developed by Lane Bray, a shareholder of the Company, and has been assigned
        exclusively to IsoRay Medical. IsoRay's predecessor also filed for patent
        protection in four European countries under the Patent Cooperation Treaty.
        Those
        patents have been assigned to IsoRay Medical.
Our
        management believes that certain aspects of the IsoRay seed design and
        construction techniques are patentable innovations. These innovations have
        been
        documented in IsoRay laboratory records, and patent applications were filed
        with
        the USPTO on November 12, 2003. Certain methodologies regarding isotope
        production, separation, and seed manufacture are retained as trade secrets
        and
        are embodied in IsoRay Medical's procedures and documentation. In June and
        July
        of 2004, three patent applications were filed relating to methods of deriving
        Cs-131 and Y-90 developed by IsoRay Medical employees. The Company is currently
        working on developing and patenting additional methods of deriving Cs-131
        and
        Y-90, and other isotopes.
There
        are
        specific conditions attached to the assignment of the Cs-131 patent from
        Lane
        Bray. In particular, the associated Royalty Agreement provides for 1% of
        gross
        profit payment from seed sales (gross seed sales price minus direct production
        cost) to Lane Bray and 1% of gross profit from any use of the Cs-131 process
        patent for non-seed products. If IsoRay Medical reassigns the Royalty Agreement
        to another company, these royalties increase to 2%. The Royalty Agreement
        has an
        anti-shelving clause which requires IsoRay Medical to return the patent if
        IsoRay Medical permanently abandons sales of products using the invention.
        Additionally, when IsoRay Medical attains a 15% domestic market share, it
        will
        pay to the Lawrence Family Trust, a major shareholder of the Company, 1%
        of the
        "Factory Price" with a minimum annual royalty of $4,000, pursuant to an
        agreement with Don Lawrence.
Research
        And Development
From
        inception (December 17, 2001) through December 31, 2004, IsoRay Medical and
        its
        predecessor companies incurred more than $1.6 million in costs related to
        research and development activities. The Company expects to continue to have
        employees working on activities that will be classified as research or
        development for the foreseeable future.
Government
        Regulation
The
        Company's present and future intended activities in the development, manufacture
        and sale of cancer therapy products are subject to extensive laws, regulations,
        regulatory approvals and guidelines. Within the United States, the Company's
        therapeutic radiological devices must comply with the U.S. Federal Food,
        Drug
        and Cosmetic Act, which is enforced by the FDA. The Company is also required
        to
        adhere to applicable FDA regulations for Good Manufacturing Practices, including
        extensive record keeping and periodic inspections of manufacturing facilities.
17
IsoRay
        Medical's predecessor obtained FDA 510(k) clearance in March 2003 to market
        the
        IsoRay Cs
131
seed
        for
        the treatment of localized solid tumors. A new 510(k) clearance would be
        required for any modifications in the device or its labeling that could
        significantly affect the safety or effectiveness of the original
        product.
Washington
        voters approved Initiative 297 in late 2004, which may impose additional
        restrictions on sites at which mixed radioactive and hazardous wastes are
        generated and stored, including PNNL. The constitutionality of this initiative
        has been challenged, but if it were enforced it could impact our ability
        to
        manufacture our seeds, whether at PNNL or elsewhere in the State of
        Washington.
Seasonality
The
        Company is aware of a decrease in orders for the Cs
131
seed
        during the month of December. This decrease in orders is related to a decrease
        in the number of brachytherapy procedures performed during the month of
        December, as many physicians are on vacation. The Company is not aware of
        any
        other significant seasonal influences on its business. The composition of
        certain products and services changes modestly with shifts in weather with
        no
        material impact on total revenues.
Employees
Currently
        IsoRay, Inc. has no employees, but certain executives of IsoRay Medical will
        likely be employed by IsoRay, Inc. prior to September 30, 2005. IsoRay Medical
        employs twenty-one full-time individuals, two temporary individuals and three
        part-time individuals. The Company's future success will depend, in part,
        on its
        ability to attract, retain, and motivate highly qualified technical and
        management personnel. From time to time, the Company may employ independent
        consultants or contractors to support its research and development, marketing,
        sales and support and administrative organizations. Neither the Company's
        nor
        IsoRay Medical's employees are represented by any collective bargaining unit.
        IsoRay Medical estimates that successful implementation of its growth plan
        would
        result in up to 15 additional employees by the end of 2005.
Plan
        of Operations
The
        Company has $1,191,545 cash on hand as of July 28, 2005. At the Company's
        current operational burn rate of approximately $500,000 per month, cash on
        hand
        and additional financing currently available would fund the Company's operations
        until November 2005, not including capital expenses. Management believes
        that an
        additional $9.4 million will need to be raised by the end of 2005 to fund
        planned growth and operations through 2006.
IsoRay
        Medical has four outstanding loans. The first, from TRIDEC, with a principal
        amount of $40,000, was funded in 2001 and requires annual principal only
        payments of $10,000. It is non-interest bearing and unsecured. The second
        loan
        is with the Benton-Franklin Economic Development District in the amount of
        $230,000 and was funded in December 2004. It bears interest at eight percent
        and
        has a sixty month term with a final balloon payment. This loan is secured
        by
        certain equipment, materials and inventory of IsoRay Medical, and also required
        personal guarantees, for which the guarantors were issued 83,640 shares of
        common stock in IsoRay Medical. The third loan is a line of credit, from
        Columbia River Bank in the amount of $395,000. It bears interest at a floating
        prime plus two percent rate, and is secured by certain accounts receivable
        and
        inventory and personal guarantees, for which the guarantors were issued 127,500
        shares of common stock of IsoRay Medical. The fourth loan is with Columbia
        River
        Bank in the amount of $150,000, of which $50,000 was funded as of July 28,
        2005.
        This loan is to be used for equipment purchases only and is secured by the
        equipment purchased with the borrowed funds. It bears interest at seven percent
        for thirty-six months. IsoRay Medical is in negotiations with the Hanford
        Area
        Economic Investment Fund Committee (HAEIFC) for a $1,400,000 loan. There
        can be
        no assurance that this loan will be funded.
On
        April
        4, 2005 a capital lease agreement was executed by IsoRay Medical with Nationwide
        Funding LLC, whereby the lessor will fund the $75,000 acquisition of a glove
        box
        being built to the Company's specifications by Premier Technology, Inc. of
        Pocatello, ID. This is a 48 month agreement with a minimum monthly lease
        payment
        of $2,475.38.
18
On
        May
        16, 2005 a capital lease agreement was executed by IsoRay Medical with Vencore
        Solutions LLC. This is a capital lease for a hot cell with a lease line in
        the
        amount of $430,000. This is a 36 month lease, a provision of which is that
        IsoRay Medical can purchase the hot cell for fair market price, defined in
        the
        lease agreement as not more than 15% of the initial fair value purchase price.
        Based on this amount, for the first five months, the minimum monthly lease
        payment will be $7,589.50. The minimum monthly lease payment increases to
        $15,910 for the remaining 31 months, based on the entire value of the $430,000
        lease line. In connection with the lease agreement, IsoRay Medical granted
        warrants to purchase 6,757 shares of its common stock at $3.50/share. These
        warrants expire after four years from the date of issuance, and were converted
        at the ratio listed above as part of the merger.
Property
The
        Company's executive offices are located at 350 Hills Street, Suite 106,
        Richland, WA 99354, (509) 375-1202, where it currently leases approximately
        3,100 square feet of office and laboratory space for $4,196 per month. The
        lease
        expires December 31, 2005. Additional office space will be needed as employees
        are hired, and is currently available at this location. The Company believes
        that the current administrative facilities will be adequate until the end
        of
        2005, but it will need additional facilities at that time. In the future,
        due to
        business growth, the Company may elect to combine administrative services
        and
        production in one building which the Company may lease or build depending
        on
        market conditions.
In
        April
        2004, IsoRay Medical's predecessor signed a contract with PNNL, permitting
        IsoRay Medical to subcontract certain of its manufacturing needs to PNNL,
        use
        PNNL facilities to produce the Cs-131 brachytherapy seeds, and ship them
        to
        customers from the PNNL facilities. Using PNNL's facilities has reduced the
        immediate need for IsoRay Medical to purchase specialized capital-intensive
        equipment. The contract allows it to manufacture Cs
131
seeds in
        PNNL for up to 18 months subsequent to commencement of production in PNNL.
        The
        PNNL facility has limited capacity and if demand for Cs
131
seeds
        exceeds this capacity the Company may need to shift production to its new
        leased
        facility before the end of the 18 month period. We have entered into a lease,
        to
        commence as of regulatory licensing approval, for an approximately 4300 square
        foot facility located in Richland, Washington that our management believes
        will
        provide adequate space to manufacture the Cs-131 product for the prostate
        cancer
        markets until late 2007. The lease is for a term of twelve months following
        regulatory licensing approval, which management believes will be obtained
        during
        the third quarter of 2005, and payment for the lease term is the issuance
        of
        25,800 shares of IsoRay Medical (pre-merger) common stock. The lease may
        be
        extended on a month-to-month basis by mutual agreement of the parties.
Legal
Proceedings
There
        are
        no legal actions pending against the Company.
Competition
The
        Company competes in a market characterized by technological innovation,
        extensive research efforts and significant competition. In general, the IsoRay
        seed competes with conventional methods of treating localized cancer, including,
        but not limited to, radical prostatectomy and external beam radiation therapy
        which includes intensity modulated radiation therapy, as well as competing
        permanent devices. RP currently represents the most common medical treatment
        for
        early-stage, localized prostate cancer. EBRT is also a well-established method
        of treatment and is widely accepted for patients who represent a poor surgical
        risk or whose prostate cancer has advanced beyond the stage for which surgical
        treatment is indicated. Management believes that if general conversion from
        these treatment options (or other established or conventional procedures)
        to the
        IsoRay seed does occur, such conversion will likely be the result of a
        combination of equivalent or better efficacy, reduced incidence of side effects
        and complications, lower cost, quality of life issues and pressure by health
        care providers and patients.
History
        has shown the advantage of being the first to market a new brachytherapy
        product. For example, ONCURA currently claims nearly 50% of the market with
        the
        original I-125 seed. Theragenics, which introduced the original Pd-103 seed,
        is
        second with a nearly 30% market share. The Company believes it will obtain
        a
        similar and significant advantage by being the first to introduce a Cs-131
        seed.
19
The
        Company's patented Cs-131 separation process is likely to provide us a
        sustainable competitive advantage in this area. Production of Cs-131 also
        requires specialized facilities (hot cells) that represent high cost and
        long
        lead time if not readily available. In addition, a competitor would need
        to
        develop a method for isotope attachment and seed assembly, would need to
        conduct
        testing to meet NRC and FDA requirements, and would need to obtain regulatory
        approvals before marketing a competing device.
Because
        the exterior seed dimensions of all seeds are substantially the same, the
        threshold to physician acceptance of the IsoRay seed is not significant.
        Treatment planning systems and seed implantation equipment used worldwide
        all
        rely on seeds of the same length and diameter. Technical costs for users
        to
        switch from I-125 and Pd-103 to the IsoRay Cs-131 seed should be minimal.
Several
        companies have obtained regulatory approval to produce and distribute
        Palladium-103 and Iodine-125 seeds, which compete directly with our seed.
        Ten of
        those companies represent nearly 100% of annual brachytherapy seed sales
        worldwide:
ONCURA
,
        Theragenics Corp., North American Scientific, Inc., Mentor Corp., Implant
        Sciences Corp., International Brachytherapy S.A., Cardinal Health, Inc.,
        SourceTech Medical LLC,
DRAXIMAGE
(a
        division of
DRAXIS
Health,
        Inc.) and Best Medical International, Inc. The top three - ONCURA, Theragenics,
        and North American Scientific - currently garner nearly 90% of annual sales.
It
        is
        possible that three or four of the current I-125 or Pd-103 seed manufacturers
        (i.e., Oncura, Theragenics, North American Scientific, etc.) are capable
        of
        producing and marketing a Cs-131 seed, but none have reported efforts to
        do so.
        Best Medical obtained a seed core patent in 1992 that named 10 different
        isotopes, including Cs-131, for use in their seeds. Best Medical received
        FDA
        510(k) approval to market a Cs-131 seed on June 6, 1993 but has failed to
        produce any products for sale.
Additional
        Growth Opportunities
The
        Cs-131 isotope has the performance characteristics to be a technological
        platform for sustained long-term growth. The most immediate opportunities
        are
        introducing Cs-131 to Europe and other international markets, introducing
        Cs-131-based therapies for other forms of solid tumors focusing first on
        breast
        tumors, and through the marketing other radioactive isotopes. These growth
        initiatives are in the early stages of planning and appear to be significant
        incremental opportunities.
The
        Company plans to introduce Cs
131
initially
        into Europe and later into other international markets through partnerships
        and
        strategic alliances with channel partners for manufacturing and distribution.
        Another advantage of the Cs-131 isotope is its potential applicability to
        other
        cancers and other diseases. Cs-131 has FDA approval to be used for treatments
        for a broad spectrum of cancers including breast, brain, and liver cancer,
        and
        the Company believes that a major opportunity exists as an adjunct therapy
        for
        the treatment of breast cancer. In addition to Y-90, there is the opportunity
        to
        develop and market other radioactive isotopes to the US market, and to market
        the Cs-131 isotope itself, separate from its use in our seeds.
Risk
        Factors
IsoRay
        Medical Has Begun Generating Revenue But Is Not Yet Profitable
.
IsoRay
        Medical began generating revenue in October 2004, generated revenue of
        approximately $262,836 through July 28, 2005, and is in the early stages
        of
        marketing its IsoRay Cs
131
seed.
        IsoRay Medical and the Company have minimal historical, operating or financial
        information upon which to evaluate its performance. There can be no assurance
        that the Company will obtain profitability.
Our
        Revenues Depend Primarily Upon One Product
.
Our
        revenues depend upon the successful production, marketing, and sales of the
        IsoRay Cs
131
seed.
        A
        number of factors may affect the rate and level of market acceptance of this
        product including:
20
¨
the
                  perception by physicians and other members of the healthcare community
                  of
                  its safety and efficacy as compared to that of competing products,
                  if
                  any;
¨
the
                  clinical outcomes of the patients
                  treated;
¨
the
                  effectiveness of our sales and marketing efforts in the United
                  States;
¨
any
                  unfavorable publicity concerning our product or similar
                  products;
¨
its
                  price relative to other products or competing
                  treatments;
¨
any
                  decrease in current reimbursement rates from Medicare and/or third
                  party
                  payers;
¨
regulatory
                  developments related to the manufacture or continued use of the
                  product;
¨
ability
                  to produce sufficient quantities of this product;
                  and
¨
the
                  ability of physicians to properly utilize the device and avoid
                  excessive
                  levels of radiation to patients.
Because
        of our reliance on this product as the sole source of our revenue, any material
        adverse developments with respect to the commercialization of this product
        may
        cause us to incur losses rather than profits in the future.
We
        Have Limited Data On The Clinical Performance Of Cs-131
.
        As of
        July 28, 2005, the IsoRay Medical Cs
131
seed has
        been implanted in forty-nine
patients.
        While this limited number of patients prevents us from drawing statistically
        significant conclusions, we can report that the side effects experienced
        by
        these patients were consistent with the types of side effects seen in seed
        brachytherapy with Iodine and Palladium. These early results indicate that
        the
        onset of side effects generally occurs between one and three weeks post-implant,
        and the side effects are resolved between weeks six and eight post-implant,
        indicating that, at least for these initial patients, side effects resolved
        more
        quickly than the side effects that occur with competing seeds. These limited
        findings support management's belief that the Cs
131
seed
        will result in less severe side effects than competing treatments, but we
        will
        have to wait for outcomes from additional patients before we can definitively
        establish the incidence of side effects from our seeds.
Our
        Subsidiary's Independent Accountants Have Expressed Doubt About Its Ability
        To
        Continue As A Going Concern
.
        IsoRay
        Medical's ability to continue as a going concern is an issue raised as a
        result
        of the material operating losses incurred since inception, and its stockholders'
        deficit. We expect to continue to experience net operating losses. Our ability
        to continue as a going concern is subject to our ability to obtain necessary
        funding from outside sources, including obtaining additional funding from
        the
        sale of our securities or obtaining loans and grants from various financial
        institutions where possible. The going concern increases the difficulty in
        meeting such goals.
We
        Will Need To Raise Additional Capital
.
        The
        hiring of upper level sales executives, entry into capital lease agreements
        for
        a glove box and a hot cell, and entry into executive contracts requiring
        payments upon reaching certain milestones significantly increased IsoRay
        Medical's monthly cash "burn rate" since August 2004. Ongoing obligations
        to
        meet greater payroll obligations coupled with legal and accounting fees related
        to completing the recent merger with Century Park Pictures Corp. have resulted
        in greater amounts of short term cash demands than ever before in the history
        of
        IsoRay Medical. We have been actively raising capital and will need to continue
        to do so in greater amounts than we have raised in the past.
We
        will
        also need substantial funds to complete the development, manufacturing, and
        marketing of our potential future products. Consequently, we will seek to
        raise
        further capital through not only public and private offerings of equity and
        debt
        securities, but also collaborative arrangements, strategic alliances, and
        equity
        and debt financings or from other sources. We will need to raise at least
        $9.4
        million of additional funding by the end of 2005 to fund working capital
        through
        2006 and to acquire additional equipment for the interim production facility
        currently under construction. IsoRay Medical has entered into a lease, to
        commence as of regulatory licensing approval, for an approximately 4300 square
        foot facility located in Richland, Washington that its management believes
        will
        provide adequate space to manufacture the Cs-131 product for the prostate
        cancer
        markets until late 2007.
21
We
        may be
        unable to raise additional capital on commercially acceptable terms, if at
        all,
        and if we raise capital through additional equity financing, existing
        shareholders may have their ownership interests diluted. Our failure to be
        able
        to generate adequate funds from operations or from additional sources would
        harm
        our business.
In
        the
        event of our insolvency, bankruptcy, liquidation, reorganization, or dissolution
        or upon our default in payment with respect to any indebtedness or an event
        of
        default with respect to such indebtedness resulting in the acceleration thereof,
        our assets are not expected to be sufficient to result in any payment to
        holders
        of the Company's preferred or common stock.
The
        Recent Passage Of Initiative 297 In Washington May Result In The Relocation
        To
        Idaho Of Our Manufacturing Operations
.
Washington
        voters approved Initiative 297 in late 2004, which may impose additional
        restrictions on sites at which mixed radioactive and hazardous wastes are
        generated and stored, including PNNL. The U.S. Secretary of Energy is a party
        to
        litigation challenging the constitutionality of this initiative in U.S. District
        Court. Due to this litigation, the State of Washington and the U.S. Justice
        Department have agreed to delay any implementation of Initiative 297 for
        an
        indefinite period of time. Thus, we have the ability to manufacture seeds
        at
        PNNL for some period of time. If the State of Washington begins enforcement
        of
        the initiative and the protective legislation described above has not been
        enacted, we may be unable to continue to produce seeds at PNNL under our
        Commercial Work For Others contract with the Department of Energy, and if
        we
        cannot continue to produce seeds at PNNL, we would have to move our
        manufacturing operations to an alternate facility that may be outside the
        State
        of Washington.
Management
        believes that we will be able to continue our manufacturing operations in
        the
        State of Washington for the foreseeable future, whether at PNNL or at our
        leased
        interim facility in the State of Washington. In the event Initiative 297
        is
        enforced against us, management has been engaged in discussions with officials
        in Idaho regarding an alternate manufacturing facility in Idaho. Because
        Idaho
        has a business friendly environment and the state has offered an attractive
        incentive package, we would expect to be able to build our own manufacturing
        facility at a cost below that anticipated for a similar facility in the State
        of
        Washington. We may consider moving all or part of our operations to Idaho
        even
        if Initiative 297 is not enforced against us.
We
        Have Limited Manufacturing Experience And May Not Be Able To Meet
        Demand
.
        Our
        manufacturing experience is limited and existing management team and staff
        of
        IsoRay Medical and the Company have experience primarily in research and
        development of products and not in manufacturing products. IsoRay Medical
        began
        commercial production of the Cs
131
seed
        in
        the fourth quarter of 2004. IsoRay Medical has not tested commercial production
        of Yttrium-90, although certain members of its management team previously
        produced weekly batches of Y-90 for the research market when they were
        affiliated with another company. Although IsoRay Medical's management team
        has
        significant radiochemistry experience, there is a possibility that
        commercial-scale production may result in challenges that may be too expensive
        or difficult to overcome. IsoRay Medical has procured equipment for a
        semi-automated process of laser welding, but its ability to produce the
        Cs
131
seed
        in
        very large quantities may be limited by the current lack of a completely
        automated process for welding. IsoRay Medical believes it will find a more
        efficient means of welding the titanium seeds, however, there can be no
        assurance that seeds will not be welded individually by the semi-automated
        process for the foreseeable future. Consequently, we cannot ensure that either
        IsoRay Medical's manufacturing process or its ability to sustain ongoing
        production of its products will be able to meet demand.
We
        Have Limited Sales And Marketing Experience
.
Some
        members of IsoRay Medical's team have extensive experience in successfully
        establishing and training domestic and international sales forces as well
        as
        successfully introducing new medical devices to the market, but we have limited
        specific experience with the commercial sales and marketing of the Cesium-131
        radioisotope. IsoRay Medical has marketing professionals with extensive
        experience selling medical devices, including radioisotopes for large,
        international companies. Its initial marketing activities have begun, and
        we
        will need to recruit additional employees to assist with these functions.
        We
        cannot be certain that our products will be marketed and distributed in
        accordance with our expectations or that our market research will be accurate.
        We also cannot be certain that we will ever be able to develop our own sales
        and
        marketing capabilities to the extent anticipated by management. We may need
        to
        rely on third-party efforts and distribution channels and may not be able
        to
        maintain satisfactory arrangements with the third parties on whom we rely.
        We
        are currently developing in-house customer service, order entry, shipping,
        billing, customer reimbursement assistance and sales support. We cannot be
        certain that we will successfully develop and coordinate these departments
        and
        may need to find outside contractors to carry out part or all of these
        functions. Even if needed, we cannot be certain that we can successfully
        contract with outside contractors or that they will be available at projected
        prices.
22
Our
        Operating Results Will Be Subject To Significant Fluctuations
.
Our
        quarterly revenues, expenses, and operating results are likely to fluctuate
        significantly in the future. Fluctuation may result from a variety of factors,
        including:
¨
our
                  achievement of product development objectives and
                  milestones;
¨
demand
                  and pricing for the Company's
                  products;
¨
effects
                  of aggressive competitors;
¨
hospital
                  and clinic buying decisions;
¨
research
                  and development and manufacturing
                  expenses;
¨
patient
                  outcomes from our therapy;
¨
physician
                  acceptance of our products;
¨
government
                  or private healthcare reimbursement
                  policies;
¨
our
                  manufacturing performance and
                  capacity;
¨
incidents,
                  if any, that could cause temporary
                  shutdown;
¨
the
                  amount and timing of sales orders;
¨
rate
                  and success of product approvals;
¨
timing
                  of FDA approval, if any, of competitive products and the rate of
                  market
                  penetration of competing products;
¨
foreign
                  currency exchange rates;
¨
seasonality
                  of purchasing behavior in our
                  market;
¨
overall
                  economic conditions; and
¨
the
                  successful introduction or market penetration of alternative
                  therapies.
We
        Rely Heavily On A Limited Number Of Suppliers
.
Some
        materials used in our products are currently available only from a limited
        number of suppliers. Any interruption or delay in the supply of materials
        required to produce our products could harm our business if we were unable
        to
        obtain an alternative supplier for these materials in a cost-effective and
        timely manner. Additional factors that could cause interruptions or delays
        in
        our source of materials include limitations on the availability of raw materials
        or manufacturing performance experienced by our suppliers and a breakdown
        in our
        commercial relations with one or more suppliers. Some of these factors may
        be
        completely out of our control.
We
        Are Subject To Uncertainties Regarding Healthcare Reimbursement And
        Reform
.
In
        2003,
        IsoRay Medical's predecessor applied for, and CMS (Centers for Medicare and
        Medicaid Services) created a classification for reimbursement for our
        Cs
131
seed
        (HCPCS code C2633 and APC code 2633) The initial reimbursement under these
        codes
        was $44.67 per seed. However, since January 1, 2004 hospitals and clinics
        ordering our seeds are to be paid on a cost basis instead. On an ongoing
        basis,
        our ability to commercialize products depends in part on the extent to which
        healthcare services and products are paid by governmental agencies, private
        health insurers and other organizations, such as health maintenance
        organizations, for the cost of such products and related treatments. Our
        business could be harmed if healthcare payers and providers implement
        cost-containment measures and governmental agencies implement healthcare
        reform
        measures that reduce payment to our customers for their use of our products.
23
Our
        Industry Is Intensely Competitive
.
The
        medical device industry is intensely competitive. We compete with both public
        and private medical device, biotechnology and pharmaceutical companies that
        have
        been established longer than we have, have a greater number of products on
        the
        market, have greater financial and other resources and have other technological
        or competitive advantages. We also compete in the development of technologies
        and processes and in acquiring personnel and technology from academic
        institutions, government agencies, and other private and public research
        organizations. We cannot be certain that one or more of our competitors will
        not
        receive patent protection that dominates, blocks or adversely affects our
        product development or business; will benefit from significantly greater
        sales
        and marketing capabilities or will not develop products that are accepted
        more
        widely than ours.
We
        May Be Unable To Adequately Protect Or Enforce Our Intellectual Property
        Rights
        Or Secure Rights To Third-Party Patents
.
Our
        ability and the abilities of our partners to obtain and maintain patent and
        other protection for our products will affect our success. We are assigned,
        have
        rights to, or have exclusive licenses to patents in the U.S. and four foreign
        countries. The patent positions of medical device companies can be highly
        uncertain and involve complex legal and factual questions. Our patent rights
        may
        not be upheld in a court of law if challenged. Our patent rights may not
        provide
        competitive advantages for our products and may be challenged, infringed
        upon or
        circumvented by our competitors. We cannot patent our products in all countries
        or afford to litigate every potential violation worldwide.
Because
        of the large number of patent filings in the medical device and biotechnology
        field, our competitors may have filed applications or been issued patents
        and
        may obtain additional patents and proprietary rights relating to products
        or
        processes competitive with or similar to ours. We cannot be certain that
        U.S. or
        foreign patents do not exist or will not issue that would harm our ability
        to
        commercialize our products and product candidates.
Our
        Cs-131 separation patent is essential for production of Cesium-131. The owner
        of
        the patent, Lane Bray, a shareholder of the Company and Chief Chemist of
        IsoRay
        Medical, has the right to terminate the license agreement that allows the
        Company to use this patent if we discontinue production for any consecutive
        18
        month period. The Company has no plans to discontinue production, and management
        considers it highly unlikely that production will be discontinued at any
        significant period at any time in the future.
Failure
        To Comply With Government Regulations Could Harm Our Business
.
        As a
        medical device and medical isotope manufacturer, we, as well as our contract
        manufacturers and suppliers are subject to extensive, complex, costly, and
        evolving governmental rules, regulations and restrictions administered by
        the
        FDA, by other federal and state agencies, and by governmental authorities
        in
        other countries. In the United States, our products cannot be marketed until
        they are approved for market by the FDA. IsoRay Medical has received FDA
        approval for the marketing of the Cs
131
seed
        and
        our competitors have received FDA approval for marketing Yttrium-90.
        Accordingly, we believe our application for FDA approval of our Y-90 will
        be
        limited, and require no patient trials.
Obtaining
        FDA market approval involves the submission, among other information, of
        the
        results of preclinical and clinical studies on the product, and requires
        substantial time, effort and financial resources. The FDA, Washington State
        Department of Health, and other federal and state agencies, as well as
        equivalent agencies of other countries with whom we will export our products,
        will also perform pre-licensing inspections of our facility and our contract
        manufacturers' and suppliers' facilities. Our failure or the failure of our
        partners, contract manufacturers, or suppliers to meet FDA or other agencies'
        requirements would delay or preclude our ability to sell our products
        potentially having an adverse material effect on our business.
Even
        with
        FDA market approval, we, as well as our partners, contract manufacturers
        and
        suppliers, are subject to numerous FDA requirements covering, among other
        things, testing, manufacturing, quality control, labeling and continuing
        review
        of medical products, and to permit government inspection at all times. Failure
        to meet or comply with any rules, regulations, or restrictions of the FDA
        or
        other agencies could result in fines, unanticipated expenditures, product
        delays, non-approval or recall, interruption of production, and criminal
        prosecution.
24
Although
        we have implemented internal compliance programs and will continue to address
        any compliance issues raised from time to time by the FDA and the other
        agencies, we may not be able to meet regulatory agency standards, and any
        lack
        of compliance may harm our business.
Our
        Business Exposes Us To Product Liability Claims
.
Our
        design, testing, development, manufacture, and marketing of products involve
        an
        inherent risk of exposure to product liability claims and related adverse
        publicity. Insurance coverage is expensive and difficult to obtain, and,
        although we currently have a five million dollar policy, in the future we
        may be
        unable to obtain coverage on acceptable terms, if at all. If we are unable
        to
        obtain sufficient insurance at an acceptable cost or if a successful product
        liability claim is made against us, whether fully covered by insurance or
        not,
        our business could be harmed.
Our
        Business Involves Environmental Risks
.
Our
        business involves the controlled use of hazardous materials, chemicals,
        biologics, and radioactive compounds. Manufacturing is extremely susceptible
        to
        product loss due to radioactive, microbial, or viral contamination; material
        equipment failure; or vendor or operator error; or due to the very nature
        of the
        product's short half life. Although we believe that our safety procedures
        for
        handling and disposing of such materials comply with state and federal standards
        there will always be the risk of accidental contamination or injury. In
        addition, radioactive, microbial, or viral contamination may cause the closure
        of the respective manufacturing facility for an extended period of time.
        By law,
        radioactive materials may only be disposed of at state-approved facilities.
        We
        currently dispose of our radioactive waste through the Battelle managed PNNL
        site under a one year renewable agreement. We intend to open our own facility
        and intend to use commercial disposal contractors. We may incur substantial
        costs related to the disposal of these materials. If we were to become liable
        for an accident, or if we were to suffer an extended facility shutdown, we
        could
        incur significant costs, damages, and penalties that could harm our
        business.
We
        Rely Upon Key Personnel
.
Our
        success will depend, to a great extent, upon the experience, abilities and
        continued services of our executive officers and key scientific personnel.
        If we
        lose the services of any of these officers or key scientific personnel, our
        business could be harmed. Our success also will depend upon our ability to
        attract and retain other highly qualified scientific, managerial, sales,
        and
        manufacturing personnel and our ability to develop and maintain relationships
        with key individuals in the industry. Competition for these personnel and
        relationships is intense and we compete with numerous pharmaceutical and
        biotechnology companies as well as with universities and non-profit research
        organizations. We may not be able to continue to attract and retain qualified
        personnel.
The
        Value Of Our Granted Patent, and Our Patents Pending, Is
        Uncertain
.
Although
        our management strongly believes that our patent on the process for producing
        Cesium-131, our patent pending on the manufacture of the brachytherapy seed,
        our
        patent applications on additional methods for producing Cesium-131 and
        Yttrium-90 which have been filed, and anticipated future patent applications,
        which have not yet been filed, have significant value, we cannot be confident
        that other like-kind processes may not exist or be discovered, or that any
        of
        these patents is enforceable.
Our
        Ability To Initiate Operations And Manage Growth Is Uncertain
.
Our
        efforts to commercialize our medical products will result in new and increased
        responsibilities for management personnel and will place a strain upon our
        management, operating software, financial systems, and resources. To compete
        effectively and to accommodate growth, if any, we may be required to continue
        to
        implement and to improve our management, operating and financial systems,
        procedures and controls on a timely basis and to expand, train, motivate
        and
        manage our employees. There can be no assurance that our personnel, systems,
        procedures, and controls will be adequate to support our future operations.
        If
        Cesium-131 were to become the "seed of choice," explosive sales growth could
        occur, making it unlikely that we could meet demand. This would cause customer
        discontent and invite competition.
Our
        Reporting Obligations As A Public Company Will Be Costly.
Operating
        a public company involves substantial costs to comply with reporting obligations
        under federal securities laws that are continuing to increase as provisions
        of
        the Sarbanes Oxley Act of 2002 are implemented. These reporting obligations
        will
        increase our operating costs. We may not reach sufficient size to justify
        our
        public reporting status.
25
There
        Is A Limited Market For Our Common Stock.
Currently
        only a limited trading market exists for our common stock. Our common stock
        trades solely on the Pink Sheets, a market with very limited liquidity and
        minimal listing standards under the symbol "CPPC.PK." This symbol will change
        as
        a result of the Merger. Any broker/dealer that makes a market in our stock
        or
        other person that buys or sells our stock could have a significant influence
        over its price at any given time. We intend to seek a listing on the Over-the
        Counter Bulletin Board, but there can be no assurance that such a listing
        will
        be obtained. We cannot assure our shareholders that a market for our stock
        will
        be sustained. There is no assurance that our shares will have any greater
        liquidity than shares that do not trade on a public market.
Our
        Common Stock Is Subject To Penny Stock Regulation.
Our
        shares are subject to the provisions of Section 15(g) and Rule 15g-9 of the
        Securities Exchange Act of 1934, as amended (the "Exchange Act"), commonly
        referred to as the "penny stock" rule. Section 15(g) sets forth certain
        requirements for transactions in penny stocks and Rule 15g-9(d)(1) incorporates
        the definition of penny stock as that used in Rule 3a51-1 of the Exchange
        Act.
        The SEC generally defines penny stock to be any equity security that has
        a
        market price less than $5.00 per share, subject to certain exceptions. Rule
        3a51-1 provides that any equity security is considered to be penny stock
        unless
        that security is: registered and traded on a national securities exchange
        meeting specified criteria set by the SEC; authorized for quotation on The
        NASDAQ Stock Market; issued by a registered investment company; excluded
        from
        the definition on the basis of price (at least $5.00 per share) or the
        registrant's net tangible assets; or exempted from the definition by the
        SEC.
        Since our shares are deemed to be "penny stocks", trading in the shares will
        be
        subject to additional sales practice requirements on broker-dealers who sell
        penny stocks to persons other than established customers and accredited
        investors.
ITEM
        3.02 Unregistered Sales of Equity Securities
Pursuant
        to the Merger, the Registrant will issue 6,401,081 shares of its common stock,
        1,338,167 shares of its Series B preferred stock, options to purchase 2,069,337
        shares of its common stock, warrants to purchase 344,792 shares of its common
        stock, and warrants to purchase 233,014 shares of its preferred stock. These
        securities will be issued by the Registrant in reliance upon an exemption
        from
        registration under Section 4(2) and Regulation D of the Securities Act of
        1933,
        as amended.
Market
        for Common Equity and Related Stockholder Matters; Description Of
        Securities
Overview
The
        Company's Articles of Incorporation provide that the Company has the authority
        to issue 200 million shares of capital stock, which are currently divided
        into
        two classes as follows: 194 million shares of common stock, par value of
        $0.001
        per share; and 6 million shares of preferred stock, also with a par value
        of
        $0.001 per share. Immediately prior to the Merger, and following its recent
        30:1
        reverse stock split, the Company had approximately 2,498,000 shares of common
        stock outstanding, and no shares of preferred stock outstanding. As of July
        28,
        2005, the Company had 8,899,630 shares of common stock and 1,338,137 shares
        of
        Series B preferred stock outstanding.
Since
        October 1, 2002 and until their delisting earlier this year, the Company's
        common shares have traded on the Pink Sheets under the symbol "CPPC.PK."
        There
        have been only very limited or sporadic quotations, none exceeded $0.10 per
        share, and there has been no trading activity in our stock since February
        17,
        2005. As of July 28, 2005, there were approximately 676 beneficial holders
        of
        record of the Company's common stock, exclusive of shares held in street
        name.
The
        Common Stock
Voting.
Holders
        of the common stock are entitled to one vote per share on all matters to
        be
        voted on by the Company's shareholders. The Company's bylaws provide that
        a
        majority of the outstanding shares of the corporation entitled to vote
        constitute a quorum at a meeting of the shareholders.
Dividends
.
        The
        Company's Board of Directors, in its sole discretion, may declare and pay
        dividends on the common stock, payable in cash or other consideration, out
        of
        funds legally available, if all dividends due on the preferred stock have
        been
        declared and paid. The Company has not paid any cash dividends on its common
        stock and does not plan to pay any cash dividends on its common stock for
        the
        foreseeable future.
26
Liquidation,
        Subdivision, or Combination
.
        In the
        event of any liquidation, dissolution or winding up of the Company or upon
        the
        distribution of its assets, all assets and funds remaining after payment
        in full
        of the Company's debts and liabilities, and after the payment to holders
        of any
        then outstanding preferred stock of the full preferential amounts to which
        they
        were entitled, would be divided and distributed among holders of the common
        stock.
The
        Preferred Stock
The
        Company's preferred stock is divided into two series - Series A and Series
        B -
        designated as follows:
·
1,000,000
                  shares of Series A are authorized and 5,000,000 shares of Series
                  B are
                  authorized. There are no shares of Series A issued and outstanding;
                  there
                  are 1,338,167 Series B preferred shares issued and outstanding.
                  The
                  Company has no plans to issue any Series A shares for the foreseeable
                  future.
·
The
                  Series A shares are entitled to a 10% dividend annually on the
                  stated
                  value per share ($1.20) of the Series A, while the Series B shares
                  are
                  entitled to a cumulative 15% dividend annually on the stated value
                  per
                  share ($1.20) of the Series B. Such dividends will be declared
                  and paid at
                  the discretion of the Board to the extent funds are legally available
                  for
                  the payment of dividends.
·
Both
                  series of preferred shares vote equally with the common stock,
                  with each
                  share of preferred having the number of votes equal to the voting
                  power of
                  one share of common stock, except that the vote or written consent
                  of a
                  majority of the outstanding preferred shares is required for any
                  changes
                  to the Company's Articles of Incorporation, Bylaws or Certificate
                  of
                  Designation or for any bankruptcy, insolvency, dissolution or liquidation
                  of the company.
·
Upon
                  the liquidation of the company, the company's assets would be distributed
                  ratably to the holders of Series A preferred stock first, then
                  to the
                  holders of Series B preferred stock and then to the holders of
                  common
                  stock.
·
Shares
                  of either series of preferred stock may be converted at the option
                  of the
                  holder into shares of common stock at a rate of one share of common
                  stock
                  for each share of preferred stock being converted, subject to adjustment
                  for certain corporate events.
·
Both
                  series of preferred stock are subject to automatic conversion into
                  common
                  stock upon the closing of a firmly underwritten public offering
                  pursuant
                  to an effective registration statement under the Act, covering
                  the offer
                  and sale of common stock in which the gross proceeds to the Company
                  are at
                  least $4 million.
Equity
        Compensation Plans
On
        May
        27, 2005, the Company adopted the 2005 Stock Option Plan (the "Option Plan")
        and
        the 2005 Employee Stock Option Plan (the "Employee Plan"), pursuant to which
        it
        may grant equity awards to eligible persons. The Option Plan allows the Board
        of
        Directors to grant options to purchase up to 1,500,000 shares of common stock
        to
        directors, officers, key employees and service providers of the Company,
        and the
        Employee Plan allows the Board of Directors to grant options to purchase
        up to
        1,500,000 shares of common stock to officers and key employees of the Company.
        As of July 28, 2005, options to purchase 1,180,472 shares had been granted
        under
        the Option Plan and options to purchase 888,865 shares had been granted under
        the Employee Plan as part of the Merger.
27
Plan
                  Category
Number
                  of securities to be issued upon exercise of outstanding options,
                  warrants
                  and rights (#)
Weighted-average
                  exercise price of outstanding options, warrants and rights
                  ($)
Number
                  of securities remaining available for future issuance under equity
                  compensation plans
Equity
                  compensation plans approved by shareholders
N/A
N/A
N/A
Equity
                  compensation plans not approved by shareholders
2,069,337
$1.33
930,663
Total
2,069,337
$1.33
930,663
Recent
        Sales of Unregistered Securities
In
        addition to the securities issued pursuant to the Merger, the Company issued
        an
        aggregate of 2,500,000 shares of common stock in April 2005 (prior to the
        30:1
        reverse stock split) for cash proceeds of $85,000. These securities were
        sold to
        Andrew Eccelstone (1,470,000 shares), Gary Boster (882,000 shares) and Philip
        and Stephanie Rogers (148,000 shares). Mr. Rogers served as the Company's
        President prior to the Merger. The Company relied upon § 4(2) of the Securities
        Act of 1933, as amended, as the exemption from registration for this
        transaction. No underwriters were used in connection with this
        transaction.
ITEM
        5.01 Changes in Control of Registrant
Following
        the Merger, the holders of all of the common stock of IsoRay before the Merger
        only own 28.07% of the common stock, and 24.41% of the combined voting stock
        of
        the Company. The former holders of voting stock in IsoRay Medical now own
        71.93%
        of the common stock, and 75.59% of the combined voting stock of the Company.
ITEM
        5.02 Departure of Directors or Principal Officers; Election of Directors;
        Appointment of Principal Officers
In
        conjunction with the Merger, and effective as of July 28, 2005 (the closing
        date
        of the Merger), Thomas Scallen resigned from his positions as Chief Executive
        Officer and Chairman of the Board, Philip Rogers resigned from his position
        as
        President and a director, and Wally Bietak resigned from his position as
        a
        director of the Registrant.
Effective
        as of July 28, 2005, Roger Girard and David Swanberg were appointed as directors
        by the resigning Board, and, also effective as of July 28, 2005, they appointed
        Robert Kauffman, Thomas LaVoy and Stephen Boatwright to fill the remaining
        three
        vacant Board positions. The Board has not yet determined on which Board
        committees these five directors will serve, although it expects to do so
        at its
        next scheduled meeting after the Board establishes which committees the Company
        will form. Further information about the new Board members may be found below.
Effective
        as of July 28, 2005, Roger Girard was appointed as Chief Executive Officer
        and
        President of the Registrant and Michael Dunlop was appointed as Chief Financial
        Officer and Treasurer of the Company. Also effective July 28, 2005, John
        Hrobsky
        was appointed Vice President, Sales and Marketing and David Swanberg was
        appointed Secretary and Vice President, Operations. The Registrant has not
        entered into employment agreements with any of these officers as of the date
        of
        this filing. Further information about these officers may be found
        below.
Management
IsoRay's
        management and directors and their respective ages as of the date of this
        report
        are set forth in the table below. Also provided is a brief description of
        the
        experience of each director and officer during the past five years and
        directorships (if any) held by each director in other companies.
28
Name
Age
Position
Roger
                  Girard
61
CEO,
                  President, Chairman
John
                  Hrobsky
55
VP
                  - Sales and Marketing
Michael
                  Dunlop
53
CFO,
                  Treasurer
David
                  J. Swanberg
48
VP-Operations,
                  Secretary, Director
Robert
                  Kauffman
64
Director
Thomas
                  LaVoy
45
Director
Stephen
                  Boatwright
41
Director
Roger
        Girard
:
        In
        addition to serving as President, Chairman and CEO for the Registrant, Mr.
        Girard is currently the CEO, President and Chairman of the Board of IsoRay
        Medical, Inc., and has served in these positions since the formation of IsoRay
        Medical, Inc.   Mr. Girard was CEO and Chairman of IsoRay Medical's
        predecessor company from August of 2003 until October 1, 2004.  
        Mr.
        Girard has been actively involved in the management and the development of
        the
        management team at IsoRay Medical, and his experienced leadership has helped
        drive IsoRay's development to date.    From June 1998
        until
        August of 2003, Mr. Girard served as President of Strategic Financial Services,
        a company designed to help wealthy individuals and companies with strategic
        planning and financial strategy.    Mr. Girard also
        served as the
        managing partner for the Northwest office of Capital Consortium during this
        time.   Mr. Girard has knowledge, experience and connections
        to private, institutional and public sources of capital
        and is
        experienced in managing and designing capital structures for business
        organizations as well as organizing and managing the manufacturing
        process,
        distribution, sales, and marketing, based on his 35 years of
        experience.
John
        Hrobsky
:
        Prior
        to joining IsoRay's predecessor company as Executive Vice President of Sales
        and
        Marketing in 2004, Mr. Hrobsky was President, CEO and a director of Advanced
        Cochlear Systems, positions he held beginning in 2001. From 1999 to 2001,
        Mr.
        Hrobsky served as President, CEO and a director of Zaxis International, Inc.,
        a
        biotechnology company. Prior to 1999, Mr. Hrobsky served as a senior executive
        or CEO of a number of biotech and medical device companies. IsoRay Medical
        products with which Mr. Hrobsky has experience include a medical device for
        restoring neuro-control after spinal cord injury, the leading cochlear implant
        worldwide, and radiology and imaging equipment. Notably, Mr. Hrobsky served
        as
        Vice President of Sales for Cochlear Corporation, the U.S. subsidiary of
        Cochlear Ltd., an Australian based manufacturer of cochlear implants. Cochlear
        Ltd. is the world's leading provider of cochlear implants commanding
        approximately 60% of the market. Mr. Hrobsky earned a B.S. IsoRay Medical
        Technology in 1971 from the University of Wisconsin - Eau Claire, and has
        earned
        credits toward an MBA from Regis University, Denver, CO.
Michael
        Dunlop:
Mr.
        Dunlop has been responsible for IsoRay Medical and its predecessor companies'
        financial and accounting operations and administrative services in his position
        as CFO since April 2001. Mr. Dunlop has over 16 years of administrative
        experience in the healthcare industry. As Director of Contracting and Marketing
        for Community Choice, PHCO, an organized healthcare delivery system, from
        October 1997 to December 2003, he assisted in developing the strategic direction
        and business plan of the PHCO, negotiated and maintained contractual relations
        with state-wide major health insurance plans, increased compensation for
        80+
        independent providers and 6 area hospitals, and enhanced PHCO provider
        membership through development of programs that lowered clinic and hospital
        operating costs. He was granted the Pentad Industry Council, Chelan-Douglas
        Counties' 'Employer of the Year' award in 1996, while administrator of Lake
        Chelan Clinic. Mr. Dunlop holds an M.B.A. from California State University
        and
        B.M. Education from Walla Walla College.
David
        J. Swanberg:
Mr.
        Swanberg has more than 20 years experience in engineering and materials science,
        nuclear waste and chemical processing, aerospace materials and processes,
        and
        environmental technology development and environmental compliance. During
        the
        past five years, until January 2004, Mr. Swanberg was employed full time
        as Sr.
        Chemical/Environmental Engineer for Science Applications International
        Corporation working on a variety of projects including nuclear waste research
        and development. Mr. Swanberg joined IsoRay Medical's predecessor company
        in
        March of 1999 and has held management positions in the IsoRay companies since
        2000. He has been instrumental in development of IsoRay Medical's initial
        product, the Cs-131 brachytherapy seed, including interfaces with technical,
        regulatory, and quality assurance requirements. With IsoRay Medical and its
        predecessor companies, he has managed the development and production of
        radioactive seeds to support testing to meet NRC and FDA requirements, provided
        technical guidance for characterization of the IsoRay seed to meet AAPM Task
        Group 43 protocols, and coordinated production and testing of non-radioactive
        seeds to conform to ISO standards for brachytherapy devices. He is President
        of
        the Nuclear Medicine Research Council. He holds an MS in Chemical Engineering,
        is a licensed Chemical Engineer, and a certified Level II Radiation Worker.
29
Robert
        Kauffman:
Mr.
        Kauffman has served as Chief Executive Officer and Chairman of the Board
        of
        Alanco Technologies, Inc. (NASDAQ: ALAN), an Arizona-based information
        technology company, since July 1, 1998. Mr. Kauffman was formerly President
        and
        Chief Executive Officer of NASDAQ-listed Photocomm, Inc., from 1988 until
        1997
        (since renamed Kyocera Solar, Inc.). Photocomm was the nation's largest publicly
        owned manufacturer and marketer of wireless solar electric power systems
        with
        annual revenues in excess of $35 million. Prior to Photocomm, Mr. Kauffman
        was a
        senior executive of the Atlantic Richfield Company (ARCO) whose varied
        responsibilities included Senior Vice President of ARCO Solar, Inc., President
        of ARCO Plastics Company and Vice President of ARCO Chemical Company. Mr.
        Kauffman earned an M.B.A. in Finance at the Wharton School of the University
        of
        Pennsylvania, and holds a B.S. in Chemical Engineering from Lafayette College,
        Easton, Pennsylvania.
Thomas
        LaVoy:
Mr.
        LaVoy has served as Chief Financial Officer of SuperShuttle International,
        Inc.,
        since July 1997 and as Secretary since March 1998. He has also served as
        a
        director of Alanco Technologies, Inc. (NASDAQ: ALAN) since 1998. From September
        1987 to February 1997, Mr. LaVoy served as Chief Financial Officer of
        NASDAQ-listed Photocomm, Inc. Mr. LaVoy was a Certified Public Accountant
        with
        the firm of KPMG Peat Marwick from 1980 to 1983. Mr. LaVoy has a Bachelor
        of
        Science degree in Accounting from St. Cloud University, Minnesota, and is
        a
        Certified Public Accountant.
Stephen
        Boatwright:
Mr.
        Boatwright has been a member of Keller Rohrback, PLC in Phoenix, Arizona
        since
        January 2005. From 1997 through January 2005 Mr. Boatwright was a partner
        at
        Gammage & Burnham, PLC, also in Phoenix, Arizona. Throughout his career, he
        has provided legal counsel to both private and public companies in many diverse
        industries. In recent years, Mr. Boatwright's legal practice has focused
        on
        representing technology, biotechnology, life science and medical device
        companies for their securities, corporate and intellectual property licensing
        needs. Mr. Boatwright earned both a J.D. and an M.B.A. from the University
        of
        Texas at Austin, and holds a B.A. in Philosophy from Wheaton College.
Significant
        Employees
Certain
        significant employees of our subsidiary, IsoRay Medical, Inc., and their
        respective ages as of the date of this report are set forth in the table
        below.
        Also provided is a brief description of the experience of each significant
        employee during the past five years.
Name
Age
Position
                  with IsoRay Medical, Inc.
Lane
                  Bray
77
Chief
                  Chemist
Garrett
                  Brown
42
Chief
                  Technology Officer
Keith
                  Welsch
58
Chief
                  Quality Officer
Lane
        Bray
:
        Mr.
        Bray is known nationally and internationally as a technical expert in
        separations, recovery, and purification of isotopes and is a noted authority
        in
        the use of Cesium and Strontium ion exchange for Department of Energy's West
        Valley and Hanford nuclear waste cleanup efforts. In 2000, Mr. Bray received
        the
        'Radiation Science and Technology' award from the American Nuclear Society.
        Mr.
        Bray has authored or co-authored over 110 research publications, 12 articles
        for
        9 technical books, and holds 24 U.S. and foreign patents. Mr. Bray patented
        the
        USDOE/PNNL process for purifying medical grade Yttrium-90 that was successfully
        commercialized in 1999. Mr. Bray also recently invented and patented the
        proprietary isotope separation and purification process that is assigned
        to
        IsoRay. Mr. Bray was elected 'Tri-Citian of the Year' in 1988, nominated
        for
        'Engineer of the Year' by the American Nuclear Society in 1995, and was elected
        'Chemist of the Year for 1997' by the American Chemical Society, Eastern
        Washington Section. Mr. Bray is retired from the Pacific Northwest National
        Laboratory and currently serves as a part time consultant for medical isotope
        development. Mr. Bray has been a Washington State Legislator, a Richland
        City
        Councilman, and a Mayor of Richland. Mr. Bray has a B.A. in Chemistry from
        Lake
        Forest College.
30
Garrett
        Brown
:
        Dr.
        Brown was Manager of Radiochemistry - Hot Cell Operations for International
        Isotopes, Inc., a major radiopharmaceutical and medical device startup company,
        from January 1998 until May 1999 and was instrumental in bringing a new
        brachytherapy seed implant device to commercialization. Dr. Brown's
        responsibilities included hands-on radiological work in fume hoods, glove
        boxes
        and remote manipulator hot cells, process definition, research, development,
        installation, optimization, waste minimization, procedure documentation,
        facility design and training. Dr. Brown also served as the technical interface
        to executive management for business development, shipping/receiving, QA/QC,
        facilities and marketing/sales. Dr. Brown, as a Senior Research Scientist
        at the
        Pacific Northwest National Laboratory, was responsible for the weekly production
        of multi-Curie quantities of medical grade Y-90, and research programs to
        develop high tech sorbents for separation of Cs-137, Sr-90 and Tc-99 from
        high-level radioactive wastes stored at the Hanford Nuclear Reservation.
        From
        May 1999 to the present, Dr. Brown has been a technical consultant with GNB
        Technical Consultants. Dr. Brown has co-authored numerous technical publications
        in the field. Dr. Brown has a Ph.D. in Analytical Chemistry and BS in Chemistry,
        cum laude. He has served as IsoRay Medical's Chief Technical Officer since
        May
        of 2000. In March 2004, Dr. Brown was certified as a Radiological Safety
        Officer.
Keith
        Welsch
:
        Mr.
        Welsch is a quality control professional with experience in a wide range
        of
        organizations and disciplines including the nuclear, aerospace, environmental
        restoration, construction, tubing, steel and aluminum industries. Mr. Welsch
        managed the registration of a plant to ISO 9002:1994 and subsequently
        transitioned the facility to ISO 9001:2000 and conducted continuous improvement
        actions. These included statistical process control, six sigma, lean
        manufacturing, and total preventive maintenance programs. Mr. Welsch's other
        significant achievements include facilitation of quality improvement and
        stand
        down teams, innovative education training manager, management of records
        review
        for two nuclear sites, management of audit programs and corrective-action
        systems, and teaching safety, technical, and quality courses. He has earned
        the
        Certified Quality Auditor, Certified Quality Technician and Certified Quality
        Improvement Associate certifications from the American Society for Quality.
        Mr.
        Welsch received a BA in Business Administration from Washington State
        University.
Executive
        Compensation
The
        following table provides certain summary information concerning the compensation
        earned by IsoRay Medical's Chief Executive Officer or comparable officer
        for
        services rendered in all capacities to IsoRay Medical or its predecessor
        companies for the calendar years ended December 31, 2002, 2003 and 2004.
        No
        other executive officer of IsoRay Medical or its predecessor companies received
        compensation in excess of $100,000 during calendar years 2002, 2003 or 2004.
        The
        following information includes the dollar value of base salaries, bonus awards,
        the number of stock options granted and certain other compensation, if any,
        whether paid or deferred.
31
Summary
        Compensation Table
Annual
                  Compensation
Long
                  Term Compensation
All
                  Other Compensation
($)
Awards
Payouts
Name
                  and Principal Position
Year
Salary
($)
Bonus
($)
Restricted
                  Stock Awards
($)
Securities
                  Underlying Options/ SARs
(#)
LTIP
                  Payouts
($)
Donald
                  Segna, President, IsoRay Products LLC
2002
0
0
0
0
0
0
2003
0
0
0
41,580
0
0
2004
24,000
0
0
0
0
0
Roger
                  Girard, CEO, IsoRay, Inc. and IsoRay Medical, Inc.
2003
12,000
0
49,900
0
0
0
2004
97,258
0
9,900
610,000
0
0
Securities
        Ownership of Certain
Beneficial Owners and Management
The
        following tables set forth certain information regarding the beneficial
        ownership of the Company's common stock and preferred stock as of July 28,
        2005
        for (a) each person known by the Company to be a beneficial owner of five
        percent or more of the outstanding common or preferred stock of the Company,
        (b)
        each executive officer, director and nominee for director of the Company,
        and
        (c) all directors and executive officers of the Company as a group. As of
        July
        28, 2005, the Company had 8,899,629.76 shares of common stock and 1,338,167.05
        shares of preferred stock outstanding.
COMMON
                  STOCK SHARE OWNERSHIP AS OF JULY 28, 2005
Name
                  and Address of
Beneficial
                  Owner
(1)
Amount
                  of
Common
                  Shares Owned
Options
                  or Warrants Exercisable Within 60 Days of July 28, 2005
Total
                  Shares Beneficially Owned
Percent
                  of
Common
                  Shares Owned
(2)
Roger
                  Girard, Chief Executive Officer, President and Chairman
338,492.75
219,014.12
0
6.11%
Michael
                  Dunlop, Chief Financial Officer
136,619.33
0
0
1.54%
John
                  Hrobsky, Vice President
0
234,176.64
0
2.56%
David
                  Swanberg, Vice President
284,609.70
0
0
3.20%
Robert
                  Kauffman, Director
43,802.83
0
0
.49%
Thomas
                  LaVoy, Director
0
0
0
0%
Stephen
                  Boatwright, Director
0
84,236.20
0
.94%
Lawrence
                  Family Trust
(3)
888,530.20
0
0
9.98%
Donald
                  Segna
511,214.35
0
0
5.74%
Anthony
                  Silverman
(4)
777,020.84
296,431.89
27,376.77
11.67%
All
                  Officers and Directors
as
                  a group (7 persons)
803,494.61
537,426.96
0
14.21%
(1)
Except
        as
        otherwise noted, the address for each of these individuals is c/o IsoRay,
        Inc.,
        350 Hills St., Suite 106, Richland, Washington 99354.
(2)
Percentage
        ownership is based on 8,899,629.76 shares of Common Stock outstanding on
        July
        28, 2005. Shares of Common Stock subject to stock options or warrants which
        are
        currently exercisable or will become exercisable within 60 days after July
        28,
        2005 are deemed outstanding for computing the percentage ownership of the
        person
        or group holding such options, but are not deemed outstanding for computing
        the
        percentage ownership of any other person or group.
(3)
The
        address of the
Lawrence
        Family Trust is 285 Dondero Way, San Jose, California 95119.
(4)
The
          address of Mr.
Silverman
          is 2747 Paradise Road #903, Las Vegas, Nevada 98109.
32
PREFERRED
        STOCK SHARE OWNERSHIP AS OF JULY 28, 2005
Name
                  and Address of
Beneficial
                  Owner
(1)
Amount
                  of
Preferred
                  Shares Owned
Options
                  or Warrants Exercisable Within 60 Days of July 28, 2005
Total
                  Shares Beneficially Owned
Percent
                  of
Preferred
                  Shares Owned
(2)
Lebowitz
                  Living Trust
(3)
142,189.03
0
0
10.63%
David
                  Swanberg, Vice President
14,218.23
0
0
1.06%
All
                  Officers and Directors
as
                  a group (7 persons)
(4)
14,218.23
0
0
1.06%
(1)
Except
        as
        otherwise noted, the address for each of these individuals is c/o IsoRay,
        Inc.,
        350 Hills St., Suite 106, Richland, Washington 99354.
(2)
Percentage
        ownership is based on 1,338,167.05
shares
        of
        Preferred Stock outstanding on July 28, 2005. Shares of Preferred Stock subject
        to stock options or warrants which are currently exercisable or will become
        exercisable within 60 days after July 28, 2005 are deemed outstanding for
        computing the percentage ownership of the person or group holding such options,
        but are not deemed outstanding for computing the percentage ownership of
        any
        other person or group.
(3)
The
          address of the
Lebowitz
          Living Trust is 16123 Greenwood Road, Monte Sereno, California
          95030.
(4)
No
        officers or directors other than Mr. Swanberg beneficially own shares of
        Preferred Stock.
Certain
        Relationships and Related Transactions
IsoRay
        Medical's patent rights to its Cesium-131 process were acquired from Lane
        Bray,
        a shareholder of the Company, and are subject to a 1% royalty on gross profits
        and certain contractual restrictions. Additionally, when IsoRay Medical attains
        a 15% domestic market share, it will pay to the Lawrence Family Trust, a
        major
        shareholder of the Company, 1% of the "Factory Price" with a minimum annual
        royalty of $4,000, pursuant to an agreement with Don Lawrence. In exchange
        for
        consulting services, Quatsch Ventures, LLC, an entity controlled by Stephen
        Boatwright, one of the Company's directors, received options to purchase
        84,236
shares
        of
        our common stock in 2004. Mr. Boatwright is a member of Keller Rohrback,
        PLC,
        which provides legal services to the Company and IsoRay Medical.
33
Indemnification
        of Directors and Officers
The
        Company's Articles of Incorporation provides to directors and officers
        indemnification to the full extent provided by law, and provide that, to
        the
        extent permitted by Minnesota law, a director will not be personally liable
        for
        monetary damages to the Company or its shareholders for breach of his or
        her
        fiduciary duty as a director, except for liability for certain actions that
        may
        not be limited under Minnesota law.
Insofar
        as indemnification for liabilities arising under the Securities Act of 1933
        may
        be permitted to directors, officers and controlling persons pursuant to the
        foregoing provisions, or otherwise, in the opinion of the Securities and
        Exchange Commission such indemnification is against public policy as expressed
        in the Act and is, therefore, unenforceable.
ITEM
        5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal
        Year
On
        June
        28, 2005, the Registrant filed a Certificate of Designation with the Minnesota
        Secretary of State to designate the rights, preferences and privileges of
        Series
        A and B Convertible Preferred Stock, as required by the Merger Agreement.
        The
        Registrant is now authorized to issue up to 1 million shares of Series A
        Convertible Preferred Stock and up to 5 million shares of Series B Convertible
        Preferred Stock. The Series A Preferred carries a dividend of ten percent
        per
        year on the stated value per share of $1.20 through March 31, 2007. The Series
        B
        Preferred carries a dividend of fifteen percent per year on the stated value
        per
        shares of $1.20, and accrued but unpaid dividends cumulate. Both series of
        preferred stock vote equally with the common stock, and may be converted
        into
        common stock at a rate of one share of common stock for each one share of
        preferred stock converted.
On
        July
        29, 2005, the Registrant filed a Certificate of Amendment to its Articles
        of
        Incorporation, changing the name of the Registrant from "Century Park Pictures
        Corporation" to "IsoRay, Inc."
On
        August
        1, 2005, the Registrant determined that it would change its fiscal year end
        from
        September 30 to June 30, and by August 15, 2005 the Registrant will file
        Form
        1128 with the Internal Revenue Service (IRS) to effectuate this change. Pending
        approval from the IRS, the Registrant will file its transition report on
        Form
        10-KSB.
ITEM 8.01
        Other Events
As
        a
        result of the Merger, IsoRay has moved its principal executive offices to
        350
        Hills Street, Suite 106, Richland, Washington 99354.
ITEM
        9.01 Exhibits
(a)
Financial
        Statements of Business Acquired
To
        be
        filed by amendment.
(b)
Pro
        Forma Financial Information
To
        be filed by amendment.
34
(c)
Exhibits
2.1
Merger
        Agreement dated as of May 27, 2005, by and among Century Park Pictures
        Corporation, Century Park Transitory Subsidiary, Inc., certain shareholders
        and
        IsoRay Medical, Inc.
2.2
Certificate
        of Merger, filed with the Delaware Secretary of State on July 28,
        2005
3.1
Certificate
        of Designation of Rights, Preferences and Privileges of Series A and B
        Convertible Preferred Stock, filed with the Minnesota Secretary of State
        on June
        29, 2005
3.2
Amendment
        to Articles of Incorporation, filed with the Minnesota Secretary of State
        on
        July 29, 2005
4.1
Form
        of
        Lock-Up Agreement for Certain IsoRay Medical, Inc. Shareholders
4.2
Form
        of
        Lock-Up Agreement for Anthony Silverman
4.3
Form
        of
        Registration Rights Agreement among IsoRay Medical, Inc., Century Park Pictures
        Corporation and the other signatories thereto
4.4
Form
        of
        Escrow Agreement among Century Park Pictures Corporation, IsoRay Medical,
        Inc.
        and Anthony Silverman
4.5
Form
        of
        Escrow Agreement among Century Park Pictures Corporation, IsoRay Medical,
        Inc.
        and Thomas Scallen
35
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.
IsoRay,
                Inc., a Minnesota corporation
Dated: August
                3, 2005
By:
/s/ Roger
                Girard
Roger
                Girard, CEO
36