VIVOS INC - FORM 10-Q - August 4, 2011

Attached files

file	filename
EXCEL - IDEA: XBRL DOCUMENT - VIVOS INC	Financial_Report.xls
EX-31.1 - CEO CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES - OXLEY ACT OF 2002 - VIVOS INC	exhibit_31-1.htm
EX-31.2 - CFO CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES - OXLEY ACT OF 2002 - VIVOS INC	exhibit_31-2.htm
EX-32.1 - CEO AND CFO CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 - VIVOS INC	exhibit_32-1.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: JUNE 30, 2011

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

COMMISSION FILE NUMBER 0-53497

(Exact name of registrant as specified in its charter)

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

6208 W Okanogan Ave,

Kennewick WA 99336

(Address of principal executive offices, Zip Code)

(509) 736-4000

(Registrant’s telephone number, including area code)

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

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

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

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

The number of shares of registrant’s common stock outstanding, as of August 4, 2011 was 70,959,896.

TABLE OF CONTENTS

		Page
PART I - FINANCIAL INFORMATION

Item 1. Financial Statements		3
Balance Sheets as of June 30, 2011 (unaudited) and December 31, 2010		3
Statements of Operations for the Three Months and the Six Months ended June 30, 2011 (unaudited) and the Three Months and the Six Months ended June 30, 2010 (unaudited)		4
Statements of Changes in Shareholders’ Equity (Deficit) for the period ended June 30, 2011 (unaudited)		5
Statements of Cash Flows for the six months ended June 30, 2011 (unaudited) and the six months ended June 30, 2010 (unaudited)		6
Notes to Condensed Financial Statement (unaudited)		7-14
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		15-30
Item 3. Quantitative and Qualitative Disclosures About Market Risk		30
Item 4. Controls and Procedures		31

PART II - OTHER INFORMATION

Item 1. Legal Proceedings		32
Item 1A. Risk Factors		32
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		32
Item 3. Defaults Upon Senior Securities		32
Item 5. Other Information		32
Item 6. Exhibits		32

SIGNATURES		32

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

Advanced Medical Isotope Corporation

Balance Sheets


	June 30,			December 31,
	2011			2010
	(unaudited)
ASSETS

Current Assets:
Cash and cash equivalents	$	5,132		$	589,390
Accounts receivable - trade		21,459			15,370
Accounts receivable - other		125,000			425,504
Prepaid expenses		15,795			46,975
Prepaid expenses paid with stock, current portion		45,750			89,949
Inventory		7,800			1,400
Total current assets		220,936			1,168,588

Fixed assets, net of accumulated depreciation		941,804			1,211,664

Other assets:
License fees, net of amortization		13,058			16,390
Patents		287,738			219,803
Prepaid expenses paid with stock, long-term portion		3,125			21,875
Deposits		5,406			5,406
Total other assets		309,327			263,474

Total assets	$	1,472,067		$	2,643,726

LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)

Current liabilities:
Accounts payable and accrued expenses	$	656,419		$	591,416
Accrued interest payable		335,332			245,105
Payroll liabilities payable		6,078			13,229
Deferred income		1,085,272			1,191,492
Short term loan payable		55,000			-
Loans from shareholder		103,570			126,508
Convertible notes payable		1,899,370			2,006,128
Current portion of capital lease obligations		417,000			405,338
Total current liabilities		4,558,041			4,579,216

Long term liabilities:
Capital lease obligations, net of current portion		821,792			1,029,171
Total liabilities		5,379,833			5,608,387

Shareholders’ Equity (Deficit):
Preferred Stock, $.001 par value, 20,000,000 share authorized; zero issued and outstanding		-			-
Common stock, $.001 par value; 200,000,000 shares authorized;
68,959,896 and 67,917,983 shares issued and outstanding,
respectively		68,959			67,918
Paid in capital		18,739,898			18,299,253
Accumulated deficit		(22,716,623	)		(21,331,832	)
Total shareholders’ equity (deficit)		(3,907,766	)		(2,964,661	)

Total liabilities and shareholders’ equity (deficit)	$	1,472,067		$	2,643,726

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

Advanced Medical Isotope Corporation
Statements of Operations (unaudited)

	Three months ended June 30,						Six months ended June 30,
	2011			2010			2011			2010

Revenues	$	139,926		$	138,193		$	290,483		$	202,663
Cost of Goods Sold		11,464			14,476			36,538			29,938
		128,462			123,717			253,945			172,725

Operating expenses
Sales and marketing expenses		35,298			4,636			58,589			15,957
Depreciation and amortization		136,596			135,117			273,192			271,617
Professional fees		220,478			101,472			500,566			580,603
Stock options granted		(12,350	)		50,630			-			137,886
Payroll expenses		166,216			121,576			412,417			345,125
General and administrative expenses		153,868			140,373			298,148			292,836
Total operating expenses		700,106			553,804			1,542,912			1,644,024
Operating loss		(571,644	)		(430,087	)		(1,288,967	)		(1,471,299	)

Non-operating income (expense)
Interest expense		(103,003	)		(213,415	)		(202,044	)		(404,713	)
Grant income recognized		43,125			-			106,220
Non-operating income (expense), net		(59,878	)		(213,415	)		(95,824	)		(404,713	)

Loss before Income Taxes		(631,522	)		(643,502	)		(1,384,791	)		(1,876,012	)
Income Tax Provision		-			-			-			-
Net Loss	$	(631,522	)	$	(643,502	)	$	(1,384,791	)	$	(1,876,012	)
Loss per common share	$	(0.01)		$	(0.01	)	$	(0.02	)	$	(0.04	)

Weighted average common shares outstanding		68,890,965			53,546,680			68,524,613			53,212,311

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

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

	Common Stock				Paid in		Accumulated
	Shares		Amount		Capital		Deficit			Total

Balances at December 31, 2010 (audited)		67,917,983	$	67,918	$	18,299,253	$	(21,331,832	)	$	(2,964,661	)

Common stock issued for:
Stock options exercised		750,000		750		111,750		-			112,500
Services		60,000		60		17,940		-			18,000
Debt		156,167		156		46,694		-			46,850
Loan fees on convertible debt		75,746		75		29,611		-			29,686
Options issued for debt		-		-		234,650		-			234,650
Net loss		-		-		-		(1,384,791	)		(1,384,791	)
Balances at June 30, 2011		68,959,896	$	68,959	$	18,739,898	$	(22,716,623	)	$	(3,907,766	)

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

Advanced Medical Isotope Corporation
Statements of Cash Flow
(Unaudited)
	Six months ended
	June 30,
	2011			2010
CASH FLOW FROM OPERATING ACTIVITIES:
Net Loss	$	(1,384,791	)	$	(1,876,012	)

Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation of fixed assets		269,860			269,256
Amortization of licenses and intangible assets		3,332			2,361
Amortization of convertible debt discount		27,313			254,395
Amortization of prepaid expenses paid with stock		62,949			70,775
Common stock issued for services		18,000			350,000
Stock options issued for services		-			137,886
Changes in operating assets and liabilities:
Accounts receivable		(6,091	)		7,870
Accounts receivable - other		300,504			-
Inventory		(6,400	)		450
Prepaid expenses		31,180			-
Deposits		-			2,765
Accounts payable		346,503			225,825
Payroll liabilities		(7,150	)		23,900
Stock based consulting fees payable		-			(25,246	)
Accrued interest		90,227			50,307
Deferred income		(106,220	)		-
Net cash used by operating activities		(360,784	)		(497,968	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Cash used to purchase equipment		-			(12,640	)
Cash used to acquire license fees		-			(10,000	)
Cash used to acquire patents		(67,935	)		(24,038	)
Net cash used in investing activities		(67,935	)		(46,678	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on Washington Trust debt		(22,938	)		(18,019	)
Principal payments on capital lease		(195,717	)		(175,760	)
Proceeds from short term loan		55,000			-
Proceeds from convertible note		189,366			632,700
Payments on convertible note		(293,750	)		-
Proceeds from cash sales of common shares		-			47,000
Proceeds from exercise of options and warrants		112,500			72,500
Net cash provided (used) by financing activities		(155,539	)		558,421

Net increase in cash and cash equivalents		(584,258	)		13,775
Cash and cash equivalents, beginning of period		589,390			37,562

CASH AND CASH EQUIVALENTS, END OF PERIOD	$	5,132		$	51,337


Supplemental disclosures of cash flow information:
Cash paid for interest	$	68,025		$	86,086
Cash paid for income taxes		-		$	-

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

Advanced Medical Isotope Corporation

Notes to Financial Statements

For the six months ended June 30, 2011 (unaudited) and the year ended December 31, 2010

NOTE 1: BASIS OF PRESENTATION

Nature of Organization

The accompanying condensed financial statements of the Company have been prepared without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and disclosures required by accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations. These condensed financial statements reflect all adjustments that, in the opinion of management, are necessary to present fairly the results of operations of the Company for the period presented. The results of operations for the six months ended June 30, 2011, are not necessarily indicative of the results that may be expected for any future period or the fiscal year ending December 31, 2011.

NOTE 2: GOING CONCERN

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

We anticipate a requirement of $1 million in funds over the next twelve months to maintain current operation activities. In addition we anticipate a requirement of approximately $15 million in funds over the next twelve months due to the anticipation of adding additional staff in the future assuming we are successful in selling our medical isotopes and/or the start of development by us on future manufacturing sites or other projects. Currently we have $5,132 cash on hand which means there will be an anticipated shortfall of nearly the full $15 million requirement in additional funds over the next twelve months. There are currently commitments to vendors for products and services purchased, plus, the employment agreements of the CFO and other employees of the Company and our current lease commitments that will necessitate liquidation of the Company if we are unable to raise additional capital. The current level of cash is not enough to cover the fixed and variable obligations of the Company.

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

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

Advanced Medical Isotope Corporation

Notes to Financial Statements

For the six months ended June 30, 2011 (unaudited) and the year ended December 31, 2010

NOTE 3: ACCOUNTS RECEIVABLE – OTHER

Accounts receivable – other consists of the following at June 30, 2011 and December 31, 2010:

	June 30, 2011		December 31, 2010
Balance due on sale of fixed assets	$	125,000	$	125,000
Reimbursable expenses		-		16,675
Grant proceeds received February 2011		-		283,829
	$	125,000	$	425,504

NOTE 4: FIXED ASSETS

Fixed assets consist of the following at June 30, 2011 and December 31, 2010:

	June 30, 2011			December 31, 2010
Production equipment	$	2,116,627		$	2,116,627
Building		446,772			446,772
Leasehold improvements		3,235			3,235
Office equipment		32,769			32,769
		2,599,403			2,599,403
Less accumulated depreciation		(1,657,599	)		(1,387,739	)
	$	941,804		$	1,211,664

Accumulated depreciation related to fixed assets is as follows:

	June 30, 2011		December 31, 2010
Production equipment	$	1,309,856	$	1,098,194
Building		328,238		273,531
Leasehold improvements		2,428		2,054
Office equipment		17,077		13,960
	$	1,657,599	$	1,387,739

Depreciation expense for the above fixed assets for the six months ended June 30, 2011 and 2010, respectively, was $269,860 and $269,256.

The Company had paid an upfront fee of $150,000 towards the upgrade of its linear accelerator purchased in 2008. This fee was for the eventual upgrade of the accelerator from a 7.5 MeV to a 10 MeV accelerator. Because the Company had not yet completed this upgrade as of December 31, 2010 and was unsure as to whether it intended to complete the upgrade in the near term, the Company wrote off the $150,000 as impairment expense in the twelve months ended December 31, 2010.

Advanced Medical Isotope Corporation

Notes to Financial Statements

For the six months ended June 30, 2011 (unaudited) and the year ended December 31, 2010

NOTE 5: INTANGIBLE ASSETS

Intangible assets consist of the following at June 30, 2011 and December 31, 2010:


	June 30, 2011			December 31, 2010
License Fee	$	95,000		$	95,000
Less accumulated amortization		(81,942	)		(78,610	)
		13,058			16,390
Patents		287,738			219,803
Intangible assets net of accumulated amortization	$	300,796		$	236,193

Amortization expense for the above intangible assets for the six months ended June 30, 2011 and 2010, respectively, was $3,332 and $2,361.

NOTE 6: RELATED PARTY TRANSACTIONS

Indebtedness from Related Parties

The Company had a $200,000 revolving line of credit with Washington Trust Bank that was to expire in September 2009. The Company had $199,908 in borrowings under the line of credit as of October 28, 2008 at which time it was paid off and replaced with a loan from two of the major shareholders. The loan calls for $4,066 monthly payments, including 8% interest, beginning November 30, 2008, with a balloon payment for the balance at October 31, 2009 at which time the loan was extended for one year with a balloon payment for the balance due at October 31, 2010, at which time the loan was extended for one year with a balloon payment for the balance due at October 31, 2011. There is no security held as collateral for this loan. As of June 30, 2011 and December 31, 2010, the balance was $103,570 and $126,508, respectively, and all payments were current on this shareholder loan.

The Company issued various shares of common stock and convertible promissory notes during the six months ended June 30, 2011 from a director and major shareholder. The details of these transactions are outlined in NOTE 11 STOCKHOLDERS EQUITY - Common Stock Issued for Convertible Debt.

Advanced Medical Isotope Corporation

Notes to Financial Statements

For the six months ended June 30, 2011 (unaudited) and the year ended December 31, 2010

NOTE 6: RELATED PARTY TRANSACTIONS - continued

Rent Expenses

On August 1, 2007 the Company began renting office and warehouse space, known as the Production Facility located in Kennewick, Washington from a shareholder holding less that 5% of the total shares outstanding. The lease agreement calls for monthly rental payments starting at $3,500, increasing every August 1st until they become $4,762 as of August 1, 2011. During the six months ended June 30, 2011 and 2010, respectively, the Company incurred rent expenses for this facility totaling $26,454 and $24,494, respectively. In addition, the lease agreement called for the issuance of $187,500 in common stock valued at $0.40 per share for a total of 416,667 shares. The company recognized the issuance of all 416,667 shares in 2007 and will amortize the $187,500 value of that stock over the sixty month term of the lease. For the six months ended June 30, 2011 and 2010, respectively, the Company amortized $18,750 and $18,750 of this stock issuance and recognized it as rent expense.

Additionally, in June 2008, the Company entered into two twelve month leases for its corporate offices with three four-month options to renew, but in no event will the lease extend beyond December 31, 2010. Subsequent to December 31, 2010 the Company is renting this space on a month to month basis. The lease agreement calls for monthly rental payments of $2,733 and $2,328 per month for two separate office areas. Effective November 1, 2009 the Company terminated the portion of the lease consisting of the $2,328 rental payment per month. During the six months ended June 30, 2011 and 2010, respectively, the Company incurred rent expenses for this facility totaling $16,400 and $16,400, respectively.

The Company purchased a used Cyclotron April 2009 and paid storage fees from that time until it was sold November 2010. The storage fees began at $2,050 per month until December 2009 when they were increased to $5,600 per month. Storage fees for the Cyclotron were $0 and $33,000 for the six months ended June 30, 2011 and 2010, respectively.

Future minimum rental payments required under the Company’s current rental agreements in excess of one year as of June 30, 2011, are as follows:

	Production Facility
Twelve months ended June 30, 2012	$	56,788
Twelve months ended June 30, 2013		4,762
Total	$	61,550

Rental expense for the six months ended June 30, 2011 and 2010 consisted of the following:

	Six months ended June 30, 2011		Six months ended June 30, 2010
Office and warehouse lease effective August 1, 2007
Monthly rental payments	$	26,454	$	24,494
Rental expense in the form of stock issuance		18,750		22,625
Corporate office		16,400		16,400
Cyclotron storage		-		33,000
Total Rental Expense	$	61,604	$	96,519

Advanced Medical Isotope Corporation

Notes to Financial Statements

For the six months ended June 30, 2011 (unaudited) and the year ended December 31, 2010

NOTE 7: PREPAID EXPENSES PAID WITH STOCK

The Company has issued stock to companies for various service agreements extending beyond June 30, 2011; however all of which are expected to expire sometime within the next twelve months. Additionally, the Company issued stock for prepaid rent which will expire annually through July 2012 at the rate of $37,500 per year. Prepaid Expenses are expected to mature as follows:

For the twelve month period ending June 30, 2012	$	45,750
For the twelve month period ending June 30, 2013		3,125
	$	48,875

NOTE 8: DEBT

The Company borrowed $55,000 May 2011, due February 2012, with interest at 8%. The holder of the note had the right, after the first one hundred eighty days of the note (November 8, 2011), to convert the note and accrued interest into common stock at a price per share equal to 61% (representing a discount rate of 39%) of the average closing price of the last five trading prices for the common stock ending one trading day prior to the date of conversion.

The Company had the right to prepay the note and accrued interest during the first ninety days following the date of the note. During that time the amount of any prepayment would equal 135% of the outstanding principal balance of the note plus accrued interest on the note. The Company prepaid the note in full on August 3, 2011 and therefore has accrued interest expense of $20,046 related to the prepayment cost in the accompanying financial statements for the six months ending June 30, 2011. If the Company had not paid off the note and related accrued interest by August 10, 2011, the Company could have paid off the note between the period ninety-one days to one hundred twenty days following the issue date and the prepayment would have equaled 140% of the outstanding principal balance of the note plus accrued interest on the note. If the Company had not paid off the note and related accrued interest by November 8, 2011, the note would have become convertible and the Company would have had to accrue an additional $12,981 to interest expense to account for the beneficial conversion feature of the note.

NOTE 9: INCOME FROM GRANTS AND DEFERRED INCOME

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

For the twelve months ended December 31, 2010 the Company recognized $23,508 of a $1,215,000 Department of Energy grant as income with the remaining $1,191,492 recorded as deferred income as of December 31, 2010. The $23,508 recognized as of December 31, 2010 was for costs incurred for the twelve months ended December 31, 2010. For the six months ended June 30, 2011 the Company recognized an additional $106,220 as income leaving a remaining balance of $1,085,272 recorded as deferred income as of June 30, 2011. The $106,220 was for costs incurred for the six months ended June 30, 2011.

The Company fully recognized $244,479 grant money received on both a Molybdenum tax grant and a Brachytherapy tax grant as income in the twelve months ended December 31, 2010.

Advanced Medical Isotope Corporation

Notes to Financial Statements

For the six months ended June 30, 2011 (unaudited) and the year ended December 31, 2010

NOTE 9: INCOME FROM GRANTS AND DEFERRED INCOME – continued

As of June 30, 2011 the grant money received and grant money recognized as income and deferred income can be summarized as follows:

	$1,215,000 Brachytherapy Grant		$244,479 Molybdenum Grant		$244,479 Brachytherapy Grant		Total
Grant money received	$	1,215,000	$	205,129	$	-	$	1,420,129
Grant money recorded as account receivable		-		39,350		244,479		283,829
Total grant money		1,215,000		244,479		244,479		1,703,958
Recognized income in 2010 from grants		23,508		244,479		244,479		512,466
Deferred income at December 31, 2010		1,191,492		-		-		1,191,492
Recognized income for the six months ended June 30, 2011 from grants		106,220		-		-		106,220
Deferred income at June 30, 2011	$	1,085,272	$	-	$	-	$	1,085,272

NOTE 10: COMMON STOCK OPTIONS

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

The following schedule summarizes the changes in the Company’s stock option plan during the six months ended June 30, 2011:

					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, 2010	9,295,912		$	0.15-0.87	0.90 years	$	465,000	$	0.29
Options granted	1,235,000		$	0.30	2.54 years	$	-	$	0.30
Options exercised	(750,000	)	$	0.15				$	0.15
Options expired	(190,912	)	$	0.39-0.87				$	0.57
Balance at June 30, 2011	9,590,000		$	0.20-0.55	0.74 years	$	315,000	$	0.30

Exercisable at December 31, 2010	9,295,912		$	0.15-0.87	0.90 years	$	465,000	$	0.29

Exercisable at June 30, 2011	9,590,000		$	0.20-0.55	0.74 years	$	315,000	$	0.30

Advanced Medical Isotope Corporation

Notes to Financial Statements

For the six months ended June 30, 2011 (unaudited) and the year ended December 31, 2010

NOTE 11: STOCKHOLDERS’ EQUITY

Common Stock Sale

In March 2011 the Company issued 750,000 shares of common stock for the exercise of options at $0.15 per share for total cash proceeds of $112,500.

Common Stock Issued for Services and Other

In February 2011 the Company issued 60,000 shares of common stock for services. The fair market value of the shares issued were $0.30 per share for a total fair market value of $18,000.

Common Stock Issued for Convertible Debt

On June 9, 2011 the Company issued 20,000 shares of its common stock and a convertible promissory note in the amount of $50,000 with interest payable at 10% per annum in 2011. The Note matures in June of 2012. 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 $0.22 per share. The value of the $50,000 debt plus the $0.22 fair market value of the 20,000 shares at the date of the agreement was prorated to arrive at the allocation of the original $50,000 debt and the value of the 20,000 shares and the beneficial conversion feature. The computation resulted in an allocation of $45,956 toward the debt and $4,044 to the shares and $4,044 to the beneficial conversion feature. The $4,044 value of the shares and the $4,044 value of the beneficial conversion feature are then amortized to interest over the twelve month life of the debt. Interest expense of $340 has been recognized in the accompanying financial statements for the six months ending June 30, 2011.

On June 17, 2011 the Company issued 15,400 shares of its common stock and a convertible promissory note in the amount of $38,500 with interest payable at 10% per annum in 2011. The Note matures in June of 2012. 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 $0.20 per share. The value of the $38,500 debt plus the $0.20 fair market value of the 15,400 shares at the date of the agreement was prorated to arrive at the allocation of the original $38,500 debt and the value of the 15,400 shares and the beneficial conversion feature. The computation resulted in an allocation of $35,517 toward the debt and $2,983 to the shares and $2,983 to the beneficial conversion feature. The $2,983 value of the shares and the $2,983 value of the beneficial conversion feature are then amortized to interest over the twelve month life of the debt. Interest expense of $250 has been recognized in the accompanying financial statements for the six months ending June 30, 2011.

On June 30, 2011 the Company issued 40,346 shares of its common stock and a convertible promissory note in the amount of $100,866 with interest payable at 10% per annum in 2011. The Note matures in June of 2012. 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 $0.20 per share. The value of the $100,866 debt plus the $0.20 fair market value of the 40,346 shares at the date of the agreement was prorated to arrive at the allocation of the original $100,866 debt and the value of the 40,346 shares and the beneficial conversion feature. The computation resulted in an allocation of $93,050 toward the debt and $7,816 to the shares and $7,816 to the beneficial conversion feature. The $7,816 value of the shares and the $7,816 value of the beneficial conversion feature are then amortized to interest over the twelve month life of the debt. Interest expense of $0 has been recognized in the accompanying financial statements for the six months ending June 30, 2011.

Advanced Medical Isotope Corporation

Notes to Financial Statements

For the six months ended June 30, 2011 (unaudited) and the year ended December 31, 2010

NOTE 12: SUPPLEMENTAL CASH FLOW INFORMATION

During the six months ended June 30, 2010, the Company had no non-cash investing and financing activities.

During the six months ended June 30, 2011, the Company issued 156,167 shares of common stock for an extinguishment of $46,850 worth of debt, issued 1,235,000 options for an extinguishment of $234,650 worth of debt, and issued 75,746 shares of common stock for loan fees on convertible debt of $29,686.

NOTE 13: SUBSEQUENT EVENTS

In July 2011 the Company received $200,000 for the exercise of 1,000,000 warrants at $0.20.

In July 2011 the Company issued 1,000,000, one year, $0.20 options to a director for services.

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

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

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

General Development of Business

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

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

On September 27, 2006, the Company acquired the assets of Neu-Hope Technologies, Inc (“NHTI”), a Florida corporation and a subsidiary of UTEK Corporation (“UTEK”), a Delaware Corporation, and $310,000 from UTEK in exchange for 100,000 shares of Series A Preferred Stock (which Series A Preferred Stock was later converted to shares of the Company’s common stock in March 2009). The Company conducted the acquisition in order to obtain cash and NHTI’s technology.

On June 13, 2007, the Company acquired the assets of the life sciences business segment of Isonics Corporation (Isonics), a California corporation. The Company acquired the assets in exchange for $850,000 cash payment for the purpose of combining the assets into our business of marketing medical isotopes. The assets acquired consist of intellectual property, agreements with third party companies for purchase and marketing of isotopes, customer lists, and equipment located in Buffalo, New York.

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

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

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

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

The Company has never filed for bankruptcy and has never been subject to receivership or similar proceedings.

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

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

Narrative Description of Business

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

The August 9, 2009 issue of the Los Angeles Times reported that there are currently more than 15 million nuclear medicine procedures are performed each year in the U.S. Approximately one-third of all patients admitted to U.S. hospitals undergo at least one medical procedure that employs the use of medical isotopes.

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

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

Accordingly, the Company is reviewing possible acquisition candidates.

Products

We currently offer the following products:

Stable Isotopes:

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

Radiopharmaceuticals:

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

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

Radio Chemicals:

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

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

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

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

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

Products - continued

Generators:

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

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

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

Status of New Products

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

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

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

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

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

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

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

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

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

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

Manufacturing

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

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

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

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

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

In August 2010, we entered into an exclusive license agreement with Battelle Memorial Institute related to patents for the production of radioisotopes. This license agreement calls for an upfront license fee and a royalty based on a percent of net sales for licensed products sold; however the license agreement contains a minimum royalty amount to be paid each year starting with 2012.

In February 2011, we entered into a one year option agreement to negotiate an exclusive license agreement with Battelle Memorial Institute related to patents for the production of radioisotopes. This option agreement calls for an upfront option fee.

Competitors

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

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

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

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

Employees

As of June 30, 2011, we had thirteen employees. At any given time, we utilize eight to ten independent contractors to assist with the company operations. We do not have a collective bargaining agreement with any of our employees and we believe our relations with our employees are good.

Raw Materials

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

Customers

Our customers include a broad range of hospitals, universities, research centers and national laboratories, in addition to academic and government institutions. These customers are located in essentially all major U.S. and international markets. Sales for the years ended December 31, 2007 consisted mainly of imported stable isotopes.

In July 2008, we began production of F-18 in our production facilities in Kennewick, Washington. Sales of F-18 for the year ended December 31, 2008 totaled approximately 29% of total revenue.

Our sales for 2009 consisted of both F-18 (70.3% of total revenues) and stable isotopes (29.7% of total revenues). Sales to customers whose sales were greater than 10% of our total sales for the year ended December 31, 2009 totaled 70.3%.

Our sales for 2010 consisted of F-18 (61.3% of total revenues) and Consulting Income (38.7% of total revenues). We had no sales of stable isotopes in 2010 due to the decrease in profit margins for that product; however we are looking into selling more stable isotopes in 2011 and beyond due to the possibility of obtaining lower prices from our vendors. Sales of F-18 for 2010 were 100% to one customer located close to the production facility. 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.

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

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

Patents, Trademarks, Licenses

License Agreement:

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

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

* These items have not been paid to date.

The License Agreement may be cancelled by giving 90 days written notice to the University. We did not have a relationship with UTEK before the acquisition of Neu-Hope Technologies and we do not currently have any business relationship or affiliation with UTEK. In fact, in 2008, due to the Company’s lack of funds to act upon the patent license for the neutron generator and develop the technology, the Company lost considerable ground towards the advantages of utilization of the patent license.

Additionally the Company has made the following investments in patent licenses and intellectual property during 2010:

The Company made a $10,000 investment in 2010 for a patent license regarding its technology for the production of Mo-99. In May 2010 the Company entered into a License Agreement for the Patent Rights in the area of radioisotope production using electron beam accelerator(s) for creating short lived radioisotopes such as molybdenum-99 and technetium-99 with the University of Missouri. This Agreement calls for a $10,000 nonrefundable fee paid upon execution, a royalty agreement on sales, and an equipment licensing fee on equipment sales. Additionally the Agreement calls for a milestone payment of $250,000, due and payable five years after execution of this agreement and a milestone payment of $250,000, due and payable upon reaching $50,000,000 in cumulative net sales. The $10,000 nonrefundable fee paid upon execution was capitalized as License Fees and is amortized on the straight line basis over a three year life.

The Company made a $10,000 investment in 2010 for an exclusive patent license with Battelle Memorial Institute regarding its technology for the production of Brachytherapy. In September 2010 the Company entered into a License Agreement for the Patent Rights in the area of a resorbable brachytherapy seed. This Agreement calls for a $10,000 nonrefundable fee upon execution, a royalty agreement on sales and on funds received from any sublicenses. The $10,000 nonrefundable fee paid upon execution was capitalized as License Fees and is amortized on the straight line basis over a three year life. Additionally the Agreement calls for a minimum annual fee as follows:

Calendar Year	Minimum Royalties per Calendar Year
2010	$	-
2011	$	-
2012	$	2,500
2013	$	5,000
2014	$	7,500
2015	$	10,000
2016 and each calendar year thereafter	$	25,000

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

Patents, Trademarks, Licenses - continued

The amortization of these items is computed using the straight-line method over the following estimated useful lives:

Intellectual property ……..….. 3 years

Contracts and agreements …. 3 years

Customer lists …………..…… 2 years

Patents:

Patent filing costs totaling $67,935, and $24,037, were capitalized during the six months ended June 30, 2011, and 2010; resulting in a total $287,738 of capitalized patents at June 30, 2011. The patents are pending and are being developed, as such, they are not being amortized. Management has determined that the economic life of the patents to be 10 years and amortization, over such 10-year period and on a straight-line basis, will begin once the patents have been issued and the Company begins utilization of the patents through production and sales, resulting in revenues. The Company evaluates the recoverability of intangible assets, including patents 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.

Research and Development

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

The costs expensed in the six months ended June 30, 2011 and 2010 were $213,826 and $519,573, respectively. The $213,826 spent for the six months ended June 30, 2011 consist of the following:

	Brachytherapy		Molybdenum
Supplies	$	4,815	$	390
Amortization		1,666		1,666
Conferences & seminars		7,087		9,432
Dues & subscriptions		-		32
Marketing		8,287		15,658
Office Supplies		117		180
Payroll and benefits		14,764		45,707
Consulting fees		45,500		26,900
Consulting fees – stock based		6,000		-
Legal fees		-		6,000
Research		17,606		-
Stock options granted		50		750
Telephone		328		342
Travel		-		549
Total	$	106,220	$	107,606

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

Results of Operations – Six Months Ended

The following table sets forth information from our statements of operations for the six months ended June 30, 2011 and 2010.

	Six Months Ended June 30, 2011			Six Months Ended June 30, 2010
Revenues	$	290,483			$	202,663
Cost of goods sold		36,538				29,938
Gross profit		253,945				172,725
Operating expenses		1,542,912				1,644,024
Operating loss		(1,288,967	)			(1,471,299	)
Non-operating expenses		-				-
Recognized income from grants		106,220
Interest expense		(202,044	)			(404,713	)
Net income (loss)	$	(1,384,791	)		$	(1,876,012	)

Details related to Revenues and Cost of Goods Sold for the six months ended June 30, 2011 and 2010 are as follows:

	Six Months Ended June 30, 2011		Six Months Ended June 30, 2010
Revenues
Consulting	$	176,114		$	86,863
Stable Isotopes		15,769			-
F-18		98,600			115,800
Total Revenue	$	290,483		$	202,663

Cost of Goods Sold
Stable Isotopes	$	13,191		$	-
F-18		23,347			29,938
Total Cost of Goods Sold	$	36,538		$	29,938

Revenue

Revenue was $290,453 for the six months ended June 30, 2011 and $202,663 for the six months ended June 30, 2010. The increase was the result of consulting revenues. In July 2008 we established our linear accelerator production center and began the production and marketing of F-18 in August 2008. F-18 sales accounted for $98,600 of the total six months ended June 30, 2011 revenues and $115,800 of the total six months ended June 30, 2010 revenues. Revenues for F-18 were lower in the six months ended June 30, 2011 as a result of a reduction in price to our sole customer effective April 2010 and a reduction in the number of doses sold for the six months ended June 30, 2011 (341) from the six months ended June 30, 2010 (382). The reason the number of doses sold was lower is due to one week of lost production due to annual maintenance and two weeks of lost production due to a part that stopped working and was back ordered. Stable isotope sales were $15,769 and $0 for the six months ended June 30, 2011 and 2010 respectively. The Company discontinued the sale of stable isotopes in the six months ended June 30, 2010 due to the reduction in profitability of that line of product. The Company intends to continue to minimize stable isotope sales at this time due to the low profitability. Consulting revenues consisted of $176,114 and $86,863 of the total six months ended June 30, 2011 and 2010 revenues. 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.

Cost of Goods Sold

Cost of Goods Sold for the six months ended June 30, 2011 was $36,538, or 12.6% of total revenues. Cost of Goods Sold for the six months ended June 30, 2010 was $29,938, or 14.8% of total revenues. Cost for the F-18 production (consisting mostly of supplies) was $23,347 for the six months ended June 30, 2011, which was 23.7% of total F-18 revenues. Cost for the stable isotopes we purchased from our vendors was $13,191 for the six months ended June 30, 2011, which was 83.6% of total stable isotopes revenues. Cost for the F-18 production (consisting mostly of supplies) was $29,938 for the six months ended June 30, 2010, which was 25.8% of total F-18 revenues.

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

Operating Expenses

Operating expenses for the six months ended June 30, 2011 and 2010 was $1,542,912 and $1,644,024 respectively. The decrease in operating expenses from 2010 to 2011 can be attributed to the reduction in Stock Options Granted expense ($0 for the six months ended June 30, 2011 versus $137,886 for the six months ended June 30, 2010) and the reduction of Professional Fees ($500,566 for the six months ended June 30, 2011 versus $580,603 for the six months ended June 30, 2010). Part of this reduction in expenses was offset by an increase in Payroll expenses ($412,417 for the six months ended June 30, 2011 versus $345,125 for the six months ended June 30, 2010).

	Six Months Ended June 30, 2011		Six Months Ended June 30, 2010
Depreciation and amortization expense	$	273,192	$	271,617
Professional fees		500,566		580,603
Stock options granted		-		137,886
Payroll expenses		412,417		345,125
General and administrative expenses		298,148		292,836
Sales and marketing expense		58,589		15,957
	$	1,542,912	$	1,644,024

Non-Operating Expense

Non-operating expense for the six months ended June 30, 2011 and 2010 was $98,824 and $404,713, respectively. The decrease in non-operating expense was due to a decrease in interest expense ($202,044 for the six months ended June 30, 2011 versus $404,713 for the six months ended June 30, 2010) and an increase in grant income recognized ($106,220 for the six months ended June 30, 2011 versus $0 for the six months ended June 30, 2010).

Net Loss

Our net loss for the six months ended June 30, 2011 and 2010 was $1,384,791 and $1,876,012, respectively.

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

Results of Operations – Three Months Ended

The following table sets forth information from our statements of operations for the three months ended June 30, 2011 and 2010 are as follows:

	Three Months Ended June 30, 2011			Three Months Ended June 30, 2010
Revenues	$	139,926			$	138,193
Cost of goods sold		11,464				14,476
Gross profit		128,462				123,717
Operating expenses		700,106				553,804
Operating loss		(571,644	)			(430,087	)
Non-operating income		43,125				-
Interest expense		(103,003	)			(213,415	)
Net income (loss)	$	(631,522	)		$	(643,502	)

Details related to Revenues and Cost of Goods Sold for the three months ended June 30, 2011 and 2010 are as follows:

	Three Months Ended June 30, 2011		Three Months Ended June 30, 2010
Revenues
Consulting	$	88,057		$	86,863
Stable Isotopes		2,569			-
F-18		49,300			51,330
Total Revenue	$	139,926		$	138,193

Cost of Goods Sold
Stable Isotopes	$	1,850		$	-
F-18		9,614			14,476
Total Cost of Goods Sold	$	11,464		$	14,476

Revenue

Revenue was $139,926 for the three months ended June 30, 2011 and $138,193 for the three months ended June 30, 2010. During 2007 we began our stable isotope marketing program which was acquired through the purchase of the Life Science division of Isonics, Inc. During the three months ended June 30, 2011, we continued the stable isotope marketing program generating $2,569 in stable isotope revenues for that period compared to $0 for the three months ended June 30, 2010. The Company has minimized the sales of stable isotopes due to the decrease in profitability of sales of stable isotopes. In July 2008 we established our linear accelerator production center and began the production and marketing of F-18 in August 2008, accounting for $49,300 of the total revenues for the three months ended June 30, 2011 and for $51,330 of the total revenues for the three months ended June 30, 2010. During the three months ended June 30, 2010 we began generating consulting revenue, which accounted for $86,863 of the total revenues for those three months and $88,057 of the total revenues for the three months ended June 30, 2011.

Cost of Goods Sold

Cost of Goods Sold for the three months ended June 30, 2011 was $11,464, or 8.2% of total revenues. Cost of Goods Sold for the three months ended June 30, 2010 was $14,476, or 10.5% of total revenues. Cost for the F-18 production (consisting mostly of supplies) was $9,614 for the three months ended June 30, 2011, which was 19.5% of total F-18 revenues. Cost for the stable isotopes we purchased from our vendors was $1,850 for the three months ended June 30, 2011, which was 72.0% of total stable isotopes revenues. Cost for the F-18 production (consisting mostly of supplies) was $14,476 for the three months ended June 30, 2010, which was 28.2% of total F-18 revenues

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

Operating Expenses

Operating expenses for the three months ended June 30, 2011 and 2010 was $700,106 and $553,804 respectively. The increase in operating expenses from 2010 to 2011 can be attributed largely to the increase in cost of Sales and Marketing Expenses ($35,298 for the three months ended June 30, 2011 and $4,636 for the three months ended June 30, 2010), Professional Fees ($220,478 for the three months ended June 30, 2011 and $101,472 for the three months ended June 30, 2010), Payroll expenses ($166,216 for the three months ended June 30, 2011 and $121,576 for the three months ended June 30, 2010), offset by a reduction in Stock Options Granted (negative expense of $12,350 for the three months ended June 30, 2011 versus $50,630 for the three months ended June 30, 2010).

	Three Months Ended June 30, 2010			Three Months Ended June 30, 2009
Depreciation and amortization expense	$	136,596		$	135,117
Professional fees		220,478			101,472
Stock options granted		(12,350	)		50,630
Payroll expenses		166,216			121,576
General and administrative expenses		153,868			140,373
Sales and marketing expense		35,298			4,636
	$	700,106		$	553,804

Non-Operating Expense

Non-operating expense for the three months ended June 30, 2011 and 2010 was $59,878 and $213,415, respectively. The decrease in non-operating expense was due to a decrease in interest expense ($103,003 for the three months ended June 30, 2011 versus $213,415 for the three months ended June 30, 2010) and an increase in grant income recognized ($43,125 for the three months ended June 30, 2011 versus $0 for the three months ended June 30, 2010).

Net Loss

Our net loss for the three months ended June 30, 2011 and 2010 was $631,522 and $643,502, respectively.

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

Liquidity and Capital Resources

At June 30, 2011, we had negative working capital of $4,337,105, as compared to $3,410,628 December 31, 2010. During the six months ended June 30, 2011 we experienced negative cash flow from operations of $360,784, and we expended $67,935 for investing activities and another $155,539 from financing activities. As of June 30, 2011, we had $0 commitments for capital expenditures.

We have generated material operating losses since inception. We have incurred a net loss of $19,829,600 from inception through June 30, 2011, including a net loss of $1,384,791 for the six months ended June 30, 2011. We expect to continue to experience net operating losses. Historically, we have relied upon outside investor funds to maintain our operations and develop our business. We anticipate raising additional capital within the next twelve months from investors for working capital as well as business expansion and we can provide no assurance that additional investor funds will be available on terms acceptable to us. If we are unable to obtain additional financing to meet our working capital requirements, we may have to curtail our business.

Based on the current cash run rate, approximately $1,000,000 will be needed to fund operations for an additional year. As disclosed in the risk factors, we are presently taking steps to raise additional funds to continue operations for the next 12 months and beyond. We will need to raise an additional $15,000,000 in the next year to develop an infrastructure for Brachytherapy production and distribution as well as to initiate a Molybdenum 99 production facility. We may, however, choose to further modify our growth and operating plans to the extent of available funding, if any.

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

Contractual Obligations (payments due by period as of June 30, 2011)

Contractual Obligation	Total Payments Due		Less than 1 Year		1-3 Years		3-5 Years			More than 5 Years
Capital Lease Obligation	$	1,238,792	$	417,000	$	778,700	$	43,092	$	-
Production center lease	$	61,550	$	56,788	$	4,762	$	-	$	-
License agreement with Regents of the University of California	$	505,000	$	85,000	$	180,000	$	180,000	$	60,000 each year
License Agreement with Battelle Memorial Institute	$	125,000	$	2,500	$	22,500	$	75,000	$	25,000 each year

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

We began renting office and warehouse space effective August 1, 2007, located in Kennewick, Washington from a non-affiliated shareholder. The lease agreement calls for monthly rental payments starting at $3,500, increasing every August 1st until they become $4,762 as of August 1, 2011. During the year ended December 31, 2010 the Company incurred rent expenses for this facility totaling $50,622. During the six months ended June 30, 2011 and 2010 the Company incurred rent expenses for this facility totaling $26,454 and $24,494, respectively. In addition, the lease agreement calls for the issuance of $187,500 in common stock valued at $0.40 per share for a total of 416,667 shares. The company recognized the issuance of all 416,667 shares in 2007 and will amortize the $187,500 value of that stock over the sixty month term of the lease. For the twelve months ended December 31, 2010 the Company amortized $37,500, of this stock issuance and recognized it as rent expense. For the six months ended June 30, 2011 and 2010 the Company amortized $18,750 and $18,750, respectively, of this stock issuance and recognized it as rent expense.

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

Critical Accounting Policies

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

Use of Estimates

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

Cash Equivalents

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

Accounts Receivable

Accounts receivables are stated at the amount that management of the Company expects to collect from outstanding balances. Management provides for probable uncollectible amounts through an allowance for doubtful accounts. Additions to the allowance for doubtful accounts are based on management’s judgment, considering historical write-offs, collections and current credit conditions. Balances which remain outstanding after management has used reasonable collection efforts are written off through a charge to the allowance for doubtful accounts and a credit to the applicable accounts receivable. Payments received subsequent to the time that an account is written off are considered bad debt recoveries. As of June 30, 2011, the Company has experienced no bad debt write offs from operations.

Inventory

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

Fixed Assets

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

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

Production equipment

3 to 7 years

Office equipment

2 to 5 years

Furniture and fixtures

2 to 5 years

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

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

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

Fixed Assets - continued

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

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

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

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

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

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

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

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

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

Although management has made its best estimate of the factors that affect the carrying value based on current conditions, it is reasonably possible that changes could occur which could adversely affect management’s estimate of net cash flows expected to be generated from its assets, and necessitate asset impairment write-downs.

License Fees

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

Patents

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

Revenue Recognition

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

The Company recognizes revenue once an order has been received and shipped to the customer. Prepayments, if any, received from customers prior to the time products are shipped are recorded as deferred revenue. In these cases, when the related products are shipped, the amount recorded as deferred revenue is recognized as revenue. The Company does not accrue for sales returns and other allowances as it has not experienced any returns or other allowances.

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

Income from Grants and Deferred Income

Net Loss Per Share

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

Securities, all of which represent common stock equivalents, that could be dilutive in the future as of June 30, 2011 and December 31, 2010 are as follows:

	June 30, 2011		December 31, 2010
Convertible debt		6,919,058		4,775,415
Common stock options		9,590,000		9,295,912
Total potential dilutive securities		16,509,058		14,071,327

Research and Development Costs

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

Advertising and Marketing Costs

Advertising and marketing costs are expensed as incurred except for the cost of tradeshows which are deferred until the tradeshow occurs. There were $12,675 tradeshow expenses incurred and not expensed as of the year ended December 31, 2010 which are prepayment costs for 2011 tradeshow expenses. During the six months ended June 30, 2011 and 2010 the Company incurred $58,589 and $15,957, respectively, in advertising and marketing costs.

Shipping and Handling Costs

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

Legal Contingencies

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

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

Income Taxes

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

The Company or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction, and Delaware. The Company did not have any tax expense for the year ended December 31, 2010. The Company did not have any deferred tax liability or asset on its balance sheet on December 31, 2010.

Interest costs and penalties related to income taxes, if any, will be classified as interest expense and general and administrative costs, respectively, in the Company's financial statements. For the year ended December 31, 2010, the Company did not recognize any interest or penalty expense related to income taxes. The Company believes that it is not reasonably possible for the amounts of unrecognized tax benefits to significantly increase or decrease during the year 2011.

Fair Value of Financial Instruments

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

Stock-Based Compensation

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

Recently Issued Accounting Pronouncements

The Company reviews recently issued account pronouncements on a quarterly basis. As of June 30, 2011 there are no recently issued accounting pronouncements that the Company believes are applicable or would have a material impact on the financial statements of the Company.

Off-Balance Sheet Arrangements

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

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

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

Item 4. Controls and Procedures.

Disclosure Controls and Procedures

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

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

Changes in Internal Control Over Financial Reporting

There has been no change in our internal control over financial reporting that occurred during this current fiscal quarter (our first fiscal quarter of 2011) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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

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

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

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

PART II

Item 1. Legal Proceedings.

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

Item 1A. Risk Factors.

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

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

Common stock sale

In March 2011 the Company issued 750,000 shares of common stock for the exercise of options at $0.15 per share for total cash proceeds of $112,500.

Common stock issued for services and other

During the six months ended June 30, 2011 the Company issued 60,000 shares of common stock for services. The fair market value of the shares issued were $0.30 per share for a total value of $18,000.

During the six months ended June 30, 2011 the Company issued 75,746 shares of common stock for loan fees on convertible debt. The fair market value of the shares ranged from $0.20 to $0.21 per share for a total value of $29,686.

Item 3. Defaults Upon Senior Securities.

Not applicable.

Item 5. Other Information.

Not applicable.

Item 6. Exhibits.

(a)	Exhibits

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

SIGNATURES

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

	ADVANCED MEDICAL ISOTOPE CORPORATION

Date: August 4, 2011	By:	/s/ James C. Katzaroff
	Name:	James C. Katzaroff
	Title:	Chairman and Chief Executive Officer

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