VIVOS INC - Quarter Report: 2012 March (Form 10-Q)

advancedmed_10q-15106.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: MARCH 31, 2012
	OR
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 000-53497

ADVANCED MEDICAL ISOTOPE CORPORATION

(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.)

6208 W. Okanogan Ave.,

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) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period 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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). 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 the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	o	Accelerated filer	o

Non-accelerated filer	o	Smaller reporting company	x
(Do not check if a smaller reporting company)

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 May 3, 2012 was 74,918,019.

TABLE OF CONTENTS

		Page
PART I - FINANCIAL INFORMATION

Item 1. Financial Statements		3
Balance Sheets as of March 31, 2012 (unaudited) and December 31, 2011		4
Statements of Operations for the Three Months ended March 31, 2012 (unaudited) and the Three Months ended March 31, 2011 (unaudited)		5
Statement of Changes in Stockholders’ Equity (Deficit) for the period ended March 31, 2012 (unaudited)		6
Statements of Cash Flow for the three months ended March 31, 2012 (unaudited) and the three months ended March 31, 2011 (unaudited)		7
Notes to Condensed Financial Statements (unaudited)		8-15
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		16-32
Item 3. Quantitative and Qualitative Disclosures About Market Risk		32
Item 4. Controls and Procedures		33

PART II - OTHER INFORMATION

Item 1A. Risk Factors		34
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		34
Item 6. Exhibits		34

SIGNATURES		35

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

Advanced Medical Isotope Corporation

Balance Sheets


	March 31,			December 31,
	2012			2011
	(unaudited)
ASSETS

Current Assets:
Cash	$	13,290		$	52,557
Accounts receivable - trade		12,829			13,699
Prepaid expenses		4,717			1,060
Prepaid expenses paid with stock, current portion		18,000			35,375
Inventory		6,450			9,675
Total current assets		55,286			112,366

Fixed assets, net of accumulated depreciation		534,254			671,944

Other assets:
License fees, net of amortization		25,434			9,722
Patents and intellectual property		348,853			317,224
Deposits		5,406			5,406
Total other assets		379,693			332,352

Total assets	$	969,233		$	1,116,662

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

Current liabilities:
Accounts payable and accrued expenses	$	991,350		$	929,496
Accrued interest payable		516,421			422,279
Payroll liabilities payable		120,297			62,421
Deferred income		890,399			945,765
Short term loan payable		161,000			116,000
Loans from stockholder		72,815			83,468
Convertible notes payable		2,716,226			2,361,231
Current portion of long-term debt		26,871			-
Current portion of capital lease obligations		925,033			1,031,813
Total current liabilities		6,420,412			5,952,473

Long term liabilities:
Long-term debt		17,354			-
Total liabilities		6,437,766			5,952,473

Stockholders’ Equity (Deficit):
Preferred Stock, $.001 par value, 20,000,000 shares authorized; zero issued and outstanding		-			-
Common stock, $.001 par value; 200,000,000 shares authorized;
74,804,899 and 70,653,399 shares issued and outstanding,
respectively		74,805			70,653
Paid in capital		19,690,888			19,174,984
Accumulated deficit		(25,234,226	)		(24,081,448	)
Total stockholders’ equity (deficit)		(5,468,533	)		(4,835,811	)

Total liabilities and stockholders’ equity (deficit)	$	969,233		$	1,116,662

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

Advanced Medical Isotope Corporation

Statements of Operations

(Unaudited)

	Three months ended
	March 31,
	2012			2011

Revenues	$	48,584		$	150,557

Operating expenses
Cost of goods sold		16,859			25,074
Sales and marketing expenses		1,034			23,291
Depreciation and amortization expense		139,478			136,596
Professional fees		536,244			280,088
Stock options granted		117,000			12,350
Payroll expenses		184,370			246,200
General and administrative expenses		109,901			144,280
Total operating expenses		1,104,886			867,879

Operating loss		(1,056,302	)		(717,322	)

Non-operating income (expense):
Interest expense		(151,292	)		(99,040	)
Net gain (loss) on settlement of debt		(550	)		-
Recognized income from grants		55,366			63,095
Non-operating income (expense), net		(96,476	)		(35,945	)

Loss before Income Taxes		(1,152,778	)		(753,267	)

Income Tax Provision		-			-

Net loss	$	(1,152,778	)	$	(753,267	)

Loss per common share	$	(0.02	)	$	(0.01	)

Weighted average common shares outstanding		71,684,656			68,154,191

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

Advanced Medical Isotope Corporation
Statement of Changes in Stockholders’ Equity (Deficit)
(Unaudited)

	Common Stock				Paid in		Accumulated
	Shares		Amount		Capital		Deficit			Total

Balances at December 31, 2011 (audited)		70,653,399	$	70,653	$	19,174,984	$	(24,081,448	)	$	(4,835,811	)

Common stock issued for:
Services		3,990,500		3,991		355,155		-			359,146
Debt		15,000		15		2,535		-			2,550
Loan fees on convertible debt		146,000		146		41,214		-			41,360
Options issued for services		-		-		117,000		-			117,000
Net loss		-		-		-		(1,152,778	)		(1,152,778	)
Balances at March 31, 2012		74,804,899	$	74,805	$	19,690,888	$	(25,234,226	)	$	(5,468,533	)

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

Advanced Medical Isotope Corporation
Statements of Cash Flow
(Unaudited)
	Three months ended
	March 31,
	2012			2011
CASH FLOW FROM OPERATING ACTIVITIES:
Net Loss	$	(1,152,778	)	$	(753,267	)

Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation of fixed assets		137,690			134,930
Amortization of licenses and intangible assets		1,788			1,666
Amortization of convertible debt discount		31,355			24,605
Amortization of prepaid expenses paid with stock		17,375			32,824
Common stock issued for services		359,144			18,000
Stock options issued for services		117,000			12,350
Changes in operating assets and liabilities:
Accounts receivable		870			(12,040	)
Accounts receivable - other		-			300,504
Inventory		3,225			(10,100	)
Prepaid expenses		(3,657	)		6,657
Accounts payable		111,129			43,514
Payroll liabilities		57,878			1,764
Accrued interest		94,142			26,342
Deferred income		(55,366	)		24,962
Net cash used by operating activities		(280,205	)		(147,289	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Cash used to acquire license fees		(17,500	)		-
Cash used to acquire patents and intellectual property		(31,629	)		(16,269	)
Net cash used in investing activities		(49,129	)		(16,269	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on Washington Trust debt		(10,653	)		(12,996	)
Principal payments on capital lease		(106,780	)		(98,678	)
Proceeds from short term loan		45,000			-
Proceeds from convertible note		365,000			-
Payments on convertible note		-			(293,750	)
Principal payments on long-term debt		(2,500	)		-
Proceeds from exercise of options and warrants		-			112,500
Net cash provided by financing activities		290,067			(292,924	)

Net increase in cash		(39,267	)		(456,482	)
Cash, beginning of period		52,557			589,390

CASH AND CASH EQUIVALENTS, END OF PERIOD	$	13,290		$	132,908


Supplemental disclosures of cash flow information:
Cash paid for interest	$	1,616		$	20,938
Cash paid for income taxes	$	-		$	-

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

Advanced Medical Isotope Corporation

Notes to Condensed Financial Statements

For the three months ended March 31, 2012 (unaudited) and the year ended December 31, 2011

NOTE 1: BASIS OF PRESENTATION

Nature of Organization

The accompanying condensed 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 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 three months ended March 31, 2012, are not necessarily indicative of the results that may be expected for any future period or the fiscal year ending December 31, 2012.

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, among others, may indicate that the Company will be unable to continue as a going concern for a reasonable time. 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 $1.5 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. As of March 31, 2012 we have $13,290 cash on hand which means there will be an anticipated shortfall of nearly the full $16.5 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 sales/development effort, we believe that we will be able to raise additional funds through the sale of our stock to either current or new stockholders. 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 Condensed Financial Statements

For the three months ended March 31, 2012 (unaudited) and the year ended December 31, 2011

NOTE 3: FIXED ASSETS

Fixed assets consist of the following at March 31, 2012 and December 31, 2011:

	March 31, 2012			December 31, 2011
Production equipment	$	2,116,627		$	2,116,627
Building		446,772			446,772
Leasehold improvements		3,235			3,235
Office equipment		32,769			32,769
		2,599,403			2,599,403
Less accumulated depreciation		(2,065,149	)		(1,927,459	)
	$	534,254		$	671,944

Accumulated depreciation related to fixed assets is as follows:

	March 31, 2012		December 31, 2011
Production equipment	$	1,625,756	$	1,521,519
Building		414,857		382,945
Leasehold improvements		3,019		2,801
Office equipment		21,517		20,194
	$	2,065,149	$	1,927,459

Depreciation expense for the above fixed assets for the three months ended March 31, 2012 and 2011, respectively, was $137,690 and $134,930.

Advanced Medical Isotope Corporation

Notes to Condensed Financial Statements

For the three months ended March 31, 2012 (unaudited) and the year ended December 31, 2011

NOTE 4: INTANGIBLE ASSETS

Intangible assets consist of the following at March 31, 2012 and December 31, 2011:


	March 31, 2012			December 31, 2011
License Fee	$	112,500		$	95,000
Less accumulated amortization		(87,066	)		(85,278	)
		25,434			9,722
Patents and intellectual property		348,853			317,224
Intangible assets net of accumulated amortization	$	374,287		$	326,946

Amortization expense for the above intangible assets for the three months ended March 31, 2012 and 2011, respectively, was $1,788 and $1,666.

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. We had $199,908 in borrowings under the line of credit as of October 28, 2008 at which time the line of credit was paid off and replaced with a loan in the initial principal amount of $199,908 from James C. Katzaroff and Carlton M. Cadwell. Mr. Katzaroff is our chief executive officer, and Mr. Katzaroff and Mr. Cadwell are directors and beneficial owners of more than 10% of our common stock. 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 note was extended for another year to October 31, 2010, at which time the note was extended for another year to October 31, 2011, at which time the note was extended for another year to October 31, 2012 with monthly payments increasing to $4,090. There is no security held as collateral for this loan. As of March 31, 2012, all payments were current on this stockholder loan. The Company paid $10,654 in principal and $1,616 in interest to the holders of this loan for the three months ended March 31, 2012. As of March 31, 2012 and December 31, 2011, the outstanding balance on this loan was $72,815 and $83,468 respectively.

The Company issued various shares of common stock and convertible promissory notes during the three months ended March 31, 2012 to a director and major stockholder. The details of these transactions are outlined in NOTE 10 STOCKHOLDERS’ EQUITY (DEFICIT) - Common Stock Issued for Convertible Debt.

Advanced Medical Isotope Corporation

Notes to Condensed Financial Statements

For the three months ended March 31, 2012 (unaudited) and the year ended December 31, 2011

NOTE 5: RELATED PARTY TRANSACTIONS - continued

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 stockholder 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 three months ended March 31, 2012 and 2011 the Company incurred rent expenses for this facility totaling $14,284 and $13,227, respectively. In addition, the lease agreement called for the issuance of $187,500 in common stock valued at $0.40 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 three months ended March 31, 2012 and 2011 the Company amortized $9,375 and $9,375 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. Subsequent to December 31, 2010 the Company is renting this space on a month to month basis. These lease agreements calls for monthly rental payments of $2,733 and $2,328 per month for two separate office areas. Effective November 1, 2009 the Company terminated the portion of the lease consisting of the $2,328 rental payment per month. During the three months ended March 31, 2012 and 2011 the Company incurred rent expenses for this facility totaling $7,500 and $8,200, respectively.

There are no future minimum rental payments as the Company’s current rental agreements either expire as of July 2012 or are on a month to month basis.

Rental expense for the three months ended March 31, 2012 and 2011 consisted of the following:

	Three months ended March 31, 2012		Three months ended March 31, 2011
Office and warehouse lease effective August 1, 2007
Monthly rental payments	$	14,284	$	13,227
Rental expense in the form of stock issuance		9,375		9,375
Corporate office		7,500		8,200
Total Rental Expense	$	31,159	$	30,802

Advanced Medical Isotope Corporation

Notes to Condensed Financial Statements

For the three months ended March 31, 2012 (unaudited) and the year ended December 31, 2011

NOTE 6: PREPAID EXPENSES PAID WITH STOCK

The Company has issued stock to companies for a service agreement and issued stock for prepaid rent of $18,000 and $35,375 as of March 31, 2012 and December 31, 2011, respectively; however all of this is expected to expire within the next twelve months.

NOTE 7: DEBT

The Company borrowed $55,000 May 2011, due November 2011, with interest at 8%. The holder of the note had the right, after the first one hundred eighty days of the note (November 8, 2011), to convert the note and accrued interest into common stock at a price per share equal to 61% (representing a discount rate of 39%) 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. During that time the amount of any prepayment would equal 135% of the outstanding principal balance of the note plus accrued interest on the note. The Company prepaid the note in full on August 3, 2011 and therefore has accrued interest expense of $20,046 related to the prepayment cost in the financial statements for the twelve months ending December 31, 2011. If the Company had not paid off the note and related accrued interest by August 10, 2011, the Company could have paid off the note between the period ninety-one days to one hundred twenty days following the issue date and the prepayment would have equaled 140% of the outstanding principal balance of the note plus accrued interest on the note. If the Company had not paid off the note and related accrued interest by November 8, 2011, 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 borrowed $53,000 October 2011, due July 2012, with interest at 8%. The holder of the note had the right, after the first one hundred eighty days of the note (April 15, 2012), to convert the note and accrued interest into common stock at a price per share equal to 61% (representing a discount rate of 39%) of the average of the lowest five trading prices for the Common Stock during the ten trading day period ending one trading day prior to the date of Conversion Notice.

The Company had the right to prepay the note and accrued interest during the first sixty days following the date of the note. During that time the amount of any prepayment would equal 130% of the outstanding principal balance of the note plus accrued interest on the note. The Company had the right to prepay the note and accrued interest during the next thirty days following the date of the note. During that time the amount of any prepayment would equal 135% of the outstanding principal balance of the note plus accrued interest on the note. The Company has the right to prepay the note and accrued interest during the third, fourth, and fifth thirty days periods following the date of the note. During that time the amount of any prepayment would equal 140%, 145%, and 150% of the outstanding principal balance of the note plus accrued interest on the note.

The Company has accrued interest expense of $871 related to the prepayment cost in the financial statements for the year ending December 31, 2011. The Company prepaid the note in full April 13, 2012 and therefore has accrued interest expense of $27,685 related to the prepayment cost in the accompanying financial statements for the three months ending March 31, 2012.

The Company borrowed $63,000 November 2011, due August 2012, with interest at 8%. The holder of the note had the right, after the first one hundred eighty days of the note (May 15, 2012), to convert the note and accrued interest into common stock at a price per share equal to 61% (representing a discount rate of 39%) of the average of the lowest five trading prices for the Common Stock during the ten trading day period ending one trading day prior to the date of Conversion Notice.

Advanced Medical Isotope Corporation

Notes to Condensed Financial Statements

For the three months ended March 31, 2012 (unaudited) and the year ended December 31, 2011

NOTE 7: DEBT - continued

The Company has accrued interest expense of $621 related to the prepayment cost in the financial statements for the year ending December 31, 2011, and accrued interest expense of $1,257 related to the prepayment cost in the accompanying financial statements for the three months ending March 31, 2012. If the Company has not paid off the note and related accrued interest by May 15, 2012, the note will become convertible and the Company would have to accrue an additional $96,402 to interest expense to account for the beneficial conversion feature of the note.

The Company borrowed $45,000 February 27, 2012, due August 2012, with interest at 8%. The holder of the note had the right, after the first one hundred eighty days of the note (August 24, 2012), to convert the note and accrued interest into common stock at a price per share equal to 61% (representing a discount rate of 39%) of the average of the lowest five trading prices for the Common Stock during the ten trading day period ending one trading day prior to the date of Conversion Notice.

The Company has the right to prepay the note and accrued interest during the first sixty days following the date of the note. During that time the amount of any prepayment would equal 130% of the outstanding principal balance of the note plus accrued interest on the note. The Company has the right to prepay the note and accrued interest during the next thirty days following the date of the note. During that time the amount of any prepayment would equal 135% of the outstanding principal balance of the note plus accrued interest on the note. The Company has the right to prepay the note and accrued interest during the third, fourth, and fifth thirty-day periods following the date of the note. During that time the amount of any prepayment would equal 140%, 145%, and 150% of the outstanding principal balance of the note plus accrued interest on the note.

The Company had credit card debt of $46,725.42 that was converted to a promissory note March 15, 2012 secured by personal guarantees of Mr. Katzaroff, CEO and Mr. Jolliff, CFO of the Company. The note calls for $2,500 up front payment and nineteen payments of $2,568 including interest of twelve percent. For the three month period ending March 31, 2012 the Company paid $2,500 in principal and $0 in interest towards the debt. The balance of the debt was $44,225 at March 31, 2012 of which $26,871 was recorded as current and $17,354 was recorded as long term.

NOTE 8: INCOME FROM GRANTS AND DEFERRED INCOME

The Company has chosen to recognize grant money received as income as it incurs costs associated with those grants, and until such time as it recognizes the grant as income those funds received will be classified as Deferred Income on the balance sheet.

For the twelve months ended December 31, 2011 the Company recognized $245,727 of a $1,215,000 Department of Energy grant as income with the remaining $945,765 recorded as deferred income as of December 31, 2011. The $245,727 recognized as of December 31, 2011 was for costs incurred for the twelve months ended December 31, 2011. For the three months ended March 31, 2012 the Company recognized an additional $55,366 as income leaving a remaining balance of $890,399 recorded as deferred income as of March 31, 2012. The $55,366 was for costs incurred for the three months ended March 31, 2012.

As of March 31, 2012 the grant money received and grant money recognized as income and deferred income can be summarized as follows:

	$1,215,000 Brachytherapy Grant
Grant money received during 2010	$	1,215,000
Recognized income from grants in 2010		23,508
Deferred income at December 31, 2010		1,191,492
Recognized income from grants in 2011		245,727
Deferred income at December 31, 2011		945,765
Recognized income from grants for the three months ended March 31, 2012		55,366
Deferred income at March 31, 2012	$	890,399

Advanced Medical Isotope Corporation

Notes to Condensed Financial Statements

For the three months ended March 31, 2012 (unaudited) and the year ended December 31, 2011

NOTE 9: COMMON STOCK OPTIONS

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.

The following schedule summarizes the changes in the Company’s stock options during the three months ended March 31, 2012:

					Weighted			Weighted
	Options Outstanding				Average			Average
	Number		Exercise		Remaining	Aggregate		Exercise
	Of		Price		Contractual	Intrinsic		Price
	Shares		Per Share		Life	Value		Per Share

Balance at December 31, 2011	5,135,000		$	0.20-0.50	.94 years	$	315,000	$	0.35
Options granted	1,950,000		$	0.09	2.94 years	$	-	$	0.09
Options exercised	-		$	-	-		-	$	-
Options expired	(500,000	)	$	0.46	-		-	$	-
Balance at March 31, 2012	6,585,000		$	0.09-0.50	1.42 years	$	315,000	$	0.26

Exercisable at December 31, 2011	5,135,000		$	0.20-0.50	0.94 years	$	315,000	$	0.35

Exercisable at March 31, 2012	6,585,000		$	0.09-0.50	1.42 years	$	315,000	$	0.26

Advanced Medical Isotope Corporation

Notes to Condensed Financial Statements

For the three months ended March 31, 2012 (unaudited) and the year ended December 31, 2011

NOTE 10: STOCKHOLDERS’ EQUITY (DEFICIT)

Common Stock Issued for Services and Other

In March 2012 the Company issued 15,000 shares of common stock with a total fair market value of $2,550. The fair market value of the shares issued was $0.17 per share. The shares were issued to extinguish $2,000 of a prior year liability.

In March 2012 the Company issued 3,990,500 shares of common stock with a total fair market value of $359,145. The fair market value of the shares issued was $0.09 per share. The shares were issued for $359,145 worth of current year services.

Common Stock Issued for Convertible Debt

The Company issued 51,400 shares of its common stock and a convertible promissory note in the amount of $128,500 with interest payable at 10% per annum in January 2012 to our major stockholder, who is also a Director. The Note matures in January of 2013. 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 $0.15 per share. The value of the $128,500 debt plus the $0.15 fair market value of the 51,400 shares at the date of the agreement was prorated to arrive at the allocation of the original $128,500 debt and the value of the 51,400 shares and the beneficial conversion feature. The computation resulted in an allocation of $113,952 toward the debt and $7,274 to the shares and $7,274 to the beneficial conversion feature. The $7,274 value of the shares and the $7,274 value of the beneficial conversion feature are then amortized to interest over the twelve month life of the debt. Interest expense of $2,425 has been accrued and added to the note payable bringing the total debt balance related to this convertible promissory note to $116,377 as of March 31, 2012. Additionally, $2,142 worth of interest expense on the notes principal balance has been recognized in the accompanying financial statements for the three months ending March 31, 2012.

The Company issued 48,600 shares of its common stock and a convertible promissory note in the amount of $121,500 with interest payable at 10% per annum in February 2012 to our major stockholder, who is also a Director. The Note matures in February of 2013. 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 $0.16 per share. The value of the $121,500 debt plus the $0.16 fair market value of the 48,600 shares at the date of the agreement was prorated to arrive at the allocation of the original $121,500 debt and the value of the 48,600 shares and the beneficial conversion feature. The computation resulted in an allocation of $106,884 toward the debt and $7,308 to the shares and $7,308 to the beneficial conversion feature. The $7,308 value of the shares and the $7,308 value of the beneficial conversion feature are then amortized to interest over the twelve month life of the debt. Interest expense of $1,522 has been accrued and added to the note payable bringing the total debt balance related to this convertible promissory note to $108,406 as of March 31, 2012. Additionally, $1,265 worth of interest expense on the notes principal balance has been recognized in the accompanying financial statements for the three months ending March 31, 2012.

The Company issued 46,000 shares of its common stock and a convertible promissory note in the amount of $115,000 with interest payable at 10% per annum in March 2012 to our major stockholder, who is also a Director. The Note matures in March of 2013. 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 $0.14 per share. The value of the $115,000 debt plus the $0.14 fair market value of the 46,000 shares at the date of the agreement was prorated to arrive at the allocation of the original $115,000 debt and the value of the 46,000 shares and the beneficial conversion feature. The computation resulted in an allocation of $102,804 toward the debt and $6,098 to the shares and $6,098 to the beneficial conversion feature. The $6,098 value of the shares and the $6,098 value of the beneficial conversion feature are then amortized to interest over the twelve month life of the debt. Interest expense of $254 has been accrued and added to the note payable bringing the total debt balance related to this convertible promissory note to $103,058 as of March 31, 2012. Additionally, $240 worth of interest expense on the notes principal balance has been recognized in the accompanying financial statements for the three months ending March 31, 2012.

Advanced Medical Isotope Corporation

Notes to Condensed Financial Statements

For the three months ended March 31, 2012 (unaudited) and the year ended December 31, 2011

NOTE 11: SUPPLEMENTAL CASH FLOW INFORMATION

During the three months ended March 31, 2011, the Company issued 156,167 shares of common stock for an extinguishment of $46,850 worth of debt and issued 1,235,000 options for an extinguishment of $234,650 worth of debt.

During the three months ended March 31, 2012, the Company issued 15,000 shares of common stock for an extinguishment of $2,000 worth of debt.

NOTE 12: SUBSEQUENT EVENTS

In April 2012, in exchange for $132,800, the Company issued to our major stockholder, who is also a Director, 53,120 restricted shares of common stock and a one-year convertible promissory note in the principal amount of $132,800. The note bears interest at 10% per annum. At the option of the holder, the principal and interest is convertible into common stock at $0.09 per share.

In April 2012 the Company issued 20,000 shares of its common stock valued at $0.09 per share on the date of issuance, in exchange for services of $1,800.

In April 2012 the Company issued an 8% Convertible Promissory Note in the amount of $60,000 to an unrelated company. The note calls for a $3,000 loan fee to be paid from the proceeds. The note is not convertible by the holder for the first 180 days, in which time the Company can repay the note at the rate of the 8% accrued interest plus 50% additional of both the original $60,000 and the accrued interest.

In April 2012, in exchange for $100,000, the Company issued to our major stockholder, who is also a Director, 40,000 restricted shares of common stock and a one-year convertible promissory note in the principal amount of $100,000. The note bears interest at 10% per annum. At the option of the holder, the principal and interest is convertible into common stock at $0.10 per share.

The Company evaluated subsequent events pursuant ASC Topic 855 and has determined that there are no additional events to report.

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 Form 10-Q report 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, including our expectations of our future results of operations or 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 to accurately predict or to control. Further, we urge you to be cautious of the forward-looking statements which are contained in this Form 10-Q report because they involve risks, uncertainties and other factors affecting our operations, market growth, service, products and licenses. The risk factors in the section captioned “Risk Factors” in Item 1A of our Form 10-K report for the year ended December 31, 2011, as well as other cautionary language in this Form 10-Q report, 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.

General Development of Business

Advanced Medical Isotope Corporation (“we” or 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.

SMSC had limited activity from inception and was considered dormant from the period May 1, 2000 through December 31, 2005. On September 6, 2006, SMSC changed its name to Advanced Medical Isotope Corporation.

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 in exchange for 100,000 shares of Series A Preferred Stock (which Series A Preferred Stock was later converted to shares of the Company’s common stock in March 2009). The Company conducted the acquisition in order to obtain cash and NHTI’s technology.

On June 13, 2007, the Company acquired the assets of the life sciences business segment of Isonics Corporation (Isonics), a California corporation. 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.

On August 1, 2007, the Company began renting office and warehouse space, known as the Production Facility located in Kennewick, Washington. Through this facility and the use of a proton linear accelerator, on June 30, 2008 we began offering regional distribution of F-18 (FDG).

On October 28, 2010, the Company received $1,215,000 net proceeds from the Department of Energy grant for the Proposed Congressionally Directed Project entitled “Research to Develop and Test an Advanced Resorbable Brachytherapy Seed Research for Controlled Delivery of Yttrium-90 Microspheres in Cancer Treatment.” This grant reimburses the Company for anticipated expenditures related to the development of its Brachytherapy project over the period April 1, 2010 through March 31, 2012. The Company projects this project could cost approximately $5,500,000; however, the Company recognizes the costs could be as high as $8,000,000 before it gets to production.

On October 29, 2010, the Company received notification it had been awarded $244,479 grant funds from the Qualified Therapeutic Discovery Project Program for this same Brachytherapy Project. The $244,479 grant was received February 4, 2011. This grant reimburses the Company for eligible expenditures made during the twelve months ended December 31, 2010.

On October 29, 2010, the Company received notification it had been awarded $244,479 grant funds from the Qualified Therapeutic Discovery Project Program for the Molybdenum Project. On December 3, 2010, the Company received $205,129 and the remaining $39,350 of the grant was received February 4, 2011. The grant funds received in 2010 reimburses the Company for eligible expenditures made during the twelve months ended December 31, 2009.

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

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 company that has a limited amount of revenue and that has accumulated deficits since inception. If we cannot obtain sufficient funding, we may have to delay the implementation of our business strategy.

Narrative Description of Business

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.

Over 10,000 hospitals worldwide use radioisotopes in medicine, and about 90% of the procedures are for diagnosis. The most common radioisotope used in diagnosis is technetium-99, with some 30 million procedures per year, accounting for 80% of all nuclear medicine procedures worldwide. In developed countries (26% of world population), the frequency of diagnostic nuclear medicine is 1.9% per year, and the frequency of therapy with radioisotopes is about one tenth of this. In the United States there are some 18 million nuclear medicine procedures per year among 311 million people, and in Europe about 10 million among 500 million people. In Australia there are about 560,000 per year among 21 million people, 470,000 of these using reactor isotopes. The use of radiopharmaceuticals in diagnosis is growing at over 10% per year. All of the information in this paragraph is derived from “Radioisotopes in Medicine” (updated October 2011) posted by the World Nuclear Association at www.world-nuclear.org/info/inf55.html.

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.

We are reviewing possible acquisition candidates as a means of achieving our objective.

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 of stable isotopes includes 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.

Radiopharmaceuticals:

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.

F-18 FDG: We currently offer regional distribution of F-18 FDG from our Kennewick, WA production facility. Other regional production facilities are being considered throughout the U.S. and abroad.

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

Products - continued

Radio Chemicals:

F-18: We currently offer regional distribution of F-18 from our Kennewick, WA production facility. Other regional production facilities are being considered 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. We believe that 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 and are in negotiations with a domestic source.

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.

Status of New Products

Within the next several years, we intend to offer the following products:

A Brachytherapy seed with a Fast-dissolving Matrix for Optimized Delivery of Radionuclides; and a Brachytherapy treatment utilizing a radiogel technology.

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. Up to 90% of all procedures involving medical isotopes use this isotope.

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

Status of New Products - continued

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.

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 paid the University total project costs of $45,150 in 2008 and 2009 for that research. We plan to work with the University of Utah to develop and manufacture cancer treatments using brachytherapy seeds.

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 paid the University total project costs of $67,500 during 2009 and 2010. 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 gave 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 for the Patent Rights in the area of radioisotope production using electron beam accelerator(s) for creating short lived radioisotopes such as Molybdenum-99 and Technetium-99 with the University of Missouri. This Agreement calls for a $10,000 nonrefundable fee paid upon execution, a royalty agreement on sales, and an equipment licensing fee on equipment sales. Additionally, the Agreement calls for a milestone payment of $250,000, due and payable five years after the May 14, 2010 effective date of this agreement and a milestone payment of $250,000, due and payable upon reaching $50,000,000 in cumulative net sales. The University has the right to either terminate or render the license non-exclusive in a licensed field or individual countries if the Company (i) has not demonstrated within 3 years after the effective date of this agreement access to $25,000,000 of available operating capital to proceed with commercialization of licensed products in such a manner as to cause the expenditure of that capital 4 years after the effective date; (ii) has not within 3 years after the effective date obtained the University’s approval of a new commercialization plan for licensed products not previously introduced by the Company into commercial use; or (iii) has not within 5 years after the effective date achieved, or does not each year thereafter maintain, sales levels of licensed products that result in specified royalties to the University.

In August 2010, we made a $10,000 investment for an exclusive license agreement with Battelle Memorial Institute regarding its technology for the production of a Brachytherapy seed. This license agreement calls for a $10,000 nonrefundable license fee and a royalty based on a percent of net sales for licensed products sold; the license agreement also contains a minimum royalty amount to be paid each year starting with 2012.

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

Manufacturing - continued

In February 2011, we paid $5,000 for a one year option agreement to negotiate an exclusive license agreement with Battelle Memorial Institute regarding its patents for the production of a radiogel technology. This option agreement calls for a $5,000 upfront fee for the option, which expired February 2012. Effective March 2012, we entered into an exclusive license agreement with Battelle Memorial Institute regarding the use of its patented radiogel technology. This license agreement calls for a $17,500 nonrefundable license fee and a royalty based on a percent of gross sales for licensed products sold; the license agreement also contains a minimum royalty amount to be paid each year starting with 2013.

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 barriers to entry, including 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 suppliers are closing their facilities or limiting their production. 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, Nordion Inc. (formerly MDS Inc.) and Covidien (formerly Mallinckrodt). 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 March 31, 2012, we had ten employees, of whom three were full-time employees. At any given time, we utilize eight to ten independent contractors to assist with our operations. We do not have a collective bargaining agreement with any of our employees, and we believe our relations with our employees are good.

Raw Materials

Some of the materials used in the products we manufacture are currently available only from a limited number of suppliers, many of which are international suppliers. We obtain many of our stable isotopes from suppliers in Russia. The Company plans to expand the availability of its supplies and products utilizing manufacturing capability at reactors located at the U.S. Department of Energy's National Laboratories (“National Laboratories”) as well as production capabilities at various universities and foreign countries other than Russia. This strategy is intended to reduce the risk associated with concentrating isotope production at a single facility. We obtain supplies, hardware, handling equipment and packaging from several different U.S. and foreign suppliers.

Customers

Our customers for sales of stable isotopes have included 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.

Our sales for 2011 consisted of F-18 (49.2% of total revenues) and Consulting Income (45.5% of total revenues) and sales of stable isotopes (5.3% of total revenues). Sales of F-18 for 2011 were 100% to Kadlec Hospital in Richland, Washington. Consulting revenues consist of providing a company with assistance in strategic targetry services, and research into production of radiophamaceuticals and the operations of radioisotope production facilities.

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

Patents, Trademarks, Licenses

License Agreement:

On September 27, 2006, we acquired the assets of Neu-Hope Technologies (“NHTI”) from UTEK. Included in the acquired assets was a Non-Exclusive License Agreement with the Regents of the University of California (“University”) for a neutron generator in exchange for preferred stock. NHTI paid a non-refundable fee in the amount of $25,000 in connection with the license agreement. The license fee is non-refundable unless our commercialization plan is deemed unacceptable by the University. If the plan is deemed unacceptable, the license agreement will terminate. To date, no commercialization plan has been deemed acceptable or unacceptable. In consideration for the license, we agreed to pay royalties equal to the greater of three percent of the selling price of each licensed product we sell or the maintenance fee according to the following schedule:

2008	$	10,000	*
2009	$	15,000	*
2010	$	15,000	*
2011	$	45,000	*
2012 and each year thereafter	$	60,000
	$	145,000

* These items have not been paid to date.

The License Agreement may be cancelled by giving 90 days written notice to the University. We did not have a relationship with UTEK before the acquisition of Neu-Hope Technologies, and we do not currently have any business relationship or affiliation with UTEK. In 2008, partially due to the Company’s lack of funds to act upon the patent license for the neutron generator and develop the technology, the Company lost considerable ground towards the advantages of utilization of the patent license. Since other companies made progress towards the development of the patent license technology and management no longer had the means or interest in pursuing the development of this technology, the Company’s management determined that the patent license for the neutron generator no longer had value to the Company and wrote off the net unamortized balance of $643,917 in 2008.

Additionally the Company has made the following investments in patent licenses and intellectual property during 2011:

In February 2011, the Company paid $5,000 for a one year option agreement to negotiate an exclusive license agreement with Battelle Memorial Institute regarding its patents for the production of a radiogel technology. This option agreement calls for a $5,000 upfront fee for the option, which expired February 2012. This fee was fully expensed in the twelve months ended December 31, 2011. Effective March 2012, we entered into an exclusive license agreement with Battelle Memorial Institute regarding the use of its patented radiogel technology. This license agreement calls for a $17,500 nonrefundable license fee and a royalty based on a percent of gross sales for licensed products sold; the license agreement also contains a minimum royalty amount to be paid each year starting with 2013.

Patent filing costs totaling $97,421, were capitalized during the twelve months ended December 31, 2011; resulting in a total $317,224 of capitalized patents and intellectual property at December 31, 2011. The patents are pending and are being developed, and as such, the patents and filing costs associated with them are not being amortized. Management has determined the economic life of the patents to be 10 years, and amortization, over such 10-year period and on a straight-line basis, will begin once the patents have been issued and the Company begins utilization of the patents through production and sales, resulting in revenues. The Company evaluates the recoverability of intangible assets, including patents on a continual basis. Several factors are used to evaluate intangibles, including, but not limited to, management’s plans for future operations, recent operating results and projected and expected undiscounted future cash flows.

Patent filing costs totaling $31,629, and $16,270 were capitalized during the three months ended March 31, 2012, and 2011; resulting in a total $348,853 of capitalized patents at March 31, 2012. The patents are pending and are being developed, and as such, they are not being amortized. Management has determined the economic life of the patents to be 10 years, and amortization, over such 10-year period and on a straight-line basis, will begin once the patents have been issued and the Company begins utilization of the patents through production and sales, resulting in revenues. The Company evaluates the recoverability of intangible assets, including patents on a continual basis. Several factors are used to evaluate intangibles, including, but not limited to, management’s plans for future operations, recent operating results and projected and expected undiscounted future cash flows.

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

Research and Development

We spent approximately $67,006 and $90,150 during the years ended December 31, 2009 and 2008, respectively, on research and development. The costs incurred in 2008 and 2009 were to a University for tests involved in the making of isotopes. The costs incurred in the twelve months ended December 31, 2010 consisted of $513,416 towards the Brachytherapy Project and $655,006 towards the Molybdenum Project, for a total cost of $1,168,422. The costs incurred in the twelve months ended December 31, 2011 were $245,727 towards the Brachytherapy Project and $235,950 towards the Molybdenum Project, for a total cost of $481,677.

The costs expensed in the three months ended March 31, 2012 and 2011 were $288,259 and $126,275, respectively. The $126,275 spent for the three months ended March 31, 2011 were $63,095 towards the Brachytherapy Project and $63,180 towards the Molybdenum Project The $288,259 spent for the three months ended March 31, 2012 were $55,366 towards the Brachytherapy Project and $232,893 towards the Molybdenum Project and consists of the following:

	Brachytherapy		Molybdenum
Supplies	$	-	$	-
Amortization		955		833
Conferences & seminars		-		1,034
Dues & subscriptions		-		-
Marketing		-		-
Office Supplies		-		134
Payroll and benefits		6,843		20,211
Consulting fees		1,830		16,993
Consulting fees – stock based		36,000		171,000
Legal fees		-		-
Research		-		-
Stock options granted		9,000		6,000
Telephone		159		159
Travel		579		16,529
Total	$	55,366	$	232,893

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

Results of Operations

Comparison of the Three Months Ended March 31, 2012 and 2011

The following table sets forth information from our statements of operations for the three months ended March 31, 2012 and 2011.

	Three Months Ended March 31, 2012			Three Months Ended March 31, 2011
Revenues	$	48,584			$	150,557

Operating expenses		1,104,886				867,879

Operating loss		(1,056,302	)			(717,322	)
Non-operating income (expense)
Recognized income from grants		55,366				63,095
Net gain (loss) on settlement of debt		(550	)			-
Interest expense		(151,292	)			(99,040	)
Net income (loss)	$	(1,152,778	)		$	(753,267	)

Revenue

Revenue was $48,584 for the three months ended March 31, 2012 and $150,557 for the three months ended March 31, 2011. The decrease was mainly the result of consulting revenues. Consulting revenues consisted of $3,054 and $88,057 of the total revenue for the three months ended March 31, 2012 and 2011, respectively. Consulting revenues consist of providing a company with assistance in strategic targetry services, and research into production of radiophamaceuticals and the operations of radioisotope production facilities. In July 2008 we established our linear accelerator production center and began the production and marketing of F-18 in August 2008. F-18 sales accounted for $45,530 of the total three months ended March 31, 2012 revenues and $49,300 of the total three months ended March 31, 2011 revenues. Revenues for F-18 were lower in the three months ended March 31, 2012 as a result of a reduction in the number of doses sold for the three months ended March 31, 2012 (157) from the three months ended March 31, 2011 (173). Stable isotope sales were $0 and $13,200 for the three months ended March 31, 2012 and 2011 respectively. The Company discontinued the sale of stable isotopes in the three months ended March 31, 2012 due to the reduction in profitability of that line of product. The Company intends to continue to minimize stable isotope sales at this time due to the low profitability.

Revenue for the three months ended March 31, 2012 and 2011 consists of the following:

	Three months ended March 31, 2012		Three months ended March 31, 2011
F-18	$	45,530	$	49,300
Stable isotopes		-		13,200
Consulting		3,054		88,057
	$	48,584	$	150,557

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

Results of Operations – Comparison of the Three Months Ended March 31, 2012 and 2011 - continued

Cost of Goods Sold

Effective with the Statement of Operations for the year ended December 31, 2011, the Company changed its method of reflecting the Cost of Goods Sold. The Company has moved the Cost of Goods Sold into Operating Expenses versus reflecting it as a reduction to Revenues with the resulting Gross Profit. The change has been made to be in accordance with FASB ASC 225-10-S99, SAB Topic 11.B, Depreciation and Depletion Excluded from Cost of Sales. The Statement of Operations for the three months ended March 31, 2011 was changed from the way it was originally reflected to correspond with the changes made for the three months ended March 31, 2012.

Operating Expenses

Operating expenses for the three months ended March 31, 2012 and 2011 were $1,104,886 and $867,879 respectively. The increase in operating expenses from 2011 to 2012 can be attributed to the increase in Professional Fees ($536,244 for the three months ended March 31, 2012 versus $280,088 for the three months ended March 31, 2011) and the increase in Stock Options granted ($117,000 for the three months ended March 31, 2012 versus $12,350 for the three months ended March 31, 2011). These increases were partially offset by a decrease in Payroll Expenses ($184,370 for the three months ended March 31, 2012 versus $246,200 for the three months ended March 31, 2011) and General and Administrative Expenses ($109,901 for the three months ended March 31, 2012 versus $144,280 for the three months ended March 31, 2011).

Operating expenses for the three months ended March 31, 2012 and 2011 consists of the following:

	Three Months Ended March 31, 2012		Three Months Ended March 31, 2011
Cost of goods sold	$	16,859	$	25,074
Depreciation and amortization expense		139,478		136,596
Professional fees		536,244		280,088
Stock options granted		117,000		12,350
Payroll expenses		184,370		246,200
General and administrative expenses		109,901		144,280
Sales and marketing expense		1,034		23,291
	$	1,104,886	$	867,879

Non-Operating Income (Expense)

Non-operating expense for the three months ended March 31, 2012 and 2011 was $96,476 and $35,945, respectively. The increase in non-operating expense was due to an increase in interest expense ($151,292 for the three months ended March 31, 2012 versus $99,040 for the three months ended March 31, 2011) along with a loss on settlement of debt.

Non-Operating income (expense) for the three months ended March 31, 2012 and 2011 consists of the following:

	Three months ended March 31, 2012			Three months ended March 31, 2011
Interest expense	$	(151,292	)	$	(99,040	)
Net gain (loss) on settlement of debt		(550	)		-
Recognized income from grants		55,366			63,095
	$	(96,476	)	$	(35,945	)

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

Results of Operations – Comparison of the Three Months Ended March 31, 2012 and 2011 - continued

Income from Grants

As of March 31, 2012 the grant money received and grant money recognized as income and deferred income can be summarized as follows:

	$1,215,000 Brachytherapy Grant
Grant money received during 2010	$	1,215,000
Recognized income from grants in 2010		(23,508	)
Deferred income at December 31, 2010		1,191,492
Recognized income from grants in 2011		(245,727	)
Deferred income at December 31, 2011		945,765
Recognized income from grants for the three months ended March 31, 2012		(55,366	)
Deferred income at March 31, 2012	$	890,399

Net Loss

Our net loss for the three months ended March 31, 2012 and 2011 was $1,152,778 and $753,267, respectively.

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

Liquidity and Capital Resources

At March 31, 2012, we had negative working capital of $6,365,126, as compared to $3,716,584 at March 31, 2011. During the three months ended March 31, 2012 we experienced negative cash flow from operations of $280,205 and we expended $49,129 for investing activities while adding $290,067 of cash flows from financing activities. As of March 31, 2012, we had $0 commitments for capital expenditures.

Cash used in operating activities increased from $147,289 for the three month period ending March 31, 2011 to $280,205 for the three month period ending March 31, 2012. Cash used in operating activities was primarily a result of our net loss, partially offset by non-cash items, such as amortization and depreciation, included in that net loss, and common stock and stock options issued for services and other expenses. Cash used in investing activities increased from $16,269 for the three month period ended March 31, 2011 to $49,129 for the three month period ended March 31, 2012. Cash was used to acquire patents and intellectual property during the 2012 and 2011 three month periods. Cash provided from financing activities increased from $(292,924) for the three month period ending March 31, 2011 to $290,067 for the three month period ending March 31, 2012. The increase in cash provided from financing activities was primarily a result of increase in proceeds from short term loans and convertible debt along with a decrease in payments on convertible debt. The increase in cash provided from financing activities was partially offset by a decrease in proceeds from the exercise of options and warrants.

We have generated material operating losses since inception. We have incurred a net loss of $22,347,184 from January 1, 2006 through March 31, 2012, including a net loss of $4,055,026 for the twelve months ended December 31, 2010, and a net loss of $2,749,616 for the twelve months ended December 31, 2011. We expect to continue to experience net operating losses. Historically, we have relied upon 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, although 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.

We have modified our growth and operating plans as a result of our continuing losses. The going concern disclosure in Note 1 to our audited financial statements for the year ended December 31, 2011 anticipated that we would need $1.5 million in funds over the next twelve months to maintain current operation activities. As a result of changes and additions to our business plans, our current cash run rate is approximately $1.5 million.

Based on the current cash run rate, approximately $1,500,000 will be needed to fund operations for an additional year. As disclosed in the risk factors set forth in our Form 10-K report for the year ended December 31, 2011, 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 an infrastructure for Brachytherapy production and distribution as well as to initiate a Molybdenum 99 production facility. However, we may choose to further 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. Having only modest sales since our inception, we are unable to determine the effect of the recent economic crises on our sales.

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

Liquidity and Capital Resources - continued

Contractual Obligations (payments due by period as of March 31, 2012)

Contractual Obligation	Total Payments Due		Less than 1 Year		1-3 Years		3-5 Years			More than 5 Years
Capital Lease Obligation	$	925,033	$	925,033	$	-	$	-	$	-
Production Center Lease	$	19,045	$	19,045	$	-	$	-	$	-
License Agreement with Regents of the University of California	$	565,000	$	145,000	$	180,000	$	180,000	$	60,000 each year
License Agreement with Battelle Memorial Institute	$	125,000	$	2,500	$	22,500	$	75,000	$	25,000 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 our major stockholders, which we obtained during September 2007. The purpose of the lease agreements was 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.

We were in default on the capital lease obligation as of December 31, 2008 due to failure to maintain the minimum debt service coverage ratio identified in the Lease by an amount of $35,000 as per notice from the debtor. We believed at the time of the issuance of the December 31, 2008 financial statements that we had remedied the default which existed at year end. Accordingly we recorded a current and long term portion of the capital leases. Subsequent to the issuance of the December 31, 2008 financial statements, we determined that more likely than not that the Company is in default of the terms of the capital leases. Accordingly we recorded the entire value of the leases as a current obligation. The Company was in default on the capital lease obligation as of December 31, 2009 due to failure to maintain the minimum debt service ratio identified in the lease. However, the Company was in compliance with the minimum debt service coverage ratio stipulated in the loan covenants at December 31, 2010 and accordingly recognized current and long term portions of the lease on its balance sheet at December 31, 2010. We were in default on a covenant in the capital lease obligations as of December 31, 2011 and March 31, 2012 due to failure to maintain the minimum debt service ratio required by the leases. Accordingly we recorded the entire value of the leases as a current obligation for the year ended December 31, 2011 and for the three months ended March 31, 2012.

We began renting office and warehouse space effective August 1, 2007, located in Kennewick, Washington from a non-affiliated stockholder. 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 year ended December 31, 2011 and 2010 the Company incurred rent expenses for this facility totaling $54,869 and $50,622, respectively. During the three months ended March 31, 2012 and 2011 the Company incurred rent expenses for this facility totaling $14,284 and $13,227, respectively. In addition, the lease agreement calls for the issuance of $187,500 in common stock valued at $0.40 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 twelve months ended December 31, 2011 the Company amortized $37,500 of this stock issuance and recognized it as rent expense. For the three months ended March 31, 2012 and 2011 the Company amortized $9,375 and $9,375, respectively, of this stock issuance and recognized it as rent expense.

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.

Changes in Accounting and Financial Disclosures

Cash Equivalents

For the purposes of the statement of cash flows, the Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents.

Accounts Receivable

Accounts receivables are stated at the amount that management of the Company expects to collect from outstanding balances. Management provides for probable uncollectible amounts through an allowance for doubtful accounts. Additions to the allowance for doubtful accounts are based on management’s judgment, considering historical write-offs, collections and current credit conditions. Balances which remain outstanding after management has used reasonable collection efforts are written off through a charge to the allowance for doubtful accounts and a credit to the applicable accounts receivable. Payments received subsequent to the time that an account is written off are considered bad debt recoveries. As of March 31, 2012, the Company has experienced no bad debt write offs from operations.

Inventory

Inventory is reported at the lower of cost or market, determined using the first-in, first-out basis, or net realizable value. All inventories consist of Finished Goods. The company had no Raw Materials or Work in Process.

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

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:

Production equipment 3 to 7 years

Office equipment 2 to 5 years

Furniture and fixtures 2 to 5 years

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 reviews the net carrying value of all of its equipment on an asset by asset basis whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. 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.

The types of events and circumstances that management believes could indicate impairment are as follows:

A significant decrease in the market price of a live-lived asset.

A significant adverse change in the extent or manner in which a long-lived asset is being used or in its physical condition.

A significant adverse change in legal factors or in the business climate that could affect the value of a long-lived asset, including an adverse action or assessment by a regulator.

An accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of a long-lived asset.

A current period operating or cash flow loss combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with the use of a long-lived asset.

A current expectation that, more likely than not, a long-lived asset will be sold or otherwise disposed of significantly before the end of its previously estimated useful life.

The fair value of assets is first determined by quoted market prices, if available. Otherwise, the estimate of fair value is based on the best information available in the circumstances, including prices for similar assets and the results of using other valuation techniques. If quoted market prices are not available a present value technique is often the best available valuation technique with which to estimate fair value. It is believed that an expected present value technique is superior to a traditional present value technique, especially in situations in which the timing or amount of estimated future cash flows is certain.

The traditional approach is useful for many measurements, especially those in which comparable assets and liabilities can be observed in the marketplace. However, the traditional approach does not provide the tools needed to address some complex measurement problems, including the measurement of nonfinancial assets and liabilities for which no market for the item or a comparable item exists. The traditional approach places most of the emphasis on selection of an interest rate. A proper search for “the rate commensurate with the risk” requires analysis of at least two items – one asset or liability that exists in the marketplace and has an observed interest rate and the asset or liability being measured. The appropriate rate of interest for the cash flows being measured must be inferred from the observable rate of interest in some other asset or liability and, to draw that inference, the characteristics of the cash flows must be similar to those of the asset being measured.

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.

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

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.

Patents and Intellectual Property

The Company has determined that the economic life of its patents and intellectual property to be 10 years and will begin amortization over such 10-year period and on a straight-line basis once the patents have been issued and the Company begins utilization of the patents through production and sales, resulting in revenues. The Company evaluates the recoverability of intangible assets, including patents on a continual basis. Several factors are used to evaluate intangibles, including, but not limited to, management’s plans for future operations, recent operating results and projected and expected undiscounted future cash flows.

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 March 31, 2012 consisted of the sales of Flouride 18 and Consulting Revenue. Revenue for the three months year ended March 31, 2011 consisted of the sales of Oxygen 18 (stable isotope), Flouride 18 and Consulting Revenue. The Company recognizes revenue once an order has been received and shipped to the customer or services have been performed. 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.

Income from Grants and Deferred Income

Net Loss Per Share

The Company accounts for its income (loss) per common share by replacing primary and fully diluted earnings per share with basic and diluted earnings per share. Basic earnings/loss per share is computed by dividing income (loss) available to common stockholders (the numerator) by the weighted-average number of common shares outstanding (the denominator) for the period, and does not include the impact of any potentially dilutive common stock equivalents. The computation of diluted earnings per share is similar to basic earnings per share, except that the denominator is increased to include the number of additional common shares that would have been outstanding if potentially dilutive common shares had been issued.

Securities, all of which represent common stock equivalents, that could be dilutive in the future as of March 31, 2012 and March 31, 2011 are as follows:

	March 31, 2012		March 31, 2011
Convertible debt		16,986,100		5,365,880
Common stock options		6,585,000		9,590,000
Total potential dilutive securities		23,571,100		14,955,880

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

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.

Advertising and Marketing Costs

Advertising and marketing costs are expensed as incurred except for the cost of tradeshows which are deferred until the tradeshow occurs. There were no tradeshow expenses incurred and not expensed as of the three months ended March 31, 2012. There were $12,675 tradeshow expenses incurred and not expensed as of the three months ended March 31, 2011 which are prepayment costs for 2011 tradeshow expenses. During the three months ended March 31, 2012 and 2011, the Company incurred $1,034 and $23,291, respectively, in advertising and marketing costs.

Shipping and Handling Costs

Shipping and handling costs are expensed as incurred and included in cost of product sales.

Legal Contingencies

In the ordinary course of business, the Company is involved in legal proceedings involving contractual and employment relationships, product liability claims, patent rights, and a variety of other matters. The Company records contingent liabilities resulting from asserted and unasserted claims against it, when it is probable that a liability has been incurred and the amount of the loss is reasonably estimable. The Company discloses contingent liabilities when there is a reasonable possibility that the ultimate loss will exceed the recorded liability. Estimated probable losses require analysis of multiple factors, in some cases including judgments about the potential actions of third-party claimants and courts. Therefore, actual losses in any future period are inherently uncertain. Currently, the Company does not believe any probable legal proceedings or claims will have a material impact on its financial position or results of operations. However, if actual or estimated probable future losses exceed the Company’s recorded liability for such claims, it would record additional charges as other expense during the period in which the actual loss or change in estimate occurred.

Income Taxes

To address accounting for uncertainty in tax positions, the Company clarifies the accounting for income taxes by prescribing a minimum recognition threshold that a tax position is required to meet before being recognized in the financial statements. The Company also provides guidance on de-recognition, measurement, classification, interest, and penalties, accounting in interim periods, disclosure and transition.

The Company files income tax returns in the U.S. federal jurisdiction, and Delaware. The Company did not have any tax expense for the year ended December 31, 2011. The Company did not have any deferred tax liability or asset on its balance sheet on December 31, 2011.

Interest costs and penalties related to income taxes, if any, will be classified as interest expense and general and administrative costs, respectively, in the Company's financial statements. For the year ended December 31, 2011, the Company did not recognize any interest or penalty expense related to income taxes. The Company believes that it is not reasonably possible for the amounts of unrecognized tax benefits to significantly increase or decrease during the year 2012.

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

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

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

The Company reviews recently issued accounting pronouncements on a quarterly basis. As of March 31, 2012 there are no recently issued accounting pronouncements that the Company believes are applicable or would have a material impact on the financial statements of the Company.

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.

This item is not applicable to us because we are a smaller reporting company as defined by Rule 12b-2 under the Securities Exchange Act of 1934.

Item 4. Controls and Procedures.

Disclosure Controls and Procedures

Based on an evaluation as of the date of the end of the period covered by this 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, because of a previously disclosed material weakness in our internal control over financial reporting, our disclosure controls and procedures were ineffective 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 first fiscal quarter of 2012) 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 1A. Risk Factors.

There have been no material changes to the risk factors set forth in Item 1A in our Form 10-K report for the year ended December 31, 2011.

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

Common stock issued in connection with convertible notes

In January 2012, in exchange for $128,500, the Company issued to Carlton Cadwell, who is a director and principal stockholder of the Company, 51,400 restricted shares of its common stock and a one-year convertible promissory note in the principal amount of $128,500. The note bears interest at 10% per annum. At the option of the holder, the principal and interest is convertible into common stock at $0.15 per share.

In February 2012, in exchange for $121,500, the Company issued to Carlton Cadwell, who is a director and principal stockholder of the Company, 48,600 restricted shares of its common stock and a one-year convertible promissory note in the principal amount of $121,500. The note bears interest at 10% per annum. At the option of the holder, the principal and interest is convertible into common stock at $0.16 per share.

In March 2012, in exchange for $115,000, the Company issued to Carlton Cadwell, who is a director and principal stockholder of the Company, 46,000 restricted shares of its common stock and a one-year convertible promissory note in the principal amount of $115,000. The note bears interest at 10% per annum. At the option of the holder, the principal and interest is convertible into common stock at $0.14 per share.

Common stock issued for services and other

In February 2012 the Company issued 15,000 shares of common stock with a total fair market value of $2,550. The fair market value of the shares issued was $0.17 per share. The shares were issued to a law firm to extinguish $2,000 of a prior year liability for fees owed for legal services.

As to all of the forgoing transactions, the Company relied upon the exemption from registration set forth in section 4(2) of the Securities Act of 1933, as amended, based upon the private nature and the limitations of the transactions.

Item 6. Exhibits.


Exhibit
Number		Description
10.1		Form of Non-Statutory Stock Option Agreement (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on March 15, 2012).
31.1	*	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes – Oxley Act of 2002
31.2	*	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes – Oxley Act of 2002
32.1	*	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350

101.INS	*	XBRL Instance Document
101.SCH	*	XBRL Taxonomy Extension Schema
101.CAL	*	XBRL Taxonomy Extension Calculation Linkbase
101.DEF	*	XBRL Taxonomy Extension Definition Linkbase
101.LAB	*	XBRL Taxonomy Extension Label Linkbase
101.PRE	*	XBRL Taxonomy Extension Presentation Linkbase

* Filed herewith.

SIGNATURES

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

	ADVANCED MEDICAL ISOTOPE CORPORATION

Date: May 14, 2012	By:	/s/ James C. Katzaroff
	Name:	James C. Katzaroff
	Title:	Chairman and Chief Executive Officer
		(Principal Executive Officer)


Date: May 14, 2012	By:	/s/ L .Bruce Jolliff
	Name:	L. Bruce Jolliff
	Title:	Chief Financial Officer
		(Principal Financial and Accounting Officer)