VIVOS INC - Annual Report: 2015 (Form 10-K)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

For the fiscal year ended December 31, 2015

or

For the transition period from ________ to _________

Commission file number: 0-53497

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.001 Par Value

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [  ] No [X]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes [  ] No [X]

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 [  ]

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 [  ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [  ]

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):

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

The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter was approximately $1,769,000. Shares of common stock held by each executive officer and director and by each person who owns 10% or more of the outstanding common stock of the registrant have been excluded in that such persons may be deemed to be affiliates.  This determination of affiliate status is not necessarily a conclusive determination for other purposes.  Without acknowledging that any individual director of registrant is an affiliate, all directors have been included as affiliates with respect to shares owned by them.

As of May 13, 2016, there were 1,999,998,519 shares of the registrant’s Common Stock and 2,407,545 shares of the registrant’s Series A Preferred Stock outstanding.

Advanced Medical Isotope Corporation

Report on Form 10-K

TABLE OF CONTENTS

PART I.

FORWARD LOOKING STATEMENTS

Except for statements of historical fact, certain information described in this Form 10-K 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 the Company’s future expectations, including its expectations of its future results of operations or financial position, or state other “forward-looking” information.  Advanced Medical Isotope Corporation believes that it is important to communicate its future expectations to its investors.  However, there may be events in the future that the Company is not able to accurately predict or to control.  Further, the Company urges you to be cautious of the forward-looking statements which are contained in this Form 10-K report because they involve risks, uncertainties and other factors affecting its operations, market growth, service, products and licenses.  The risk factors in the section captioned “Risk Factors” in Item 1A of the Company’s Form 10-K, as well as other cautionary language in this Form 10-K report, describe such risks, uncertainties and events that may cause the Company’s actual results and achievements, whether expressed or implied, to differ materially from the expectations the Company describes in its forward-looking statements.  The occurrence of any of the events described as risk factors could have a material adverse effect on the Company’s business, results of operations and financial position.

ITEM 1. BUSINESS.

General Statement of Business

Advanced Medical Isotope Corporation (the “Company,” “AMI” or “we”) was incorporated under the laws of Delaware on December 23, 1994 as Savage Mountain Sports Corporation (“SMSC”). On September 6, 2006, the Company changed its name to Advanced Medical Isotope Corporation. AMI has authorized capital of 2,000,000,000 shares of Common Stock, $0.001 par value per share and 20,000,000 shares of Preferred Stock, $0.001 par value per share (ADMD: OTCQB).

AMI is a late stage radiation oncology focused medical device company engaged in the development of yttrium-90 based brachytherapy devices for the treatment of non-resectable tumors. Brachytherapy uses radiation to destroy cancerous tumors by placing a radioactive isotope inside or next to the treatment area. A prominent team of radiochemists, scientists and engineers, collaborating with strategic partners, including national laboratories, universities and private corporations, lead the Company’s development efforts. AMI has been recognized as a leader in the development of new isotope technologies by local, state and federal agencies. The Company’s overall vision is to globally empower physicians, medical researchers and patients by providing them with new isotope technologies that offer safe and effective treatments for cancer.

Since late 2013, AMI has focused its resources on developing a proposed line of yttrium-90 based brachytherapy products for the treatment of non-resectable tumors and on endeavoring to secure FDA clearance with respect to the initial proposed brachytherapy product. AMI’s proposed brachytherapy products incorporate patented technology developed for Battelle Memorial Institute (“Battelle”) at Pacific Northwest National Laboratory, a leading research institute for government and commercial customers. Battelle has granted AMI an exclusive license to patents covering these developments for manufacturing, processing and applications for medical isotopes (the “Battelle License”).

The Company’s lead product is the Y-90 RadioGel™ device. The Company is currently conducting additional bench and animal tests requested by the FDA to support a new de novo filing with the FDA that would request marketing clearance for the device as a Class II medical device in the United States. The Company is also exploring the pathway to regulatory clearance in other international markets.

In March of 2016, the Company established a wholly-owned subsidiary, IsoPet Solutions Corporation, to focus on the vibrant and expanding veterinary oncology market. IsoPet Solutions will focus on bringing AMI's yttrium-90 brachytherapy products to veterinary oncologists to treat animals such as dogs and cats suffering from tumor cancers. IsoPet Solutions is currently establishing the infrastructure necessary to provide product to veterinary clinics including regulatory clearances and compliance.

Research and development of the Company’s brachytherapy product line has been funded with proceeds from the sale of equity and debt securities as well as a series of grants. On October 28, 2010, the Company received $1,215,000 net proceeds from a 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.” 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. Additionally, on September 1, 2015, the Company received notification it had been awarded from Washington State University, $42,019 grant funds from the sub-award project entitled “Optimized Injectable Radiogels for High-dose Therapy of Non-Resectable Solid Tumors”.

The Company requires funding of approximately $1.5 million annually to maintain current operating activities. Over the next 12-24 months, the Company believes it will cost approximately $5 million to $10 million to fund: (1) the FDA approval process and initial deployment of the brachytherapy products and (2) initiate regulatory approval processes outside of the United States. The continued deployment of the brachytherapy products and a worldwide regulatory approval effort will require additional resources and personnel.  The principal variables in the timing and amount of spending for the brachytherapy products in the next 12-24 months will be the FDA’s classification of the Company’s brachytherapy products as Class II or Class III devices (or otherwise) and any requirements for additional studies which may possibly include clinical studies.  Thereafter, the principal variables in the amount of the Company’s spending and its financing requirements would be the timing of any approvals and the nature of the Company’s arrangements with third parties for manufacturing, sales, distribution and licensing of those products and the products’ success in the U.S. and elsewhere. The Company intends to fund its activities through strategic transactions such as licensing and partnership agreements or additional capital raises.

Following receipt of required regulatory approvals and financing, in the United States, the Company intends to outsource material aspects of manufacturing, distribution, sales and marketing.  Outside of the United States, the Company intends to pursue licensing arrangements and/or partnerships to facilitate its global commercialization strategy.  

In the longer-term, subject to the Company receiving adequate funding, regulatory approval for brachytherapy products and thereafter being successful in commercializing brachytherapy products, the Company intends to consider resuming research efforts with respect to other products and technologies. The Company’s core goal is to develop and commercialize isotopes, businesses and technologies intended to help improve the diagnosis and treatment of cancer and other illnesses.  Among those longer-term projects being considered by the Company are potential solutions for the impending severe shortages of Molybendum-99 and its derivative product Technetium-99m, the most widely used isotopes for diagnostic purposes.

Based on the Company’s financial history since inception, its auditor has expressed substantial doubt as to the Company’s ability to continue as a going concern. The Company has limited revenue, nominal cash, and has accumulated deficits since inception.  If the Company cannot obtain sufficient additional capital, the Company will be required to delay the implementation of its business strategy and not be able to continue operations.

In April 2015 the Company announced the beginning of its capital restructuring plan. This included reaching an agreement with its primary lender, Carlton Cadwell, and his affiliated entities to convert $5 million of long term debt into a newly designated series of equity based convertible preferred stock as well as having, several other lenders agree to these debt conversion terms. The Company also successfully eliminated approximately $500,000 of seasoned trade payables.

The Company also provided an update on additional matters to significantly simplify the Company's capital structure and improve its balance sheet. The Company reported that in November and December of 2014, in connection with the conversion of certain convertible debt and exercise of warrants, there was an error in the calculation of common shares that should have properly been issued, resulting in significant excess issuances of common stock. The miscalculations were the result of conversions and exercises being executed below the Company's stated par value of $0.001. The transfer agent erroneously issued excess freely tradable common shares based on defective legal opinions provided by the respective note and warrant holders. In order to remedy the situation, the Company notified all applicable convertible note and warrant holders of the excess issuance and has proposed specific solutions to facilitate compliance with the State of Delaware and federal securities laws. Specifically, the investors may either deliver to the transfer agent the excess shares they were issued, or they may offset any remaining convertible debt or warrants to satisfy proper consideration for the excess common shares issued. The Company reported it believed that these actions will have a positive impact on the Company’s balance sheet, potentially eliminating up to $800,000 of convertible debt, potentially eliminating a substantial portion of the warrants outstanding and potentially eliminating a substantial amount of the nearly $11 million of derivative liabilities then outstanding. The obligations that were resolved as of December 31, 2015 are reflected in the year-end financial statements. The obligations resolved subsequent to the end of 2015 are detailed in the subsequent events section of the year-end financial statement.

On June 24, 2015 the Company provided an update on financial matters and stated that it intends to pursue an uplisting transaction as part of its financial recapitalization plan to raise the capital necessary to complete the direct de novo FDA filing for the Y-90 RadioGel™ device and to pursue commercialization and partnering efforts.

On June 30, 2015, the Company filed the Certificate of Designations, Preferences, and Rights of the Series A Convertible Preferred Stock (“Certificate of Designations”) with the Delaware Secretary of State, designating 2.5 million shares of the Company’s preferred stock, par value $0.001 per share, as Series A Convertible Preferred Stock (“Series A Preferred”). A Certificate of Amendment was filed on March 31, 2016 authorizing 5 million shares.

On August 28, 2015 the Company announced a collaboration with IsoTherapeutics Group, LLC of Angleton, TX on the preclinical development of Y-90 based brachytherapy products including AMICs Y-90 RadioGel™ device.

In the third quarter, the Company reported it completed a variety of initiatives that significantly reduced the Company’s debt.  Dr. Carlton Cadwell and his related entities exchanged an aggregate of $5,338,940 of debt into 355,929 shares of Series A Convertible Preferred. The 305,929 shares of Series A Convertible Preferred converts into 355,929,000 Common shares, at an effective conversion price of $0.015 per share. In addition to the debt conversion, Dr. Cadwell exchanged $1,055,532 of short term debt for a new long term 8% non-convertible note payable upon demand on March 31, 2017. Such note was converted into 73,546 Series A preferred shares on May 19, 2016. Substantially all of the holders of the short term bridge loans have converted their debt into Series A preferred shares. Separately, substantially all of the toxic debt has either been satisfied and removed from the company’s balance sheet or is in the process of finalizing settlement documentation. The Company noted it commenced studies with IsoTherapeutics Group pursuant to the FDA request for further studies and specific manufacturing plans for the Y-90 RadioGel™ device.

In the fourth quarter, the Company announced its progress in seeking FDA clearance for marketing of its lead product, the Y-90 RadioGel™ device. CEO Jim Katzaroff and the lead scientific and medical advisory team from the Company met at the FDA offices to discuss next steps, expectations and required testing to progress towards obtaining marketing clearance for the Y-90 RadioGel™ device. The Company reported it is working closely with the FDA in order to obtain all appropriate data and benchmarks the FDA requires in order to proceed with providing final clearance for marketing the device in the United States. The Company reported it intends to seek classification and clearance as a class II medical device through a de novo application. The Company also announced that its product development partner IsoTherapeutics had completed the first stage of the project, comprised of tech transfer, manufacturing and in vitro testing.

2016 Significant Events

In the first quarter of 2016 the Company’s Founder, Chairman and CEO co-authored an article published in the January, 2016 issue of the World Council on Isotopes (WCI) Newsletter. The WCI was founded in 2008 and has a global membership from over 50 countries consisting of 103 member organizations and 40 individual members. WCI provides a strong voice, as an internationally recognized non-governmental organization, at important regional and international forums.

In the first quarter of 2016, the Company added two members to its Medical Advisory board, Dr. Ludwig E. Feinendegen, M.D. and Dr. Albert S. DeNittis, MD, MS, FCPP. Dr. Ludwig E. Feinendegen is a medical doctor known for his pioneering work and leadership in the fields of both diagnostic and therapeutic applications of radionuclides through various roles and research in nuclear medicine, internal medicine, cell biology and radiobiology. Dr. Feinendegen has numerous honors from national and international institutions and has authored over 700 publications in molecular nuclear medicine, cell biology and low-dose radiobiology. Dr. Albert S. DeNittis is currently is the Chief of Radiation Oncology at Lankenau Medical Center and Clinical Professor at Lankenau Insitute for Medical Research in Wynnewood, Pennsylvania and the Director of Radiation Oncology at Brodesseur Cancer Center in New Jersey. Dr. DeNittis has served on numerous regional, national and government committees related to key issues in the field of oncology including the NRG Oncology group which focuses on protocol development for cancer patients on the national level. He has received regional and national awards for his research and his clinical work and authored over 100 publications and presentations as well as 6 book chapters. 

In the first quarter of 2016, the Company announced the formation of a new, wholly-owned subsidiary, IsoPet Solutions Corporation, to focus on the vibrant and expanding veterinary oncology market. The IsoPet Solutions division will focus on bringing the Company’s yttrium-90 brachytherapy products to veterinary oncologists to treat dogs and cats suffering from tumor cancers. The division will also provide product awareness and education to veterinary oncologists. Dr. Alice Villalobos, DVM, FNAP, a specialist and advocate on the topic of cancer in pets, was appointed Chair of the Company's Veterinary Medicine Advisory Board.

Subsequent to the reporting period, in support of the Company’s efforts to focus resources on the development and commercialization of its yttrium-90 brachytherapy products, the Company permanently closed its Production Facility located in Kennewick Washington. The key piece of equipment, the Company’s linear accelerator is currently being marketed for sale.

Collaborations

The Company is engaged in collaborative efforts with U.S. national laboratories and universities and with international teaming partners.   The Company has active research collaborations for its brachytherapy products with Washington State University and the University of Utah as well as the Pacific Northwest National Laboratory, operated by Battelle.  

On August 28, 2015 the Company announced a collaboration with IsoTherapeutics Group, LLC of Angleton, TX on the preclinical development of Y-90 based brachytherapy products including AMICs Y-90 RadioGel™ device.

Products

Brachytherapy

Pursuant to the Battelle License, the Company has licensed certain exclusive rights to yttrium-90 (Y-90) polymer composite technology developed at Pacific Northwest National Laboratory, a leading research institute for government and commercial customers.  The license agreement grants the Company the exclusive right to manufacture and market products using the yttrium-90 isotope carried by an injectable water-based biodegradable polymer.  The use of yttrium 90 (Y-90) for the treatment of cancers is well established.

Subject to receipt of all required regulatory approvals from the FDA in the United States and analogous regulators outside of the United States, the Company plans to introduce a new Y-90-based brachytherapy product line for a range of applications for the delivery of a prescribed dose of radiation to a target site. If the Company receives FDA clearance for the Y-90 RadioGel™ device, subject to receipt of adequate financing, the Company will commence production, sales, and distribution of that product. Also, subject to receipt of adequate financing, the Company intends then to seek FDA clearance for the two additional products described below, each of which also incorporates the patented technologies licensed from Battelle. Even if the FDA grants clearance for the Y-90 RadioGel™ device there can be no assurance the FDA would also grant clearance for either or both of the foregoing products.

Y-90 RadioGel™ device - combines Y-90 particles with a polymer carrier that may be injected directly into the tumor.

Y-90 Fast-Resorbable Polymer Seeds - Y-90 contained within a polymer seed, as opposed to metal or glass.  This product would be used in place of treating cancers with currently marketed titanium or glass seeds.

Y-90 Polymer Topical Paste – designed to be applied directly to tissue surfaces after surgical tumor removals (also referred to as “resections”) to treat residual tumor cells.

Based upon its studies and analyses, or general application of experience with current brachytherapy devices and yttrium-90, the Company believes that if it is able to obtain regulatory approval and adequate financing to commercialize our products, our brachytherapy products are likely to offer the following benefits, among others, for patients and medical professionals:

In June 2015, the FDA notified the Company that the de novo submitted on December 23, 2014 for its Y-90 RadioGel™ device pursuant to Section 513(f)(2) of the U.S. Food, Drug and Cosmetic Act (the “Act”)was not accepted. The Company had several formal and informal interactions with the FDA during the second half of 2015 to clarify the agency’s expectations for data and testing to be provided in a future filing. The Company has incorporated the feedback from the FDA into its continued and active product development and commercialization efforts, utilizing its partnership with IsoTherapeutics Group.

Competitors and Markets

There are established competitors in all of the markets in which the Company has products or currently plans to have products.

Brachytherapy

Brachytherapy is the use of radiation to destroy cancerous tumors by placing a radiation source inside or next to the treatment area.  According to the 2014 MEDraysintell report, the global market for brachytherapy reached US$ 680 million in 2013 and is projected to reach $2.4 billion by 2030.  It is estimated that the U.S. market represents approximately half of the global market.  The Company believes there are significant opportunities in prostate, breast, liver, pancreatic, head and neck cancers.  The 2014 U.S. estimated new cases of cancer according to the American Cancer Society are 233,000 prostate, 235,030 breast, 31,190 liver, and 46,420 pancreas.

There are a wide variety of cancer treatments approved and marketed in the U.S. and globally. General categories of treatment include surgery, chemotherapy, radiation therapy and immunotherapy. These products have a diverse set of success rates and side effects. The Company’s products fall into a particular type of radiation therapy called brachytherapy. There are a number of brachytherapy devices currently marketed in the U.S. and globally.  The traditional iodine-125 (I-125) and palladium-103 (Pd-103) technologies for brachytherapy are well entrenched with powerful market players controlling the market. The industry-standard I-125-based therapy was developed by Oncura, which is a unit of General Electric Company (NYSE:GE) Additionally, C.R. Bard, a major industry player competes in the I-125 brachytherapy marketplace. These market competitors are also involved in the distribution of Pd-103 based products.  Cs-131 brachytherapy products are sold by IsoRay (AMEX:ISR).  Several Y-90 therapies have been FDA approved including SIR-Spheres by Sirtex (OTC:SXMDF), TheraSphere by Biocompatibles UK (OTC:BCTBF) and Zevalin by Spectrum Pharmaceuticals (NASDAQ:SPPI).

Veterinary Brachytherapy

There are about 150 million pet dogs and cats in the United States. Nearly half of dogs and one third of cats are diagnosed with cancer at some point in their lifetime. The Veterinary Oncology & Hermatology Center in Norwalk, CT reports that cancer is the number one natural cause of death in older cats and dogs, accounting for nearly 50 percent of pet deaths each year. The American Veterinary Medical Association reports that half of the dogs ten years or older will die because of cancer. The National Cancer Institute reports that about six million dogs are diagnosed with cancer each year, translating to more than 16,000 a day. The average cost of treating tumors in dogs using radiation is $5,000-7,000 according to petcarerx.com.

There are oncology treatments available currently in the U.S. and globally for the veterinary market represent a similar, but smaller set of products than is available for the human market. 

Employees

As of December 31, 2015, the Company had six employees, including three full-time employees.  The Company utilizes eight to ten independent contractors to assist with its operations.  The Company does not have a collective bargaining agreement with any of its employees, and believes its relations with its employees are good. The Company is not current on payroll and requires additional funding to make past and current payroll payments.

Raw Materials

The Company manufactures research quantities of brachytherapy products or components of these products.  The Company obtains supplies, hardware, handling equipment and packaging from several different U.S. and foreign suppliers.  Some of the products the Company manufactures or intend to manufacture require purchasing raw materials from a limited number of suppliers, many of which are international suppliers. 

Customers

The Company’s sale for 2015 consisted of only Consulting Income.

The Company anticipates that potential customers for our potential brachytherapy products likely would include those institutions and individuals that currently purchase brachytherapy products or other oncology treatment products.

Patents, Trademarks, Licenses

License Agreement:

The Company has made the following investments in patent licenses and intellectual property during 2015:

No patent filing costs were capitalized during the twelve months ended December 31, 2015 and 2014. During the year ended December 31, 2013 the Company impaired $332,709 worth of patent and intellectual property. This left a total $35,482 of capitalized patents and intellectual property costs at December 31, 2015 and 2014. The patents are pending and are being developed, and as such, the patents and filing costs associated with them are not being amortized.  

In February 2011, the Company paid $5,000 for a one year option to negotiate an exclusive license agreement with Battelle Memorial Institute regarding its patents for the production of a radioactive polymer gel technology.  Effective March 2012, the Company entered into an exclusive license agreement with Battelle Memorial Institute regarding the use of a patented brachytherapy gel technology.  This license agreement requires a $17,500 nonrefundable license fee and a payment of a royalty based on a percent of gross sales for licensed products sold.  The agreement also requires payment of a minimum royalty amount to be paid each year starting with 2013.  

Research and Development

The costs incurred in the twelve months ended December 31, 2014 were $414,906 towards the Brachytherapy Project and $19,113 towards the Molybdenum Project, for a total cost of $434,019.  The costs incurred in the twelve months ended December 31, 2015 were $431,564 towards the Brachytherapy Project and $0 towards the Molybdenum Project, for a total cost of $431,564.  

Government Regulation

Significant areas of regulation and intervention include the following:

Environmental and Health Compliance.  

The Company is committed to conducting its activities so that there is no or only minimal impact to the environment; there is no assurance, however, that the Company’s activities will not at times result in liability under environmental and health regulations.

The current ongoing continuing costs of compliance are immaterial.  Future costs and expenses resulting from such liability may, however, materially negatively impact the Company’s operations and financial condition.  Overall, environmental and health laws and regulations will continue to affect the Company’s businesses worldwide.

Medical Device Regulation

In the United States, radioactive medical devices are regulated by the U.S. Food and Drug Administration (FDA) Center for Devices and Radiological Health (CDRH) under the Food and Drugs Act (CFR Title 21). Three categories of medical devices, Class I, Class II and Class III each of specific regulations that apply to the testing, approvals and marketing of such devices. In other countries there are also regulatory bodies that oversee the testing, approval and marketing of radiological devices.

Import/Export Regulation.  

The Company is subject to significant regulatory oversight of the Company’s import and export operations due to the nature of its product offerings.  Penalties for non-compliance can be significant, and violation can result in adverse publicity and financial risk for the Company.

Financial Accounting Standards.  

The Company’s financial results can be impacted by new or modified financial accounting standards.

Other Regulations.  

The Company’s operations are subject to rules and regulations administered by the U.S. Nuclear Regulatory Commission, Department of Energy, Food and Drug Administration, Department of Transportation, Department of Homeland Security, the Washington State Department of Health and other regulatory bodies.  To the extent that these regulations are or become burdensome, business development could be adversely affected. 

Available Information

The Company prepares and files annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and certain other information with the United States Securities and Exchange Commission (the “SEC”).  Persons may read and copy any materials the Company files with the SEC at the SEC’s public reference room at 100 F Street, NE, Washington D.C. 20549, on official business days during the hours of 10 a.m. to 3 p.m. Eastern Time.  Information may be obtained on the operation of the public reference room by calling the SEC at 1-800-SEC-0330.  The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at http://www.sec.gov.  Moreover, the Company maintains a website at http://www.isotopeworld.com that contains important information about the Company, including biographies of key management personnel, as well as information about the Company’s business.  This information is publicly available (i.e., not password protected) and is updated regularly. The content on any website referred to in this Form 10-K report is not incorporated by reference into this Form 10-K report, unless (and only to the extent) expressly so stated herein.

ITEM 1A. RISK FACTORS.

Any of the risk factors described below could cause the Company’s business or financial performance to differ from any expectations or other forward-looking statements set forth in this Form 10-K report.  Any of the risks described below, as well as other risks or uncertainties set forth elsewhere in this report could materially and adversely affect the Company’s business, operations, prospects, results of operation, financial condition, or the value of its stock or other securities.

RISKS ASSOCIATED WITH THE COMPANY’S BUSINESS

Our independent registered public accounting firm’s report on its financial statements questions the Company’s ability to continue as a going concern.

The Company’s independent registered public accounting firm’s report on the Company’s financial statements for the years ended December 31, 2015 and 2014 expresses doubt about the Company’s ability to continue as a going concern.  The report includes an explanatory paragraph stating that the Company has suffered recurring losses, used significant cash in support of its operating activities and, based on its current operating levels, require additional capital or significant restructuring to sustain its operation for the foreseeable future. There is no assurance that the Company will be able to obtain sufficient additional capital to continue its operations and to alleviate doubt about its ability to continue as a going concern. If the Company obtains additional financing, such funds may not be available on favorable terms and likely would entail considerable dilution to existing shareholders. Any debt financing, if available, may involve restrictive covenants that restrict its ability to conduct its business.  It is extremely remote that the Company could obtain any financing on any basis that did not result in considerable dilution for shareholders.  Inclusion of a “going concern qualification” in the report of its independent accountants or in any future report may have a negative impact on its ability to obtain debt or equity financing and may adversely impact its stock price.

A combination of our current financial condition and the FDA’s determinations to date regarding our brachytherapy products raise material concerns about ability to continue as a going concern.

The Company will not be able to continue as a going concern unless the Company obtains financing. Depending upon the amount of financing, if any, that the Company is able to obtain, the Company may not receive adequate funds to continue the approval process with the FDA.

The Company has generated operating losses since inception, which are expected to continue, and has increasing cash requirements, which it may be unable to satisfy.

The Company has generated material operating losses since inception.  The Company has had recurring net losses since inception which has resulted in a total Retained Earnings Accumulated Deficit of $54,247,231, including a net loss of $18,108,706 for the year ended December 31, 2014 and a net gain of $6,232,686 for the year ended December 31, 2015.  Historically, the Company has relied upon investor funds to maintain its operations and develop its business.  The Company needs to raise additional capital within the next quarter from investors for working capital as well as business expansion, and there is no assurance that additional investor funds will be available on terms acceptable to the Company, or at all.  If the Company is unable to unable to obtain additional financing to meet its working capital requirements, the Company likely would cease operations.

The Company requires funding of at least $1.5 million per year to maintain current operating activities. Over the next 12-24 months, the Company believes it will cost approximately $5 million to $10 million to fund: (1) the FDA approval process and initial deployment of the brachytherapy products and (2) initiate regulatory approval processes outside of the United States. The continued deployment of the brachytherapy products and a worldwide regulatory approval effort will require additional resources and personnel.  The principal variables in the timing and amount of spending for the brachytherapy products in the next 12-24 months will be the FDA’s classification of the Company’s brachytherapy products as Class II or Class III devices (or otherwise) and any requirements for additional studies which may possibly include clinical studies.  Thereafter, the principal variables in the amount of the Company’s spending and its financing requirements would be the timing of any approvals and the nature of the Company’s arrangements with third parties for manufacturing, sales, distribution and licensing of those products and the products’ success in the U.S. and elsewhere. The Company intends to fund its activities through strategic transactions such as licensing and partnership agreements or additional capital raises. 

Recent economic events, including the inherent instability in global capital markets, as well as the lack of liquidity in the capital markets, could adversely impact the Company’s ability to obtain financing and its ability to execute its business plan.  

The Company has a limited operating history, which may make it difficult to evaluate its business and prospects.

The Company has a limited operating history upon which one can base an evaluation of its business and prospects.  As a company in the development stage, there are substantial risks, uncertainties, expenses and difficulties to which its business is subject.  To address these risks and uncertainties, the Company must do the following:

There is no assurance that the Company will achieve or maintain profitable operations or that the Company will obtain or maintain adequate working capital to meet its obligations as they become due.  The Company cannot be certain that its business strategy will be successfully developed and implemented or that the Company will successfully address the risks that face its business.  In the event that the Company does not successfully address these risks, its business, prospects, financial condition, and results of operations could be materially and adversely affected.

The Company’s new products are regulated and require appropriate clearances and approvals to be marketed in the U.S. and globally.

There is no assurance that the FDA or other global regulatory authorities will grant the Company permission to market the Company’s products, including the Company’s brachytherapy Y-90 RadioGel™ device, Y-90 Fast-Resorbable Polymer Seeds and Y-90 Polymer Topical Paste.

The Company has been working with the FDA to obtain clearance for its brachytherapy Y-90 RadioGel™ device, but no promises or assurances have been received.   It is important to note that the FDA has determined that the Y-90 RadioGel™ device is a medical device.  On December 23, 2014 the Company announced that it submitted a de novo to the FDA for marketing clearance for its patented Y-90 RadioGel™ device pursuant to Section 513(f)(2) of the U.S. Food, Drug and Cosmetic Act (the “Act”). In June 2015 the FDA notified the Company the de novo was not granted. The Company intends to generated additional data and file a new de novo. In February 2014, the FDA found the same device under Section 510(k) of the Act not substantially equivalent, and concluded that the device is classified by statute as a Class III medical device, unless the device is reclassified. By filing the de novo, the Company is seeking reclassification of the product to Class II. If the de novo is granted, as a regulatory matter, the device could be immediately marketed in the United States, though, as a practical matter, the Company would have to secure funding and commercial arrangements before marketing could commence. If the de novo is declined and if the Company obtains funding to permit it to continue operations, the Company will explore steps toward seeking approval for the device as a Class III medical device. Generally, the time period and cost of seeking approval as a Class III medical device is materially greater than the time period and cost of seeking approval as a Class II medical device.  If the Company seeks approval as a Class III device, human clinical trials will be necessary.  Generally, human trials for Class III products are larger, of longer duration and more costly than those for Class II devices.  If human clinical trials are necessary, there will be additional cost and time to reach marketing clearance or approval.  Unless the Company obtains sufficient funding it will be unable to do the foregoing activities.  There can be no assurance that the product will be approved as either a Class II or Class III device by the FDA even if additional data is provided. There can be no assurance that the Company will receive FDA approval, or the timing thereof.

If the Company is successful in increasing the size of its organization, the Company may experience difficulties in managing growth.

The Company is a small organization with a minimal number of employees.  If the Company is successful, it may experience a period of significant expansion in headcount, facilities, infrastructure and overhead and further expansion may be required to address potential growth and market opportunities.  Any such future growth will impose significant added responsibilities on members of management, including the need to improve the Company’s operational and financial systems and to identify, recruit, maintain and integrate additional managers.  The Company’s future financial performance and its ability to compete effectively will depend, in part, on the ability to manage any future growth effectively.

The Company is heavily dependent on its key personnel and consultants.  The loss of any of these key personnel or consultants could have a material adverse effect on the Company’s business, results of operations and financial condition.

The Company’s success is heavily dependent on the continued active participation of its current executive officers and certain consultants and collaborating scientists.  Certain key employees have no written employment contracts. The Company does not have key-man insurance on any of its executive officers or consultants.  Loss of the services of any one or more of its executive officers or consultants could have a material adverse effect upon the Company’s business, results of operations and financial condition.

If the Company is unable to hire and retain additional qualified personnel, the business and financial condition may suffer.

The Company’s success and achievement of its growth plans depend on its ability to recruit, hire, train and retain highly qualified technical, scientific, regulatory and managerial employees, consultants and advisors.  Competition for qualified personnel among pharmaceutical and biotechnology companies is intense, and an inability to attract and motivate additional highly skilled personnel required for the expansion of the Company’s activities, or the loss of any such persons, could have a material adverse effect on its business, results of operations and financial condition.

The Company’s revenues have been derived from sales made to a small number of customers.  The Company has discontinued prior operations and to succeed would need a materially larger number of customers.

During 2014, the Company ceased all previous manufacturing and sales activities. Our sales for the year ended December 31, 2015 and 2014 consisted of only Consulting Income. The Company’s consulting revenues for the years ended December 31, 2014 and 2015 were made to one customer, and those sales constituted 100.0% and 100.0%, respectively, of total revenues for those years. There is no assurance that the Company will be successful in achieving an expansion of the customers purchasing its products and services.

 Many of the Company’s competitors have greater resources and experience than the Company has.

Many of the Company’s competitors have greater financial resources, longer history, broader experience, greater name recognition, and more substantial operations than the Company has, and they represent substantial long-term competition for us.  The Company’s competitors may be able to devote more financial and human resources than the Company can to research, new product development, regulatory approvals, and marketing and sales.  The Company’s competitors may develop or market products that are viewed by customers as more effective or more economical than the Company’s products.  There is no assurance that the Company will be able to compete effectively against current and future competitors, and such competitive pressures may adversely affect the Company’s business and results of operations.

The Company’s future revenues depend upon acceptance of its current and future products in the markets in which they compete.

The Company’s future revenues depend upon receipt of financing, regulatory approval and the successful production, marketing, and sales of the various isotopes the Company might market in the future.  The rate and level of market acceptance of each of these products, if any, may vary depending on the perception by physicians and other members of the healthcare community of its safety and efficacy as compared to that of any competing products; the clinical outcomes of any patients treated; the effectiveness of its sales and marketing efforts in the United States, Europe, Far East, Middle East, and Russia; any unfavorable publicity concerning its products or similar products; the price of the Company’s products relative to other products or competing treatments; any decrease in current reimbursement rates from the Centers for Medicare and Medicaid Services or third-party payers; regulatory developments related to the manufacture or continued use of its products; availability of sufficient supplies to either purchase or manufacture its products; its ability to produce sufficient quantities of its products; and the ability of physicians to properly utilize its products and avoid excessive levels of radiation to patients.  Any material adverse developments with respect to the commercialization of any such products may adversely affect revenues and may cause the Company to continue to incur losses in the future.

The Company will in the future rely heavily on a limited number of suppliers.

Some of the products the Company might market and components thereof are currently available only from a limited number of suppliers, several of which are international suppliers.  Failure to obtain deliveries from these sources could have a material adverse effect on the Company’s ability to operate.

The Company may incur material losses and costs as a result of product liability claims that may be brought against it.

The Company faces an inherent business risk of exposure to product liability claims in the event that products supplied by the Company fail to perform as expected or such products result, or is alleged to result, in bodily injury.  Any such claims may also result in adverse publicity, which could damage the Company’s reputation by raising questions about the safety and efficacy of its products, and could interfere with its efforts to market its products.  A successful product liability claim against the Company in excess of its available insurance coverage or established reserves may have a material adverse effect on its business.  Although the Company currently maintains liability insurance in amounts it believes are commercially reasonable, any product liability the Company may incur may exceed its insurance coverage.

The Company is subject to the risk that certain third parties may mishandle the Company’s products.

If the Company markets products, the Company likely will rely on third parties, such as commercial air courier companies, to deliver the products, and on other third parties to package the products in certain specialized packaging forms requested by customers.  The Company thus would be subject to the risk that these third parties may mishandle its product, which could result in material adverse effects, particularly given the radioactive nature of some of the products.

The Company’s operations expose it to the risk of material environmental liabilities.

The Company is subject to potentially material liabilities related to the remediation of environmental hazards and to personal injuries or property damages that may be caused by hazardous substance releases and exposures.  The Company is subject to various federal, state, local and foreign government requirements regulating the discharge of materials into the environment or otherwise relating to the protection of the environment.  These laws and regulations can impose substantial fines and criminal sanctions for violations, and can require installation of costly equipment or operational changes to limit emissions and/or decrease the likelihood of accidental hazardous substance releases.  The Company expects to incur capital and operating costs to comply with these laws and regulations.  In addition, changes in laws, regulations and enforcement of policies, the discovery of previously unknown contamination or new technology or information related to individual sites, or the imposition of new clean-up requirements or remedial techniques may require the Company to incur costs in the future that would have a negative effect on its financial condition or results of operations.  Operational hazards could result in the spread of contamination within the Company’s facility and require additional funding to correct.

The Company is subject to uncertainties regarding reimbursement for use of its products.

Hospitals and freestanding clinics may be less likely to purchase the Company’s products if they cannot be assured of receiving favorable reimbursement for treatments using its products from third-party payers, such as Medicare and private health insurance plans.  Third-party payers are increasingly challenging the pricing of certain medical services or devices, and there is no assurance that they will reimburse the Company’s customers at levels sufficient for it to maintain favorable sales and price levels for the Company’s products.  There is no uniform policy on reimbursement among third-party payers, and there is no assurance that the Company’s products will continue to qualify for reimbursement from all third-party payers or that reimbursement rates will not be reduced.  A reduction in or elimination of third-party reimbursement for treatments using the Company’s products would likely have a material adverse effect on the Company’s revenues.

The Company’s future growth is largely dependent upon its ability to develop new technologies that achieve market acceptance with appropriate margins.

The Company’s business operates in global markets that are characterized by rapidly changing technologies and evolving industry standards.  Accordingly, future growth rates depends upon a number of factors, including the Company’s ability to (i) identify emerging technological trends in the Company’s target end-markets, (ii) develop and maintain competitive products, (iii) enhance the Company’s products by adding innovative features that differentiate the Company’s products from those of its competitors, and (iv) develop, manufacture and bring products to market quickly and cost-effectively.  The Company’s ability to develop new products based on technological innovation can affect the Company’s competitive position and requires the investment of significant resources.  These development efforts divert resources from other potential investments in the Company’s business, and they may not lead to the development of new technologies or products on a timely basis or that meet the needs of the Company’s customers as fully as competitive offerings.  In addition, the markets for the Company’s products may not develop or grow as it currently anticipates.  The failure of the Company’s technologies or products to gain market acceptance due to more attractive offerings by the Company’s competitors could significantly reduce the Company’s revenues and adversely affect the Company’s competitive standing and prospects.

The Company may rely on third parties to represent it locally in the marketing and sales of its products in international markets and its revenue may depend on the efforts and results of those third parties.

The Company’s future success may depend, in part, on its ability to enter into and maintain collaborative relationships with one or more third parties, the collaborator’s strategic interest in the Company’s products and the Company’s products under development, and the collaborator’s ability to successfully market and sell any such products.  The Company intends to pursue collaborative arrangements regarding the marketing and sales of its products; however, it may not be able to establish or maintain such collaborative arrangements, or if it is able to do so, the Company’s collaborators may not be effective in marketing and selling its products.  To the extent that the Company decides not to, or is unable to, enter into collaborative arrangements with respect to the sales and marketing of its products, significant capital expenditures, management resources and time will be required to establish and develop an in-house marketing and sales force with technical expertise.  To the extent that the Company depends on third parties for marketing and distribution, any revenues received by the Company will depend upon the efforts and results of such third parties, which may or may not be successful.

The Company may pursue strategic acquisitions that may have an adverse impact on its business.

Executing the Company’s business strategy may involve pursuing and consummating strategic transactions to acquire complementary businesses or technologies.  In pursuing these strategic transactions, even if the Company does not consummate them, or in consummating such transactions and integrating the acquired business or technology, the Company may expend significant financial and management resources and incur other significant costs and expenses.  There is no assurance that any strategic transactions will result in additional revenues or other strategic benefits for the Company’s business.  The Company may issue the Company’s stock as consideration for acquisitions, joint ventures or other strategic transactions, and the use of stock as purchase consideration could dilute the interests of its current stockholders.  In addition, the Company may obtain debt financing in connection with an acquisition.  Any such debt financing may involve restrictive covenants relating to capital-raising activities and other financial and operational matters, which may make it more difficult for the Company to obtain additional capital and pursue business opportunities, including potential acquisitions.  In addition, such debt financing may impair the Company’s ability to obtain future additional financing for working capital, capital expenditures, acquisitions, general corporate or other purposes, and a substantial portion of cash flows, if any, from the Company’s operations may be dedicated to interest payments and debt repayment, thereby reducing the funds available to the Company for other purposes.

The Company will need to hire additional qualified accounting personnel in order to remediate a material weakness in its internal control over financial accounting, and the company will need to expend any additional resources and efforts that may be necessary to establish and to maintain the effectiveness of its internal control over financial reporting and its disclosure controls and procedures.

As a public company, the Company is subject to the reporting requirements of the Securities Exchange Act of 1934 and the Sarbanes-Oxley Act of 2002.  The Company’s management is required to evaluate and disclose its assessment of the effectiveness of the Company’s internal control over financial reporting as of each year-end, including disclosing any “material weakness” in the Company’s internal control over financial reporting.  A material weakness is a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected.  As a result of its assessment, management has determined that there is a material weakness due to the lack of segregation of duties and, due to this material weakness, management concluded that, as of December 31, 2014 and 2015, the Company’s internal control over financial reporting was ineffective. This material weakness was first identified in the Company’s Form 10-K/A amended annual report for the year ended December 31, 2008. This material weakness has the potential of adversely impacting the Company’s financial reporting process and the Company’s financial reports.  Because of this material weakness, management also concluded that the Company’s disclosure controls and procedures were ineffective as of December 31, 2014 and 2015.  See Item 9A of this Form 10-K report.  The Company needs to hire additional qualified accounting personnel in order to resolve this material weakness.  The Company also will need to expend any additional resources and efforts that may be necessary to establish and to maintain the effectiveness of the Company’s internal control over financial reporting and disclosure controls and procedures.

The Company may be unable to make timely license and patent payments

Patent costs associated with existing and new technology are significant.  Existing patent and license fees must be paid for the Company to maintain rights to the technology.  The Company would forfeit its exclusive rights to licensed technologies without paying patent and rights fees in a timely fashion.  There is no assurance of sufficient capital to meet ongoing legal costs associated with the patent costs for the Company’s technology.

The Company’s patented or other technologies may infringe on other patents, which may expose it to costly litigation.

It is possible that the Company’s patented or other technologies may infringe on patents or other rights owned by others.  The Company may have to alter its products or processes, pay licensing fees, defend infringement actions or challenge the validity of the patents in court, or cease activities altogether because of patent rights of third parties, thereby causing additional unexpected costs and delays to the Company.  Patent litigation is costly and time consuming, and the Company may not have sufficient resources to pursue such litigation.  If the Company does not obtain a license under such patents, if it is found liable for infringement, or if it are not able to have such patents declared invalid, the Company may be liable for significant money damages, may encounter significant delays in bringing products to market or may be precluded from participating in the manufacture, use or sale of products or methods of treatment requiring such licenses.

Protecting the Company’s intellectual property is critical to its innovation efforts.

The Company owns or has a license to use several U.S. and foreign patents and patent applications, trademarks and copyrights.  The Company’s intellectual property rights may be challenged, invalidated or infringed upon by third parties, or it may be unable to maintain, renew or enter into new licenses of third party proprietary intellectual property on commercially reasonable terms.  In some non-U.S. countries, laws affecting intellectual property are uncertain in their application, which can adversely affect the scope or enforceability of the Company’s patents and other intellectual property rights.  Any of these events or factors could diminish or cause the Company to lose the competitive advantages associated with the Company’s intellectual property, subject the Company to judgments, penalties and significant litigation costs, or temporarily or permanently disrupt its sales and marketing of the affected products or services.

The Company may not be able to protect its trade secrets and other unpatented proprietary technology, which could give competitors an advantage.

The Company relies upon trade secrets and other unpatented proprietary technology.  The Company may not be able to adequately protect its rights with regard to such unpatented proprietary technology, or competitors may independently develop substantially equivalent technology.  The Company seeks to protect trade secrets and proprietary knowledge, in part through confidentiality agreements with its employees, consultants, advisors and collaborators.  Nevertheless, these agreements may not effectively prevent disclosure of the Company’s confidential information and may not provide the Company with an adequate remedy in the event of unauthorized disclosure of such information, and as a result the Company’s competitors could gain a competitive advantage.

General economic conditions in markets in which the Company does business can impact the demand for the Companies goods and services.  Decreased demand for the Companies products and services could have a negative impact on its financial performance and cash flow.

Demand for the Company’s products and services, in part, depends on the general economic conditions affecting the countries and industries in which the Company does business.  A downturn in economic conditions in a country or industry that the Company serves may adversely affect the demand for the Company’s products and services, in turn negatively impacting the Company’s operations and financial results.  Further, changes in demand for the Company’s products and services can magnify the impact of economic cycles on the Company’s businesses.  Unanticipated contract terminations by current customers can negatively impact operations, financial results and cash flow.  The Company’s earnings, cash flow and financial position are exposed to financial market risks worldwide, including interest rate and currency exchange rate fluctuations and exchange rate controls.   Fluctuations in domestic and world financial markets could adversely affect interest rates and impact the Company’s ability to obtain credit or attract investors.

The Company is subject to extensive government regulation in jurisdictions around the world in which it does business. Regulations address, among other things, environmental compliance, import/export restrictions, healthcare services, taxes and financial reporting, and those regulations can significantly increase the cost of doing business, which in turn can negatively impact operations, financial results and cash flow.

If the Company is successful in expanding its manufacturing capability, the Company will be subject to extensive government regulation and intervention both in the United States and in all foreign jurisdictions in which it conducts business.  Compliance with applicable laws and regulations will result in higher capital expenditures and operating costs, and changes to current regulations with which the Company complies can necessitate further capital expenditures and increases in operating costs to enable continued compliance.  Additionally, from time to time, the Company may be involved in proceedings under certain of these laws and regulations.  Foreign operations are subject to political instabilities, restrictions on funds transfers, import/export restrictions, and currency fluctuation.

Volatility in raw material and energy costs, interruption in ordinary sources of supply, and an inability to recover from unanticipated increases in energy and raw material costs could result in lost sales or could increase significantly the cost of doing business.

Market and economic conditions affecting the costs of raw materials, utilities, energy costs, and infrastructure required to provide for the delivery of the Company’s products and services are beyond the Company’s control.  Any disruption or halt in supplies, or rapid escalations in costs, could adversely affect the Company’s ability to manufacture products or to competitively price the Company’s products in the marketplace.  To date, the ultimate impact of energy costs increases have been mitigated through price increases or offset through improved process efficiencies; however, continuing escalation of energy costs could have a negative impact upon the Company’s business and financial performance.

The Company’s common stock is listed on the OTC Bulletin Board. Failure to develop or maintain a more active trading market may negatively affect the value of the Company’s common stock, may deter some potential investors from purchasing the Company’s common stock or other equity securities, and may make it difficult or impossible for stockholders to sell their shares of common stock.

The Company’s average daily volume of shares traded for the years ended December 31, 2015 and 2014 was 40,392,679 and 20,161,465, respectively.  Failure to develop or maintain an active trading market may negatively affect the value of the Company’s common stock, may make some potential investors unwilling to purchase the Company’s common stock or equity securities that are convertible into or exercisable for the Company’s common stock, and may make it difficult or impossible for the Company’s stockholders to sell their shares of common stock and recover any part of their investment.

RISKS RELATED TO THE COMPANY’S COMMON STOCK

The Company’s outstanding securities, the stock or securities that it may become obligated to issue under existing agreements, and certain provisions of those securities, may cause immediate and substantial dilution to existing stockholders and may make it more difficult to raise additional equity capital.

The Company had 1,999,998,519 shares of common stock outstanding on May 13, 2016.  The Company also had outstanding on that date derivative securities consisting of options, warrants, and convertible notes that if they had been exercised and converted in full on May 13, 2016, would have resulted in the issuance of up to 1,470,077,392 additional shares of common stock.  However the Company has been in negotiations with some of the holders of convertible notes and has successfully reached agreements, subsequent to December 31, 2015, with some of the note holders that would reduce the 1,470,077,392 additional shares of common stock by 680,233,376 shares of common stock. The issuance of shares upon the exercise of options or the conversion of convertible notes may result in substantial dilution to each stockholder by reducing that stockholder’s percentage ownership of the Company’s total outstanding common stock.  See Item 13 of this Form 10-K report regarding its convertible notes.  Additionally, the Company has outstanding notes that if not prepaid by specific dates entitle the holder to convert the principal and accrued interest into common stock at 61% of an average trading price of the Company’s common stock prior to conversion as provided in the notes. See Note 11 of the Notes to its Financial Statements included in this Form 10-K report. The issuance of some or all of those warrants and any exercise of those warrants will have the effect of further diluting the percentage ownership of the Company’s other stockholders. That agreement also provides for stock compensation for consulting services. The existence and terms of these derivative securities and other obligations may make it more difficult for the Company to raise additional capital through the sale of stock or other equity securities.

Future sales of the Company’s stock, including sales following exercise or conversion of derivative securities, or the perception that such sales may occur, may depress the price of common stock and could encourage short sales.

The sale or availability for sale of substantial amounts of the Company’s shares in the public market, including shares issuable upon exercise of options or warrants or upon the conversion of convertible securities, or the perception that such sales may occur, may adversely affect the market price of the Company’s common stock.  Any decline in the price of the Company’s common stock may encourage short sales, which could place further downward pressure on the price of the Company’s common stock.

The Company’s authorized common stock is insufficient to meet its obligations

As of December 31, 2015 there was an insufficient amount of the Company’s authorized common stock to satisfy the potential number of shares that would be required to satisfy the outstanding options, warrants and convertible debt into common stock. As a result, the Company recorded a liability in the amount of $852,091, offset by $852,091 of equity. There are ongoing discussions with some of the Company’s lenders regarding alternatives to rectify the situation. There can be no assurance that a reasonable outcome will be reached.

The Company’s outstanding securities, the stock or securities that it may become obligated to issue under existing agreements, and certain provisions of those securities, may cause immediate and substantial dilution to existing stockholders and may make it more difficult to raise additional equity capital.

The Company had 1,999,998,519 shares of common stock outstanding on May 13, 2016.  The Company also had outstanding on that date derivative securities consisting of options, warrants, and convertible notes that if they had been exercised and converted in full on May 13, 2016, would have resulted in the issuance of up to 1,1470,077,392 additional shares of common stock without factoring in the par value limitation as required under Delaware law.  The issuance of shares upon the exercise of options or the conversion of convertible notes may result in substantial dilution to each stockholder by reducing that stockholder’s percentage ownership of the Company’s total outstanding common stock.   See Item 13 of this Form 10-K report regarding its convertible notes.  Additionally, the Company has outstanding notes that if not prepaid by specific dates entitle the holder to convert the principal and accrued interest into common stock at 61% of an average trading price of the Company’s common stock prior to conversion as provided in the notes. See Note 11 of the Notes to its Financial Statements included in this Form 10-K report. The existence and terms of these derivative securities and other obligations may make it more difficult for the Company to raise additional capital through the sale of stock or other equity securities.

The Company, as a Delaware Corporation, is subject to the laws of that state.  Under Delaware law, the Company may not issue shares for a value less than par value.  Certain issuances that occurred in the fourth quarter of 2014 were issued in error below par value in violation of Delaware Law.  The Company intends to enforce the Delaware par value limitation, and to remedy any transactions that occurred below par in 2014. Under this limitation, the conversion and exercise floor would then consist of 1,313,292,440 shares and the Company anticipates that the convertible note holders will either deliver to the Company the excess shares, or deliver cash, or have any remaining principal and interest lowered by the equivalent dollar amount that is owed to the Company as a result of the excess shares issued to these holders.  The outcome and timing related to Company’s enforcement of the par value limitation on its convertible securities cannot be determined at this time.

The Company’s stock price is likely to be volatile.

For the year ended December 31, 2015, the reported low closing price for the Company’s common stock was $0.00014 per share, and the reported high closing price was $0.049 per share.  For the year ended December 31, 2014, the reported low closing price for the Company’s common stock was $0.0009 per share, and the reported high closing price was $0.12 per share.  There is generally significant volatility in the market prices, as well as limited liquidity, of securities of early stage companies, particularly early stage medical product companies.  Contributing to this volatility are various events that can affect the Company’s stock price in a positive or negative manner.  These events include, but are not limited to: governmental approvals, refusals to approve, regulations or other actions; market acceptance and sales growth of the Company’s products; litigation involving the Company or the Company’s industry; developments or disputes concerning the Company’s patents or other proprietary rights; changes in the structure of healthcare payment systems; departure of key personnel; future sales of its securities; fluctuations in its financial results or those of companies that are perceived to be similar to us; investors’ general perception of us; and general economic, industry and market conditions.  If any of these events occur, it could cause the Company’s stock price to fall, and any of these events may cause the Company’s stock price to be volatile.

The Company’s common stock is subject to the “Penny Stock” rules of the SEC and the trading market in its securities is limited, which makes transactions in its common stock cumbersome and may reduce the value of an investment in the Company’s stock.   

The Securities and Exchange Commission has adopted Rule 3a51-1 which establishes the definition of a “penny stock,” for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions.  For any transaction involving a penny stock, unless exempt, Rule 15g-9 requires that a broker or dealer approve a person’s account for transactions in penny stocks and that the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.

In order to approve a person’s account for transactions in penny stocks, the broker or dealer must obtain financial information and investment experience and objectives of the person and must make a reasonable determination that the transactions in penny stocks are suitable for that person and that the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.

 The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which sets forth the basis on which the broker or dealer made the suitability determination, and that the broker or dealer received a signed, written agreement from the investor prior to the transaction.

Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules.  This may make it more difficult for investors to dispose of the Company’s common stock and may cause a decline in the market value of its stock.

Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions.  Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.

The Companies controlling stockholders may exercise significant control over the Company.

The Company’s directors, executive officers and principal stockholders beneficially own approximately 3.3% of the Company’s common stock and 41.5% of the Company’s preferred shares, effectively owning 20.5% should all of the preferred be converted into common.

As a result of the Company issuing preferred stock, the rights of holders of the Company’s common stock and the value of the Company’s common stock may be adversely affected.

The Company’s board of directors is authorized to issue classes or series of preferred stock, without any action on the part of the stockholders.  The Company’s board of directors also has the power, without stockholder approval, to set the terms of any such classes or series of preferred stock, including voting rights, dividend rights and preferences over the common stock with respect to dividends or upon the liquidation, dissolution or winding-up of its business, and other terms.  The Company has issued preferred stock that has a preference over the common stock with respect to the payment of dividends or upon liquidation, dissolution or winding-up, and with respect to voting rights.  In accordance with that and with the issuance of preferred stock the voting rights the common stockholders voting rights have been diluted and it is possible that the rights of holders of the common stock or the value of the common stock has been adversely affected. 

The Company does not expect to pay any dividends on common stock for the foreseeable future.

The Company has not paid any cash dividends on its common stock to date and does not anticipate it will pay cash dividends on its common stock in the foreseeable future. Accordingly, stockholders must be prepared to rely on sales of their common stock after price appreciation to earn an investment return, which may never occur.  Any determination to pay dividends in the future will be made at the discretion of the Company’s board of directors and will depend on the Company’s results of operations, financial conditions, contractual restrictions, restrictions imposed by applicable law, and other factors that the Company’s board deems relevant.

ITEM 1B. UNRESOLVED STAFF COMMENTS.

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

ITEM 2. PROPERTIES.

The Company’s headquarters has office space which makes it adequate for the Company to conduct its ongoing business operations.

In January 2014, the Company entered into a 12-month lease for its corporate offices for a monthly rent of $1,500 from an entity controlled by Carlton M. Cadwell, a significant shareholder and a Director of the Company. The lease expired in December of 2014 however the Company continues to rent the space on a month-to-month basis.

ITEM 3. LEGAL PROCEEDINGS.

There has been an ongoing dispute with the landlord, Rob and Maribeth Myers, regarding the Production Center rent.  During 2016 the Company reached a Settlement Agreement with regards to this dispute resulting in a payment of $438,830 for rent, interest, and costs.

There is an ongoing dispute with BancLease and Washington Trust Bank regarding application of lease payments to the principal loan amount for the linear accelerator, and the Company believes it has overpaid by approximately $300,000. At this time, the Company believes it will prevail in this matter however there can be no assurance as to the outcome of this event.

As of December 31, 2015 there was an insufficient amount of the Company’s authorized common stock to satisfy the number of shares that would have been required for the outstanding options, warrants and conversion of debts. As a result, the Company recorded a liability in the amount of $852,091, offset by $11,593 and $840,499 to Common Stock and Paid in Capital, respectively. There are ongoing discussions with some of the Company’s lenders regarding alternatives to rectify the situation.  There can be no assurance that a reasonable outcome can be reached.

In addition there are disputes related to approximately $180,000 principle worth of toxic notes. The Company believes it has affirmative defenses and is actively working to address these disputes.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Market Information

The Company’s common stock is traded on the OTC Bulletin Board under the symbol “ADMD.OB.”  The following table sets forth, in U.S. dollars the high and low closing prices for each of the calendar quarters indicated, as reported by the Bulletin Board for the past two fiscal years.  The prices in the table may not represent actual transactions and do not include retail markups, markdowns or commissions.

Holders

As of May 13, 2016 there were 1,999,998,519 shares of common stock outstanding and approximately 200 stockholders of record.

Dividend Policy

The Company has not paid any cash dividends on its common stock to date and do not anticipate it will pay cash dividends on its common stock in the foreseeable future.  The payment of dividends in the future will be contingent upon revenues and earnings, if any, capital requirements, and its general financial condition.  The payment of any dividends will be within the discretion of the board of directors.  It is the present intention of the board of directors to retain all earnings, if any, for use in the business operations.  Accordingly, the board does not anticipate declaring any dividends on its common stock in the foreseeable future.

Securities Authorized for Issuance Under Equity Compensation Plans

The Company currently does not have any compensation plan under which equity securities are authorized for issuance.  The Company has however granted and issued options and warrants to purchase and acquire shares of its common stock.  The following table sets forth information as of December 31, 2015 with respect to the Company’s equity compensation plans previously approved by stockholders and equity compensation plans not previously approved by stockholders.

Recent Sales of Unregistered Securities

During the months of October, November, and December 2015, the Company issued 10,000 Series A preferred shares for $10,000.

During the months of October, November, and December 2015, the Company issued 207,833 Series A preferred shares in exchange for $47,700 of convertible debt, $9,812 of accrued interest, and loan fees on $1,360,413 of convertible debt.

During the months of October, November, and December 2015, the Company issued 521,797 Series A preferred shares in exchange for $262,500 of accrued payroll to the Company's CEO and CFO, $370,197 of accounts payable, and $334,880 of consulting services.

Subsequent to the Period Covered by this Report

In the months of January through May 2016 the Company settled $1,742,082 in convertible notes plus $110,880 of accrued interest in exchange for a combination of $120,000 cash, 504,852 Series A Preferred shares, and $500,000 common stock warrants.

In the months of January through May 2016 the Company received $528,000 cash in exchange for 8% convertible notes due June 30, 20116.

In the months of January through May 2016 the Company received $159,695 cash in exchange for 10%, one year, promissory notes.

In the months of January through May 2016 the Company issued 53,840 Series A Preferred shares as loan fees on $673,000 of convertible notes.

In the months of January through May 2016 the Company issued 3,064,397 shares of unrestricted common stock in exchange for warrants related to debt raised in 2015.

In the months of January through May 2016 the Company received $221,853 in exchange for 221,853 Series A Preferred shares.

ITEM 6. SELECTED FINANCIAL DATA.

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

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion and analysis is intended as a review of significant factors affecting the Company’s financial condition and results of operations for the periods indicated.  The discussion should be read in conjunction with the Company’s financial statements and the notes presented herein.  In addition to historical information, the following Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that involve risks and uncertainties. The Company’s actual results could differ significantly from those anticipated in these forward-looking statements as a result of the risk factors set forth above in Item 1A and other factors discussed in this Form 10-K report.

Results of Operations

Comparison for the Year Ended December 31, 2015 and December 31, 2014

The following table sets forth information from the Company’s statements of operations for the years ended December 31, 2015 and 2014.

Revenue

Consulting revenue was $24,108 for the year ended December 31, 2015 and 2014.  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.

Operating Expenses

Operating expenses for the twelve months ended December 31, 2015 and 2014 were $2,601,718 and $1,979,129, respectively. The increase in operating expenses from 2014 to 2015 can be attributed largely to professional fees ($741,375 for the twelve months ended December 31, 2015 versus $530,797 for the twelve months ended December 31, 2014), research and development ($149,650 for the twelve months ended December 31, 2015 versus $44,268 for the twelve months ended December 31, 2014), and general and administrative expenses ($944,653 for the twelve months ended December 31, 2015 versus $401,295 for the twelve months ended December 31, 2014). These increases were partially offset by decreases to stock options and warrants granted ($80,635 for the twelve months ended December 31, 2015 versus $232,748 for the twelve months ended December 31, 2014), depreciation and amortization expense ($5,672 for the twelve months ended December 31, 2015 versus $11,992 for the twelve months ended December 31, 2014), sales and marketing expenses ($0 for the twelve months ended December 31, 2015 versus $1,300 for the twelve months ended December 31, 2014), and in payroll expenses ($679,259 for the twelve months ended December 31, 2015 versus $755,625 for the twelve months ended December 31, 2014).

Operating expenses for the twelve months ended December 31, 2015 and 2014 consists of the following:

Non-Operating Income (Expense)

Non-operating income (expense) for the twelve months ended December 31, 2015 varied from the twelve months ended December 31, 2014 primarily due to an decrease in loss on settlement of debt from $(638,491) in 2014 versus $3,562,067 gain on settlement of debt in 2015, a $(10,566,120) loss on derivative liability in 2014 versus a $7,887,025 gain on derivative liability in 2015, and an increase in income from grants from $0 in 2014 versus $21,010 in 2015. These were partially offset by an increase of interest expense from $2,458,322 in 2014 versus $2,659,806 in 2015.

Non-Operating income (expense) for the twelve months ended December 31, 2015 and 2014 consists of the following:

Income from Grants

On September 1, 2015, the Company received notification it had been awarded from Washington State University, $42,019 grant funds from the sub-award project entitled “Optimized Injectable Radiogels for High-dose Therapy of Non-Resectable Solid Tumors”. The Company received $21,010 of the total grand award in December 2015.

Net Loss

The Company’s net income (loss) for the twelve months ended December 31, 2015 and 2014 was $6,232,686 and $(18,108,706), respectively, as a result of the items described above.

Liquidity and Capital Resources

At December 31, 2015, the Company had negative working capital of $9,755,129, as compared to $20,222,303 at December 31, 2014.  During the twelve months ended December 31, 2015 the Company experienced negative cash flow from operations of $1,193,105 and it expended $0 for investing activities while adding $1,371,934 of cash flows from financing activities.  As of December 31, 2015, the Company had $0 commitments for capital expenditures.

Cash used in operating activities increased from $1,135,926 for the twelve month period ending December 31, 2014 to $1,193,105 for the twelve month period ending December 31, 2015.  Cash used in operating activities was primarily a result of the Company’s non-cash items, such as loss on preferred and common stock and stock options and warrants issued for services and other expenses and the penalties resulting from short term debt, offset by the net gain and the gain realized from derivative liabilities and settlement of debt. Cash provided from financing activities increased from $1,136,129 for the twelve month period ending December 31, 2014 to $1,371,934 for the twelve month period ending December 31, 2015. The increase in cash provided from financing activities was primarily a result of increase in proceeds from convertible debt along with payments on convertible debt, and a decrease in proceeds from the exercise of options and warrants.

The Company has generated material operating losses since inception.  The Company has incurred a net gain of $6,232,686 for the twelve months ended December 31, 2015, and a net loss of $18,108,706 for the twelve months ended December 31, 2014.  The Company expects to continue to experience net operating losses.  Historically, the Company has relied upon investor funds to maintain its operations and develop the Company’s business.  The Company anticipates raising additional capital within the next twelve months from investors for working capital as well as business expansion, although the Company can provide no assurance that additional investor funds will be available on terms acceptable to the Company.  If the Company is unable to obtain additional financing to meet its working capital requirements, it may have to curtail its business.

The Company anticipates raising additional capital within the next twelve months from investors for working capital as well as business expansion, although the Company can provide no assurance that additional investor funds will be available on terms acceptable to the Company.  If the Company is unable to obtain additional financing to meet its working capital requirements, it may have to cease operations.

The Company requires funding of at least $1.5 million per year to maintain current operating activities. Over the next 12-24 months, the Company believes it will cost approximately $5 million to $10 million to fund: (1) the FDA approval process and initial deployment of the brachytherapy products and (2) initiate regulatory approval processes outside of the United States. The continued deployment of the brachytherapy products and a worldwide regulatory approval effort will require additional resources and personnel.  The principal variables in the timing and amount of spending for the brachytherapy products in the next 12-24 months will be the FDA’s classification of the Company’s brachytherapy products as Class II or Class III devices (or otherwise) and any requirements for additional studies which may possibly include clinical studies.  Thereafter, the principal variables in the amount of the Company’s spending and its financing requirements would be the timing of any approvals and the nature of the Company’s arrangements with third parties for manufacturing, sales, distribution and licensing of those products and the products’ success in the U.S. and elsewhere. The Company intends to fund its activities through strategic transactions such as licensing and partnership agreements or additional capital raises.

Although the Company is seeking the foregoing funding and have engaged in numerous discussions with potential finders, investment bankers and investors with respect to the initial portion thereof, the Company has not received firm commitments for the required funding. Based upon its discussions, the Company anticipates that if the Company is able to obtain the funding required to retire outstanding debt, pay past due payables and maintain its current operating activities that the terms thereof will be materially dilutive to existing shareholders.

The recent economic events, including the inherent instability and volatility in global capital markets, as well as the lack of liquidity in the capital markets, could impact its ability to obtain financing and its ability to execute its business plan. The Company believes healthcare institutions will continue to purchase the medical solutions that it distributes.  

Contractual Obligations (payments due by period as of December 31, 2015)

According to the debt service coverage ratio computation, at December 31, 2014 the Company was not in compliance with the minimum debt service coverage ratio stipulated in the loan covenants of a capital lease, accordingly the Company recorded the entire value of the leases as a current value at December 31, 2014.  This obligation was paid in full as of December 31, 2015.

In January 2014, the Company entered into a new 12-month lease for its corporate offices for a monthly rent of $1,500 from an entity controlled by Carlton M. Cadwell, a significant shareholder and a Director of the Company. During the year ended December 31, 2014 the Company incurred rent expenses for this facility totaling $18,000. The Company continued to rent this facility in 2015 on a month-to-month basis. The Company incurred $18,000 rent expenses for this facility for the twelve months ended December 31, 2015.

Off-Balance Sheet Arrangements

The Company does not have any off balance sheet arrangements that are reasonably likely to have a current or future effect on the Company’s financial condition, revenues, results of operations, liquidity or capital expenditures.

Accounting Policies

Use of Estimates

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

Fixed Assets

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

Depreciation is computed using the straight-line method over the following estimated useful lives:

Leasehold improvements and capital lease assets are amortized over the shorter of the life of the lease or the estimated life of the asset.

Management of the Company 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.

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 asset.

The Company periodically reviews the carrying values of capitalized license fees 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 a total $35,482 and $35,482 of capitalized patents and intellectual property costs at December 31, 2015 and 2014, respectively.

While patents are being developed or pending they are not being amortized.  Management has determined that 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 and intellectual property 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 fiscal years ended December 31, 2015 and 2014 consisted of Consulting Revenue. The Company recognizes revenue as Consulting services have been performed. Prepayments, if any, received from customers prior to the services being performed are recorded as deferred revenue. In these cases, when the services are performed, 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

Government grants are recognized when all conditions of such grants are fulfilled or there is reasonable assurance that they will be fulfilled. The Company has chosen to recognize income from grants 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.

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.

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.

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.

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 years ended December 31, 2015 and 2014, 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 within the next 12 months.

Fair Value of Financial Instruments

The Company adopted ASC Topic 820 (originally issued as SFAS 157, “Fair Value Measurements”) as of January 1, 2008 for financial instruments measured as fair value on a recurring basis. ASC Topic 820 defines fair value, established a framework for measuring fair value in accordance with accounting principles generally accepted in the United States and expands disclosures about fair value measurements.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC Topic 820 established a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). These tiers include:

Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets;

Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and

Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

Stock-Based Compensation

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

The Company accounts 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.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

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

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

All financial information required by this Item is included on the pages immediately following the Index to Financial Statements appearing on page F-1, and is hereby incorporated by reference.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

On January 19, 2016 (the “Resignation Date”) HJ & Associates, LLC (“HJ”) resigned as the independent registered public accounting firm for Advanced Medical Isotope (the “Company”). January 19, 2016, the Company engaged Haynie & Company, Salt Lake City, Utah, as its new independent registered public accounting firm. The change of the Company’s independent registered public accounting firm from HJ to Haynie & Company was approved unanimously by our Board of Directors.

The reports of HJ on the Company’s financial statements for the two most recent fiscal years did not contain an adverse or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope, or accounting principles.

During the two most recent fiscal years and through the Resignation Date, there were (i) no disagreements between the Company and HJ on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which disagreement, if not resolved to the satisfaction of HJ, would have caused HJ to make reference thereto in their reports on the consolidated financial statements for such years, and (ii) no “reportable events” as that term is defined in Item 304(a)(1)(v) of Regulation S-K.

ITEM 9A. 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, the Company’s Chief Executive Officer and Chief Financial Officer conducted an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures, as required by Exchange Act Rule 13a-15.  Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that, because of the disclosed material weaknesses in the Company’s internal control over financial reporting, the Company’s 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 the Company in the reports that the Company files or submits 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 the Company’s 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 the Company’s reports filed under the Exchange Act is accumulated and communicated to management, including the Company’s Chief Executive Officer and the Company’s Chief Financial Officer, to allow timely decisions regarding required disclosure.

Management’s Annual Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Exchange Act Rule 13a-15(f).  Management conducted an evaluation of the effectiveness of the internal control over financial reporting as of December 31, 2015, using the criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).  Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

A material weakness is a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected.  As a result of management’s assessment, management has determined that there are material weaknesses due to the lack of segregation of duties and, due to the limited resources based on the size of the Company. Due to the material weaknesses management concluded that as of December 31, 2015, the Company’s internal control over financial reporting was ineffective.  In order to address and resolve the weaknesses, the Company will endeavor to locate and appoint additional qualified personnel to the board of directors and pertinent officer positions as the Company’s financial means allow.  To date, the Company’s limited financial resources have not allowed the Company to hire the additional personnel necessary to address the material weaknesses.

Management’s Annual Report on Internal Control Over Financial Reporting

This Annual Report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.

Changes in Internal Control Over Financial Reporting

There have been no changes in the Company’s internal control over financial reporting that occurred during the Company’s last fiscal quarter (the Company’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Company’s 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:

ITEM 9B. OTHER INFORMATION.

None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

Identification of directors and executive officers

The Company’s current directors and executive officers are as follows:

Term of Office

All of the Company’s directors hold office until the next annual meeting of the stockholders or until their successors is elected and qualified.  The Company’s executive officers are appointed by the Company’s board of directors and hold office until their resignation, removal, death or retirement.

Background and Business Experience

The business experience during the past five years of each of the Company’s directors and executive officers is as follows:

James C. Katzaroff, the Chief Executive Officer and Chairman of the Board, is the founder of Advanced Medical Isotope Corporation. Initially a financial consultant with Wall Street firms Bateman Eichler, Smith Barney and EF Hutton, Mr. Katzaroff has been responsible for senior-level corporate strategy, fostering investment banking relationships, and served as a senior financial advisor for numerous start-ups and development-stage companies.  From 1998 to 2001, Mr. Katzaroff held senior positions including Chief Financial Officer, Senior Vice President of Finance, Senior Vice President, and Corporate Secretary of Telemac Corporation, an international communications company active in the wireless telephony market.  In 2001 he became Chairman and CEO of Apogee Biometrics, and in 2004 became President of Manakoa Services Corporation, serving as its interim CEO.  He holds a Bachelor’s Degree in Business Economics from the University of California, Santa Barbara, and has completed advanced management courses at the University of Washington.

Leonard Bruce Jolliff, the Chief Financial Officer, joined Advanced Medical Isotope Corporation as chief financial officer in 2006.  For nine years prior to joining the Company, Mr. Jolliff was a sole practitioner in the role of CFO for Hire and as a Forensic Accountant, working with companies ranging from Fortune 500 to small family operations.  Mr. Jolliff is a CPA and a member of the Washington Society of CPAs.  He is also a CFE and a member of the Association of Certified Fraud Examiners.  Mr. Jolliff has held CFO and Controller positions in an array of industries and has worked as a CPA in public practice.

Carlton M. Cadwell, a Director, joined Advanced Medical Isotope Corporation as a director in 2006.  Dr. Cadwell brings over 30 years of experience in business management, strategic planning, and implementation.  He co-founded Cadwell Laboratories, Inc. in 1979 and has served as its President since its inception.  Cadwell Laboratories, Inc. is a major international provider of neurodiagnostic medical devices. After receiving his bachelor’s degree from the University of Oregon in 1966 and a doctoral degree from the University of Washington in 1970, he began his career serving in the United States Army as a dentist for 3 years.  From 1973 to 1980, Dr. Cadwell practiced dentistry in private practice and since has started several businesses.

Thomas J. Clement, a Director, joined Advanced Medical Isotope Corporation as a Director in 2013. Mr. Clement has over 30 years experience in product development engineering, engineering management, and senior management. He has participated in two Company startups through full production. He was responsible for development of seven novel medical devices through commercial launch; one device was the leading royalty generator for the University of Washington for nearly ten years, and in another, generated revenues of more than $140 million for a leading medical device company.

Identification of Significant Employees and Consultants

Fu-Min Su, Ph.D., Chief RadioChemist, was appointed as Advanced Medical Isotope Corporation’s Chief RadioChemist and Radiation Safety Officer in 2007.  With over 20 years experience in medical isotope R&D and manufacture, Dr. Su is also knowledgeable in the area of coordinating and conducting clinical trials.  He has worked as a senior scientist for a several bio-technology firms, including NeoRx Corporation from 1987 through 1998, Nycomed-Amersham Imaging in 1999, Bristol-Myers Squibb from 2000 to 2006, and Cellectar, LLC in 2007, during which time he developed various radiopharmaceuticals, isotope production methods and generator systems.  Dr. Su has authored a number of scientific papers, and has written numerous abstracts for the Journal of Nuclear Medicine.  He also holds several patents relating to radionuclide production and preparation.  Dr. Su received his Ph.D. from the University of Washington.

Alan E. Waltar, Ph.D., Chairman of Scientific Advisory Board.  Dr. Waltar served as director of Nuclear Energy for the Pacific Northwest National Laboratory (PNNL) in Richland, Wash. Since 2004, he has continued his affiliation with PNNL as a Senior Advisor. Waltar’s other professional appointments include director of International Programs at Advanced Nuclear Medical Systems; manager of various Fast Reactor Safety and Fuels Organizations of Westinghouse Hanford Company; and as professor and department head of Nuclear Engineering at Texas A&M University.

His other teaching experience includes stints at the Joint Center for Graduate Study in Richland Wash., the University of Virginia, and Los Alamos National Laboratory. Formerly the president of the American Nuclear Society, Waltar has served on a number of international nuclear science and radiation panels, societies, and committees. He is the author of three books: Fast Breeder Reactors, America the Powerless: Facing Our Nuclear Energy Dilemma, and Radiation and Modern Life: Fulfilling Marie Curie’s Dream, and has penned over 70 open literature papers.

Dr. Waltar earned his M.S. in Nuclear Engineering from M.I.T. and his PhD in Engineering Science from the University of California, Berkeley. 

Nigel R. Stevenson, Ph.D., Scientific Advisory Committee.  Dr. Nigel Stevenson is a world renowned expert in the production of medical isotopes. He holds a Ph.D. in Nuclear Physics from the University of London and has directed many corporate innovations for imaging and therapeutic nuclide agents. For the past five years he has served as Chief Operating Officer for Clear Vascular Inc. and was previously Chief Operating Officer of Trace Life Sciences, which produced a range of medical radiochemicals and radiopharmaceuticals. Prior to this, he had been VP Production and Research for Theragenics Corp. and directed operations in Atlanta for the world’s largest cyclotron facility (14 cyclotrons) that produced brachytherapy seeds.  Dr. Stevenson was also Head of Isotope Production and Research at TRIUMF (Canadian National Accelerator Laboratory) where he managed the production of medical radioisotopes for MDS Nordion.

Donald A. Ludwig, Ph.D., Scientific Advisory Committee. Dr. Ludwig is an expert in particle accelerator applications in radiation therapy, nuclear medicine and radioisotope production. Since 1988 he has served as an advisor to numerous entities in the field, both domestic and foreign. Among these are the Atomic Energy of Canada, the U. S. Department of Energy Labs at Los Alamos, Berkeley, Fermi, Hanford and Oak Ridge, the Israel Atomic Energy Agency, the Australian Nuclear Science and Technology Organization, the Kurchatov Russian Research Institute in Moscow and the Bhabha Atomic Research Center in Mumbai, India. He holds a Ph.D. from UCLA in Medical Physics as well as an MS in Nuclear Physics from Cal Tech, a BS in Physics from the U. S. Military Academy at West Point and an MBA in Theoretical Marketing from the University of Southern California.

Family Relationships

The Company currently does not have any executive officers or directors who are related to each other.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934 requires the Company’s executive officers, directors and persons who own more than 10% of the Company’s common stock to file with the SEC initial reports of beneficial ownership on Form 3, changes in beneficial ownership on Form 4, and an annual statement of beneficial ownership on Form 5.  Such executive officers, directors and greater than 10% stockholders are required by SEC rules to furnish the Company with copies of all such forms that they have filed.

Based solely on its review of such forms filed with the SEC and received by the Company and representations from certain reporting persons, the Company believes that for the fiscal year ended December 31, 2015, all the executive officers, directors and more than 10% beneficial owners complied with the above described filing requirements.

Code of Ethics

The Company’s board of directors has not adopted a code of ethics that applies to the principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, because of the Company’s limited number of executive officers and employees that would be covered by such a code and the Company’s limited financial resources.  The Company anticipates that it will adopt a code of ethics after it increases the number of executive officers and employees and obtain additional financial resources.

Audit Committee and Audit Committee Financial Expert

As of the date of this report, the Company has not established an audit committee, and therefore, the Company’s board of directors performs the functions that customarily would be undertaken by an audit committee.  The Company’s board of directors during 2015 was comprised of three directors, two of whom the Company has determined satisfied the general independence standards of the Nasdaq listing requirements.  See Item 13 of this Form 10-K report.  However, under Nasdaq listing and SEC requirements, a member of an audit committee of a listed issuer, in addition to satisfying those independence standards, cannot be an “affiliated person” of the issuer, which depends in part upon the amount of beneficial ownership such member has of the issuer’s stock. The Company has determined that the Company’s independent directors during 2015 did not satisfy this additional requirement.

The Company’s board of directors has determined that none of its current members qualifies as an “audit committee financial expert,” as defined by the rules of the SEC.  In the future, the Company intends to establish board committees and to appoint such persons to those committees as are necessary to meet the corporate governance requirements imposed by a national securities exchange, although it is not required to comply with such requirements until the Company elects to seek listing on a national securities exchange.

ITEM 11. EXECUTIVE COMPENSATION.

Summary Compensation Table

The following table sets forth the compensation paid to the Company’s Chief Executive Officer and those executive officers that earned in excess of $100,000 during the twelve month periods ended December 31, 2015 and 2014 (collectively, the “Named Executive Officers”):

(1) Of this amount $150,000 was exchanged for 100,000 Series A Preferred Shares and $75,144 was not paid in 2015, but was accrued as of December 31, 2015.

(2) Of this amount $138,502 was not paid in 2014, but was accrued as of December 31, 2014.

(3) Of this amount $112,500 was exchanged for 75,000 Series A Preferred shares.

(4) Of this amount, $62,896 was not paid in 2014, but was accrued as of December 31, 2014.

(5) Mr. Jolliff received the additional $11,357 2015 and $20,400 2014 to compensate for additional duties performed that were not originally contemplated.

Narrative Disclosure to Summary Compensation Table

The Company has an employment agreement with the Company’s CFO, L. Bruce Jolliff that determines the compensation paid to him.  The Company’s Chief Executive Officer, James C. Katzaroff, does not have a written employment agreement and therefore no structured amount or schedule of pay, however his projected rate of pay is $250,000 and so accruals were made for his compensation in 2015 and 2014 to bring his recorded salary to $250,000.  In 2015 Mr. Katzaroff received $24,856, exchanged $150,000 for 100,000 Series A Preferred shares, and an additional $75,144 was accrued as of December 31, 2015. In 2014 Mr. Katzaroff received $111,498 and an additional $138,502 was accrued as of December 31, 2014.

The Company paid bonuses to certain employees based on their performance, the Company’s need to retain such employees, and funds available.  All bonus payments were approved by the Company’s board of directors.

Employment Agreement with L. Bruce Jolliff

Mr. Jolliff has a May 2007 employment agreement with the Company which provides for a salary of $100,000 per year which was increased January 1, 2012 to $156,000, and was again adjusted beginning January 1, 2013 to $180,000. In 2015 Mr. Jolliff received $67,500, and exchanged $112,500 for 75,000 Series A Preferred shares. In 2014 Mr. Jolliff received $117,104 and an additional $62,896 was accrued as of December 31, 2014. The Company may terminate the agreement without cause at any time upon 30 days’ written notice.  Upon termination, the Company will pay Mr. Jolliff a severance allowance of two month’s salary.

Outstanding Equity Awards at Fiscal Year-End Table

The following table sets forth all outstanding equity awards held by the Company’s Named Executive Officers as of the end of last fiscal year.

Additional Narrative Disclosure

During February 2013, the Company granted James C. Katzaroff and L. Bruce Jolliff, each, an option to purchase 250,000 shares of the Company’s common stock and 200,000 shares of the Company’s common stock, respectively. All options issued in February 2013 had an exercise price of $0.20 per share and were fully vested and expire on February 11, 2016.  The quoted market price of the common stock at the time of issuance of the options was $0.19 per share. During November 2013, due to the decrease in market price for the Company stock, and in order to provide proper incentive to retain Executive Officers, the Company reduced the exercise price for these options to $0.15, with all other terms of the options remaining the same.

During February 2013, the Company granted James C. Katzaroff an option to purchase 3,250,000 shares of the Company’s common stock. All options issued in February 2013 had an exercise price of $0.20 per share and 800,000 of the options were fully vested and expired on February 11, 2023.  The remaining 2,450,000 of the options are to vest ratably over the next twenty-four months and expire on February 11, 2023. The quoted market price of the common stock at the time of issuance of the options was $0.19 per share. During November 2013, due to the decrease in market price for the Company stock, and in order to provide proper incentive to retain Executive Officers, the Company reduced the exercise price for these options to $0.15, with all other terms of the options remaining the same. These options are to be reset.

Retirement, Pension, Profit Sharing or Insurance Plans

No retirement, pension, profit sharing, or insurance programs or other similar programs have been adopted by the Company for the benefit of its employees.

Employment Agreement with Significant Employee

Employment Agreement with Dr. Fu Min-Su

In January 2008, the Company entered into a five-year employment agreement with Dr. Fu Min-Su pursuant to which the Company agreed to pay Dr. Fu Min-Su an annual salary equal to $90,000, which was increased to $95,000 on January 1, 2010, to$110,000 on January 1, 2011, and to $125,000 effective June 1, 2016.

In the event the employment is terminated by the Company without cause, by Dr. Fu Min-Su for good reason or a change in control, the Company will have to provide Dr. Fu Min-Su with one month of his base salary and any portion of an annual bonus allocated by the board of directors, disability and other welfare plan benefits  for a period of one year from the date of termination and pro-rated vesting of all outstanding options, stock grants, shares of restricted stock and any other equity incentive compensation; provided, that the stock options shall be exercisable only until the earlier to occur of (i) two years from the date of the termination, or (ii) the date the option would have otherwise expired if Dr. Fu Min-Su had not terminated employment.

During the term of the employment agreement, including any extension thereof, and for a period of one year thereafter, Dr. Fu Min-Su shall not provide services that he provides for the Company for a business in the production, import for resale, and distribution of radioisotopes for use in the medical industries.

Compensation of Directors

The following table sets forth information regarding compensation earned by the Company’s non-employee directors for the year ended December 31, 2015.  Mr. Clement became a director effective September 6, 2012. Mr. Katzaroff is not included in this table because his compensation is included in the Summary Executive Compensation table and he received no compensation for his service as a director.

The following table sets forth, for each of the Company’s non-employee directors who served during 2015, the aggregate number of stock awards and the aggregate number of stock option awards that were outstanding as of December 31, 2015:

During November 2013, the Company granted Mr. Cadwell and Mr. Clement options to purchase 250,000 shares of common stock and 125,000 shares of common stock, respectively, at an exercise price of $0.15 per share. The options are fully vested and expire February 11, 2016.  

In 2015 the shareholders approved the Company’s 2015 OMNIBUS SECURITIES AND INCENTIVE PLAN, a copy of which is included in the Exhibits. This plan has been adopted in order to provide an incentive to attract and retain officers, directors, key employees, consultants, and independent contractors, and to further align the interests of the Eligible Recipients with the interests of the Company and its shareholders. 

There are no employment contracts or compensatory plans or arrangements with respect to any director that would result in payments by the Company to such person because of his or her resignation as a director or any change in control of the Company. 

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

Beneficial Ownership of The Company’s Common Stock

The following table sets forth, as of May 13, 2016, the number of shares of Common Stock beneficially owned by the following persons: (i) all persons the Company knows to be beneficial owners of at least 5% of the Company’s Common Stock, (ii) the Company’s directors, (iii) the Company’s executive officers, both of whom are named in the Summary Compensation Table above, and (iv) all current directors and executive officers as a group.  As of May 13, 2016, there were 1,999,997,740 shares outstanding and up to 10,510,314 shares issuable upon exercise of outstanding options and conversion of outstanding convertible securities, assuming exercise and conversion occurred as of that date, for a total of 2,010,508,054 shares.

Beneficial Ownership of The Company’s Preferred Stock

The following table sets forth, as of May 13, 2016, the number of shares of Preferred Stock beneficially owned by the following persons: (i) all persons the Company knows to be beneficial owners of at least 5% of the Company’s Common Stock, (ii) the Company’s directors, (iii) the Company’s executive officers, both of whom are named in the Summary Compensation Table above, and (iv) all current directors and executive officers as a group.  As of May 13, 2016, there were 2,397,840 shares outstanding and up to 326,728 shares issuable upon exercise of outstanding options and conversion of outstanding convertible securities, assuming exercise and conversion occurred as of that date, for a total of 2,724,568 shares.

Changes in Control

The Company does not know of any arrangements, including any pledges of the Company’s securities that may result in a change in control of the Company.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

Indebtedness from related parties

Beginning in December, 2008, the Company has obtained financing from Carlton M. Cadwell, one of our directors and a beneficial owner of more than 10% of the Company’s common stock, in transactions which involved the Company’s issuance of convertible notes and common stock. On September 4, 2015 the Company exchanged $1,414,100 of convertible notes plus $810,538 of accrued interest into 148,311 of Series A Preferred shares and another $2,224,466 of convertible notes plus $889,838 of accrued interest into 207,620 of Series A Preferred shares. Additionally the Company exchanged the remaining $906,572 of convertible notes plus $148,960 accrued interest into a $1,055,532 demand note, 8% interest rate, due on demand at any time after March 31, 2017. Such note was converted into 73,546 Series A Preferred shares on May 19, 2016.   

Independent Directors

 The Company’s common stock is traded on the OTC Bulletin Board, which does not impose any independence requirements on the board of directors or the board committees of the companies whose stock is traded on that market.  The Company has decided to adopt the independence standards of the Nasdaq listing rules in determining whether the Company’s directors are independent.  Generally, under those rules a director does not qualify as an independent director if the director or a member of the director’s immediate family has had in the past three years certain relationships or affiliations with the company, the company’s auditors, or other companies that do business with the company.  The Company’s board of directors has determined that Mr. Cadwell and Mr. Clement each qualified as an independent director under those Nasdaq rules, and accordingly, each would have been qualified under those rules to serve on a compensation committee or a nominating committee, if the Company had established such committees of the Company’s board of directors. Mr. Katzaroff is not an independent director due to his employment by the Company as an executive officer.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

Audit Fees

The aggregate fees incurred by the Company’s principal accountant for the audit of the Company’s annual financial statements, review of financial statements included in the quarterly reports and other fees that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for the fiscal years ended December 31, 2015 and 2014 were $156,000 ($71,000 was to HJ & Associates, LLC and $85,000 was to Haynie & Company) and $132,000 (all was to HJ & Associates, LLC), respectively.

Tax Fees

The aggregate fees billed for professional services rendered by principal accountant for tax compliance, tax advice and tax planning during the fiscal years ended December 31, 2015 and 2014 were $3,000 and $2,000, respectively, all of which was paid to HJ & Associates, LLC. These fees related to the preparation of federal income tax returns.

All Other Fees

There were no other fees billed for products or services provided by the Company’s principal accountant during the fiscal years ended December 31, 2015 and 2014.

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Documents filed as part of this Report.

1. Financial Statements.  The Advanced Medical Isotope Corporation Balance Sheets as of December 31, 2015 and 2014, the Statements of Operations for the years ended December 31, 2015 and 2014, the Statements of Changes in Stockholders’ Equity (Deficit) for the years ended December 31, 2015 and December 31, 2014, and the Statements of Cash Flows for the years ended December 31, 2015 and 2014, together with the notes thereto and the report of HJ & Associates, LLC as required by Item 8 are included in this 2015 Annual Report on Form 10-K as set forth in Item 8 above.

2. Financial Statement Schedules.  All financial statement schedules have been omitted since they are either not required or not applicable, or because the information required is included in the financial statements or the notes thereto.

3. Exhibits. The following exhibits are either filed as a part hereof or are incorporated by reference.  Exhibit numbers correspond to the numbering system in Item 601 of Regulation S-K.  Exhibits 10.3, 10.5, 10.7 and 10.10 relate to compensatory plans included or incorporated by reference as exhibits hereto.

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. - continued

* Filed herewith.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Advanced Medical Isotope Corporation

Index to Financial Statements

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders

Advanced Medical Isotope Corporation

We have audited the accompanying balance sheet of Advanced Medical Isotope Corporation as of December 31, 2015, and the related statements of operations, stockholders’ equity (deficit), and cash flow for the year then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Advanced Medical Isotope Corporation as of December 31, 2015 , and the results of its operations and its cash flows for the year then ended, in conformity with U.S. generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered recurring losses, used significant cash in support of its operating activities, and, based upon current operating levels, requires additional capital or significant restructuring to sustain its operations for the foreseeable future. These issues raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Haynie & Company

Salt Lake City, Utah

May 25, 2016

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders

Advanced Medical Isotope Corporation

We have audited the accompanying balance sheet of Advanced Medical Isotope Corporation as of December 31, 2014, and the related statements of operations, stockholders’ equity (deficit), and cash flows for the year then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Advanced Medical Isotope Corporation as of December 31, 2014, and the results of its operations and its cash flows for the year then ended, in conformity with U.S. generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered recurring losses, used significant cash in support of its operating activities and, based upon current operating levels, requires additional capital or significant restructuring to sustain its operation for the foreseeable future. These issues raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

HJ & Associates, LLC

Salt Lake City, Utah

April 15, 2015

Advanced Medical Isotope Corporation

Balance Sheets

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

Advanced Medical Isotope Corporation

Statements of Operations

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

Advanced Medical Isotope Corporation

Statements of Changes in Stockholders’ Equity (Deficit)