VIVOS INC - Quarter Report: 2015 March (Form 10-Q)

admd_10q-16406.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED: March 31, 2015
OR
o	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM __________ TO __________

COMMISSION FILE NUMBER 000-53497

ADVANCED MEDICAL ISOTOPE CORPORATION

(Exact name of registrant as specified in its charter)

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

1021 N Kellogg Street,

Kennewick, WA 99336

(Address of principal executive offices, Zip Code)

(509) 736-4000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

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

Large accelerated filer	o	Accelerated filer	o

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

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

The number of shares of registrant’s common stock outstanding, as of May 11, 2015 was 1,971,934,122.

TABLE OF CONTENTS

		Page
PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements	3
	Condensed Balance Sheets as of March 31, 2015 (unaudited) and December 31, 2014	3
	Condensed Statements of Operations for the Three Months March 31, 2015 (unaudited) and the Three Months ended March 31, 2014 (unaudited)	4
	Condensed Statement of Changes in Stockholders’ Equity (Deficit) for the period ended March 31, 2015 (unaudited)	5
	Condensed Statements of Cash Flow for the Three Months ended March 31, 2015 (unaudited) and the Three Months ended March 31, 2014 (unaudited)	6
	Notes to Condensed Financial Statements (unaudited)	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29
Item 4.	Controls and Procedures	29

PART II – OTHER INFORMATION

Item 1A.	Risk Factors	30
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30
Item 6.	Exhibits	30

SIGNATURES		31

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

Advanced Medical Isotope Corporation

Condensed Balance Sheets


	March 31,			December 31,
	2015			2014
	(unaudited)
ASSETS

Current Assets:
Cash	$	2,485		$	203
Prepaid expenses		20,800			21,710
Inventory		8,475			8,475
Total current assets		31,760			30,388

Fixed assets, net of accumulated depreciation		7,423			8,753

Other assets:
License fees, net of amortization		-			1,339
Patents and intellectual property		35,482			35,482
Debt issuance costs		4,277			13,917
Deposits		644			644
Total other assets		40,403			51,382

Total assets	$	79,586		$	90,523

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

Current liabilities:
Accounts payable and accrued expenses	$	1,431,213		$	1,461,028
Accrued interest payable		1,796,604			1,656,763
Payroll liabilities payable		372,751			309,160
Convertible notes payable, net		935,806			600,569
Derivative liability		9,190,076			11,502,380
Related party convertible notes payable, net		4,507,528			4,430,204
Current portion of capital lease obligations		-			39,481
Liability for lack of authorized shares		3,018,312			253,106
Total current liabilities		21,252,290			20,252,691

Stockholders’ Equity (Deficit):
Preferred stock, $.001 par value, 20,000,000 shares authorized;
zero issued and outstanding		-			-
Common stock, $.001 par value; 2,000,000,000 shares authorized;
1,888,434,122 and 1,705,382,554 shares issued and outstanding, respectively		1,888,434			1,705,382
Paid in capital		29,611,360			32,379,681
Accumulated deficit		(52,672,498	)		(54,247,231	)
Total stockholders’ equity (deficit)		(21,172,704	)		(20,162,168	)

Total liabilities and stockholders’ equity (deficit)	$	79,586		$	90,523

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

Advanced Medical Isotope Corporation

Condensed Statements of Operations

(unaudited)

	Three months ended March 31,
	2015			2014

Revenues	$	12,054		$	14,054

Operating expenses
Cost of materials		390			251
Sales and marketing expenses		-			600
Depreciation and amortization		2,669			2,998
Professional fees		63,993			185,177
Stock options granted		28,500			58,187
Payroll expenses		191,536			189,563
General and administrative expenses		53,779			122,971
Total operating expenses		340,867			559,747

Operating loss		(328,813	)		(545,693	)

Non-operating income (expense)
Interest expense		(326,140	)		(393,283	)
Net loss on settlement of debt		(3,574	)		(32,630	)
Recognized income from grants		-			-
Gain (Loss) on derivative liability		2,233,260			(111,796	)
Non-operating income (expense), net		1,903,546			(537,709	)

Gain (Loss) before Income Taxes		1,574,733			(1,083,402	)

Income Tax Provision		-			-

Net Gain (Loss)	$	1,574,733		$	(1,083,402	)

Gain (Loss) per common share	$	0.0009		$	(0.01	)

Weighted average common shares outstanding		1,705,623,106			106,653,383

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

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

	Common Stock						Paid in			Accumulated
	Shares			Amount			Capital			Deficit			Total

Balances at December 31, 2014 (audited)		1,705,382,554		$	1,705,382		$	32,379,681		$	(54,247,231	)	$	(20,162,168	)

Common stock issued for:
Cash and the exercise of warrants		91,000,000			91,000			(91,000	)		-			-
Loan fees on convertible debt		3,579,221			3,579			38,045			-			41,624
Debt converted		92,051,568			92,052			17,761			-			109,813
Classified to liability due to lack of authorizes shares		(3,579,221	)		(3,579	)		(2,761,627	)		-			(2,765,206	)
Options and warrants issued for services		-			-			28,500			-			28,500
Net gain (loss)		-			-			-			1,574,733			1,574,733
Balances at March 31, 2015		1,888,434,122		$	1,888,434		$	29,611,360			(52,672,498	)	$	(21,172,704	)

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

Advanced Medical Isotope Corporation
Condensed Statements of Cash Flow
(Unaudited)
	Three months ended
	March 31,
	2015			2014
CASH FLOW FROM OPERATING ACTIVITIES:
Net Loss	$	1,574,733		$	(1,083,402	)

Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation of fixed assets		1,330			1,540
Amortization of licenses and intangible assets		1,339			1,458
Amortization of convertible debt discount		176,380			545,263
Amortization of debt issuance costs		9,640			13,607
Amortization of prepaid expenses paid with stock		-			28,897
Common stock issued for services		-			10,900
Stock options and warrants issued for services		28,500			58,187
Gain (Loss) on derivative liability		(2,233,260	)		(111,796	)
Loss on settlement of debt		3,574			32,630
Changes in operating assets and liabilities:
Prepaid expenses		910			(20,862	)
Accounts payable		(29,815	)		(24,372	)
Payroll liabilities		63,591			(7,346	)
Accrued interest		139,841			127,589
Net cash used by operating activities		(263,237	)		(427,707	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Cash used to acquire patents and intellectual property		-			-
Net cash used by investing activities		-			-

CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on Washington Trust debt					-
Principal payments on capital lease		(39,481	)		(64,497	)
Debt issuance costs		-			(36,145	)
Proceeds from convertible debt		305,000			623,990
Principal payments on convertible debt		-			(10,000	)
Proceeds from exercise of warrants		-			6,000
Net cash provided by financing activities		265,519			519,348

Net increase (decrease) in cash		2,282			91,641
Cash, beginning of period		203			-

CASH, END OF PERIOD	$	2,485		$	91,641


Supplemental disclosures of cash flow information:
Cash paid for interest	$	9,920		$	126,494
Cash paid for income taxes	$	-		$	-

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

Advanced Medical Isotope Corporation

Notes to Condensed Financial Statements

NOTE 1: BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

The accompanying condensed financial statements of the Company have been prepared without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and disclosures required by accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations. These condensed financial statements reflect all adjustments that, in the opinion of management, are necessary to present fairly the results of operations of the Company for the period presented. The results of operations for the three months ended March 31, 2015, are not necessarily indicative of the results that may be expected for any future period or the fiscal year ending December 31, 2015.

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.

Fair Value of Financial Instruments

Fair Value of Financial Instruments, requires disclosure of the fair value information, whether or not recognized in the balance sheet, where it is practicable to estimate that value. As of March 31, 2015 and December 31, 2014, the balances reported for cash, prepaid expenses, accounts receivable, accounts payable, and accrued expenses, approximate the fair value because of their short maturities.

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.

The Company measures certain financial instruments at fair value on a recurring basis. Assets and liabilities measured at fair value on a recurring basis were calculated using the Black-Scholes pricing model and are as follows at March 31, 2015:

	Total		Level 1		Level 2		Level 3
Assets
Total Assets Measured at Fair Value	$	-	$	-	$	-	$	-

Liabilities
Derivative Liability	$	9,190,076	$	-	$	-	$	9,190,076
Total Liabilities Measured at Fair Value	$	9,190,076	$	-	$	-	$	9,190,076

Recent Accounting Pronouncements

There are no recently issued accounting pronouncements that the Company believes are applicable or would have a material impact on the financial statements of the Company.

Advanced Medical Isotope Corporation

Notes to Condensed Financial Statements

NOTE 2: GOING CONCERN

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

The Company anticipates a requirement of $1.5 million in funds over the next twelve months to maintain current operation activities. In addition the Company anticipates spending from approximately $5 million to $10 million over the next 12-24 months fund the initial deployment of the Company’s brachytherapy products should FDA clearance be obtained, a modest distribution capability for third party isotopes and equipment and the potential acquisition of a controlling interest in a European company with which it is having discussions. As of March 31, 2015 the Company has $2,485 cash on hand which means there will be an anticipated shortfall of the full $5 to $10 million requirement in additional funds over the next twelve months. There are currently commitments to vendors for products and services purchased, plus, the employment agreements of the CFO and other employees of the Company and the Company’s current lease commitments that will necessitate liquidation of the Company if it is unable to raise additional capital. The current level of cash is not enough to cover the fixed and variable obligations of the Company.

Assuming the Company is successful in the Company’s sales/development effort it believes that it will be able to raise additional funds through the sale of the Company’s stock to either current or new stockholders. There is no guarantee that the Company will be able to raise additional funds or to do so at an advantageous price.

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

NOTE 3: FIXED ASSETS

Fixed assets consist of the following at March 31, 2015 and December 31, 2014:

	March 31, 2015			December 31, 2014
Production equipment	$	2,131,377		$	2,131,377
Building		446,772			446,772
Leasehold improvements		3,235			3,235
Office equipment		32,769			32,769
		2,614,153			2,614,153
Less accumulated depreciation		(2,606,730	)		(2,605,400	)
	$	7,423		$	8,753

Accumulated depreciation related to fixed assets is as follows:

	March 31, 2015		December 31, 2014
Production equipment	$	2,124,370	$	2,123,462
Building		446,772		446,772
Leasehold improvements		3,235		3,235
Office equipment		32,353		31,931
	$	2,606,730	$	2,605,400

Depreciation expense for the above fixed assets for the three months ended March 31, 2015 and 2014, respectively, was $1,330 and $1,540.

Advanced Medical Isotope Corporation

Notes to Condensed Financial Statements

NOTE 4: INTANGIBLE ASSETS

Intangible assets consist of the following at March 31, 2015 and December 31, 2014:

	March 31, 2015			December 31, 2014
License Fee	$	112,500		$	112,500
Less accumulated amortization		(112,500	)		(111,161	)
		-			1,339
Patents and intellectual property		35,482			35,482
Intangible assets net of accumulated amortization	$	35,482		$	36,821

Amortization expense for the above intangible assets for the three months ended March 31, 2015 and 2014, respectively, was $1,339 and $1,458.

NOTE 5: RELATED PARTY TRANSACTIONS

Related Party Convertible Notes Payable

The Company issued various shares of common stock and convertible promissory notes during the three months ended March 31, 2015 to a director and major stockholder. The details of these transactions are outlined in Note 10: Stockholders’ Equity - Common Stock Issued for Convertible Debt. In addition the Company also entered into a $1,500 cash advance from a Director.

Rent Expenses

On July 17, 2007, the Company entered into a lease at 6208 West Okanogan Avenue, Kennewick, Washington, 99336 which has been used as the Company’s production center. The original term of the lease was five years, commencing on August 1, 2007, however, subsequent to July 31, 2012 the Company began renting this space on a month to month basis at $11,904 per month. The landlord of this space is a non-affiliated stockholder of the Company, who holds less than 5 percent of the total outstanding shares. The Company moved out of this facility as of December 31, 2014. There is an ongoing dispute with the landlord, Rob and Maribeth Myers, regarding the Production Facility rent

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.

There are no future minimum rental payments required under this rental agreement because it expired as of December 31, 2014 and subsequent to that date the Company is renting this space on a month to month basis.

Rental expense for the three months ended March 31, 2015 and 2014 consisted of the following:

	Three months ended March 31, 2015		Three months ended March 31, 2014
Office and warehouse lease effective August 1, 2007
Monthly rental payments	$	-	$	147,613
Corporate office		4,500		18,000
Total Rental Expense	$	4,500	$	165,613

NOTE 6: PREPAID EXPENSES PAID WITH STOCK

The Company issued stock for prepaid services for the year ended December 31, 2013 in the amount of $78,000 of which $26,000 expired in 2013 and was expensed and recorded as stock issued for services and $52,000 expired in 2014 was expensed and recorded as stock issued for services. The Company also issued stock for prepaid services for the year ended December 31, 2013 in the amount of $69,550 of which $5,796 expired in 2013 and was expensed and recorded as stock issued for services and $63,754 expired in 2014 and was expensed and recorded as stock issued for services. The Company also issued stock for prepaid services for the year ended December 31, 2013 in the amount of $3,600 of which $0 expired in 2013 and $3,600 expired in 2014 and was expensed and recorded as stock issued for services. Prepaid expenses completely expired through December 2014.

Advanced Medical Isotope Corporation

Notes to Condensed Financial Statements

NOTE 7: SHORT TERM LOAN PAYABLE

The Company had research costs of $349,913 that were converted to an unsecured promissory note May 1, 2013. The note calls for 10% interest and was due May 1, 2014. On May 15, 2014 the Company renewed the unsecured promissory note as a 10% convertible debenture, due May 15, 2015, in the principal amount of $350,000 along with a warrant exercisable for shares of common stock of the Company and 532,609 shares of Common Stock. On June 6, 2014 the convertible debenture was converted into common stock of the Company for a total issuance of 16,530,974 shares of Common Stock.

The Warrant is exercisable for three years from issuance to purchase up to the number of shares of Common Stock equal to the quotient obtained by dividing the original principal amount of the Debenture ($350,000) by the Warrant Exercise Price (subject to adjustment to maintain the original value proposition and to support the ability of Battelle to convert the full value of the indebtedness to shares of Common Stock) at a price per share equal to the Warrant Exercise Price in cash. The “Warrant Exercise Price” is equal to the lesser of the market value (defined as the mean market closing price per share over the 10 trading days immediately prior to the notice date of exercise) and $0.046 per share.

Interest in the amount of $2,031 was paid on this note for the year ended December 31, 2014.

NOTE 8: CONVERTIBLE NOTES PAYABLE

As of March 31, 2015 and December 31, 2014 the Company had the following convertible notes outstanding:

		March 31, 2015				December 31, 2014
	Principal (net)		Accrued Interest		Principal (net)		Accrued Interest
July and August 2012 $1,060,000 Convertible Notes, 12% interest, due December 2013 and January 2014 (18 month notes), $170,000 and $170,000 outstanding , net of debt discount of $0 and $0, respectively	$	170,000	$	54,344	$	170,000	$	49,313	(1)
October 2013 $97,700 Convertible Note, 8% interest, due April 2014, with a 12% original issue discount, $2,700 and $2,700 outstanding, net of debt discount of $0 and $0, respectively		2,700		6,766		2,700		6,713	(2)
January 2014 $50,000 Convertible Note, 8% interest, due January 2015, $50,000 and $50,000 outstanding, net of debt discount of $0 and $3,709, respectively		50,000		4,677		46,291		3,693	(3)
January 2014 $55,500 Convertible Note, 10% interest, due October 2014, with a $5,500 original issue discount, $10,990 and $10,990 outstanding, net of debt discount of $0 and $0, respectively		10,990		4,631		10,990		4,361	(4)
February 2014 $46,080 Convertible Note, 10% interest, due February 2015, $0 and $0 outstanding, net of debt discount of $0 and $0, respectively		-		2,358		-		2,358	(5)
February 2014 $27,800 Convertible Note, 10% one-time interest, due February 2015, with a 10% original issue discount, $51,159 and $51,559 outstanding, net of debt discount of $37,011 and $46,566, respectively		14,148		1,552		1,533		294	(6)
March 2014 $50,000 Convertible Note, 10% interest, due March 2015, $36,961 and $36,961 outstanding, net of debt discount of $0 and $5,504, respectively		36,961		3,795		31,457		2,886	(7)
March 2014 $165,000 Convertible Note, 10% interest, due April 2015, with a $16,450 original issue discount, $61,301 and $84,512 outstanding, net of debt discount of $0 and $15,236, respectively		61,301		16,740		77,521		14,328	(8)
April 2014 $32,000 Convertible Note, 10% interest, due April 2015, $22,042 and $22,042 outstanding, net of debt discount of $0 and $7,710, respectively		22,042		1,377		14,332		835	(9)
April 2014 $46,080 Convertible Note, 10% interest due April 2015, $5,419 and $5,4190 outstanding, net of debt discount of $0 and $0, respectively		5,419		4,741		5,419		4,608	(10)
May 2014 $42,500 Convertible Note, 8% interest, due February 2015, $12,705 and $21,215 outstanding, net of debt discount of $0 and $15,116, respectively		12,705		988		6,099		1,051	(11)
May 2014 $55,000 Convertible Note, 12% interest, due May 2015, with a $5,000 original issue discount, $46,090 and $46,090 outstanding, net of debt discount of $10,753 and $24,315, respectively		35,337		4,745		21,775		3,385	(12)

Advanced Medical Isotope Corporation

Notes to Condensed Financial Statements

NOTE 8: CONVERTIBLE NOTES PAYABLE - continued

	March 31, 2015				December 31, 2014
	Principal (net)		Accrued Interest		Principal (net)		Accrued Interest
June 2014 $37,500 Convertible Note, 8% interest, due March 2015, $37,500 and $37,500 outstanding, net of debt discount of $0 and $13,340, respectively		37,500		2,390		27,211		1,652	(13)
June 2014 $28,800 Convertible Note, 10% interest due June 2015, $28,800 and $28,800 outstanding, net of debt discount of $6,629 and $13,730, respectively		22,171		3,588		15,070		2,880	(14)
June 2014 $40,000 Convertible Note, 10% interest, due June 2015, $40,000 and $40,000 outstanding, net of debt discount of $9,535 and $19,398, respectively		30,465		3,044		20,602		2,060	(15)
June 2014 $40,000 Convertible Note, 10% interest, due June 2015, $38,689 and $38,689 outstanding, net of debt discount of $8,799 and $18,554, respectively		29,890		2,944		20,135		1,993	(16)
June 2014 $56,092 Convertible Note, 16% interest, due July 2015, with a $5,000 original issue discount, $56,092 and $56,092 outstanding, net of debt discount of $13,863 and $27,815, respectively		42,229		6,719		28,277		4,512	(17)
July 2014 $37,500 Convertible Note, 12% interest, due July 2015, $37,015 and $37,015 outstanding, net of debt discount of $11,465 and $20,737, respectively		25,550		3,039		16,278		1,947	(18)
July 2014 $37,500 Convertible Note, 8% interest, due April 2015, $37,500 and $37,500 outstanding, net of debt discount of $1,359 and $13,587, respectively		36,141		2,185		23,913		1,447	(19)
August 2014 $22,500 Convertible Note, 8% interest, due May 2015, $22,500 and $22,500 outstanding, net of debt discount of $2,817 and $9,488, respectively		19,683		1,168		13,012		725	(20)
August 2014 $36,750 Convertible Note, 10% interest, due April 2015, $36,750 and $36,750 outstanding, net of debt discount of $13,693 and $20,588, respectively		23,057		2,777		13,995		1,873	(21)
August 2014 $33,500 Convertible Note, 4% interest, due February 2015, with a $8,500 original issue discount, $33,500 and $33,500 outstanding, net of debt discount of $0 and $10,367, respectively		33,500		-		23,133		-	(22)
September 2014 $37,500 Convertible Note, 12% interest, due September 2015, with a $5,000 original issue discount, $36,263 and $36,263 outstanding, net of debt discount of $16,680 and $25,927, respectively		19,582		2,306		10,336		1,236	(23)
January 2015 $19,000 Convertible Note, 10% interest, due July 8, 2015, $19,000 and $0 outstanding, net of debt discount of $895 and $0, respectively		18,105		467		-		-	(24)
January 2015 $12,500 Convertible Note, 10% interest, due July 8, 2015, $12,500 and $0 outstanding, net of debt discount of $589 and $0, respectively		11,911		307		-		-	(25)
February 2015 $100,000 Convertible Note, 10% interest, due August 9, 2015, $100,000 and $0 outstanding, net of debt discount of $8,468 and $0, respectively		91,532		2,459		-		-	(26)
February 2015 $25,000 Convertible Note, 10% interest, due August 4, 2015, $25,000 and $0 outstanding, net of debt discount of $2,315 and $0, respectively		22,685		615		-		-	(27)
March 2015 $50,000 Convertible Note, 10% interest, due September 19, 2015, $50,000 and $0 outstanding, net of debt discount of $12,419 and $0, respectively		37,581		1,230		-		-	(28)
March 2015 $20,000 Convertible Note, 10% interest, due September 25, 2015, $20,000 and $0 outstanding, net of debt discount of $7,379 and $0, respectively		12,621		492		-		-	(29)

Total Convertible Notes Payable, Net	$	935,806	$	142,444	$	600,079	$	114,150

(1) The Company had received $1,060,000 in cash as of December 31, 2012 in exchange for Convertible Debt instruments. These Convertible Debt instruments have an eighteen month term, accrued interest at an annual rate of 12% and a conversion price of $0.10. In addition, the Convertible Debt instruments have an equal amount of $0.15, five year common stock warrants. During the year ending December 31, 2013, the Company entered into new notes with attached warrants with an exercise price of $0.06 per share, which triggered a reset provision of the exercise price of this note’s conversion price and the price of the warrants to $0.06. The Convertible Debt instruments also include Additional Investment Rights to enter into an additional convertible note with a corresponding amount of warrants equal to forty percent of the convertible note principal. The Company recorded a debt discount of $1,060,000 related to the conversion feature of the notes and the attached warrants, along with a derivative liability at inception.

During December of 2012 the holders of the Convertible Debt instruments exercised their conversion rights and converted $171,500 and $37,044 of the outstanding principal and accrued interest balances, respectively, into 2,085,440 shares of the Company’s common stock.

During the twelve months ending December 31, 2013 the holders of the Convertible Debt instruments exercised their conversion rights and converted $708,500 and $153,036 of the outstanding principal and accrued interest balances.

During the twelve months ending December 31, 2014 the holders of the Convertible Debt instruments exercised their conversion rights and converted $10,000 and $2,160 of the outstanding principal and accrued interest balances.

Advanced Medical Isotope Corporation

Notes to Condensed Financial Statements

NOTE 8: CONVERTIBLE NOTES PAYABLE - continued

Interest expense for the amortization of the debt discounts is calculated on a straight-line basis over the eighteen month life of the Convertible Debt instruments. During 2012 total amortization was recorded in the amount of $431,154 resulting in a debt discount of $628,846 at December 31, 2012. During 2012 interest expense of $84,243 was recorded for the Convertible Debt Instruments. During the twelve months ending December 31, 2013, total amortization was recorded in the amount of $213,838 and principal of $708,500 was converted into shares of common stock resulting in a decrease to the debt discount of $404,627. After conversions and amortization, principal totaled $180,000 and debt discount totaled $8,576 at December 31, 2013. During the twelve months ending December 31, 2013 interest expense of $136,447 was recorded for the Convertible Debt Instruments. During the twelve months ending December 31, 2014, total amortization was recorded in the amount of $8,576 and principal of $10,000 and accrued interest of 2,160 was converted into shares of common stock. After conversions and amortization, principal totaled $170,000 and debt discount totaled $0 at December 31, 2014. During the three month ending March 31, 2015 and the twelve months ending December 31, 2014 interest expense of $5,031 and $20,864 was recorded for the Convertible Debt Instruments. The $170,000 balance of the notes reached maturity during the year ended December 31, 2014 and are currently in default.

(2) The Company borrowed $97,700 October 2013, due April 2014, with interest at 8%. The holder of the note has the right, after the first ninety days of the note (January 29, 2014), to convert the note and accrued interest into common stock at a price per share equal to 60% (representing a discount rate of 40%) of the lowest trading price for the Common Stock during the twenty trading day period ending one trading day prior to the date of Conversion Notice. The Company has the right to prepay the note and accrued interest during the first one hundred eighty days following the date of the note. During that time the amount of any prepayment during the first one hundred eighty days is 130% of the outstanding amounts owed while the amount of the prepayment increases every subsequent thirty days to 135%, 140%, 145%, and 150% of the outstanding amounts owed. The Company recorded a debt discount of $97,700 related to the conversion feature of the note, along with a derivative liability at inception. Interest expense for the amortization of the debt discounts is calculated on a straight-line basis over the eighteen month life of the note. During the twelve months ending December 31, 2013 total amortization was recorded in the amount of $32,927 resulting in a debt discount of $64,773. Also during the twelve months ending December 31, 2013, interest expense of $1,954 was recorded for the note. During the twelve months ended December 31, 2014, total amortization was recorded in the amount of $64,773. Also during the twelve months ending December 31, 2014, total principal of $95,000 was converted into shares of common stock resulting in a decrease to the debt discount of $0. After conversions and amortization, principal totaled $2,700, debt discount totaled $0, and accumulated interest totaled $6,713.12 at December 31, 2014. During the three months ended March 31, 2015 the Company accrued $53 additional interest on the note. The balance of the note reached maturity during the year ended December 31, 2014 and is currently in default.

(3) The Company borrowed $50,000 January 2014, due January 2015, with interest at 8%. The holder of the note has the right, after the first one hundred eighty days of the note (July 27, 2014), to convert the note and accrued interest into common stock at a price per share equal to the lesser of $0.09 or 58% of the lowest trade price in the 10 trading days previous to the conversion. The Company recorded a debt discount of $50,000 related to the conversion feature and original issue discount, along with a derivative liability at inception. Interest expense for the amortization of the debt discount is calculated on a straight-line basis over the twelve month life of the note. During the twelve months ended December 31, 2014, total amortization was recorded in the amount of $46,291. After amortization, principal totaled $50,000, debt discount totaled $3,709, and accumulated interest totaled $3,693 at December 31, 2014. During the three months ended March 31, 2015, total amortization was recorded in the amount of $50,000. After amortization, principal totaled $50,000, debt discount totaled $0. The Company accrued an additional $984 interest for the three months ended March 31, 2015. The balance of the note reached full maturity during the quarter ended March 31, 2015 and is currently in default.

(4) The Company borrowed $55,500 January 2014, due October 2014, with interest at 10%. The holder of the note has the right, after the first one hundred eighty days of the note (July 23, 2014), to convert the note and accrued interest into common stock at a price per share equal to the lesser of $0.28 or 60% of the lowest trade price in the 25 trading days previous to the conversion. The note has an original issue discount of $5,500 which has been added to the principal balance of the note and is being recognized in interest expense over the life of the note. The Company recorded a debt discount of $55,000 related to the conversion feature and original issue discount, along with a derivative liability at inception. Interest expense for the amortization of the debt discount is calculated on a straight-line basis over the twelve month life of the note. During the twelve months ended December 31, 2014, total amortization was recorded in the amount of $52,065. Also during the twelve months ending December 31, 2014, total principal of $44,510 was converted into shares of common stock, resulting in a decrease to the debt discount of $7,565. After conversions and amortization, principal totaled $10,990, debt discount totaled $0, and accumulated interest totaled $4,361 at December 31, 2014. The Company accrued an additional $270 interest for the three months ended March 31, 2015. The balance of the note reached maturity during the year ended December 31, 2014, and is currently in default.

(5) The Company borrowed $46,080 February 2014, due February 2015, with a one-time interest charge of 10%. The holder of the note has the right, after the first one hundred eighty days of the note (August 10, 2014), to convert the note and accrued interest into common stock at a price per share equal to the lesser of $0.08 or 60% of the lowest trade price in the 25 trading days previous to the conversion. The Company has the right to prepay the note during the first ninety days following the date of the note. The Company recorded a debt discount of $46,080 related to the conversion feature and original issue discount, along with a derivative liability at inception. Interest expense for the amortization of the debt discount is calculated on a straight-line basis over the twelve month life of the note. During the twelve months ended December 31, 2014, Total amortization was recorded in the amount of $26,503. Also during the twelve months ending December 31, 2014, total principal of $46,080 and accrued interest of $2,250 was converted into shares of common stock, resulting in a decrease to the debt discount of $19,577. After conversions and amortization, principal totaled $0, debt discount totaled $0, and accumulated interest totaled $2,358 at March 31, 2015 and December 31, 2014. The balance of the note reached full maturity during the quarter ended March 31, 2015 and is currently in default.

(6) The Company borrowed $27,800 February 2014, due February 2015, with a one-time interest charge of 10%. The holder of the note has the right to convert the note and accrued interest into common stock at a price per share equal to the lesser of $0.195 or 60% of the lowest trade price in the 25 trading days previous to the conversion. The note has an original issue discount of $2,800 which has been added to the principal balance of the note and is being recognized in interest expense over the life of the note. Additionally, the holder of the note added a market price adjustment of $53,192 on the note due to delay in issuance of conversion shares. The Company increased the amount of the note by $53,192 and recorded a debt discount of $53,192. Interest expense for the amortization of the debt discounts is calculated on a straight-line basis over the nine month life of the note. During the twelve months ending December 31, 2014, total amortization was recorded in the amount of $22,056. Also during the twelve months ending December 31, 2014, total principal of $29,833 and accrued interest of $2,780 was converted into shares of common stock, resulting in a decrease to the debt discount of $506. After conversions and amortization, principal totaled $51,159, debt discount totaled $49,626, and accumulated interest totaled $294 at December 31, 2014. During the three months ending March 31, 2015, total amortization was recorded in the amount of $12,615 and an additional $1,258 of interest was accrued. The balance of the note reached full maturity during the quarter ended March 31, 2015 and is currently in default.

Advanced Medical Isotope Corporation

Notes to Condensed Financial Statements

NOTE 8: CONVERTIBLE NOTES PAYABLE - continued

(7) The Company borrowed $50,000 March 2014, due March 2015, with interest at 10%. The holder of the note has the right, after the first one hundred eighty days of the note (September 18, 2014), to convert the note and accrued interest into common stock at a price per share equal to 60% of the lowest trade price in the 25 trading days previous to the conversion. The Company recorded a debt discount of $50,000 related to the conversion feature and original issue discount, along with a derivative liability at inception. Interest expense for the amortization of the debt discount is calculated on a straight-line basis over the twelve month life of the note. During the twelve months ended December 31, 2014, total amortization was recorded in the amount of $39,042. Also during the twelve months ending December 31, 2014, total principal of $13,039 and accrued interest of $727 was converted into shares of common stock, resulting in a decrease to the debt discount of $5,454. After conversions and amortization, principal totaled $36,961, debt discount totaled $5,504, and accumulated interest totaled $2,886 at December 31, 2014. During the three months ending March 31, 2015, total amortization was recorded in the amount of $5,504 and an additional $909 of interest was accrued. The balance of the note reached full maturity during the quarter ended March 31, 2015 and is currently in default.

(8) The Company borrowed $165,000 March 2014, due April 2015, with interest at 10%. The holder of the note has the right to convert the note and accrued interest into common stock at a price per share equal to the lesser of $1.00 or 65% of the average of the three lowest trading prices in the 20 trading days previous to the conversion. The note has an original issue discount of $15,000 which has been added to the principal balance of the note and is being recognized in interest expense over the life of the note. The Company recorded a debt discount of $165,000 related to the conversion feature and original issue discount, along with a derivative liability at inception. Interest expense for the amortization of the debt discount is calculated on a straight-line basis over the twelve month life of the note. During the twelve months ended December 31, 2014, total amortization was recorded in the amount of $120,417. Also during the twelve months ending December 31, 2014, total principal of $80,488 was converted into shares of common stock, resulting in a decrease to the debt discount of $37,592. After conversions and amortization, principal totaled $84,512, debt discount totaled $6,991, and accumulated interest totaled $14,328 at December 31, 2014. During the three months ending March 31, 2015, total principal of $23,211 was converted into shares of common stock, resulting in a decrease to the debt discount of $6,991. After conversions and amortization, principal totaled $61,301, debt discount totaled $0, and accumulated interest totaled $16,740 at March 31, 2015.

(9) The Company borrowed $32,000 April 2014, due April 2015, with interest at 10%. The holder of the note has the right, after the first one hundred eighty days of the note (October 1, 2014), to convert the note and accrued interest into common stock at a price per share equal to 60% of the lowest trade price in the 25 trading days previous to the conversion. The Company recorded a debt discount of $32,000 related to the conversion feature and original issue discount, along with a derivative liability at inception. Interest expense for the amortization of the debt discount is calculated on a straight-line basis over the twelve month life of the note. During the twelve months ended December 31, 2014, total amortization was recorded in the amount of $21,216. Also during the twelve months ending December 31, 2014, total principal of $9,958 and accrued interest of $681 was converted into shares of common stock, resulting in a decrease to the debt discount of $3,074. After conversions and amortization, principal totaled $22,042, debt discount totaled $7,710, and accumulated interest totaled $835 at December 31, 2014. During the three months ending March 31, 2015, total amortization was recorded in the amount of $7,710 and an additional $542 of interest was accrued.

(10) The Company borrowed $46,080 April 2014, due April 2015, with interest at 10%. The holder of the note has the right, after the first one hundred eighty days of the note (October 11, 2014), to convert the note and accrued interest into common stock at a price per share equal to the lesser of $0.08 or 60% of the lowest trade price in the 25 trading days previous to the conversion. The Company has the right to prepay the note during the first ninety days following the date of the note. The Company recorded a debt discount of $46,080 related to the conversion feature and original issue discount, along with a derivative liability at inception. Interest expense for the amortization of the debt discount is calculated on a straight-line basis over the twelve month life of the note. During the twelve months ended December 31, 2014, total amortization was recorded in the amount of $30,094. Also during the twelve months ending December 31, 2014, total principal of $40,661 was converted into shares of common stock, resulting in a decrease to the debt discount of $15,986. After conversions and amortization, principal totaled $5,419, debt discount totaled $0, and accumulated interest totaled $4,608 at December 31, 2014. During the three months ending March 31, 2015, an additional $133 of interest was accrued.

(11) The Company borrowed $42,500 May 2014, due February 2015, with interest at 8%. The holder of the note has the right, after the first one hundred eighty days of the note (November 16, 2014), to convert the note and accrued interest into common stock at a price per share equal to 61% (representing a discount rate of 39%) of the average of the lowest five trading prices for the Common Stock during the ten trading day period ending one trading day prior to the date of Conversion Notice. The Company has the right to prepay the note and accrued interest during the first one hundred eighty days following the date of the note. During that time the amount of any prepayment during the first sixty days is 130% of the outstanding amounts owed while the amount of the prepayment increases every subsequent thirty days to 135%, 140%, 145%, and 150% of the outstanding amounts owed. The Company recorded a debt discount of $42,500 related to the conversion feature of the note, along with a derivative liability at inception. Additionally, the note holder assed a $14,890 penalty due to the inability of the Company to provide conversion shares timely. The Company increased the amount of the note by $14,890 and recorded a debt discount of $14,890. Interest expense for the amortization of the debt discounts is calculated on a straight-line basis over the nine month life of the note. During the twelve months ending December 31, 2014, total amortization was recorded in the amount of $32,535. Also during the twelve months ending December 31, 2014, total principal of $36,175 was converted into shares of common stock resulting in a decrease to the debt discount of $9,739. After conversions and amortization, principal totaled $21,215, debt discount totaled $15,116, and accumulated interest totaled $1,051 at December 31, 2014. During the three months ending March 31, 2015, total principal of $8,510 was converted into shares of common stock resulting in a decrease to the debt discount of $15,116. After conversions and amortization, principal totaled $12,705, debt discount totaled $0, and accumulated interest totaled $988 at March 31, 2015. The balance of the note reached full maturity during the quarter ended March 31, 2015 and is currently in default.

Advanced Medical Isotope Corporation

Notes to Condensed Financial Statements

NOTE 8: CONVERTIBLE NOTES PAYABLE - continued

(12) The Company borrowed $55,000 May 2014, due May 2015, with interest at 12%. The holder of the note has the right to convert the note and accrued interest into common stock at a price per share equal to the lesser of $0.03 or 55% of the lowest trade price in the 25 trading days previous to the conversion. The note has an original issue discount of $5,000 which has been added to the principal balance of the note and is being recognized in interest expense over the life of the note. The Company recorded a debt discount of $55,000 related to the conversion feature and original issue discount, along with a derivative liability at inception. Interest expense for the amortization of the debt discount is calculated on a straight-line basis over the twelve month life of the note. During the twelve months ended December 31, 2014, total amortization was recorded in the amount of $30,685. Also during the twelve months ending December 31, 2014, total principal of $8,910 was converted into shares of common stock, resulting in a decrease to the debt discount of $0. After conversions and amortization, principal totaled $46,090, debt discount totaled $24,315, and accumulated interest totaled $3,385 at December 31, 2014. During the three months ending March 31, 2015, total amortization was recorded in the amount of $13,562 and an additional $1,360 of interest was accrued.

(13) The Company borrowed $37,500 June 2014, due March 2015, with interest at 8%. The holder of the note has the right, after the first one hundred eighty days of the note (December 10, 2014), to convert the note and accrued interest into common stock at a price per share equal to 61% (representing a discount rate of 39%) of the average of the lowest five trading prices for the Common Stock during the ten trading day period ending one trading day prior to the date of Conversion Notice. The Company has the right to prepay the note and accrued interest during the first one hundred eighty days following the date of the note. During that time the amount of any prepayment during the first sixty days is 130% of the outstanding amounts owed while the amount of the prepayment increases every subsequent thirty days to 135%, 140%, 145%, and 150% of the outstanding amounts owed. The Company recorded a debt discount of $37,500 related to the conversion feature and original issue discount, along with a derivative liability at inception. Interest expense for the amortization of the debt discount is calculated on a straight-line basis over the twelve month life of the note. During the twelve months ended December 31, 2014, total amortization was recorded in the amount of $27,211. After amortization, principal totaled $37,500, debt discount totaled $10,289, and accumulated interest totaled $1,652 at December 31, 2014. During the three months ending March 31, 2015, total amortization was recorded in the amount of $10,289 and an additional $738 of interest was accrued. The balance of the note reached full maturity during the quarter ended March 31, 2015 and is currently in default.

(14) The Company borrowed $28,800 June 2014, due June 2015, with interest at 10%. The holder of the note has the right, after the first one hundred eighty days of the note (December 20, 2014), to convert the note and accrued interest into common stock at a price per share equal to the lesser of $0.08 or 60% of the lowest trade price in the 25 trading days previous to the conversion. The Company has the right to prepay the note during the first ninety days following the date of the note. The Company recorded a debt discount of $28,800 related to the conversion feature and original issue discount, along with a derivative liability at inception. Interest expense for the amortization of the debt discount is calculated on a straight-line basis over the twelve month life of the note. During the twelve months ended December 31, 2014, total amortization was recorded in the amount of $15,070. After amortization, principal totaled $28,800, debt discount totaled $13,730, and accumulated interest totaled $2,880 at December 31, 2014. During the three months ending March 31, 2015, total amortization was recorded in the amount of $7,101 and an additional $708 of interest was accrued.

(15) The Company borrowed $40,000 June 2014, due June 2015, with interest at 10%. The holder of the note has the right, after the first one hundred eighty days of the note (December 23, 2014), to convert the note and accrued interest into common stock at a price per share equal to 60% of the lowest trade price in the 25 trading days previous to the conversion. The Company has the right to prepay the note and accrued interest during the first one hundred eighty days following the date of the note. During that time the amount of the prepayment is 145% of the outstanding amounts owed. The Company recorded a debt discount of $40,000 related to the conversion feature and original issue discount, along with a derivative liability at inception. Interest expense for the amortization of the debt discount is calculated on a straight-line basis over the twelve month life of the note. During the twelve months ended December 31, 2014, total amortization was recorded in the amount of $20,602. After amortization, principal totaled $40,000, debt discount totaled $19,398, and accumulated interest totaled $2,060 at December 31, 2014. During the three months ending March 31, 2015, total amortization was recorded in the amount of $9,863 and an additional $984 of interest was accrued.

(16) The Company borrowed $40,000 June 2014, due June 2015, with interest at 10%. The holder of the note has the right, after the first one hundred eighty days of the note (December 23, 2014), to convert the note and accrued interest into common stock at a price per share equal to 60% of the lowest trade price in the 25 trading days previous to the conversion. The Company has the right to prepay the note and accured interest during the first one hundred eighty days following the date of the note. During that time the amount of any repayment is 145% of the outstanding amounts owed. . The Company recorded a debt discount of $40,000 related to the conversion feature and original issue discount, along with a derivative liability at inception. Interest expense for the amortization of the debt discount is calculated on a straight-line basis over the twelve month life of the note. During the twelve months ended December 31, 2014, total amortization was recorded in the amount of $20,814. Also during the twelve months ending December 31, 2014, total principal of $1,311 was converted into shares of common stock, resulting in a decrease to the debt discount of $632. After conversions and amortization, principal totaled $38,689, debt discount totaled $18,554, and accumulated interest totaled $1,993 at December 31, 2014. During the three months ending March 31, 2015, total amortization was recorded in the amount of $9,755 and an additional $951 of interest was accrued.

Advanced Medical Isotope Corporation

Notes to Condensed Financial Statements

NOTE 8: CONVERTIBLE NOTES PAYABLE - continued

(17) The Company borrowed $56,092 July 2014, due July 2015, with interest at 16%. The holder of the note has the right to convert the note and accrued interest into common stock at a price per share equal to the lesser of $1.00 or 65% of the average of the three lowest trading prices in the 20 trading days previous to the conversion. The note has an original issue discount of $5,000 which has been added to the principal balance of the note and is being recognized in interest expense over the life of the note. The Company recorded a debt discount of $51,092 related to the conversion feature and original issue discount, along with a derivative liability at inception. Interest expense for the amortization of the debt discount is calculated on a straight-line basis over the twelve month life of the note. During the twelve months ended December 31, 2014, total amortization was recorded in the amount of $28,276. After amortization, principal totaled $56,092, debt discount totaled $27,815, and accumulated interest totaled $4,512 at December 31, 2014. During the three months ending March 31, 2015, total amortization was recorded in the amount of $13,953 and an additional $2,207 of interest was accrued.

(18) The Company borrowed $37,500 July 2014, due July 2015, with interest at 12%. The holder of the note has the right to convert the note and accrued interest into common stock at a price per share equal to 50% of the lowest of the lowest trading price in the 15 trading days previous to the conversion. The Company recorded a debt discount of $37,500 related to the conversion feature and original issue discount, along with a derivative liability at inception. Interest expense for the amortization of the debt discount is calculated on a straight-line basis over the twelve month life of the note. During the twelve months ended December 31, 2014, total amortization was recorded in the amount of $16,483. Also during the twelve months ending December 31, 2014, total principal of $485 was converted into shares of common stock (see Note 13: Stockholders’ Equity), resulting in a decrease to the debt discount of $280. After conversions and amortization, principal totaled $37,015, debt discount totaled $20,737, and accumulated interest totaled $1,947 at December 31, 2014. During the three months ending March 31, 2015, total amortization was recorded in the amount of $9,272 and an additional $1,092 of interest was accrued.

(19) The Company borrowed $37,500 July 2014, due April 2015, with interest at 8%. The holder of the note has the right, after the first one hundred eighty days of the note (January 5, 2015), to convert the note and accrued interest into common stock at a price per share equal to 61% (representing a discount rate of 39%) of the average of the lowest five trading prices for the Common Stock during the ten trading day period ending one trading day prior to the date of Conversion Notice. The Company has the right to prepay the note and accrued interest during the first one hundred eighty days following the date of the note. During that time the amount of any prepayment during the first sixty days is 130% of the outstanding amounts owed while the amount of the prepayment increases every subsequent thirty days to 135%, 140%, 145%, and 150% of the outstanding amounts owed. The Company recorded a debt discount of $37,500 related to the conversion feature, along with a derivative liability at inception. Interest expense for the amortization of the debt discount is calculated on a straight-line basis over the twelve month life of the note. During the twelve months ended December 31, 2014, total amortization was recorded in the amount of $23,913. After amortization, principal totaled $37,500, debt discount totaled $13,587, and accumulated interest totaled $1,447 at December 31, 2014. During the three months ending March 31, 2015, total amortization was recorded in the amount of $12,228 and an additional $738 of interest was accrued.

(20) The Company borrowed $22,500 August 2014, due August 2015, with interest at 8%. The holder of the note has the right, after the first one hundred eighty days of the note (February 2, 2014), to convert the note and accrued interest into common stock at a price per share equal to 61% (representing a discount rate of 39%) of the average of the lowest five trading prices for the Common Stock during the ten trading day period ending one trading day prior to the date of Conversion Notice. The Company has the right to prepay the note and accrued interest during the first one hundred eighty days following the date of the note. During that time the amount of any prepayment during the first sixty days is 130% of the outstanding amounts owed while the amount of the prepayment increases every subsequent thirty days to 135%, 140%, 145%, and 150% of the outstanding amounts owed. The Company recorded a debt discount of $20,384 related to the conversion feature and original issue discount, along with a derivative liability at inception. Interest expense for the amortization of the debt discount is calculated on a straight-line basis over the twelve month life of the note. During the twelve months ended December 31, 2014, total amortization was recorded in the amount of $10,896. After amortization, principal totaled $22,500, debt discount totaled $9,488, and accumulated interest totaled $725 at December 31, 2014. During the three months ending March 31, 2015, total amortization was recorded in the amount of $6,671 and an additional $443 of interest was accrued.

(21) The Company borrowed $36,750 August 2014, due August 2015, with interest at 10%. The holder of the note has the right, after the first one hundred eighty days of the note (February 10, 2014), to convert the note and accrued interest into common stock at a price per share equal to 60% (representing a discount rate of 40%) of the lowest trading price for the Common Stock during the twenty five trading day period ending one trading day including the date of Conversion Notice. The Company has the right to prepay the note and accrued interest during the first one hundred eighty days following the date of the note. During that time the amount of any prepayment is 145% of the outstanding amounts owed. The Company recorded a debt discount of $36,750 related to the conversion feature and original issue discount, along with a derivative liability at inception. Interest expense for the amortization of the debt discount is calculated on a straight-line basis over the twelve month life of the note. During the twelve months ended December 31, 2014, total amortization was recorded in the amount of $13,995. After amortization, principal totaled $36,750, debt discount totaled $22,755, and accumulated interest totaled $1,873 at December 31, 2014. During the three months ending March 31, 2015, total amortization was recorded in the amount of $9,062 and an additional $904 of interest was accrued.

Advanced Medical Isotope Corporation

Notes to Condensed Financial Statements

NOTE 8: CONVERTIBLE NOTES PAYABLE - continued

(22) The Company borrowed $33,500 August 2014, due February 2015, with interest at 4%. The Company may prepay the note for a net payment of $33,500 at any time prior to November 27, 2014. After November 27, 2014, the holder has the right to refuse any further payments and to convert this note when it matures, February 27, 2015. The holder of the note has the right to convert the note and accrued interest into common stock at a price per share equal to 60% (represents a 40% discount) of the average three lowest trade prices in the 20 trading days previous to the conversion. The note has an original issue discount of $6,500 which has been added to the principal balance of the note and is being recognized in interest expense over the life of the note. The Company recorded a debt discount of $32,807 related to the conversion feature and original issue discount, along with a derivative liability at inception. Interest expense for the amortization of the debt discount is calculated on a straight-line basis over the twelve month life of the note. During the twelve months ended December 31, 2014, total amortization was recorded in the amount of $22,520. After amortization, principal totaled $33,500, debt discount totaled $10,367, and accumulated interest totaled $0 at December 31, 2014. During the three months ending March 31, 2015, total amortization was recorded in the amount of $10,367. The balance of the note reached full maturity during the quarter ended March 31, 2015 and is currently in default.

(23) The Company borrowed $37,500 September 2014, due September 2015, with interest at 12%. The holder of the note has the right to convert the note and accrued interest into common stock at a price per share equal to 55% (represents a 45% discount) of the lowest trade prices in the 15 trading days previous to the conversion. The note has an original issue discount of $5,000 which has been added to the principal balance of the note and is being recognized in interest expense over the life of the note. The Company recorded a debt discount of $37,500 related to the conversion feature and original issue discount, along with a derivative liability at inception. Interest expense for the amortization of the debt discount is calculated on a straight-line basis over the twelve month life of the note. During the twelve months ended December 31, 2014, total amortization was recorded in the amount of $10,685. Also during the twelve months ending December 31, 2014, total principal of $1,238 was converted into shares of common stock resulting in a decrease to the debt discount of $888. After conversions and amortization, principal totaled $36,262, debt discount totaled $25,927, and accumulated interest totaled $1,236 at December 31, 2014. During the three months ending March 31, 2015, total amortization was recorded in the amount of $9,247 and an additional $1,070 of interest was accrued.

(24) The Company borrowed $19,000 January 2015, due July 2015, with interest at 10%. The holder of the note has the right to convert the note and accrued interest into common stock at the end of the six months (July 8, 2015) at a price per share of $0.001. The Company issued the note holder 3,800,000, $0.001, one year warrants as a loan origination fee. The Company recorded a debt discount of $1,628 related to the warrants issued as a loan origination fee, along with a derivative liability at inception. Interest expense for the amortization of the debt discount is calculated on a straight-line basis over the twelve month life of the note. During the three months ending March 31, 2015 total amortization in the amount of $733 and accrued interest in the amount of $467 was recorded towards this note.

(25) The Company borrowed $12,500 January 2015, due July 2015, with interest at 10%. The holder of the note has the right to convert the note and accrued interest into common stock at the end of the six months (July 8, 2015) at a price per share of $0.001. The Company issued the note holder 2,500,000, $0.001, one year warrants as a loan origination fee. The Company recorded a debt discount of $1,071 related to the warrants issued as a loan origination fee, along with a derivative liability at inception. Interest expense for the amortization of the debt discount is calculated on a straight-line basis over the twelve month life of the note. During the three months ending March 31, 2015 total amortization in the amount of $482 and accrued interest in the amount of $307 was recorded towards this note.

(26) The Company borrowed $100,000 February 2015, due August 2015, with interest at 10%. The holder of the note has the right to convert the note and accrued interest into common stock at the end of the six months (August 9, 2015) at a price per share of $0.001. The Company issued the note holder 20,000,000, $0.001, one year warrants as a loan origination fee. The Company recorded a debt discount of $11,635 related to the warrants issued as a loan origination fee, along with a derivative liability at inception. Interest expense for the amortization of the debt discount is calculated on a straight-line basis over the twelve month life of the note. During the three months ending March 31, 2015 total amortization in the amount of $3,167 and accrued interestion the amount of $2,459 was accrued towards this note.

(27) The Company borrowed $25,000 February 2015, due August 2015, with interest at 10%. The holder of the note has the right to convert the note and accrued interest into common stock at the end of the six months (August 4, 2015) at a price per share of $0.001. The Company issued the note holder 5,000,000, $0.001, one year warrants as a loan origination fee. The Company recorded a debt discount of $1,991 related to the warrants issued as a loan origination fee, along with a derivative liability at inception. Interest expense for the amortization of the debt discount is calculated on a straight-line basis over the twelve month life of the note. During the three months ending March 31, 2015 total amortization in the amount of $597 and accrued interest in the amount of $615 was recorded towards this note.

(28) The Company borrowed $50,000 March 2015, due September 2015, with interest at 10%. The holder of the note has the right to convert the note and accrued interest into common stock at the end of the six months (September 19, 2015) at a price per share of $0.001. The Company issued the note holder 10,000,000, $0.0015, one year warrants as a loan origination fee. The Company recorded a debt discount of $13,213 related to the warrants issued as a loan origination fee, along with a derivative liability at inception. Interest expense for the amortization of the debt discount is calculated on a straight-line basis over the twelve month life of the note. During the three months ending March 31, 2015 total amortization in the amount of $794 and accrued interest in the amount of $1,230 was recorded towards this note.

Advanced Medical Isotope Corporation

Notes to Condensed Financial Statements

NOTE 8: CONVERTIBLE NOTES PAYABLE - continued

(29) The Company borrowed $20,000 March 2015, due September 2015, with interest at 10%. The holder of the note has the right to convert the note and accrued interest into common stock at the end of the six months (September 25, 2015) at a price per share of $0.0022. The Company issued the note holder 4,000,000, $0.0022, one year warrants as a loan origination fee. The Company recorded a debt discount of $7,586 related to the warrants issued as a loan origination fee, along with a derivative liability at inception. Interest expense for the amortization of the debt discount is calculated on a straight-line basis over the twelve month life of the note. During the three months ending March 31, 2015 total amortization in the amount of $207 and accrued interest in the amount of $492 was recorded towards this note.

NOTE 9: COMMON STOCK OPTIONS AND WARRANTS

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

The following schedule summarizes the changes in the Company’s stock options during the three months ended March 31, 2015:

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

Balance at December 31, 2014		8,785,000		$	0.09-0.15	3.42 years		$	-	$	0.14
Options granted		-		$	-	-				$	-
Options exercised		-		$	-		-			$	-
Options expired		(1,950,000	)	$	0.09		-			$	0.09
Balance at March 31, 2015		6,835,000		$	0.12-0.15	4.09 years		$	-	$	0.15

Exercisable at December 31, 2014		7,713,125		$	0.09-0.15	3.42 years		$	-	$	0.14

Exercisable at March 31, 2015		6,835,000		$	0.12-0.15	4.09 years		$	-	$	0.15

The following schedule summarizes the changes in the Company’s stock warrants during the three months ended March 31, 2015:

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

Balance at December 31, 2014		2,310,770,115		$	0.0001-0.25	2.86 years	$	-	$	0.01
Warrants granted		45,300,000		$	0.001-0.0022	.87 years			$	0.012
Warrants exercised		(130,275,550	)	$	0.003	-			$	0.003
Warrants expired		(5,750,000	)	$	0.06-0.175	-			$	0.06-0.175
Balance at March 31, 2015		2,220,044,565		$	0.01-0.25	2.76 years	$	19,972,343	$	0.008

Exercisable at December 31, 2014		1,978,455,471		$	0.0001-0.25	2.86 years	$	-	$	0.01

Exercisable at March 31, 2015		2,220,044,565		$	0.001-0.25	2.76 years	$	19,972,343	$	0.008

Advanced Medical Isotope Corporation

Notes to Condensed Financial Statements

NOTE 10: STOCKHOLDERS’ EQUITY

Common Stock Issued for Cash and the Exercise of Warrants

In February 2015, the Company issued 66,000,000 shares of common stock for cashless warrants exercise.

In March 2015, the Company issued 25,000,000 shares of common stock for cashless warrants exercise.

Common Stock Issued for Convertible Debt

The Company authorized 1,539,221 shares (which were not actually issued due to the lack of availability of authorized shares, but will be issued once shares are available) of its common stock and a convertible promissory note in the amount of $26,000 with interest payable at 10% per annum in January 2015 to our major stockholder, who is also a Director. The Note matures in January of 2016. The entire outstanding principal balance and any outstanding fees or interest is due and payable in full on the maturity date. At the option of the holder, the note and interest is convertible into the Company’s common stock at $0.001 per share. The value of the $26,000 debt plus the $0.0004 fair market value of the 1,539,221 shares at the date of the agreement was prorated to arrive at the allocation of the original $26,000 debt and the value of the 1,539,221 shares and the beneficial conversion feature. The computation resulted in an allocation of $25,399 toward the debt and $601 to the shares and $0 to the beneficial conversion feature. The $601 value of the shares and the $0 value of the beneficial conversion feature are then amortized to interest over the twelve month life of the debt. Interest expense of $125 has been accrued and added to the note payable bringing the total debt balance related to this convertible promissory note to $25,524 as of March 31, 2015. Additionally, $542 worth of interest expense on the notes principal balance has been recognized in the accompanying financial statements for the three months ending March 31, 2015.

The Company authorized 1,000,000 shares (which were not actually issued due to the lack of availability of authorized shares, but will be issued once shares are available) of its common stock and a convertible promissory note in the amount of $25,000 with interest payable at 10% per annum in February 2015 to our major stockholder, who is also a Director. The Note matures in February of 2016. The entire outstanding principal balance and any outstanding fees or interest is due and payable in full on the maturity date. At the option of the holder, the note and interest is convertible into the Company’s common stock at $0.001 per share. The value of the $25,000 debt plus the $0.0007 fair market value of the 1,000,000 shares at the date of the agreement was prorated to arrive at the allocation of the original $25,000 debt and the value of the 1,000,000 shares and the beneficial conversion feature. The computation resulted in an allocation of $24,319 toward the debt and $681 to the shares and $0 to the beneficial conversion feature. The $681 value of the shares and the $0 value of the beneficial conversion feature are then amortized to interest over the twelve month life of the debt. Interest expense of $85 has been accrued and added to the note payable bringing the total debt balance related to this convertible promissory note to $24,404 as of March 31, 2015. Additionally, $313 worth of interest expense on the notes principal balance has been recognized in the accompanying financial statements for the three months ending March 31, 2015.

The Company authorized 1,040,000 shares (which were not actually issued due to the lack of availability of authorized shares, but will be issued once shares are available) of its common stock and a convertible promissory note in the amount of $26,000 with interest payable at 10% per annum in February 2015 to our major stockholder, who is also a Director. The Note matures in February of 2016. The entire outstanding principal balance and any outstanding fees or interest is due and payable in full on the maturity date. At the option of the holder, the note and interest is convertible into the Company’s common stock at $0.0008 per share. The value of the $26,000 debt plus the $0.0008 fair market value of the 1,040,000 shares at the date of the agreement was prorated to arrive at the allocation of the original $26,000 debt and the value of the 1,400,000 shares and the beneficial conversion feature. The computation resulted in an allocation of $25,194 toward the debt and $806 to the shares and $0 to the beneficial conversion feature. The $806 value of the shares and the $0 value of the beneficial conversion feature are then amortized to interest over the twelve month life of the debt. Interest expense of $100 has been accrued and added to the note payable bringing the total debt balance related to this convertible promissory note to $25,294 as of March 31, 2015. Additionally, $325 worth of interest expense on the notes principal balance has been recognized in the accompanying financial statements for the three months ending March 31, 2015.

Common Stock Issued for Debt Converted

During the three months ending March 31, 2015 the Company issued 92,051,568 shares of unrestricted stock in exchange for convertible debt raised in 2014 resulting in a reduction in debt of $31,721, a reduction in derivative liability of $80,052 with an offset of $3,035 to debt discount and a $3,574 gain on extinguishment of debt.

Advanced Medical Isotope Corporation

Notes to Condensed Financial Statements

NOTE 11: SUPPLEMENTAL CASH FLOW INFORMATION

During the three months ended March 31, 2014 the Company issued 100,000 shares of common stock for an extinguishment of $7,500 worth of debt.

During the three months ended March 31, 2014 the Company issued 210,400 shares of common stock as a loan fee of $53,604.

During the three months ended March 31, 2014, the Company issued 6,851,676 shares of stock to settle convertible notes payable with a principal note balance, accrued interest, interest expense, debt discount, and derivative liabilities valued at $450,202 and the Company recognized a $32,630 loss on extinguishment of debt.

During the three months ended March 31, 2014, the Company increased additional paid in capital and increased debt discount for $94,500 for a beneficial conversion feature on a convertible note.

During the three months ended March 31, 2014, the Company Decreased related party convertible notes by $2,088 and decreased convertible notes payable by $38,045 and increased additional paid in capital by $40,133 and increased common stock by $3,579 due to authorization of 3,579,220 shares and warrants issued in conjunction with convertible notes for the debt discount.

During the three months ended March 31, 2015, the Company issued 176,835,519 shares of stock to settle convertible notes payable with a principal note balance, accrued interest, interest expense, debt discount, and derivative liabilities valued at $2,147,388 and the Company recognized a $120,024 loss on settlement of debt.

During the three months ended March 31, 2015 the Company authorized 3,579,221 shares of common stock, but did not issue them due to a lack of sufficient authorized shares, which resulted in a decrease to additional paid in capital and an increase to a liability for lack of authorized shares for a total of $2,761,627.

During the three months ended March 31, 2015, the Company issued 92,051,568 shares of stock to settle convertible notes payable with a principal note balance, accrued interest, interest expense, debt discount, and derivative liabilities valued at $109,813 and the Company recognized a $2,083 gain on extinguishment of debt.

NOTE 12: SUBSEQUENT EVENTS

In April 2015 the Company received $26,500 in exchange for a convertible 10%, one year note. The note plus interest is convertible at the option of the note holder into common stock shares at $0.003 per share. In addition the Company issued the note holder 353,333 shares of its common stock as a loan origination fee. These shares for the loan origination fees have not been issued due to the lack of availability of authorized shares, but will be issued once shares are available.

In April 2015 the Company received a $50,000 loan, the terms of which are still being determined.

In April 2015 the Company received $10,000 in exchange for a convertible 10%, six month note. The note plus interest is convertible at the option of the note holder into common stock shares at $0.001 per share. In addition the Company issued the note holder 400,000 shares of its common stock as a loan origination fee. These shares for the loan origination fees have not been issued due to the lack of availability of authorized shares, but will be issued once shares are available.

In April 2015 the Company received $25,000 in exchange for a convertible 10%, six month note. The note plus interest is convertible at the option of the note holder into common stock share at $0.001 per share. In addition the Company issued the note holder 1,000,000 shares of its common stock as a loan origination fee. These shares for the loan origination fees have not been issued due to the lack of availability of authorized shares, but will be issued once shares are available.

In May 2015 the Company issued 83,500,000 shares of unrestricted stock in exchange for warrants related to convertible debt raised in 2013 and 2014.

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

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

Except for statements of historical fact, certain information described in this Form 10-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.

General Statement of Business

Advanced Medical Isotope Corporation (the “Company,” “AMIC” 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. AMIC 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).

AMIC is a Kennewick, Washington-based late stage development company engaged primarily in the development of brachytherapy devices for therapeutic applications. AMIC's focus is on transitioning to full operations upon receipt, if any, of FDA clearance for its patented brachytherapy cancer products. Brachytherapy uses radiation to destroy cancerous tumors by placing a radioactive isotope inside or next to the treatment area.

Since 2006, AMIC has been focused on development of a range of medical isotope technologies, certain of which AMIC has abandoned and others of which remain in development. AMIC’s financial constraints have generally caused AMIC to reduce or defer continued development of the technologies it has considered.

From August 2008 through January 2013, the Company manufactured and sold F-18 FDG from its Production Facility in its local region around Kennewick, WA.

Since late 2013, AMIC has focused its resources on developing a proposed line of brachytherapy products and on endeavoring to secure FDA clearance with respect to the initial proposed brachytherapy product. AMIC’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 AMIC an exclusive license to patents covering these developments for manufacturing, processing and applications for medical isotopes (the “Battelle License”).

A prominent team of radiochemists, scientists and engineers, collaborating with strategic partners, including national laboratories, universities and private corporations, lead AMIC’s development efforts. AMIC has been recognized as a leader in the development of new isotope technologies by local, state and federal agencies.

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 a limited amount of revenue and has accumulated deficits since inception. If the Company cannot obtain sufficient funding, the Company would have to delay the implementation of its business strategy and might not be able to continue operations.

2014 Significant Events

Throughout 2014, the Company focused on the development of its brachytherapy products including the regulatory review of the Y-90 RadioGel™ device by the Food and Drug Administration (“FDA”).

In February 2014, the FDA determined that under Section 510(k) of the Act the Y-90 RadioGel™ device was not substantially equivalent to the devices cited by the Company, and concluded that the device is classified by statute as a Class III medical device, unless the device is reclassified. On December 23, 2014 the Company announced that it has submitted a de novo to the FDA for marketing clearance for its Y-90 RadioGel™ device pursuant to Section 513(f)(2) of the U.S. Food, Drug and Cosmetic Act (the “Act”). The FDA may grant clearance to market the Y-90 RadioGel™ as a Class II device or they may decline the de novo and require that the device be reviewed as a Class III device. The Company is waiting for feedback from the FDA on the de novo application.

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

2014 Significant Events - continued

On July 7, 2014 the Company announced that Battelle had acquired approximately 11% of AMIC’s outstanding Common Stock at that time. Battelle acquired its interest in the Company by converting a note previously issued for partial consideration of studies conducted at Pacific Northwest National Laboratory (PNNL).

On September 16, 2014 the Company announced that an additional patent was awarded to Battelle for technology related to its brachytherapy products. The patent, US 8,821,364 B2, relates to AMIC’s brachytherapy seed product and is entitled: Brachytherapy Seed with Fast Dissolving Matrix for Optimal Delivery of Radionuclides to Cancer Tissue. Pursuant to the Battelle License, AMIC received an exclusive license to that patent.

On December 17, 2014 the Company announced that a Life Sciences Discovery Fund (LSDF) Proof of Concept Grant has been awarded to Washington State University (WSU) for a proposal titled “Optimized Injectable Radiogels for High-dose Therapy of Non-resectable Solid Tumors”, submitted by Principal Investigator Dr. Darrell Fisher, in the amount of $250,000. As the commercialization partner, AMIC will receive a portion of the award by supplying product to WSU for the study as well as providing scientific and technical support. AMIC plans to use the data generated during the study to support the commercialization of the Company’s brachytherapy products for both human and veterinary markets. Dr. Darrell Fisher serves on the AMIC Medical Advisory Board.

Based on the Company’s financial history since inception, our auditor has expressed substantial doubt as to the Company’s ability to continue as a going concern. Since inception, the Company has had limited revenue and has accumulated deficits. If the Company does not obtain sufficient funding, the Company will have to delay the implementation of its business strategy and might not be able to continue operations.

Narrative Description of Business

The Company is a late stage development company engaged primarily in the development of brachytherapy devices for therapeutic applications. The Company's focus is on transitioning to full operations upon receipt, if any, of FDA clearance for its patented brachytherapy cancer products. Brachytherapy uses radiation to destroy cancerous tumors by placing a radioactive isotope inside or next to the treatment area.

The Company’s overall objective is to empower physicians, medical researchers, and ultimately, patients, by providing them with essential radionuclides that, until now, have not been practical or economical to produce, in an effort to detect, manage, and cure human disease, and improve the lives of patients. The Company’s shorter-term objective is to obtain regulatory approval for its brachytherapy products and to then commercialize those products.

In late 2013, the Company’s board approved a three year business strategy focused on transitioning to full operations if we are able to secure FDA approval to begin marketing our brachytherapy cancer products. Should the Company first receive regulatory approval outside of the United States, the Company could commence operations in the applicable territories. No applications have been made for approval outside of the United States. Unless the Company receives additional and sufficient financing to support its operations, or enters into a strategic partnership specific to an international market, it is unlikely that any application will be made for approval outside of the United States.

The business strategy results from the Company’s development of a family of three brachytherapy devices and the Company’s belief that there is: (1) strong market potential for these products in the United States and internationally, (2) the potential for attractive operating margins from the commercialization of such devices, (3) the amount of capital required to complete the regulatory process and deploy these devices (4) a material potential for the Company to receive advances and minimum guarantees from international licensees of these products when they are ready for such licensing activities.

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 generally to enter into licensing arrangements. The Company will evaluate its alternatives before finalizing its plans.

As a result of our financial constraints and our focus on brachytherapy products, we have in all material respects terminated, suspended or deferred our research efforts regarding other technologies and products.

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. Our 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. It is also possible that if we receive sufficient funding that we might resume operation of our linear accelerator.

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

Narrative Description of Business - continued

We require funding of at least $1.5 million per year to maintain current operating activities and from approximately $5 million to $10 million to fund: (1) the FDA approval process and initial deployment of the brachytherapy products and (2) initial regulatory approval processes outside of the United States. We also require up to approximately $1.5 million to retire outstanding debt and past due payables. 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 2015 will be 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 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.

Although we are seeking the foregoing funding and have engaged in numerous discussions with potential finders, investment bankers and investors with respect to the initial portion thereof, we have not received firm commitments for the required funding. Based upon our discussions, we anticipate that if we are able to obtain the funding required to retire outstanding debt, pay past due payables and maintain our current operating activities that the terms thereof will be materially dilutive to existing shareholders. We further anticipate that if we are able to obtain any additional funding, that funding would also be materially dilutive to existing shareholders.

Research and development of the Company’s brachytherapy product line has been supported in part through 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.” This grant reimbursed the Company for expenditures related to the development of its Brachytherapy project from April 1, 2010 through March 31, 2012. On October 29, 2010, the Company received notification it had been awarded $244,479 grant funds from the Qualified Therapeutic Discovery Project Program for this same Brachytherapy Project. The $244,479 grant was received February 4, 2011. This grant reimburses the Company for eligible expenditures made during the twelve months ended December 31, 2010.

There can be no assurance regarding the outcome of the Company’s regulatory, financing or commercial efforts. If some of the anticipated results are delayed or do not occur, the Company may be forced to cease operations.

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.

Potential acquisitions

No definitive agreements or commitments have been entered into by the Company pertaining to potential acquisitions. Except for stock acquisitions, potential acquisitions would be subject to the Company’s receipt of sufficient financing.

Products

Brachytherapy

Pursuant to the Battelle License, we have 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 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. There can be no assurance that we will obtain such approvals. Our open FDA application is a de novo for the Y-90 RadioGel™ device. If we receive FDA clearance for the Y-90 RadioGel™ device, subject to receipt of adequate financing, we will commence commercialization of that product. Also, subject to receipt of adequate financing, we intend 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.

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

Products - continued

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 we are 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:

Maximizing Therapeutic Index: The short-range beta particles emitted by Y-90 deliver radiation energy within a tight range. This enables radiation to be selectively delivered to target tissues while minimizing radiation dose to nearby normal tissues. High therapeutic indices imply that more radiation energy may be imparted to cancer tissues, with less radiation reaching adjacent normal tissues.

Half Life: The industry-standard products have a half-life of 17 days, meaning the patient is radioactive for over two months. The Company’s brachytherapy products use the yttrium-90 isotope, which has a half-life of just 2.7 days. A patient treated with Y-90 would be close to radiation free in 10 days.

Optimized Delivery Method: Current brachytherapy devices place permanent metal particles seeds in the prostate by using up to 30 large gauge needles. By contrast, the Company’s biodegradable polymer carrying Y-90 particles may be administered with small-gauge needles.

No Permanent Seeds Remaining: Current brachytherapy devices place permanent metal seeds in the tumor. The Company’s Y-90 RadioGel™ device utilizes a biodegradable, non-toxic polymer that is ultimately absorbed by the body. This eliminates the possibility of a long-term seed migration or other problems that may sometimes arise when seeds remain in the body.

Good Safety Profile: Many current brachytherapy devices utilize isotopes that emit x-rays (akin to gamma radiation). X-rays or gamma radiation travels within and outside of the body and the isotopes used in current brachytherapy products can remain radioactive for more than two months. The Company’s brachytherapy products use the yttrium-90 isotope, which is a beta-emitter. The yttrium-90 beta-emissions travel only a short distance and have a short half life of 2.7 days.

On December 23, 2014 the Company announced that it has submitted a de novo to the Food and Drug Administration (“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 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, the device may be immediately marketed in the United States, though the Company would have to secure funding and commercial arrangements before marketing could commence. If the de novo is declined, 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. We would be unable to pursue the foregoing regulatory approval process unless we receive additional funds.

In addition to developing brachytherapy products for human markets, we are devoting limited resources to adapting our proposed human products for the veterinary market. The veterinary market offers the potential to treat animal cancers. Many veterinary clinics already use various types of nuclear medicine. Regulations covering the use of medical isotopes in the veterinary market are different than those for the human markets and may offer a quicker path to market for some products. In addition, offering products in the veterinary markets creates additional distribution channels. We believe the financial potential for the veterinary market is much more limited than the potential for the human market.

Subject to receipt of regulatory approval and sufficient 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 generally to enter into licensing arrangements. The Company will evaluate its alternatives before finalizing its plans.

There can be no assurance that we will ever receive regulatory approvals or, if we do receive such approvals, the timing thereof. There can be no assurance that we will receive the funds required to continue to pursue regulatory approvals, or to take any of the other steps in our business plan described in this document. Further, there can be no assurance that should we receive regulatory approval or funds that our products would be successfully and profitable introduced in any market.

Molybdenum-99 and Technetium-99

Because of the Company’s financial constraints and focus on the brachytherapy products, the Company has delayed the potential implementation of production activities pertaining to Molybdenum-99 and Technetium-99.

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

Products - continued

One of AMIC's future goals is to produce the medical imaging isotope Technetium-99m. This critical imaging isotope is created from another commonly known isotope Molybdenum-99 (Mo-99). Nuclear Fission is used to produce the radioactive substance, Technetium-99m from Molydenum-99. Technetium-99m is employed in more than 16 million nuclear imaging procedures per-year in the US alone. Unfortunately, supply and reliability has declined over the past decade due to unexpected or extended shutdowns at the few aging 99Mo producing research reactor and processing facilities. These shutdowns have created global supply shortages.

Unless and until the Company receives additional funding sufficient to pursue our brachytherapy products and also sufficient to resume development of Technetium-99, we have suspended and will continue to suspend our efforts with respect to Technetium-99.

Diagnostic Medical Isotopes

From August 2008 through January 2013, the Company manufactured and sold F-18 FDG from its Production Facility in its local region around Kennewick, WA. The linear accelerator requires repairs to be operation. To resume operations of the linear accelerator the company would require funds to repair the equipment and operate the production center.

F-18 is an important isotope in the radiopharmaceutical industry, and is primarily synthesized into fluorodeoxyglucose (FDG) for use in positron emission tomography (PET) scans. FDG is the primary PET imaging isotope. It is used for medical and diagnostic purposes, such as cancer detection, heart imaging, and brain imaging. When operating, the Company’s linear accelerator is capable of producing a variety of isotopes and future manufacturing and sales could expand beyond F-18 FDG.

The cornerstone equipment selected for the Company’s Production Facility is a proton linear accelerator. The Company’s proton linear accelerator is designed to replace large and cyclotron systems with significant infrastructure and utility requirements, such as electrical and air-handling, for the production of positron emitting isotopes. Large amounts of fluorine-18, carbon-11, nitrogen-13, and oxygen-15 can be produced for synthesis into compounds used in oncology, cardiology, neurology, and molecular imaging. The radio-labeled glucose analog, FDG, can be synthesized and distributed for use in Positron Emission Tomography. Based on its experience in the industry, it is the Company’s belief that no other accelerator in North America has sufficient flexibility to produce the full spectrum of PET imaging radioisotopes, as well as other high-demand isotopes, both short and long lived, for diagnostic and therapeutic applications. The Company’s business strategy contemplates that the Company may resume operation of its linear accelerator. There can be no assurance that the linear accelerator can be repaired and that production of radioisotopes can resume even if funding is made available.

Sales Agency Activities:

On its behalf and on behalf of third parties, from 2008 to 2013 AMIC secured sales for isotopes and related equipment. AMIC views distribution as a growth area and if we obtain sufficient funds, we intend to resume this activity. AMIC engaged in sales agency activities for worldwide distribution of O-18 enriched water. AMIC also has the ability to act as a sales agency for other stable isotopes as well as radioactive isotopes. Resuming our sales agency activities for isotopes and related equipment manufactured by third parties requires very little capital, facilitates the Company’s interaction with potential partners, customers and vendors and should be immediately cash positive. In 2013, the Company derived approximately $101,745 of revenue from such activities.

Competitors

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

Nuclear Medicine

According to the World Nuclear Association: over 10,000 hospitals worldwide use radioisotopes in medicine, and about 90% of the procedures are for diagnosis. The most common radioisotope used in diagnosis is technetium-99, with some 40-45 million procedures per year (16.7 million in USA in 2012). In the USA there are over 20 million nuclear medicine procedures per year among 311 million people. The use of radiopharmaceuticals in diagnosis is growing at over 10% per year. The global radioisotope market was valued at $4.8 billion in 2012, with medical radioisotopes accounting for about 80% of this, and is poised to reach about $8 billion by 2017. North America is the dominant market for diagnostic radioisotopes with close to half of the market share, while Europe accounts for about 20%.

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 MEDraysintell the global market for brachytherapy reached US$ 680 million in 2013. 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.

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

Competitors - continued

There are many 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), but the product is currently marketed by Theragenics Corporations (NYSE:TGX). 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).

Diagnostic Medical Isotopes

According to the World Nuclear Association, the main world isotope suppliers are Mallinckrodt Pharmaceuticals (Ireland), MDS Nordion (Canada), IRE (Europe), NTP (South Africa), Isotop-NIIAR (Russia) and ANSTO (Australia).. Most medical radioisotopes made in nuclear reactors are sourced from relatively few research reactors. Most of the world's supply of Mo-99 for this comes from only five reactors, all of them 43 to 52 years old (in mid 2010). A number of incidents in 2008 pointed up shortcomings and unreliability in the supply of medical isotopes, particular technetium.

Employees

As of December 31, 2014, the Company had eight employees, including four 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 we manufacture 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 2014 consisted of only Consulting Income.

The Company’s prior customers for sales of stable isotopes have included a broad range of hospitals, universities, research centers and national laboratories, in addition to academic and government institutions. The Company expects the same potential future customers for stable isotope sales if that activity is resumed in the future. These customers are located in major U.S. and international markets.

The Company’s customers for sales of AMIC produced F-18 FDG were regional hospitals including KADLEC and Kennewick General Hospital (Trios).

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 2014:

Patent filing costs totaling $0 and $0, were capitalized during the three months ended March 31, 2015 and the twelve months ended December 31, 2014, respectively. During the three months ended March 31, 2015 and the twelve months ended December 31, 2014, the Company impaired $0 and $0, respectively, worth of patent and intellectual property. This left a total $35,482 and $35,482 of capitalized patents and intellectual property costs at March 31, 2015 and December 31, 2014, respectively. The patents are pending and are being developed, and as such, the patents and filing costs associated with them are not being amortized. Management has determined the economic life of the patents to be 10 years, and amortization, over such 10-year period and on a straight-line basis, will begin once the patents have been issued and the Company begins utilization of the patents through production and sales, resulting in revenues. The Company evaluates the recoverability of intangible assets, including patents on a continual basis. Several factors are used to evaluate intangibles, including, but not limited to, management’s plans for future operations, recent operating results and projected and expected undiscounted future cash flows.

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

Patents, Trademarks, Licenses - continued

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. This fee was fully expensed in the twelve months ended December 31, 2011. 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. The $5,000 minimum royalty amount for the year 2013 was paid in February, 2014. The $7,500 minimum royalty amount for the year 2014 was paid in February, 2015.

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 Company has spent approximately $950,000 on its facility to meet environmental regulation, including the cost of confinement of the facility, exhaust and air balance systems and waste storage facilities. As the Company expands its manufacturing capability, it will be subject to extensive government regulation and intervention both in the United States and in all foreign jurisdictions in which it conduct business.

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.

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

Results of Operations

Comparison of the three Months Ended March 31, 2015 and 2014

The following table sets forth information from our statements of operations for the three months ended March 31, 2015 and 2014.

	Three Months Ended March 31, 2015			Three Months Ended March 31, 2014
Revenues	$	12,054			$	14,054

Operating expenses		(340,867	)			(559,758	)

Operating loss		(328,813	)			(545,694	)
Non-operating income (expense)
Gain (loss) on derivative liability		2,233,260				(111,796	)
Net loss on settlement of debt		(3,574	)			(32,630	)
Interest expense		(326,140	)			(393,283	)
Net income (loss)	$	1,574,733			$	(1,083,402	)

Revenue

Revenue was $12,054 for the three months ended March 31, 2015 and $14,054 for the three months ended March 31, 2014. The decrease was a result of a decrease in Consulting revenues which consisted of $12,054 and $14,054 for the three months ended March 31, 2015 and 2014, respectively. Consulting revenues consist of providing a company with assistance in strategic targetry services, and research into production of radiophamaceuticals and the operations of radioisotope production facilities. No proprietary information belonging to our Company is shared during the process of this consulting.

Revenue for the three months ended March 31, 2015 and 2014 consists of the following:

	Three months ended March 31, 2015		Three months ended March 31, 2014
Consulting	$	12,054	$	14,054
TOTAL	$	12,054	$	14,054

Operating Expenses

Operating expenses for the three months ended March 31, 2015 and 2014 was $340,867 and $559,747, respectively. The decrease in operating expenses from 2014 to 2015 can be attributed to the decrease in Professional Fees expenses ($185,177 for the three months ended March 31, 2014 versus $63,993 for the three months ended March 31, 2015); and the decrease in Stock Options Granted expense ($58,187 for the three months ended March 31, 2014 versus $28,500 for the three months ended March 31, 2015); and the decrease in General and Administrative Expenses ($122,971 for the three months ended March 31, 2014 versus $53,779 for the three months ended March 31, 2015).

Operating expenses for the nine months ended March 31, 2015 and 2014 consists of the following:

	Three months ended March 31, 2015		Three months ended March 31, 2014
Cost of materials	$	390	$	251
Depreciation and amortization expense		2,669		2,998
Professional fees		63,993		185,177
Stock options granted		28,500		58,187
Payroll expenses		191,536		189,563
General and administrative expenses		53,779		122,971
Sales and marketing expense		-		600
	$	340,867	$	559,747

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

Non-Operating Income (Expense)

Non-operating income (expense) for the three months ended March 31, 2015 varied from the three months ended March 31, 2014 primarily due to an increase of gain on derivative liability to $2,233,260 for the three months ended March 31, 2015 from a loss of $(111,796) for the three months ended March 31, 2014; and an decrease in interest expense from $(393,283) for the three months ended March 31, 2014 to $(326,140) for the three months ended March 31, 2015; and an decrease in net loss on settlement of debt from $(32,630) for the three months ended March 31, 2014 to $(3,574) for the three months ended March 31, 2015.

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

	Three months ended March 31, 2015			Three months ended March 31, 2014
Interest expense	$	(326,140	)	$	(393,283	)
Net loss on settlement of debt		(3,574	)		(32,630	)
Gain (loss) on derivative liability		2,233,260			(111,796	)
	$	1,903,546		$	(537,709	)

Net Loss

Our net gain (loss) for the three months ended March 31, 2015 and 2014 was $1,574,733 and $(1,083,402), respectively.

Liquidity and Capital Resources

At March 31, 2015, the Company had negative working capital of $21,220,530, as compared to $9,437,613 at March 31, 2014. During the three months ended March 31, 2015 the Company experienced negative cash flow from operations of $263,237 and it expended $0 for investing activities while adding $265,519 of cash flows from financing activities. As of March 31, 2015, the Company had $0 commitments for capital expenditures.

Cash used in operating activities decreased from $427,707 for the three month period ending March 31, 2014 to $263,237 for the three month period ending March 31, 2015. Cash used in operating activities was primarily a result of the Company’s net loss, partially offset by non-cash items, such as loss on derivative liability and amortization and depreciation, included in that net loss and common stock and stock options issued for services and other expenses. The Company had no cash used in investing activities for the three month periods ended March 31, 2015 and 2014. Cash provided from financing activities decreased from $519,348 for the three month period ending March 31, 2014 to $265,519 for the three month period ending March 31, 2015. The decrease in cash provided from financing activities was primarily a result of decrease in proceeds from convertible debt, partially offset with a decrease in payments on capital lease.

The Company has generated material operating losses since inception. The Company has incurred a net loss of $52,672,498 from January 1, 2006 through March 31, 2015, including a net gain of $1,574,733 for the three months ended March 31, 2015, and a net loss of $1,083,402 for the three months ended March 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.

Based on the current cash run rate, we require funding of at least $1.5 million per year to maintain current operating activities and from approximately $5 million to $10 million to fund: (1) the FDA approval process and initial deployment of the brachytherapy products and (2) initial regulatory approval processes outside of the United States. We also require up to approximately $1.5 million to retire outstanding debt and past due payables. 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 2015 will be 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 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.

As of March 31, 2015 and December 31, 2014 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 $3,018,312 and $253,106, offset by $3,018,312 and $253,106 of equity for the period ended March 31, 2015 and December 31, 2014, 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 will be reached.

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

Liquidity and Capital Resources - continued

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.

Critical Accounting Policies and Estimates

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the unaudited condensed consolidated financial statements and accompanying notes. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results could differ from these estimates under different assumptions or conditions. During the period ended March 31, 2015, we believe there have been no significant changes to the items disclosed as significant accounting policies in management's notes to the consolidated financial statements in our annual report on Form 10-K for the year ended December 31, 2014, filed on April 15, 2015.

Off-Balance Sheet Arrangements

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

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

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

Item 4. Controls and Procedures.

Disclosure Controls and Procedures

Based on an evaluation as of the date of the end of the period covered by this report, 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.

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 4. Controls and Procedures. - continued

Changes in Internal Control Over Financial Reporting - continued

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

(b)

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

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

PART II

Item 1A. Risk Factors.

There have been no material changes to the risk factors set forth in Item 1A in our Form 10-K report for the year ended December 31, 2014.

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

Item 6. Exhibits.


Exhibit
Number		Description
10.1		Form of Non-Statutory Stock Option Agreement (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on March 15, 2012).
31.1	*	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes – Oxley Act of 2002
31.2	*	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes – Oxley Act of 2002
32.1	*	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350
99.1	*	Temporary Hardship Exemption
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema
101.CAL		XBRL Taxonomy Extension Calculation Linkbase
101.DEF		XBRL Taxonomy Extension Definition Linkbase
101.LAB		XBRL Taxonomy Extension Label Linkbase
101.PRE		XBRL Taxonomy Extension Presentation Linkbase

* Filed herewith.

SIGNATURES

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

	ADVANCED MEDICAL ISOTOPE CORPORATION

Date: May 15, 2015	By:	/s/ James C. Katzaroff
	Name:	James C. Katzaroff
	Title:	Chairman and Chief Executive Officer
		(Principal Executive Officer)


Date: May 15, 2015	By:	/s/ L. Bruce Jolliff
	Name:	L. Bruce Jolliff
	Title:	Chief Financial Officer
		(Principal Financial and Accounting Officer)