VIVOS INC - Quarter Report: 2010 September (Form 10-Q)

advanced_medical-10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED: September 30, 2010

o	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM __________ TO __________

COMMISSION FILE NUMBER 0-53497

(Exact name of registrant as specified in its charter)

Delaware	80-0138937
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

8131 W. Grandridge Blvd. Suite 101,

Kennewick WA 99336

(Address of principal executive offices, Zip Code)

(509) 736-4000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

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

Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	o	Smaller reporting company	x

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

The number of shares of registrant’s common stock outstanding, as of November 2, 2010 was 62,133,191.

TABLE OF CONTENTS

		Page
PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements	3
	Balance Sheets as of September 30, 2010 (unaudited) and December 31, 2009	3
	Statements of Operations for the Three Months and the Nine Months ended September 30, 2010 (unaudited) and the Three Months and the Nine Months ended September 30, 2009 (unaudited)	4
	Statements of Changes in Shareholders’ Equity (Deficit) for the period ended September 30, 2010 (unaudited)	5
	Statements of Cash Flows for the nine months ended September 30, 2010 (unaudited) and the nine months ended September 30, 2009 (unaudited)	6
	Notes to Consolidated Financial Statement (unaudited)	7-13
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26
Item 4.	Controls and Procedures	26

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	27
Item 1A.	Risk Factors	27
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	27
Item 3.	Defaults Upon Senior Securities	28
Item 5.	Other Information	28
Item 6.	Exhibits	28

SIGNATURES		28

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

Advanced Medical Isotope Corporation

Balance Sheets

	September 30,			December 31,
	2010			2009
	(unaudited)
ASSETS

Current Assets:
Cash and cash equivalents	$	555,991		$	37,562
Accounts receivable		4,060			19,030
Prepaid expenses paid with stock, current portion		109,304			151,432
Inventory		4,200			1,550
Total current assets		673,555			209,574

Fixed assets, net of accumulated depreciation		1,578,449			1,970,113

Other assets:
License fees, net of amortization		18,056			2,083
Patents		148,423			106,476
Prepaid expenses paid with stock, long-term portion		31,250			103,125
Deposits		155,406			158,171
Total other assets		353,135			369,855
Total assets	$	2,605,139		$	2,549,542

LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)

Current liabilities:
Accounts payable	$	828,848		$	622,713
Accrued interest payable		259,407			131,264
Payroll liabilities payable		44,547			20,047
Short term loan payable		60,000			-
Loans from shareholder		136,013			163,275
Convertible notes payable		2,735,921			1,581,504
Current portion of capital lease obligations		1,567,201			1,839,418
Total current liabilities		5,631,937			4,358,221

Long term liabilities:
Capital lease obligations, net of current portion		-			-
Total liabilities		5,631,937			4,358,221

Shareholders’ Equity (Deficit):
Common stock, $.001 par value; 100,000,000 shares authorized;
61,476,559 and 52,128,817 shares issued and outstanding,
respectively		61,477			52,129
Paid in capital		17,246,059			15,415,998
Accumulated deficit		(20,334,334	)		(17,276,806	)
Total shareholders’ equity (deficit)		(3,026,798	)		(1,808,679	)
Total liabilities and shareholders’ equity (deficit)	$	2,605,139		$	2,549,542

The accompanying notes are an integral part of these financial statements

Advanced Medical Isotope Corporation
Statements of Operations (unaudited)

	Three months ended September 30,						Nine months ended September 30,
	2010			2009			2010			2009

Revenues	$	107,490		$	102,245		$	310,153		$	242,387
Cost of Goods Sold		25,844			44,607			55,782			95,706
		81,646			57,638			254,371			146,681

Operating expenses
Sales and marketing expenses		-			1,200			15,957			6,627
Depreciation and amortization		136,714			140,668			408,331			422,003
Professional fees		675,561			318,628			1,256,164			621,127
Stock options granted		-			183,746			137,886			395,018
Payroll expenses		124,670			92,306			469,795			300,263
General and administrative expenses		106,186			115,482			399,023			348,229
Total operating expenses		1,043,131			852,030			2,687,156			2,093,267
Operating loss		(961,485	)		(794,392	)		(2,432,785	)		(1,946,586	)

Non-operating income (expense)
Interest expense		(220,030	)		(209,514	)		(624,743	)		(589,839	)
Net gain (loss) on settlement of debt		-			-			-			(573,344	)
Non-operating income (expense), net		(220,030	)		(209,514	)		(624,743	)		(1,163,183	)

Loss before Income Taxes		(1,181,515	)		(1,003,906	)		(3,057,528	)		(3,109,769	)
Income Tax Provision		-			-			-			-
Net Loss	$	(1,181,515	)	$	(1,003,906	)	$	(3,057,528	)	$	(3,109,769	)
Net Loss per common share	$	(0.02)		$	(0.02	)	$	(0.06	)	$	(0.07	)

Weighted average common shares outstanding		56,032,211			51,016,791			54,162,607			46,908,553

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

Advanced Medical Isotope Corporation
Statement of Changes in Shareholders’ Equity (Deficit) (unaudited)

	Common Stock				Paid in		Accumulated
	Shares		Amount		Capital		Deficit			Total

Balances at December 31, 2009 (audited)		52,128,817	$	52,129	$	15,415,998	$	(17,276,806	)	$	(1,808,679	)

Common stock issued for:
Cash		5,090,912		5,091		541,909		-			547,000
Stock options exercised		250,000		250		72,250		-			72,500
Services, including prepaid services of $62,500		3,450,000		3,450		834,050		-			837,500
Loan fees on convertible debt		413,080		413		116,124		-			116,537
Intrinsic value of convertible debt issued		-		-		70,487		-			70,487
Conversion of convertible debt		143,750		144		57,355		-			57,499
Vesting of stock options		-		-		137,886		-			137,886
Net loss		-		-		-		(3,057,528	)		(3,057,528	)
Balances at September 30, 2010		61,476,559	$	61,477	$	17,246,059	$	(20,334,334	)	$	(3,026,798	)

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

Advanced Medical Isotope Corporation
Statements of Cash Flow
(unaudited)

	Nine months ended			Nine months ended
	September 30, 2010			September 30, 2009
CASH FLOW FROM OPERATING ACTIVITIES:
Net Loss	$	(3,057,528	)	$	(3,109,769	)

Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation of fixed assets		404,304			403,252
Amortization of licenses and intangible assets		4,026			18,750
Amortization of convertible debt discount		358,741			416,034
Amortization of prepaid expenses paid with stock		176,503			112,197
Common stock issued for services		775,000			182,150
Stock options issued for services		137,886			395,019
Loss on settlement of debt		-			606,944
Changes in operating assets and liabilities:
Accounts receivable		14,970			6,087
Inventory		(2,650	)		(9,950)
Prepaid expenses		-			3,000
Deposits		-			(235,000	)
Accounts payable		248,482			299,456
Payroll liabilities		24,500			(3,513	)
Stock based consulting fees payable		(39,581	)		(31,800	)
Accrued interest		135,641			70,712
Net cash used by operating activities		(819,706	)		(876,431	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Cash used to purchase equipment		(12,640	)			-
Cash used to acquire patents		(41,946	)		(69,292	)
Cash used to acquire license fees		(20,000	)		-
Net cash used in investing activities		(74,586	)		(69,292	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on Washington Trust debt		(27,262	)		(22,565	)
Principal payments on capital lease		(272,217	)		(214,970	)
Proceeds from convertible note		1,032,700			701,400
Proceeds from officers related party debt		-			22,800
Payments on officers related party debt		-			(22,800	)
Proceeds from cash sales of common shares		547,000			397,000
Proceeds from exercise of options and warrants		72,500			-
Proceeds from short term loan		60,000			-
Net cash provided by financing activities		1,412,721			860,865

Net increase in cash and cash equivalents		518,429			(84,858	)
Cash and cash equivalents, beginning of period		37,562			86,631

CASH AND CASH EQUIVALENTS, END OF PERIOD	$	555,991		$	1,773


Supplemental disclosures of cash flow information:
Cash paid for interest	$	159,195		$	228,582
Cash paid for income taxes		-		$	-

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

Advanced Medical Isotope Corporation

Notes to Consolidated Financial Statements

For the nine months ended September 30, 2010 (unaudited) and the year ended December 31, 2009

NOTE 1: BASIS OF PRESENTATION

Nature of Organization

The accompanying condensed consolidated financial statements of the Company have been prepared without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and disclosures required by accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations. These condensed consolidated financial statements reflect all adjustments that, in the opinion of management, are necessary to present fairly the results of operations of the Company for the period presented. The results of operations for the nine months ended September 30, 2010, are not necessarily indicative of the results that may be expected for any future period or the fiscal year ending December 31, 2010.

NOTE 2: GOING CONCERN

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. As shown in the accompanying financial statements, the Company has suffered recurring losses and used significant cash in support of its operating activities and the Company’s cash position is not sufficient to support the Company’s operations. Historically, we have relied upon outside investor funds to maintain our operations and develop our business. We anticipate we will continue to require funding from investors for working capital as well as business expansion during this fiscal year and we can provide no assurance that additional investor funds will be available on terms acceptable to us. These factors raise substantial doubt about the ability of the Company to continue as a going concern. In addition, our ability to continue as a going concern must be considered in light of the problems, expenses and complications frequently encountered by entrance into established markets and the competitive environment in which we operate.

We anticipate a requirement of $1 million in funds over the next twelve months to maintain current operation activities. In addition we anticipate a requirement of approximately $15 million in funds over the next twelve months due to the anticipation of adding additional staff in the future assuming we are successful in selling our medical isotopes and/or the start of development by us on future manufacturing sites or other projects. Currently we have $555,991 cash on hand which means there will be an anticipated shortfall of nearly the full $15 million requirement in additional funds over the next twelve months. There are currently commitments to vendors for products and services purchased, plus, the employment agreements of the CFO and other employees of the company and our current lease commitments that will necessitate liquidation of the Company if we are unable to raise additional capital. The current level of cash is not enough to cover the fixed and variable obligations of the Company.

Assuming we are successful in our development efforts of our patented technologies, we believe that we will be able to raise additional funds through the sale of our stock to either current or new shareholders. There is no guarantee that we will be able to raise additional funds or to do so at an advantageous price.

The financial statements do not include any adjustments relating to the recoverability and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company’s continuation as a going concern is dependent upon its ability to generate sufficient cash flow to meet its obligations on a timely basis and ultimately to attain profitability. The Company plans to seek additional funding to maintain its operations through debt and equity financing and to improve operating performance through a focus on strategic products and increased efficiencies in business processes and improvements to the cost structure. There is no assurance that the Company will be successful in its efforts to raise additional working capital or achieve profitable operations. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Advanced Medical Isotope Corporation

Notes to Consolidated Financial Statements

For the nine months ended September 30, 2010 (unaudited) and the year ended December 31, 2009

NOTE 3: FIXED ASSETS

Fixed assets consist of the following at September 30, 2010 and December 31, 2009:

	September 30, 2010			December 31, 2009
Production equipment	$	2,113,218		$	2,113,218
Production equipment, not in use		235,000			235,000
Building		446,772			446,772
Leasehold improvements		3,235			3,235
Office equipment		32,768			20,128
		2,830,993			2,818,353
Less accumulated depreciation		(1,252,544	)		(848,240	)
	$	1,578,449		$	1,970,113

Accumulated depreciation related to fixed assets is as follows:

	September 30, 2010		December 31, 2009
Production equipment	$	992,386	$	675,403
Production equipment, not in use		-		-
Building		246,178		164,119
Leasehold improvements		1,867		1,307
Office equipment		12,113		7,411
	$	1,252,544	$	848,240

Depreciation expense for the above fixed assets for the nine months ended September 30, 2010 and 2009, respectively, was $404,304 and $403,253.

NOTE 4: INTANGIBLE ASSETS

Intangible assets consist of the following at September 30, 2010 and December 31, 2009:

	September 30, 2010			December 31, 2009
License Fee	$	95,000		$	75,000
Patents		148,423			106,476
		243,423			181,476
Less accumulated amortization		(76,944	)		(72,917	)
Intangible assets net of accumulated amortization	$	166,479		$	108,559

Amortization expense for the above intangible assets for the nine months ended September 30, 2010 and 2009, respectively, was $4,027 and $18,750.

NOTE 5: RELATED PARTY TRANSACTIONS

Indebtedness from Related Parties

The Company had a $200,000 revolving line of credit with Washington Trust Bank that was to expire in September 2009. The Company had $199,908 in borrowings under the line of credit as of October 28, 2008 at which time it was paid off and replaced with a loan from two of the major shareholders. The loan calls for $4,066 monthly payments, including 8% interest, beginning November 30, 2008, with a balloon payment for the balance at October 31, 2009 at which time the loan was extended for one year with a balloon payment for the balance due at October 31, 2010. There is no security held as collateral for this loan. As of September 30, 2010, the balance was $136,013 and all payments were current on this shareholder loan.

Advanced Medical Isotope Corporation

Notes to Consolidated Financial Statements

For the nine months ended September 30, 2010 (unaudited) and the year ended December 31, 2009

NOTE 5: RELATED PARTY TRANSACTIONS - continued

On July 19, 2010 the Company issued 40,000 shares of its common stock and a convertible promissory note in the amount of $100,000 with interest payable at 10% per annum in 2010. The Note matures in July of 2011. The entire outstanding principal balance and any outstanding fees or interest is due and payable in full on the Maturity Date. At the option of the holder, the note and interest is convertible into the Company’s common stock at $0.13 per share. The value of the $100,000 debt plus the $0.13 fair market value of the 40,000 shares at the date of the agreement was prorated to arrive at the allocation of the original $100,000 debt and the value of the 40,000 shares and the beneficial conversion feature. The computation resulted in an allocation of $95,057 toward the debt and $4,943 to the shares and $4,943 to the beneficial conversion feature. The $4,943 value of the shares and the $4,943 value of the beneficial conversion feature are then amortized to interest over the twelve month life of the debt. Interest expense of $2,060 has been recognized in the accompanying financial statements for the nine months ending September 30, 2010.

On August 20, 2010 the Company issued 60,000 shares of its common stock and a convertible promissory note in the amount of $150,000 with interest payable at 10% per annum in 2010. The Note matures in August of 2011. The entire outstanding principal balance and any outstanding fees or interest is due and payable in full on the Maturity Date. At the option of the holder, the note and interest is convertible into the Company’s common stock at $0.09 per share. The value of the $150,000 debt plus the $0.09 fair market value of the 60,000 shares at the date of the agreement was prorated to arrive at the allocation of the original $150,000 debt and the value of the 60,000 shares and the beneficial conversion feature. The computation resulted in an allocation of $144,788 toward the debt and $5,212 to the shares and $5,212 to the beneficial conversion feature. The $5,212 value of the shares and the $5,212 value of the beneficial conversion feature are then amortized to interest over the twelve month life of the debt. Interest expense of $1,085 has been recognized in the accompanying financial statements for the nine months ending September 30, 2010.

On September 14, 2010 the Company issued 60,000 shares of its common stock and a convertible promissory note in the amount of $150,000 with interest payable at 10% per annum in 2010. The Note matures in September of 2011. The entire outstanding principal balance and any outstanding fees or interest is due and payable in full on the Maturity Date. At the option of the holder, the note and interest is convertible into the Company’s common stock at $0.12 per share. The value of the $150,000 debt plus the $0.12 fair market value of the 60,000 shares at the date of the agreement was prorated to arrive at the allocation of the original $150,000 debt and the value of the 60,000 shares and the beneficial conversion feature. The computation resulted in an allocation of $143,130 toward the debt and $6,870 to the shares and $6,870 to the beneficial conversion feature. The $6,870 value of the shares and the $6,870 value of the beneficial conversion feature are then amortized to interest over the twelve month life of the debt. Interest expense of $570 has been recognized in the accompanying financial statements for the nine months ending September 30, 2010.

Rent Expenses

On August 1, 2007 the Company began renting office and warehouse space, known as the Production Facility located in Kennewick, Washington from a shareholder holding less that 5% of the total shares outstanding. The lease agreement calls for monthly rental payments starting at $3,500, increasing every August 1st until they become $4,762 as of August 1, 2011. During the nine months ended September 30, 2010 and 2009, respectively, the Company incurred rent expenses for this facility totaling $37,394 and $34,020, respectively. In addition, the lease agreement called for the issuance of $187,500 in common stock valued at $.40 per share for a total of 416,667 shares. The company recognized the issuance of all 416,667 shares in 2007 and will amortize the $187,500 value of that stock over the sixty month term of the lease. For the nine months ended September 30, 2010 and 2009, respectively, the Company amortized $28,125 and $28,125 of this stock issuance and recognized it as rent expense.

Additionally, in June 2008, the Company entered into two twelve month leases for its corporate offices with three four month options to renew, but in no event will the lease extend beyond December 31, 2010. The lease agreement calls for monthly rental payments of $2,733 and $2,328 per month. During the nine months ended September 30, 2010 and 2009, respectively, the Company incurred rent expenses for this facility totaling $24,600 and $45,552, respectively. Effective November 1, 2009 the Company terminated the portion of the lease consisting of the $2,328 rental payment per month.

Advanced Medical Isotope Corporation

Notes to Consolidated Financial Statements

For the nine months ended September 30, 2010 (unaudited) and the year ended December 31, 2009

NOTE 5: RELATED PARTY TRANSACTIONS - continued

Future minimum rental payments required under the Company’s current rental agreements in excess of one year as of September 30, 2010, are as follows:

	Production		Corporate
	Facility		Offices		Total
Twelve months ended September 30, 2011	$	53,613	$	8,200	$	61,813
Twelve months ended September 30, 2012		47,617		-		47,617
Total	$	101,230	$	8,200	$	109,430

Rental expense for the nine months ended September 30, 2010 and 2009 consisted of the following:

	Nine months ended		Nine months ended
	September 30, 2010		September 30, 2009

Office and warehouse lease effective August 1, 2007
Monthly rental payments	$	37,394	$	34,020
Rental expense in the form of stock issuance		32,000		35,875
Corporate office		24,600		45,552
Cyclotron storage		47,500		12,600
Total Rental Expense	$	141,494	$	128,047

NOTE 6: PREPAID EXPENSES PAID WITH STOCK

The Company has issued stock to companies for various service agreements extending beyond September 30, 2010; however all of which are expected to expire sometime within the next twelve months. Additionally, the Company issued stock for prepaid rent which will expire annually through July 2012 at the rate of $37,500 per year. Prepaid Expenses are expected to mature as follows:

For the twelve month period ending September 30, 2011	$	109,304
For the twelve month period ending September 30, 2012		31,250
For the twelve month period ending September 30, 2013		-
	$	140,554

NOTE 7: DEBT

The Company borrowed $60,000 July 2010, due April 2011, with interest at 8%. The holder of the note had the right, after the first ninety days of the note (October 19, 2010), to convert the note and accrued interest into common stock at a price per share equal to 58% (representing a discount rate of 42%) of the average closing price of the last five trading prices for the common stock ending one trading day prior to the date of conversion.

The Company had the right to prepay the note and accrued interest during the first ninety days following the date of the note. The amount of any prepayment equals 150% of the outstanding principal balance of the note plus accrued interest on the note. The Company prepaid the note in full prior to October 19, 2010 and therefore has accrued interest expense of $30,467 related to the prepayment cost in the accompanying financial statements for the nine months ending September 30, 2010. If the Company had not paid off the note and related accrued interest by October 19, 2010, the note would have become convertible and the Company would have had to accrue an additional $12,981 to interest expense to account for the beneficial conversion feature of the note. The Company paid the debt in full as of October 7, 2010.

Advanced Medical Isotope Corporation

Notes to Consolidated Financial Statements

For the nine months ended September 30, 2010 (unaudited) and the year ended December 31, 2009

NOTE 8: STOCKHOLDERS’ EQUITY

Common Stock Sale

The Company issued 5,090,912 shares of common stock for cash during the nine months ended September 30, 2010. The price per share ranged from $0.10 to $0.58 per share. The Company also granted 5,090,912 warrants in conjunction with these stock for cash issuances, with an exercise price per share ranging from $0.20 to $0.87 and an exercise period of one year.

The Company issued 250,000 shares of common stock for cash during the nine months ended September 30, 2010 for options exercised at $0.29 per share.

Common Stock Issued for Services and Other

In 2010, the Company issued 3,450,000 shares of common stock with a total fair market value of $837,500. The fair market value of the shares issued ranged from $0.15 to $0.50. The shares were issued for $837,500 in services.

Common Stock Issued for Convertible Debt

The Company issued 40,000 shares of its common stock and a convertible promissory note in the amount of $100,000 with interest payable at 10% per annum in January 2010. The Note matures in January of 2011. The entire outstanding principal balance and any outstanding fees or interest is due and payable in full on the Maturity Date. At the option of the holder, the note and interest is convertible into the Company’s common stock at $0.50 per share. The value of the $100,000 debt plus the $0.45 fair market value of the 40,000 shares at the date of the agreement was prorated to arrive at the allocation of the original $100,000 debt and the value of the 40,000 shares and the beneficial conversion feature. The computation resulted in an allocation of $79,492 toward the debt and $15,254 to the shares and $5,254 to the beneficial conversion feature. The $15,254 value of the shares and the $5,254 value of the beneficial conversion feature are then amortized to interest over the twelve month life of the debt. Interest expense of $14,104 has been recognized in the accompanying financial statements for the nine months ending September 30, 2010.

The Company issued 40,000 shares of its common stock and a convertible promissory note in the amount of $100,000 with interest payable at 10% per annum in February 2010. The Note matures in February of 2011. The entire outstanding principal balance and any outstanding fees or interest is due and payable in full on the Maturity Date. At the option of the holder, the note and interest is convertible into the Company’s common stock at $0.50 per share. The value of the $100,000 debt plus the $0.49 fair market value of the 40,000 shares at the date of the agreement was prorated to arrive at the allocation of the original $100,000 debt and the value of the 40,000 shares and the beneficial conversion feature. The computation resulted in an allocation of $69,224 toward the debt and $16,388 to the shares and $14,388 to the beneficial conversion feature. The $16,388 value of the shares and the $14,388 value of the beneficial conversion feature are then amortized to interest over the twelve month life of the debt. Interest expense of $19,238 has been recognized in the accompanying financial statements for the nine months ending September 30, 2010.

The Company issued 90,000 shares of its common stock and a convertible promissory note in the amount of $225,000 with interest payable at 10% per annum in March 2010. The Note matures in March of 2011. The entire outstanding principal balance and any outstanding fees or interest is due and payable in full on the Maturity Date. At the option of the holder, the note and interest is convertible into the Company’s common stock at $0.40 per share. The value of the $225,000 debt plus the $0.40 fair market value of the 90,000 shares at the date of the agreement was prorated to arrive at the allocation of the original $225,000 debt and the value of the 90,000 shares and the beneficial conversion feature. The computation resulted in an allocation of $162,932 toward the debt and $31,034 to the shares and $31,034 to the beneficial conversion feature. The $31,034 value of the shares and the $31,034 value of the beneficial conversion feature are then amortized to interest over the twelve month life of the debt. Interest expense of $33,614 has been recognized in the accompanying financial statements for the nine months ending September 30, 2010.

The Company issued 20,200 shares of its common stock and a convertible promissory note in the amount of $50,500 with interest payable at 10% per annum in April 2010. The Note matures in April of 2011. The entire outstanding principal balance and any outstanding fees or interest is due and payable in full on the Maturity Date. At the option of the holder, the note and interest is convertible into the Company’s common stock at $0.40 per share. The value of the $50,500 debt plus the $0.40 fair market value of the 20,200 shares at the date of the agreement was prorated to arrive at the allocation of the original $50,500 debt and the value of the 20,200 shares and the beneficial conversion feature. The computation resulted in an allocation of $36,568 toward the debt and $6,966 to the shares and $6,966 to the beneficial conversion feature. The $6,966 value of the shares and the $6,966 value of the beneficial conversion feature are then amortized to interest over the twelve month life of the debt. Interest expense of $6,383 has been recognized in the accompanying financial statements for the nine months ending September 30, 2010.

Advanced Medical Isotope Corporation

Notes to Consolidated Financial Statements

For the nine months ended September 30, 2010 (unaudited) and the year ended December 31, 2009

NOTE 8: STOCKHOLDERS’ EQUITY – continued

The Company issued 22,880 shares of its common stock and a convertible promissory note in the amount of $57,200 with interest payable at 10% per annum in May 2010. The Note matures in May of 2011. The entire outstanding principal balance and any outstanding fees or interest is due and payable in full on the Maturity Date. At the option of the holder, the note and interest is convertible into the Company’s common stock at $0.30 per share. The value of the $57,200 debt plus the $0.30 fair market value of the 22,880 shares at the date of the agreement was prorated to arrive at the allocation of the original $57,200 debt and the value of the 22,880 shares and the beneficial conversion feature. The computation resulted in an allocation of $44,942 toward the debt and $6,129 to the shares and $6,129 to the beneficial conversion feature. The $6,129 value of the shares and the $6,129 value of the beneficial conversion feature are then amortized to interest over the twelve month life of the debt. Interest expense of $7,661 has been recognized in the accompanying financial statements for the nine months ending September 30, 2010.

The Company issued 40,000 shares of its common stock and a convertible promissory note in the amount of $100,000 with interest payable at 10% per annum in June 2010. The Note matures in June of 2011. The entire outstanding principal balance and any outstanding fees or interest is due and payable in full on the Maturity Date. At the option of the holder, the note and interest is convertible into the Company’s common stock at $0.18 per share. The value of the $100,000 debt plus the $0.18 fair market value of the 40,000 shares at the date of the agreement was prorated to arrive at the allocation of the original $100,000 debt and the value of the 40,000 shares and the beneficial conversion feature. The computation resulted in an allocation of $86,568 toward the debt and $6,716 to the shares and $6,716 to the beneficial conversion feature. The $6,716 value of the shares and the $6,716 value of the beneficial conversion feature are then amortized to interest over the twelve month life of the debt. Interest expense of $7,216 has been recognized in the accompanying financial statements for the nine months ending September 30, 2010.

Advanced Medical Isotope Corporation

Notes to Consolidated Financial Statements

For the nine months ended September 30, 2010 (unaudited) and the year ended December 31, 2009

NOTE 9: SUPPLEMENTAL CASH FLOW INFORMATION

During the nine months ended September 30, 2009, the Company had the following non-cash investing and financing activities:

●

Issued 373,333 shares of Common Stock as payment against Accounts Payable of $114,500, increasing Common Stock by $373, Paid In Capital by $115,093 and Loss on Settlement of Debt by $967.

●

Converted 95,000 share of Preferred Stock into 10,857,142 shares of Common Stock, decreasing Preferred Stock by $95, Preferred Stock Redeemable by $3,182,405, and Accrued Interest by $171,628, while increasing Common Stock by $10,857, Paid In Capital by $3,800,095, and Loss on Settlement of Debt by $456,824.

During the nine months ended September 30, 2010, the Company had the following non-cash investing and financing activities:

●

Converted $50,000 and $7,499 worth of Convertible Debt and Accrued Interest, respectively, into 143,750 shares of Common Stock, increasing Common Stock by $144 and Additional Paid in Capital by $57,355.

●

Recognized Debt Discounts on Convertible Debt of $187,024 and increased Common Stock by $413 and Additional Paid in Capital by $186,611.

NOTE 10: SUBSEQUENT EVENTS

In October 2010 the Company issued 105,000 shares to a consultant for services valued at the closing trading price of $0.11 per share or $11,550.

In October 2010 the Company issued 76,923 shares as payment against Accounts Payable valued at the closing trading price of $0.13 per share or $10,000.

In October 2010 the Company issued 269,928 shares as payment against Accounts Payable valued at the closing trading price of $0.18 per share or $48,587.

In October 2010 the Company issued 195,000 shares as payment against Stock Based Consulting Fees Payable valued at the closing trading price of $0.14 per share or $27,300.

In October 2010 the Company issued 9,781 shares as payment against Stock Based Consulting Fees Payable valued at the closing trading price of $0.14 per share or $1,369.

In October 2010 the Company received $1,215,000 grant funds for Research to Develop and Test an Advanced Resorbable Brachytherapy Seed Research.

In November 2010 the Company received notification it is to receive $488,958 grant funds for qualified investments in Brachytherapy and Molybdenum 99 research.

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

Except for statements of historical fact, certain information described in this document contains “forward-looking statements” that involve substantial risks and uncertainties. You can identify these statements by forward-looking words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “should,” “will,” “would” or similar words. The statements that contain these or similar words should be read carefully because these statements discuss our future expectations, contain projections of our future results of operations or of our financial position, or state other “forward-looking” information. Advanced Medical Isotope Corporation believes that it is important to communicate our future expectations to our investors. However, there may be events in the future that we are not able accurately to predict or control. Further, we urge you to be cautious of the forward-looking statements which are contained in this Form 10-K because they involve risks, uncertainties and other factors affecting our operations, market growth, service, products and licenses. The factors listed below in the section captioned “Risk Factors” within Item 1A, “Description of Business,” as well as other cautionary language in this Form 10-K, describe such risks, uncertainties and events that may cause our actual results and achievements, whether expressed or implied, to differ materially from the expectations we describe in our forward-looking statements. The occurrence of any of the events described as risk factors could have a material adverse effect on our business, results of operations and financial position.

Organizational History

Advanced Medical Isotope Corporation (the “Company”) was incorporated under the laws of Delaware on December 23, 1994 as Savage Mountain Sports Corporation (“SMSC”) for the purpose of acquiring or investing in businesses which were developing and marketing active sports products, equipment, and apparel. In April 2000, Earth Sports Products, Inc (“ESP”), a corporation registered in Washington, merged with SMSC. In April 2000, HHH Entertainment, Inc (“HHH”), a Nevada corporation, merged with SMSC. As of the date of merger, HHH was the only stockholder of SMSC.

The Company has had limited activity since inception and was considered dormant from the period May 1, 2000 through December 31, 2005. On September 6, 2006, the Company changed its name to Advanced Medical Isotope Corporation. The Company began planned principal operations in August 2007, but has not generated significant revenue. The Company plans to wholesale medical isotopes as well as to develop, produce and market medical isotopes.

On September 27, 2006, the Company acquired the assets of Neu-Hope Technologies, Inc (“NHTI”), a Florida corporation and a subsidiary of UTEK Corporation (“UTEK”), a Delaware Corporation, and $310,000 from UTEK for 100,000 shares of Series A Preferred Stock. 95,000 shares of Series Preferred Stock were issued to UTEK and 5,000 shares were issued to Aware Capital Corporation. At any time after September 27, 2007, UTEK’s 100,000 Series A Preferred Stock shares can be converted to our Common Stock in the amount of $3,350,000. The number of Common Stock shares shall be calculated based on the previous 10-day average closing price on the day of conversion. As of the end of trading on December 31, 2008, the 10-day average closing price was $0.422. In December 2007, 5,000 shares of the Company’s Series A preferred stock were converted to 299,642 shares of common stock at $.559 per share by Aware Capital Corporation. UTEK can then receive 7,541,469 shares of our Common Stock for its 95,000 shares of Series A Preferred Stock.

In March 2009 one of the members of the Board of Directors converted 95,000 shares of the Company’s Series A Preferred Stock into 10,857,142 shares of the Company’s common stock. The board member acquired the Company’s Series A Preferred Stock from UTEK in February 2009. The Series A Preferred Stock conversion was based on the Company’s common stock’s average closing price for the ten trading days before the date of conversion.

The Company conducted the acquisition in order to obtain cash and NHTI’s technology. UTEK provides its clients with externally developed technologies from universities, university incubators, federal labs, medical centers, and corporate research laboratories worldwide. To effectuate a technology transfer, such as our purchase of NHTI, UTEK creates a newly formed company to acquire a new technology from a university, medical center, corporation or federal research laboratory and then sell this newly formed company to a client, such as Advanced Medical Isotope Corporation for securities or cash.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - continued

Organizational History - continued

The assets acquired by the Company were recorded at the value which the preferred stock could have been converted into common stock, $3,350,000, as follows:

	As of September 27, 2006
Cash	$	310,000
License fee		3,040,000
Net assets acquired	$	3,350,000

The Company did not have any relationship with UTEK before the acquisition of Neu Hope Technologies. UTEK is a public corporation. It is our understanding that Dr. Clifford M. Gross, PhD, Chairman and Chief Executive Officer, Ms. Carole R. Wright, Chief Financial Officer and Mr. Douglas Schaedler, Chief Operating Officer, make the investment decisions on behalf of UTEK.

UTEK, a publicly-held corporation, also entered into a technology transfer agreement with Manakoa Services Corporation. Manakoa Services Corporation has recently changed its name to TeslaVision Corporation. Mr. Katzaroff is an officer and a director of TeslaVision Corporation. TeslaVision Corporation is not a shell company but is not current in its reporting. Other than Mr. Katzaroff’s service as an officer of both corporations, there is no relationship between TeslaVision Corporation and Advanced Medical Isotope Corporation.

On June 13, 2007, the Company acquired the assets of the life sciences business segment of Isonics Corporation (Isonics), a California corporation. Isonics is a non-related business of the Company and neither company owns stock in the other. The Company acquired the assets in exchange for $850,000 cash payment for the purpose of combining the assets into our business of marketing medical isotopes. The assets acquired consist of intellectual property, agreements with third party companies for purchase and marketing of isotopes, customer lists, and equipment located in Buffalo, New York. Intellectual property, agreements with third parties and customer lists are stated at the Companies estimation of fair market value at the time of acquisition. None of the acquired assets hold any ongoing liabilities or contractual obligations that would result in additional cash transactions required by the Company.

Based on our financial history since inception, our auditor has expressed substantial doubt as to our ability to continue as a going concern. We are a development stage company that has a limited amount of revenue which has accumulated deficits since inception. If we cannot obtain sufficient funding, we may have to delay the implementation of our business strategy.

General Description

We are engaged in the production and distribution of medical isotopes and medical isotope technologies that are changing the practice of medicine and ushering in a new era of improved patient care. Isotopes are a form of chemical element with the same atomic number as another element but with a different atomic mass. Medical isotopes are used in molecular imaging, therapy, and nuclear medicine to diagnose, manage and treat diseases.

Currently, more than 15 million nuclear medicine procedures are performed each year in the U.S. Approximately one-third of all patients admitted to U.S. hospitals undergo at least one medical procedure that employs the use of medical isotopes.

We employ innovative production methods to offer a wide range of reliable, domestically produced medical isotopes as well as in vivo delivery systems to aid medical practitioners and medical researchers in the timely diagnosis and effective treatment of diseases such as cancer, heart disease, neurological disorders, and many other medical conditions.

Our objective is to empower physicians, medical researchers, and ultimately, patients, by providing them with essential medical isotopes that, until now, have not been practical or economical to produce, in an effort to detect, manage, and cure human disease, and improve the lives of patients.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - continued

Products

We currently offer the following products:

Stable Isotopes:

We currently offer worldwide distribution of O-18 enriched water and a wide range of other stable isotopes. Our product line includes stable isotopes of the following elements: Antimony, Barium, Cadmium, Calcium, Cerium, Chromium, Copper, Dysprosium, Erbium, Europium, Gadolinium, Gallium, Germanium, Hafnium, Indium, Iron, Krypton, Lanthanum, Lead, Lutetium, Magnesium, Mercury, Molybdenum, Neodymium, Nickel, Osmium, Palladium, Platinum, Potassium, Rhenium, Rubidium, Ruthenium, Samarium, Selenium, Silicon, Silver, Strontium, Sulphur, Tellurium, Thallium, Tin, Titanium, Tungsten, Vanadium, Xenon, Ytterbium, Zinc, and Zirconium.

Many of our products are used in connection with Positron Emission Tomography (“PET”). In cancer, changes in biochemistry occur before tumor mass forms. As a result, PET can often identify the presence of disease earlier than a test which looks for a tumor mass. Isotopes identified by PET include radiopharmaceutical Fluorodeoxyglucose (“FDG”), a sugar compound that is labeled with radioactive fluoride.

Radio Pharmaceuticals:

F-18 FDG: We currently offer regional distribution of F-18 FDG from our Kennewick, WA production facility. Other regional production facilities are planned throughout the U.S. and abroad, including Los Angeles, Oahu, Idaho and Montana.

Radio Chemicals:

F-18: We currently offer regional distribution of F-18 from our Kennewick, WA production facility. Other regional production facilities are planned throughout the U.S. and abroad. This is the primary PET imaging isotope. It is used for medical and diagnostic purposes, such as cancer detection, heart imaging, and brain imaging.

Strontium-82: Used as a myocardial imaging agent, early detection of coronary artery disease, PET imaging, blood flow tracers

Germanium-68: It is used for study of thrombosis and atherosclerosis, PET imaging, detection of pancreatic cancer, and attenuation correction.

Actinium-225: Used for advanced research in therapy of leukemia and other cancers. It holds great promise for treating HIV/AIDS, and we are negotiating with a foreign manufacturer to commence U.S. shipments.

Generators:

Strontium-82/Rubidium-82 generators: Used as a myocardial imaging agent, early detection of coronary artery disease, PET imaging, blood flow tracers. We have access via a foreign manufacturer.

Germanium-68/Gallium-68 generators: It is used for study of thrombosis and atherosclerosis, PET imaging, detection of pancreatic cancer, and attenuation correction. We have access via a foreign manufacturer.

Actinium-225/Bismuth-213 generators: Actinium-225 is the parent of Bismuth-213, an isotope which has been used in animal trials to kill human HIV virus. Bismuth-213 has been used in human clinical trials for the treatment of Acute Myelogenous Leukemia (AML). We are negotiating with a foreign manufacturer for a new patented process to commence manufacturing in the U.S.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - continued

Products - continued

Within the next three years, we intend to offer the following isotopes:

Carbon-11: Used in cancer diagnosis/staging. Radiotracer in PET scans to study normal/abnormal brain functions related to various drug addictions and is also used to evaluate disease such as Alzheimer’s, epilepsy, Parkinson’s and heart disease.

Cobalt-57: Used for gamma camera calibration. Also used as radiotracer in research and a source for X-ray fluorescence spectroscopy.

Copper-64: PET scanning, planar imaging, SPECT imaging, dosimetry studies, cerebral and myocardial blood flow. This isotope is used in stem cell research, and cancer treatments.

Iodine-123: Used in brain, thyroid, kidney, and myocardial imaging, cerebral blood flow (ideal for imaging) and neurological disease (Alzheimer's).

Molybdenum-99 / Technitium 99: It is the favored choice among medical professionals because its chemical properties allow it to be bonded to many different chemical materials, thus allowing use for a wide variety of diagnoses.

Thallium-201: Used in clinical cardiology, heart imaging, myocardial perfusion studies and cellular dosimetry.

Iodine-124: This is a radiotracer primarily used in PET imaging and to create images of human thyroid. Other treatment uses include apoptosis, cancer biotherapy, glioma, heart disease, mediastinal micrometastases, and thyroid cancer.

Indium-111: In-111 Chloride bulk solution for U.S. distribution. This radio chemical is used for infection imaging, cancer treatments, and tracer studies.

Manufacturing

The cornerstone equipment selected for our production center is a proton linear accelerator. Our proton linear accelerator is designed to replace large and demanding cyclotron systems for the production of positron emitting isotopes. Large amounts of fluorine-18, carbon-11, nitrogen-13, and oxygen-15 can be produced for synthesis into compounds used in oncology, cardiology, neurology, and molecular imaging. The radio-labeled glucose analog, FDG, can be synthesized and distributed for use in Positron Emission Tomography.

Based on our experience in the industry, it is our belief that no other accelerator in North America has sufficient flexibility to produce the full spectrum of PET imaging radioisotopes, as well as other high-demand isotopes, both short and long lived, for diagnostic and therapeutic applications.

We are also engaged in a number of collaborative efforts with U.S. national laboratories and universities, along with several international teaming partners. These collaborative effort projects include complementary isotope manufacturing technologies as well as isotope devices. We have entered into agreements to produce isotopes in conjunction with the University of Missouri at Columbia, Pacific Northwest National Laboratory, operated by Battelle, and the University of Utah. These regional university centers will allow us to become a local supplier for the short-lived isotopes like Fluorine 18 as well as being a domestic supplier of several other isotopes in demand by the medical community.

In January 2008, we entered into a five-year agreement with Central Pharmaceutical Services, Inc. (“CRS”) for the joint production and marketing of Indium-111, an isotope used in specialized diagnostic imaging applications. CRS is an advanced biomedical research and development facility established by the State University of New York at Buffalo. By labeling In-111 to antibodies and peptides that transport it to specific parts of the body, physicians can image colorectal cancer, prostate cancer, and neuro-endocrine tumors. In-111 can also be used to radiolabel white blood cells, platelets and red blood cells for diagnostic purposes. The comprehensive agreement with CRS is designed to enable us to complement production capacity of a variety of high-value medical isotopes with our Kennewick, Wash. facility. Several other radio-chemicals are also under consideration for production in the near future at the Buffalo, N.Y. facility. The agreement with CRS allows for the initial product to be Indium-111, a radioisotope produced from the stable isotope cadmium-112. CRS will provide irradiation facilities as well as production expertise and chemical syntheses. As of November 30, 2009 the Company reached a Settlement and Mutual Release Agreement with CRS thereby terminating this five-year agreement.

In May 2008, we entered into a research agreement with the University of Utah related to the use of brachytherapy seeds for cancer treatments. Pursuant to the research agreement, we will pay total project costs that will not exceed $45,150. We hope to work with the University of Utah to develop and manufacture cancer treatments using brachytherapy seeds.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - continued

Manufacturing - continued

In June 2008, we entered into a research agreement with the University of Missouri related to the production of radio isotopes. Pursuant to the research agreement, we will pay total project costs that will not exceed $75,000. We also entered into a one year option agreement in June 2008, which was extended for another year in June 2009, with the University of Missouri. The option agreement gives us the option to enter into a licensing agreement to utilize certain intellectual property held by the University of Missouri for the production of medical, research, and industrial radioisotopes. In May 2010, we exercised our option agreement by entering into a license agreement with the University of Missouri. This license agreement calls for an upfront license fee and a royalty based on a percent of net sales for licensed products sold. If the University of Missouri’s intellectual property functions as early analysis have indicated, this production facility could be a manufacturing source of critical health care radio isotopes.

In August 2010, we entered into an exclusive license agreement with Battelle Memorial Institute related to patents for the production of radio isotopes. This license agreement calls for an upfront license fee and a royalty based on a percent of net sales for licensed products sold; however the license agreement contains a minimum royalty amount to be paid each year starting with 2012. If the University of Missouri’s intellectual property functions as early analysis have indicated, this production facility could be a manufacturing source of critical health care radio isotopes.

Customers

Our customers include a broad range of hospitals, universities, research centers and national laboratories, in addition to academic and government institutions. These customers are located in essentially all major U.S. and international markets. In July 2008, we began production of F-18 in our production facilities in Kennewick, Washington.

The company is also working with United Pharmacy Partners Inc (UPPI). UPPI has a network of approximately 120 nuclear pharmacies within the United States. We have entered into an affiliation agreement with UPPI to provide to the UPPI network preferred prices and special terms and conditions for certain products that we anticipate to manufacture or re-sell during 2010 and 2011.

Competitors

The suppliers of radioisotopes for diagnosis, treatment, and research for a wide variety of diseases, in particular cancer, vary in size and product offerings. Competition is limited because there are many complications and regulatory hurdles, including licensing, government approvals and capital outlays associated with starting an isotope company. Many current competitors are international companies.

Further, competition is limited as some competitors are closing their facilities or limiting their production. In November 2007, Canadian supplier MDS Nordion was forced to shut down its radioisotope production facility. At one time, the U.S. government was supposed to be the source of medical isotopes, but over the course of the last two decades, it has either closed or failed to adequately fund its production facilities.

About 90% of all the non PET radioisotopes used in the United States are imported from two companies. Approximately half of these were imported directly from the now-defunct MDS Nordion plant and the other half supplied by Covidien (formerly Mallinkrodt). The remaining 10% that are produced in the United States are manufactured in a fragmented, piecemeal manner with companies producing a single isotope instead of a wide variety.

Employees

As of September 30, 2010, we had five full time employees. At any given time, we utilize eight to ten independent contractors to assist with the company operations. We do not have a collective bargaining agreement with any of our employees and we believe our relations with our employees are good.

Research and Development / Intellectual Property

The Company made a $10,000 investment in 2010 for a patent license regarding its technology for the production of Brachytherapy. The amortization of this patent was computed using the straight-line method over a three year estimated useful life.

The Company had made a $75,000 investment in 2007 for a patent license, good for the life of the patent due to expire in 2027, for the production of Actinium 225. The patent concerns methods and processes directed to the preparation of Actinium-225 and daughters having high radiochemical and radionuclidic purity. These isotopes may be used for the preparation of therapeutic radiopharmaceuticals such as those containing monoclonal antibodies, proteins, peptides, antisense, statin, natural products and hormones. Additionally, the alpha-emitting radionuclide Actinium-225 and its daughters may be used for both therapeutic and diagnostic purposes. The amortization of this patent was computed using the straight-line method over a three year estimated useful life.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - continued

Research and Development / Intellectual Property - continued

The Company made a $10,000 investment in 2010 for a patent license regarding its technology for the production of Mo-99. The amortization of this patent was computed using the straight-line method over a three year estimated useful life.

Results of Operations

The following table sets forth information from our statements of operations for the nine months ended September 30, 2010 and 2009.

	Nine Months Ended September 30, 2010			Nine Months Ended September 30, 2009
Revenues	$	310,153			$	242,387
Cost of goods sold		55,782				95,706
Gross profit		254,371				146,681
Operating expenses		2,687,156				2,093,267
Operating loss		(2,432,785	)			(1,946,586	)
Non-operating expenses		-				(573,344	)
Interest expense		(624,743	)			(589,839	)
Net income (loss)	$	(3,057,528	)		$	(3,109,769	)

Details related to Revenues and Cost of Goods Sold for the nine months ended September 30, 2010 and 2009.

		Nine Months Ended September 30, 2010		Nine Months Ended September 30, 2009
Revenues
Consulting		$	139,393			4,900
Stable Isotopes			-		$	72,787
	F-18		170,760			164,700
Total Revenue		$	310,153		$	242,387

Cost of Goods Sold
Stable Isotopes		$	-		$	53,080
	F-18		55,782			42,626
Total Cost of Goods Sold		$	55,782		$	95,706

Revenue

Revenue was $310,153 for the nine months ended September 30, 2010 and $242,387 for the nine months ended September 30, 2009. During 2007 we began our stable isotope marketing program which was acquired through the purchase of the Life Science division of Isonics, Inc. During the nine months ended September 30, 2009, we continued the stable isotope marketing program generating $72,787 revenues for that period compared to $0 for the nine months ended September 30, 2010 revenues attributable to stable isotopes. The reason for the reduction in stable isotope sales has been due to the decrease in profitability of sales of stable isotopes. In July 2008 we established our linear accelerator production center and began the production and marketing of F-18 in August 2008, accounting for $170,760 of the total nine months ended September 30, 2010 and for $164,700 of the total nine months ended September 30, 2009 revenues. During the nine months ended September 30, 2010 we began generating consulting revenue, which accounted for 44.9% of the total revenues for those nine months.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - continued

Cost of Goods Sold

Cost of goods sold for the nine months ended September 30, 2010 and 2009 was $55,782 and $95,706, respectively. The $55,782 cost of goods sold for the nine months ended September 30, 2010, 18.0% of total revenues, was our costs for the F-18 production (consisting mostly of supplies). The $95,706 cost of goods sold for the nine months ended September 30, 2009, 39.5% of total revenues consisted of costs for both the F-18 production (consisting mostly of supplies) and the sale of stable isotopes. The reason for the decrease in the cost of goods sold percentage from the nine months ended September 30, 2009 to the nine months ended September 30, 2010 was mostly due to the elimination of the sale of stable isotopes which has ceased to be as profitable as it had been in the past and for the increase in Consulting income which requires no cost of goods sold.

Operating Expenses

Operating expenses for the nine months ended September 30, 2010 and 2009 was $2,687,156 and $2,093,267 respectively. The increase in operating expenses from 2009 to 2010 can be attributed largely to the increase in professional fees from $621,127 to $1,256,164, increase in payroll expenses from $300,263 to $469,795, increase in general and administrative expenses from $348,229 to $399,023 and a decrease in stock options granted from $395,018 to $137,886.

	Nine Months Ended September 30, 2010		Nine Months Ended September 30, 2009
Depreciation and amortization expense	$	408,331	$	422,003
Professional fees		1,256,164		621,127
Stock options granted		137,886		395,018
Payroll expenses		469,795		300,263
General and administrative expenses		399,023		348,229
Sales and marketing expense		15,957		6,627
	$	2,687,331	$	2,093,267

Non-Operating Expense

Non operating expense for the nine months ended September 30, 2010 and 2009 was $0.00 and $573,344, respectively. The decrease in non-operating loss is due to an decrease in loss on settlement of debt ($606,945 for the nine months ended September 30, 2009 versus $0 for the nine months ended September 30, 2010).

Net Loss

Our net loss for the nine months ended September 30, 2010 and 2009 was $3,057,528, and $3,109,769, respectively.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - continued

The following table sets forth information from our statements of operations for the three months ended September 30, 2010 and 2009.

	Three Months Ended September 30, 2010			Three Months Ended September 30, 2009
Revenues	$	107,490			$	102,245
Cost of goods sold		25,844				44,607
Gross profit		81,646				57,638
Operating expenses		1,043,131				852,030
Operating loss		(961,485	)			(794,392	)
Non-operating expenses		-				-
Interest expense		(220,030	)			(209,514	)
Net income (loss)	$	(1,181,515	)		$	(1,003,906	)

Details related to Revenues and Cost of Goods Sold for the three months ended September 30, 2010 and 2009.

		Three Months Ended September 30, 2010		Three Months Ended September 30, 2009
Revenues
Consulting		$	52,530	$		-
Stable Isotopes			-			39,245
	F-18		54,960			63,000
Total Revenue		$	107,490		$	102,245

Cost of Goods Sold
Stable Isotopes		$	-		$	30,677
	F-18		25,844			13,930
Total Cost of Goods Sold		$	25,844		$	44,607

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - continued

Revenue

Revenue was $107,490 for the three months ended September 30, 2010 and $102,245 for the three months ended September 30, 2009. During 2007 we began our stable isotope marketing program which was acquired through the purchase of the Life Science division of Isonics, Inc. During the three months ended September 30, 2009, we continued the stable isotope marketing program generating $39,245 revenues for that period compared to $0 for the three months ended September 30, 2010 revenues attributable to stable isotopes. The reason for the reduction in stable isotope sales has been due to the decrease in profitability of sales of stable isotopes. In July 2008 we established our linear accelerator production center and began the production and marketing of F-18 in August 2008, accounting for $54,960 of the total three months ended September 30, 2010 and for $63,000 of the total three months ended September 30, 2009 revenues. During the three months ended September 30, 2010 we began generating consulting revenue, which accounted for 48.9% of the total revenues for those three months.

Cost of Goods Sold

Cost of goods sold for the three months ended September 30, 2010 and 2009 was $25,844 and $44,607, respectively. The $25,844 cost of goods sold for the three months ended September 30, 2010, 24.0% of total revenues, was our costs for the F-18 production (consisting mostly of supplies). The $44,607 cost of goods sold for the three months ended September 30, 2009, 43.6% of total revenues consisted of costs for both the F-18 production (consisting mostly of supplies) and the sale of stable isotopes. The reason for the decrease in the cost of goods sold percentage from the three months ended September 30, 2009 to the three months ended September 30, 2010 was mostly due to the elimination of the sale of stable isotopes which has ceased to be as profitable as it had been in the past and for the increase in Consulting income which requires no cost of goods sold.

Operating Expenses

Operating expenses for the three months ended September 30, 2010 and 2009 was $1,043,131 and $852,030 respectively. The increase in operating expenses from 2009 to 2010 can be attributed largely to the cost of Professional fees ($675,561 for the three months ended September 30, 2010 versus $318,628 for the three months ended September 30, 2009), Payroll Expenses ($124,670 for the three months ended September 30, 2010 versus $92,306 for the three months ended September 30, 2009), and a decrease in Stock Options Granted ($0 for the three months ended September 30, 2010 versus $183,746 for the three months ended September 30, 2009).

	Three Months Ended September 30, 2010		Three Months Ended September 30, 2009
Depreciation and amortization expense	$	136,714	$	140,668

Professional fees		675,561		318,628
Stock options granted		-		183,746
Payroll expenses		124,670		92,306
General and administrative expenses		106,186		115,482
Sales and marketing expense		-		1,200
	$	1,043,131	$	852,030

Non-Operating Expense

Non operating expense for the three months ended September 30, 2010 and 2009 was $220,030 and $209,514, respectively. The increase in non-operating loss is due to an increase in interest expense ($220,030 for the three months ended September 30, 2010 versus $209,514 for the three months ended September 30, 2009).

Net Loss

Our net loss for the three months ended September 30, 2010 and 2009 was $1,181,515, and $1,003,906, respectively.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - continued

Liquidity and Capital Resources

At September 30, 2010, we had negative working capital of $4,958,382, as compared to $4,148,647 at December 31, 2009. During the nine months ended September 30, 2010 we experienced negative cash flow from operations of $819,706, and we expended $74,586 for investing activities while adding $1,412,721 from financing activities. As of September 30, 2010, we had $3,409 commitments for capital expenditures.

We have generated material operating losses since inception. We have incurred a net loss of $20,334,333 from inception through September 30, 2010, including a net loss of $1,181,515 for the three months ended September 30, 2010. We expect to continue to experience net operating losses. Historically, we have relied upon outside investor funds to maintain our operations and develop our business. We anticipate raising additional capital within the next twelve months from investors for working capital as well as business expansion and we can provide no assurance that additional investor funds will be available on terms acceptable to us. If we are unable to obtain additional financing to meet our working capital requirements, we may have to curtail our business.

Based on the current cash run rate, approximately $1,000,000 will be needed to fund operations for an additional year. As disclosed in the risk factors, we are presently taking steps to raise additional funds to continue operations for the next 12 months and beyond. We will need to raise an additional $15,000,000 in the next year to develop new isotope manufacturing centers and complete our aggressive growth plans. We may, however, choose to modify our growth and operating plans to the extent of available funding, if any.

The recent economic events, including the substantial decline in global capital markets, as well as the lack of liquidity in the capital markets, could impact our ability to obtain financing and our ability to execute our business plan. Although market conditions have deteriorated, we believe healthcare institutions will continue to purchase the medical solutions that we distribute. As a development stage company with modest sales from our inception, we are unable to determine the effect of the recent economic crises on our sales.

Contractual Obligations (payments due by period)

Contractual Obligation	Total Payments Due		Less than 1 Year		1-3 Years		3-5 Years		More than 5 Years
Capital Lease Obligation	$	1,567,201	$	405,218	$	1,051,031	$	110,952	$	-
Production center lease		101,230		53,613		47,617		-		-
Corporate office lease		8,200		8,200		-		-		-
License agreement with Regents of the University of California		385,000		25,000		120,000		180,000	60,000 each year

The capital lease obligations represent two lease agreements for $1,875,000 and $631,000, secured by equipment and personal guarantee of two of the major shareholders we obtained during September 2007. The purpose of the lease agreements is to acquire a Pulsar 10.5 PET Isotope Production System for a contracted amount of $1,875,000 plus ancillary equipment and facility for $631,000.

For the nine months ended September 30, 2010 and the year ended December 31, 2009, we had no long term liability reported on the financial statements due to the Company being out of compliance with the terms of the debt and therefore being subjected to the possibility of the entire loan being called due. The long term liability is related to two capital lease obligations we obtained in September 2007 that are secured by equipment and the personal guarantee of the two major shareholders. The lease allowed the company to acquire a Pulsar 7 PET Isotope Production System and ancillary equipment.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - continued

Critical Accounting Policies

The Securities and Exchange Commission (“SEC”) defines “critical accounting policies” as those that require application of management's most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Not all of the accounting policies require management to make difficult, subjective or complex judgments or estimates. However, the following policies could be deemed to be critical within the SEC definition.

Use of Estimates

The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Fixed Assets

Fixed assets are carried at the lower of cost or net realizable value. Production equipment with a cost of $2,500 or greater and other fixed assets with a cost of $1,500 or greater are capitalized. Major betterments that extend the useful lives of assets are also capitalized. Normal maintenance and repairs are charged to expense as incurred. When assets are sold or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in operations.

Depreciation is computed using the straight-line method over the following estimated useful lives. Leasehold improvements and capital lease assets are amortized over the shorter of the life of the lease or the estimated life of the asset.

Management of the Company periodically reviews the net carrying value of all of its equipment on an asset by asset basis. These reviews consider the net realizable value of each asset, as measured in accordance with the preceding paragraph, to determine whether impairment in value has occurred, and the need for any asset impairment write-down. Although management has made its best estimate of the factors that affect the carrying value based on current conditions, it is reasonably possible that changes could occur which could adversely affect management’s estimate of net cash flows expected to be generated from its assets, and necessitate asset impairment write-downs.

License Fees

License fees are stated at cost, less accumulated amortization. Amortization of license fees is computed using the straight-line method over the estimated economic useful life of the assets. The Company periodically reviews the carrying values of patents and any impairments are recognized when the expected future operating cash flows to be derived from such assets are less than their carrying value.

Intangible Assets

Intangible assets resulted from the purchase, for cash, from Isonics Corporation, the rights to intellectual property related to the production of isotopes, customer lists, contracts and agreements with third party companies, and certain equipment. The Company allocated the purchase price to each of the assets based upon the Companies believe of the long term value of each of those assets and comparison to replacement cost, where that information was available. Intangible assets are stated at cost, less accumulated amortization. Amortization of intangible assets is computed using the straight-line method over the estimated economic useful life of the assets. The Company periodically reviews the carrying values of intangible assets and any impairments are recognized when the expected future operating cash flows to be derived from such assets are less than their carrying value.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - continued

Revenue Recognition

The Company recognized revenue related to product sales when (i) persuasive evidence of the arrangement exists, (ii) shipment has occurred, (iii) the fee is fixed or determinable, and (iv) collectability is reasonably assured.

Revenue for the three months ended September 30, 2010 was derived from the sales of Floride 18 produced with the Linear Accelerator Oxygen 18, which is used in the production of medical isotopes and from Consulting services provided. Revenue for the three months ended September 30, 2009 consisted of the sales of Oxygen 18 (Stable Isotopes) and Floride 18 and Consulting services. The Company recognizes revenue once an order has been received and shipped to the customer. Prepayments, if any, received from customers prior to the time products are shipped are recorded as deferred revenue. In these cases, when the related products are shipped, the amount recorded as deferred revenue is recognized as revenue. The Company does not accrue for sales returns and other allowances as it has not experienced any returns or other allowances.

Research and Development Costs

Research and developments costs, including salaries, research materials, administrative expenses and contractor fees, are charged to operations as incurred. The cost of equipment used in research and development activities which has alternative uses is capitalized as part of fixed assets and not treated as an expense in the period acquired. Depreciation of capitalized equipment used to perform research and development is classified as research and development expense in the year computed.

Fair Value of Financial Instruments

The carrying amounts of cash, receivables and accrued liabilities approximate fair value due to the short-term maturity of the instruments.

Stock-Based Compensation

The Company recognizes in the financial statements compensation related to all stock-based awards, including stock options, based on their estimated grant-date fair value. The Company has estimated expected forfeitures and is recognizing compensation expense only for those awards expected to vest. All compensation is recognized by the time the award vests.

We account for equity instruments issued in exchange for the receipt of goods or services from non-employees. Costs are measured at the fair market value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. The value of equity instruments issued for consideration other than employee services is determined on the earlier of the date on which there first exists a firm commitment for performance by the provider of goods or services or on the date performance is complete. The Company recognizes the fair value of the equity instruments issued that result in an asset or expense being recorded by the company, in the same period(s) and in the same manner, as if the Company has paid cash for the goods or services.

Recently Issued Accounting Pronouncements

On February 24, 2010, the FASB issued Accounting Standards Update (ASU) 2010-09, Amendments to Certain Recognition and Disclosure Requirements. The amendments to the FASB Accounting Standards Codification (TM) (ASC) 855, Subsequent Events, included in the ASU make a number of changes to the existing requirements of ASC 855. The amended guidance was effective on its issuance date, except that the use of the issued date by conduit bond obligors will be effective for interim or annual periods ending after June 15, 2010. As a result of the amendments, SEC filers that file financial statements after February 24, 2010 are not required to disclose the date through which subsequent events have been evaluated.

Off-Balance Sheet Arrangements

We do not have any off balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, revenues, and results of operations, liquidity or capital expenditures.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Based on an evaluation as of the date of the end of the period covered by report, our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as required by Exchange Act Rule 13a-15. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms.

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and our Chief Financial Officer, to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There has been no change in our internal control over financial reporting that occurred during this current fiscal quarter (our third fiscal quarter of 2010) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

The term “internal control over financial reporting” is defined as a process designed by, or under the supervision of, the registrant’s principal executive and principal financial officers, or persons performing similar functions, and effected by the registrant’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

(a) Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the registrant;

(b) Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the registrant are being made only in accordance with authorizations of management and directors of the registrant; and

(c) Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the registrant’s assets that could have a material effect on the financial statements.

PART II

Item 1. Legal Proceedings.

We are not a party to any pending legal proceeding, nor are our properties the subject of any pending legal proceedings, that are not in the ordinary course of business or otherwise material to the financial condition of our business. None of our directors, officers or affiliates is involved in a proceeding adverse to our business or has a material interest adverse to our business.

Item 1A. Risk Factors.

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Common stock sale

The Company issued 5,000,000 shares of common stock for $0.10 per common stock share for total proceeds of $500,000 during the three months ended September 30, 2010. No underwriters were used. The securities were issued pursuant to an exemption from registration provided under Section 4(2) of the Securities Act of 1933.

Common stock issued for services and other

The company issued 2,500,000 shares of common stock with a total fair market value of $425,000 during the three months ended September 30, 2010. The fair market value of the shares issued was $0.17. The shares were issued for $425,000 in services. No underwriters were used. The securities were issued pursuant to an exemption from registration provided under Section 4(2) of the Securities Act of 1933.

Common stock issued for convertible debt

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. - continued

Item 3. Defaults Upon Senior Securities.

Not applicable.

Item 5. Other Information.

Not applicable.

Item 6. Exhibits.

(a)	Exhibits

	Number	Description
	31.1	CEO certification pursuant to Section 302 of The Sarbanes – Oxley Act of 2002
	31.2	CFO certification pursuant to Section 302 of The Sarbanes – Oxley Act of 2002
	32.1	CEO and CFO certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	ADVANCED MEDICAL ISOTOPE CORPORATION

Date: November 2, 2010	By:	/s/ James C. Katzaroff
	Name:	James C. Katzaroff
	Title:	Chairman and Chief Executive Officer