UNITED STATES SECURITIES AND EXCHANGE
COMMISSION
 Washington,
D.C. 20549
  Form 10-K
  þ
                ANNUAL
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
                  
                  For the fiscal year ended December 31,
    2008
  Or
 
 o
                TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
                  
                  For the transition period from   ___________ to
      ___________
  Commission
file number: 0-53497









ADVANCED
MEDICAL ISOTOPE CORPORATION


(Exact
name of registrant as specified in charter)




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





8131
W. Grandridge Blvd.  Suite 101, Kennewick WA99336


(Address
of principal executive offices) (Zip Code)





Registrant's
telephone Number: (509)736-4000




Securities
registered pursuant to section 12(g) of the Act: NONE




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




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




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




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




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





Large
      Accelerated Filer
                    o
                    
                    Accelerated
      Filer
                    oNon-accelerated
      Filer
                    o
                    (Do
      not check if a smaller reporting company)
                    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     x   No




The
aggregate market value of the voting stock held by non-affiliates of the
registrant was approximately $10,681,833 based upon the closing sales price of
the registrant’s common stock on June 30, 2008 of $0.69 per share. At
March 31, 2009, 49,666,124 shares of the registrant’s common stock were
outstanding.




DOCUMENTS INCORPORATED BY REFERENCE:NONE








1







TABLE OF
CONTENTS





PagePART
      IItem
      1.
                                                                                      Business
                                                                                      3Item
      1A
                                                                                      Rick
      Factors
                                                                                      9Item
      1B
                                                                                      Unresolved
      Staff Comments
                                                                                      14Item
      2.
                                                                                      Properties
                                                                                      15Item
      3.
                                                                                      Legal
      Proceedings
                                                                                      15Item
      4.
                                                                                      Submission
      of Matters to a Vote of Security Holders
                                                                                      15PART
      IIItem
      5.
                                                                                      Market
      for Registrant’s Common Equity, Related Stockholder Matters and Issuer
      Purchase of Equity Securities
                                                                                      15Item
      6
                                                                                      Selected
      Financial Data
                                                                                      17Item
      7.
                                                                                      Management's
      Discussion and Analysis of Financial Condition and Results of
      Operation
                                                                                      17Item
      7A
                                                                                      Quantitative
      and Qualitative Disclosures About Market Risk
                                                                                      21Item
      8.
                                                                                      Financial
      Statements and Supplementary Data
                                                                                      21Item
      9.
                                                                                      Changes
      In and Disagreements with Accountants on Accounting and Financial
      Disclosure
                                                                                      22Item
      9A(T).
                                                                                      Controls
      and Procedures
                                                                                      22Item
      9B.
                                                                                      Other
      Information
                                                                                      22PART
      IIIItem
      10.
                                                                                      Directors,
      Executive Officers, Promoters and Corporate Governance
                                                                                      22Item
      11.
                                                                                      Executive
      Compensation
                                                                                      23Item
      12.
                                                                                      Security
      Ownership of Certain Beneficial Owners and Management and
      Related Stockholder Matters
                                                                                      30Item
      13.
                                                                                      Certain
      Relationship and Related Transactions, and Director
      Independence
                                                                                      31Item
      14.
                                                                                      Principal
      Accountant Fees and Services
                                                                                      31Item
      15.
                                                                                      Exhibits
                                                                                      32SIGNATURES
                                                                                      32











2




PART I








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





ITEM
1. DESCRIPTION OF BUSINESS.




Organizational
History




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




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




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




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




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








3




ITEM 1. DESCRIPTION OF
BUSINESS. -
continued
  Organizational
History-
continued





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




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




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





UTEK also
entered into a technology transfer agreement with Manakoa Services
Corporation.  Manakoa Services Corporation has recently changed its
name to TeslaVision Corporation.  Mr. Katzaroff is an officer and a
director of TeslaVision Corporation.  TeslaVision Corporation is not a
shell company but is not current in its reporting.  Other than Mr.
Katzaroff’s service as an officer of both corporations, there is no relationship
between TeslaVision Corporation and Advanced Medical Isotope
Corporation.  UTEK Corporation is a publicly-held corporation that,
pursuant to its public filings, completed 45 technology transfers during their
fiscal years ended December 31, 2007 and 2006.




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





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




General
Description




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




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




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




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








4




ITEM 1. DESCRIPTION OF
BUSINESS. -
continued
  Products




We
currently offer the following products




Stable
Isotopes:




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





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




Radio
Pharmaceuticals:




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




Indium-111:  We plan to
offer Indium Chloride and Indium Oxine during the first six months of
2009.




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.




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




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.




Generators:




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




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




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).








5




ITEM
1. DESCRIPTION OF BUSINESS.-
continued




Products
- continued




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




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





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





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





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





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





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





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 at
Idaho State University, the University of Missouri at Columbia, the
State University of New York at Buffalo, 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
November 2007, we entered into an agreement with the Idaho Accelerator Center
(IAC), located on the campus of Idaho State University in Pocatello, ID, to
create a regional medical isotope production center.  The IAC will
investigate the production of a variety of isotopes at IAC facilities and we
will proceed with conceptual planning for production facility
development.  We intend to use the IAC to develop and manufacture
medical isotopes.




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




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.






6




ITEM
1. DESCRIPTION OF BUSINESS.-
continued
  Manufacturing
- continued




In June
2008, we entered into a research agreement with the University of Missouri
related to the production of radio isotopes.  Pursuant
to the research agreement, we will pay total project costs that will not exceed
$75,000.  We also entered into an option agreement in June 2008 with
the University of Missouri.  The option agreement gives us a one-year
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.  If the University of
Missouri’s intellectual property functions as early analysis have indicated,
this production facility could be a manufacturing source of critical health care
radio isotopes.




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 valued at $3,040,000 on
September 27, 2006, discounted using a 4.25% incremental borrowing rate, and a
$2,897,625 present value.  This license agreement is stated at cost,
less accumulated amortization computed based on a useful life of three
years.  The license agreement is being amortized using a useful life
of three years.





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
                  
                  $
                  10,0002009
                  
                  $
                  15,0002010
                  
                  $
                  15,0002011
                  
                  $
                  45,0002012
      and each year thereafter
                  
                  $
                  60,000$
                  145,000




The
License Agreement may be cancelled by giving 90 days written notice to the
University.





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 reactor 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 of imported stable isotopes.  Sales to
our customers whose sales were greater than 10% of our total sales for the
year ended December 31, 2007 totaled 24.9%, 17.5%, and 15.5% of total revenues
in 2007.  We are not, however, dependent on one or a few major
customers as, given our current net losses, the termination of any agreements
with current customers would not materially increase our net
losses.




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.  Sales to our customers
whose sales were greater than 10% of our total sales for the year ended December
31, 2008 totaled 17.8%, 14.2%, and 11.7% of total revenues in 2008.




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 2009 and 2010.





7




ITEM
1. DESCRIPTION OF BUSINESS.-
continued




Competitors




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




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




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




Employees




As
of March 31, 2009, we had six full time employees.  At any given time,
we utilize eight to ten contract employees to assist with the company
operations.  We do not have a collective bargaining agreement with any
of our employees and we believe our relations with our employees are
good.




Research and Development /
Intellectual Property




We spent
approximately $90,150 and $1,250 during the years ended December 31, 2008 and
December 31, 2007, respectively, on research and development. This cost was
incurred to a University for tests involved in the making of
isotopes.




Additionally
the Company has made through acquisitions the following investments in patent
licenses and intellectual property during 2007:




·
            $75,000
      for a patent license fee, good for the life of the patent, for the
      production of Actinium 225;




·
            $3,040,000
      of preferred stock issuance for a patent license, good for the life of the
      patent, of a Neutron Generator; and·
            $658,750
      for the purchase of a company in order to acquire the rights of
      intellectual property related to the process for the production of
      isotopes, customer lists, contracts and agreements with third party
      companies, and certain equipment.  The amortization of these
      items is computed using the straight-line method over the following
      estimated useful lives:




Intellectual
      property
              3
      yearsContracts
      and agreements
              3
      yearsCustomer
      lists
              2
      years




In
January 2007 AMIC received a license for United States Patent 6,680,993. 
The patent concerns methods and processes directed to the preparation of
Actinium-225 and daughters having high radiochemical and radionuclidic
purity.  These isotopes may be used for the preparation of therapeutic
radiopharmaceuticals such as those containing monoclonal antibodies, proteins,
peptides, antisense, statin, natural products and hormones.  Additionally,
the alpha-emitting radionuclide Actinium-225 and its daughters may be used for
both therapeutic and diagnostic purposes.








8




ITEM 1. DESCRIPTION OF BUSINESS.-
continued




Government
Regulation




Significant
areas of regulation and intervention include the following:




Environmental and Health
Compliance. We are committed to conducting our activities so that
there is no or only minimal damage to the environment; there is no assurance,
however, that its activities will not at times result in liability under
environmental and health regulations.





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





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




Import/Export
Regulation. We are subject to significant regulatory oversight of
our import and export operations due to the nature of our product offerings.
Penalties for non-compliance can be significant and violation can result in
adverse publicity for the Company.




Financial Accounting
Standards. Our financial results can be impacted by new or modified
financial accounting standards.




Other Regulations.  Our
operations are subject to U.S. Nuclear Regulatory Commission, Food and Drug
Administration, Department of Transportation, and Department of Homeland
Security regulations.  The extent these regulations are or become
burdensome, our business development could be adversely affected.







ITEM
1A. RISK FACTORS.




RISKS
ASSOCIATED WITH OUR BUSINESS




Our
business plan is at an early stage of development and has a limited operating
history.




We have a
limited operating history upon which you can base an evaluation of our business
and prospects. As a start-up company in the early stage of development, there
are substantial risks, uncertainties, expenses and difficulties to which our
business is subject. To address these risks and uncertainties, we must do the
following:




·
            Successfully
      execute our business strategy;·
            Respond
      to competitive developments; and·
            Attract,
      integrate, retain and motivate qualified
  personnel.




There can
be no assurance that at this time we will operate profitably or that it will
have adequate working capital to meet our obligations as they become
due.  We cannot be certain that our business strategy will be
successful or that we will successfully address the risks that face our
business. In the event that we do not successfully address these risks, its
business, prospects, financial condition, and results of operations could be
materially and adversely affected.




We have increasing cash
requirements.




We have
generated material operating losses since inception. We have incurred a net loss
of $10,400,769 from January 1, 2006 (inception) through December 31, 2008,
including a net loss of $6,158,755 for the year ended December 31,
2008.   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 12 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. These conditions raise
substantial doubt about the ability of the Company to continue as a going
concern. If we are unable to generate profits and unable to obtain additional
financing to meet our working capital requirements, we may have to curtail our
business.





9




ITEM 1A. RISK
FACTORS.-
continued
  RISKS ASSOCIATED WITH OUR
BUSINESS-
continued
  We
will need to increase the size of our organization and may experience
difficulties in managing growth.




We are a
small organization with a minimal number of employees. We expect to experience a
period of significant expansion in headcount, facilities, infrastructure and
overhead and anticipate that further expansion will be required to address
potential growth and market opportunities. Future growth will impose significant
added responsibilities on members of management, including the need to identify,
recruit, maintain and integrate managers. Our future financial performance and
its ability to compete effectively will depend, in part, on the ability to
manage any future growth effectively.




We
are dependent on key personnel and consultants and the loss of these key
personnel And consultants could have a material adverse effect on our business,
results of operations or financial condition.




Our
success is heavily dependent on the continued active participation of our
current executive officers listed under “Management.” We do not have key-man
insurance on any of our officers or consultants. We are highly dependent upon
certain consultants and collaborating scientists. Loss of the services of one or
more of our officers or consultants could have a material adverse effect upon
our business, results of operations or financial condition. Certain key
employees have no employment contracts.




If
we are unable to hire qualified personnel our business and financial condition
may suffer.




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




We
may rely on third parties to represent us locally in international markets and
our revenue may depend on their efforts.




Our
future success may depend, in part, on our ability to enter into and maintain
collaborative relationships with one or more third parties, the collaborator’s
strategic interest in the products under development and such collaborator’s
ability to successfully market and sell any such products. We intend to pursue
collaborative arrangements regarding the sales and marketing of our products,
however, we may not be able to establish or maintain such collaborative
arrangements, or if we are able to do so, they may not have effective sales
forces. To the extent that we decide not to, or are unable to, enter into
collaborative arrangements with respect to the sales and marketing of our
proposed products, significant capital expenditures, management resources and
time will be required to establish and develop an in-house marketing and sales
force with technical expertise. To the extent that we depend on third parties
for marketing and distribution, any revenues received by us will depend upon the
efforts of such third parties, which may not be successful.




Our
revenues depend upon suitable markets.




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




Our
future growth is largely dependent upon our ability to develop new technologies
that achieve market acceptance with acceptable margins.




Our
businesses operate in global markets that are characterized by rapidly changing
technologies and evolving industry standards. Accordingly, our future growth
rate depends upon a number of factors, including our ability to (i) identify
emerging technological trends in our target end-markets, (ii) develop and
maintain competitive products, (iii) enhance our products by adding innovative
features that differentiate our products from those of our competitors, and (iv)
develop, manufacture and bring products to market quickly and
cost-effectively.





10




ITEM 1A. RISK
FACTORS.-
continued
  RISKS ASSOCIATED WITH OUR
BUSINESS-
continued
  Our
ability to develop new products based on technological innovation can affect our
competitive position and requires the investment of significant resources. These
development efforts divert resources from other potential investments in our
businesses, and they may not lead to the development of new technologies or
products on a timely basis or that meet the needs of our customers as fully as
competitive offerings. In addition, the markets for our products may not develop
or grow as we currently anticipate. The failure of our technologies or products
to gain market acceptance due to more attractive offerings by our competitors
could significantly reduce our revenues and adversely affect our competitive
standing and prospects.




General
economic conditions in markets in which we do business can impact the demand for
our goods and services. Decreased demand for our products and services could
have a negative impact on our financial performance and cash flow.




Demand
for our products and services, in part, depends on the general economic
conditions affecting the countries and industries in which we do business. A
downturn in economic conditions in a country or industry that we serve may
negatively impact demand for our products and services, in turn negatively
impacting our operations and financial results. Further, changes in demand for
our products and services can magnify the impact of economic cycles on our
businesses. Unanticipated contract terminations by current customers can
negatively impact operations, financial results and cash flow.




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




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




We
are subject to uncertainties regarding reimbursement for use of our
products.




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




Our
earnings, cash flow and financial position are exposed to financial market risks
worldwide, including interest rate and currency exchange rate fluctuations and
exchange rate controls.   Fluctuations in domestic and world markets could
adversely affect interest rates and impact our ability to obtain credit or
attract investors.  In order to reduce this risk the Company is structuring
future agreements in such a manner that they provide for early termination
provisions by the Company and continued development of the Company core business
segments to such an extent that additional investment would not be required to
sustain the Company as a going concern.





Our
patented technologies may infringe on other patents, which may expose us to
costly litigation.




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





Protecting
our intellectual property is critical to our innovation efforts.




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






11




ITEM 1A. RISK
FACTORS.-
continued
  RISKS ASSOCIATED WITH OUR
BUSINESS-
continued




We
may not be able to protect our trade secrets and other unpatented proprietary
technology which could give our competitors an advantage over us.




We rely
upon trade secrets and other unpatented proprietary technology. We may not be
able to adequately protect our rights with regard to such unpatented proprietary
technology or competitors may independently develop substantially equivalent
technology. We seek to protect trade secrets and proprietary knowledge, in part
through confidentiality agreements with our employees, consultants, advisors and
collaborators. Nevertheless, these agreements may not effectively prevent
disclosure of our confidential information and may not provide us with an
adequate remedy in the event of unauthorized disclosure of such information and
as a result our competitors could gain a competitive
advantage.  Operational hazards could result in the spread of
contamination within our facility and require additional funding to
correct.




We
may incur material losses and costs as a result of product liability claims that
may be brought against us.




We face
an inherent business risk of exposure to product liability claims in the event
that products supplied by us fail to perform as expected or such failure
results, or is alleged to result, in bodily injury, and possible adverse
publicity, which could damage our reputation by raising questions about our
products' safety and efficacy, and could interfere with our efforts to market
our products.




We
are subject to the risk that certain third parties may mishandle our
product.




We rely
on third parties, such as Federal Express, to deliver our products, and on other
third parties to package our products in certain specialized packaging forms
requested by customers. We are subject to the risk that these third parties may
mishandle our product, which could result in adverse effects, particularly given
the radioactive nature of some of our products.  A successful product
liability claim against us in excess of our available insurance coverage or
established reserves may have a material adverse effect on our business.
 Although we currently maintain liability insurance in amounts we believe
are commercially reasonable, any product liability we incur may exceed our
insurance coverage.




We
are subject to extensive government regulation in jurisdictions around the globe
in which we do business. Regulations address, among other things, environmental
compliance, import/export restrictions, healthcare services, taxes and financial
reporting, and can significantly increase the cost of doing business, which in
turn can negatively impact our operations, financial results and cash flow.




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




Our
operations expose us to the risk of material environmental
liabilities.




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








12




ITEM 1A. RISK
FACTORS.-
continued
  RISKS ASSOCIATED WITH OUR
BUSINESS-
continued
  Future
production increases will depend on our ability to acquire larger quantities of
O-18.




We
currently obtain O-18 through international sources. The amount of O-18 that can
be produced from a given reactor source is limited by the power level and volume
available within the reactor for irradiating targets. There is no assurance that
the Company will have a continuing sufficient supply of O-18 and if sufficient
supplies are attained, we will need to increase our manufacturing
staff.




We
Rely Heavily On A Limited Number Of Suppliers.




Some of
the products we market and 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. The Company plans to expand the
availability of its supplies and products utilizing manufacturing capability at
reactors located at 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
reactor facility. Failure to obtain deliveries from these sources could have a
material adverse effect on our production and there may be a delay before we
could locate alternative suppliers. We may not be able to locate alternative
suppliers capable of producing the level of output of at the quality standards
we require. Additional factors that could cause interruptions or delays in our
source of materials include limitations on the availability of raw materials or
manufacturing performance experienced by our suppliers and a breakdown in our
commercial relations with one or more suppliers. Some of these factors may be
completely out of our and our suppliers’ control. We do not have formal written
agreements with any key supplier. Any interruption or delay in the supply of
materials required to produce our products could harm our business if we were
unable to obtain an alternative supplier or substitute equivalent materials in a
cost-effective and timely manner.




RISKS
RELATED TO OUR COMMON STOCK




There
is a limited public market for our common stock.  Failure to develop
or maintain a trading market could negatively affect the value of our shares and
make it difficult or impossible for shareholders to sell their
shares




To date
there is a limited trading market in our common stock on the Pink Sheets.
Failure to develop or maintain an active trading market could negatively affect
the value of our shares and make it difficult for our shareholders to sell their
shares or recover any part of their investment in us. The market price of our
common stock may be highly volatile. In addition to the uncertainties relating
to our future operating performance and the profitability of our operations,
factors such as variations in our interim financial results, or various, as yet
unpredictable factors, many of which are beyond our control, may have a negative
effect on the market price of our common stock.




Our
stock price is likely to be volatile.




There is
generally significant volatility in the market prices and limited liquidity of
securities of early stage companies, and particularly of early stage medical
product companies. Contributing to this volatility are various events that can
affect our stock price in a positive or negative manner. These events include,
but are not limited to: governmental approvals, refusals to approve, regulations
or actions; market acceptance and sales growth of our products; litigation
involving the Company or our industry; developments or disputes concerning our
patents or other proprietary rights; changes in the structure of healthcare
payment systems; departure of key personnel; future sales of our securities;
fluctuations in our financial results or those of companies that are perceived
to be similar to us; investors’ general perception of us; and general economic,
industry and market conditions. If any of these events occur, it could cause our
stock price to fall.




Future
sales by shareholders, or the perception that such sales may occur, may depress
the price of our common stock.




The sale
or availability for sale of substantial amounts of our shares in the public
market, including shares issuable upon conversion of outstanding preferred stock
or exercise of warrants and options, or the perception that such sales could
occur, could adversely affect the market price of our common stock and also
could impair our ability to raise capital through future offerings of our
shares. As of December 31, 2008, we had 36,778,611 outstanding shares of common
stock.  In March 2009 one of the members of the Board of Directors
converted 95,000 shares of the Company’s Series A Preferred Stock into
10,857,142 shares of the Company’s common stock. The board member acquired the
Company’s Series A Preferred Stock from UTEK in February 2009. The Series A
Preferred Stock conversion was based on the Company’s common stock’s average
closing price for the ten trading days before the date of
conversion.  The following additional shares were reserved as of
December 31, 2008 for issuance: 3,533,321 shares upon exercise of outstanding
options and 2,075,700 shares upon exercise of outstanding
warrants.  Any decline in the price of our common stock may encourage
short sales, which could place further downward pressure on the price of our
common stock and may impair our ability to raise additional capital through the
sale of equity securities.







13




ITEM
1A. RISK FACTORS.-
continued




RISKS RELATED TO OUR
COMMON STOCK-
continued




Our
controlling shareholders may exercise significant control over us.




As
of March 31, 2009, our directors, executive officers and principal shareholders
beneficially owned approximately 57.7% of the outstanding shares of our common
stock. Our shareholders do not have cumulative voting rights with respect to the
election of directors. If our principal shareholders vote together, they could
effectively elect all of our directors.





The
issuance of shares upon exercise of derivative securities may cause immediate
and substantial dilution to our existing shareholders.




The
issuance of shares upon the exercise of warrants and options may result in
substantial dilution to the interests of other shareholders since these selling
shareholders may ultimately convert or exercise and sell all or a portion of the
full amount issuable upon exercise. If all derivative securities were converted
or exercised into shares of common stock, there would be an approximate
additional 6,000,000 shares of common stock outstanding as a result. The
issuance of these shares will have the effect of further diluting the
proportionate equity interest and voting power of holders of our common
stock.




We
do not expect to pay any dividends for the foreseeable future.




We do not
anticipate paying any dividends to our shareholders for the foreseeable future.
The terms of certain of our outstanding indebtedness substantially restrict the
ability of us to pay dividends. Accordingly, shareholders must be prepared to
rely on sales of their common stock after price appreciation to earn an
investment return, which may never occur. Any determination to pay dividends in
the future will be made at the discretion of our Board of Directors and will
depend on our results of operations, financial conditions, contractual
restrictions, restrictions imposed by applicable law and other factors our Board
deems relevant.




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




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





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




The
broker or dealer must also deliver, prior to any transaction in a penny stock, a
disclosure schedule prescribed by the SEC relating to the penny stock market,
which, in highlight form:




·
            sets
      forth the basis on which the broker or dealer made the suitability
      determination; and·
            that
      the broker or dealer received a signed, written agreement from the
      investor prior to the transaction.




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




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







ITEM
1B. UNRESOLVED STAFF COMMENTS





N/A








14





ITEM
2. PROPERTIES.





Our
headquarters has office and production space which makes it adequate for the
Company to conduct its ongoing business operations.




On July
17, 2007, the Company entered into a lease at 6211 West Okanogan Avenue,
Kennewick Washington, 99336 (“the premises”) to be used as the company’s
production center.  The term of the lease was five years and it
commenced on August 1, 2007.  Monthly rent for the first year of
tenancy was $3,500.  Under the terms of the lease, the monthly rent
would increase 8 percent each year so that monthly rent for the year beginning
August 1, 2008 was $3,780, monthly rent for the year beginning August 1, 2009
will be $4,092.  The landlord of this space is a shareholder of the
company, though one that holds less than 5 percent of the total outstanding
shares.




Additionally,
in June 2008, the Company entered into a twelve month lease for its corporate
offices with three four month options to renew, but in no event will the lease
extend beyond May 31, 2010. The lease agreement calls for monthly rental
payments of $5,061 per month.




In
Bentonville, Arkansas, AVI Media rents an office, on a month-to-month basis, in
an office suite consisting of one office of about 300 square feet which houses
one employee.  AVI Media uses the office when it visits Wal-Mart
corporate offices.






ITEM 3. LEGAL PROCEEDINGS.





Presently, there are not any material pending legal
proceedings to which the Registrant is a party or as to which any of its
property is subject, and the Registrant does not know nor is it aware of any
legal proceedings threatened or contemplated against it.







ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.




None







PART II





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





MARKET
INFORMATION





High
      Bid
                    
                    
                    Low
      BidFiscal
      Year Ended December 31, 2006First
      Fiscal Quarter
                    
                    $
                    .01
                    
                    
                    $
                    .0001Second
      Fiscal Quarter
                    
                    
                    .35
                    
                    
                    
                    .0030Third
      Fiscal Quarter
                    
                    
                    .26
                    
                    
                    
                    .0500Fourth
      Fiscal Quarter
                    
                    
                    .24
                    
                    
                    
                    .1100Fiscal
      Year Ended December 31, 2007First
      Fiscal Quarter
                    
                    $
                    1.04
                    
                    
                    $
                    0.10Second
      Fiscal Quarter
                    
                    
                    0.98
                    
                    
                    
                    0.64Third
      Fiscal Quarter
                    
                    
                    0.87
                    
                    
                    
                    0.39Fourth
      Fiscal Quarter
                    
                    
                    0.50
                    
                    
                    
                    0.40Fiscal
      Year Ended December 31, 2008First
      Fiscal Quarter
                    
                    $
                    0.84
                    
                    
                    $
                    0.56Second
      Fiscal Quarter
                    
                    
                    0.89
                    
                    
                    
                    0.44Third
      Fiscal Quarter
                    
                    
                    0.78
                    
                    
                    
                    0.35Fourth
      Fiscal Quarter
                    
                    
                    0.72
                    
                    
                    
                    0.26





The
market price of our common stock, like that of other technology companies, is
highly volatile and is subject to fluctuations in response to variations in
operating results, announcements of technological innovations or new products,
or other events or factors. Our stock price may also be affected by broader
market trends unrelated to our performance.







15




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




MARKET INFORMATION-
continued




Holders




As
of March 31, 2009 there were 49,666,124 shares of common stock
outstanding and approximately 135 stockholders of record.




Transfer
Agent and Registrar




Our
transfer agent is American Registrar & Transfer Co., 342 East 900 South,
Salt Lake City, UT 84111; telephone (801) 363-9065.




Dividend
Policy




We have
not paid any cash dividends on our common stock to date and do not anticipate we
will pay dividends in the foreseeable future. The payment of dividends in the
future will be contingent upon revenues and earnings, if any, capital
requirements, and our general financial condition. The payment of any dividends
will be within the discretion of the then Board of Directors. It is the present
intention of the Board of Directors to retain all earnings, if any, for use in
the business operations. Accordingly, the Board does not anticipate declaring
any dividends in the foreseeable future.




Warrants,
Options and Convertible Debt




There are
no outstanding options or warrants that would entitle any person to purchase our
preferred stock.  Currently, there are outstanding options and
warrants to purchase shares of our common stock. We currently do not have any
compensation plan under which equity securities are authorized for
issuance.





RECENT
SALES OF UNREGISTERED SECURITIES





Set forth below is information regarding the issuance and sales
of our securities without registration for the past three (3) years from the
date of this Registration Statement. No such sales involved the use of an
underwriter, no advertising or public solicitation were involved, and no
commissions were paid in connection with the sale of any
securities.





Preferred
Stock





On
September 26, 2006, we issued 95,000 shares of Series A preferred stock to UTEK
Corporation in connection with our acquisition of Neu-Hope Technologies,
Inc.




On
September 26, 2006, we issued 5,000 shares of Series A preferred stock to Aware
Capital Corporation in connection with our acquisition of Neu-Hope Technologies,
Inc.




The below
shares of common stock were sold or issued primarily pursuant to an exemption
from registration under Section 4(2) of the Securities Act. These shares of
common stock are restricted securities and may not be resold for a period of up
to one year from the date of the acquisition. Once we have been subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act for a period
of 90 days and if we have filed all of our required reports under such act at
the time of sale, the applicable holding period will be shortened to six months,
assuming that other requirements of Rule 144 of the Securities Act are met, or
unless sold or transferred in transactions that are exempt under applicable
federal and state securities laws or pursuant to registration
thereunder.





Names/Identities
      of
                    Persons
      to
                    whom
      Securities Issued
                  
                  Issue
      Date
                  
                  Amount
      of Shares Issued
                  
                  
                  Price
      of Shares
                  
                  
                  Aggregate
      Value of Securities Issued
                  
                  Purpose
      of IssuanceConsultant
                  
                  May
      2006
                  
                  
                  600,000
                  
                  
                  $
                  0.20
                  
                  
                  $
                  120,000
                  
                  Consulting
      servicesWilliam
      J. Stokes
                  
                  September
      2006
                  
                  
                  1,500,000
                  
                  
                  $
                  0.18
                  
                  
                  $
                  270,000
                  
                  Compensation
      for OfficerConsultant
                  
                  September
      2006
                  
                  
                  500,000
                  
                  
                  $
                  0.18
                  
                  
                  $
                  90,000
                  
                  Compensation
      as Chief Scientific OfficerConsultant
                  
                  September
      2006
                  
                  
                  300,000
                  
                  
                  $
                  0.18
                  
                  
                  $
                  54,000
                  
                  Legal
      servicesConsultant
                  
                  October
      2006
                  
                  
                  250,000
                  
                  
                  $
                  0.18
                  
                  
                  $
                  45,000
                  
                  Consulting
      servicesConsultant
                  
                  February
      2007
                  
                  
                  250,000
                  
                  
                  $
                  0.30
                  
                  
                  $
                  75,000
                  
                  Patent
      licenseConsultant
                  
                  March
      2007
                  
                  
                  250,000
                  
                  
                  $
                  0.87
                  
                  
                  $
                  217,500
                  
                  Business
      consulting servicesConsultant
                  
                  June
      2007
                  
                  
                  160,000
                  
                  
                  $
                  0.75
                  
                  
                  $
                  120,000
                  
                  Settlement
      of DebtLandlord
                  
                  August
      2007
                  
                  
                  416,667
                  
                  
                  $
                  0.45
                  
                  
                  $
                  187,500
                  
                  Prepaid
      rentConsultant
                  
                  September
      2007
                  
                  
                  100,000
                  
                  
                  $
                  0.82
                  
                  
                  $
                  82,000
                  
                  Business
      consulting servicesConsultant
                  
                  November
      2007
                  
                  
                  100,000
                  
                  
                  $
                  0.74
                  
                  
                  $
                  74,000
                  
                  Legal
      servicesConsultant
                  
                  November
      2007
                  
                  
                  32,000
                  
                  
                  $
                  0.74-0.75
                  
                  
                  $
                  $24,813
                  
                  Consulting
      servicesConsultant
                  
                  December
      2007
                  
                  
                  25,000
                  
                  
                  $
                  0.75
                  
                  
                  $
                  18,725
                  
                  Consulting
      servicesConsultant
                  
                  December
      2007
                  
                  
                  7,000
                  
                  
                  $
                  0.82
                  
                  
                  $
                  5,733
                  
                  BonusWilliam
      J. Stokes
                  
                  December
      2007
                  
                  
                  1,000,000
                  
                  
                  $
                  0.07
                  
                  
                  $
                  70,000
                  
                  Exercise
      of Options (Company paid exercise price)Preferred
      Stockholder
                  
                  March
      2008
                  
                  
                  299,642
                  
                  
                  $
                  0.78
                  
                  
                  $
                  233,720
                  
                  Stock
      Offering CostsConsultant
                  
                  April
      2008
                  
                  
                  190,000
                  
                  
                  $
                  0.75
                  
                  
                  $
                  142,500
                  
                  Bonus
      compensation to the Chief Science OfficerNon-Executive
      Employees
                  
                  April
      2008
                  
                  
                  50,000
                  
                  
                  $
                  0.75
                  
                  
                  $
                  37,500
                  
                  Bonus
      compensation to employeesConsultant
                  
                  April
      2008
                  
                  
                  70,000
                  
                  
                  $
                  0.75
                  
                  
                  $
                  52,500
                  
                  Business
      consulting servicesConsultant
                  
                  July
      2008
                  
                  
                  3,818
                  
                  
                  $
                  0.63
                  
                  
                  $
                  2,405
                  
                  Business
      consulting servicesConsultant
                  
                  September
      2008
                  
                  
                  100,000
                  
                  
                  $
                  0.70
                  
                  
                  $
                  54,688
                  
                  Business
      consulting
services




16




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




RECENT
SALES OF UNREGISTERED SECURITIES-
continued




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






ITEM 6. SELECTED FINANCIAL DATA





N/A






ITEM
7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION.




Results of Operations




The
following table sets forth information from our statements of operations for
the years ended December 31, 2008 and 2007.




Year
      Ended
                      December
      31, 2008
                    
                    
                    Year
      Ended
                      December
      31, 2007Revenues
                    
                    $
                    268,242
                    
                    
                    $
                    130,055Cost
      of goods sold
                    
                    
                    155,457
                    
                    
                    
                    55,841Gross
      profit
                    
                    
                    112,785
                    
                    
                    
                    74,214Operating
      expenses
                    
                    
                    6,052,087
                    
                    
                    
                    2,664,621Operating
      loss
                    
                    
                    (5,939,302
                    )
                    
                    
                    (2,590,407
                    )Non-operating
      expenses
                    
                    
                    -
                    
                    
                    
                    (40,000
                    )Interest
      expense
                    
                    
                    (219,453
                    )
                    
                    
                    (238,984
                    )Net
      income (loss)
                    
                    $
                    (6,158,755
                    )
                    
                    $
                    (2,869,391
                    )


Revenue




Revenue
was $268,242 for the twelve months ended December 31, 2008.  During
2007, beginning in August, we began our stable isotope marketing program which
was complemented by the purchase of the Life Science division of Isonics, Inc.
During 2008, we continued the stable isotope marketing program generating
$191,742 of total 2008 revenues. We also established our linear accelerator
production center and began the production and marketing of F-18 in August 2008,
accounting for $76,500 of the total 2008 revenues.




Cost
of Goods Sold




Cost of
Goods Sold for the twelve months ended December 31, 2008 was
$155,457.  Cost of goods sold for our fiscal year ended December 31,
2007 was $55,841. The cost of goods sold of  $55,841 for 2007, 42.9%
of revenues, was our cost of the stable isotopes included in revenues. The
$155,457 cost of goods sold for 2008 consists of $116,402, 60.7% of revenues,
for stable isotopes and $39,055, 51.1% of revenues, was our costs for the F-18
production (consisting mostly of supplies). The reason for the increase in the
cost of goods sold percentage from 2007 (42.9%) to 2008 (60.7%) for stable
isotopes was due to a reduction in sales price for stable isotopes we were able
to obtain. We have worked with our supplier in an attempt to reduce our costs
for stable isotopes in an effort to keep the cost of goods sold in line with
available pricing for the product.




Operating
Expenses




Operating
expenses for the twelve months ended December 31, 2008 and 2007 was $6,052,087
and $2,664,621, respectively.  The increase in operating expenses from
2007 to 2008 can be attributed largely to depreciation and amortization of
licenses, fixed assets and intangible assets ($1,531,214 for the year ended
December 31, 2007 versus $1,135,841 for the year ended December 31, 2007), write
off of the net unamortized balance of impaired assets ($903,535 for the year
ended December 31, 2008 versus $0.00 for the year ended December 31, 2007),
professional fees ($1,281,557 for the year ended December 31, 2008 versus
$607,379 for the year ended December 31, 2007), stock options granted
($1,211,392 for the year ended December 31, 2008 versus $592,447 for the year
ended December 31, 2007) and additional payroll expense ($574,228 for the year
ended December 31, 2008 versus $197,557 for the year ended December 31,
2007).




Year
      Ended
                      December
      31, 2008
                    
                    
                    Year
      Ended
                      December
      31, 2007Depreciation
      and amortization expense
                    
                    $
                    1,531,214
                    
                    
                    $
                    1,135,841Impairment
      expense
                    
                    
                    903,535
                    
                    
                    
                    -Professional
      fees
                    
                    
                    1,281,557
                    
                    
                    
                    607,379Stock
      options granted
                    
                    
                    1,211,392
                    
                    
                    
                    592,447Payroll
      expenses
                    
                    
                    574,228
                    
                    
                    
                    197,557General
      and administrative expenses
                    
                    
                    510,813
                    
                    
                    
                    129,012Sales
      and marketing expense
                    
                    
                    39,348
                    
                    
                    
                    2,385$
                    6,052,087
                    
                    
                    $
                    2,664,621








17




ITEM 7. MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION.-
continued
  Results of
Operations -
continued




Net
Loss




Our net
loss for the year ended December 31, 2008 and 2007 was $6,158,755 and
$2,869,391, respectively, as a result of the above-mentioned
factors.




Liquidity
and Capital Resources




At
December 31, 2008, we had negative working capital of $4,491,859, as compared to
$3,373,417 at December 31, 2007, and $3,244,190 at December 31,
2006. During the twelve months ended December 31, 2008 we experienced
negative cash flow from operations of $1,543,998, and we expended $1,710,590 for
investing activities while adding $3,286,711 from financing activities. As
of December 31, 2008, we had $150,000 commitments for capital
expenditures.





We have
generated material operating losses since inception. We have incurred a
net loss of $10,400,769 from January 1, 2006 (inception) through December
31, 2008, including a net loss of $6,158,755 for the twelve months ended
December 31, 2008. 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 $10,000,000
in the next year to develop three isotope manufacturing centers and complete its
aggressive growth plans.  We may, however, choose to modify its growth
and operating plans to the extent of available funding, if any, by developing
fewer than three isotope manufacturing centers or developing them over a longer
period of time.





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




Contractual
Obligations (payments due by period)




Contractual
      Obligation
                
                Total
      Payments Due
                
                
                Less
      than 1 Year
                
                
                1-3
      Years
                
                
                3-5
      Years
                
                
                More
      than 5 YearsCapital
      Lease Obligation
                
                $
                2,138,852
                
                
                $
                352,118
                
                
                $
                1,213,149
                
                
                $
                573,585
                
                
                $
                -Production
      center lease
                
                
                185,497
                
                
                
                46,872
                
                
                
                138,625
                
                
                
                -
                
                
                
                -Corporate
      office lease
                
                
                86,041
                
                
                
                60,736
                
                
                
                25,305
                
                
                
                -
                
                
                
                -License
      agreement with Regents of the University of
    California
                
                
                335,000
                
                
                
                25,000
                
                
                
                70,000
                
                
                
                180,000
                
                
                
                60,000Total
                
                $
                2,745,390
                
                
                $
                484,726
                
                
                $
                1,447,079
                
                
                $
                753,585
                
                
                $
                60,000




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




For the
year ended December 31, 2007, we had a long term liability of $581,630 compared
to a long term liability of $0 for the year ended December 31, 2006. The long
term liability is related to two capital lease obligations we obtained in
September 2007 that are secured by equipment and the personal guarantee of the
two major shareholders.  The lease allowed the company to acquire a
Pulsar 7 PET Isotope Production System and ancillary equipment.








18




ITEM 7. MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION.-
continued


Contractual Obligations
(payments due by period)-
continued
  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, 2008 the
Company incurred rent expenses for this facility totaling $43,400. In addition,
the lease agreement calls for the issuance of $187,500 in common stock valued at
$.40 per share for a total of 416,667 shares. The company recognized the
issuance of all 416,667 shares in 2007 and will amortize the $187,500 value of
that stock over the sixty month term of the lease. For the twelve months ended
December 31, 2008 and the twelve months ended December 31, 2007 the Company
amortized $37,500 and $15,625, respectively, of this stock issuance and
recognized it as rent expense.




Future
minimum rental payments required under the Company’s current rental agreement in
excess of one year as of December 31, 2008, are as follows:




Twelve
      months ended December 31, 2009
                
                $
                46,872Twelve
      months ended December 31, 2010
                
                
                50,622Twelve
      months ended December 31, 2011
                
                
                54,671Twelve
      months ended December 31,
    2012
                
                
                33,332Total
                
                $
                185,497




Additionally,
in June 2008, the Company entered into a twelve month lease for its
corporate offices with three four month options to renew, but in no event will
the lease extend beyond May 31, 2010. The lease agreement calls for monthly
rental payments of $5,061 per month. During the twelve months ended December 31,
2008 the Company incurred rent expenses for this facility totaling $31,708.
Future minimum rental payments required under the Company’s current rental
agreement in excess of one year as of December 31, 2008, are as
follows:




Twelve
      months ended December 31, 2009
                
                $
                60,736Twelve
      months ended December 31, 2010
                
                
                25,305Twelve
      months ended December 31, 2011
                
                
                -Twelve
      months ended December 31, 2012
                
                
                -Total
                
                $
                86,041




Off-Balance
Sheet Arrangements




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




Recent
Accounting Pronouncements




In
February 2006, the FASB issued SFAS No. 155 "Accounting for Certain Hybrid
Financial Instruments-an amendment of FASB Statements No. 133 and 140" ("FAS
155"). FAS 155 addresses the following: a) permits fair value re-measurement for
any hybrid financial instrument that contains an embedded derivative that
otherwise would require bifurcation; b) clarifies which interest-only strips and
principal-only strips are not subject to the requirements of Statement 133; c)
establishes a requirement to evaluate interests in securitized financial assets
to identify interests that are freestanding derivatives or that are hybrid
financial instruments that contain an embedded derivative requiring bifurcation;
d) clarifies that concentrations of credit risk in the form of subordination are
not embedded derivatives; and e) amends Statement 140 to eliminate the
prohibition on a qualifying special-purpose entity from holding a derivative
financial instrument that pertains to a beneficial interest other than another
derivative financial instrument. SFAS 155 is effective for all financial
instruments acquired or issued after the beginning of an entity's first fiscal
year that begins after September 15, 2006.  Adoption of this standard
did not have a material impact on the Company’s financial
statements.




In March
2006, the FASB issued SFAS 156 - "Accounting for Servicing of Financial Assets -
an amendment of FASB Statement No. 140" ("SFAS 156"). SFAS 156 is effective for
the first fiscal year beginning after September 15, 2006. SFAS 156 changes the
way entities account for servicing assets and obligations associated with
financial assets acquired or disposed of. Adoption of this standard did not have
a material impact on the Company’s financial statements.




In July
2006, the Financial Accounting Standards Board issued Interpretation No. 48,
"Accounting for Uncertainty in Income Taxes - an Interpretation of FASB
Statement No. 109" (the "Interpretation"). The Interpretation establishes for
all entities a minimum threshold for financial statement recognition of the
benefit of tax positions, and requires certain expanded disclosures. The
Interpretation is effective for fiscal years beginning after December 31, 2006,
and is to be applied to all open tax years as of the date of effectiveness.
Adoption of this standard did not have a material impact on the Company’s
financial statements.







19




ITEM
7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION.-
continued




Recent
Accounting Pronouncements-
continued




In
September 2006, the FASB issued Statement of Financial Accounting Standard No.
157, "Fair Value Measurements" (“SFAS 157”). This statement defines fair value,
establishes a fair value hierarchy to be used in generally accepted accounting
principles and expands disclosures about fair value measurements. Although this
statement does not require any new fair value measurements, the application
could change current practice. The statement is effective for fiscal years
beginning after November 15, 2007. Adoption of this standard did not have a
material impact on the Company’s financial statements.




In
February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for
Financial Assets and Liabilities" ("SFAS No. 159"). SFAS No. 159 provides
companies with an option to report selected financial assets and liabilities at
fair value, and establishes presentation and disclosure requirements designed to
facilitate comparisons between companies that choose different measurement
attributes for similar types of assets and liabilities. The new guidance is
effective for fiscal years beginning after November 15, 2007. Adoption of this
standard did not have a material impact on the Company’s financial
statements.




In
September 2006, the staff of the Securities and Exchange Commission issued SAB
No. 108 which provides interpretive guidance on how the effects of the carryover
or reversal of prior year misstatements should be considered in quantifying a
current year misstatement. SAB 108 becomes effective in fiscal 2007. Adoption of
this standard did not have a material impact on the Company’s financial
statements.




In
December 2006, the FASB approved FASB Staff Position (FSP) No. EITF 00-19-2,
"Accounting for Registration Payment Arrangements" ("FSP EITF 00-19-2"), which
specifies that the contingent obligation to make future payments or otherwise
transfer consideration under a registration payment arrangement, whether issued
as a separate agreement or included as a provision of a financial instrument or
other agreement, should be separately recognized and measured in accordance with
SFAS No. 5, "Accounting for Contingencies". FSP EITF 00-19-2 also requires
additional disclosure regarding the nature of any registration payment
arrangements, alternative settlement methods, the maximum potential amount of
consideration and the current carrying amount of the liability, if any. The
guidance in FSP EITF 00-19-2 amends FASB Statements No. 133, "Accounting for
Derivative Instruments and Hedging Activities", and No. 150, "Accounting for
Certain Financial Instruments with Characteristics of both Liabilities and
Equity", and FASB Interpretation No. 45, "Guarantor's Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of
Others", to include scope exceptions for registration payment
arrangements.





FSP EITF
00-19-2 is effective immediately for registration payment arrangements and the
financial instruments subject to those arrangements that are entered into or
modified subsequent to the issuance date of this FSP, or for financial
statements issued for fiscal years beginning after December 15, 2006, and
interim periods within those fiscal years, for registration payment arrangements
entered into prior to the issuance date of this FSP. Adoption of this standard
did not have a material impact on the Company’s financial
statements.




Critical
Accounting Policies





Use
of estimates





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





Fixed
Assets





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





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





Management
of the Company 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.





20




ITEM
7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION.-
continued
  License
Fees





License
fees are stated at cost, less accumulated amortization. Amortization of license
fees is computed using the straight-line method over the estimated economic
useful life of the assets.  The Company periodically reviews the
carrying values of patents in accordance with SFAS No. 144 and any impairments
are recognized when the expected future operating cash flows to be derived from
such assets are less than their carrying value.




Intangible
Assets





Intangible
assets resulted from the purchase, for cash, from Isonics Corporation, the
rights to intellectual property related to the production of isotopes, customer
lists, contracts and agreements with third party companies, and certain
equipment. The Company allocated the purchase price to each of the assets based
upon the Companies believe of the long term value of each of those assets and
comparison to replacement cost, where that information was available. Intangible
assets are stated at cost, less accumulated amortization. Amortization of
intangible assets is computed using the straight-line method over the estimated
economic useful life of the assets. The Company periodically reviews the
carrying values of intangible assets in accordance with SFAS No. 144 and any
impairments are recognized when the expected future operating cash flows to be
derived from such assets are less than their carrying value.




Revenue
Recognition




The
Company applies the provision of SEC Staff Accounting Board (“SAB”) No. 104,
Revenue Recognition.
SAB No. 104, which supersedes SAB No. 101, Revenue Recognition in Financial
Statements, provides guidance on the recognition, presentation and
disclosure of revenue in financial statements. SAB No. 104 outlines the basic
criteria that must be met to recognize revenue and provides guidance for the
disclosure of revenue recognition policies. 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.





Research
and Development Costs





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





Fair
value of financial instruments





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





Stock-based
compensation





Effective
January 1, 2006, the Company adopted SFAS No. 123 (Revised 2004), Share-Based Payment, which
requires that compensation related to all stock-based awards, including stock
options, be recognized in the financial statements based on their estimated
grant-date fair value. The Company has estimated expected forfeitures, as
required by SFAS No. 123R, and is recognizing compensation expense only for
those awards expected to vest. All compensation is recognized by the time the
award vests.






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






ITEM
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.





All
financial information required by this Item is attached hereto at the end of
this report beginning on page F-1 and is hereby incorporated by reference.














21





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




None







ITEM
9A(T). CONTROLS AND PROCEDURES.





Management’s
Report on Internal Control over Financial Reporting




Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting as such term is defined in Exchange Act Rule
13a - 15(f). Our internal control system was designed to provide reasonable
assurance to our management and the Board of Directors regarding the preparation
and fair presentation of published financial statements. All internal control
systems, no matter how well designed have inherent limitations. Therefore, even
those systems determined to be effective can provide only reasonable assurance
with respect to financial statement preparation and presentation. Our
evaluation, which was not done using the COSO framework, immediately revealed
that there were material weaknesses primarily as a result of our lack of
personnel and management did not prepare a written report.  Based on
our assessment we believe that, as of December 31, 2008, our internal control
over financial reporting is effective based on those criteria.




This
report does not include an attestation report by HJ & Associates, LLC, our
independent registered public accounting firm, regarding internal control over
financial reporting.  Management’s report was not subject to
attestation by the Company’s independent registered public accounting firm
pursuant to temporary rules of the SEC that permits the Company to only provide
management’s report in this Form 10-K.




Changes in Internal Control over
Financial Reporting




There
were no changes in our internal control over financial reporting that occurred
during the year ended December 31, 2008 that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.






ITEM
9B. OTHER INFORMATION.




None.






PART III





ITEM
10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE





Our
officers and directors and additional information concerning them are as
follows:




NAME
                    
                    AGE
                    
                    POSITIONJames
      C. Katzaroff
                    
                    51
                    
                    CEO
      and ChairmanWilliam
      J. Stokes
                    
                    56
                    
                    PresidentL.
      Bruce Jolliff
                    
                    58
                    
                    Chief
      Financial OfficerCarlton
      Cadwell
                    
                    64
                    
                    DirectorWilliam
      E. Root
                    
                    64
                    
                    Director




James
C. Katzaroff, Chief Executive Officer and Chairman




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




William
J. Stokes, President




Mr.
Stokes joined Advanced Medical Corporation as its president  in
2006.  He founded Columbia Basin Consulting Group in 1997 and has
worked as a consultant with Columbia Basin Consulting Group since its
inception.  Mr. Stokes has over 30 years experience in management of
nuclear industry services firms and the design and construction of nuclear
facilities. Mr. Stokes has been involved in isotope production methods and
facilities since 1995, having led efforts for reuse of surplus DOE reactors for
isotope production. He played an instrumental role in the founding of a
successful brachytherapy seed company which is used to treat prostate cancer.
Mr. Stokes has received numerous awards and recognition for performance of
nuclear projects and companies under his management.






22




ITEM 10. DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE-
continued




Leonard
Bruce Jolliff, Chief Financial Officer




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




Carl
Cadwell, Director




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




William
E. Root, Director




Mr. Root
joined Advanced Medical Corporation as a director in 2006.  For the
last five years, Mr. Root has been a senior consultant with ARES Corporation, an
engineering, risk management, software  and project management
company.  He brings over 30 years experience in the management and
leadership of engineering, technology development/application, construction, and startup
projects for: nuclear research, environmental technology development, nuclear
power plants, coal power plants, nuclear waste treatment, petroleum plants and
RCRA/CERCLA environmental restoration work. Mr. Root has provided key roles in
negotiating and establishing agreements with state and federal regulators
including the Washington Department of Ecology and the U.S. Nuclear Regulatory
Commission. He has been responsible for projects that ranged from a few million
dollars up to $2.8 billion with an ability to establish and deliver to a
baseline. Mr. Root holds a Bachelor’s and Master’s of Science in Chemical
Engineering.





Committees
of the Board of Directors





We intend
to appoint such persons to the Board of Directors and committees of the Board of
Directors as are expected to be required to meet the corporate governance
requirements imposed by a national securities exchange, although we are not
required to comply with such requirements until we elect to seek listing on a
securities exchange. We do not currently have any independent
directors.




Compensation Committee Interlocks and Insider
Participation




None of
our executive officers serves as a member of the Board of Directors or
compensation committee of any other entity that has one or more of its
executive officers serving as a member of our Board of Directors.






ITEM 11.
EXECUTIVE COMPENSATION.





Executive
Compensation




The
following table sets forth information concerning the total compensation that we
have paid or that has accrued on behalf of our chief executive officer and other
executive officers with annual compensation exceeding $100,000 during the years
ended December 31, 2006, December 31, 2007 and December 31,
2008.




Summary
Compensation Table




Name
      & Position
                                                  
                                                  Year
                                                  
                                                  Salary
      ($)
                                                  
                                                  
                                                  Bonus
      ($)
                                                  
                                                  Stock
      Awards ($)
                                                  
                                                  Option
      Awards
                                                    ($)
                                                  
                                                  Non-Equity
      Incentive Plan Compensation ($)
                                                  
                                                  Changes
      in Pension Value and Nonqualified Deferred Compensation
      Earnings
                                                    ($)
                                                  
                                                  All
      Other Compensation ($)
                                                  
                                                  Total
                                                    ($)James
      C. Katzaroff,
                                                  
                                                  2006
                                                  
                                                  $
                                                  36,053
                                                  
                                                  
                                                  $
                                                  0
                                                  
                                                  $
                                                  0
                                                  
                                                  $
                                                  0
                                                  
                                                  $
                                                  0
                                                  
                                                  $
                                                  0
                                                  
                                                  $
                                                  0
                                                  
                                                  $
                                                  36,053CEO
      and Chairman
                                                  
                                                  2007
                                                  
                                                  $
                                                  112,034
                                                  
                                                  
                                                  $
                                                  0
                                                  
                                                  $
                                                  0
                                                  
                                                  $
                                                  67,215
                                                  
                                                  $
                                                  0
                                                  
                                                  $
                                                  0
                                                  
                                                  $
                                                  0
                                                  
                                                  $
                                                  179,2492008
                                                  
                                                  $
                                                  192,109
                                                  
                                                  
                                                  $
                                                  0
                                                  
                                                  $
                                                  0
                                                  
                                                  $
                                                  50,819
                                                  
                                                  $
                                                  0
                                                  
                                                  $
                                                  0
                                                  
                                                  $
                                                  0
                                                  
                                                  $
                                                  242,928William
      J. Stokes,
                                                  
                                                  2006
                                                  
                                                  $
                                                  0
                                                  
                                                  
                                                  $
                                                  0
                                                  
                                                  $
                                                  105,000
                                                  
                                                  $
                                                  0
                                                  
                                                  $
                                                  0
                                                  
                                                  $
                                                  0
                                                  
                                                  $
                                                  0
                                                  
                                                  $
                                                  105,000President
                                                  
                                                  2007
                                                  
                                                  $
                                                  0
                                                  
                                                  
                                                  $
                                                  30,000
                                                  
                                                  $
                                                  70,000
                                                  
                                                  $
                                                  0
                                                  
                                                  $
                                                  0
                                                  
                                                  $
                                                  0
                                                  
                                                  $
                                                  0
                                                  
                                                  $
                                                  100,0002008
                                                  
                                                  $
                                                  40,000
                                                  
                                                  
                                                  $
                                                  8,500
                                                  
                                                  $
                                                  0
                                                  
                                                  $
                                                  0
                                                  
                                                  $
                                                  0
                                                  
                                                  $
                                                  0
                                                  
                                                  $
                                                  0
                                                  
                                                  $
                                                  48,500L.
      Bruce Jolliff,
                                                  
                                                  2006
                                                  
                                                  $
                                                  0
                                                  
                                                  
                                                  $
                                                  0
                                                  
                                                  $
                                                  0
                                                  
                                                  $
                                                  0
                                                  
                                                  $
                                                  0
                                                  
                                                  $
                                                  0
                                                  
                                                  $
                                                  0
                                                  
                                                  
                                                  -CFO
                                                  
                                                  2007
                                                  
                                                  $
                                                  101,124
                                                  
                                                  
                                                  $
                                                  0
                                                  
                                                  $
                                                  
                                                  
                                                  $
                                                  1,046,837
                                                  
                                                  $
                                                  0
                                                  
                                                  $
                                                  0
                                                  
                                                  $
                                                  0
                                                  
                                                  $
                                                  1,147,9612008
                                                  
                                                  $
                                                  139,267
                                                  
                                                  
                                                  $
                                                  25,000
                                                  
                                                  $
                                                  0
                                                  
                                                  $
                                                  25,409
                                                  
                                                  $
                                                  0
                                                  
                                                  $
                                                  0
                                                  
                                                  $
                                                  0
                                                  
                                                  $
                                                  189,676Fu-Min
      Su,
                                                  
                                                  2006
                                                  
                                                  $
                                                  0
                                                  
                                                  
                                                  $
                                                  0
                                                  
                                                  $
                                                  0
                                                  
                                                  $
                                                  0
                                                  
                                                  $
                                                  0
                                                  
                                                  $
                                                  0
                                                  
                                                  $
                                                  0
                                                  
                                                  $
                                                  0Chief
      Radiochemist
                                                  
                                                  2007
                                                  
                                                  $
                                                  0
                                                  
                                                  
                                                  $
                                                  0
                                                  
                                                  $
                                                  0
                                                  
                                                  $
                                                  0
                                                  
                                                  $
                                                  0
                                                  
                                                  $
                                                  0
                                                  
                                                  $
                                                  0
                                                  
                                                  $
                                                  02008
                                                  
                                                  $
                                                  74,615
                                                  
                                                  
                                                  $
                                                  5,000
                                                  
                                                  $
                                                  76,750
                                                  
                                                  $
                                                  25,409
                                                  
                                                  $
                                                  0
                                                  
                                                  $
                                                  0
                                                  
                                                  $
                                                  0
                                                  
                                                  $
                                                  181,774








23





ITEM 11. EXECUTIVE
COMPENSATION.-
continued




Narrative
to Summary Compensation Table





We have
employment agreements with William J. Stokes, L. Bruce Jolliff and Fu-Min Su
that determine the compensation paid to each of them.




William
E. Stokes





In August
2006, the Company entered into a three-year employment agreement with William E.
Stokes pursuant to which the Company agreed to pay Mr. Stokes an annual salary
equal to $48,000 from January 1, 2007 to August 1, 2007 and an annual salary of
$96,000 thereafter.  Mr. Stokes received 1,500,000 shares of the
Company’s common stock as an inducement to sign the employment
agreement.




In
theevent the
employment is terminated by the Company without cause, by Mr. Stokes for good
reason or a change in control, the Company will have to provide Mr. Stokes with
one month of his base salary and any portion of an annual bonus allocated by the
Board of Directors, disability and other welfare plan benefits  for a
period of one year from the date of termination and immediate vesting of
alloutstanding
options, stock grants, shares of restricted stock and any other equity incentive
compensation; provided, that the stock options shall be exercisable only until
the earlier to occur of (A) two years from the date of the termination, or (B)
the date the option would have otherwise expired if Mr. Stokes had not
terminatedemployment.




During
the term of the employment agreement, including any extension thereof, and for a
period of one year thereafter, Mr. Stokes shall not, directly or indirectly work
for a business in the production, import for resale, and distribution of
radioisotopes for use in the medical industries.





L.
Bruce Jolliff





In August
2007, Mr. Jolliff signed an employment agreement with the Company and will
receive a salary of $100,000 per year.  He will also receive 1,500,000
options (500,000 options per year beginning in August 2008) to purchase the
Company’s common stock at $0.50.  The Company may terminate the
agreement without cause at any time upon 30 days' written
notice.  Upon termination, the Company will pay Mr. Jolliff a
severance allowance of two months salary.





Dr.
Fu Min-Su





In
January 2008, the Company entered into a five-year employment agreement with Dr.
Fu Min-Su pursuant to which the Company agreed to pay Dr. Fu Min-Su an annual
salary equal to $90,000.




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




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





B. Significant
Employees.




Fu-Min
Su, Chief Radiochemist





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




C. Family
Relationships.  None.





24





ITEM
11. EXECUTIVE COMPENSATION.-
continued  Narrative to Summary
Compensation Table-
continued
  D.
Involvement in Certain Legal Proceedings.




There
have been no events under any bankruptcy act, no criminal proceedings and no
judgments, injunctions, orders or decrees material to the evaluation of the
ability and integrity of any director, executive officer, promoter or control
person of Registrant during the past five years.





Options Granted to Named Executive
Officers





During
January 2007, the Company granted James C. Katzaroff an option to purchase an
aggregate of 250,000 shares of the Company’s common stock at an exercise price
of $.29 per share.  The options are fully vested and expire January
23, 2010. The quoted market price of the common stock at the time of issuance of
the options was $.27 per share.





During
May 2007, the Company granted L. Bruce Jolliff an option to purchase an
aggregate of 1,500,000 shares of the Company’s common stock at an exercise price
of $.50 per share.  The options vest at 500,000 shares May 2008,
500,000 shares May 2009, and 500,000 shares May 2010 and expire May 2012. The
quoted market price of the common stock at the time of issuance of the options
was $.70 per share.





During
November 2008, the Company granted James C. Katzaroff an option to purchase
100,000 shares and L. Bruce Jolliff and option to purchase 50,000 shares of the
Company’s common stock.  All options issued in November 2008 have an
exercise price of $.55 per share and are fully vested and expire on November 26,
2011.  The quoted market price of the common stock at the time of
issuance of the options was $.51 per share.




Outstanding
Equity Awards





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




Option
      Awards
                                    
                                    Stock
      AwardsName
                                    
                                    Grant
      Date
                                    
                                    Number
      of Securities Underlying Unexercised Options (#)
    Exercisable
                                    
                                    Equity
      Incentive Plan Awards: Number of Securities Underlying Unexercised
      Unearned Options (#)
                                    
                                    Number
      of Securities Underlying Unexercised Options (#)
    Unexercisable
                                    
                                    Option
      Exercise Price
                                      ($)
                                    
                                    Option
      Expiration Date
                                    
                                    Number
      of Shares or Units of Stock That Have Not Vested (#)
                                    
                                    Market
      Value of Shares or Units of Stock That Have Not Vested ($)
                                    
                                    Equity
      Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights
      That Have Not Vested (#)
                                    
                                    Equity
      Incentive Awards: Market or Payout Value of Unearned Shares, Units or
      Other Rights That Have Not Vested ($)James
      C. Katzaroff
                                    
                                    
                                    1-23-07
                                    
                                    
                                    250,000
                                    
                                    
                                    -
                                    
                                    
                                    -
                                    
                                    $
                                    0.29
                                    
                                    
                                    1-23-2010
                                    
                                    
                                    -
                                    
                                    
                                    -
                                    
                                    
                                    -
                                    
                                    
                                    -11-26-08
                                    
                                    
                                    100,000
                                    
                                    
                                    -
                                    
                                    
                                    -
                                    
                                    $
                                    0.55
                                    
                                    
                                    11-26-2011
                                    
                                    
                                    -
                                    
                                    
                                    -
                                    
                                    
                                    -
                                    
                                    
                                    -William
      J. Stokes
                                    
                                    
                                    -
                                    
                                    
                                    -
                                    
                                    
                                    -
                                    
                                    
                                    -
                                    
                                    
                                    -
                                    
                                    
                                    -
                                    
                                    
                                    -
                                    
                                    
                                    -
                                    
                                    
                                    -
                                    
                                    
                                    -L.
      Bruce Jolliff
                                    
                                    
                                    5-16-07
                                    
                                    
                                    500,000
                                    
                                    
                                    -
                                    
                                    
                                    1,000,000
                                    
                                    $
                                    0.50
                                    
                                    
                                    5-16-2012
                                    
                                    
                                    -
                                    
                                    
                                    -
                                    
                                    
                                    -
                                    
                                    
                                    -11-26-08
                                    
                                    
                                    50,000
                                    
                                    
                                    -
                                    
                                    
                                    -
                                    
                                    $
                                    0.55
                                    
                                    
                                    11-26-2011
                                    
                                    
                                    -
                                    
                                    
                                    -
                                    
                                    
                                    -
                                    
                                    
                                    -Fu-Min
      Su
                                    
                                    
                                    11-26-08
                                    
                                    
                                    50,000
                                    
                                    
                                    -
                                    
                                    
                                    -
                                    
                                    $
                                    0.55
                                    
                                    
                                    11-26-2011
                                    
                                    
                                    -
                                    
                                    
                                    -
                                    
                                    
                                    -
                                    
                                    
                                    -








25




ITEM
11. EXECUTIVE COMPENSATION.-
continued




Equity
Compensation, Pension or Retirement Plans




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




Audit
Committee




Presently,
our Board of Directors is performing the duties that would normally be performed
by an audit committee. We intend to form a separate audit committee, and plan to
seek potential independent directors. In connection with our search, we plan to
appoint an individual qualified as an audit committee financial
expert.




OPTIONS/SARS
GRANT




During
January 2007, the Company granted its three board members, Carlton Cadwell,
James C. Katzaroff and William E. Root, options to purchase an aggregate of
250,000 shares each of the Company’s common stock at an exercise price of $.29
per share.  The options are fully vested and expire January 23, 2010.
The quoted market price of the common stock at the time of issuance of the
options was $.27 per share.  The Company valued the options in
accordance with SFAS 123(R).  The fair value of the options totaled
$72,500 for each of the board members, for an aggregate of $217,500, and was
recorded as stock-based compensation in the accompanying financial statements
for the year ended December 31, 2007.  The fair value of the options
was estimated at the date of grant using the Black-Scholes option-pricing model
with the following assumptions:




Risk-free
      interest rate
                
                
                4.79
                %Dividend
      yield
                
                
                0.00
                %Volatility
      factor
                
                
                329.1
                %Weighted
      average expected life
                
                3
      years




During
April 2007, the Company granted a non-employee consultant options to purchase an
aggregate of 100,000 shares of the Company’s common stock at an exercise price
of $.50 per share.  The options are fully vested and expire April
2010. The quoted market price of the common stock at the time of issuance of the
options was $.85 per share.  The Company valued the options in
accordance with SFAS 123(R).  The fair value of the options totaled
$50,000, and was recorded as stock-based compensation in the accompanying
financial statements for the year ended December 31, 2007.  The fair
value of the options was estimated at the date of grant using the Black-Scholes
option-pricing model with the following assumptions:




Risk-free
      interest rate
                
                
                4.60
                %Dividend
      yield
                
                
                0.00
                %Volatility
      factor
                
                
                329.1
                %Weighted
      average expected life
                
                3
      years




During
May 2007, the Company granted its Chief Financial Officer, L. Bruce
Jolliff, options to purchase an aggregate of 1,500,000 shares of the
Company’s common stock at an exercise price of $.50 per share.  The
options vest at 500,000 shares May 2008, 500,000 shares May 2009, and 500,000
shares May 2010 and expire May 2012. The quoted market price of the common stock
at the time of issuance of the options was $.70 per share.  The
Company valued the options in accordance with SFAS 123(R).  The fair
value of the options totaled $750,000, and was recorded as stock-based
compensation in the accompanying financial statements for the year ended
December 31, 2007 on a pro-rata bases of the months worked compared to the total
of the vesting schedule.  The fair value of the options was estimated
at the date of grant using the Black-Scholes option-pricing model with the
following assumptions:




Risk-free
      interest rate
                
                
                4.67
                %Dividend
      yield
                
                
                0.00
                %Volatility
      factor
                
                
                257.3
                %Weighted
      average expected life
                
                5 years






26




ITEM
11. EXECUTIVE COMPENSATION.-
continued




OPTIONS/SARS GRANT-
continued




During
April 2007, the Company appointed a local County Commissioner, past County Board
of Supervisors, and past County Treasurer as the Chairman of its Government
Affairs Advisory Board. In exchange for his local interaction with local
government on our behalf we granted  him options to purchase an
aggregate of 100,000 shares of the Company’s common stock at an exercise price
of $.50 per share.  The options are fully vested and expire April
2010. The quoted market price of the common stock at the time of issuance of the
options was $.85 per share.  The Company valued the options in
accordance with SFAS 123(R).  The fair value of the options totaled
$50,000, and was recorded as stock-based compensation in the accompanying
financial statements for the year ended December 31, 2007.  The fair
value of the options was estimated at the date of grant using the Black-Scholes
option-pricing model with the following assumptions:




Risk-free
      interest rate
                
                
                4.60
                %Dividend
      yield
                
                
                0.00
                %Volatility
      factor
                
                
                329.1
                %Weighted
      average expected life
                
                3
      years




During
December 2007, the Company granted the non-employee consultant acting as the
Project Manager on the Company’s construction project, in accordance with the
terms of his contract, options to purchase 122,400 shares of the Company’s
common stock, at an exercise price of $.17 per share.  The options are
fully vested and expire December 31, 2012. The quoted market price of the common
stock at the time of issuance of the options was $.72 per share.  The
Company valued the options in accordance with SFAS 123(R).  The fair
value of the options totaled $87,975 and was recorded as stock-based
compensation in the accompanying financial statements for the year ended
December 31, 2007.  The fair value of the options was estimated at the
date of grant using the Black-Scholes option-pricing model with the following
assumptions:




Risk-free
      interest rate
                
                
                3.49
                %Dividend
      yield
                
                
                0.00
                %Volatility
      factor
                
                
                257.3
                %Weighted
      average expected life
                
                5
      years




During
February 2008, the Company granted a non-employee consultant, in exchange for
banking and financing leads and opportunities, options to purchase 714,286
shares of the Company’s common stock, at an exercise price of $1.05 per share.
The options are fully vested and expire February 12, 2009. The quoted market
price of the common stock at the time of issuance of the options was $.65 per
share. The Company valued the options in accordance with SFAS 123(R). The fair
value of the options totaled $461,827 and was recorded as stock-based
compensation in the accompanying financial statements for the nine months ended
September 30, 2008. The fair value of the options was estimated at the date of
grant using the Black-Scholes option-pricing model with the following
assumptions:




Risk-free
      interest rate
                
                
                2.05
                %Dividend
      yield
                
                
                0.00
                %Volatility
      factor
                
                
                312.5
                %Weighted
      average expected life
                
                1 year








27




ITEM
11. EXECUTIVE COMPENSATION.-
continued
  OPTIONS/SARS GRANT-
continued
  During
March 2008, the Company granted the non-employee consultant acting as the
Project Manager on the Company’s construction project, in accordance with the
terms of his contract, options to purchase 106,800 shares of the Company’s
common stock, at an exercise price of $.17 per share. The options are fully
vested and expire March 31, 2013. The quoted market price of the common stock at
the time of issuance of the options was $.84 per share. The Company valued the
options in accordance with SFAS 123(R). The fair value of the options totaled
$89,565 and was recorded as stock-based compensation in the accompanying
financial statements for the nine months ended September 30, 2008.  The
fair value of the options was estimated at the date of grant using the
Black-Scholes option-pricing model with the following
assumptions:




Risk-free
      interest rate
                
                
                2.48
                %Dividend
      yield
                
                
                0.00
                %Volatility
      factor
                
                
                257.3
                %Weighted
      average expected life
                
                5
      years




During
June 2008, the Company granted the consultant acting as the non-employee Project
Manager on the Company’s construction project, in accordance with the terms of
his contract, options to purchase 39,600 shares of the Company’s common stock,
at an exercise price of $.17 per share. The options are fully vested and expire
June 30, 2013. The quoted market price of the common stock at the time of
issuance of the options was $.69 per share. The Company valued the options in
accordance with SFAS 123(R). The fair value of the options totaled $27,276 and
was recorded as stock-based compensation in the accompanying financial
statements for the nine months ended September 30, 2008.  The fair value of
the options was estimated at the date of grant using the Black-Scholes
option-pricing model with the following assumptions:




Risk-free
      interest rate
                
                
                3.49
                %Dividend
      yield
                
                
                0.00
                %Volatility
      factor
                
                
                257.5
                %Weighted
      average expected life
                
                5
      years





During
July 2008, the Company granted a non-employee consultant, along with his
appointment as the Chair of the Company’s Scientific Advisory Board, options to
purchase 100,000 shares of the Company’s common stock, at an exercise price of
$.50 per share. The options are fully vested and expire January 29, 2011. The
quoted market price of the common stock at the time of issuance of the options
was $.40 per share. The Company valued the options in accordance with SFAS
123(R). The fair value of the options totaled $39,850 and was recorded as
stock-based compensation in the accompanying financial statements for the nine
months ended September 30, 2008.  The fair value of the options was
estimated at the date of grant using the Black-Scholes option-pricing model with
the following assumptions:




Risk-free
      interest rate
                
                
                2.87
                %Dividend
      yield
                
                
                0.00
                %Volatility
      factor
                
                
                337.6
                %Weighted
      average expected life
                
                3 years




During
November 2008, the Company granted stock options to the following:





·
            Two
      board members, James C. Katzaroff and Carlton Cadwell, options to purchase
      an aggregate of 100,000 shares each and one board member, William E. Root,
      options to purchase an aggregate of 25,000 shares of the Company’s common
      stock.  The fair value of the options totaled $50,819, $50,819,
      and $12,705, for an aggregate of $114,343, and was recorded as stock-based
      compensation in the accompanying financial statements for the year ended
      December 31, 2008.






28




ITEM
11. EXECUTIVE COMPENSATION.-
continued
  OPTIONS/SARS GRANT-
continued




·
            five
      non-executive employees options to purchase the following shares: 50,000,
      25,000, 10,000, 10,000, and 5,000, for an aggregate of 100,000 shares of
      the Company’s common stock and our Chief Financial Officer, L. Bruce
      Jolliff, options to purchase 50,000 shares of the Company’s common stock.
      The fair value of the options totaled $25,409, $25,409, $12,705, $5,082,
      $5,082, and $2,541, for an aggregate of $76,228, and was recorded as
      stock-based compensation in the accompanying financial statements for the
      year ended December 31, 2008.





·
            non-employee
      consultant, in exchange for financial and marketing expertise options to
      purchase an aggregate of 25,000 shares of the Company’s common stock The
      fair value of the options totaled $12,705 and was recorded as stock-based
      compensation in the accompanying financial statements for the year ended
      December 31, 2008.





·
            non-employee
      consultant, in exchange for his strategic business advice as an expert in
      our industry, options to purchase an aggregate of 75,000 shares of the
      Company’s common stock The fair value of the options totaled $38,114 and
      was recorded as stock-based compensation in the accompanying financial
      statements for the year ended December 31,
2008.





·
            non-employee
      consultant, in exchange for marketing efforts, options to purchase an
      aggregate of 5,000 shares of the Company’s common stock The fair value of
      the options totaled $2,541 and was recorded as stock-based compensation in
      the accompanying financial statements for the year ended December 31,
      2008.





All
options issued in November 2008 have an exercise price of $.55 per share and are
fully vested and expire on November 26, 2011.  The quoted market price
of the common stock at the time of issuance of the options was $.51 per
share.  The Company valued the options in accordance with SFAS
123(R).  The fair value of the options was estimated at the date of
grant using the Black-Scholes option-pricing model with the following
assumptions:





Risk-free
      interest rate
                
                
                1.51
                %Dividend
      yield
                
                
                0.00
                %Volatility
      factor
                
                
                337.22
                %Weighted
      average expected life
                
                3
      years





DIRECTOR
COMPENSATION




Non-management
directors received the following compensation:





Name
                            
                            
                            
                            Fees
      earned or paid in cash
                              ($)
                            
                            
                            Stock
      awards
                              ($)
                            
                            
                            Option
      awards
                              ($)
                            
                            
                            All
      other compensation
                              ($)
                            
                            
                            Total
                              ($)2006
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            $
                            17,500
                            
                            
                            
                            -
                            
                            
                            $
                            17,500Carlton
      Cadwell
                            
                            2007
                            
                            
                            -
                            
                            
                            
                            
                            
                            
                            $
                            67,215
                            
                            
                            
                            -
                            
                            
                            $
                            67,2152008
                            
                            
                            -
                            
                            
                            
                            
                            
                            
                            $
                            50,819
                            
                            
                            
                            -
                            
                            
                            $
                            50,8192006
                            
                            
                            -
                            
                            
                            
                            
                            
                            
                            $
                            17,500
                            
                            
                            
                            -
                            
                            
                            $
                            17,500William
      E. Root
                            
                            2007
                            
                            
                            -
                            
                            
                            
                            
                            
                            
                            $
                            67,215
                            
                            
                            
                            -
                            
                            
                            $
                            67,2152008
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            $
                            12,705
                            
                            
                            
                            -
                            
                            
                            $
                            12,705





During
September 2006, the Company granted three board members options to purchase an
aggregate of 250,000 shares each of the Company’s common stock and granted the
Chief Executive Officer options to purchase 1,000,000 shares of the Company’s
common stock, all at an exercise price of $.07 per share.  The options
are fully vested and expire September 1, 2009. The quoted market price of the
common stock at the time of issuance of the options was $.07 per
share.  The Company valued the options in accordance with SFAS
123(R).  The fair value of the options totaled $17,500 for each of the
board members and $70,000 for the CEO, for an aggregate of $122,500, and was
recorded as stock-based compensation in the accompanying financial statements
for the year ended December 31, 2006.  All these were exercised in
2007.






29




ITEM
11. EXECUTIVE COMPENSATION.-
continued




DIRECTOR
COMPENSATION-
continued





During
January 2007, the Company granted three board members options to purchase an
aggregate of 250,000 shares each of the
Company’s common stock at an exercise price of $.29 per share.  The
options are fully vested and expire January 23, 2010. The quoted market price of
the common stock at the time of issuance of the options was $.27 per
share.  The Company valued the options in accordance with SFAS
123(R).  The fair value of the options totaled $67,215 for each of the
board members, for an aggregate of $201,645, and was recorded as stock-based
compensation in the accompanying financial statements for the year ended
December 31, 2007.




During
November 2008, the Company granted two board members options to purchase an
aggregate of 100,000 shares each and one board member options to purchase an
aggregate of $25,000 shares of the Company’s common stock at an exercise price
of $.55 per share.  The options are fully vested and expire November
26, 2011. The quoted market price of the common stock at the time of issuance of
the options was $.51 per share.  The Company valued the options in
accordance with SFAS 123(R).  The fair value of the options totaled
$50,819 for each of the two board members receiving 100,000 shares and $12,705
for the one board member receiving $25,000 shares for an aggregate of $114,343,
and was recorded as stock-based compensation.




POTENTIAL
CONFLICTS OF INTEREST




James C.
Katzaroff, Chief Executive Officer and Chairman of the Board owns a substantial
interest in Mirari Corporation (“Mirari”).  The Company has had
business dealing with Mirari.







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




A. Security ownership of certain beneficial
owners.




The
following table sets forth, as of March 31 2009, the number of shares
of Common Stock owned of record and beneficially by executive officers,
directors and persons who hold 5% or more of the outstanding Common Stock of the
Company.  As of March 31, 2009, there were 49,666,124 shares
outstanding.




Name
      and Address
                  
                  Amount
      and Nature of
                    Beneficial
      Ownership (1)
                  
                  
                  Percentage
      of ClassJames
      C. Katzaroff, CEO and Chairman
                  
                  
                  7,419,002
                  
                  
                  
                  14.8William
      J. Stokes, President
                  
                  
                  2,500,000
                  
                  
                  
                  5.0L.
      Bruce Jolliff, CFO
                  
                  
                  550,000
                  
                  
                  
                  1.1Carlton
      Cadwell, Director
                  
                  
                  18,420,145
                  
                  
                  
                  37.0William
      E. Root, Director
                  
                  
                  525,000
                  
                  
                  
                  1.1All
      Officers and Directors as a group (5 individuals)
                  
                  
                  29,414,147
                  
                  
                  
                  57.7*         
      less than 1 percent




(1)
            In
      determining beneficial ownership of our common stock as of a given date,
      the number of shares shown includes shares of common stock which may be
      acquired on exercise of warrants or options or conversion of convertible
      securities within 60 days of that date.  In determining the
      percent of common stock owned by a person or entity on March 31,
      2009, (a) the numerator is the number of shares of the class
      beneficially owned by such person or entity, including shares which may be
      acquired within 60 days on exercise of warrants or options and conversion
      of convertible securities, and (b) the denominator is the sum of
      (i) the total shares of common stock outstanding on March 31, 2009,
      and (ii) the total number of shares that the beneficial owner may
      acquire upon conversion of the preferred and on exercise of the warrants
      and options. Unless otherwise stated, each beneficial owner has sole power
      to vote and dispose of its shares.  Beneficial ownership of
      shares includes 350,000 options currently exercisable by James C.
      Katzaroff and 550,000 options currently exercisable by L. Bruce Jolliff,
      100,000 options currently exercisable by Carlton Cadwell and 275,000
      options currently exercisable by William E.
  Root.





Equity
Compensation, Pension or Retirement Plans




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







30





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




James C.
Katzaroff took part in founding and organizing the business of the Company and
is a promoter of  the Company as defined by Rule 405 of the Securities
Act of 1933. James C. Katzaroff will not receive any compensation in connection
with this registration statement. During the past five years, James C. Katzaroff
received the salary, bonus and options disclosed in the Summary Compensation
Table.




Indebtedness
from related parties




James C.
Katzaroff, Chief Executive Officer and Chairman of the Board owns a substantial
interest in Mirari.  In 2006, the company purchased a note receivable
of $28,500, from a non-related individual, due from Mirari, a Washington
corporation, and an affiliate under common control. This amount was written off
as an investment loss in 2006. Additionally, during the year 2006, we advanced
funds on behalf of Mirari for rent and administrative costs in the amount of
$33,000. This amount was written off as bad debt in 2006.  It is
management’s intention to acquire all the assets, which consists of certain
intellectual property related to nuclear facilities, and common stock of
Mirari during the year 2009.  There have not been, however, any
negotiations between us and Mirari.




In
November 2006 the Company received $30,000 from an employee, who is not an
officer, in the form of a loan and in April 2007 received another $50,000 from
the same shareholder. In June 2007 the Company extinguished the $80,000 debt
through the issuance of 160,000 shares of the Company’s common stock. The fair
market value at the time was $.75, resulting in a $40,000 loss from
extinguishment of debt.  The employee, who was not an affiliate of any
officer or principal shareholder of the Advanced Medical Isotope Corporation
made the loan to help us with our liquidity.




Rent
and other administrative expenses




The
Company began renting office space located in Kennewick, Washington from Apogee
Biometrics, Inc. (“ABI”), an affiliate under common control, in January
2006.  Commencing January 1, 2006, the parties verbally agreed that
the Company would make monthly rent payments of $3,500 on a month-to-month
basis.  In addition, the Company paid 36% of certain administrative
expenses utilized by both parties.  During the years ended December
31, 2007 and 2006 the Company incurred rent and administrative expenses to ABI
totaling $15,147 and $59,500 respectively.  The Company made payments
to ABI totaling $15,147 and $59,500 during the years ended December 31, 2007 and
2006 respectively.  The Company terminated the rental agreement with
ABI.







ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.




Audit
Fees




The
aggregate fees billed by our principal accountant for the audit of our annual
financial statements, review of financial statements included in the quarterly
reports and other fees that are normally provided by the accountant in
connection with statutory and regulatory filings or engagements for the fiscal
years ended December 31, 2008 were $60,000.




Tax
Fees




The
aggregate fees billed for professional services rendered by our principal
accountant for tax compliance, tax advice and tax planning for the fiscal years
ended December 31, 2008 were $3,000. These fees related to the preparation of
federal income and state franchise tax returns.







All
Other Fees




There
were $11,000 in other fees billed for products or services provided by
our principal accountant for the fiscal years ended December 31,
2008.









31





Advanced
Medical Isotope Corporation


(A
Development Stage Company)


Index
to Financial Statements







PageReport
      of Independent Registered Public Accounting Firm for 2008 and
      2007
                        F-2Financial
      Statements:Balance
      Sheets as of December 31, 2008 and 2007
                        F-3Statements
      of Operations for the years ended December 31, 2008 and
    2007
                        F-4Statements
      of Shareholders’ Equity (Deficit) for the years ended December 31, 2008
      and 2007
                        F-5Statements
      of Cash Flow for the years ended December 31, 2008 and
2007
                        F-8Notes
      to Financial Statements
                        F-9




F-1


Report
of Independent Registered Public Accounting Firm
 
 
 To the
Board of Directors and Stockholders of
 Advanced
Medical Isotope Corporation
 Kennewick,
Washington
 
 We have
audited the consolidated balance sheets of Advanced Medical Isotope Corporation
(A Development Stage Company) as of December 31, 2008 and 2007, and the related
consolidated statements of operations, stockholders’ equity (deficit) and cash
flows for the years then ended and from inception of the development stage on
January 1, 2006 through December 31, 2008.  These consolidated
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
 
 We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
 
 In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Advanced
Medical Isotope Corporation as of December 31, 2008 and 2007 and the results of
their operations and their cash flows for the years then ended and from
inception of the development stage on January 1, 2006 through December 31, 2008
in conformity with U.S. generally accepted accounting principles.
 
 The accompanyingconsolidatedfinancial statements have been prepared
assuming that the Company will continue as a going concern.As discussed in Note 1 to theconsolidated financial
statements, the Company has suffered recurring losses, used significant cash in
support of its operating activities and, based upon current operating levels,
requires additional capital or significant restructuring to sustain its
operation for the foreseeable future. Management’s plans in regard to these
matters are also described in Note 1. The consolidated financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
 
 We were
not engaged to examine management's assertion about the effectiveness of
Advanced Medical Isotope Corporation’s internal control over financial reporting
as of December 31, 2008 and 2007, and, accordingly, we do not express an opinion
thereon.
 
 
 /s/  HJ &
Associates, LLC
 HJ &
Associates, LLC
 Salt Lake
City, Utah
 March 30,
2009


F-2






Advanced
      Medical Isotope Corporation(A
      Development Stage Company)Balance
      SheetsASSETSDecember
      31,
                                                                                
                                                                                
                                                                                December
      31,2008
                                                                                
                                                                                
                                                                                2007Current
      Assets:Cash
      and cash equivalents
                                                                                
                                                                                $
                                                                                86,631
                                                                                
                                                                                
                                                                                $
                                                                                54,508Accounts
      receivable
                                                                                
                                                                                
                                                                                35,747
                                                                                
                                                                                
                                                                                
                                                                                12,000Prepaid
      expenses
                                                                                
                                                                                
                                                                                3,000
                                                                                
                                                                                
                                                                                
                                                                                -Prepaid
      expenses paid with stock, current portion
                                                                                
                                                                                
                                                                                140,579
                                                                                
                                                                                
                                                                                
                                                                                239,250Inventory
                                                                                
                                                                                
                                                                                7,100
                                                                                
                                                                                
                                                                                
                                                                                28,400Total
      current assets
                                                                                
                                                                                
                                                                                273,057
                                                                                
                                                                                
                                                                                
                                                                                334,158Fixed
      assets, net of accumulated depreciation
                                                                                
                                                                                
                                                                                2,272,784
                                                                                
                                                                                
                                                                                
                                                                                875,044Other
      assets:License
      fees, net of amortization
                                                                                
                                                                                
                                                                                27,083
                                                                                
                                                                                
                                                                                
                                                                                1,661,875Intangible
      assets, net of amortization
                                                                                
                                                                                
                                                                                -
                                                                                
                                                                                
                                                                                
                                                                                511,701Patents
                                                                                
                                                                                
                                                                                24,594
                                                                                
                                                                                
                                                                                
                                                                                -Prepaid
      expenses paid with stock, long-term portion
                                                                                
                                                                                
                                                                                96,875
                                                                                
                                                                                
                                                                                
                                                                                161,563Deposits
                                                                                
                                                                                
                                                                                155,406
                                                                                
                                                                                
                                                                                
                                                                                5,928Total
      other assets
                                                                                
                                                                                
                                                                                303,958
                                                                                
                                                                                
                                                                                
                                                                                2,341,067Total
      assets
                                                                                
                                                                                $
                                                                                2,849,799
                                                                                
                                                                                
                                                                                $
                                                                                3,550,269LIABILITIES
      AND SHAREHOLDERS’ EQUITY (DEFICIT)Current
      liabilities:Accounts
      payable
                                                                                
                                                                                $
                                                                                580,258
                                                                                
                                                                                
                                                                                $
                                                                                180,488Accrued
      interest payable
                                                                                
                                                                                
                                                                                188,956
                                                                                
                                                                                
                                                                                
                                                                                171,628Payroll
      liabilities payable
                                                                                
                                                                                
                                                                                9,098
                                                                                
                                                                                
                                                                                
                                                                                45,163Preferred
      stock redeemable as common
                                                                                
                                                                                
                                                                                3,182,405
                                                                                
                                                                                
                                                                                
                                                                                3,182,405Line
      of credit
                                                                                
                                                                                
                                                                                -
                                                                                
                                                                                
                                                                                
                                                                                40,908Loan
      from shareholder
                                                                                
                                                                                
                                                                                194,599
                                                                                
                                                                                
                                                                                
                                                                                -Convertible
      notes payable
                                                                                
                                                                                
                                                                                257,481
                                                                                
                                                                                
                                                                                
                                                                                -Current
      portion of capital lease obligations
                                                                                
                                                                                
                                                                                352,119
                                                                                
                                                                                
                                                                                
                                                                                86,983Total
      current liabilities
                                                                                
                                                                                
                                                                                4,764,916
                                                                                
                                                                                
                                                                                
                                                                                3,707,575Long
      term liabilities:Capital
      lease obligations, net of current portion
                                                                                
                                                                                
                                                                                1,786,734
                                                                                
                                                                                
                                                                                
                                                                                581,630Total
      liabilities
                                                                                
                                                                                
                                                                                6,551,650
                                                                                
                                                                                
                                                                                
                                                                                4,289,205Shareholders’
      Equity (Deficit):Preferred
      stock, $.001 par value; 100,000 authorized;95,000
      and 95,000 shares issued and outstanding, respectively
                                                                                
                                                                                
                                                                                95
                                                                                
                                                                                
                                                                                
                                                                                95Common
      stock, $.001 par value; 100,000,000 shares authorized;36,778,611
      and 31,664,631  shares issued and outstanding,respectively
                                                                                
                                                                                
                                                                                36,779
                                                                                
                                                                                
                                                                                
                                                                                31,655Paid
      in capital
                                                                                
                                                                                
                                                                                9,546,087
                                                                                
                                                                                
                                                                                
                                                                                6,152,861Common
      stock subscriptions
                                                                                
                                                                                
                                                                                -
                                                                                
                                                                                
                                                                                
                                                                                202,500Accumulated
      deficit prior to the development stage
                                                                                
                                                                                
                                                                                (2,884,043
                                                                                )
                                                                                
                                                                                
                                                                                (2,884,043
                                                                                )Deficit
      accumulated during the development stage
                                                                                
                                                                                
                                                                                (10,400,769
                                                                                )
                                                                                
                                                                                
                                                                                (4,242,014
                                                                                )Total
      shareholders’ equity (deficit)
                                                                                
                                                                                
                                                                                (3,701,851
                                                                                )
                                                                                
                                                                                
                                                                                (738,936
                                                                                )Total
      liabilities and shareholders’ equity (deficit)
                                                                                
                                                                                $
                                                                                2,849,799
                                                                                
                                                                                
                                                                                $
                                                                                3,550,269





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


F-3


Advanced
Medical Isotope Corporation


(A
Development Stage Company)


Statements
of Operations




From
      inception ofdevelopment
      stageYears
      ended
                                                                              
                                                                              
                                                                              on
      January 1, 2006December
      31,
                                                                              
                                                                              
                                                                              through
      December2008
                                                                              
                                                                              
                                                                              2007
                                                                              
                                                                              
                                                                              31,
      2008Revenues
                                                                              
                                                                              $
                                                                              268,242
                                                                              
                                                                              
                                                                              $
                                                                              130,055
                                                                              
                                                                              
                                                                              $
                                                                              398,297Cost
      of goods sold
                                                                              
                                                                              
                                                                              155,457
                                                                              
                                                                              
                                                                              
                                                                              55,841
                                                                              
                                                                              
                                                                              
                                                                              211,298Gross
      profit
                                                                              
                                                                              
                                                                              112,785
                                                                              
                                                                              
                                                                              
                                                                              74,214
                                                                              
                                                                              
                                                                              
                                                                              186,999Operating
      expensesSales
      and marketing expenses
                                                                              
                                                                              
                                                                              39,348
                                                                              
                                                                              
                                                                              
                                                                              2,385
                                                                              
                                                                              
                                                                              
                                                                              51,733Start
      up costs
                                                                              
                                                                              
                                                                              -
                                                                              
                                                                              
                                                                              
                                                                              -
                                                                              
                                                                              
                                                                              
                                                                              62,510Amortization
      expense
                                                                              
                                                                              
                                                                              1,531,214
                                                                              
                                                                              
                                                                              
                                                                              1,135,841
                                                                              
                                                                              
                                                                              
                                                                              2,989,013Impairment
      expense
                                                                              
                                                                              
                                                                              903,535
                                                                              
                                                                              
                                                                              
                                                                              -
                                                                              
                                                                              
                                                                              
                                                                              903,535Professional
      fees
                                                                              
                                                                              
                                                                              1,281,557
                                                                              
                                                                              
                                                                              
                                                                              607,379
                                                                              
                                                                              
                                                                              
                                                                              2,468,144Stock
      options granted
                                                                              
                                                                              
                                                                              1,211,392
                                                                              
                                                                              
                                                                              
                                                                              592,447
                                                                              
                                                                              
                                                                              
                                                                              1,943,839Payroll
      expenses
                                                                              
                                                                              
                                                                              574,228
                                                                              
                                                                              
                                                                              
                                                                              197,557
                                                                              
                                                                              
                                                                              
                                                                              771,785General
      and administrative expenses
                                                                              
                                                                              
                                                                              510,813
                                                                              
                                                                              
                                                                              
                                                                              129,012
                                                                              
                                                                              
                                                                              
                                                                              747,750Total
      operating expenses
                                                                              
                                                                              
                                                                              6,052,087
                                                                              
                                                                              
                                                                              
                                                                              2,664,621
                                                                              
                                                                              
                                                                              
                                                                              9,938,310Operating
      loss
                                                                              
                                                                              
                                                                              (5,939,302
                                                                              )
                                                                              
                                                                              
                                                                              (2,590,407
                                                                              )
                                                                              
                                                                              
                                                                              (9,751,311
                                                                              )Non-operating
      income (expense):Interest
      expense
                                                                              
                                                                              
                                                                              (219,453
                                                                              )
                                                                              
                                                                              
                                                                              (238,984
                                                                              )
                                                                              
                                                                              
                                                                              (551,958
                                                                              )Investment
      loss
                                                                              
                                                                              
                                                                              -
                                                                              
                                                                              
                                                                              
                                                                              -
                                                                              
                                                                              
                                                                              
                                                                              (28,500
                                                                              )Loss
      on conversion of shareholder loan
                                                                              
                                                                              
                                                                              -
                                                                              
                                                                              
                                                                              
                                                                              (40,000
                                                                              )
                                                                              
                                                                              
                                                                              (69,000
                                                                              )Non-operating
      income(expense),
      net
                                                                              
                                                                              
                                                                              (219,453
                                                                              )
                                                                              
                                                                              
                                                                              (278,984
                                                                              )
                                                                              
                                                                              
                                                                              (649,458
                                                                              )Loss
      before Income Taxes
                                                                              
                                                                              
                                                                              (6,158,755
                                                                              )
                                                                              
                                                                              
                                                                              (2,869,391
                                                                              )
                                                                              
                                                                              
                                                                              (10,400,769
                                                                              )Income
      Tax Provision
                                                                              
                                                                              
                                                                              -
                                                                              
                                                                              
                                                                              
                                                                              -
                                                                              
                                                                              
                                                                              
                                                                              -Net
      loss
                                                                              
                                                                              
                                                                              (6,158,755
                                                                              )
                                                                              
                                                                              $
                                                                              (2,869,391
                                                                              )
                                                                              
                                                                              $
                                                                              (10,400,769
                                                                              )Loss
      per common share
                                                                              
                                                                              $
                                                                              (0.18
                                                                              )
                                                                              
                                                                              $
                                                                              (0.10
                                                                              )Weighted
      average common sharesoutstanding
                                                                              
                                                                              
                                                                              34,745,710
                                                                              
                                                                              
                                                                              
                                                                              28,744,391




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










F-4


Advanced
Medical Isotope Corporation


(A
Development Stage Company)


Statements
of Changes in Shareholders’ Equity (Deficit)




DeficitAccumulatedSeries
      A Preferred
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  duringStock
                                  
                                  
                                  Common
      Stock
                                  
                                  
                                  Paid
      in
                                  
                                  
                                  Subscriptions
                                  
                                  
                                  Accumulated
                                  
                                  
                                  developmentShares
                                  
                                  
                                  Amount
                                  
                                  
                                  Shares
                                  
                                  
                                  Amount
                                  
                                  
                                  Capital
                                  
                                  
                                  Receivable
                                  
                                  
                                  Deficit
                                  
                                  
                                  Stage
                                  
                                  
                                  TotalBalances
      at December 31,2005,
      prior to inception ofdevelopment
      stagecompany
                                  
                                  
                                  -
                                  
                                  
                                  $
                                  -
                                  
                                  
                                  
                                  23,237,045
                                  
                                  
                                  $
                                  23,237
                                  
                                  
                                  $
                                  2,830,806
                                  
                                  
                                  $
                                  30,000
                                  
                                  
                                  $
                                  (2,884,043
                                  )
                                  
                                  $
                                  -
                                  
                                  
                                  $
                                  -Common
      stock issued for:Services
      as of May 15, 2006($.20
      per share)
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  600,000
                                  
                                  
                                  
                                  600
                                  
                                  
                                  
                                  119,400
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  120,000Compensation
      as of August 15,2006
      ($.18 per share)
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  1,500,000
                                  
                                  
                                  
                                  1,500
                                  
                                  
                                  
                                  268,500
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  270,000Services
      September 1, 2006($.18
      per share)
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  250,000
                                  
                                  
                                  
                                  250
                                  
                                  
                                  
                                  44,750
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  45,000Debt
      settlement October 10,2006
      ($.18 per share)
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  300,000
                                  
                                  
                                  
                                  300
                                  
                                  
                                  
                                  53,700
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  54,000Compensation
      as ofSeptember
      1, 2006($.18
      per share)
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  500,000
                                  
                                  
                                  
                                  500
                                  
                                  
                                  
                                  89,500
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  90,000Issuance
      of common stockoptions
      August andSeptember
      2006 pursuantto
      exercise of options
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  140,000
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  140,000Issuance
      of sharesDecember
      6, 2006 for cashreceived
      in 1999
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  150,000
                                  
                                  
                                  
                                  150
                                  
                                  
                                  
                                  29,850
                                  
                                  
                                  
                                  (30,000
                                  )
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -Issuance
      of preferred sharesSeptember
      22, 2006 foracquisition
      of licensefees
                                  
                                  
                                  100,000
                                  
                                  
                                  
                                  100
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  100Net
      loss
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (1,372,623
                                  )
                                  
                                  
                                  (1,372,623
                                  )Balances
      at December 31,2006
                                  
                                  
                                  100,000
                                  
                                  
                                  
                                  100
                                  
                                  
                                  
                                  26,537,045
                                  
                                  
                                  
                                  26,537
                                  
                                  
                                  
                                  3,576,506
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (2,884,043
                                  )
                                  
                                  
                                  (1,372,623
                                  )
                                  
                                  
                                  (653,523
                                  )Common
      stock issued for:Patent
      license as ofFebruary
      2007 ($.30per
      share)
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  250,000
                                  
                                  
                                  
                                  250
                                  
                                  
                                  
                                  74,750
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  $
                                  75,000Services
      March 2007($.87
      per share)
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  250,000
                                  
                                  
                                  
                                  250
                                  
                                  
                                  
                                  217,250
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  $
                                  217,500Cash
      April 2007($.71
      per share)
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  112,277
                                  
                                  
                                  
                                  112
                                  
                                  
                                  
                                  79,605
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  $
                                  79,717Options
      exercised May2007
      ($.07 per share)
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  250,000
                                  
                                  
                                  
                                  250
                                  
                                  
                                  
                                  17,250
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  $
                                  17,500Debt
      April 2007 ($.75per
      share
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  160,000
                                  
                                  
                                  
                                  160
                                  
                                  
                                  
                                  119,840
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  $
                                  120,000Cash
      June 2007 ($.40per
      share)
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  2,125,000
                                  
                                  
                                  
                                  2,125
                                  
                                  
                                  
                                  847,875
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  850,000Prepaid
      rent August 2007($.45
      per share)
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  416,667
                                  
                                  
                                  
                                  417
                                  
                                  
                                  
                                  187,083
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  187,500Services
      September 2007($.82
      per share)
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  100,000
                                  
                                  
                                  
                                  100
                                  
                                  
                                  
                                  81,900
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  82,000




F-5
  Statements of Changes in
Shareholders’ Equity (Deficit) -
continued
  DeficitAccumulatedSeries
      A Preferred
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            duringStock
                                                            
                                                            
                                                            Common
      Stock
                                                            
                                                            
                                                            Paid
      in
                                                            
                                                            
                                                            Subscriptions
                                                            
                                                            
                                                            Accumulated
                                                            
                                                            
                                                            developmentShares
                                                            
                                                            
                                                            Amount
                                                            
                                                            
                                                            Shares
                                                            
                                                            
                                                            Amount
                                                            
                                                            
                                                            Capital
                                                            
                                                            
                                                            Receivable
                                                            
                                                            
                                                            Deficit
                                                            
                                                            
                                                            Stage
                                                            
                                                            
                                                            TotalServices
      November 2007($.74
      per share)
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            117,000
                                                            
                                                            
                                                            
                                                            117
                                                            
                                                            
                                                            
                                                            86,463
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            86,580Services
      November 2007($.75
      per share)
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            15,000
                                                            
                                                            
                                                            
                                                            15
                                                            
                                                            
                                                            
                                                            11,235
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            11,250Services
      December 2007($.75
      per share)
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            25,000
                                                            
                                                            
                                                            
                                                            25
                                                            
                                                            
                                                            
                                                            18,725
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            18,750Options
      exercised December2007
      ($.07 per share)
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            1,000,000
                                                            
                                                            
                                                            
                                                            1,000
                                                            
                                                            
                                                            
                                                            69,000
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            70,000Services
      December 2007($.82
      per share)
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            7,000
                                                            
                                                            
                                                            
                                                            7
                                                            
                                                            
                                                            
                                                            5,733
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            5,740Convert
      5,000 convertiblepreferred
      shares ($.559per
      share)
                                                            
                                                            
                                                            (5,000
                                                            )
                                                            
                                                            
                                                            (5
                                                            )
                                                            
                                                            
                                                            299,642
                                                            
                                                            
                                                            
                                                            300
                                                            
                                                            
                                                            
                                                            167,200
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            167,495Cash
      received July 2007 forshares
      issued in 2008
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            10,000
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            10,000Cash
      received August 2007for
      shares issued in 2008
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            20,000
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            20,000Cash
      received September2007
      for shares issued in2008
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            17,500
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            17,500Cash
      received November2007
      for shares issued in2008
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            150,000
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            150,000Cash
      received December2007
      for shares issued in2008
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            5,000
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            5,000Granting
      of common stockoptions
      December 2007
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            592,446
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            592,446Net
      loss
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            (2,869,391
                                                            )
                                                            
                                                            
                                                            (2,869,391
                                                            )Balances
      at December 31,2007
                                                            
                                                            
                                                            95,000
                                                            
                                                            
                                                            
                                                            95
                                                            
                                                            
                                                            
                                                            31,664,631
                                                            
                                                            
                                                            
                                                            31,665
                                                            
                                                            
                                                            
                                                            6,152,861
                                                            
                                                            
                                                            
                                                            202,500
                                                            
                                                            
                                                            
                                                            (2,884,043
                                                            )
                                                            
                                                            
                                                            (4,242,014
                                                            )
                                                            
                                                            
                                                            (738,936
                                                            )Common
      stock issued for:Cash
      January 2008 ($.40per
      share)
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            137,500
                                                            
                                                            
                                                            
                                                            137
                                                            
                                                            
                                                            
                                                            54,863
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            55,000Options
      exercised 2008($.29
      per share)
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            250,000
                                                            
                                                            
                                                            
                                                            250
                                                            
                                                            
                                                            
                                                            72,250
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            72,500Cash
      February 2008($.40
      per share)
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            950,000
                                                            
                                                            
                                                            
                                                            950
                                                            
                                                            
                                                            
                                                            379,050
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            380,000Services
      March 2008($.78
      per share)
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            299,642
                                                            
                                                            
                                                            
                                                            299
                                                            
                                                            
                                                            
                                                            233,421
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            233,720Cash
      March 2008($.40
      per share)
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            550,700
                                                            
                                                            
                                                            
                                                            551
                                                            
                                                            
                                                            
                                                            219,729
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            220,280Services
      April 2008($.75
      per share)
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            310,000
                                                            
                                                            
                                                            
                                                            310
                                                            
                                                            
                                                            
                                                            232,190
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            232,500Services
      July 2008($.63
      per share)
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            3,818
                                                            
                                                            
                                                            
                                                            4
                                                            
                                                            
                                                            
                                                            2,401
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            2,405Cash
      July 2008 ($.40per
      share
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            250,000
                                                            
                                                            
                                                            
                                                            250
                                                            
                                                            
                                                            
                                                            99,750
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            100,000Cash
      August 2008($.40
      per share)
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            150,000
                                                            
                                                            
                                                            
                                                            150
                                                            
                                                            
                                                            
                                                            59,850
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            60,000Loan
      fee September 2008($.55
      per share)
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            100,000
                                                            
                                                            
                                                            
                                                            100
                                                            
                                                            
                                                            
                                                            54,588
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            54,688
   F-6
  Statements
of Changes in Shareholders’ Equity (Deficit)-
continued
  DeficitAccumulatedSeries
      A Preferred
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          duringStock
                                                          
                                                          
                                                          Common
      Stock
                                                          
                                                          
                                                          Paid
      in
                                                          
                                                          
                                                          Subscriptions
                                                          
                                                          
                                                          Accumulated
                                                          
                                                          
                                                          developmentShares
                                                          
                                                          
                                                          Amount
                                                          
                                                          
                                                          Shares
                                                          
                                                          
                                                          Amount
                                                          
                                                          
                                                          Capital
                                                          
                                                          
                                                          Receivable
                                                          
                                                          
                                                          Deficit
                                                          
                                                          
                                                          Stage
                                                          
                                                          
                                                          TotalServices
      October 2008($.53
      per share)
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          87,900
                                                          
                                                          
                                                          
                                                          88
                                                          
                                                          
                                                          
                                                          46,499
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          46,587Services
      October 2008($.58
      per share)
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          35,000
                                                          
                                                          
                                                          
                                                          35
                                                          
                                                          
                                                          
                                                          20,265
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          20,300Loan
      fee November 2008($.43
      per share)
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          20,000
                                                          
                                                          
                                                          
                                                          20
                                                          
                                                          
                                                          
                                                          8,726
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          8,746Options
      exercised November2008
      ($.17 per share)
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          129,765
                                                          
                                                          
                                                          
                                                          130
                                                          
                                                          
                                                          
                                                          21,930
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          22,060Services
      November 2008($.45
      per share)
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          35,000
                                                          
                                                          
                                                          
                                                          35
                                                          
                                                          
                                                          
                                                          15,715
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          15,750Services
      November 2008($.51
      per share)
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          375,000
                                                          
                                                          
                                                          
                                                          375
                                                          
                                                          
                                                          
                                                          190,875
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          191,250Cash
      November 2008($.30
      per share)
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          333,333
                                                          
                                                          
                                                          
                                                          333
                                                          
                                                          
                                                          
                                                          99,667
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          100,000Services
      December 2008($.33
      per share)
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          27,573
                                                          
                                                          
                                                          
                                                          28
                                                          
                                                          
                                                          
                                                          9,072
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          9,099Loan
      fee December 2008($.31
      per share)
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          150,000
                                                          
                                                          
                                                          
                                                          150
                                                          
                                                          
                                                          
                                                          45,903
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          46,053Issuance
      of shares February,2008
      for cash receivedin
      2007
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          825,893
                                                          
                                                          
                                                          
                                                          826
                                                          
                                                          
                                                          
                                                          184,862
                                                          
                                                          
                                                          
                                                          (185,688
                                                          )
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -Stock
      offering costs March,2008
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          (233,720
                                                          )
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          (233,720
                                                          )Issuance
      of shares April,2008
      for cash receivedin
      2007
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          92,856
                                                          
                                                          
                                                          
                                                          93
                                                          
                                                          
                                                          
                                                          16,719
                                                          
                                                          
                                                          
                                                          (16,812
                                                          )
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -Granting
      of stock optionsJune
      2008
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          753,140
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          753,140Granting
      of stock optionsSeptember
      2008
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          127,086
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          127,086Granting
      of stock optionsDecember
      2008
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          331,166
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          331,166Intrinsic
      value of convertibledebt
      issued October 2008
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          24,996
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          24,996Intrinsic
      value of convertibledebt
      issued November 2008
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          322,234
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          322,234Net
      Loss
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          (6,158,755
                                                          )
                                                          
                                                          
                                                          (6,158,755
                                                          )Balances
      at December 31,2008
                                                          
                                                          
                                                          95,000
                                                          
                                                          
                                                          $
                                                          95
                                                          
                                                          
                                                          
                                                          36,778,611
                                                          
                                                          
                                                          $
                                                          36,778
                                                          
                                                          
                                                          $
                                                          9,546,088
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          $
                                                          (2,884,043
                                                          )
                                                          
                                                          $
                                                          (10,400,769
                                                          )
                                                          
                                                          $
                                                          (3,701,851)
  The
accompanying notes are an integral part of these financial
statements.






F-7




Advanced
Medical Isotope Corporation


(A
Development Stage Company)


Statements
of Cash Flow




From
      inception ofdevelopment
      stage onYear
      ended
                                            
                                            
                                            Year
      ended
                                            
                                            
                                            January
      1, 2006 throughDecember 31, 2008
                                            
                                            
                                            December 31, 2007
                                            
                                            
                                            December 31, 2008CASH
      FLOW FROM OPERATING ACTIVITIES:Net
      Loss
                                            
                                            $
                                            (6,158,755
                                            )
                                            
                                            $
                                            (2,869,391
                                            )
                                            
                                            $
                                            (10,400,769
                                            )Adjustments
      to reconcile net loss to net cashused
      by operating activities:Depreciation
      of fixed assets
                                            
                                            
                                            288,256
                                            
                                            
                                            
                                            22,313
                                            
                                            
                                            
                                            310,569Amortization
      of licenses and intangible assets
                                            
                                            
                                            1,242,958
                                            
                                            
                                            
                                            1,135,841
                                            
                                            
                                            
                                            2,700,757Amortization
      of prepaid expense paid with stock
                                            
                                            
                                            208,609
                                            
                                            
                                            
                                            247,688
                                            
                                            
                                            
                                            533,797Amortization
      of debt discount
                                            
                                            
                                            39,198
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            39,198Impairment
      of intangible assets
                                            
                                            
                                            903,535
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            903,535Common
      stock issued for services
                                            
                                            
                                            1,211,392
                                            
                                            
                                            
                                            118,320
                                            
                                            
                                            
                                            1,743,712Stock
      options issued for services
                                            
                                            
                                            347,422
                                            
                                            
                                            
                                            592,447
                                            
                                            
                                            
                                            1,079,869Stock
      issued for repairs and maintenance
                                            
                                            
                                            7,875
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            7,875Loss
      on conversion of shareholder loan
                                            
                                            
                                            -
                                            
                                            
                                            
                                            40,000
                                            
                                            
                                            
                                            40,000Changes
      in operating assets and liabilities:Accounts
      receivable
                                            
                                            
                                            (23,747
                                            )
                                            
                                            
                                            (12,000
                                            )
                                            
                                            
                                            (35,747
                                            )Inventory
                                            
                                            
                                            21,300
                                            
                                            
                                            
                                            (28,400
                                            )
                                            
                                            
                                            (7,100
                                            )Prepaid
      expenses
                                            
                                            
                                            (3,000
                                            )
                                            
                                            
                                            -
                                            
                                            
                                            
                                            (3,000
                                            )Deposits
                                            
                                            
                                            (149,478
                                            )
                                            
                                            
                                            (5,930
                                            )
                                            
                                            
                                            (155,408
                                            )Accounts
      payable
                                            
                                            
                                            326,530
                                            
                                            
                                            
                                            180,489
                                            
                                            
                                            
                                            507,019Payroll
      liabilities
                                            
                                            
                                            (36,065
                                            )
                                            
                                            
                                            45,163
                                            
                                            
                                            
                                            9,098Stock
      based consulting fees payable
                                            
                                            
                                            212,644
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            212,644Accrued
      interest
                                            
                                            
                                            17,328
                                            
                                            
                                            
                                            125,565
                                            
                                            
                                            
                                            188,956Accrued
      interest (rolled into notes payable)
                                            
                                            
                                            -
                                            
                                            
                                            
                                            94,917
                                            
                                            
                                            
                                            142,375Net
      cash used by operating activities
                                            
                                            
                                            (1,543,998
                                            )
                                            
                                            
                                            (312,978
                                            )
                                            
                                            
                                            (2,182,620
                                            )CASH
      FLOWS FROM INVESTING ACTIVITIES:Cash
      acquired from investment
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            310,000Cash
      used to acquire equipment
                                            
                                            
                                            (1,685,996
                                            )
                                            
                                            
                                            (897,357
                                            )
                                            
                                            
                                            (2,583,353
                                            )Cash
      used to acquire patents
                                            
                                            
                                            (24,594
                                            )
                                            
                                            
                                            -
                                            
                                            
                                            
                                            (24,594
                                            )Cash
      used to acquire intangible assets
                                            
                                            
                                            -
                                            
                                            
                                            
                                            (658,750
                                            )
                                            
                                            
                                            (658,750
                                            )Net
      cash provided by investing activities
                                            
                                            
                                            (1,710,590
                                            )
                                            
                                            
                                            (1,556,107
                                            )
                                            
                                            
                                            (2,956,697
                                            )CASH
      FLOWS FROM FINANCING ACTIVITIES:Proceeds
      received from bank line of credit
                                            
                                            
                                            179,000
                                            
                                            
                                            
                                            40,908
                                            
                                            
                                            
                                            219,908Payments
      on line of credit
                                            
                                            
                                            (219,908
                                            )
                                            
                                            
                                            -
                                            
                                            
                                            
                                            (219,908
                                            )Proceeds
      from Washington Trust debt
                                            
                                            
                                            199,908
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            199,908Payments
      on Washington Trust debt
                                            
                                            
                                            (5,309
                                            )
                                            
                                            
                                            -
                                            
                                            
                                            
                                            (5,309
                                            )Proceeds
      from convertible debt
                                            
                                            
                                            218,283
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            218,283Proceeds
      from officers related party debt
                                            
                                            
                                            48,000
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            48,000Payments
      on officer related party debt
                                            
                                            
                                            (48,000
                                            )
                                            
                                            
                                            -
                                            
                                            
                                            
                                            (48,000
                                            )Proceeds
      from capital lease
                                            
                                            
                                            1,748,142
                                            
                                            
                                            
                                            697,014
                                            
                                            
                                            
                                            2,445,156Principal
      payments on capital lease
                                            
                                            
                                            (277,902
                                            )
                                            
                                            
                                            (28,401
                                            )
                                            
                                            
                                            (306,303
                                            )Proceeds
      received from shareholder loan
                                            
                                            
                                            -
                                            
                                            
                                            
                                            50,000
                                            
                                            
                                            
                                            80,000Proceeds
      from cash sales of common shares
                                            
                                            
                                            1,371,997
                                            
                                            
                                            
                                            894,716
                                            
                                            
                                            
                                            2,266,713Proceeds
      from exercise of options and warrants
                                            
                                            
                                            72,500
                                            
                                            
                                            
                                            52,500
                                            
                                            
                                            
                                            125,000Proceeds
      from subscription shares payable
                                            
                                            
                                            -
                                            
                                            
                                            
                                            202,500
                                            
                                            
                                            
                                            202,500Net
      cash provided by financing activities
                                            
                                            
                                            3,286,711
                                            
                                            
                                            
                                            1,909,237
                                            
                                            
                                            
                                            5,225,948Net
      increase in cash and cash equivalents
                                            
                                            
                                            32,123
                                            
                                            
                                            
                                            40,152
                                            
                                            
                                            
                                            86,631Cash
      and cash equivalents, beginning of period
                                            
                                            
                                            54,508
                                            
                                            
                                            
                                            14,356
                                            
                                            
                                            
                                            -CASH
      AND CASH EQUIVALENTS, END OF PERIOD
                                            
                                            $
                                            86,631
                                            
                                            
                                            $
                                            54,508
                                            
                                            
                                            $
                                            86,631Supplemental
      disclosures of cash flow information:Cash
      paid for interest
                                            
                                            $
                                            25,772
                                            
                                            
                                            $
                                            18,502
                                            
                                            
                                            $
                                            44,274Cash
      paid for income taxes
                                            
                                            $
                                            -
                                            
                                            
                                            $
                                            -
                                            
                                            
                                            $
                                            -




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




F-8
 Advanced
Medical Isotope Corporation
 (A Development Stage
Company)
 Notes
to Consolidated Financial Statements
 For
the years ended December 31, 2008 and 2007


NOTE
1:                      NATURE
OF ORGANIZATION





Nature
of Organization





Advanced
Medical Isotope Corporation (the “Company” or “AMIC”) 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. The
Company has had limited activity since inception and was considered dormant from
the period May 1, 2000 through December 31, 2005. On September 6, 2006, the
Company changed its name to Advanced Medical Isotope Corporation. AMIC has an
authorized capital of 100,000,000 shares of Common Stock, $.001 par value per
share and 100,000 of Series A Preferred Stock, $.001 par value per share. The
Company is considered a development stage company in accordance with Statement
of Financial Accounting Standard (“SFAS”) No. 7 for its operations beginning
January 1, 2006. The company has had no significant revenues and planned
principal operations have not yet commenced. The Company plans to wholesale
medical isotopes as well as to develop, produce, and market medical
isotopes.





Savage
Mountain Sports Corporation mergers





In April
2000, Earth Sports Products, Inc (“ESP”), a corporation registered in
Washington, merged with SMSC. ESP had an authorized capital of 100,000,000
shares of Common Stock, $.001 par value per share. As of the date of the merger,
ESP had 3,377,206 shares of Common Stock issued and outstanding. As of the date
of the merger, SMSC had 1,000 shares of Common Stock issued and outstanding, all
of which were held by HHH Entertainment, Inc (“HHH”), a Nevada
corporation.





In April
2000, HHH merged with SMSC. On the date of the merger, HHH had authorized
capital stock of 100,000,000 shares of Common Stock, $.001 par value per share.
As of the date of the merger, HHH had 23,237,045 shares of Common Stock issued
and outstanding.





Going
Concern





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





We
anticipate a requirement of $3 million in funds over the next twelve months to
maintain current operation activities. In addition we anticipate a requirement
of approximately $7 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 approximately $86,631
cash on hand which means there will be an anticipated shortfall of nearly the
full $10 million requirement in additional funds over the next twelve months.
There are currently commitments to vendors for products and services purchased,
plus, the employment agreements of the CFO and other employees of the company
and 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.




F-9
 Advanced
Medical Isotope Corporation
 (A Development Stage
Company)
 Notes
to Consolidated Financial Statements
 For
the years ended December 31, 2008 and 2007




NOTE
1:                      NATURE
OF ORGANIZATION-
continued




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.







NOTE
2:                      SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES





Use
of estimates





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





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-off’s, 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 December 31, 2008, the Company has experienced no bad
debt write offs from operations.








F-10
 Advanced
Medical Isotope Corporation
 (A Development Stage
Company)
 Notes
to Consolidated Financial Statements
 For
the years ended December 31, 2008 and
2007


NOTE
2:                      SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES-
continued





Related
Party Note Receivable





The
Company, in 2006, advanced funds on behalf of Mirari (a Washington corporation,
and an affiliate under common control) for rent and administrative costs in the
amount of $33,000. This balance was written off as bad debt in 2006. It is
management’s intention to acquire all the assets and common stock of Mirari
during the year 2009.





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 yearsOffice
      equipment
                  2
      to 5 yearsFurniture
      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.





The
Company has adopted the provisions of Statement of Accounting Standards (SFAS)
No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. The provisions of SFAS No.
144 require that an impairment loss be recognized when the estimated future cash
flows (undiscounted and without interest) expected to result from the use of an
asset are less than the carrying amount of the asset. Measurement of an
impairment loss is based on the estimated fair value of the asset if the asset
is expected to be held and used.





Management
of the Company reviews the net carrying value of all of its equipment on an
asset by asset basis whenever events or changes in circumstances indicate that
its carrying amount may not be recoverable. These reviews consider the net
realizable value of each asset, as measured in accordance with the preceding
paragraph, to determine whether impairment in value has occurred, and the need
for any asset impairment write-down.




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




·
              A
      significant decrease in the market price of a live-lived
      asset.
 ·
              A
      significant adverse change in the extent or manner in which a long-lived
      asset is being used or in its physical
  condition.
 ·
              A
      significant adverse change in legal factors or in the business climate
      that could affect the value of a long-lived asset, including an adverse
      action or assessment by a
regulator.
 ·
              An
      accumulation of costs significantly in excess of the amount originally
      expected for the acquisition or construction of a long-lived
      asset.
 ·
              A
      current period operating or cash flow loss combined with a history of
      operating or cash flow losses or a projection or forecast that
      demonstrates continuing losses associated with the use of a long-lived
      asset.
 ·
              A
      current expectation that, more likely than not, a long-lived asset will be
      sold or otherwise disposed of significantly before the end of its
      previously estimated useful life.
 
 The fair
value of assets is first determined by quoted market prices, if available.
Otherwise, the estimate of fair value is based on the best information available
in the circumstances, including prices for similar assets and the results of
using other valuation techniques. If quoted market prices are not available a
present value technique is often the best available valuation technique with
which to estimate fair value. Two present value techniques, expected present
value and traditional present value, are provided for in SFAS No. 144. 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.







F-11
 Advanced
Medical Isotope Corporation
 (A Development Stage
Company)
 Notes
to Consolidated Financial Statements
 For
the years ended December 31, 2008 and 2007


NOTE
2:                      SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES-
continued





Investments





The
Company purchased from a nonrelated individual the interest in a related
company, Mirari, for $28,500. This investment was written off in 2006. The
Company intends to acquire all the assets and common stock of Mirari during the
year 2009.





License
Fees





License
fees resulted from the acquisition of a patent license, for the production of
Actinium 225, from a related individual for common stock valued, at the time of
acquisition, at $75,000, and from the result of the acquisition of a patent
license, for a Neutron Generator, from Neu-Hope Technologies for preferred stock
valued, at the time of acquisition, at $3,040,000, discounted for 4.25%
incremental borrowing rate to $2,897,625. 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 in accordance with
SFAS No. 144 and any impairments are recognized when the expected future
operating cash flows to be derived from such assets are less than their carrying
value. In accordance with this policy, management concluded the patent license
for the Neutron Generator was no longer of value to the Company. This decision
resulted in the Company writing off the net unamortized portion balance of
$643,917 early.
 
 Amortization
is computed using the straight-line method over the estimated useful live of
three years. Amortization of license fees was $990,875 and $988,792 for the
years ended December 31, 2008 and 2007, respectively. Based on the license fees
recorded at December 31, 2008, and assuming no subsequent impairment of the
underlying assets, the annual amortization expense for each year ending December
31 is expected to be as follows: $25,000 for 2009, and $2,083 for
2010.





Intangible
Assets





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





The
Company has adopted the provisions of Statement of Accounting Standards (SFAS)
No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. The provisions of SFAS No.
144 require that an impairment loss be recognized when the estimated future cash
flows (undiscounted and without interest) expected to result from the use of an
asset are less than the carrying amount of the asset. Measurement of an
impairment loss is based on the estimated fair value of the asset if the asset
is expected to be held and used.




The
Company periodically reviews the net carrying values of intangible assets in
accordance with SFAS No. 144 and any impairments are recognized when the
expected future operating cash flows to be derived from such assets are less
than their carrying value. In accordance with this policy, management concluded
the intangible assets acquired from Isonics were no longer of value to the
Company. This decision resulted in the Company writing off the total net
unamortized portion balance of $259,618 early.










F-12
 Advanced
Medical Isotope Corporation
 (A Development Stage
Company)
 Notes
to Consolidated Financial Statements
 For
the years ended December 31, 2008 and 2007


NOTE
2:                      SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES-
continued





Amortization was
computed using the straight-line method over the following estimated useful
lives:




Intellectual
      property
                  3
      yearsContracts
      and agreements
                  3
      yearsCustomer
      lists
                  2
      years
 Amortization
of intangible assets was $252,083 and $147,049 for the years ended December 31,
2008 and 2007, respectively. All intangible assets were fully written off as of
December 31, 2008 and so no further amortization of intangible assets will be
recognized from these assets in ensuing years.
 
 Patents
 
 Patent
filing costs totaling $24,594 have been capitalized at December 31, 2008. 
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.  The Company evaluates
the recoverability of intangible assets, including patents on a continual basis
utilizing the guidance of SFAS 142, “Goodwill and Other Intangible
Assets”.  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 applies the provision of SEC Staff Accounting Board (“SAB”) No. 104,
Revenue Recognition.
SAB No. 104, which supersedes SAB No. 101, Revenue Recognition in Financial
Statements, provides guidance on the recognition, presentation and
disclosure of revenue in financial statements. SAB No. 104 outlines the basic
criteria that must be met to recognize revenue and provides guidance for the
disclosure of revenue recognition policies. The Company recognized revenue
related to product sales when (i) persuasive evidence of the arrangement exists,
(ii) shipment has occurred, (iii) the fee is fixed or determinable, and (iv)
collectability is reasonably assured.





Revenue
for the for the first half of fiscal year ended December 31, 2008 and all of the
fiscal year ended December 31, 2007 was derived solely from the sales of Oxygen
18, which is used in the production of medical isotopes. In July 2008 the
Company also began recognizing revenue from the production of Fluoride 18
produced with the Linear Accelerator. 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.





Net
loss per share





The
Company accounts for its income (loss) per common share according to SFAS No.
128, Earnings Per
Share. Under the provisions of SFAS No. 128, primary and fully diluted
earnings per share are replaced 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 December 31, 2008 and 2007 are as follows:




2008
                              
                              
                              2007Convertible
      debt
                              
                              
                              1,269,541
                              
                              
                              
                              -Preferred
      stock
                              
                              
                              7,577,381
                              
                              
                              
                              4,700,358Common
      stock options
                              
                              
                              5,609,021
                              
                              
                              
                              5,447,400Total
      potential dilutive securities
                              
                              
                              14,455,943
                              
                              
                              
                              10,147,758


F-13
 Advanced
Medical Isotope Corporation
 (A Development Stage
Company)
 Notes
to Consolidated Financial Statements
 For
the years ended December 31, 2008 and
2007
 NOTE
2:                      SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES-
continued




Research
and Development Costs




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





The
Company incurred $90,150 and $1,250 research and development costs for the years
ended December 31, 2008 and 2007 respectively.




Advertising
and Marketing Costs




Advertising
and marketing costs are expensed as incurred except for the cost of tradeshows
which are deferred until the tradeshow occurs. There were no tradeshow expenses
incurred and not expensed as of the years ended December 31, 2008 and
2007.





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.






F-14
 Advanced
Medical Isotope Corporation
 (A Development Stage
Company)
 Notes
to Consolidated Financial Statements
 For
the years ended December 31, 2008 and
2007
 NOTE
2:                      SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES-
continued




Income
taxes




In June
2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income
Taxes, an Interpretation of FASB Statement No. 109, Accounting for Income Taxes(FIN 48), to create a single model to address accounting for uncertainty
in tax positions. FIN 48 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. FIN 48 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 years ended December 31, 2008 and 2007.  The Company did not have any
deferred tax liability or asset on its balance sheet on December 31, 2008 and
2007.




The
Company adopted FIN 48 as of January 1, 2007, and the adoption did not have a
material impact to the Company's consolidated financial statements and did not
result in any unrecognized tax benefits. 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
consolidated financial statements. For the years ended December 31, 2008 and
2007, the Company did not recognize any interest or penalty expense related to
income taxes. The Company believes that it is not reasonably possible for the
amounts of unrecognized tax benefits to significantly increase or decrease
within the next 12 months.





Fair
value of financial instruments





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





Stock-based
compensation




Effective
January 1, 2006, the Company adopted SFAS No. 123 (Revised 2004),Share-Based Payment, which
requires that compensation related to all stock-based awards, including stock
options, be recognized in the financial statements based on their estimated
grant-date fair value. The Company has estimated expected forfeitures, as
required by SFAS No. 123R, and is recognizing compensation expense only for
those awards expected to vest. All compensation is recognized by the time the
award vests.





We
account for equity instruments issued in exchange for the receipt of goods or
services from non-employees in accordance with the consensus reached by the
Emerging Issues Task Force, or EITF, in Issue No. 96-18, Accounting for Equity Instruments
That Are Issued to Other Than Employees for Acquiring, or in Conjunction with
Selling, Goods or Services. 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.














F-15
 Advanced
Medical Isotope Corporation
 (A Development Stage
Company)
 Notes
to Consolidated Financial Statements
 For
the years ended December 31, 2008 and
2007
 NOTE
2:                      SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES-
continued





Recent
accounting pronouncements





In
September 2006, the FASB issued Statement No. 157, “Fair Value Measurements”
(“SFAS No. 157”). SFAS No. 157 addresses how companies should measure fair value
when they are required to use a fair value measure for recognition or disclosure
purposes under GAAP. SFAS No. 157 defines fair value, establishes a framework
for measuring fair value and expands the required disclosures about fair value
measurements. SFAS No. 157 is effective for fiscal years beginning after
November 15, 2007, with earlier adoption permitted. Management believes adoption
of SFAS No. 157 will not have a material impact on the Company’s financial
statements.





In
September 2006, the SEC issued Staff Accounting Bulletin No. 108,
Considering the Effects of
Prior Year Misstatements when Quantifying Misstatements in Current Year
Financial Statements, or SAB No. 108.  SAB No. 108
addresses how the effects of prior year uncorrected misstatements should be
considered when quantifying misstatements in current year financial statements.
SAB No. 108 requires companies to quantify misstatements using a balance sheet
and income statement approach and to evaluate whether either approach results in
quantifying an error that is material in light of relevant quantitative and
qualitative factors. When the effect of initial adoption is material, companies
will record the effect as
a cumulative effect adjustment to beginning of year retained earnings and
disclose the nature and amount of each individual error being corrected in the
cumulative adjustment. The adoption of SAB No. 108 did not have a material
impact on the Company’s financial statements.





In
February 2007, the FASB issued Statement No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities” (“SFAS No. 159”), an amendment of
FASB Statement No. 115. SFAS No. 159 addresses how companies should measure many
financial instruments and certain other items at fair value. The objective is to
mitigate volatility in reported earnings caused by measuring related assets and
liabilities differently without having to apply complex hedge accounting
provisions. SFAS No. 159 is effective for fiscal years beginning after November
15, 2007, with earlier adoption permitted. Management is assessing the impact of
the adoption of SFAS No. 159.







NOTE
3:                      FIXED
ASSETS





Fixed
assets consist of the following at December 31, 2008 and 2007:
 2008
                              
                              
                              2007Production
      equipment
                              
                              $
                              2,113,218
                              
                              
                              $
                              191,250Building
                              
                              
                              446,772
                              
                              
                              
                              -Office
      equipment
                              
                              
                              20,128
                              
                              
                              
                              -Leasehold
      improvements
                              
                              
                              3,235
                              
                              
                              
                              -Construction
      in progress
                              
                              
                              -
                              
                              
                              
                              706,1072,583,353
                              
                              
                              
                              897,357Less
      accumulated depreciation
                              
                              
                              (310,569
                              )
                              
                              
                              (22,313
                              )$
                              2,272,784
                              
                              
                              $
                              875,044


Construction
in progress consists of progress payments made for equipment and facilities that
was completed in May 2008. These payments were funded through the Capital Lease
Obligations. All assets are pledged as collateral against the Capital Lease
obligation.





Depreciation
expense related to fixed assets is as follows:
  December
      31, 2008
                            
                            
                            December
      31, 2007Production
      equipment
                            
                            $
                            252,759
                            
                            
                            $
                            22,313Building
                            
                            
                            54,707
                            
                            
                            
                            -Leasehold
      improvements
                            
                            
                            560
                            
                            
                            
                            -Office
      equipment
                            
                            
                            2,543
                            
                            
                            
                            -Construction
      in progress
                            
                            
                            -
                            
                            
                            
                            -$
                            310,569
                            
                            
                            $
                            22,313


F-16
 Advanced
Medical Isotope Corporation
 (A Development Stage
Company)
 Notes
to Consolidated Financial Statements
 For
the years ended December 31, 2008 and 2007
  NOTE
4:                      INTANGIBLE
ASSETS





Intangible
assets consist of the following at December 31, 2007 and 2006:




2008
                            
                            
                            2007Intellectual
      property
                            
                            $
                            250,750
                            
                            
                            $
                            250,750Contracts
      and agreements
                            
                            
                            213,000
                            
                            
                            
                            213,000Customer
      lists
                            
                            
                            195,000
                            
                            
                            
                            195,000658,750
                            
                            
                            
                            658,750Less
      accumulated amortization
                            
                            
                            (658,750
                            )
                            
                            
                            (147,049
                            )$
                            -
                            
                            
                            $
                            511,701
   NOTE
5:                      RELATED
PARTY TRANSACTIONS





Indebtedness
from related parties




In 2006,
the company purchased a note receivable of $28,500, from a non-related
individual, due from Mirari, Inc (“Mirari”), a Washington corporation, and an
affiliate under common control. This amount was written off as an investment
loss in 2006. Additionally, during the year 2006, AMIC advanced funds on behalf
of Mirari for rent and administrative costs in the amount of $33,000. This
amount was written off as bad debt in 2006. It is management’s intention to
acquire all the assets and common stock of Mirari during the year
2009.





In
November 2006 the Company received $30,000 from a shareholder and officer in the
form of a loan and in April 2007 received another $50,000 from the same
shareholder. In June 2007 the Company extinguished the $80,000 debt through the
issuance of 160,000 shares of the Company’s common stock. The fair market value
at the time was $.75, resulting in a $40,000 loss from extinguishment of
debt.





Rent
and other administrative expenses




The
Company began renting office space located in Kennewick, Washington from Apogee
Biometrics, Inc. (“ABI”), an affiliate under common control, in January
2006. Commencing January 1, 2006, the parties verbally agreed that the
Company would make monthly rent payments of $3,500 on a month-to-month
basis. In addition, the Company pays 36% of certain administrative expenses
utilized by both parties. During the years ended December 31, 2008 and 2007
the Company incurred rent and administrative expenses to ABI totaling $0 and
$15,147 respectively. The Company made payments to ABI totaling $0 and
$15,147 during the years ended December 31, 2008 and 2007
respectively.
 
 The
Company terminated the rental agreement with ABI and began renting office and
warehouse space, known as the Production Facility, effective August 1, 2007,
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 years ended December 31,
2008 and 2007 the Company incurred rent expenses for this facility totaling
$43,400 and $17,500, respectively. In addition, the lease agreement
called for the issuance of $187,500 in common stock valued at $.40 per share for
a total of 416,667 shares. The company recognized the issuance of all 416,667
shares in 2007 and will amortize the $187,500 value of that stock over the sixty
month term of the lease. For the years ended December 31, 2008 and 2007 the
Company amortized $37,500 and $15,625 of this stock issuance and recognized it
as rent expense.
  Additionally,
in June 2008, the Company entered into a twelve month lease for its corporate
offices with three four month options to renew, but in no event will the lease
extend beyond May 31, 2010. The lease agreement calls for monthly rental
payments of $5,061 per month. During the years
ended December 31, 2008 and 2007 the Company incurred rent expenses for this
facility totaling $31,708 and $0, respectively.








F-17
 Advanced
Medical Isotope Corporation
 (A Development Stage
Company)
 Notes
to Consolidated Financial Statements
 For
the years ended December 31, 2008 and
2007


NOTE
5:                      RELATED
PARTY TRANSACTIONS-
continued




Future
minimum rental payments required under the Company’s current rental agreements
in excess of one year as of December 31, 2008, are as
follows:


Production
                    Facility
                  
                  
                  Corporate
                    Offices
                  
                  
                  TotalTwelve months ended
      December 31, 2009
                  
                  $
                  46,872
                  
                  
                  $
                  60,736
                  
                  
                  $
                  107,608Twelve months ended
      December 31, 2010
                  
                  
                  50,622
                  
                  
                  
                  25,305
                  
                  
                  
                  75,927Twelve months ended
      December 31, 2011
                  
                  
                  54,671
                  
                  
                  
                  -
                  
                  
                  
                  54,671Twelve months ended
      December 31, 2012
                  
                  
                  33,332
                  
                  
                  
                  -
                  
                  
                  
                  33,332Total
                  
                  $
                  185,497
                  
                  
                  $
                  86,041
                  
                  
                  $
                  271,538
  Rental
expense for the years ending December 31, 2008 and 2007 consisted of the
following:


December 31,2008
                      
                      
                      2007ABI
                      
                      
                      $
                      -
                      
                      
                      $
                      15,147Office
      and warehouse lease effective August 1, 2007Monthly
      rental payments
                      
                      
                      43,400
                      
                      
                      
                      17,500Rental
      expense in the form of stock issuance
                      
                      
                      37,500
                      
                      
                      
                      15,625Corporate
      office
                      
                      
                      31,708
                      
                      
                      
                      -Total
      Rental Expense
                      
                      $
                      112,608
                      
                      
                      $
                      28,397
 
  NOTE
6:                      ASSET
ACQUISITION





On June
13, 2007, the Company acquired some of the assets of Isonics Corporation
(Isonics); a California corporation. Isonics is a non-related business of the
Company and neither company owns stock in the other. The Company acquired the
assets in exchange for $850,000 cash payment for the purpose of establishing
itself in a turnkey distribution business of 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. None of the acquired assets hold any ongoing liabilities or
contractual obligations that would result in additional cash transactions
required by the Company.





Intellectual
property, agreements with third parties and customer lists are stated at the
Companies estimation of fair market value at the time of acquisition, less
accumulated amortization. Amortization of these items is computed using the
straight-line method over the estimated economic useful life of the assets
ranging from 2-3 years.
 
 The
Company periodically reviews the net carrying values of intangible assets in
accordance with SFAS No. 144 and any impairments are recognized when the
expected future operating cash flows to be derived from such assets are less
than their carrying value. In accordance with this policy, management concluded
the intangible assets acquired from Isonics were no longer of value to the
Company. This decision resulted in the Company writing off the total net
unamortized portion balance of $259,618 early.





F-18
 Advanced
Medical Isotope Corporation
 (A Development Stage
Company)
 Notes
to Consolidated Financial Statements
 For
the years ended December 31, 2008 and
2007


NOTE
6:                      ASSET
ACQUISITION-continued





Amortization
of these items was $252,083 and $147,049 for the years ended December 31, 2008
and 2007, respectively. All intangible assets were fully written off as of
December 31, 2008 and so no further amortization of intangible assets will be
recognized from these assets in ensuing years.
 
 Depreciation of the equipment was
$38,250 and $22,313 for the years ended December 31, 2008 and 2007,
respectively.Based on the
value of these items recorded at December 31,2008, and
assuming no subsequent impairment of the underlying assets, the annual
amortization expense for each year ending December 31 is expected to be as
follows: $38,250 for 2009, $38,250 for 2010, $38,250 for 2011, and $15,938 for
2012.





The
assets acquired by the Company were recorded at the estimated fair market value
as of the date of acquisition, or $850,000, as follows:




Intellectual
      property related to the production of Indium-111 as
focusedon
      the chemical separation of Indium from a Cadmium-112
target
                                        
                                        $
                                        70,750Consulting
      expense incurred by Isonics for training of Indium-111
      production
                                        
                                        
                                        150,000License
      fees paid by Isonics for Indium-111 production
                                        
                                        
                                        30,000Customer
      list associated with the Indium-111 production
                                        
                                        
                                        65,000Total
      purchase price allocated to Indium-111 production
                                        
                                        
                                        
                                        
                                        
                                        
                                        315,750Contract
      with Kurchatov Institute dated July 14, 2004 for the
    purchaseOf
      Actinium-225
                                        
                                        
                                        71,000Contract
      with Institute for Physics and Power Engineering for thePurchase
      of Actinium-225
                                        
                                        
                                        71,000Customer
      list associated with the purchases of Actinium-225
                                        
                                        
                                        65,000Total
      purchase price allocated to Actinium-225 purchases
                                        
                                        
                                        
                                        
                                        
                                        
                                        207,000Service
      Agreement with Global Scientific Technologies and Center
ofMolecular
      Research in connection with the production, marketing,and
      sale of Oxygen-18
                                        
                                        
                                        71,000Customer
      list associated with the sale of Oxygen-18
                                        
                                        
                                        65,000Total
      purchase price allocated to Oxygen-18 productionand
      marketing
                                        
                                        
                                        
                                        
                                        
                                        
                                        136,000Equipment
      located at Central Radiopharmaceutical Services, Buffalo, New
      York
                                        
                                        
                                        
                                        
                                        
                                        
                                        191,250$
                                        850,000







F-19
 Advanced
Medical Isotope Corporation
 (A Development Stage
Company)
 Notes
to Consolidated Financial Statements
 For
the years ended December 31, 2008 and 2007
  NOTE
7:                      LICENSE
FEE ACQUISITION





On
September 27, 2006, the Company acquired the assets of Neu-Hope Technologies,
Inc (“NHTI”), a Florida corporation from UTEK Corporation (“UTEK”), a Delaware
corporation. UTEK is a shareholder of less than 5% of the Company’s issued and
outstanding common stock. The Company acquired NHTI’s assets from UTEK in
exchange for 100,000 shares of the Company’s Series A preferred stock. At any
time after September 27, 2007, these Series A preferred stock shares can be
converted to unrestricted common stock in the amount of $3,350,000. The number
of shares shall be calculated based on the previous 10 day average closing price
on the day of conversion. The Company conducted the acquisition in order to
obtain NHTI’s cash, rights, and customer relationships. The assets acquired by
the Company were recorded at the value which the preferred stock can be
converted into common stock, $3,350,000, as follows:




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




In
December 2007, 5,000 shares of the Company’s Series A preferred stock were
converted to 299,642 shares of common stock at $.559 per share




On August
30, 2006, NHTI entered into a Non-Exclusive License Agreement with the Regents
of the University of California. NHTI paid a non-refundable License Issue Fee in
the amount of $25,000. The license fee is non-refundable unless the Company’s
commercialization plan is deemed unacceptable by the University. If the plan is
deemed unacceptable, the license agreement will terminate and may be converted
to a non-exclusive license. To date, no commercialization plan has been deemed
acceptable or unacceptable.




In
consideration for the license, the Company agreed to the following
payments:





·
            $25,000
      License Issue Fee, described above;


·
            $25,000
      upon submission by University of California to U.S. Federal Drug
      Administration (or comparable agency) of either notification of or request
      for approval of (as applicable), a Licensed
  Product;


·
            $100,000
      upon satisfaction of necessary requirements (e.g., notification or receipt
      of approval, as applicable) by Federal Drug Administration (or comparable
      agency) for commercial sale of a Licensed
  Product;


·
            Royalties
      equal to the greater of three percent of the Selling Price of each
      Licensed Product Licensee sells or the maintenance fee according to the
      following schedule:




2006
                            
                            $
                            02007
                            
                            $
                            02008
                            
                            $
                            10,000
                            (not
      yet paid)2009
                            
                            $
                            15,0002010
                            
                            $
                            15,0002011
                            
                            $
                            45,0002012
      and each year thereafter
                            
                            $
                            60,000





F-20
 Advanced
Medical Isotope Corporation
 (A Development Stage
Company)
 Notes
to Consolidated Financial Statements
 For
the years ended December 31, 2008 and
2007


NOTE
8:                      PREPAID
EXPENSES PAID WITH STOCK





The
Company has issued stock with companies for various service agreements extending
beyond December 31, 2008; 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:




2009
                        
                        $
                        75,3362010
                        
                        
                        37,5002011
                        
                        
                        37,5002012
                        
                        
                        21,875$
                        172,211






NOTE
9:                      BANK
LINE OF CREDIT and SHAREHOLDER LOAN
 
 The Companyhada $200,000 revolving line of credit
with Washington Trust Bank thatwas to expirein September2009.The Company had$199,908in borrowings under the line of credit
as ofOctober 28, 2008 at
which time 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. There is no security held as collateral for this loan. As of
December 31, 2008, all payments were current on this shareholder
loan.
   NOTE
10:                      CAPITAL
LEASE OBLIGATIONS





During
September 2007, the Company obtained two Master Lease Agreements for $1,875,000
and $631,000, with interest on both leases accruing at 8.6% annually, secured by
equipment and personal guarantee of two of the major shareholders. These
long-term agreements shall be deemed Capital Lease Obligations for purposes of
financial statement reporting. The purpose of the lease 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 $933,888. Advances made by the Lessor for
the benefit of the Company, less payments, total $2,138,853 as of December 31,
2008:
 
 In
accordance with paragraph 10 of SFAS 13, this capital lease and its resulting
obligation is recorded at an amount equal to the present value at the beginning
of the lease term of minimum lease payments during the lease term, excluding any
portion of the payments representing taxes to be paid by the Company. This
amount does not exceed the fair value of the leased property at the lease
inception, so the recorded amount is the fair value.
  Capital
      Lease ObligationPET
      Isotope Production System
                          
                          
                          Ancillary
      Equipment
                          
                          
                          TotalTotal
      lease commitment
                          
                          $
                          1,875,000
                          
                          
                          $
                          933,888
                          
                          
                          $
                          2,808,888Advances
      made for purchases
                          
                          $
                          1,511,268
                          
                          
                          $
                          933,888
                          
                          
                          $
                          2,445,156Principal
      portion of payments
                          
                          
                          179,337
                          
                          
                          
                          126,966
                          
                          
                          
                          306,303Net
      balance of advances payable
                          
                          $
                          1,331,931
                          
                          
                          $
                          806,922
                          
                          
                          $
                          2,138,853Add
      factor to arrive at total future
                            minimum
      lease payments
                          
                          
                          372,139
                          
                          
                          
                          153,788
                          
                          
                          
                          525,927Total
      future minimum lease payments
                          
                          
                          1,704,070
                          
                          
                          
                          960,710
                          
                          
                          
                          2,664,780Less
      amount representing interest
                          
                          
                          372,139
                          
                          
                          
                          153,788
                          
                          
                          
                          525,927Present
      value of net minimum lease
                            payments
                          
                          
                          1,331,931
                          
                          
                          
                          806,922
                          
                          
                          
                          2,138,853Less
      amounts due within one year
                          
                          
                          182,750
                          
                          
                          
                          169,369
                          
                          
                          
                          352,119Amounts
      due after one year
                          
                          $
                          1,149,181
                          
                          
                          $
                          637,552
                          
                          
                          $
                          1,786,733


F-21
 Advanced
Medical Isotope Corporation
 (A Development Stage
Company)
 Notes
to Consolidated Financial Statements
 For
the years ended December 31, 2008 and
2007


NOTE
10:                      CAPITAL
LEASE OBLIGATIONS-continued





The lease
requires the Company to maintain a minimum debt service coverage ratio of 1:1
measured at fiscal yearend; non
compliance with this provision shall constitute a default and guarantors must
contribute capital sufficient to fund any deficit in the debt service coverage
ratio.
 
 The
definition of debt service coverage ratio is EBITDA (earnings before interest,
taxes, depreciation and amortization), minus cash taxes, minus unfunded capital
expenditures, plus capital injections, divided by (interest plus current
portion of long-term debt). According to the debt service coverage ratio
computation, the Company is not in compliance with the minimum debt service
coverage ratio stipulated in the loan covenants. Accordingly the lenders could
accelerate the debt; causing the Company to seek replacement funding from other
sources. There is no guarantee the Company could find replacement
funding.
 
 The
Company’s actual resultsof theminimum
debt service ratio calculation for the yearsDecember 31,2008
and 2007 areas
follows:


December 31,2008
                              
                              
                              2007Net
      loss
                              
                              $
                              (6,158,755
                              )
                              
                              $
                              (2,869,391
                              )Add
      (subtract)Interest
                              
                              
                              219,453
                              
                              
                              
                              238,984Depreciation
      and amortization
                              
                              
                              1,531,214
                              
                              
                              
                              1,135,841Unfunded
      capital expenditures
                              
                              
                              (72,485
                              )
                              
                              
                              (191,347
                              )Capital
      injections
                              
                              
                              (1,838,188
                              )
                              
                              
                              -$
                              (6,318,761
                              )
                              
                              $
                              (1,685,913
                              )Interest
      plus current portion of long-term debt
                              
                              
                              571,572
                              
                              
                              
                              325,967Debt
      service coverage ratio
                              
                              $
                              0.000
                              
                              
                              $
                              0.000
  Principal
maturities on the amount of the capital lease obligations advanced through
December 31, 2008 are due as follows:
  Year ended December 31,
                                  
                                  Production Facility
                                  
                                  
                                  Ancillary Equipment2009
                                  
                                  $
                                  182,749
                                  
                                  
                                  $
                                  169,3692010
                                  
                                  
                                  193,384
                                  
                                  
                                  
                                  180,9832011
                                  
                                  
                                  210,776
                                  
                                  
                                  
                                  197,1152012
                                  
                                  
                                  229,554
                                  
                                  
                                  
                                  201,3372013
                                  
                                  
                                  250,378
                                  
                                  
                                  
                                  58,117Thereafter
                                  
                                  
                                  265,090
                                  
                                  
                                  
                                  -$
                                  1,331,931
                                  
                                  
                                  $
                                  806,921
 The
capital lease obligation is the only Company debt that contains
covenants.
 
 NOTE
11:                    INCOME
TAXES





Income
taxes are provided based upon the liability method of accounting pursuant to
SFAS No. 109, “Accounting for Income Taxes.” Under this approach, deferred
income taxes are recorded to reflect the tax consequences in future years of
differences between the tax basis of assets and liabilities and their financial
reporting amounts at each year-end. A valuation allowance is recorded against
deferred tax assets if management does not believe the Company has met the “more
likely than not’ standard imposed by SFAS No. 109 to allow recognition of such
an asset.





The
amount of deferred income tax benefit is impacted by the difference between the
estimated Federal and State statutory income tax rates used to estimate deferred
tax assets and liabilities and actual rates utilized when determining income
taxes due or the application of net operating losses which are impacted by lower
rates for taxable income less than $100,000 along with differences in state tax
rates. In addition, other estimates utilized in determining deferred income tax
benefit resulting from anticipated timing differences may differ from amounts
initially determined when the timing differences are realized.





Deferred
taxes are provided on a liability method whereby deferred tax assets are
recognized for deductible temporary differences and operating loss and tax
credit carry-forwards and deferred tax liabilities are recognized for taxable
temporary differences. Temporary differences are the differences between the
reported amounts of assets and liabilities and their tax bases. Deferred tax
assets are reduced by a valuation allowance when, in the opinion of management,
it is more likely than not that some portion or all of the deferred tax assets
will not be realized. Deferred tax assets and liabilities are adjusted for the
effects of changes in tax laws and rates on the date of enactment.




F-22
 Advanced
Medical Isotope Corporation
 (A Development Stage
Company)
 Notes
to Consolidated Financial Statements
 For
the years ended December 31, 2008 and 2007
  NOTE
11:                    INCOME
TAXES -continued





Net
deferred tax assets consist of the following components as of December 31, 2008
and 2007:
 2008
                      
                      
                      2007Deferred
      tax assets:Net
      operating loss carryover
                      
                      $
                      4,133,788
                      
                      
                      $
                      1,395,015Deferred
      tax liabilities:Depreciation
                      
                      
                      (683,007
                      )
                      
                      
                      (383,664
                      )Valuation
      allowance
                      
                      
                      (3,450,781
                      )
                      
                      
                      (1,011,351
                      )Net
      deferred tax asset
                      
                      $
                      -
                      
                      
                      $
                      -





The
income tax provision differs from the amount of income tax determined by
applying the U.S. Federal income tax rate to pretax income from continuing
operations for the years ended December 31, 2008 and 2007 due to the
following:




2008
                          
                          
                          2007Book
      income
                          
                          $
                          (2,401,914
                          )
                          
                          $
                          (535,323
                          )Depreciation
                          
                          
                          (498,618
                          )
                          
                          
                          69,060Meals
      and entertainment
                          
                          
                          3,595
                          
                          
                          
                          587Stock
      for services
                          
                          
                          285,158
                          
                          
                          
                          75,660Options
      expense
                          
                          
                          472,443
                          
                          
                          
                          -Officers
      life insurance
                          
                          
                          2,094
                          
                          
                          
                          -Gain/loss
      on disposal
                          
                          
                          (693,666
                          )
                          
                          
                          -Valuation
      allowance
                          
                          
                          2,830,908
                          
                          
                          
                          390,016$
                          -
                          
                          
                          $
                          -


At
December 31, 2008 and 2007, the Company had net operating loss carryovers of
approximately $10,600,000 and $3,300,000, respectively, that may be offset
against future taxable income from the year 2009 through 2028. No tax benefit
has been reported in the years ended December 31, 2008 and 2007 consolidated
financial statements since the potential tax benefit is offset by a valuation
allowance of the same amount.





Due to
the change in ownership provisions of the Tax Reform Act of 1986, net operating
loss carryovers for Federal income tax reporting purposes are subject to annual
limitations. Should a change in ownership occur, net operating loss carryovers
mat be limited as to use in future years.





In July
2006, the FASB issued Interpretation No. 48, ACCOUNTING FOR UNCERTAINTY IN
INCOME TAXES – AN INTERPRETATION OF FASB STATEMENT NO. 109” (“FIN 48”), which
clarifies the accounting and disclosure for uncertainty in tax positions, as
defined. FIN 48 seeks to reduce the diversity in practice associated with
certain aspects of the recognition and measurement related to accounting for
income taxes. The Company is subject to the provisions of FIN 48 as of January
1, 2007, and has analyzed filing positions in all of the Federal and state
jurisdictions where it is required to file income tax returns. The Company has
not filed its Federal income tax return since 1998, however the Company believes
that its income tax filing positions and deductions will be sustained on audit
and does not anticipate any adjustments that will result in a material impact on
the Company’s financial condition, results of operations, cash flows or net
operating loss carry-forwards. Therefore, no reserves for uncertain income tax
positions have been recorded pursuant to FIN 48. In addition, the Company did
not record a cumulative effect adjustment related to the adoption of FIN 48. The
Company is subject to audit by the IRS and various states for the prior 3
years.





The
Company’s policy for recording interest and penalties associated with taxes is
to recognize at as a component of income tax expense.




F-23
 Advanced
Medical Isotope Corporation
 (A Development Stage
Company)
 Notes
to Consolidated Financial Statements
 For
the years ended December 31, 2008 and 2007
  NOTE
12:                    STOCKHOLDERS’
EQUITY





Common
stock sale




On
October 13, 2006, the Company issued 150,000 shares of its $.001 par value
common stock to shareholders for common stock subscriptions received in
1999.





In April
2007 the Company issued 112,277 shares for cash of $79,717 at $.71 per
share.





In June
2007 the Company issued 2,125,000 shares for cash of $850,000 at $.40 per
share.




In
February 2008, the Company issued 825,893 shares of its $.001 par value common
stock to shareholders for common stock subscriptions of $185,688 received in
2007.
 
 In April
2008, the Company issued 92,856 shares of its $.001 par value common stock to
shareholders for common stock subscriptions of $16,812 received in
2007.
 
 In
January 2008 the Company issued 137,500 shares for cash of $55,000 at $.40 per
share.
  In
January 2008 the Company issued 250,000 shares for cash of $72,500 at $.29 for
exercised options.
 
 In
February 2008 the Company issued 950,000 shares for cash of $380,000 at $.40 per
share.
 
 In March
2008 the Company issued 550,700 shares for cash of $220,280 at $.40 per
share.
 
 In July
2008 the Company issued 250,000 shares for cash of $100,000 at $.40 per
share.
 
 In August
2008 the Company issued 150,000 shares for cash of $60,000 at $.40 per
share.
 
 In
November 2008 the Company issued 333,333 shares for cash of $100,000 at $.30 per
share.





Preferred
stock





On
September 27, 2006, the Company acquired the assets of Neu-Hope Technologies,
Inc (“NHTI”), a Florida corporation from UTEK Corporation (“UTEK”), a Delaware
corporation. UTEK is a shareholder of less than 5% of the Company’s issued and
outstanding common stock. The Company acquired NHTI’s assets from UTEK in
exchange for 100,000 shares of the Company’s Series A preferred stock. At any
time after September 27, 2007, these Series A preferred stock shares can be
converted to unrestricted common stock in the amount of $3,350,000. The number
of shares shall be calculated based on the previous 10 day average closing price
on the day of conversion. Additionally, during the initial twelve months
period in which UTEK is holding said preferred stock, interest shall accrue at
the annual rate of five percent, compounded quarterly, payable in cash or in
common shares of the Company. The Company conducted the acquisition in order to
obtain NHTI’s cash, rights, and customer relationships. The details of this
transaction can be found in Footnote 7.
 
 In
December 2007, 5,000 shares of the Company’s Series A preferred stock were
converted to 299,642 shares of common stock at $.559 per share.
 
 Common
stock issued for services
  During
May 2006, the Company paid for $120,000 two year business consulting services
through the issue of 600,000 shares of its common stock based on the quoted
market price of stock on the transaction date, or $.20 per
share.  Stock-based compensation expense of $50,000 and $70,000 has
been recognized in the accompanying financial statements for the years ended
December 31, 2007 and 2006.  The remaining $0 and $50,000 is reported
as prepaid expenses paid with stock in the accompanying financial statements for
the years ended December 31, 2007 and 2006.





During
October 2006, the Company paid for $45,000 two year business consulting services
through the issue of 250,000 shares of its common stock based on the quoted
market price of stock on the transaction date, or $.18 per
share.  Stock-based compensation expense of $22,500 and $7,500 has
been recognized in the accompanying financial statements for the years ended
December 31, 2007 and 2006.  The remaining $15,000 and $37,500 is
reported as prepaid expenses paid with stock in the accompanying financial
statements as of December 31, 2007, and 2006.





During
September 2006, the Company issued 1,500,000 shares of its common stock as bonus
compensation to the CEO. The transaction was recorded based on the quoted market
price of stock on the transaction date, or $.18 per
share.  Stock-based compensation expense of $270,000 has been
recognized in the accompanying financial statements for the year ended December
31, 2006.








F-24
 Advanced
Medical Isotope Corporation
 (A Development Stage
Company)
 Notes
to Consolidated Financial Statements
 For
the years ended December 31, 2008 and
2007


NOTE
12:                    STOCKHOLDERS’
EQUITY -continued





During
September 2006, the Company issued 500,000 shares of its common stock as bonus
compensation to the Chief Science Officer. The transaction was recorded based on
the quoted market price of stock on the transaction date, or $.18 per
share.  Stock-based compensation expense of $90,000 has been
recognized in the accompanying financial statements for the year ended December
31, 2006.





During
September 2006, the Company paid for $54,000 in legal services through the issue
of 300,000 shares of its common stock based on the quoted market price of stock
on the transaction date, or $.18 per share.   Stock-based
compensation expense of $54,000 has been recognized in the accompanying
financial statements for the year ended December 31, 2006.





During
February 2007, the Company purchased a patent license for $54,000 through the
issue of 250,000 shares of its common stock based on the quoted market price of
stock on the transaction date, or $.30 per share. A long term asset valued at
$75,000 has been recognized in the accompanying financial statements for the
year ended December 31, 2007.





During
March 2007, the Company paid for $217,500 two year business consulting services
through the issue of 250,000 shares of its common stock based on the quoted
market price of stock on the transaction date, or $.87 per share. Stock-based
compensation expense of $81,562.50 has been recognized in the accompanying
financial statements for the year ended December 31, 2007. The remaining
$135,937.50 is reported as prepaid expenses paid with stock in the accompanying
financial statements.





During
June 2007, the Company issued 160,000 shares of its common stock in exchange for
debt. The value if the transaction totaled $120,000 based on the quoted market
price of stock on the transaction date, or $.75 per share. Loss on
extinguishment of debt of $40,000 has been recognized in the accompanying
financial statements for the year ended December 31, 2007.





During
August 2007, the Company paid for $187,500 prepaid rent through the issue of
416,667 shares of its common stock based on the quoted market price of stock on
the transaction date, or $.45 per share. Stock-based rent expense of $15,625 has
been recognized in the accompanying financial statements for the year ended
December 31, 2007. The remaining $171,875 is reported as prepaid expenses paid
with stock in the accompanying financial statements.





During
September 2007, the Company paid for $82,000 business consulting services
through the issue of 100,000 shares of its common stock based on the quoted
market price of stock on the transaction date, or $.82 per share. Stock-based
compensation expense of $41,000 has been recognized in the accompanying
financial statements for the year ended December 31, 2007. The remaining $41,000
is reported as prepaid expenses paid with stock in the accompanying financial
statements.





During
November 2007, the Company paid for $74,000 business consulting services through
the issue of 100,000 shares of its common stock based on the quoted market price
of stock on the transaction date, or $.74 per share. Stock-based compensation
expense of $26,000 has been recognized in the accompanying financial statements
for the year ended December 31, 2007. The remaining $48,000 is reported as
prepaid expenses paid with stock in the accompanying financial
statements.








F-25
 Advanced
Medical Isotope Corporation
 (A Development Stage
Company)
 Notes
to Consolidated Financial Statements
 For
the years ended December 31, 2008 and
2007
 NOTE
12:                    STOCKHOLDERS’
EQUITY -continued


During
November 2007, the Company paid for $12,563 business consulting services through
the issue of 17,000 shares of its common stock based on the quoted market price
of stock on the transaction date, or $.74 per share. Stock-based compensation
expense of $12,563 has been recognized in the accompanying financial statements
for the year ended December 31, 2007.





During
November 2007, the Company paid for $11,250 business consulting services through
the issue of 15,000 shares of its common stock based on the quoted market price
of stock on the transaction date, or $.75 per share. Stock-based compensation
expense of $11,250 has been recognized in the accompanying financial statements
for the year ended December 31, 2007.





During
December 2007, the Company paid for $18,725 business consulting services through
the issue of 25,000 shares of its common stock based on the quoted market price
of stock on the transaction date, or $.75 per share.  Stock-based
compensation expense of $18,725 has been recognized in the accompanying
financial statements for the year ended December 31, 2007.





During
December 2007, the Company issued 7,000 shares of its common stock to two
employees as a bonus. The value of the transaction totaled $5,733 based on the
quoted market price of stock on the transaction date, or $.82 per
share.  Stock-based compensation expense of $5,733 has been recognized
in the accompanying financial statements for the year ended December 31,
2007.





During
December 2007, the Company issued 1,000,000 shares of its common stock to its
CEO in exchange for consideration of past services and for the 1,000,000 options
previously granted to the CEO in September of 2006. Because the 1,000,000 shares
were given to the CEO and were not purchased using cash by the CEO, the Company
recognized stock-based compensation expense of $70,000 in the accompanying
financial statements for the year ended December 31, 2007. The $70,000
compensation was determined by multiplying the number of options exercised
(1,000,000) times the exercise price per share ($0.07). The exercise price per
share was determined at the time the options were granted in September of
2006.




During
March 2008, the Company issued 299,642 shares of its common stock in exchange
for stock offering costs associated with the acquisition of the assets of
Neu-Hope Technologies, Inc. The value of the transaction totaled $233,720 based
on the quoted market price of stock on the transaction date, or $.78 per
share.
 
 During
April 2008, the Company issued 190,000 shares of its common stock as bonus
compensation to the Chief Science Officer. The value of the transaction totaled
$142,500 based on the quoted market price of stock on the transaction date, or
$.75 per share. Stock-based compensation expense of $142,500 has been recognized
in the accompanying financial statements for the year ended December 31,
2008.




During
April 2008, the Company issued 50,000 shares of its common stock as bonus
compensation to employees. The value of the transaction totaled $37,500 based on
the quoted market price of stock on the transaction date, or $.75 per share.
Stock-based compensation expense of $37,500 has been recognized in the
accompanying financial statements for the year ended December 31,
2008.
 
 During
April 2008, the Company issued 70,000 shares of its common stock in exchange for
business consulting services. The value of the transaction totaled $52,500 based
on the quoted market price of stock on the transaction date, or $.75 per share.
Stock-based compensation expense of $52,500 has been recognized in the
accompanying financial statements for the year ended December 31,
2008.
 
 During
July 2008, the Company issued 3,818 shares of its common stock in exchange for
business consulting services. The value of the transaction totaled $2,405 based
on the quoted market price of stock on the transaction date, or $.63 per share.
Stock-based compensation expense of $2,405 has been recognized in the
accompanying financial statements for the year ended December 31,
2008.
 
 During
October 2008, the Company issued 27,900 shares of its common stock in exchange
for business consulting services. The value of the transaction totaled $14,787
based on the quoted market price of stock on the transaction date, or $.53 per
share. Stock-based compensation expense of $14,787 has been recognized in the
accompanying financial statements for the year ended December 31,
2008.
 
 During
October 2008, the Company issued 60,000 shares of its common stock to employees
as bonuses. The value of the transaction totaled $31,800 based on the quoted
market price of stock on the transaction date, or $.53 per share. Stock-based
compensation expense of $31,800 has been recognized in the accompanying
financial statements for the year ended December 31, 2008.
 
 During
October 2008, the Company issued 35,000 shares of its common stock in exchange
for $7,000 of prepaid services and $13,300 in services performed in 2008. The
value of the transaction totaled $20,300 based on the quoted market price of
stock on the transaction date, or $.58 per share. Stock-based compensation
expense of $13,300 has been recognized in the accompanying financial statements
for the year ended December 31, 2008 and the remaining $7,000 is recorded as
prepaid expenses paid in stock at December 31, 2008.






F-26
 Advanced
Medical Isotope Corporation
 (A Development Stage
Company)
 Notes
to Consolidated Financial Statements
 For
the years ended December 31, 2008 and
2007
 NOTE
12:                    STOCKHOLDERS’
EQUITY -continued





During
November 2008, the Company issued 129,765 shares of its common stock in exchange
for business consulting services previously rendered and included in accounts
payable. The value of the transaction totaled $22,060 based on the consultants
other contractual agreement, or $.17 per share. Stock-based compensation expense
of $22,060 has been recognized in the accompanying financial statements for the
year ended December 31, 2008.





During
November 2008, the Company issued 35,000 shares of its common stock in exchange
for business consulting services. The value of the transaction totaled $15,750
based on the quoted market price of stock on the transaction date, or $.45 per
share. Stock-based compensation expense of $15,750 has been recognized in the
accompanying financial statements for the year ended December 31,
2008.




During
November 2008, the Company issued 350,000 shares of its common stock in exchange
for business consulting services. The value of the transaction totaled $178,500
based on the quoted market price of stock on the transaction date, or $.51 per
share. Stock-based compensation expense of $178,500 has been recognized in the
accompanying financial statements for the year ended December 31,
2008.
 
 During
November 2008, the Company issued 25,000 shares of its common stock to employees
as a bonus. The value of the transaction totaled $12,750 based on the quoted
market price of stock on the transaction date, or $.51 per share. Stock-based
compensation expense of $12,750 has been recognized in the accompanying
financial statements for the year ended December 31, 2008.
 
 During
December 2008, the Company issued 27,573 shares of its common stock in exchange
for business consulting services. The value of the transaction totaled $9,100
based on the quoted market price of stock on the transaction date, or $.33 per
share. Stock-based compensation expense of $9,100 has been recognized in the
accompanying financial statements for the year ended December 31,
2008.
 
 Common
stock issued for convertible debt
 
 During
September 2008, the Company issued 100,000 shares of its common stock in
exchange for $250,000 convertible note. The value of the $250,000 debt plus the
$.70 fair market value of the 100,000 shares at the date of the agreement was
prorated to arrive at the allocation of the original $250,000 debt and the value
of the 100,000 shares. This computation resulted in an allocation of $195,313
toward the debt and $54,688 to the shares. The $54,688 value of the shares is
then amortized to interest over the twelve month life of the debt. Interest
expense of $18,229 has been recognized in the accompanying financial statements
for the year ended December 31, 2008.
 
 During
November 2008, the Company issued 20,000 shares of its common stock in exchange
for $50,000 convertible note. The value of the $50,000 debt plus the $.53 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. This computation resulted
in an allocation of $16,258 toward the debt and $8,746 to the shares and $24,996
to the beneficial conversion feature. The $8,746 value of the shares and the
$24,996 value of the beneficial conversion feature are then amortized to
interest over the twelve month life of the debt. Interest expense of $5,624 has
been recognized in the accompanying financial statements for the year ended
December 31, 2008.
 
 On
December 16, 2008, Advanced Medical Isotope Corporation (the “Company”) issued a
convertible promissory note in the amount of $375,000 with interest payable at
10% per annum. The Note matures on December 16, 2009 (the "Maturity Date"). The
entire outstanding principal balance and any outstanding fees or interest is due
and payable in full on the Maturity Date. Interest on the Note is payable every
six months until the Note is paid in full. Additionally, in connection with the
convertible note, 150,000 shares of the Company’s common stock were issued to
the note holder.  At the option of the holder, the note is
convertible, in whole or in part, into the Company’s common stock by taking the
principal to be converted and dividing it by fifty percent of the
volume-weighted average trading price of the Company’s common stock for the 10
consecutive trading days immediately preceding the date of conversion. The note
is convertible at any time.
 
 The
embedded conversion feature within the convertible promissory note was assessed
under paragraph 12 of SFAS 133 to determine whether the embedded conversion
feature should be bifurcated from the host instrument and accounted for as a
derivative at fair value with changes in fair value recorded in
earnings.
  Paragraph
12 of FAS 133 requires that an embedded derivative instrument shall be separated
from the host contract and accounted for as a derivative instrument if, and only
if, certain criteria are met.  The company believes that those certain
criteria have not been met as the Company’s stock is not considered to be
readily convertible to cash as defined in paragraph 57c(3) of Appendix A, “A
security that is publicly traded but for which the market is not very active is
readily convertible to cash if the number of shares or other units of the
security to be exchanged is small relative to the daily transaction volume. That
same security would not be readily convertible if the number of shares to be
exchanged is large relative to the daily transaction volume.” Per the
agreement the Company is required to deliver shares of its common stock and
there is no mechanism outside the contract that facilitates that settlement
therefore the convertible feature does not meet the criteria of paragraph 9, it
does not meet the criteria of paragraph 6, and in turn it does not meet the
criteria of paragraph 12 of FAS 133. Therefore the company concluded that
conversion feature should not be bifurcated from the host instrument and
should be accounted for in accordance with EITF 00-27.
 
 EITF
00-27 requires the Company to allocate the proceeds to the shares issued and the
debt and then calculate a beneficial conversion feature.  The company
performed these calculations which resulted in a beneficial conversion feature
with an intrinsic value of $322,234.  The 150,000 shares of common
stock were valued at $46,053 and the debt was recorded at $6,713. Because the
debt is immediately convertible, the value of the beneficial conversion feature
is calculated as if converted on the commitment date.  The $322,234
allocated to the beneficial conversion feature along with the $46,053 allocated
to the 150,000 shares of common stock is being accreted to interest expense over
the twelve month life of the debt. Interest expense of $15,345 has been accreted
and added to the note payable bringing the total debt balance related to this
convertible promissory note to $22,058 in the accompanying financial statements
as of December 31, 2008.





F-27
 Advanced
Medical Isotope Corporation
 (A Development Stage
Company)
 Notes
to Consolidated Financial Statements
 For
the years ended December 31, 2008 and
2007
 NOTE
12:                    STOCKHOLDERS’
EQUITY -continued




Common
stock options




Options
granted to non-employees, accounted for under the fair value method





During
September 2006, the Company granted a consultant options to purchase an
aggregate of 250,000 shares of the Company’s common stock at an exercise price
of $.15 per share.  The options are fully vested and expire September
1, 2008. The quoted market price of the common stock at the time of issuance of
the options was $.07 per share.  The Company valued the options in
accordance with SFAS 123(R).  The fair value of the options totaled
$17,500, and was recorded as stock-based compensation in the accompanying
financial statements for the year ended December 31, 2006.





The fair
value of the options was estimated at the date of grant using the Black-Scholes
option-pricing model with the following assumptions:




Risk-free
      interest rate
                    
                    
                    4.77
                    %Dividend
      yield
                    
                    
                    0.00
                    %Volatility
      factor
                    
                    
                    404.0
                    %Weighted
      average expected life
                    
                    2
      years


During
September 2006, the Company granted three board members options to purchase an
aggregate of 250,000 shares each of the Company’s common stock and granted the
CEO options to purchase 1,000,000 shares of the Company’s common stock, all at
an exercise price of $.07 per share.  The options are fully vested and
expire September 1, 2009. The quoted market price of the common stock at the
time of issuance of the options was $.07 per share.  The Company
valued the options in accordance with SFAS 123(R).  The fair value of
the options totaled $17,500 for each of the board members and $70,000 for the
CEO, for an aggregate of $122,500, and was recorded as stock-based compensation
in the accompanying financial statements for the year ended December 31,
2006.





The fair
value of the options was estimated at the date of grant using the Black-Scholes
option-pricing model with the following assumptions:




Risk-free
      interest rate
                    
                    
                    4.69
                    %Dividend
      yield
                    
                    
                    0.00
                    %Volatility
      factor
                    
                    
                    325.0
                    %Weighted
      average expected life
                    
                    3
      years





During
January 2007, the Company granted three board members options to purchase an
aggregate of 250,000 shares each of the Company’s common stock at an exercise
price of $.29 per share.  The options are fully vested and expire
January 23, 2010. The quoted market price of the common stock at the time of
issuance of the options was $.27 per share.  The Company valued the
options in accordance with SFAS 123(R).  The fair value of the options
totaled $67,215 for each of the board members, for an aggregate of $201,645, and
was recorded as stock-based compensation in the accompanying financial
statements for the year ended December 31, 2007.





The fair
value of the options was estimated at the date of grant using the Black-Scholes
option-pricing model with the following assumptions:




Risk-free
      interest rate
                    
                    
                    4.79
                    %Dividend
      yield
                    
                    
                    0.00
                    %Volatility
      factor
                    
                    
                    329.1
                    %Weighted
      average expected life
                    
                    3
      years
  During
April 2007, the Company granted a consultant options to purchase an aggregate of
100,000 shares of the Company’s common stock at an exercise price of $.50 per
share.  The options are fully vested and expire April 2010. The quoted
market price of the common stock at the time of issuance of the options was $.85
per share.  The Company valued the options in accordance with SFAS
123(R).  The fair value of the options totaled $84,735, and was
recorded as stock-based compensation in the accompanying financial statements
for the year ended December 31, 2007.





The fair
value of the options was estimated at the date of grant using the Black-Scholes
option-pricing model with the following assumptions:




Risk-free
      interest rate
                    
                    
                    4.60
                    %Dividend
      yield
                    
                    
                    0.00
                    %Volatility
      factor
                    
                    
                    329.1
                    %Weighted
      average expected life
                    
                    3
      years


F-28
 Advanced
Medical Isotope Corporation
 (A Development Stage
Company)
 Notes
to Consolidated Financial Statements
 For
the years ended December 31, 2008 and
2007
 NOTE
12:                    STOCKHOLDERS’
EQUITY -continued
  During
May 2007, the Company granted its Chief Financial Officer options to purchase an
aggregate of 1,500,000 shares of the Company’s common stock at an exercise price
of $.50 per share.  The options vest at 500,000 shares May 2008,
500,000 shares May 2009, and 500,000 shares May 2010 and expire May 2012. The
quoted market price of the common stock at the time of issuance of the options
was $.70 per share.  The Company valued the options in accordance with
SFAS 123(R).  The fair value of the options totaled $1,046,837, and
was recorded as stock-based compensation in the accompanying financial
statements for the year ended December 31, 2007 on a pro-rata bases of the
months worked compared to the total of the vesting schedule.





The fair
value of the options was estimated at the date of grant using the Black-Scholes
option-pricing model with the following assumptions:




Risk-free
      interest rate
                    
                    
                    4.67
                    %Dividend
      yield
                    
                    
                    0.00
                    %Volatility
      factor
                    
                    
                    257.3
                    %Weighted
      average expected life
                    
                    5
      years








During
December 2007, the Company granted a consultant options to purchase 122,400
shares of the Company’s common stock, at an exercise price of $.17 per
share.  The options are fully vested and expire December 31, 2012. The
quoted market price of the common stock at the time of issuance of the options
was $.72 per share.  The Company valued the options in accordance with
SFAS 123(R).  The fair value of the options totaled $87,975 and was
recorded as stock-based compensation in the accompanying financial statements
for the year ended December 31, 2007.





The fair
value of the options was estimated at the date of grant using the Black-Scholes
option-pricing model with the following assumptions:




Risk-free
      interest rate
                    
                    
                    3.49
                    %Dividend
      yield
                    
                    
                    0.00
                    %Volatility
      factor
                    
                    
                    257.3
                    %Weighted
      average expected life
                    
                    5
      years




During
February 2008, the Company granted a consultant options to purchase 714,286
shares of the Company’s common stock, at an exercise price of $1.05 per share.
The options are fully vested and expire February 12, 2009. The quoted market
price of the common stock at the time of issuance of the options was $.65 per
share. The Company valued the options in accordance with SFAS 123(R). The fair
value of the options totaled $461,827 and was recorded as stock-based
compensation in the accompanying financial statements for the year ended
December 31, 2008.
 
 The fair
value of the options was estimated at the date of grant using the Black-Scholes
option-pricing model with the following assumptions:
  Risk-free
      interest rate
                        
                        
                        2.05
                        %Dividend
      yield
                        
                        
                        0.00
                        %Volatility
      factor
                        
                        
                        312.5
                        %Weighted
      average expected life
                        
                        1 year
  During
March 2008, the Company granted a consultant options to purchase 106,800 shares
of the Company’s common stock, at an exercise price of $.17 per share. The
options are fully vested and expire March 31, 2013. The quoted market price of
the common stock at the time of issuance of the options was $.84 per share. The
Company valued the options in accordance with SFAS 123(R). The fair value of the
options totaled $89,565 and was recorded as stock-based compensation in the
accompanying financial statements for the year ended December 31,
2008.
 
 The fair
value of the options was estimated at the date of grant using the Black-Scholes
option-pricing model with the following assumptions:
 Risk-free
      interest rate
                            
                            
                            2.48
                            %Dividend
      yield
                            
                            
                            0.00
                            %Volatility
      factor
                            
                            
                            257.3
                            %Weighted
      average expected life
                            
                            5
      years
 During
June 2008, the Company granted a consultant options to purchase 39,600 shares of
the Company’s common stock, at an exercise price of $.17 per share. The options
are fully vested and expire June 30, 2013. The quoted market price of the common
stock at the time of issuance of the options was $.69 per share. The Company
valued the options in accordance with SFAS 123(R). The fair value of the options
totaled $27,276 and was recorded as stock-based compensation in the accompanying
financial statements for the year ended December 31, 2008.
 
 The fair
value of the options was estimated at the date of grant using the Black-Scholes
option-pricing model with the following assumptions:
 Risk-free
      interest rate
                            
                            
                            3.49
                            %Dividend
      yield
                            
                            
                            0.00
                            %Volatility
      factor
                            
                            
                            257.5
                            %Weighted
      average expected life
                            
                            5
      years
   F-29
 Advanced
Medical Isotope Corporation
 (A Development Stage
Company)
 Notes
to Consolidated Financial Statements
 For
the years ended December 31, 2008 and
2007
 NOTE
12:                    STOCKHOLDERS’
EQUITY -continued
 During
July 2008, the Company granted a consultant options to purchase 100,000 shares
of the Company’s common stock, at an exercise price of $.50 per share. The
options are fully vested and expire January 29, 2011. The quoted market price of
the common stock at the time of issuance of the options was $.40 per share. The
Company valued the options in accordance with SFAS 123(R). The fair value of the
options totaled $39,850 and was recorded as stock-based compensation in the
accompanying financial statements for the nine months ended September 30,
2008.
 
 The fair
value of the options was estimated at the date of grant using the Black-Scholes
option-pricing model with the following assumptions:
 Risk-free
      interest rate
                            
                            
                            2.87
                            %Dividend
      yield
                            
                            
                            0.00
                            %Volatility
      factor
                            
                            
                            337.6
                            %Weighted
      average expected life
                            
                            3 years
 During
November 2008, the Company granted two board members options to purchase an
aggregate of 100,000 shares each and one board member options to purchase an
aggregate of 25,000 shares of the Company’s common stock at an exercise price of
$.55 per share.  The options are fully vested and expire November 26,
2011. The quoted market price of the common stock at the time of issuance of the
options was $.51 per share.  The Company valued the options in
accordance with SFAS 123(R).  The fair value of the options totaled
$50,819 for each of the two board members and $12,705 for the other board
member, for an aggregate of $114,343, and was recorded as stock-based
compensation in the accompanying financial statements for the year ended
December 31, 2008.
 
 The fair
value of the options was estimated at the date of grant using the Black-Scholes
option-pricing model with the following assumptions:
 Risk-free
      interest rate
                            
                            
                            1.51
                            %Dividend
      yield
                            
                            
                            0.00
                            %Volatility
      factor
                            
                            
                            337.2
                            %Weighted
      average expected life
                            
                            3 years
  During
November 2008, the Company granted four employees options to purchase an
aggregate of 115,000 shares of the Company’s common stock at an exercise price
of $.55 per share.  The options are fully vested and expire November
26, 2011. The quoted market price of the common stock at the time of issuance of
the options was $.51 per share.  The Company valued the options in
accordance with SFAS 123(R).  The fair value of the options totaled
$58,441, and was recorded as stock-based compensation in the accompanying
financial statements for the year ended December 31, 2008.
 
 The fair
value of the options was estimated at the date of grant using the Black-Scholes
option-pricing model with the following assumptions:
 Risk-free
      interest rate
                            
                            
                            1.51
                            %Dividend
      yield
                            
                            
                            0.00
                            %Volatility
      factor
                            
                            
                            337.2
                            %Weighted
      average expected life
                            
                            3
      years
 During
November 2008, the Company granted five consultants options to purchase 140,000
shares of the Company’s common stock, at an exercise price of $.55 per share.
The options are fully vested and expire November 26, 2011. The quoted market
price of the common stock at the time of issuance of the options was $.51 per
share. The Company valued the options in accordance with SFAS 123(R). The fair
value of the options totaled $71,147 and was recorded as stock-based
compensation in the accompanying financial statements for the year ended
December 31, 2008.
 
 The fair
value of the options was estimated at the date of grant using the Black-Scholes
option-pricing model with the following assumptions:
  Risk-free
      interest rate
                          
                          
                          1.51
                          %Dividend
      yield
                          
                          
                          0.00
                          %Volatility
      factor
                          
                          
                          337.2
                          %Weighted
      average expected life
                          
                          3 years
  F-30
 Advanced
Medical Isotope Corporation
 (A Development Stage
Company)
 Notes
to Consolidated Financial Statements
 For
the years ended December 31, 2008 and
2007
 NOTE
12:                    STOCKHOLDERS’
EQUITY -continued
  The
following schedule summarizes the changes in the Company’s stock option
plan:




Weighted
                                    
                                    
                                    
                                    
                                    
                                    WeightedOptions Outstanding
                                    
                                    
                                    Average
                                    
                                    
                                    
                                    
                                    
                                    AverageNumber
                                    
                                    
                                    Exercise
                                    
                                    
                                    Remaining
                                    
                                    
                                    Aggregate
                                    
                                    
                                    ExerciseOf
                                    
                                    
                                    Price
                                    
                                    
                                    Contractual
                                    
                                    
                                    Intrinsic
                                    
                                    
                                    PriceShares
                                    
                                    
                                    Per Share
                                    
                                    
                                    Life
                                    
                                    
                                    Value
                                    
                                    
                                    Per ShareBalance
      at December 31, 2005
                                    
                                    
                                    -
                                    
                                    
                                    $
                                    0.00
                                    
                                    
                                    
                                    -
                                    
                                    
                                    $
                                    -
                                    
                                    
                                    $
                                    -Options
      granted
                                    
                                    
                                    2,000,000
                                    
                                    
                                    
                                    0.07-0.15
                                    
                                    
                                    2.52 years
                                    
                                    
                                    
                                    0.00
                                    
                                    
                                    
                                    0.08Balance
      at December 31, 2006
                                    
                                    
                                    2,000,000
                                    
                                    
                                    
                                    0.07-0.15
                                    
                                    
                                    2.52
      years
                                    
                                    
                                    
                                    0.00
                                    
                                    
                                    
                                    0.08Options
      granted
                                    
                                    
                                    4,947,400
                                    
                                    
                                    
                                    0.17-1.05
                                    
                                    
                                    1.99
      years
                                    
                                    
                                    
                                    402,320
                                    
                                    
                                    
                                    0.56Options
      exercised
                                    
                                    
                                    (1,750,000
                                    )
                                    
                                    
                                    0.07
                                    
                                    
                                    2.6
      years
                                    
                                    
                                    
                                    0.00
                                    
                                    
                                    
                                    0.07Options
      expired
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -Balance
      at December 31, 2007
                                    
                                    
                                    5,197,400
                                    
                                    
                                    $
                                    0.15-1.05
                                    
                                    
                                    2.03
      years
                                    
                                    
                                    $
                                    402,320
                                    
                                    
                                    $
                                    0.56Options
      granted
                                    
                                    
                                    3,516,386
                                    
                                    
                                    
                                    0.17-1.05
                                    
                                    
                                    1.50
      years
                                    
                                    
                                    
                                    91,953
                                    
                                    
                                    
                                    0.93Options
      exercised
                                    
                                    
                                    (379,765
                                    )
                                    
                                    
                                    0.17-0.29
                                    
                                    
                                    3.0
      years
                                    
                                    
                                    
                                    -72,244
                                    
                                    
                                    
                                    0.25Options
      expired
                                    
                                    
                                    (2,725,000
                                    )
                                    
                                    
                                    0.15-1.05
                                    
                                    
                                    1.09 years
                                    
                                    
                                    
                                    0.00
                                    
                                    
                                    
                                    0.69Balance
      at December 31, 2008
                                    
                                    
                                    5,609,021
                                    
                                    
                                    $
                                    0.15-1.05
                                    
                                    
                                    1.52 years
                                    
                                    
                                    $
                                    422,029
                                    
                                    
                                    $
                                    0.75Exercisable
      at December 31, 2006
                                    
                                    
                                    2,000,000
                                    
                                    
                                    $
                                    0.07-0.15
                                    
                                    
                                    2.52
      years
                                    
                                    
                                    $
                                    0.00
                                    
                                    
                                    $
                                    0.08Exercisable
      at December 31, 2007
                                    
                                    
                                    5,197,400
                                    
                                    
                                    $
                                    0.15-1.05
                                    
                                    
                                    2.03
      years
                                    
                                    
                                    $
                                    402,300
                                    
                                    
                                    $
                                    0.56Exercisable
      at December 31, 2008
                                    
                                    
                                    5,609,021
                                    
                                    
                                    $
                                    0.15-1.05
                                    
                                    
                                    1.52
      years
                                    
                                    
                                    $
                                    422,029
                                    
                                    
                                    $
                                    0.75




NOTE
13:                    CONCENTRATIONS
OF CREDIT AND OTHER RISKS





Accounts
Receivable





The
Company’s accounts receivable result from credit sales to customers. The Company
had four and three customers whose sales were greater than 10% for the years
ended December 31, 2008 and December 31, 2007, respectively. These customers
represented 72.2% and 57.9% of the Company’s total revenues for the years ended
December 31, 2008 and December 31, 2007, respectively. Those same customers
accounted for 100% and 71.6% of the Company’s net accounts receivable balance at
December 31, 2008 and December 31, 2007, respectively.
 
 Sales to
the Company’s four customers whose sales were greater than 10% for the year
ended December 31, 2008 totaled 28.5%, 17.9%, 14.2%, and 11.6% of total revenues
in 2008. Sales to the Company’s three customers whose sales were greater than
10% for the year ended December 31, 2007 totaled 24.9%, 17.5%, and 15.5% of
total revenues in 2007.
 
 The loss
of any of these significant customers would have a temporary adverse effect on
the Company’s revenues, which would continue until the Company located new
customers to replace them
 
 The
Company routinely assesses the financial strength of its customers and provides
an allowance for doubtful accounts as necessary.
  Inventories





The
Company has two products, one of which is produced in the Company’s production
facility and the other product sold by the Company is purchased from one
supplier. The failure of this supplier to meet its commitment on schedule could
have a material adverse effect on the Company’s business, operating results and
financial condition. If the sole-source supplier were to go out of business or
otherwise become unable to meet its supply commitments, the process of locating
and qualifying alternate sources could require up to several months, during
which time the Company’s sales could be delayed. Such delays could have a
material adverse effect on the Company’s business, operating results and
financial condition.






F-31
 Advanced
Medical Isotope Corporation
 (A Development Stage
Company)
 Notes
to Consolidated Financial Statements
 For
the years ended December 31, 2008 and 2007
  NOTE
14:                    SUPPLEMENTAL
CASH FLOW INFORMATION





During
the year ended December 31, 2008, the Company had the following non-cash
investing and financing activities:
 
 ·
              Increased
      prepaid expense paid with stock by $45,250, increased common stock by $87,
      and increased paid in capital by
$45,163.
 
 ·
              Increased
      stock based consulting fee payable by $117,344, increased common stock by
      $241, and increased paid in capital by
$117,103.
 
 ·
              Decreased
      accounts payable $22,060, and increased common stock $130, and increased
      paid in capital $21,930.
 
 ·
              Decreased
      common stock subscriptions by $202,500, increased common stock by $919,
      increased paid in capital by
$201,581.
 
 During
the year ended December 31, 2007, the Company had the following non-cash
investing and financing activities:
 
 ·
              Increased
      prepaid expense paid with stock by $561,000, increased common stock by
      $867, and increased paid in capital by
$560,133.
 
 ·
              Increased
      patent license fee by $75,000, increased common stock by $250, and
      increased paid in capital by
$74,750.
 
 ·
              Increased
      common stock by $160, increased paid in capital by $119,840, decreased
      note payable – related party by $80,000, and increased loss on debt
      extinguishment by $40,000.
 
 ·
              Increased
      common stock by $300, increased paid in capital by $167,200, decreased
      preferred stock redeemable as common by $167,495, and decreased
      convertible preferred stock by $5.
 
 During
the year ended December 31, 2006, the Company had the following non-cash
investing and financing activities:
 
 ·
              Increased
      prepaid consulting by $165,000, increased common stock by $850, and
      increased paid in capital by
$164,150.
 
 ·
              Increased
      preferred stock redeemable as common by $3,207,525, increased convertible
      preferred stock by $100, and increased license fees by
      $2,897,625.
 
 ·
              Increased
      common stock subscription payable and paid in capital by
      $30,000.








NOTE
15:                      SUBSEQUENT
EVENTS
 In
January 2009 the Company made a $25,000 deposit towards a $235,000 used
Cyclotron.
 
 In
February 2009 the Company issued 80,000 shares of its common stock valued at
$0.42 per share on the date of issuance, in exchange for business consulting
services.
 
 In March
2009 the Company issued100,000 shares ofits common stock valued at $0.30 per share on the
date of issuance, in exchange for business consulting services.
 
 In March
2009 the Company issued 33,333 shares of its common stock valued at $0.36 per
share on the date of issuance, in exchange for business consulting
services.
 
 In March
2009 one of the members of the Board of Directors converted 95,000 shares of the
Company’s Series A Preferred Stock into 10,857,142 shares of the Company’s
common stock. The Series A Preferred Shares were originally issued in September,
2006 to Utek Corporation for the Company’s purchase of technology from Utek. The
board member acquired the Company’s Series A Preferred Stock from Utek in
February 2009. The Series A Preferred Stock conversion was based on the
Company’s common stock’s average closing price for the ten trading days before
the date of conversion.
 
 In March
2009 the Company received $100,000 in exchange for a convertible, 10%, one year,
note. The note plus interest is convertible at the option of the note holder
into common stock shares at $0.15 per share. In addition the Company issued the
note holder 40,000 shares of its common stock as a loan origination
fee.
 
 In March
2009 the Company sold 37,037 common stock shares at $0.27 per
share.
 
 In March
2009 the Company sold 1,500,000 common stock shares at $0.15 per share and
issued 750,000 two year warrants.
 
 In
February and March the Company received $22,800 from an officer and shareholder
for funds needed to meet operating expenses. The Company repaid $4,700 leaving a
balance of $18,100 at March 31, 2009.
   F-32
  ITEM
15. EXHIBITS.
 
 ExhibitNumber
                                        Description3.1
                                        
                                        Certificate
      of Incorporation of Savage Mountain Sports Corporation dated January 11,
      2000. (1)3.2
                                        
                                        By-Laws(1)3.3
                                        
                                        Articles
      and Certificate of Merger of HHH Entertainment Inc. and Savage Mountain
      Sports Corporation dated April 3, 2000.(1)3.4
                                        
                                        Articles
      and Certificate of Merger of Earth Sports Products Inc. and Savage
      Mountain Sports Corporation dated May 11, 2000.(1)3.5
                                        
                                        Certificate
      of Amendment of Certificate of Incorporation changing the name of the
      Company to Advanced Medical Isotope Corporation dated May 23, 2006.(1)3.6
                                        
                                        Certificate
      of Amendment of Certificate of Incorporation increasing authorized capital
      dated September 26, 2006.(1)10.1
                                        
                                        Agreement
      and Plan of Reorganization, dated as of December 15, 1998, by and among
      HHH Entertainment, Inc. and Earth Sports Products, Inc.(1)10.2
                                        
                                        Agreement
      and Plan of Merger of HHH Entertainment, Inc. and Savage Mountain Sports
      Corporation, dated as of January 6, 2000.(1)10.3
                                        
                                        Employment
      Agreement dated August 15, 2006 with William J. Stokes.(1)10.4
                                        
                                        Agreement
      and Plan of Acquisition by and between Neu-Hope Technologies, Inc., UTEK
      Corporation and Advanced Medical Isotope Corporation dated September 22,
      2006. (1)10.5
                                        
                                        Employment
      Agreement dated May 16, 2007 with Leonard Bruce Jolliff. (1)10.6
                                        
                                        Agreement
      and Plan of Acquisition by and between Isonics Corporation and Advanced
      Medical Isotope Corporation dated June 13, 2007. (1)10.7
                                        
                                        Employment
      Agreement dated January 15, 2008 with Dr. Fu-Min Su. (1)23.1
                                        
                                        Consent of HJ & Associates, LLC
      (3)31.1
                                        
                                        Certification of Chief Executive Officer pursuant
      to Sec. 302 of the Sarbanes-Oxley Act of 2002 (3)31.2
                                        
                                        Certification of Chief Financial Officer
      pursuant to Sec. 302 of the Sarbanes-Oxley Act of 2002
    (3)32
                                        
                                        Certification of Chief Executive Officer and Chief
      Fiancial Officer pursuant to 18 U.S.C. SECTION 1350
  (3)
 1.
Incorporated by reference to the Company's Registration Statement on Form 10 as
filed with the SEC on November 12, 2008.
 2.
Incorporated by reference to the Company's Registration Statement on Form 10/A
as filed with the SEC on February 17, 2009.
 3. Filed
herewith.
   SIGNATURES
 
 In
accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
  ADVANCED
      MEDICAL ISOTOPE CORPORATIONDate: April
      15, 2009
                By:
                /s/ James
      C. KatzaroffName:
      James C. KatzaroffTitle:
      Chief Executive Officer and Chairman
  Pursuant to the requirements of the
Securities Act of 1933, this registration statement or amendment has been signed
below by the following persons in the capacities and on the dates
indicated.
  Date: April
      15, 2009
                        By:
                        /s/ William
      J. StokesWilliam
      J. StokesDirector
 
 Date: April
      15, 2009
                      By:
                      /s/ Carlton
      CadwellCarlton
      CadwellDirector
 
 Date: April
      15, 2009
                      By:
                      /s/ William
      E. RootWilliam
      E. RootDirector
   32