As filed with the Securities and Exchange Commission on November 12, 2008

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10

GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(B) OR (G) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number ______
 

ADVANCED MEDICAL ISOTOPE CORPORATION

(Exact name of registrant as specified in its charter)
 
Delaware
80-0138937
(State or other jurisdiction of
(I.R.S. Employer
incorporation or organization)
Identification Number)
   
8131 W. Grandridge Blvd.  Suite B. Kennewick WA
99336
(Address of principal executive offices)
(Zip Code)

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

Copies to:

James C. Katzaroff
Advanced Medical Isotope Corporation
8131 W. Grandridge Blvd.  Suite B
Kennewick WA, 99336
(509)736-4000

Andrea Cataneo, Esq.
Sichenzia Ross Friedman Ference LLP
61 Broadway, 32 nd Floor
New York, NY 10006
(212) 930-9700

Securities to be registered under Section 12(b) of the Act: Not Applicable

Securities to be registered under Section 12(g) of the Exchange Act:
 
  Title of each class
 
  Name of Exchange on which to be so registered each class is to be registered
Common Stock, $.001 par value
 
N/A
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
 
Large accelerated filer
o    
Accelerated filer
o
Non-accelerated filer
o
(Do not check if a smaller reporting company)
 
Smaller reporting company
x




 
1

 

TABLE OF CONTENTS
 
ITEM 1. DESCRIPTION OF BUSINESS. 
4
     
ITEM 1A. RISK FACTORS.
9
     
ITEM 2. FINANCIAL INFORMATION.
16
     
ITEM 3. DESCRIPTION OF PROPERTY. 
20
     
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
21
     
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS. 
21
     
ITEM 6. EXECUTIVE COMPENSATION. 
23
     
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. 
27
     
ITEM 8. LEGAL PROCEEDINGS. 
28
     
ITEM 9. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. 
28
     
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES.
29
     
ITEM 11.  DESCRIPTION OF REGISTRANT’S SECURITIES TO BE REGISTERED. 
31
     
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS. 
31
     
ITEM 13.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. 
32
     
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. 
32
     
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS. 
33
     
  INDEX TO EXHIBITS
34
     
  SIGNATURES
35
 



 
2

 


As used in this Form 10, unless the context otherwise requires the terms “we,” “us,” “our,” and the “Company” refer to Advanced Medical Isotope Corporation, a Delaware corporation, and its subsidiaries.
 
FORWARD-LOOKING STATEMENTS
 
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 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, 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.
 
WHERE YOU CAN FIND MORE INFORMATION ABOUT US
 
When our Registration Statement on Form 10 becomes effective, we will file reports, proxy statements, information statements and other information with the Securities and Exchange Commission. You may read and copy this information, for a copying fee, at the SEC’s public reference room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for more information on its public reference rooms. Our Securities and Exchange Commission filings are also available to the public from commercial document retrieval services, and at the web site maintained by the Securities and Exchange Commission at http://www.sec.gov.
 
Our internet address is www.isotopeworld.com. We will make available through a link to the SEC’s web site, electronic copies of the materials we file with the SEC (including our annual reports on Form 10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K, the Section 16 reports filed by our executive officers, directors and 10% shareholders and amendments to those reports). To receive paper copies of our SEC materials, please contact us by mail addressed to James C. Katzaroff, Chief Executive Officer, Advanced Medical Isotope Corporation, 8131 W. Grandridge Blvd.  Suite B,  Kennewick WA, 99336.
 
 
 
 
 
 
 

 
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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 from UTEK Corporation (“UTEK”), a Delaware corporation. 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.
 
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 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.
 
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.
 
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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.
 
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 will soon offer Indium Chloride sterile solution and Indium Oxine. 
 
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 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.
 

 
5

 
 
ITEM 1.   DESCRIPTION OF BUSINESS. - continued

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). 

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 a lso 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 the our production center is a proton linear accelerator (PULSAR®) manufactured by AccSys Technology, Inc. of Pleasanton, CA, a Hitachi Company.  We have targeted this compact isotope production system as our core differentiated technology. 
 
The compact LINAC PET Isotope Production systems (PULSAR®) are proton accelerators 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.
 
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.
 

 
6

 
 
ITEM 1.   DESCRIPTION OF BUSINESS. - continued
 
Manufacturing - continued
 
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 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.
 
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”) entered into by NHTI on August 30, 2006.  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 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, we agreed to pay royalties equal to the greater of three percent of the selling price of each licensed product we sell or the maintenance fee according to the following schedule:
 
2008
  $ 10,000  
2009
  $ 15,000  
2010
  $ 15,000  
2011
  $ 45,000  
2012 and each year thereafter
  $ 60,000  
 
The License Agreement may be cancelled by giving 90 days written notice to the University.

Raw Materials

We obtain stable isotopes from suppliers in Russia. We obtain supplies, hardware, handling equipment and packaging from several different U.S. suppliers.
 
Customers
 
Our customers include a broad range of manufacturers of medical products including pharmaceutical manufacturers, biotechnology companies, and manufacturers of medical supplies and devices, in addition to academic and government institutions. These customers are located in essentially all major international markets.
 
The company is also working with United Pharmacy Partners Inc (UPPI), which helps to supply approximately 120 nuclear pharmacies.
 
 
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 September 30, 2008, 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 $1,200 and $0.00 during the years ended December 31, 2007 and December 31, 2006, 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 for the production of Actinium 225;
 
 
·
$3,040,000 of preferred stock issuance for a patent license 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 production of isotopes, customer lists, contracts and agreements with third party companies, and certain equipment.
 
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. Costs and expenses resulting from such liability may 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.
 
9

 
ITEM 1A. RISK FACTORS. - continued
 
RISKS ASSOCIATED WITH OUR BUSINESS - continued
 
We have increasing cash requirements .
 
We have generated material operating losses since inception. 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.
 
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.
 
In those countries or regions where we may encounter operational constraints due to political, religious, economical, or other reasons, we may appoint local reputable IT firms as distributors or partnerships to represent us locally.  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.
 
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ITEM 1A. RISK FACTORS. - continued  
 
RISKS ASSOCIATED WITH OUR BUSINESS - continued
 
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.
 
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.
 
 
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ITEM 1A. RISK FACTORS. - continued  
 
RISKS ASSOCIATED WITH OUR BUSINESS - continued
 
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.
 
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.
 
12

 
ITEM 1A. RISK FACTORS. - continued  
 
RISKS ASSOCIATED WITH OUR BUSINESS - continued
 
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.  
 
We are 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 results 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 are 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 incur, and expect to continue 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.
 
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.
 
 
13

 
ITEM 1A. RISK FACTORS. - continued
 
RISKS ASSOCIATED WITH OUR BUSINESS - continued
 
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. 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 June 30, 2008, we had 35,081,222 outstanding shares of common stock, and the following additional shares were reserved for issuance: 2,472,400 shares upon exercise of outstanding options, 2,375,700 shares upon exercise of outstanding warrants, and 3,050,358 shares upon conversion of preferred stock. 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.
 
 
14

 
ITEM 1A. RISK FACTORS. - continued  
 
RISKS RELATED TO OUR COMMON STOCK -  continued
 
Our controlling shareholders may exercise significant control over us.
 
Currently, our directors, executive officers and principal shareholders beneficially owned approximately 52.5 % 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 conversion of the preferred stock and 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 7,900,000 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.  
 

 
15

 
 
ITEM 1A. RISK FACTORS. - continued  
 
RISKS RELATED TO OUR COMMON STOCK -  continued
 
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 2.   FINANCIAL INFORMATION.
 
Management’s Discussion and Analysis of Financial Condition and Results of Operation
 
Results of Operations
 
We are considered a development stage company in accordance with Statement of Financial Accounting Standard No. 7 as we have started operations, but we have not generated significant revenue.
 
The following table sets forth information from our statements of operations for the six months ended June 30, 2008 and the years ended December 31, 2007 and 2006.
 
   
Six Months Ended
June 2008
   
Year Ended
December 31, 200 7
   
Year Ende d
December 31, 2006
 
   
(unaudited)
             
Revenues
  $ 83,421     $ 130,055       -  
Cost of goods sold
    75,640       55,841       -  
Gross profit
    7,781       74,214       -  
Operating expenses
    2,648,894       2,664,621     $ 1,221,602  
Operating loss
    (2,641,113 )     (2,590,407 )     (1,221,602 )
Non-operating expenses
    -       (40,000 )     (57,500 )
Interest expense
    (55,669 )     (238,984 )     (93,521 )
Net income (loss)
  $ (2,696,782 )   $ (2,869,391 )   $ (1,372,623 )
 
 
16

 
ITEM 2.   FINANCIAL INFORMATION. - continued
 
Revenue
 
Revenue was $83,421 for the six months ended June 30, 2008.  During the 12 months ended December 31, 2007, the revenues were $130,055 compared to the 12 months ended December 31, 2006 when the revenues were $0.  During the 2006 fiscal year, we had not yet commenced our principal planned operations.
 
Cost of Goods Sold
 
Cost of Goods Sold for the six months ended June 30, 2008 was $75,640.  Cost of goods sold for our fiscal year ended December 31, 2007 was $55,841.  The costs of goods sold for the fiscal year ended December 31, 2006 was $0.  The company had not yet commenced operations during the 2006 fiscal year.
 
Operating Expenses
 
Operating expenses for the year ended December 31, 2007 was $2,664,621 and $1,221,602 for the year ended December 31, 2006.  The increase in operating expenses can be attributed largely to amortization of licenses and intangible assets ($1,135,841 for the year ended December 31, 2007 versus $321,958 for the year ended December 31, 2006), stock options granted ($592,447 for the year ended December 31, 2007 versus $140,000 for the year ended December 31, 2006) and additional payroll expense ($197,557 in payroll expenses for the year ended December 31, 2007 versus $36,053 for the year ended December 31, 2006).
 
Net Loss
 
Our net loss for the year ended December 31, 2007 was $2,869,391 compared to $1,372,623 for the year ended December 31, 2006.  Our net loss for the six months ended June 30, 2008 was $2,234,955.
 
Liquidity and Capital Resources
 
At June 30, 2008, we had negative working capital of $4,060,030, as compared with $3,373,417 at December 31, 2007 and $3,244,190 at December 31, 2006.  During the six months we experienced negative cash flow from operations of $737,786, and we expended $1,515,232 for investing activities while adding $2,221,507 from financing activities.  As of June 30, 2008, we had $150,000 commitments for capital expenditures.
 
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 our aggressive growth plans.  We may, however, choose to modify our growth and operating plans to the extent of available funding, if any.
 
Contractual Obligations (payments due by period)

Contractual Obligation
 
Total Payments Due
   
Less than 1 Year
   
1-3 Years
   
3-5 Years
 
More than 5 Years
Capital Lease Obligation
    2,505,125       442,025       1,441,800       621,300    
Production center lease
    207,896       45,080       158,054       4,762    
Corporate office lease
    116,411       60,736       55,675            
License agreement with Regents of the University of California
    320,000       10,000       70,000       180,000  
60,000 each year thereafter
 
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.
 
 
17

 
ITEM 2.   FINANCIAL INFORMATION. - continued
 
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. FAS 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. We have not yet completed our evaluation of the impact of adopting SFAS 155 on our results of operations or financial position, but do not expect the adoption to have a material impact.
 
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. We have not yet completed our evaluation of the impact of adopting SFAS 156 on our results of operations or financial position, but do not expect that the adoption of SFAS 156 will have a material impact.
 
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. We are in the process of evaluating the impact of the adoption of this Interpretation. We do not expect this Interpretation to have a material impact on our financial position or results of operations.
 
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. We are currently evaluating the impact of this statement and do not expect the adoption of this pronouncement to have a material impact on our financial position or results of operations.
 
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. We are currently evaluating the potential impact of this statement and do not expect the adoption of this pronouncement to have a material impact on our financial position or results of operations.
 
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. The adoption of this pronouncement is not expected to have an impact on our financial position, results of operation or cash flows.
 
 
18

 
ITEM 2.   FINANCIAL INFORMATION. - continued
 
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. The adoption of this pronouncement is not expected to have a material impact on our financial position, results of operations or cash flows.
 
Quantitative and Qualitative Disclosures about Market Risk
 
We have not entered into any derivative contracts.
 
Principal 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.

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.
 
 
19

 
ITEM 2.   FINANCIAL INFORMATION. - continued
 
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 3.   DESCRIPTION OF PROPERTY.
 
 On July 17, 2008, 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 was $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.
 
 
20

 
ITEM 4.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
 
(a) Security ownership of certain beneficial owners.
 
The following table sets forth, as of November 12, 2008, 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 November 12, 2008, there were 35,085,041 shares outstanding.
 
Name and Address
 
Amount and Nature of
Beneficial Ownership (1)
   
Percentage of Class
 
James C. Katzaroff, President and Chairman
   
7,713,335
     
21.8
 
William J. Stokes, Chief Executive Officer
   
2,500,000
     
7.1
 
L. Bruce Jolliff, CFO
   
500,000
     
1.4
 
Carlton Cadwell, Director
   
7,869,670
     
22.4
 
William E. Root, Director
   
250,000
     
*
 
     
 
         
All Officers and Directors as a group (5 individuals)
   
18,833,005
     
52.5
 
UTEK (2)    
6,049,931
     
14.7
 
                 
 *          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 November 12, 2008, (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 November 12, 2008, 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 250,000 options currently exercisable by James C. Katzaroff and 500,000 options currently exercisable by L. Bruce Jolliff.
   
(2)
Common stock issuable to 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   As of the end of trading on November 7, 2008, the 10 day average closing price was $0.554.
 
 
ITEM 5.   DIRECTORS AND EXECUTIVE OFFICERS.
 
Our officers and directors and additional information concerning them are as follows:
 
NAME
 
AGE
 
POSITION
James C. Katzaroff
 
51
 
President and Chairman
William J. Stokes
 
56
 
Chief Executive Officer
L. Bruce Jolliff
 
58
 
Chief Financial Officer
Carlton Cadwell
 
64
 
Director
William E. Root
 
64
 
Director
 

 
21

 
ITEM 5.   DIRECTORS AND EXECUTIVE OFFICERS - continued
 
James C. Katzaroff, President 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 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.
 
Leonard Bruce Jolliff, Chief Financial Officer
 
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. 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.
 
Carl Cadwell, Director
 
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
 
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.
 
 
22

 
ITEM 5.   DIRECTORS AND EXECUTIVE OFFICERS - continued
 
B. Significant Employees.
 
Fu-Min Su, Chief Radiochemist

Fu Min Su, Ph.D., is AMIC's Chief Radio-Chemist and Radiation Safety Officer.  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, Nycomed-Amersham, Bristol-Myers Squibb, and Cellectar, 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.
 
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.
 
E. Committees
 
The Board of Directors acts as the Audit Committee and the Board has no separate committees. The Company has no qualified financial expert sitting on the Board at this time because it has not been able to hire a qualified candidate. Further, the Company believes that it has inadequate financial resources at this time to hire such an expert. The Company intends to continue to search for a qualified individual for hire.
 
 
ITEM 6. EXECUTIVE COMPENSATION.
 
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.
 
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 and December 31, 2007 and the 9 month period ended September 30, 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, President and Chairman
2006
  $ 36,053     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 36,053  
2007
  $ 112,034     $ 0     $ 0     $ 67,215     $ 0     $ 0     $ 0     $ 179,249  
2008
  $ 128,614     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 128,614  
William J. Stokes, Chief Executive Officer
2006
  $ 0     $ 0     $ 105,000     $ 0     $ 0     $ 0     $ 0     $ 105,000  
2007
  $ 0     $ 30,000     $ 70,000     $ 0     $ 0     $ 0     $ 0     $ 100,000  
2008
  $ 40,000     $ 8,500     $ 0     $ 0     $ 0     $ 0     $ 0     $ 48,500  
L. Bruce Jolliff, CFO
2006
  $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0       -  
2007
  $ 101,124     $ 0     $       $ 1,046,837     $ 0     $ 0     $ 0     $ 1,147,961  
2008
  $ 77,773     $ 25,000     $ 0     $ 0     $ 0     $ 0     $ 0     $ 102,773  
Fu-Min Su, Chief Radiochemist
2006
  $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0  
2007
  $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0  
2008
  $ 52,692     $ 5,000     $ 37,500     $ 0     $ 0     $ 0     $ 0     $ 95,192  

 

 
23

 
 
ITEM 6. EXECUTIVE COMPENSATION - continued
 
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 Awards
Name
 
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
 
-
 
-
 
-
 
-
                                                   
William J. Stokes
   
-
       -  
-
 
-
    -       -  
-
 
-
 
-
 
-
               
 
                                 
L. Bruce  Jolliff
   
5-16-07
     
500,000
 
-
 
1,000,000
  $
0.50
     
5-16-2012
 
-
 
-
 
-
 
-
                                                     
 
Employment/Consulting Agreements
 
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 GRANTS DURING LAST FISCAL YEAR
 
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 $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
 
 
 
24

 
ITEM 6. EXECUTIVE COMPENSATION - continued
 
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 $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 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
 
 
 
 

 
25

 
 
ITEM 6. EXECUTIVE COMPENSATION - continued
 
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
 
 
DIRECTOR COMPENSATION
 
Two of the three Directors were issued 250,000 options September 1, 2006 @ $0.07 and all these were exercised in 2007.
 
Each of the three Directors were issued 250,000 options January 23, 2007 @ $0.29. Only one Director has exercised their options.
 
POTENTIAL CONFLICTS OF INTEREST
 
The President and Chairman of the Board owns majority interest in Mirari Corporation (“Mirari”).  The Company has had business dealing with Mirari and intends to acquire all the assets of Mirari during the year 2008.  See Item 7 “CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS” below.
 
  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.
 
 
26

 
ITEM 7.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
 
Indebtedness from related parties
 
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 and common stock of Mirari during the year 2008.
 
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 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 and began renting office and warehouse space 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 1 st until they become $4,762 as of August 1, 2011. During the year ended December 31, 2007 the Company incurred rent expenses for this facility totaling $17,500. 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 six months ended June 30, 2008 and the year ended December 31, 2007 the Company amortized $18,750 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 June 30, 2008, are as follows:
 
Twelve months ended June 30, 2009
  $ 45,080  
Twelve months ended June 30, 2010 
    48,686  
Twelve months ended June 30, 2011
    52,581  
Twelve months ended June 30, 2012 
    56,788  
Twelve months ended June 30, 2013   
    4,762  
Total   
  $ 207,897  
 
 

 
27

 
 
ITEM 7.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS - continued
 
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 six months ended June 30, 2008 the Company incurred rent expenses for this facility totaling $1,340.
 
Future minimum rental payments required under the Company’s current rental agreement in excess of one year as of June 30, 2008, are as follows:
 
Twelve months ended June 30, 2009
  $ 60,736  
Twelve months ended June 30, 2010 
    55,675  
Twelve months ended June 30, 2011
    -  
Twelve months ended June 30, 2012 
    -  
Twelve months ended June 30, 2013   
    -  
Total   
  $ 116,411  
 
 
ITEM 8.   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 9.   MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
 
(a) Market Information.
 
Our common stock has traded over-the-counter on the OTC Pink Sheets under the symbol “ADMD.PK” since May 2006.  The following table sets forth the quarterly high and low bid information for our common stock for the period January 1, 2006 through September 30, 2008:
 
   
High Bid
   
Low Bid
 
Fiscal Year Ended December 31, 2006
           
             
First Fiscal Quarter
  $ .01     $ .0001  
Second Fiscal Quarter
    .35       .0030  
Third Fiscal Quarter
    .26       .0500  
Fourth Fiscal Quarter
    .24       .1100  
                 
Fiscal Year Ended December 31, 2007
               
                 
First Fiscal Quarter
  $ 1.04     $ 0.10  
Second Fiscal Quarter
    0.98       0.64  
Third Fiscal Quarter
    0.87       0.39  
Fourth Fiscal Quarter
    0.50       0.40  
                 
Fiscal Year Ended December 31, 2008
               
                 
First Fiscal Quarter
  $ 0.84     $ 0.56  
Second Fiscal Quarter
    0.89       0.44  
Third Fiscal Quarter
    0.78       0.35  

 

 
28

 
 
ITEM 9.   MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS - continued
 
Holders
 
As of October 3, 2008 there were 35,085,041 shares of common stock outstanding and approximately 98 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. Information about outstanding options and warrants is as follows:
 
 
Holder
 
Shares Underlying Option/Warrant (1)
 
Exercise Price (1)
 
 
Expiration Date
James C. Katzaroff
    250,000    
$ 0.29
 
1/23/2010
L. Bruce Jolliff
    1,500,000    
$ 0.50
 
5/16/2012
William E. Root
    250,000    
$ 0.29
 
1/23/2010
Others
    3,712,386    
$ 0.17 to $1.05
 
11/14/08 to 12/31/13

 
ITEM 10.   RECENT SALES OF UNREGISTERED SECURITIES.
 
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.
 
In September 2006, we issued 500,000 shares of our common stock to Dr. Robert Schenter in consideration for his service as Chair of the Scientific Advisory Committee.
 
In September 2006, we issued 300,000 shares of our common stock to Monahan & Biagi (Lost Nations LLC) in exchange for debt.
 
In September 2006, we issued 100,000 shares of our common stock to Judge John Shock for cash received in 1997.
 
In September 2006, we issued 30,000 shares of our common stock to Neil Smiley for cash received in 1997.
 
 
29

 
ITEM 10.   RECENT SALES OF UNREGISTERED SECURITIES - continued
 
In September 2006, we issued 20,000 shares of our common stock to Brad Toner for cash received in 1997.
 
In January 2007, we issued 250,000 shares of our common stock to James C. Katzaroff in consideration for his services as a director of the corporation.
 
In January 2007, we issued 250,000 shares of our common stock to Carlton M. Cadwell in consideration for his services as a director of the corporation.
 
In January 2007, we issued 250,000 shares of our common stock to William E. Root in consideration for his services as a director of the corporation.
 
In April 2007, we issued 19,150 shares of our common stock to Walter J. Kilpatrick in consideration for cash received in 2007.
 
In April 2007, we issued 21,127 shares of our common stock to Eastside Commercial Properties in consideration for cash received in 2007.
 
In April 2007, we issued 70,000 shares of our common stock to Neil and Joyce Smiley in consideration for cash received in 2007.
 
In April 2007, we issued 2000 shares of our common stock to Kevin and Jeannette Kirkpatrick in consideration for cash received in 2007.
 
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 240,178 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.
 
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 42,678 shares of its common stock as bonus compensation to the Chief Science Officer.
 
During April 2008, the Company issued 50,000 shares of its common stock as bonus compensation to employees.
 
During April 2008, the Company issued 70,000 shares of its common stock in exchange for business consulting services.
 
 
30

 
ITEM 11.  DESCRIPTION OF REGISTRANT’S SECURITIES TO BE REGISTERED.
 
The Company is authorized by its Certificate of Incorporation to issue an aggregate of 100,000,000 shares of common stock, par value $0.001 per share (the "Common Stock") and 100,000 shares of Series A preferred stock, par value $0.001 per share (the “Preferred Stock”). As of October 3, 2008, 35,085,041 shares of Common Stock were issued and outstanding.
 
All outstanding shares of Common Stock are of the same class and have equal rights and attributes. The holders of Common Stock are entitled to one vote per share on all matters submitted to a vote of stockholders of the Company. All stockholders are entitled to share equally in dividends, if any, as may be declared from time to time by the Board of Directors out of funds legally available. In the event of liquidation, the holders of Common Stock are entitled to share ratably in all assets remaining after payment of all liabilities. The stockholders do not have cumulative or preemptive rights.
 
The description of certain matters relating to the securities of the Company is a summary and is qualified in its entirety by the provisions of the Company's Certificate of Incorporation and By-Laws, copies of which have been filed as exhibits to this Form 10.
 
 
ITEM 12.   INDEMNIFICATION OF DIRECTORS AND OFFICERS.
 
Section 145 of the Delaware General Corporation Law provides that a corporation may indemnify directors and officers as well as other employees and individuals against expenses including attorneys' fees, judgments, fines and amounts paid in settlement in connection with various actions, suits or proceedings, whether civil, criminal, administrative or investigative other than an action by or in the right of the corporation, a derivative action, if they acted in good faith and in a manner they reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, if they had no reasonable cause to believe their conduct was unlawful. A similar standard is applicable in the case of derivative actions, except that indemnification only extends to expenses including attorneys' fees incurred in connection with the defense or settlement of such actions, and the statute requires court approval before there can be any indemnification where the person seeking indemnification has been found liable to the corporation. The statute provides that it is not exclusive of other indemnification that may be granted by a corporation's certificate of incorporation, bylaws, agreement, a vote of stockholders or disinterested directors or otherwise.
 
The Company’s Certificate of Incorporation provides that it will indemnify and hold harmless, to the fullest extent permitted by Section 145 of the Delaware General Corporation Law, as amended from time to time, each person that such section grants us the power to indemnify.
 
 
31

 
ITEM 12.   INDEMNIFICATION OF DIRECTORS AND OFFICERS - continued
 
The Delaware General Corporation Law permits a corporation to provide in its certificate of incorporation that a director of the corporation shall not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability for:
 
any breach of the director's duty of loyalty to the corporation or its stockholders;
 
acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;
 
payments of unlawful dividends or unlawful stock repurchases or redemptions; or
 
any transaction from which the director derived an improper personal benefit.
 
 The Company’s Certificate of Incorporation provides that, to the fullest extent permitted by applicable law, none of our directors will be personally liable to us or our stockholders for monetary damages for breach of fiduciary duty as a director. Any repeal or modification of this provision will be prospective only and will not adversely affect any limitation, right or protection of a director of our company existing at the time of such repeal or modification.
 
 
ITEM 13.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
 
Our financial statements together with the related notes and the report of HJ & Associates, L.L.C. and Cordovano and Honeck LLP, independent registered public accounting firms, are set forth in Item 15 of this Form 10.
 
 
ITEM 14.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
 
There are not and have not been any disagreements between the Registrant and its accountants on any matter of accounting principles, practices or financial statement disclosure.
 
We dismissed Cordovano and Honeck LLP (“C&H LLP”)as our independent auditors and engaged HJ & Associates, LLC as ourindependent auditors to audit its financial statements for its year ending December 31, 2007. This decision was approved by our Board of Directors. Prior to such engagement, we did not consult with HJ & Associates, LLC regarding the application of accounting principles to a specific, completed or contemplated transaction, or the type of audit opinion that might be rendered on our financial statements.  There have been no disagreements with C&H LLP on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of C&H LLP, would have caused it to make reference to the subject matter of the disagreements in connection with its reports.  C&H LLP audited our financial statements for the year ended December 31, 2006 and C&H LLP’s report for these periods did not contain an adverse opinion or a disclaimer of opinion, nor was it modified as to uncertainty, audit scope, or accounting principles.
 

 
32

 

ITEM 15.  FINANCIAL STATEMENTS AND EXHIBITS.

Advanced Medical Isotope Corporation
(A Development Stage Company)
Index to Financial Statements

 
 
  Page
   
Report of Independent Registered Public Accounting Firm for 2007 
F-1
   
Report of Independent Registered Public Accounting Firm for 2006
F-2
   
Financial Statements:
 
Balance Sheets as of December 31, 2007 and 2006
F-3
   
Statements of Operations for the years ended December 31, 2007 and 2006
F-4
   
Statements of Shareholders’ Equity (Deficit) for the years ended December 31, 2007 and 2006
F-5
   
Statements of Cash Flow for the years ended December 31, 2007 and 2006
F-7
   
Notes to Financial Statements
F-8
   
Financial Statements:  
Balance Sheets as of June 30, 2008 (unaudited) and December 31, 2007
F-29
   
Statements of Operations for the three months and the six months ended June 30, 2008 and 2007, respectively (unaudited)
F-30
   
Statement of Shareholders’ Equity (Deficit) for the six months ended June 30, 2008 (unaudited) 
F-31
   
Statements of Cash Flow for the six months ended June 30, 2008 and 2007 (unaudited)
F-32
   
Notes to Financial Statements
F-33
 


 
33

 


Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of
Advanced Medical Isotope Corporation
Kennewick, Washington

We have audited the balance sheet of Advanced Medical Isotope Corporation (a development stage enterprise) as of December 31, 2007, and the related statements of operations, shareholders’ equity (deficit) and cash flows for the year then ended and for the period from January 1, 2006 (inception of the development stage) through December 31, 2007.  These financial statements are the responsibility of the Company's management.  Our responsibility is to express an opinion on these financial statements based on our audit.  The financial statements for the period from January 1, 2006 (inception of the development stage) through December 31, 2006 were audited by other auditors whose report expressed an unqualified opinion on those statements.  Our opinion on the statements of operations, stockholders' equity (deficit), and cash flows for the period from January 1, 2006 (inception of the development stage) through December 31, 2007, insofar as it relates to amounts for prior periods through December 31, 2006, is based on the report of other auditors.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  We were not engaged to perform an audit of the Company’s internal control over financial reporting.  Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.  Accordingly, we express no such opinion.  An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  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 audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Advanced Medical Isotope Corporation as of December 31, 2007, and the results of its operations and its cash flows for the year then ended and for the period from January 1, 2006 (inception of the development stage) through December 31, 2007 in conformity with U.S. generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.  As discussed in Note 1 to the financial statements, the Company’s operating losses and lack of working capital raise substantial doubt about the Company's ability to continue as a going concern.  Management's plans in regard to these matters are also described in Note 1.  The financial statements do not include any adjustments that might result from the outcome of this uncertainty.



/s/ HJ & Associates, LLC
HJ & Associates, LLC
Salt Lake City, Utah
July 15, 2008

 
F-1

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders
Advanced Medical Isotope Corporation:


We have audited the balance sheet of Advanced Medical Isotope Corporation (a development stage enterprise) as of December 31, 2006, and the related statements of operations, changes in shareholder’s deficit, and cash flows, for the year ended December 31, 2006.  These financial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these financial statements based on our audit.

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

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Advanced Medical Isotope Corporation as of December 31, 2006, and the results of its operations and its cash flows for the year ended December 31, 2006 in conformity with accounting principles generally accepted in the United States of America.

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


/s/ Cordovano and Honeck LLP
Cordovano and Honeck LLP
Englewood, Colorado
February 28, 2008


 
F-2

 

Advanced Medical Isotope Corporation
(A Development Stage Company)
Balance Sheets
 
ASSETS
           
   
December 31,
2007
   
December 31,
2006
 
             
Current Assets:            
Cash and cash equivalents
  $ 54,508     $ 14,356  
Accounts receivable
    12,000       -  
Prepaid expenses paid with stock, current portion
    239,250       72,500  
Inventory
    28,400       -  
Total current assets
    334,158       86,856  
                 
Fixed assets, net of accumulated depreciation 
    875,044       -  
                 
Other assets:                
License fees, net of amortization  
    1,661,875       2,575,667  
Intangible assets, net of amortization   
    511,701       -  
Prepaid expenses paid with stock, long-term portion 
    161,563       15,000  
Deposits      
    5,928       -  
Total other assets
    2,341 067       2,590,667  
Total assets
  $ 3,550,269     $ 2,677,523  
                 
LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)
               
                 
Current liabilities:                
Accounts payable 
  $ 180,488     $ -  
Accrued interest payable  
    171,628       46,063  
Payroll liabilities payable 
    45,163       -  
Loan from shareholder     
    -       30,000  
Preferred stock redeemable as common 
    3,182,405       3,254,983  
Line of credit  
    40,908       -  
Current portion of capital lease obligations 
    86,983       -  
Total current liabilities  
    3,707,575       3,331,046  
                 
Long term liabilities:                
Capital lease obligations, net of current portion    
    581,630       -  
Total liabilities
    4,289,205       3,331,046  
                 
Shareholders’ Equity (Deficit):                
Preferred stock, $.001 par value; 100,000 authorized;
               
95 and 100 shares issued and outstanding, respectively    
    95       100  
Common stock, $.001 par value; 100,000,000 shares authorized;
               
31,664,631 and 26,537,045 shares issued and outstanding,
               
respectively   
    31,665       26,537  
Common stock subscriptions
    202,500       -  
Paid in capital    
    6,152,861       3,576,506  
Accumulated deficit     
    (2,884,043 )     (2,884,043 )
Deficit accumulated during the development stage     
    (4,242,014 )     (1,372,623 )
                 
Total shareholders’ equity (deficit)   
    (738,936 )     (653,523 )
Total liabilities and shareholders’ equity (deficit)    
  $ 3,550,269     $ 2,677,523  
 
 
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 of
 
         
 
   
development stage
 
   
Years ended
   
on January 1, 2006
 
   
December 31,
   
through December
 
   
2007
   
2006
   
31, 2007
 
                     
Revenues
  $ 130,055     $ -     $ 130,055  
Cost of goods sold
    55,841       -       55,841  
Gross profit
    74,214       -       74,214  
                         
                         
Operating expenses
                       
Sales and marketing expenses
    2,385       10,000       12,385  
Start up costs
    -       62,510       62,510  
Amortization expense
    1,135,841       321,958       1,457,799  
Professional fees
    607,379       579,208       1,186,587  
Stock options granted
    592,447       140,000       732,447  
Payroll expenses
    197,557       -       197,557  
General and administrative expenses
    129,012       107,926       236,938  
Total operating expenses
    2,664,621       1,221,602       3,886,223  
                         
Operating loss
    (2,590,407 )     (1,221,602 )     (3,812,009 )
                         
Non-operating income (expense):
                 
Interest expense
    (238,984 )     (93,521 )     (332,505 )
Investment loss
    -       (28,500 )     (28,500 )
Loss on conversion of shareholder loan
    (40,000 )     (29,000 )     (69,000 )
Non-operating income
                       
(expense), net
    (278,984 )     (151,021 )     (430,005 )
Income (Loss) before Income Taxes
    (2,869,391 )     (1,372,623 )     (4,242,014 )
                         
Income Tax Provision
    -       -       -  
                         
Net loss
  $ (2,869,391 )   $ (1,372,623 )   $ (4,242,014 )
                         
Loss per common share
  $ (0.100 )   $ (0.056 )        
                   
Weighted average common shares
                 
outstanding
    28,744,391       24,490,881          
 

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)
 

                                             
Deficit
       
                                             
Accumulated
       
   
Series A Preferred
                                 
during
       
   
Stock
   
Common Stock
   
Subscriptions
   
Paid in
   
Accumulated
   
development
       
   
Shares
   
Amount
   
Shares
   
Amount
   
Receivable
   
Capital
   
Deficit
   
Stage
   
Total
 
                                                       
Balances at December 31,
                                                     
2005, prior to inception of
                                                     
development stage
                                                     
company
    -     $ -       23,237,045     $ 23,237     $ 30,000     $ 2,830,806     $ (2,884,043 )   $ -     $ -  
                                                                         
Common stock issued for:
                                                                       
Services as of May 15, 2006
                                                                       
($.20 per share)
    -       -       600,000       600       -       119,400       -       -       120,000  
Compensation as of August 15,
                                                                       
2006 ($.18 per share)
    -       -       1,500,000       1,500       -       268,500       -       -       270,000  
Services September 1, 2006
                                                                       
($.18 per share)
    -       -       250,000       250       -       44,750       -       -       45,000  
Debt settlement October 10,
                                                                       
2006 ($.18 per share)
    -       -       300,000       300       -       53,700       -       -       54,000  
Compensation as of
                                                                       
September 1, 2006
                                                                       
($.18 per share)
    -       -       500,000       500       -       89,500       -       -       90,000  
Issuance of common stock
                                                                       
options August and
                                                                       
September 2006 pursuant
                                                                       
to exercise of options
    -       -       -       -       -       140,000       -       -       140,000  
Issuance of shares
                                                                       
December 6, 2006 for cash
                                                                       
received in 1999
    -       -       150,000       150       (30,000 )     29,850       -       -       -  
Issuance of preferred shares
                                                                       
September 22, 2006 for
                                                                       
acquisition of license
                                                                       
fees
    100,000       100       -       -       -       -       -       -       100  
Net 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 of
                                                                       
February 2007 ($.30
                                                                       
per share)
    -       -       250,000       250       -       74,750       -       -     $ 75,000  
Services March 2007
                                                                       
($.87 per share)
    -       -       250,000       250       -       217,250       -       -     217,500  
Cash April 2007
                                                                       
($.71 per share)
    -       -       112,277       112       -       79,605       -       -     79,717  
Options exercised May
                                                                       
2007 ($.07 per share)
    -       -       250,000       250       -       17,250       -       -     17,500  
Debt April 2007 ($.75
                                                                       
per share
    -       -       160,000       160       -       119,840       -       -     120,000  

 
F-5

 

Statements of Changes in Shareholders’ Equity (Deficit) - continued
 
                                             
Deficit
       
                                             
Accumulated
       
   
Series A Preferred
                                 
during
       
   
Stock
   
Common Stock
   
Subscriptions
   
Paid in
   
Accumulated
   
development
       
   
Shares
   
Amount
   
Shares
   
Amount
   
Receivable
   
Capital
   
Deficit
   
Stage
   
Total
 
                                                       
Cash June 2007 ($.40
                                                     
per share)
    -       -       2,125,000       2,125       -       847,875       -       -       850,000  
Prepaid rent August 2007
                                                                       
($.45 per share)
    -       -       416,667       417       -       187,083       -       -       187,500  
Services September 2007
                                                                       
($.82 per share)
    -       -       100,000       100       -       81,900       -       -       82,000  
Services November 2007
                                                                       
($.74 per share)
    -       -       117,000       117       -       86,463       -       -       86,580  
Services November 2007
                                                                       
($.75 per share)
    -       -       15,000       15       -       11,235       -       -       11,250  
Services December 2007
                                                                       
($.75 per share)
    -       -       25,000       25       -       18,725       -       -       18,750  
Options exercised December
                                                                       
2007 ($.07 per share)
    -       -       1,000,000       1,000       -       69,000       -       -       70,000  
Services December 2007
                                                                       
($.82 per share)
    -       -       7,000       7       -       5,733       -       -       5,740  
Convert 5,000 convertible
                                                                       
preferred shares ($.559
                                                                       
per share)
    (5,000 )     (5 )     299,642       300       -       167,200       -       -       167,495  
Cash received July 2007 for
                                                                       
shares issued in 2008
    -       -       -       -       10,000       -       -       -       10,000  
Cash received August 2007
                                                                       
for shares issued in 2008
    -       -       -       -       20,000       -       -       -       20,000  
Cash received September
                                                                       
2007 for shares issued in
                                                                 
2008
    -       -       -       -       17,500       -       -       -       17,500  
Cash received November
                                                                       
2007 for shares issued in
                                                                 
2008
    -       -       -       -       150,000       -       -       -       150,000  
Cash received December
                                                                       
2007 for shares issued in
                                                                 
2008
    -       -       -       -       5,000       -       -       -       5,000  
Granting of common stock
                                                                       
options December 2007
    -       -       -       -       592,446       -       -       592,446       -  
Net loss
    -       -       -       -       -       -       -       (2,869,391 )     (2,869,391 )
Balances at December 31,
                                                                       
2007
    95,000     $ 95     $ 31,664,631     $ 31,665     $ 202,500     $ 6,152,861     $ (2,884,043 )   $ (4,242,014 )   $ (738,936 )

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

 
F-6

 

Advanced Medical Isotope Corporation
(A Development Stage Company)
Statements of Cash Flow

 
               
From inception of
 
               
development stage on
 
   
Year ended
   
Year ended
   
January 1, 2006 through
 
   
December 31, 2007
   
December 31, 2006
   
December 31, 2007
 
CASH FLOW FROM OPERATING ACTIVITIES:
                 
Net Loss
  $ (2,869,391 )   $ (1,372,623 )   $ (4,242,014 )
                         
Adjustments to reconcile net loss to net cash
                       
used by operating activities:
                       
Depreciation of fixed assets
    22,313       -       22,313  
Amortization of licenses and intangible assets
    1,135,841       321,958       1,457,799  
Common stock issued for services
    118,320       414,000       532,320  
Stock options issued for services
    592,447       140,000       732,447  
Loss on conversion of shareholder loan
    40,000       -       40,000  
Changes in operating assets and liabilities:
                       
Accounts receivable
    (12,000 )     -       (12,000 )
Prepaid expense paid with stock
    247,688       77,500       325,188  
Inventory
    (28,400 )     -       (28,400 )
Deposits
    (5,930 )     -       (5,930 )
Accounts payable
    180,489       -       180,489  
Payroll liabilities
    45,163       -       45,163  
Accrued interest
    125,565       46,063       171,628  
Accrued interest (rolled into notes payable)
    94,917       47,458       142,375  
Net cash used by operating activities
    (312,978 )     (325,644 )     (638,622 )
                         
CASH FLOWS FROM INVESTING ACTIVITIES:
                       
Cash acquired from investment
    -       310,000       310,000  
Cash used to acquire equipment
    (897,357 )     -       (897,357 )
Cash used to acquire intangible assets
    (658,750 )     -       (658,750 )
Net cash provided by investing activities
    (1,556,107 )     310,000       (1,246,107 )
                         
CASH FLOWS FROM FINANCING ACTIVITIES:
                       
Proceeds received from bank line of credit
    40,908       -       40,908  
Proceeds from capital lease
    697,014       -       697,014  
Principal payments on capital lease
    (28,401 )     -       (28,401 )
Proceeds received from shareholder loan
    50,000       30,000       80,000  
Proceeds from cash sales of common shares
    894,716       -       894,716  
Proceeds from exercise of options and warrants
    52,500       -       52,500  
Proceeds from subscription shares payable
    202,500       -       202,500  
Net cash provided by financing activities
    1,909,237       30,000       1,939,237  
Net increase in cash and cash equivalents
    40,152       14,356       54,508  
Cash and cash equivalents, beginning of period
    14,356       -       -  
                         
CASH AND CASH EQUIVALENTS, END OF PERIOD
  $ 54,508     $ 14,356     $ 54,508  
                         
Supplemental disclosures of cash flow information:
                 
Cash paid for interest
  $ 18,502     $ -     $ 18,502  
Cash paid for income taxes
  $ -     $ -     $ -  

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

 
F-7

 
Advanced Medical Isotope Corporation
(A Development Stage Company)
Notes to Consolidated Financial Statements
For the years ended December 31, 2007 and 2006

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. 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.

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.


 
F-8

 
Advanced Medical Isotope Corporation
(A Development Stage Company)
Notes to Consolidated Financial Statements
For the years ended December 31, 2007 and 2006

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, 2007, the Company has experienced no bad debt write offs from operations.

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 2008.

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.


 
F-9

 
Advanced Medical Isotope Corporation
(A Development Stage Company)
Notes to Consolidated Financial Statements
For the years ended December 31, 2007 and 2006

NOTE 2:                      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

Fixed Assets

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

Depreciation is computed using the straight-line method over the following estimated useful lives:
 
Production equipment 
Office equipment     
Furniture and fixtures  
3 to 7 years
2 to 5 years
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 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.

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 2008.


 
F-10

 
Advanced Medical Isotope Corporation
(A Development Stage Company)
Notes to Consolidated Financial Statements
For the years ended December 31, 2007 and 2006

NOTE 2:                      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

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.

Amortization is computed using the straight-line method over the estimated useful live of three years. Amortization of license fees was $988,792 and $321,958 for the years ended December 31, 2007 and 2006, respectively. Based on the license fees recorded at December 31, 2007, 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: $990,875 for 2008, $668,917 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 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.

Amortization is computed using the straight-line method over the following estimated useful lives:
 
Intellectual property
Contracts and agreements 
Customer lists      
3 years
3 years
2 years
 
Amortization of intangible assets was $147,049 and $.00 for the years ended December 31, 2007 and 2006, respectively. Based on the license fees recorded at December 31, 2007, 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: $252,083 for 2008, $195,208 for 2009, and $64,410 for 2010.



 
F-11

 
Advanced Medical Isotope Corporation
(A Development Stage Company)
Notes to Consolidated Financial Statements
For the years ended December 31, 2007 and 2006

NOTE 2:                      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -  continued

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 fiscal years ended December 31, 2007 and 2006 was derived solely from the sales of Oxygen 18, which is used in the production of medical isotopes. 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 that could be dilutive in the future as of December 31, 2007 and 2006 are as follows:
 
   
2007
   
2006
 
             
Preferred stock     $ 4,700,358     $ 15,227,273  
Common stock options         5,447,400       2,000,000  
                 
Total potential dilutive securities      $ 10,147,758     $ 17,227,273  
 
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.

 
F-12

 
Advanced Medical Isotope Corporation
(A Development Stage Company)
Notes to Consolidated Financial Statements
For the years ended December 31, 2007 and 2006

NOTE 2:                      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -  continued

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, 2007 and 2006.

Shipping and Handling Costs

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

Legal Contingencies

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

Income Taxes

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, 2007 and 2006.  The Company did not have any deferred tax liability or asset on its balance sheet on December 31, 2007 and 2006.
 
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, 2007 and 2006, 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.

 
F-13

 
Advanced Medical Isotope Corporation
(A Development Stage Company)
Notes to Consolidated Financial Statements
For the years ended December 31, 2007 and 2006
 
NOTE 2:                      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -  continued

Fair Value of Financial Instruments

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

Stock-Based Compensation

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.

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.

 
F-14

 
Advanced Medical Isotope Corporation
(A Development Stage Company)
Notes to Consolidated Financial Statements
For the years ended December 31, 2007 and 2006

NOTE 3:                      FIXED ASSETS

Fixed assets consist of the following at December 31, 2007 and 2006:
 
   
2007
   
2006
 
Production equipment     $ 191,250     $ -  
Construction in progress        706,107       -  
      897,357       -  
Less accumulated depreciation        (22,313 )     -  
    $ 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 production equipment totaled $22,313 and $0 for 2007 and 2006, respectively. No depreciation has been computed on construction in progress as the equipment has not yet been placed in service as of December 31, 2007.

 
NOTE 4:                      INTANGIBLE ASSETS

Intangible assets consist of the following at December 31, 2007 and 2006:
 
   
2007
   
2006
 
Intellectual property   $ 250,750     $ -  
Contracts and agreements        213,000          
Customer lists         195,000       -  
      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 2008.

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.

 
F-15

 
Advanced Medical Isotope Corporation
(A Development Stage Company)
Notes to Consolidated Financial Statements
For the years ended December 31, 2007 and 2006

NOTE 5:                      RELATED PARTY TRANSACTIONS - continued

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, 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 and began renting office and warehouse space 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 1 st until they become $4,761.71 as of August 1, 2011. During the year ended December 31, 2007 the Company incurred rent expenses for this facility totaling $17,500. 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 year ended December 31, 2007 the Company amortized $15,625 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, 2007, are as follows:
 
Year ended December 31, 2008   $ 43,400  
Year ended December 31, 2009      46,872  
Year ended December 31, 2010        50,622  
Year ended December 31, 2011     54,671  
Year ended December 31, 2012      33,332  
         
Total   $ 228,897  
 
 
NOTE 6:                      BUSINESS COMBINATION

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 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 carrying values of patents in accordance with SFAS No. 144 and any impairment’s are recognized when the expected future operating cash flows to be derived from such assets are less than their carrying value.


 
F-16

 
Advanced Medical Isotope Corporation
(A Development Stage Company)
Notes to Consolidated Financial Statements
For the years ended December 31, 2007 and 2006

NOTE 6:                      BUSINESS COMBINATION -  continued

Amortization of these items was $147,049 and $.00 for the years ended December 31, 2007 and 2006, respectively. Based on the value of these items recorded at December 31, 2007, 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: $252,083 for 2008, $195,208 for 2009, and $64,410 for 2010.

Depreciation of the equipment was $22,313 and $.00 for the years ended December 31, 2007 and 2006, respectively. Based on the value of these items recorded at December 31, 2007, 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 2008, $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 focused
           
on the chemical separation of Indium from a Cadmium-112 target
  $ 70,750        
Consulting expense incurred by Isonics for training of Indium-111 production
    150,000        
License fees paid by Isonics for Indium-111 production
    30,000        
Customer list associated with the Indium-111 production
    65,000        
Total purchase price allocated to Indium-111 production
            315,750  
                 
Contract with Kurchatov Institute dated July 14, 2004 for the purchase
               
Of Actinium-225
    71,000          
Contract with Institute for Physics and Power Engineering for the
               
Purchase of Actinium-225
    71,000          
Customer list associated with the purchases of Actinium-225
    65,000          
Total purchase price allocated to Actinium-225 purchases
            207,000  
                 
Service Agreement with Global Scientific Technologies and Center of
               
Molecular Research in connection with the production, marketing,
               
and sale of Oxygen-18
    71,000          
Customer list associated with the sale of Oxygen-18
    65,000          
Total purchase price allocated to Oxygen-18 production
               
and marketing
            136,000  
                 
Equipment located at Central Radiopharmaceutical Services, Buffalo, New York
            191,250  
            $ 850,000  


The results of operations from this Business Combination are as follows:
 
December 31,            
   
2007
   
2006
 
Revenues      $ 130,055     $ -  
Cost of goods sold               55,841       -  
Gross profit     74,214       -  
Operating expenses     -       -  
General and administrative expenses        169,361       -  
Net loss      $ (95,147 )   $ -  
 


 
F-17

 
Advanced Medical Isotope Corporation
(A Development Stage Company)
Notes to Consolidated Financial Statements
For the years ended December 31, 2007 and 2006

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 of
 
   
September 27, 2006
 
Cash      $ 310,000  
License fee         3,040,000  
Net 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
  $ 0  
 2007
 
$ 0  
 2008
  $ 10,000  
 2009
  $ 15,000  
 2010
  $ 15,000  
 2011
  $ 45,000  
 2012 and each year thereafter
  $ 60,000  
 

 
F-18

 
Advanced Medical Isotope Corporation
(A Development Stage Company)
Notes to Consolidated Financial Statements
For the years ended December 31, 2007 and 2006

NOTE 8:                      PREPAID EXPENSES PAID WITH STOCK

The Company has issued stock with companies for various service agreements extending beyond December 31, 2007; 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 2013 at the rate of $37,500 per year. Prepaid Expenses are expected to mature as follows:
 
2008   $ 266,348  
2009     37,500  
2010     37,500  
2011     37,500  
2012     21,875  
    $ 400,813  
 
 
NOTE 9:                      BANK LINE OF CREDIT

The Company has a $200,000 revolving line of credit with Washington Trust Bank that expires in September 2008. The Company had $40,908 in borrowings under the line of credit as of December 31, 2007.

All equipment and accounts receivables are collateral for the line of credit. Additionally, the line of credit was personally guaranteed by two of the major shareholders.

 
NOTE 10:                    CAPITAL LEASE OBLIGATIONS

During September 2007, the Company obtained two Master Lease Agreements for $1,875,000 and $631,000, secured by equipment and personal guarantee of two of the major shareholders. These long-term agreement 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 $631,000. Advances made by the Lessor for the benefit of the Company, less payments, total $668,613 as of December 31, 2007:
 
   
2007
 
 Capital lease obligation (a)    $ 707,562  
 Capital lease obligation (b)         153,661  
 Total future minimum lease payments       861,223  
 Less amounts representing interest     (192,610 )
 Present value of net minimum        
 lease payments         668,613  
 Less amounts due within one year       86,983  
 Amounts due after one year       $ 581,630  
 
(a)
This represents the amount of advances, less payments made, received from the $1,875,000 lease agreement for the purchase of equipment. The lease agreement requires, when the total $1,875,000 funds are drawn, monthly payments of $29,481.88 through September 2014. Interest on the lease agreement accrues at 8.3% annually.
(b)
This represents the amount of advances, less payments made, received from the $631,000 lease agreement for the purchase of equipment. The lease agreement requires, when the total $631,000 funds are drawn, monthly payments of $12,871.90 through September 2012. Interest on the lease agreement accrues at 8.3% annually.

 
F-19

 
Advanced Medical Isotope Corporation
(A Development Stage Company)
Notes to Consolidated Financial Statements
For the years ended December 31, 2007 and 2006

NOTE 10:                    CAPITAL LEASE OBLIGATIONS -  continued

Principal maturities on the amount of the notes payable advanced through December 31, 2007 are due as follows:
 
 Year ended December 31,      
 2008   $ 86,984  
 2009     94,461  
 2010     102,581  
 2011     111,399  
 2012     111,212  
 Thereafter     161,976  
    $ 668,613  
 
The amount of advances in 2007 made from the capital lease consists of progress payments made for equipment and facilities that was completed in May 2008, totaling $706,010. No depreciation was computed on construction in progress as the equipment had not been placed in service as of December 31, 2008.

 
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.

Net deferred tax liabilities consist of the following components as of December 31, 2007 and 2006:
 
   
2007
   
2006
 
Deferred tax assets:            
NOL carryover  
  $ 1,395,015     $ 822,575  
Deferred tax liabilities:                
Depreciation
    (383,664     (69,060 )
Valuation allowance             (1,011,350 )     (753,515 )
Net deferred tax asset        $ -     $ -  
 


 
F-20

 
Advanced Medical Isotope Corporation
(A Development Stage Company)
Notes to Consolidated Financial Statements
For the years ended December 31, 2007 and 2006

NOTE 11:                    INCOME TAXES -  continued

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, 2007 and 2006 due to the following:
 
   
2007
   
2006
 
 Book income    $ (1,119,062 )   $ (535,323 )
 Depreciation        314,604       69,060  
 Meals and entertainment       964       587  
 Stock for services        231,054       75,660  
 Valuation allowance     572,440       390,016  
    $ -     $ -  
 
At December 31, 2007, The Company had net operating loss carryovers of approximately $3,500,000 that may be offset against future taxable income from the year 2007 through 2027. No tax benefit has been reported in the year December 31, 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.

 
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.

 
F-21

 
Advanced Medical Isotope Corporation
(A Development Stage Company)
Notes to Consolidated Financial Statements
For the years ended December 31, 2007 and 2006

NOTE 12:                    STOCKHOLDERS’ EQUITY - continued

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

During May 2006, the Company issued 600,000 shares of its common stock in exchange for business consulting services.  The value of the transaction totaled $120,000 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 a reduction of equity in the accompanying financial statements for the years ended December 31, 2007 and 2006.

During October 2006, the Company issued 250,000 shares of its common stock in exchange for business consulting services.  The value of the transaction totaled $45,000 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 a reduction of equity 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.

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 issued 300,000 shares of its common stock in exchange for legal services performed for HHHE, a predecessor to AMIC. 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 $54,000 has been recognized in the accompanying financial statements for the year ended December 31, 2006.


 
F-22

 
Advanced Medical Isotope Corporation
(A Development Stage Company)
Notes to Consolidated Financial Statements
For the years ended December 31, 2007 and 2006

NOTE 12:                    STOCKHOLDERS’ EQUITY -  continued

During February 2007, the Company issued 250,000 shares of its common stock in exchange for a patent license. The transaction was recorded 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 issued 250,000 shares of its common stock in exchange for business consulting services. The value of the transaction totaled $217,500 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 a reduction of equity 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 issued 416,667 shares of its common stock in exchange for rent. The value of the transaction totaled $187,500 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 a reduction of equity in the accompanying financial statements.

During September 2007, the Company issued 100,000 shares of its common stock in exchange for business consulting services. The value of the transaction totaled $82,000 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 a reduction of equity in the accompanying financial statements.

During November 2007, the Company issued 100,000 shares of its common stock in exchange for business consulting services. The value of the transaction totaled $74,000 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 a reduction of equity in the accompanying financial statements.

During November 2007, the Company issued 17,000 shares of its common stock in exchange for business consulting services. The value of the transaction totaled $12,563 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 issued 15,000 shares of its common stock in exchange for business consulting services. The value of the transaction totaled $11,250 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.



 
F-23

 
Advanced Medical Isotope Corporation
(A Development Stage Company)
Notes to Consolidated Financial Statements
For the years ended December 31, 2007 and 2006

NOTE 12:                    STOCKHOLDERS’ EQUITY -  continued

During December 2007, the Company issued 25,000 shares of its common stock in exchange for business consulting services. The value of the transaction totaled $18,725 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 for consideration of past services based upon a previously determined value of $.07 per share. The value of the transaction totaled $70,000 based on the quoted market price of stock on the transaction date, or $.07 per share.  Stock-based compensation expense of $70,000 has been recognized in the accompanying financial statements for the year ended December 31, 2007.

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.

 
F-24

 
Advanced Medical Isotope Corporation
(A Development Stage Company)
Notes to Consolidated Financial Statements
For the years ended December 31, 2007 and 2006
 
NOTE 12:                    STOCKHOLDERS’ EQUITY - continued

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 $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 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 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
 

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.

 
F-25

 
Advanced Medical Isotope Corporation
(A Development Stage Company)
Notes to Consolidated Financial Statements
For the years ended December 31, 2007 and 2006

NOTE 12:                    STOCKHOLDERS’ EQUITY - continued
 
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
 
 
The following schedule summarizes the changes in the Company’s stock option plan:
 
               
Weighted
         
Weighted
 
   
Options Outstanding
   
Average
         
Average
 
   
Number
   
Exercise
   
Remaining
   
Aggregate
   
Exercise
 
   
Of
   
Price
   
Contractual
   
Intrinsic
   
Price
 
   
Shares
   
Per Share
   
Life
   
Value
   
Per Share
 
                               
Balance at December 31, 2005
    -     $ -       -     $ -     $ -  
   Options granted
    2,000,000       0.07-0.15    
2.52 years
      0       0.08  
Balance at December 31, 2006
    2,000,000       0.07-0.15    
2.52 years
      0       0.08  
   Options granted
    4,947,400       0.17-1.05    
1.99 years
      402,320       0.56  
   Options exercised
    (1,750,000     0.07    
2.6 years
      0       0.07  
   Options expired
    -       -       -       -       -  
Balance at December 31, 2007
    5,197,400     $ 0.15-1.05    
2.03 years
    $ 402,300     $ 0.56  
Exercisable at December 31, 2006
    2,000,000     $ 0.07-0.15    
2.52 years
    $ 0     $ 0.08  
Exercisable at December 31, 2007
    5,197,400     $ 0.15-1.05    
2.03 years
    $ 402,300     $ 0.56  
 
 
NOTE 13:                    CONCENTRATIONS OF CREDIT AND OTHER RISKS

Accounts Receivable

The Company’s accounts receivable result from credit sales to customers. The Company had three customers whose sales were greater than 10% for the year ended December 31, 2007. These customers represented 57.9% of the Company’s total revenues for the year ended December 31, 2007. Those same customers accounted for 71.6% of the Company’s net accounts receivable balance at December 31, 2007.

Sales to the Company’s largest customer totaled 24.9% 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.

 
F-26

 
Advanced Medical Isotope Corporation
(A Development Stage Company)
Notes to Consolidated Financial Statements
For the years ended December 31, 2007 and 2006

NOTE 13:                    CONCENTRATIONS OF CREDIT AND OTHER RISKS - continued

Inventories

The sole 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.

 
NOTE 14:                    SUPPLEMENTAL CASH FLOW INFORMATION

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.


 
F-27

 
Advanced Medical Isotope Corporation
(A Development Stage Company)
Notes to Consolidated Financial Statements
For the years ended December 31, 2007 and 2006

NOTE 15:                    SUBSEQUENT EVENTS

During January 2008, the Company entered into a $10,000 per month, one year consulting agreement, terminating December 31, 2008, with option to renew for two additional years. In addition the Company provided 100,000 options at the option price of $.71 each. These options have a ten year life. This agreement provides the Company expertise on a broad range of corporate finance, capital structure and related financing issues.

During February 2008, the Company entered into a five year agreement with a radiopharmaceutical laboratory for use of their Cyclotron for Irradiation Services and Joint Product Development. The Company is to compensate the laboratory a minimum monthly fee of $4,800 for a minimum block of beam time for the Cyclotron plus certain consulting or technical services in the design or performance enhancement of irradiation processes, and target design and loading.

During March 2008, the Company entered into a $13,500 per month, one year consulting agreement, terminating February 28, 2009. In addition the Company provided 300,000 shares of the Company’s common stock. This agreement provides the Company overall management of the corporate communications program and introductions to open-market and private placement buyers.

During April 2008, the Company entered into a 90 day agreement to provide financial public relations in exchange for 20,000 shares of the Company’s common stock.

During May 2008, the Company entered into an eight month Research Agreement with a University whereas the University will provide certain research for a fee of $45,150.

Between February and May 2008, the Company entered into four consulting agreements, whereas the consultant would be paid an hourly rate that would be broken down into cash and stock. The cash portion of the agreements range from $15 to $42.50 per hour; and the stock portion of the agreements range from $35 to $50 per hour. All of these agreements are for assistance in writing policies and procedures regarding compliance with regulatory agencies. These four agreements expire on December 31, 2008.

During June 2008, the Company entered into a twelve month option agreement with a University to evaluate a patent owned by the University for commercialization of that patent.  The option agreement calls for a $1,000 non-refundable fee to be paid with-in thirty days of the signing of the agreement. In conjunction with this option agreement, the Company also entered into a contract with the University to perform research for a system to generate radioisotopes via proprietary processes. The cost for this research contract is not to exceed $75,000.
 
 
 
 
 


 
 
F-28

 

Advanced Medical Isotope Corporation
(A Development Stage Company)
Balance Sheets


ASSETS
           
   
June 30,
       
   
2008
   
December 31,
 
   
(unaudited)
   
2007
 
             
Current Assets:
           
Cash and cash equivalents
  $ 22,997     54,508  
Accounts receivable
    17,940       12,000  
Prepaid expenses
    8,471       -  
Prepaid expenses paid with stock, current portion
    155,925       239,250  
Inventory
    8,388       28,400  
Total current assets
    213,721       334,158  
                 
Fixed assets, net of accumulated depreciation
    2,370,856       875,044  
                 
Other assets:
               
License fees, net of amortization
    1,166,437       1,661,875  
Intangible assets, net of amortization
    385,660       511,701  
Prepaid expenses paid with stock, long-term portion
    115,625       161,563  
Deposits
    6,574       5,928  
Total other assets
    1,674,296       2,341,067  
Total assets
  $ 4,258,873     3,550,269  
                 
LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)
               
                 
Current liabilities:
               
Accounts payable
  423,517     180,488  
Accrued interest payable
    171,628       171,628  
Payroll liabilities payable
    373       45,163  
Preferred stock redeemable as common
    3,182,405       3,182,405  
Line of credit
    199,908       40,908  
Current portion of capital lease obligations
    295,920       86,983  
Total current liabilities
    4,273,751       3,707,575  
                 
Long term liabilities:
               
Capital lease obligations, net of current portion
    1,707,420       581,630  
Total liabilities
    5,981,171       4,289,205  
                 
Shareholders’ Equity (Deficit):
               
Preferred stock, $.001 par value; 100,000 authorized;
               
95,000 and 95,000 shares issued and outstanding, respectively
    95       95  
Common stock, $.001 par value; 100,000,000 shares authorized;
               
35,081,222 and 31,664,631 shares issued and outstanding,
         
respectively
    35,081       31,665  
Common stock subscriptions receivable
    -       202,500  
Paid in capital
    8,065,365       6,152,861  
Accumulated deficit prior to the development stage
    (2,884,043     (2,884,043
Deficit accumulated during the development stage
    (6,938,796     (4,242,014
                 
Total shareholders’ equity (deficit)
    (1,722,298     (738,936
Total liabilities and shareholders’ equity (deficit)
  $ 4,258,873     $ 3,550,269  
 
 
The accompanying notes are an integral part of these financial statements.

 
F-29

 

Advanced Medical Isotope Corporation
(A Development Stage Company)
Statements of Operations
(unaudited)
 
                           
From inception of
 
                           
development stage
 
   
Three months ended
   
Six months ended
   
on January 1, 2006
 
   
June 30,
   
June 30,
   
through June 30,
 
   
2008
   
2007
   
2008
   
2007
   
2008
 
                           
 
 
Revenues
  $ 51,086     $ -     $ 83,421     $ -     $ 213,476  
Cost of goods sold
    58,103       -       75,640       -       131,481  
Gross profit (deficit)
    (7,017 )     -       7,781       -       81,995  
                                         
Operating expenses
                                       
Sales and marketing expenses
    23,828       -       31,526       -       43,911  
Start up costs
    -       -       -       -       62,510  
Depreciation and amortization
    320,596       271,915       640,898       517,551       2,098,697  
Professional fees
    516,936       117,412       739,150       154,211       1,944,487  
Stock options granted
    576,339       128,353       753,140       329,999       1,485,587  
Payroll expenses
    127,660       69,984       268,584       69,984       466,141  
General and administrative
                                       
   expenses
    108,843       25,196       215,596       32,415       433,784  
Total operating expenses
    1,674,202       612,860       2,648,894       1,104,160       6,535,117  
Operating loss
    (1,681,219 )     (612,860 )     (2,641,113 )     (1,104,160 )     (6,453,122 )
                                         
Non-operating income (expense):
                                 
Interest expense
    (39,593 )     (79,000 )     (55,669 )     (152,799 )     (388,174 )
Investment loss
    -       -       -       -       (28,500 )
Loss on conversion of shareholder
                                       
Loan
    -       (40,000 )     -       (40,000 )     (69,000 )
Non-operating income
                                       
(expense), net
    (39,593 )     (119,000 )     (55,669 )     (192,799 )     (485,674 )
                                         
Loss before Income Taxes
    (1,720,812 )     (731,860 )     (2,696,782 )     (1,296,959 )     (6,938,796 )
                                         
Income Tax Provision
    -       -       -       -       -  
                                         
Net loss
  $ (1,720,812 )   $ (731,860 )   $ (2,696,782 )   $ (1,296,959 )   $ (6,938,796 )
                                         
Loss per common share
  $ (0.05 )   $ (0.03 )   $ (0.08 )   $ (0.05 )        
                                         
Weighted average common shares
                                 
Outstanding
    34,970,548       27,872,359       33,875,632       27,303,694          

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

 
F-30

 

Advanced Medical Isotope Corporation
(A Development Stage Company)
Statement of Changes in Shareholders’ Equity (Deficit) (unaudited)
 

                                             
Deficit
       
   
Series A Preferred
                                 
Accumulated
       
   
Stock
   
Common Stock
   
Paid in
   
Subscriptions
   
Accumulated
   
during
       
   
Shares
   
Amount
   
Shares
   
Amount
   
Capital
   
Receivable
   
Deficit
   
Stage
   
Total
 
                                                       
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 ($.40
                                                                 
per share)
    -       -       137,500       137       54,863       -       -       -       55,000  
Options exercised 2008
                                                                       
($.29 per share)
    -       -       250,000       250       72,250       -       -       -       72,500  
Cash February 2008
                                                                       
($.40 per share)
    -       -       950,000       950       379,050       -       -       -       380,000  
Services March 2008
                                                                       
($.78 per share)
    -       -       299,642       299       233,421       -       -       -       233,720  
Cash March 2008
                                                                       
($.40 per share)
    -       -       550,700       551       219,729       -       -       -       220,280  
Services April 2008
                                                                       
($.75 per share)
    -       -       162,678       163       232,337       -       -       -       232,500  
Issuance of shares February,
                                                                       
2008 for cash received
                                                                 
in 2007
    -       -       825,893       826       184,862       (185,688 )     -       -       -  
Stock offering costs March,
                                                                       
2008
    -       -       -       -       (233,720 )     -       -       -       (233,720 )
Issuance of shares April,
                                                                       
2008 for cash received
                                                                       
in 2007
    -       -       240,178       240       16,572       (16,812 )     -       -       -  
Granting of stock options
                                                                       
June 2008
    -       -       -       -       753,140       -       -       -       753,140  
Net loss
    -       -       -       -       -        -        -       (2,696,782 )     (2,696,782 )
Balances at June 30, 2008  
    95,000     $ 95       35,081,222     $ 35,081     $ 8,065,365     $ -     $ (2,884,043 )   $ (6,938,796 )   $ (1,722,298 )

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

 
F-31

 

Advanced Medical Isotope Corporation
(A Development Stage Company)
Statements of Cash Flow
(unaudited)


               
From inception of
 
               
development stage on
 
   
Six months ended
   
Six months ended
   
January 1, 2006 through
 
   
June 30, 2008
   
June 30, 2007
   
June 30, 2008
 
CASH FLOW FROM OPERATING ACTIVITIES:
                 
Net Loss
  $ (2,696,782 )   $ (1,296,959 )   $ (6,938,796 )
                         
Adjustments to reconcile net loss to net cash
                       
used by operating activities:
                       
Depreciation of fixed assets
    19,419       3,188       41,732  
Amortization of licenses and intangible assets
    621,479       514,362       2,079,278  
Common stock issued for services
    221,700       -       754,020  
Stock options issued for services
    753,140       329,999       1,485,587  
Loss on conversion of shareholder loan
    -       40,000       40,000  
Changes in operating assets and liabilities:
                       
Accounts receivable
    (5,940 )     -       (17,940 )
Prepaid expense paid with stock
    129,263       -       454,451  
Inventory
    20,012       -       (8,388 )
Prepaid expenses
    (8,471 )     88,438       (8,471 )
Deposits
    (645 )     -       (6,575 )
Accounts payable
    138,504       81,724       318,993  
Payroll liabilities
    (44,790 )     50,000       373  
Other payables
    115,325       -       115,325  
Accrued interest
    -       152,799       314,003  
Net cash used by operating activities
    (737,786 )     (36,449 )     (1,376,408 )
                         
CASH FLOWS FROM INVESTING ACTIVITIES:
                       
Cash acquired from investment
    -       -       310,000  
Cash used to acquire equipment
    (1,515,232 )     (316,250 )     (2,412,589 )
Cash used to acquire intangible assets
    -       (658,750 )     (658,750 )
Net cash used in investing activities
    (1,515,232 )     (975,000 )     (2,761,339 )
                         
CASH FLOWS FROM FINANCING ACTIVITIES:
                       
Proceeds received from bank line of credit
    179,000       -       219,908  
Payments on line of credit
    (20,000 )     -       (20,000 )
Proceeds from capital lease
    1,473,305       -       2,170,319  
Principal payments on capital lease
    (138,578 )     -       (166,979 )
Proceeds received from shareholder loan
    -       50,000       80,000  
Proceeds from cash sales of common shares
    655,280       929,717       1,549,996  
Proceeds from exercise of options and warrants
    72,500       17,500       125,000  
Proceeds from subscription shares payable
    -       -       202,500  
Net cash provided by financing activities
    2,221,507       997,217       4,160,744  
Net increase (decrease) in cash and cash equivalents
    (31,511 )     (14,232 )     22,997  
Cash and cash equivalents, beginning of period
    54,508       14,356       -  
                         
CASH AND CASH EQUIVALENTS, END OF PERIOD
  $ 22,997     $ 123     $ 22,997  
                         
Supplemental disclosures of cash flow information:
                 
Cash paid for interest
  $ 55,669     $ -     $ 74,171  
Cash paid for income taxes
  $ -     $ -     $ -  

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

 
F-32

 
Advanced Medical Isotope Corporation
(A Development Stage Company)
Notes to Consolidated Financial Statements
For the six months ended June 30, 2008 and the year ended December 31, 2007

NOTE 1:                      BASIS OF PRESENTATION

The accompanying condensed consolidated financial statements of the Company have been prepared without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and disclosures required by accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations.  These condensed consolidated financial statements reflect all adjustments that, in the opinion of management, are necessary to present fairly the results of operations of the Company for the period presented. The results of operations for the three and six months ended June 30, 2008, are not necessarily indicative of the results that may be expected for any future period or the fiscal year ending December 31, 2008.

 
NOTE 2:                      GOING CONCERN

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.  As shown in the accompanying financial statements, the Company has suffered recurring losses and used significant cash in support of its operating activities. 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 conditions, raise substantial doubt about the ability of the Company to continue as a going concern.

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

 
NOTE 3:                      FIXED ASSETS

Fixed assets consist of the following at June 30, 2008 and December 31, 2007:
 
   
June 30, 2008
   
December 31, 2007
 
Production equipment       $ 191,250     $ 191,250  
Leasehold improvements       3,235       -  
Office equipment       1,957       -  
Construction in progress      2,216,146       706,107  
      2,412,588       897,357  
Less accumulated depreciation     (41,732 )     (22,313 )
    $ 2,370,856     $ 875,044  
 
Construction in progress consists of progress payments made for equipment and facilities that was completed in May 2008. These assets were not placed into service as of June 30, 2008. These payments were funded through the Capital Lease Obligations. All assets are pledged as collateral against the Capital Lease obligation.


 
F-33

 
Advanced Medical Isotope Corporation
(A Development Stage Company)
Notes to Consolidated Financial Statements
For the six months ended June 30, 2008 and the year ended December 31, 2007

NOTE 3:                      FIXED ASSETS - continued
 
Depreciation expense related to fixed assets is as follows:
 
   
June 30, 2008
   
December 31, 2007
 
Production equipment     $ 41,438     $ 22,313  
Leasehold improvements     186       -  
Office equipment                108       -  
Construction in progress         -       -  
    $ 41,732     $  22,313  
 
No depreciation has been computed on construction in progress as the equipment has not yet been placed in service as of June 30, 2008.

 
NOTE 4:                      INTANGIBLE ASSETS

Intangible assets consist of the following at June 30, 2008 and December 31, 2007:
 
   
June 30, 2008
   
December 31, 2007
 
Intellectual property   $ 250,750     $ 250,750  
Contracts and agreements      213,000       213,000  
Customer lists        195,000       195,000  
      658,750       658,750  
Less accumulated amortization      (279,090 )     (147,049 )
    $ 385,660     $  511,701  
 
Amortization expense for the above intangible assets for the six months ended June 30, 2008 and 2007, respectively, is $126,141 and $21,008.

 
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 2008.

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, 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.

 
F-34

 
Advanced Medical Isotope Corporation
(A Development Stage Company)
Notes to Consolidated Financial Statements
For the six months ended June 30, 2008 and the year ended December 31, 2007

NOTE 5:                      RELATED PARTY TRANSACTIONS - continued
 
The Company terminated the rental agreement with ABI and began renting office and warehouse space 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 1 st until they become $4,762 as of August 1, 2011. During the year ended December 31, 2007 the Company incurred rent expenses for this facility totaling $17,500. 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 six months ended June 30, 2008 and the year ended December 31, 2007 the Company amortized $18,750 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 June 30, 2008, are as follows:
 
Twelve months ended June 30, 2009   $ 45,080  
Twelve months ended June 30, 2010       48,686  
Twelve months ended June 30, 2011     52,581  
Twelve months ended June 30, 2012       56,788  
Twelve months ended June 30, 2013       4,762  
         
Total    $ 207,897  
 
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 six months ended June 30, 2008 the Company incurred rent expenses for this facility totaling $1,340.

Future minimum rental payments required under the Company’s current rental agreement in excess of one year as of June 30, 2008, are as follows:
 
Twelve months ended June 30, 2009   $ 60,736  
Twelve months ended June 30, 2010       55,675  
Twelve months ended June 30, 2011     -  
Twelve months ended June 30, 2012       -  
Twelve months ended June 30, 2013       -  
         
Total    $ 116,411  
 
 
NOTE 6:                      BUSINESS COMBINATION

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 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.

 
F-35

 
Advanced Medical Isotope Corporation
(A Development Stage Company)
Notes to Consolidated Financial Statements
For the six months ended June 30, 2008 and the year ended December 31, 2007

NOTE 6:                      BUSINESS COMBINATION - continued
 
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 carrying values of patents in accordance with SFAS No. 144 and any impairment’s are recognized when the expected future operating cash flows to be derived from such assets are less than their carrying value.

Amortization of these items was $126,041 and $21,008 for the six months ended June 30, 2008 and 2007, respectively. Based on the value of these items recorded at June 30, 2008, and assuming no subsequent impairment of the underlying assets, the annual amortization expense for each twelve month period ending June 30 is expected to be as follows: $223,645 for 2009, $162,014 for 2010.

Depreciation of the equipment was $19,125 and $3,188 for the six months ended June 30, 2008 and 2007, respectively. Based on the value of these items recorded at June 30, 2008, and assuming no subsequent impairment of the underlying assets, the annual amortization expense for each twelve month period ending June 30 is expected to be as follows: $38,250 for 2009, $38,250 for 2010, $38,250 for 2011, and $35,063 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 focused
           
on the chemical separation of Indium from a Cadmium-112 target
  $ 70,750        
Consulting expense incurred by Isonics for training of Indium-111 production
    150,000        
License fees paid by Isonics for Indium-111 production
    30,000        
Customer list associated with the Indium-111 production
    65,000        
Total purchase price allocated to Indium-111 production
            315,750  
                 
Contract with Kurchatov Institute dated July 14, 2004 for the purchase
               
Of Actinium-225
    71,000          
Contract with Institute for Physics and Power Engineering for the
               
Purchase of Actinium-225
    71,000          
Customer list associated with the purchases of Actinium-225
    65,000          
Total purchase price allocated to Actinium-225 purchases
            207,000  
                 
Service Agreement with Global Scientific Technologies and Center of
               
Molecular Research in connection with the production, marketing,
               
and sale of Oxygen-18
    71,000          
Customer list associated with the sale of Oxygen-18
    65,000          
Total purchase price allocated to Oxygen-18 production
               
and marketing
            136,000  
                 
Equipment located at Central Radiopharmaceutical Services, Buffalo, New York
      191,250  
            $ 850,000  



 
F-36

 
Advanced Medical Isotope Corporation
(A Development Stage Company)
Notes to Consolidated Financial Statements
For the six months ended June 30, 2008 and the year ended December 31, 2007

NOTE 6:                      BUSINESS COMBINATION - continued
 
The results of operations from this Business Combination, as if the combination had taken place on January 1, 2007, are as follows:
 
   
December 31, 2007
 
Revenues   $ 130,055  
Cost of goods sold       55,841  
Gross profit      74,214  
General and administrative expenses     169,361  
Net loss        $ (95,147 )
 
 
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 non-related business of the Company, however is a shareholder of less than 5% of the Company’s issued and outstanding common stock, as a result of this transaction. 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 of
September 27, 2006
 
Cash       $ 310,000  
License fee           3,040,000  
Net 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.

The Company periodically reviews the carrying values of its License Fees in accordance with SFAS No. 144 and any impairment’s are recognized when the expected future operating cash flows to be derived from such assets are less than their carrying value. The useful life of this license fee has been estimated to be three years and the cost of the asset is to be written off over the three year period in the form of amortization. Amortization expense for the six months ended June 30, 2008 and 2007, respectively, is $482,938 and $482,938.

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.

The license consists of two patents related to a compact neutron generator and an external RF antenna technology. The Company believes the utilization of these two patents will be significant in the production of medical radioisotopes as well as a significant amount of other commercial applications.
 

 
F-37

 
Advanced Medical Isotope Corporation
(A Development Stage Company)
Notes to Consolidated Financial Statements
For the six months ended June 30, 2008 and the year ended December 31, 2007
 
NOTE 7:                      LICENSE FEE ACQUISITION - continued
 
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
  $ 0  
 2007
 
$ 0  
 2008
  $ 10,000  
 2009
  $ 15,000  
 2010
  $ 15,000  
 2011
  $ 45,000  
 2012 and each year thereafter
  $ 60,000  
 
 
NOTE 8:                      PREPAID EXPENSES PAID WITH STOCK

The Company has issued stock to companies for various service agreements extending beyond December 31, 2007; 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 2013 at the rate of $37,500 per year. Prepaid Expenses are expected to mature as follows:
 
For the twelve month period ending June 30, 2009    $ 155,925  
For the twelve month period ending June 30, 2010         37,500  
For the twelve month period ending June 30, 2011         37,500  
For the twelve month period ending June 30, 2012       21,875  
    $ 252,800  
 
 
NOTE 9:                      INCOME TAXES

At June 30, 2008, the Company has net operating loss carry forwards available to offset future taxable income if any of approximately $3,500,000, which will begin to expire in 2027. The utilization of the net operating loss carry forwards is dependent upon the tax laws in effect at the time the net operating loss carry forwards can be utilized. The Tax Reform Act of 1986 significantly limits the annual amount that can be utilized for certain of these carry forwards as a result of the changes in ownership.

In July 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – and 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 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. Upon review of the Company’s historical tax filings and consultation with its tax advisors, the Company believes that it has taken tax positions in preceding years that could potentially result in reductions to its cumulative net operating loss carry-forwards of approximately $1,395,015. The Company is subject to audit by the IRS and the State of Delaware for the prior three years.

The Company, as a matter of policy, would record any interest and penalties associated with taxes as a component of income tax expenses.

 
F-38

 
Advanced Medical Isotope Corporation
(A Development Stage Company)
Notes to Consolidated Financial Statements
For the six months ended June 30, 2008 and the year ended December 31, 2007

NOTE 10:                    STOCKHOLDERS’ EQUITY

Common stock sale

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 240,178 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.

Common stock issued for services

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 42,678 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 six months ended June 30, 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 six months ended June 30, 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 six months ended June 30, 2008.



 
F-39

 
Advanced Medical Isotope Corporation
(A Development Stage Company)
Notes to Consolidated Financial Statements
For the six months ended June 30, 2008 and the year ended December 31, 2007

NOTE 10:                    STOCKHOLDERS’ EQUITY - continued
 
Common stock options

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 six months ended June 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
 
 
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 six months ended June 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 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 six months ended June 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
 

 

 
F-40

 
Advanced Medical Isotope Corporation
(A Development Stage Company)
Notes to Consolidated Financial Statements
For the six months ended June 30, 2008 and the year ended December 31, 2007
 
NOTE 10:                    STOCKHOLDERS’ EQUITY - continued
 
The following schedule summarizes the changes in the Company’s stock option plan:
 
               
Weighted
         
Weighted
 
   
Options Outstanding
   
Average
         
Average
 
   
Number
   
Exercise
   
Remaining
   
Aggregate
   
Exercise
 
   
Of
   
Price
   
Contractual
   
Intrinsic
   
Price
 
   
Shares
   
Per Share
   
Life
   
Value
   
Per Share
 
                               
Balance at December 31, 2007
    5,197,400     $ 0.15-1.05    
2.03 years
    $ 402,300     $ 0.56  
   Options granted
    2,536,386       0.17-1.05    
.95 years
 
    91,953       1.00  
   Options exercised
    (250,000 )     0.29       -       -       0.29  
   Options expired
    (2,125,000 )     0.70       -       -       0.70  
Balance at June 30, 2008
    5,358,786     $ 0.15-1.05    
2.03 years
    $ 494,273     $ 0.68  
Exercisable at December 31, 2007
    5,197,400     $ 0.15-1.05    
2.03 years
    $ 402,300     $ 0.56  
Exercisable at June 30, 2008
    5,358,786     $ 0.15-1.05    
1.87 years
    $ 494,273     $ 0.73  
 

NOTE 11:                    SUPPLEMENTAL CASH FLOW INFORMATION

During the six months ended June 30, 2007, the Company had the following non-cash investing and financing activities:
 
 
·
Increased prepaid expense paid with stock by $217,500, increased common stock by $250, and increased paid in capital by $217,250.

 
·
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.

During the six months ended June 30, 2008, the Company had the following non-cash investing and financing activities:

 
·
Decreased common stock subscriptions payable and increased paid in capital by $202,500.

 
·
Decreased Stock Based Consulting Fees Payable and increased Stock Based Consulting Fees expense by $10,800.

 
NOTE 12:                      SUBSEQUENT EVENTS

The Company began delivery of short-lived radioisotopes to be used in Positive Emission Tomography during late July 2008 to a local hospital.

In July and August 2008 the Company sold 250,000 and 150,000 shares, respectively, of its common stock at $0.40 per share plus an equal amount of $1.05 one year warrants.


 
F-41

 
Advanced Medical Isotope Corporation
(A Development Stage Company)
Notes to Consolidated Financial Statements
For the six months ended June 30, 2008 and the year ended December 31, 2007
 
NOTE 12:                      SUBSEQUENT EVENTS - continued
 
In July 2008 the Company issued 100,000 three year options at $0.50 per share for consulting services.

In July 2008 the Company issued 3,818 shares of its common stock in exchange for services at a fair market value at the time of issuance of $0.63, resulting in $2,405 expense to the Company.

In September 2008 the Company received $250,000 from a shareholder in exchange for a one year convertible note with interest at 10% per year to be paid at maturity. The Company provided 100,000 shares at $0.53 fair market value as a loan origination fee; this fee resulted in an expense to the Company of $53,000. The principle and interest can be converted to common stock at $1.05 per share, at the election of the lender.

In October 2008 the Company issued 107,900 shares of its common stock at its then fair market value of $0.53 for services to outsiders and bonuses to employees. These transactions resulted in $57,187 of expense to the Company.

 
 
 




 
F-42

 

INDEX TO EXHIBITS.

Exhibit
 
Number
Description
     
3.1
 
Certificate of Incorporation of Savage Mountain Sports Corporation dated January 11, 2000.
3.2
 
By-Laws
3.3
 
Articles and Certificate of Merger of HHH Entertainment Inc. and Savage Mountain Sports Corporation dated April 3, 2000.
3.4
 
Articles and Certificate of Merger of Earth Sports Products Inc. and Savage Mountain Sports Corporation dated May 11, 2000.
3.5
 
Certificate of Amendment of Certificate of Incorporation changing the name of the Company to Advanced Medical Isotope Corporation dated May 23, 2006.
3.6
  Certificate of Amendment of Certificate of Incorporation increasing authorized capital dated September 26, 2006.
10.1
 
Agreement and Plan of Reorganization, dated as of December 15, 1998, by and among HHH Entertainment, Inc. and Earth Sports Products, Inc.
10.2
 
Agreement and Plan of Merger of HHH Entertainment, Inc. and Savage Mountain Sports Corporation, dated as of January 6, 2000.
10.3
 
Employment Agreement dated August 15, 2006 with William J. Stokes.
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
10.5
 
Employment Agreement dated May 16, 2007 with Leonard Bruce Jolliff.
10.6
 
Agreement and Plan of Acquisition by and between Isonics Corporation and Advanced Medical Isotope Corporation dated June 13, 2007.
10.7
  Employment Agreement dated January 15, 2008 with Dr. Fu-Min Su.
23.1
  Independent Registered Public Accounting Firm's Consent for 2007
23.2
  Independent Registered Public Accounting Firm's Consent for 2006
 

 

 
34

 


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 CORPORATION  
       
Date:  November 12, 2008
By:
/s/ James C. Katzaroff  
    Name: James C. Katzaroff  
    Title: President  
       
 
 
 
 
 
 
35

EXHIBIT 3.1
 
 

 
State of Delaware
 
Office of the Secretary of State
PAGE 1


 
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF INCORPORATION OF "SAVAGE MOUNTAIN SPORTS CORPORATION" FILED IN THIS OFFICE ON THE SEVENTH DAY OF JANUARY, A.D. 2000, AT 5 O'CLOCK P.M.
 
A FILED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE COUNTY RECORDER OF DEEDS.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3156522  8100
 
001012213
 
/s/  Edward J. Freel
Edward J. Freel, Secretary of State
 
AUTHENTICATION:            0193641
 
                          DATE:            01-11-00
 

 
 

 
 
 
CERTIFICATE OF INCORPORATION
OF
SAVAGE MOUNTAIN SPORTS CORPORATION
 
ARTICLE I
 
The name of the corpora ti on is Savage Mountain Sports Corporation (the "Co rpo rati on").
 
ARTICLE II
 
The address of the Corporation's registered office in the State of Delaware is 1209 Orange Street, City of Wilmington, County of New Castle, Delaware 19801. The name of its registered agent at such address is The Corporation Trust Company.
 
ARTICLE III
 
The purpose of the Corporation is to engage in any lawful act or   activity for which corporations may be organized under the General Corporation Law of Delaware.
 
ARTICLE IV
 
The Corporation is authorized to issue one class of shares of stock to be designated Common Stock, S0.001 par value per share. The total number of shares that the Corporation is authorized to issue is One Hundred Million (100,000,000) shares of Common Stock.
 
ARTICLE V
 
The Corpor a tion reserves the right to amend , alter, change, or repeal any provision   contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon the stockholders herein are granted subject to this right.
 
ARTICLE VI
 
The Corporation is to have perpetual existence.
 
ARTICLE VII
 
1.       Li mitation of Liability. To the fullest extent permitted by the Genera l   Corporation Law of the State of Delaware as the same exists or as may hereaf t er be amended, a director of the Corporation shall not be person ally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director.
 
2.       Indemnificati on. The Corporation may indemnify to   the fullest extent permitted by law any person made o r   threatened to be made a party to an action or proceeding, whether criminal, civil, administrative or investigative, by reason of the fact that such person or his or her testator or intestate is or was a director, officer or employee or the Corporation, or any predecessor of the Corporation, or serves or served at any other enterprise as a director, officer or employee at the request of the Corporation or any predecessor to the Corporation.
 

 
Page 1 of 2

 


3.       Amendments. Neither any amendment nor repeal of this Article VII, nor the adoption of any provision of the Corporation's Certificate of Incorporation inconsistent with this Article VII, shall eliminate or reduce the effect of this Article VII, in respect of any matter occurring, or any action or proceeding accruing or arising or that, but for this Article VII, would accrue or arise, prior to such amendment, repeal, or adoption of an inconsistent provision.
 
ARTICLE VIII
 
Holders of stock of any class or series of this Corporation shall not be entitled to cumulate their votes for the election of directors or any other matter submitted to a vote of the stockholders.
 
ARTICL E IX
 
1.       Number of   Directors. The number of directors which constitutes the whole Board of Directors of the Corporation shall be designated in the Bylaws of the Corporation.
 
2.       Election of Directors .  Elections of directors shall not be by written ballot unless the Bylaws of the Corporation shall so   provide.
 
ARTICLE X
 
In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to make, alter, amend or repeal the Bylaws of the Corporation.
 
ARTICLE XI
 
Meetings of stockholders may be held within or without the State of Delaware, as the Bylaws may provide. The books of the Corporation may be kept (subject to any provision contained in the statutes) outside of the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the Bylaws of the Corporation.
 
ARTICLE XII
 
The name and mailing address of the incorporator are as follows: Diane Buechner, 2049 Century Park East, Suite 3350, Los Angeles, California 90067. The undersigned incorporator hereby acknowledges that the above Certificate of Incorporation of Savage Mountain Sports Products, Inc. is her act   and deed and that the facts stated therein are true.
 
 
 
Dated: January 11, 2000
 
/s/  Diane Buecher  
    Diane Buecher, Incorporator  
 

 
Page 2 of 2


EXHIBIT 3.2

 
BY-LAWS
OF
ADVANCED MEDICAL ISOTOPE CORPORATION
 (hereinafter called the "Corporation")
 
ARTICLE I
OFFICES
 
Section 1 .   Registered Office.   The registered office of the Corporation shall be in the State of Delaware.
 
Section 2 .   Other Offices.   The Corporation may also have offices at such other places both within and without the State of Delaware as the Board of Directors may from time to time determine.
 
ARTICLE II
MEETING OF STOCKHOLDERS
 
Section 1 .   Place of Meetings.   Meetings of the stockholders for the election of directors or for any other purpose shall be held at such time and place, either within or without the State of Delaware as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting or in a duly executed waiver of notice thereof.
 
Section 2 .   Annual Meetings.   The Annual Meetings of Stockholders shall be held on such date and at such time as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting, at which meetings the stockholders shall elect by a plurality vote a Board of Directors, and transact such other business as may properly be brought before the meeting.  Written notice of the Annual Meeting stating the place, date and hour of the meeting shall be given to each stockholder entitled to vote at such meeting not less than ten nor more than sixty days before the date of the meeting.
 
Section 3 .   Special Meetings.   Unless otherwise prescribed by law or by the Certificate of Incorporation, Special Meetings of Stockholders, for any purpose or purposes, may be called by either (i) the Chairman, if there be one, or (ii) the President, (iii) any Vice President, if there be one, (iv) the Secretary, or (v) any Assistant Secretary, if there be one, and shall be called by any such officer at the request in writing of a majority of the Board of Directors or at the request in writing of stockholders owning a majority of the capital stock of the Corporation issued and outstanding and entitled to vote.  Such request shall state the purpose or purposes of the proposed meeting.  Written notice of a Special Meeting stating the place, date and hour of the meeting and the purpose or purposes for which the meeting is called shall be given not less than ten nor more than sixty days before the date of the meeting to each stockholder entitled to vote at such meeting.
 
Section 4 .   Quorum.   Except as otherwise provided by law or by the Certificate of Incorporation, the holders of a majority of the capital stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business.  If, however, such quorum shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, of the time and place of the adjourned meeting, until a quorum shall be present or represented.  At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally noticed.  If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder entitled to vote at the meeting.
 
 
1

 
Section 5 .   Voting.   Unless otherwise required by law, the Certificate of Incorporation or these By-Laws, any question brought before any meeting of stockholders shall be decided by the vote of the holders of a majority of the stock represented and entitled to vote thereat. Each stockholder represented at a meeting of shareholders shall be entitled to cast one vote for each share of the capital stock entitled to vote thereat held by such stockholder.  Such votes may be cast in person or by proxy but no proxy shall be voted on or after three years from its date, unless such proxy provides for a longer period.  The Board of Directors, in its discretion, or the officer of the Corporation presiding at a meeting of stockholders, in his discretion, may require that any votes cast at such meeting shall be cast by written ballot.
 
Section 6 .   Consent of Stockholders in Lieu of Meeting Unless otherwise provided in the Certificate of Incorpo­ration, any action required or permitted to be taken at any Annual or Special Meeting of Stockholders of the Corporation, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted.  The written consents shall be delivered to the Corporation by delivery to its registered office in Delaware, its principal place of business, or an officer or agent of the Corporation having custody of the book in which the proceedings are recorded.  Delivery to the registered officer shall be by hand or certified or registered mail, return receipt requested. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing.
 
Section 7 .   List of Stockholders Entitled to Vote. The officer of the Corporation who has charge of the stock ledger of the Corporation shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder.  Such list shall be open to the examination of any stockholder, for any purpose to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held.  The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder of the Corporation who is present.
 
Section 8 .   Stock Ledger.   The stock ledger of the Corporation shall be the only evidence as to who are the stock­holders entitled to examine the stock ledger, the list required by Section 7 of this Article II or the books of the Corporation, or to vote in person or by proxy at any meeting of stockholders.
 
 
 

 
2

 

ARTICLE III
DIRECTORS
 
Section 1 .   Number and Election of Directors.   The Board of Directors shall consist of one or more members, the exact number of which shall initially be fixed by the Incorporator and thereafter from time to time by the Board of Directors.  Except as provided in Section 2 of this Article, directors shall be elected by a plurality of the votes cast at Annual Meetings of Stockholders, and each director so elected shall hold office until the next Annual Meeting and until his successor is duly elected and qualified, or until his earlier resignation or removal.  Any director may resign at any time upon written notice to the Corporation.  Directors need not be stockholders.
 
Section 2 .   Vacancies.   Vacancies and newly created directorships resulting from any increase in the authorized number of directors may be filled by a majority of the directors then in office, though less than a quorum, or by a sole remaining director, and the directors so chosen shall hold office until the next annual election and until their successors are duly elected and qualified, or until their earlier resignation or removal.
 
Section 3 .   Duties and Powers.   The business of the Corporation shall be managed by or under the direction of the Board of Directors which may exercise all such powers of the Corporation and do all such lawful acts and things as are not by statute or by the Certificate of Incorporation or by these By-Laws directed or required to be exercised or done by the stockholders.
 
Section 4 .   Meetings.   The Board of Directors of the Corporation may hold meetings, both regular and special, either within or without the State of Delaware.  Regular meetings of the Board of Directors may be held without notice at such time and at such place as may from time to time be determined by the Board of Directors.  Special meetings of the Board of Directors may be called by the Chairman, if there be one, the President, or any one (1) director.  Notice thereof stating the place, date and hour of the meetings shall be given to each director either by mail not less than forty-eight (48) hours before the date of the meeting, by telephone or telegram on twenty-four (24) hours' notice, or on such shorter notice as the person or persons calling such meeting may deem necessary or appropriate in the circumstances.
 
Section 5 .   Quorum.   Except as may be otherwise specifically provided by law, the Certificate of Incorporation or these By-Laws, at all meetings of the Board of Directors, a majority of the entire Board of Directors shall constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors.  If a quorum shall not be present at any meeting of the Board of Directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present.
 
Section 6 .   Actions of Board.   Unless otherwise provided by the Certificate of Incorporation or these By-Laws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if all the members of the Board of Directors or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board of Directors or committee.
 
Section 7 .   Meetings by Means of Conference Telephone .  Unless otherwise provided by the Certificate of Incorporation or these By-Laws, members of the Board of Directors of the Corporation, or any committee designated by the Board of Directors, may participate in a meeting of the Board of Directors or such committee by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to the Section 7 shall constitute presence in person at such meeting.
 
 
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Section 8 .   Committees.   The Board of Directors may, by resolution passed by a majority of the entire Board of Directors, designate one or more committees, each committee to consist of one or more of the directors of the Corporation. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of any such committee. In the absence or disqualification of a member of a committee, and in the absence of a designation by the Board of Directors of an alternate member to replace the absent or disqualified member, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any absent or disqualified member.  Any committee, to the extent allowed by law and provided in the resolution establishing such committee, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation.  Each committee shall keep regular minutes and report to the Board of Directors when required.
 
Section 9 .   Compensation.   The directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid for attendance at each meeting of the Board of Directors or a stated annual salary as director.  Compensation may also consist of such options, warrants rights, shares of capital stock or any other form of remuneration approved by the Board of Directors.  No such payment shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefor.  Members of special or standing committees may be allowed like reimbursement of expenses for attending committee meetings.
 
Section 10 .   Interested Directors.   No contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other corporation, partnership, association, or other organization in which one or more of its directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board of Directors or committee thereof which authorizes the contract or transaction, or solely because his or their votes are counted for such purpose if (i) the material facts as to his or their relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or their committee, and the Board of Directors or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or (ii) the material facts as to his or their relationship or interest and as to the contract or transaction are disclosed or are known to the shareholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the shareholders; or (iii) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified, by the Board of Directors, a committee thereof or the shareholders. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee which authorizes the contract or transaction.
 
 
 
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ARTICLE IV
OFFICERS
 
Section 1 .   General.   The officers of the Corporation shall be chosen by the Board of Directors and shall be a President and a Secretary.  The Board of Directors, in its discretion, may also choose a Chairman of the Board of Directors (who must be a director), Treasurer and one or more Vice Presidents, Assistant Secretaries, Assistant Treasurers and other officers.  Any number of offices may be held by the same person, unless otherwise prohibited by law, the Certificate of Incorporation or these By-Laws.  The officers of the Corporation need not be stockholders of the Corporation nor, except in the case of the Chairman of the Board of Directors, need such officers be directors of the Corporation.
 
Section 2 .   Election.   The Board of Directors at its first meeting held after each Annual Meeting of Stockholders shall elect the officers of the Corporation who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board of Directors; and all officers of the Corporation shall hold office until their successors are chosen and qualified, or until their earlier resignation or removal.  Any officer elected by the Board of Directors may be removed at any time by the affirmative vote of a majority of the Board of Directors.  Any vacancy occurring in any office of the Corporation shall be filled by the Board of Directors.  The salaries of all officers of the Corporation shall be fixed by the Board of Directors.
 
Section 3 .   Voting Securities Owned by the Corporation.   Powers of attorney, proxies, waivers of notice of meeting, consents and other instruments relating to securities owned by the Corporation may be executed in the name of and on behalf of the Corporation by the President or any Vice President and any such officer may, in the name of and on behalf of the Corporation, take all such action as any such officer may deem advisable to vote in person or by proxy at any meeting of security holders of any corporation in which the Corporation may own securities and at any such meeting shall possess and may exercise any and all rights and power incident to the ownership of such securities and which, as the owner thereof, the Corporation might have exercised and possessed if present.  The Board of Directors may, by resolution, from time to time confer like powers upon an-other person or persons.
 
Section 4 .   Chairman of the Board of Directors.   The Chairman of the Board of Directors, if there be one, shall preside at all meetings of the stockholders and of the Board of Directors.  He shall be the Chief Executive Officer of the Corporation, and except where by law the signature of the President is required, the Chairman of the Board of Directors shall "possess the same power as the President to sign all contracts, certificates and other instruments of the Corporation which may be authorized by the Board of Directors.  During the absence or disability of the President, the Chairman of the Board of Directors shall exercise all the powers and discharge all the duties of the President.  The Chairman of the Board of Directors shall also perform such other duties and may exercise such other powers as from time to time may be assigned to him by these By-Laws or by the Board of Directors.
 
Section 5 .   President.   The President shall, subject to the control of the Board of Directors and, if there be one, the Chairman of the Board of Directors, have general supervision of the business of the Corporation and shall see that all orders and resolutions of the Board of Directors are carried into effect.  He shall execute all bonds, mortgages, contracts and other instruments of the Corporation requiring a seal, under the seal of the Corporation, except where required or permitted by law to be otherwise signed and executed and except that the other officers of the Corporation may sign and execute documents when so authorized by these By-Laws, the Board of Directors or the President.  In the absence or disability of the Chairman of the Board of Directors, or if there be none, the President shall preside at all meetings of the stockholders and the Board of Directors.  If there be no Chairman of the Board of Directors, the President shall be the Chief Executive Officer of the Corporation.  The President shall also perform such other duties and may exercise such other powers as from time to time may be assigned to him by these By-Laws or by the Board of Directors.
 
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Section 6 .   Vice-Presidents.   At the request of the President or in his absence or in the event of his inability or refusal to act (and if there be no Chairman of the Board of Directors), the Vice-President or the Vice-Presidents if there is more than one (in the order designated by the Board of Directors) shall perform the duties of the President, and when so acting, shall have all the powers of and be subject to all the restrictions upon the President.  Each Vice-President shall perform such other-duties and have such other powers as the Board of Directors from time to time may prescribe. If there be no Chairman of the Board of Directors and no Vice-President, the Board of Directors shall designate the officer of the Corporation who, in the absence of the President or in the event of the inability or refusal of the President to act, shall perform the duties of the President, and when so acting, shall have all the powers of and be subject to all the restrictions upon the President.
 
Section 7 .   Secretary.   The Secretary shall attend all meetings of the Board of Directors and all meetings of stockholders and record all the proceedings thereat in a book or books to be kept for that purpose; the Secretary shall also perform like duties for the standing committees when required. The Secretary shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors or President, under whose supervision he shall be.  If the Secretary shall be unable or shall refuse to cause to be given notice of all meetings of the stockholders and special meetings of the Board of Directors, and if there be no Assistant Secretary, then either the Board of Directors or the President may choose another officer to cause such notice to be given.  The Secretary shall have custody of the seal of the Corporation and the Secretary or any Assistant Secretary, if there be one, shall have authority to affix the same to any instrument requiring it and when so affixed, it may be attested by the signature of the Secretary or by the signature of any such Assistant Secretary.  The Board of Directors may give general authority to any' other officer to affix the seal of the Corporation and to attest the affixing by his signature.  The Secretary shall see that all books, reports, statements, certificates and other documents and records required by Law to be kept or filed are properly kept or filed, as the case may be.
 
Section 8 .   Treasurer.   The Treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors.  The Treasurer shall disburse the funds of the Corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render unto the President and the Board of Directors, at its regular meetings, or when the Board of Directors so requires, an account of all his transactions as Treasurer and of the financial condition of the Corporation.  If required by the Board of Directors, the Treasurer shall give the Corporation a bond in such sum and with such surety or sureties as shall be satisfactory to the Board of Directors for the faithful performance of the duties of his office and for the restoration to the Corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the Corporation.
 

 
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Section 9 .   Assistant Secretaries.   Except as may be otherwise provided in these By-Laws, Assistant Secretaries, if there be any, shall perform such duties and have such powers as from time to time may be assigned to them by the Board of Directors, the President, any Vice-President, if there be one, or the Secretary, and in the absence of the Secretary or in the event of his disability or refusal to act, shall perform the duties of the Secretary, and when so acting, shall have all the powers of and be subject to all the restrictions upon the Secretary.
 
Section 10 .   Assistant Treasurers.   Assistant Treasurers, if there be any, shall perform such duties and have such powers as from time to time may be assigned to them by the Board of Directors, the President, any Vice-President, if there be one, or the Treasurer, and in the absence of the Treasurer or in the event of his disability or refusal to act, shall perform the duties of the Treasurer, and when so acting, shall have all the powers of and be subject to all the restrictions upon the Treasurer.  If required by the Board of Directors, an Assistant Treasurer shall give the Corporation a bond in such sum and with such surety or sureties as shall be satisfactory to the Board of Directors for the faithful performance of the duties of his office and for the restoration to the Corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the Corporation.
 
Section 11 .   Other Officers.   Such other officers as the Board of Directors may choose shall perform such duties and have such powers as from time to time may be assigned to them by the Board of Directors.  The Board of Directors may delegate to any other officer of the Corporation the power to choose such other officers and to prescribe their respective duties and powers.
 
ARTICLE V
STOCK
 
Section 1 .   Form of Certificates.   Every holder of stock in the Corporation shall be entitled to have a certificate signed, in the name of the Corporation (i) by the Chairman of the Board of Directors, the President or a Vice-President and (ii) by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the Corporation, certifying the number of shares owned by him in the Corporation.
 
Section 2 .   Signatures.   Any or all of the signatures on the certificate may be by facsimile.  In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue.
 
Section 3 .   Lost Certificates.   The Board of Directors may direct a new certificate to be issued in place of any certificate theretofore issued by the Corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed.  When authorizing such issue of a new certificate, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate, or his legal representative, to advertise the same in such manner as the Board of Directors shall require and/or to give the Corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost, stolen or destroyed.
 
 
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Section 4 .   Transfers.   Stock of the Corporation shall be transferable in the manner prescribed by law and in these By-Laws.  Transfers of stock shall be made on the books of the Corporation only by the person named in the certificate or by his attorney lawfully constituted in writing and upon the surrender of the certificate therefor, which shall be canceled before a new certificate shall be issued.
 
Section 5 .   Record Date.   In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty days nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action.  A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.
 
Section 6 .   Beneficial Owners.   The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares of the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by law.
 
ARTICLE VI
NOTICES
 
Section 1 .   Notices.   Whenever written notice is required by law, the Certificate of Incorporation or these By-Laws, to be given to any director, member of a committee or stockholder, such notice may be given by mail, addressed to such director, member of a committee or stockholder, at his address as it appears on the records of the Corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail.  Written notice may also be given personally or by telegram, telex or cable.
 
Section 2 .   Waivers of Notice.   Whenever any notice is required by law, the Certificate of Incorporation or these By-Laws, to be given to any director, member of a committee or stockholder, a waiver thereof in writing, signed, by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto.
 
ARTICLE VII
GENERAL PROVISIONS
 
Section 1 .   Dividends.   Dividends upon the capital stock of the Corporation, subject to the provisions of the Certificate of Incorporation, if any, may be declared by the Board of Directors at any regular or special meeting, and may be paid in cash, in property, or in shares of the capital stock.  Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the Board of Directors from time to time, in its absolute discretion, deems proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for any proper purpose, and the Board of Directors may modify or abolish any such reserve.
 
 
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Section 2 .   Disbursements.   All checks or demands for money and notes of the Corporation shall be signed by such officer or officers or such other person or persons as the Board of Directors may from time to time designate.
 
Section 3 .   Fiscal Year.   The fiscal year of the Corporation shall be fixed by resolution of the Board of Directors.
 
Section 4 .   Corporate Seal.   The corporate seal shall have inscribed thereon the name of the Corporation, the year of its organization and the words "Corporate Seal, Delaware".  The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise.
 
ARTICLE VIII
INDEMNIFICATION AND DIRECTORS' LIABILITY
 
Section 1 .   Indemnification of Directors and Officers.   The Corporation shall be required, to the fullest extent authorized by Section 145 of the General Corporation Law of the State of Delaware (the "GCL"), as the same may be amended and supplemented, to indemnify any and all directors and officers of the Corporation.
 
ARTICLE IX
AMENDMENTS
 
Section 1.   These By-Laws may be altered, amended or repealed, in whole or in part, or new By-Laws may be adopted by the stockholders or by the Board of Directors, provided, however, that notice of such alteration, amendment, repeal or adoption of new By-Laws be contained in the notice' of such meeting of stockholders or Board of Directors, as the case may be.  All such amendments must be approved by either the holders of a majority of the outstanding capital stock entitled to vote thereon or by a majority of the entire Board of Directors then in office.
 
Section 2 .   Entire Board of Directors.   As used in this Article IX and in these By-Laws generally, the term "entire Board of Directors" means the total number of directors which the Corporation would have if there were no vacancies.
 
 
 
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EXHIBIT 3.3
 

 
ARTICLES AND CERTIFICATE OF MERGER
OF
HHH ENTERTAINMENT, INC.,
a Nevada corporation
AND
SAVAGE MOUNTAIN SPORTS CORPORATION,
a Delaware corporation

The undersigned officers of HHH Entertainment, Inc., a Nevada corporation, as the disappearing corporation, and of Savage Mountain Sports Corporation, a Delaware corporation, as the surviving corporation, pursuant to an Agreement and Plan of Merger, do submit these Articles and Certificate of Merger pursuant to the provisions of Nevada Revised Statutes 92A and Delaware Corporation Law Section 252.

Article I.      Constituent Corporations

The name and place of organization and governing law of each constituent corporation is:

A.       HHH Entertainment, Inc., the Disappearing Corporation, is a corporation incorporated under and governed by the laws of the State of Nevada.

B.       Savage Mountain Sports Corporation, the Surviving Corporation, is a corporation incorporated under and governed by the laws of the State of Delaware.

Article II.       Adoption and Approval of the Agreement and Plan of Merger

The Agreement and Plan of Merger has been approved, adopted, certified, executed and acknowledged by each of the constituent corporations in accordance with the provisions of Nevada Revised Statutes 92A and Delaware Corporation Law Section 252. Without limiting the foregoing:

A.       The respective Boards of Directors of the Surviving Corporation and its Disappearing Corporation have adopted the Agreement and Plan of Merger.
 
B.       The Agreement and Plan of Merger was approved by the unanimous consent of the owners of Savage Mountain Sports Corporation.
 
C.       The Agreement and Plan of Merger was approved by the affirmative vote of 22,949,045 shares (98. 76%) of the 23,237,045 shares entitled to vote on the Agreement and Plan of Merger by the owners of HHH Entertainment, Inc.


 
Page 1 of 3

 

Article III.      Name and Certificate of Incorporation of the Surviving Corporation

The name of the Surviving Corporation shall remain Savage Mountain Sports Corporation. The Certificate of Incorporation of the Surviving Corporation shall not be amended by this Articles and Certificate of Merger or by the Agreement and Plan of Merger.

Article IV.      Authorized Capital Stock

The authorized capital stock of the Disappearing Corporation consists of 100,000,000 shares of Common Stock, $.001 par value per share.

The authorized capital stock of the Surviving Corporation consists of 100,000,000 shares of Common Stock, $.001 par value per share.

Article V.      Agreement and Plan of Merger

The complete, executed Agreement and Plan of Merger is on file at the Surviving corporation's principal place of business, which is 6701 Center Drive West, Suite 700, Los Angeles, California 90045-1535.

A copy of the Agreement and Plan of Merger shall be furnished, on request and without cost, to any stockholder of a corporation which is a party to the merger.

Article VI.      Effective Date of Merger

The Merger   of the Disappearing Corporation into the Surviving Corporation shall take effect upon the filing of this Articles and Certificate of Merger.


 

 
Page 2 of 3

 

IN WITNESS WHEREOF, the undersigned have duly executed this Articles and Certificate of Merger as of the 3rd day of April, 2000.
 
 
  Savage Mountain Sports Corporation,  
  a Delaware corporation  
       
       
  By: /s/ James C. Katzaroff  
    James C. Katzaroff, President  
       
       
  By: /s/ John Baumann  
    John Baumann, Secretary  
 
 
 
  HHH Entertainment, Inc.,  
  a Nevada corporation  
       
       
  By: /s/ James C. Katzaroff  
    James C. Katzaroff, President  
       
       
  By: /s/ John Baumann  
    John Baumann, Secretary  

 




Page 3 of 3


EXHIBIT 3.4

 
 
 
State of Delaware
 
Office of the Secretary of State
PAGE 1
 

 
 
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREEY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF MERGER, WHICH MERGES:
“EARTH SPORTS PRODUCTS, INC”, A WASHINGTON CORPORATION, WITH AND INTO “SAVAGE MOUNTAIN SPORTS CORPORATION”, A CORPORATION ORGANIZED AND EXISTING UNDER THE LAWS OF THE STATE OF DELAWARE, AS RECEIVED AND FILED IN THIS OFFICE THE TENTH DAY OF MAY, A.D. 2000 AT 9:01 O’CLOCK.
A FILED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE COUNTY RECORDER OF DEEDS.
 

 
 
 
/s/   Edward J. Freel
  Edward J. Freel, Secretary of State
   
3156522   8100M AUTHENTICATION:           0433000
   
001239304                           DATE:           05-11-00
 

 
 

 


 
   
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:01 AM 5/10/2000
001239304 - 3156522
 
ARTICLES AND CERTIFICATE OF MERGER
OF
EARTH SPORTS PRODUCTS, INC.,
A Washington corporation
AND
SAVAGE MOUNTAIN SPORTS CORPORATION,
a Delaware corporation

 
The undersigned officers of Earth Sports Products, Inc., a Washington corporation, as the disappearing corporation, and of Savage Mountain Sports Corporation, a Delaware corporation, as the surviving corporation, pursuant to an Agreement and Plan of Merger, do submit these Articles and Certificate of Merger pursuant to the provisions of Revised Code of Washington 23B.11 and Delaware Corporation Law Annotated Section 2.52.

Article I.      Constituent Corporations

The name and place of organization and governing law of each constituent corporation is:

A.       Earth Sports Products, Inc., the Disappearing Corporation, is a corporation incorporated under and governed by the laws of the State of Washington.

B.       Savage Mountain Sports Corporation, the surviving corporation is a corporation incorporated under and   governed by the laws of the State of Delaware. -

 
Article II .       Adoption and Approval of the Agreement and Plan of Merger

The Agreement and Plan of Merger, a copy of which is attached hereto   as Exhibit A and incorporated herein by this reference, has been approved, adopted, certified, executed and acknowledged by each of the constituent corporations in accordance with the provisions of Revised Code of Washington 23B.11 and Delaware Corporation Law Annotated Section 2.52. Without limiting the foregoing:

A.       The respective Boards of Directors of the Surviving Corporation and its Disappearing Corporation have adopted the Agreement and Plan of Merger.

B.       The Agreement and Plan of Merger was approved by the unanimous consent  of the stockholders of Savage Mountain Sports   Corporation

 
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C.       The Agreement and   Plan of Merger was approved by the affirmative vote   of more than two - thirds   of the shares entitled to vote on the   Agreement and Plan of Merger by the owners of Earth Sports Products, Inc. pursuant to Revised Code of Washington 23B.11.030.

 
Article III.         Name and Certificate of Incorporation of the Surviving Corporation

The name of the Surviving Corporation shall remain Savage Mountain Sports Corporation. The Certificate of Incorporation of the Surviving Corporation shall not be amended by this Article and Certificate of Merger or by the Agreement and Plan of Merger.

 
Article   IV.      Authorized Capital Stock

The authorized capital stock of the Disappearing Corporation consists of 100,000,000 shares of Common Stock, $.001 par value per share.

The authorized capital stock of the Surviving Corporation consists of 100,000,000 shares of Common Stock, $.001 par value per share.

 
Article V.       Agreement and Plan of Merger

The complete, executed Agreement and Plan of Merger is on file at the Surviving corporation's principal place of business, which is 6701 Center Drive West, Suite 700, Lo s Angeles, California 90045-1535.

A copy of the Agreement and Plan of Merger shall be furnished, on request, and without costs, to any stockholder of a corporation which is   party to the merger.

 
Article VI.       Effective Date   of Merger

The Merger of the Disappearing Corporation into the Surviving Corporation shall take effect upon the filing of this Articles and Certificate of Merger.


 
Page 2 of 3

 

 
IN WITNESS WHEREOF, the undersigned have duly executed this Articles and Certificate of Merger as of the 3 rd day of April, 2000.
 
 
Savage Mountain Sports Corporation,
a Delaware corporation
 
       
 
By:
/s/  James C. Katzaroff  
    James C. Katzaroff, President  
       
       
    /s/  John Baumann  
    John Baumann, Secretary  

 
Earth Sports Products, Inc. ,
a Washington corporation
 
       
 
By:
/s/  James C. Katzaroff  
    James C. Katzaroff, President  
       
       
    /s/  John Baumann  
    John Baumann, Secretary  
 
 
 
 
 
Page 3 of 3

EXHIBIT 3.5
 
 
   
State of Delaware
Secretary of State
Division of Corporations
Delivered 11:59 AM 05/23/2006
FILED 11:59 AM 05/23/2006
SRV 060491501 - 3156522 FILE
 
STATE OF DELAWARE
CERTIFICATE OF AMENDMENT
OF CERTIFICATE OF INCORPORATION

The corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware does hereby certify:
FIRST: That at a meeting of the Board of Directors of Savage Mountain Sports Corporation, File 3156522 resolutions were duly adopted setting forth a proposed amendment of the Certificate of Incorporation of said corporation, declaring said amendment to be advisable and calling a meeting of the stockholders of said corporation for consideration thereof. The resolution setting forth the proposed amendment is as follows:
RESOLVED, that the Certificate of Incorporation of this corporation be amended by changing the Article thereof numbered “ ARTICLE I ” so that, as amended, said Article shall be and read as follows:
The name of the Corporation shall be “Advanced Medical Isotope Corporation”
 
SECOND: That thereafter, pursuant to resolution of its Board of Directors, a special meeting of the stockholders of said corporation was duly called and held upon notice in accordance with Section 222 of the General Corporation Law of the State of Delaware at which meeting the necessary number of shares as required by statute were voted in favor of the amendment.
THIRD: That said amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware.
 
IN WITNESS WHEREOF,   said corporation has caused this certificate to be signed this 23 day of May , 20 06 .
 
  By: /s/  James C. Katzaroff  
   
Authorized Officer
 
       
  Title: CEO   
       
 
Name
James C. Katzaroff  
   
Print or Type
 
 
 
 
 


EXHIBIT 3.6

 
   
State of Delaware
Secretary of State
Division of Corporations
Delivered 12:45 PM 09/25/2006
FILED 12:45 PM 09/25/2006
SRV 060880909 – 3156522 FILE
     
     
 
STATE OF DELAWARE
CERTIFICATE OF AMENDMENT
OF CERTIFICATE OF INCORPORATION
RECEIVED
SEP 26  2006
 
 
The corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware does hereby certify:
FIRST: That at a meeting of the Board of Directors of ADVANCED MEDICAL ISOTOPE CORPORATION resolutions were duly adopted setting forth a proposed amendment of the Certificate of Incorporation of said corporation, declaring said amendment to be advisable and calling a meeting of the stockholders of said corporation for consideration thereof.  The resolution setting forth the proposed amendment is as follows:
RESOLVED , that the Certificate of Incorporation of this corporation be amended by changing the Article thereof numbered “ARTICLE IV” so that, as amended, said Article shall be and read as follows:
      The authorized capital stock of the Surviving Corporation consists of 100,000,000 shares of Common Stock, $.001 par value.
      The authorized capital stock consists of 100,000 Series A shares of Preferred Capital Stock, $.001 par value per share.

SECOND: That thereafter, pursuant to resolution of its Board of Directors, a special meeting of the stockholders of said corporation was duly called and held upon notice in accordance with Section 222 of the General Corporation Law of the State of Delaware at which meeting the necessary number of shares as required by statute were voted in favor of the amendment.
THIRD: That said amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware.

IN WITNESS WHEREOF, said corporation has caused this certificate to be signed this 25 day of September, 20 06 .
 
 
By:
/s/ James C. Katzaroff  
   
Authorized Officer
 
       
  Title: President   
       
  Name: James C. Katzaroff   
   
Print or Type
 

 
 
 


EXHIBIT 10.1
 
 
AGREEMENT AND PLAN OF REORGANIZATION
 
THIS AGREEMENT AND PLAN OF REORGANIZATION dated this 15th day of December, 1998 (the "Agreement") is by and among HHH Entertainment, Inc., a Nevada corporation ("HHH") and Earth Sports Products, Inc., a Washington corporation ("ESP").
 
RECITALS:
 
A.      The Board of Directors of HHH deems it advisable and in the best interest of HHH to acquire the ESP Shares in exchange for the issuance by HHH of its Common Stock in accordance with the applicable provisions of the Washington Business Corporation Act and the terms and conditions set forth herein.
 
In consideration of the mutual promises, representations and conditions hereinafter set: forth, the parties hereto, hereby agree as follows:
 
ARTICLE I
Definitions
 
As used in this Agreement, the following terms shall have the following meanings:
 
A.       "Reorganization" shall mean the acquisition by HHH of the ESP Shares in exchange for the HHH Shares as further defined herein.
 
B.       "Closing Date" shall mean the date upon which the reorganization shall have occurred in accordance with the terms and conditions set forth herein.
 
C.       "ESP Shareholders" shall mean all the shareholders of ESP which shareholders are offering all of their shares of ESP Common Stock for exchange hereunder.
 
D.       "HHH Shares" shall mean the Common Stock, $.001 par value per share, of HHH, issued to the ESP Shareholders in accordance with the terms and conditions set forth herein.
 
ARTICLE II
Reorganization
 
2.01       P lan and A greeme n t of Reorganization . A plan of reorganization is hereby adopted to as follows:
 
A.      Subject to the terms and conditions hereinafter set forth, on the Closing Date, and in the manner hereinafter proved, (i) the ESP shareholders shall exchange the ESP Shares for the HHH Shares in the amounts set forth herein; (ii) ESP shall become a wholly-owned subsidiary of HHH; and (iii) the business of ESP shall be continued.
 
 
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B.      HHH and the ESP Shareholders, respectively, shall take, or cause to be taken, such action as may be necessary or appropriate in order to effectuate the transactions contemplated hereby such action shall include, but not be limited to the filing of Articles of Merger or Exchange with the Nevada and Washington Secretarys of State. In the event that after the Closing Date, any further action is necessary or desirable to carry out the purposes of this Agreement and to vest HHH or ESP with full title to the securities to be exchanged hereby, the officers and directors of HRH or ESP, as the case may be, shall take all such necessary action.

2.02       Effective Date of the Reorganization for Accounting   Purposes. The transactions contemplated by this Agreement shall be effective as of December 31, 1998 for accounting purposes and for all other purposes to the extent permissible by law.
 
2.03       Consideration and Basis of Exchange of Shares . The manner and basis of exchanging the ESP Shares for the Common Shares of HHH shall be as follows:

A.      On the Closing Date, ESP shall deliver to HHH certificates aggregating 100% of the issued and outstanding ESP Shares, less the shares belonging to those ESP Shareholders who exercise their dissenters' rights. The ESP Shareholders shall be issued in exchange for the ESP Shares held of record on the Closing Date, five (5) HHH Shares for each share of ESP they own. The number of ESP shares to be delivered will be no less than the legally required number to approve the reorganization and this Agreement, as provided by Washington law.
 
The ESP Shareholders and HHH agree that the ESP Shares and the HHH Shares exchanged hereby shall be “restricted securities" as that term is defined in Rule 144 under the Securities Act of 1931, as amended (the "1933 Act") and all certificates issued under this Agreement shall bear an appropriate legend to such effect.
 
2.04       Closing. Closing of this Agreement shall be held at a date to be mutually agreed upon by the parties at the offices of HHH, or such other place as the parties may mutually agree. The parties shall exchange such other documents and take such other actions as may be necessary or appropriate for completing the transactions contemplated by the Agreement.

 
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ARTICLE III
Investment Representations
 
3.01       Representations of ESP shareholders . As a condition to the issuance by HHH to each ESP Shareholder of certificates for the HHH shares, ESP, on behalf of its shareholders, hereby represent to HHH as follows:
 
A.      The ESP Shareholders are acquiring the HHH shares hereunder for their own account and for the purposes of investment, and not with a view to, or for sale in connection with, any distribution thereof.
 
B.      The ESP Shareholders (i) have such knowledge and experience in financial and business matters that they are capable of evaluating the merits and risks of their proposed investment in the HHH Shares, or (ii) they have been advised by attorneys, accountants or other representatives having such knowledge and experience. They acknowledge that their attorneys, accountants and other representatives had, prior to his/her action the opportunity to ask questions of, and to receive answers from HHH concerning HHH, its affiliates and business and financial condition.
 
C.       The ESP Shareholders understand and acknowledge that all of the HHH Shares to be delivered to him/her pursuant to the provisions of this Agreement, will be "restricted securities" within the meaning of the 1933 Act, and agrees that the certificate shall bear the following legend:
 
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE REEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT"), OR ANY STATE SECURITIES LAW AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAW
 
D.       The ESP Shareholders understand and acknowledge that the HHH Shares to be delivered pursuant to the provisions of this Agreement will not be registered under the 1933 Act and, accordingly, they recognize that they will be required to bear the economic risk of their investment until such securities are registered, if at all. They agree on behalf of themselves, their heirs, executors, successors and assigns, that they will only sell, transfer, pledge or hypothecate any of the HHH Shares to be acquired by them pursuant to the provisions of this Agreement pursuant to an effective Registration Statement under the 1933 Act or in a transaction wherein registration of the securities is not required. ESP Shareholders understand that HHH has no obligation to register the HHH Shares under the 1933 Act.
 
 
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E.      ESP and its shareholders shall indemnify and hold harmless HHH, each person who controls HHH within the meaning of the 1933 Act, and each officer and director of HHH, against losses, claims, damages or liabilities, joint or several, to which HHH, such controlling person, or any such officer or director may become subject under the 1933 Act or otherwise, insofar as such losses, claims damages or liabilities or actions with respect thereof) arise out of or are based upon any breach or violation of their representations and Agreements contained in this Agreement and shall reimburse HHH, such   controlling persons and such officers and directors for any legal and any other expenses reasonably incurred by them in connection with, investigating or defending any such loss, claim, damage or liability or any action. The rights to indemnification provided for in this Section 3.01 shall be in addition to and not in substitution of any other rights or remedies to which HHH, such controlling person or such officer or director may be entitled under this Agreement or at law, in equity or otherwise.
 
3.02       Disclosure Materials . HHH has distributed to the ESP Shareholders and ESP hereby represents and warrants to HHH that it has had the opportunity to review, prior to its action in closing under this Agreement:
 
A.       The Audited Financial Statements of HHH dated December 31, 1997; and
 
B.       Such other data in the possession of HHH regarding the business and/or finances of HHH and its affiliates as ESP Shareholders have reasonably requested.
 
ARTICLE IV
General Representations
 
4.01       Represe ntations of ESP . ESP hereby represents and warrants, on behalf of its shareholders, as follows:
 
A.       Each ESP Share delivered to HHH for exchange hereunder shall be delivered free and clear of any lien, encumbrance or security interest thereon, and the ESP shares delivered hereunder by the ESP Shareholders constitute no less than the legally required amount to approve this transaction.
 
B.       No ESP Shares issued and delivered to HHH for exchange hereunder shall be subject to any option, warrant or other right to purchase such shares, or any voting trust or other arrangement relating  to the voting of such shares.

 
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C.       The ESP Shares delivered to HHH for exchange hereunder shall constitute the amount legally required by the State of Washington.

D.      There is no firm, corporation, agency or other person that is entitled to a finder's fee or any type of brokerage commission in relation to or in connection with the transactions contemplated by this Agreement as a result of any Agreement or understanding with such ESP Shareholder or such ESP Shareholder's affiliates or shareholders.
 
E.       ESP has received or otherwise has knowledge of any and all liabilities of HHH as of the date of closing and hereby confirm its acceptance of same.
 
4.02              Representations of H H H . HHH hereby represents and warrants to ESP as follows:
 
A.       Organization and Good Standing. HHH is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada. HHH has full corporate power and authority to conduct its business as now conducted and to own or lease and operate the assets and property now owned or leased or operated by it. HHH is qualified to transact business in those jurisdictions wherein its business requires such action.
 
B.       Disclosure Statement. HHH has made available to the ESP Shareholders true, accurate and complete copies of its financial statements.
 
C.       Absence of Certain Events. Except as disclosed in the materials referred to herein, there has not been any change in the financial condition or in the nature of the business or operation of HHH which has had a materially adverse affect on its business, operations, assets, properties or prospects since December 31, 1998. Except as disclosed in the materials referred to herein, HHH knows of no development, except general economic conditions effecting business generally, of a nature that is materially adverse to the business, operations, assets, properties or prospects of HHH.
 
D.       Authority and Comp liance. HHH has full corporate power and lawful authority to execute and deliver this Agreement. The consummation and performance by HHH of the transactions contemplated by this Agreement have been duly and validly authorized by all necessary corporate and other proceedings. This Agreement has been duly and validly executed and delivered on behalf of HHH and constitutes a valid obligation of HHH, enforceable in accordance with its terms. No   consent, authorization or approval of, exemption by, or filing with any domestic governmental or administrative authority, or any court, is required to be obtained or made by HHH in connection with the execution, delivery and performance of this Agreement or the consummation of the transactions contemplated hereby. The execution, delivery, consummation and performance of this Agreement by HHH will not conflict with or result in the breach or violation of any term or provision of, or constitute a default under, any statute, indenture, mortgage, deed of trust, note or other material agreement or instrument to which HHH is a party or by which it is bound, or any law, order, writ, injunction, rule or regulation or any court or governmental agency or body.
 
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E.       S hares of HHH . The HHH Shares to be issued pursuant to this Agreement will be issued from the authorized and previously unissued Common Shares of HHH and, upon issuance and delivery to the ESP Shareholders, will be duly authorized and validly issued, fully paid and nonassessable,
 
F.       Full Disclosure. No representation or warranty by HHH in this Agreement or any document to be delivered by HHH pursuant hereto, and no statement, list, certificate or instrument furnished or to be furnished to the ESP Shareholders pursuant hereto or in connection with the negotiation, execution or performance of this Agreement contains or will contain any untrue statement of material fact or omits or will omit to state any fact necessary to make any statement herein or therein not misleading or necessary to complete and correct the presentation of all material aspects of the business of HHH.
 
G.       Finder. There is no firm corporation, agency or other person that is entitled to a finder's fee or any type of brokerage commission in relation to or in connection with the transactions contemplated by this Agreement as a result of any agreement or understanding with HHH or any of HHH's affiliates or shareholders.
 
4.03       Representations of ESP . ESP hereby represents and warrants to HHH as follows:
 
A.       Organization and Good St a ndi n g . ESP is a corporation duly organized, validly existing and in good standing under the laws of the State of Washington. ESP has full corporate power and authority to conduct its business as now conducted and to own or lease and operate the assets and property now owned or leased or operated by it. ESP is qualified to transact business in those jurisdictions wherein its business requires such action.

 
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B.       Absence of Certain Events . Except as disclosed in the materials referred to herein, there has not been any change in the financial condition or in the nature of the business or operation of ESP which has had a materially adverse affect on its business, operations, assets, properties or prospects since December, 1998. Except as disclosed in the disclosure materials referred to herein, ESP knows of no development, except general economic conditions effecting business generally, of a nature that is materially adverse to the business, operations, assets, properties or prospects of ESP.
 
C.       Authority and Compliance . ESP has full corporate power and lawful authority to execute and deliver this Agreement. The consummation and performance by ESP of the transactions contemplated by this Agreement have been duly and validly authorized by all necessary corporate and other proceedings. This Agreement has been duly and validly executed and delivered on behalf of ESP and constitutes a valid obligation of ESP, enforceable in accordance with its terms: No consent, authorization or approval of, exemption by, or filing with any domestic governmental or administrative authority, or any court, is required to be obtained or made by ESP in connection with the execution, delivery and performance of this Agreement or the consummation of the transactions contemplated hereby. The execution, delivery, consummation and performance of this Agreement by ESP will not conflict with or result in the breach or violation of any term or provision of, or constitute a default under, any statute, indenture, mortgage, deed of trust, note or other material agreement or instrument to which ESP is a party or by which it is bound, or any law, order, writ, injunction, rule or regulation or any court or governmental agency or body.
 
D.       Full Disc losure. No representation or warranty by ESP in this Agreement or any document to be delivered by ESP pursuant hereto, and no statement, list, certificate or instrument furnished or to be furnished to the ESP Shareholders pursuant hereto or in connection with the negotiation, execution or performance of this Agreement contains or will contain any untrue statement of material fact or omits or will omit to state any fact necessary to make any statement herein or therein not misleading or necessary to complete and correct the presentation of all material aspects of the business of ESP.

E.       Tender of A l l Shares. The Shares tendered by the ESP. Shareholders for exchange hereunder constitute 100% of the issued and outstanding shares of ESP as of the Closing Date.
 
F.       Finder. There is no firm, corporation, agency or other person that is entitled to a finder's fee or any type of brokerage commission in relation to or in connection with the transactions contemplated by this Agreement as a result of any agreement or understanding with ESP or any of ESP's affiliates or shareholders.
 
 
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ARTICLE V
Additional Agreements
 
HHH and ESP hereby further agree as follows:
 
5.01       Access and Information. HHH hereby agrees to give ESP and the ESP Shareholders and their respective accountants, attorneys and representatives, full access during normal business hours through the period prior to the Closing Date to all of its properties, books, contracts, commitments and records, and HHH will furnish to ESP and the ESP Shareholders during such period all such information concerning its affairs that ESP and the ESP Shareholders may reasonably request. The ESP Shareholders hereby agree that each will give to HHH and its accountants, attorneys and representatives full access during normal business hours through the period prior to the Closing Date to such information as may be reasonably necessary in order to confirm the representations and warranties of the ESP Shareholders set forth herein. In the event of the termination of this Agreement, each party will return to the other all documents, work papers and other materials obtained from the other relating to the transactions contemplated hereby, whether so obtained before or after the execution hereof, and will use best efforts to have any information so obtained and not heretofore made public, kept confidential.
 
5.02       Expenses . Upon termination of this Agreement as provided herein, each party will pay all costs and expenses of its performance of and compliance with all agreements and conditions contained herein to be performed or complied with, including fees, expenses and disbursements of its accountants and attorneys.
 
5.03       Further Assurances . If at any time, any party to this Agreement shall consider or be advised that any further action or assurance is necessary or desirable to vest the title to any securities exchanged hereby, the officer and directors of HHH, or the ESP Shareholders, as the case may be, shall deliver such documents or take such other action as may be necessary or proper to perfect or confirm title to such securities and otherwise carry out the purposes of this Agreement.
 
ARTICLE VI
Conditions Precedent

 
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6.01       C onditions Precedent to Obligations of ESP Shareholders . The obligations of the ESP shareholders to effect the transaction contemplated herein shall be subject to the following conditions (which may be waived in writing by the ESP Shareholders):
 
A.      The representations and warranties of HHH herein, shall be true and accurate as of and at the Closing Date with the same effect as though made at such time HHH shall have performed all obligations and complied with all covenants required by this Agreement to be performed or complied with by it prior to the Closing Date; and
 
B.      No material change in the corporate status, business, operations or financial condition of HHH shall have occurred since December 31, 1998 other than changes in the ordinary course of business, none of which has been materially adverse in relation to HHH, and no other event or condition of any character shall have occurred or arisen since that date which shall have materially or adversely effected the corporate status, business, operations or financial condition of HHH.
 
6.02       Conditions Precedent to the Obligations of ESP.  The obligation of ESP to effect the transaction contemplated hereby shall be subject to the conditions (which may be waived in writing by ESP that the representations and warranties of HHH contained herein shall be true and accurate as of and at the Closing Date with the same effect as though made at such time; and that HHH shall have performed all obligations and complied with all covenants required by this Agreement to be performed or complied with by them prior to the Closing Date.
 
6.03       Conditions Precedent to Obligations of HHH . The obligations of HHH to effect the transaction contemplated herein shall be subject to the following conditions (which may be waived in writing by HHH):
 
C.      The representations and warranties of ESP and the ESP Shareholders herein shall be true and accurate as of and at the Closing Date with the same effect as though made at such time; ESP and the ESP Shareholders shall have performed all obligations and complied with all covenants required by this Agreement to be performed or complied with by it prior to the Closing Date; and

B.      No material change in the corporate status, business, operations or financial condition of ESP shall have occurred since December 31, 1998, other than changes in the ordinary course of business, none of which has been materially adverse in relation to ESP, and no other event or condition of any character shall have occurred or arisen since that date which shall have materially or adversely effected the corporate status, business, operations or financial condition of ESP.
 


 
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ARTICLE VII
Termination and Abandonment
 
Anything herein or elsewhere to the contrary notwithstanding, this Agreement may be terminated and abandoned at any time before or after the Closing Date under any one or more of the following circumstances:
 
A.       By the mutual consent of the Board of Directors of ESP and the Board of Directors of HHH;
 
B.       By HHH, if prior to the Closing Date, the conditions set forth in section 6.03 have not been met;
 
C.       By ESP, if prior to the closing the conditions set forth in Section 6.02 have not been met;
 
D.      By the ESP Shareholders, if prior to the Closing Date, the conditions set forth in section 6.01 have not been made;
 
E.      By any party, if any action or proceeding before any court or governmental body or agency shall have been instituted or threatened to restrain or prohibit the transaction contemplated hereby and the ESP Shareholders and HHH deem it advisable not to proceed with the transaction.
 
Upon termination and abandonment, no party shall have any liability or obligation to any other party to this Agreement.
 
ARTICLE VIII
General Provisions
 
8.01       Survival of Representations , Wa rranties and Agreements . The representations, warranties and agreements contained in this Agreement shall survive the Closing Date.
 
8.02       A ssignability and Amendments . This Agreement shall not be altered or otherwise amended except pursuant to an instrument in writing signed by each of the parties. No assignment of any of its obligations by any party shall relieve such party from primary liability for any of its obligations hereunder. This Agreement shall be binding upon, and subject to the terms of the foregoing sentence, shall inure to the benefit of the parties, their successors, legal representatives and assigns.
 
8.03       Notices . Any notice, request, instruction or other d ocument to be given hereunder by any part to any of the other parties shall be in writing and shall be deemed to have been duly given when delivered personally or five days after dispatch by registered or certified mail, postage prepaid, return receipt requested, to the party to whom the same is given or made, at the addressee of each party or at such other address as any party shall specify to the others in writing.
 
 
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8.04       Exp enses. Whether or not the transactions contemplated by this Agreement, each party hereto shall bear the expenses incurred by it in connection with the transactions contemplated hereby.
 
8.05       Entire A greement . This Agreement, and other writings and agreements specifically identified herein, contain the entire agreement between the parties with respect to the transactions contemplated herein and supersede all previous written or oral negotiations, commitments or understandings.
 
8.06       Waiv ers and Remedies . Any waiver must be in writing. A waiver of any breach or failure to perform any of the terms or conditions of this Agreement shall not in any way effect, limit or waiver a party's right at any time to enforce strict compliance thereafter with every other term or condition of this Agreement. All remedies under this Agreement shall be cumulative, but not alternative.
 
8.07       Counterparts and Headings . This Agreement may be executed in counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument. All headings (including, without limitation, article headings and section titles, are inserted for convenience of reference only and shall not effect the meaning or interpretation of any terms of this Agreement. References to masculine, feminine or neuter shall each include the other, as the circumstances may require,
 
8.08       Severability . If to the extent that any court of competent jurisdiction holds any provision (or any part thereof) of this Agreement to be invalid or unenforceable, such holdings shall in no way effect the validity of the remainder of this Agreement.
 
8.09       Governing Law . This Agreement shall be governed by, and construed in accordance with, the laws of the State of Nevada.
 
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written
 
  HHH ENTERTAINMENT, INC.  
       
 
By:
/s/  James C. Katzaroff                      12/15/98  
    James Katzaroff, President  
       

 
  EARTH SPORTS PRODUCTS, INC.  
       
 
By:
/s/  Carlton M. Cadwell  
    15 Dec, 1998  
 
 
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EXHIBIT 10.2
 
 
AGREEMENT AND PLAN OF MERGER OF
HMH ENTERTAINMENT, INC. ,
a Nevada corporation
AND
SAVAGE MOUNTAIN SPORTS CORPORATION,
a Delaware corporation

THIS AGREEMENT AND PLAN OF MERGER dated as of January 6, 2000. (the “ Agreement ”) is between Savage Mountain Sports Corporation, a Delaware corporation (“ Savage Mountain ”) and HHH Entertainment, Inc., a Nevada corporation (" HHH ”). Savage Mountain and HHH are sometimes referred to herein as the "Constituent Corporations."

RECITALS

A.      Savage Mountain is a corporation duly organized and existing under the laws of the State of Delaware and has an authorized capital of 100,000,000 shares, all of which are designated "Common Stock," $.001 par value. As of the date of this Agreement of Merger, 1,000 shares of Common Stock were issued and outstanding, all of which were held by HHH.

B.      HHH is a corporation duly organized and existing under the laws of the State of Nevada and has an authorized capital of 100,000,000 shares, all of which are designated "Common Stock”, $.001 par value per share. As of the date of this Agreement of Merger, 23,237,045 shares of Common Stock were issued and outstanding.

C.      The Board of Directors of HHH has determined that, for the purpose of effecting the reincorporation of HHH in the State of Delaware, it is advisable and in the best interests of HHH that HHH merge with and into Savage Mountain upon the terms and conditions herein provided.

D.      The respective Boards of Directors of Savage Mountain and HHH have approved this Agreement and have directed that this Agreement be submitted to a vote of their respective stockholders and executed by the undersigned officers.

NOW, THEREFORE, in consideration of the mutual agreements and covenants set forth herein, Savage Mountain and HHH hereby agree, subject to the terms and conditions hereinafter set forth, as follows:


I. MERGER

1.1       Merger. In accordance with the provisions of this Agreement, the Delaware General Corporation Law and the Nevada Revised Statutes, HHH shall be merged with and into Savage Mountain (the "Merger”), the separate existence of HHH shall cease and Savage Mountain shall be, and is herein sometimes referred as, the "Surviving Corporation", and the name of the Surviving Corporation shall be Savage Mountain Sports Corporation.
 
 
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1.2       F iling and Effec tiveness . The Merger shall become effective when the following actions shall have been   completed:

(a)       This Agreement and Merger shall have been adapted and approved by the stockholders of each Constituent Corporation in accordance with the requirements of the Delaware General Corporation Law and the Nevada Revised Statutes;

(b)       All of the conditions precedent to the consummation of the Merger specified in this Agreement shall have been satisfied or duly waived by the party entitled to satisfaction thereof;

(c)       An executed Agreement and Plan of Merger meeting the requirements of the Delaware General Corporation Law shall have been filed with the Secretary of State of the State of Delaware; and The date and time when the Merger shall become effective, as aforesaid, is herein called the “ Effective Date of the Merger

1.3       E ffe c t of the Merger. Upon the Effective Date of the Merger, the separate existence of HHH shall cease and Savage Mountain, as the Surviving Corporation, (i) shall continue to possess all of its assets, rights, powers and property as constituted immediately prior the Effective Date of the Merger, (ii) shall be subject to all actions previously taken by its and HHH’s Board of Directors, (iii) shall succeed, without other transfer, to all of the assets, rights, powers and property of HHH in the manner more fully set forth in Section 259 of the Delaware General Corporation Law, (iv) shall continue to be subject to all of the debts, liabilities and obligations of Savage Mountain as constituted immediately prior to the Effective Date of the Merger, and (v) shall succeed, without other transfer, to all of the debts, liabilities and obligations of HHH in the same manner as if Savage Mountain had itself incurred them, all as more fully provided under the applicable provisions of the Delaware General Corporation Law and the Nevada Revised Statutes.


II. CHARTER DOCUMENTS, DIRECTORS AND OFFICERS

2.1       Certificate of Inc orporation . The Certificate of Incorporation of Savage Mountain as in effect immediately prior to the Effective Date of the Merger shall continue in full force and effect as the Certificate of Incorporation of the Surviving Corporation until duly amended in accordance with the provisions thereof and applicable law.

2.2       Bylaws. The Bylaws of Savage Mountain as in effect immediately prior to the Effective Date of the Merger shall continue in full force and effect as the Bylaws of the Surviving Corporation until duly amended in accordance with the provisions thereof and applicable law.

2.3       Directors and Officers . The directors and officers of HHH immediately prior to the Effective Date of the Merger shall be the directors and officers of the Surviving Corporation until their successors shall have been duly elected and qualified or until as otherwise provided by law, the   Certificate of   Incorporation of the Surviving Corporation or the Bylaws of the Surviving Corporation.
 
 
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III. MANNER OF CONVERSION OF STOCK

3.1.       HHH Common Shares . Upon the Effective Date of the Merger, each share of HHH Common Stock, $.001 par value, issued and outstanding immediately prior thereto, shall by virtue of the Merger and without any action by the Constituent Corporations, the holder of such shares or any other person, be converted into and exchanged for one fully paid and nonassessable share of Common Stock, $.001 par value per share, of the Surviving Corporation. No fractional share interests of Surviving Corporation Common Stock shall be   issued. In lieu thereof, any fractional share interests to which a holder would otherwise be entitled shall be aggregated.

3.2       HHH Options, Stock Purchase Rights and Convertible Securities.

(a)       Upon the Effective Date of the Merger, the Surviving Corporation shall assume the obligations of HHH under, and continue, any and all option plans. Each outstanding and unexercised option, other right to purchase, or security convertible into HHH Common Stock (a " R ight ”) shall become, subject to the provisions in paragraph (c) hereof, an option, right to purchase or a security convertible into the Surviving Corporation's Common Stock on the basis of one share of the Surviving Corporation's Common Stock for each one share of HHH Common Stock issueable pursuant to any such Right, on the same terms and conditions and at an exercise price equal to the exercise price applicable to any such HHH Right at the Effective Date of the Merger.  This paragraph 3.2(a) shall not apply to HHH Common Stock which is subject to paragraph 3.1.

(b)       A number of shares of the Surviving Corporation's Common Stock shall be reserved for issuance upon the exercise of options, stock purchase rights and convertible securities, equal to the number of shares of HHH Common Stock so reserved immediately prior to the Effective Date of the Merger.

(c)       The assumed Rights shall not entitle any holder thereof to a fractional share upon exercise or conversion. In addition, no "additional benefits" (within the meaning of Section 424(a)(2) of the Internal Revenue Code of 1986, as amended) shall be accorded to the optionees pursuant to the assumption of their options.

3.3       S avage Mountain Common Stock . Upon the Effective Date of the Merger, each share of Common Stock, $.001 par value, of Savage Mountain issued and outstanding immediately prior thereto shall, by virtue of the Merger and without any action by Savage Mountain, the holder of such shares or any other person, be canceled and returned to the status of authorized but unissued shares.

3.4       E xchange of Certificates . After the Effective Date of the merger, each holder of an outstanding certificate representing shares of HHH Common Stock may be asked to surrender the same for cancellation to American Registrar & Transfer Co. (the "Exchange Agent”), and each such holder shall be entitled to receive in exchange therefor a certificate or certificates representing the number of shares of the Surviving Corporation's Common Stock as the case may be, into which the surrendered shares were converted as herein provided. Until so surrendered, each outstanding certificate theretofore representing shares of HHH Common Stock shall be deemed for all purposes to represent the number of shares of the Surviving Corporation's Common Stock, respectively, into which such shares of HHH Common Stock, as the case may be, were converted in the Merger.
 
 
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The registered owner on the books and records of the Surviving Corporation or the Exchange Agent of any such outstanding certificate shall, until such certificate shall have been surrendered for transfer or conversion or otherwise accounted for to the Surviving Corporation or the Exchange Agent, have and be entitled to exercise any voting and other rights with respect to and to receive dividends and other distributions upon the shares of Common Stock of the Surviving Corporation represented by such outstanding certificate as provided above.

Each certificate representing Common Stock of the Surviving Corporation so issued in the Merger shall bear the same legends, if any, with respect to the restrictions on transferability as the certificates of .HHH so converted and given in exchange therefore, unless otherwise determined by the Board of Directors of the Surviving Corporation in compliance with applicable laws.

If any certificate for shares of the Surviving Corporation's stock is to be issued in a name other than that in which the certificate surrendered in exchange therefor is registered, it shall be a condition of issuance thereof that the certificate so surrendered shall be properly endorsed and otherwise in proper form for transfer, that such transfer otherwise be proper and comply with applicable securities laws and that the person requesting such transfer pay to the Exchange Agent any transfer or other taxes payable by reason of issuance of such new certificate in a name other than that of the registered holder of the certificate surrendered or establish to the satisfaction of the Surviving Corporation that such tax has been paid or is not payable.


IV. GENERAL

4.1       Covenants of Savage Mountain . Savage Mountain covenants and agrees that it will, on or before the Effective Date of the Merger:

(a)       Qualify to do business as a foreign corporation in the State of Nevada and in connection therewith irrevocably appoint an agent for service of process.

(b)       File any and all documents necessary for the assumption by Savage Mountain of all of the tax liabilities of HHH.

(c)      Take such other actions as may be required by the Nevada Revised Statutes.

4.2       Further Assurances . From time to time, as and when required by Savage Mountain or by its successors or assigns, there shall be executed and delivered on behalf of HHH such deeds and other instruments, and there shall be taken or caused to be taken by it such further and other actions as shall be appropriate or necessary in order to vest or perfect in or conform of record or otherwise by Savage Mountain the title to and possession of all the property, interests, assets, rights, privileges, immunities, powers, franchises and authority of HHH and otherwise to carry out the purposes of this Agreement, and the officers and directors of Savage Mountain are fully authorized in the name and on behalf of HHH or otherwise to take any and all such action and to execute and deliver any and all such deeds and other instruments.
 
 
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4.3       Abandonment. At any time before the Effective Date of the Merger, this Agreement may be terminated and the Merger may be abandoned for any reason whatsoever by the Board of Directors of either HHH or Savage Mountain, or of both, notwithstanding the approval of this Agreement by the stockholders of HHH or by the sole stockholder of Savage Mountain, or by both.

4.4       A mendment . The Boards of Directors of the Constituent Corporations may amend this Agreement at any time prior to the filing of this Agreement (or certificate in lieu thereof) with the Secretary of State of the States of Nevada and Delaware, provided that an amendment made subsequent to the adoption of this Agreement by the stockholders of either Constituent Corporation shall not: (1) alter or change the amount or kind of shares, securities, cash, property and/or rights to be received in exchange for or on conversion of all or any of the shares of any class or series thereof of such Constituent Corporation, (2) alter or change any term of the Certificate of Incorporation of the Surviving Corporation to be effected by the Merger, or (3) alter or change any of the terms and conditions of this Agreement if such alternation or change would adversely affect the holders of any class or series of capital stock of any Constituent Corporation.

4.5       R egistered Office . The registered office of the Surviving Corporation in the State of Delaware is 1209 Orange Street, Wilmington, County of New Castle, DE 19801 and The Corporation Trust Company is the registered agent of the Surviving Corporation at such address.

4.6       Ag reement . Executed copies of this Agreement will be on file at the principal place of business of the Surviving Corporation at 6701 Center Drive West, Suite 700, Los Angeles, California 90045, and copies thereof will be   furnished to any stockholder of either Constituent Corporation, upon request and without cost.

4.7       Governing Law . This Agreement shall in all respects be construed, interpreted and enforced in accordance with the governed by the laws of the State of Delaware and, so far as applicable, the merger provisions of the Nevada Revised Statutes.

4.8       Counterparts . In order to facilitate the filing and recording of this Agreement, the same may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which together shall constitute one and the same instrument.

 
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IN WITNESS WHEREOF, this Agreement having first been approved by the resolutions of the Board of Directors of Savage Mountain and HHH is hereby executed on behalf of each of such two corporations and attested by their respective officers there unto duly authorized.
 
    Savage Mountain Sports Corporation, a Delaware corporation  
         
 
 
By:
/s/  James C. Katzaroff  
      James C. Katzaroff, President  
         
         
ATTEST:        
         
/s/  John Baumann        
John Baumann, Secretary        
 

    HHH Entertainment, Inc., a Nevada corporation  
         
 
 
By:
/s/  James C. Katzaroff  
      James C. Katzaroff, President  
         
         
ATTEST:        
         
/s/  John Baumann        
John Baumann, Secretary        

 
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EXHIBIT 10.3
 
 
EMPLOYMENT AQREEMENT
 
THIS AGREEMENT entered into as of August 15, 2006 and effective as of August 15, 2006 (the "Effective Date"), subject to Board of Directors approval, by and between Advanced Medical Isotope Corporation (AMIC) or its successors and/or assignees. (hereinafter called the "Company") and William J. Stokes, an individual residing at 257 Riverwood Street, Richland WA 99352 called the "Executive").
 
WITNESSETH:
 
 
WHEREAS, the Company and   the Executive desire to enter into an employment agreement to establish the rights and obligations of the Executive and the Company in such employment relationship;
 
WHEREAS, the terms of this Agreement have been approved by the Board Chairman and will be presented to the full Board of Directors, of the Company;
 
NOW, THEREFORE, and in consideration of the mutual covenants herein contained, the Company and the Executive hereby mutually agree as follows:
 
1.       Employment and Duties.
 
The Company hereby employs the Executive and the Executive hereby accepts employment with the Company upon the terms and conditions hereinafter set forth. The Executive shall serve the Company as its Chief Executive Officer. In such capacity, the Executive shall report directly to the Company's Board of Directors and the Executive shall have all powers, duties, and obligations as are normally associated with such position as described in Exhibit I. The Executive shall further perform such other duties related to the business of the Company as may from time to time be reasonably requested of him by the Board of Directors.
 
Executive shall promptly notify the Company of his/her election or appointment to any corporate, civic or charitable boards or committees on or after the date of this Agreement.
 
2.       Term of Employment.
 
The term of employment (the "Term") shall begin on the Effective Date and shall expire on the third anniversary of the Effective Date, subject, however, to prior termination, as herein provided.
 
3.       Base Salary.
 
The Executive shall receive a monthly salary of $4,000 salary, beginning on January 1, 2007 until August 1, 2007 upon which the salary shall be $8,000. Adjustments shall be made at the discretion of the Board of Directors considering the performance of the company and contributions of the Executive.
 
 
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4.       Bonus
 
1,500,000 shares of common stock as a sign-on bonus. Within forty five (45) days of the close of each half of the Company's fiscal year, during which Executive is employed by the Company, the Executive shall be eligible to receive bonus payments ("Bonus") under the plan established by the Board of Directors for the   Executive.
 
5.       Fringe Benefits.
 
The Company shall further provide the Executive with medical insurance that covers all benefits that are available to other employees and/or executives for health, dental, and vision, The Company will also provide life insurance coverages, sick leave, personal time, vacation time, short and long   term disability programs, tax-qualified retirement plans, stock option and/or stock grant plans, paid holidays, expense reimbursement policies and such other fringe benefits of employment as the Company may provide from time to time to actively employed personnel of the Company who are similarly situated.
 
Notwithstanding the preceding provisions of this Paragraph 5, during the term of this Agreement (including extensions thereof) the Company shall provide the Executive reimbursement for all reasonable expenses incurred by the Executive in connection with the conduct of the Company's business art presentation of reasonable and appropriate receipts and in accordance with the Company's regular authorization and reimbursement policy applicable to senior executives and/or the Internal Revenue Service policies for business expense reimbursement and receipts.
 
6.       Stock Options.
 
Executive shall be eligible for all Executive Stock Option Plans that are available to other Executives. The Board of Directors will be responsible for the general employee Stock Option Plans annually.
 
7.       Provision of Directors and Officers Insurance.
 
The Company shall provide the Executive with full and complete Directors and Officers insurance coverage up to the maximum amount allowed under the Company's Directors and Officers insurance policy. The Executive shall he insured to the same extent as the Directors of the Company.
 
8.       Termination of   Employment.
 
(a)       Termination of Employment   by the Company.
 
The Executive's employment hereunder may be terminated by the Board of Directors without any breach of this Agreement. With the exception of termination for Cause, the Executive is expected to be provided thirty (30) days notice of a termination of employment.
 
The Executive's employment hereunder shall terminate upon his death and may be terminated by the Company in the event of his Disability for a continuous period of at least one hundred eighty (180) days. If Executive becomes subject to a Disability which is expected to last for a continuous period of at least one hundred eighty (18O) days, the Company may appoint an acting CEO, during such one hundred eighty (180)   day period without any breach of this Agreement; provided, that Executive shall be entitled to continue receiving Base Salary and benefits under this Agreement during such one hundred eighty (180) day period.
 
 
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(b)       Termination of Employment by Executive.
 
The Executive may terminate his employment at any time with or   without Good Reason. With the exception of personal hardship, the   Executive is expected to provide thirty (30) days notice of a voluntary termination of employment.
 
(c)       Notice of Termination.
 
Any termination of the Executive's employment by the Company hereunder, or by the Executive other than termination upon the Executive's death, shall be communicated by written Notice of   Termination to the other party.
 
9.       Amounts Payable Upon Termination of Employment.
 
(a)       Termination by the Company Without Cause   or by the Executive   for Good Reason.
 
In the   event Executive's employment is terminated by the Company without Cause or by the Executive for Good Reason, Executive shall be entitled to the following payments and benefits: The determination of "Good Reason" is in the sole discretion of the Company.
 
(i)       payment of all Accrued   Obligations in a lump sum in cash as soon as practicable but no later than ninety (90) days following the Date of Termination;
 
(ii)           payment of an amount equal to one (1) times the sum of Executive's monthly current Base Salary plus any portion of the Annual Bonus allocated by the Board of Directors for the period of employment.
 
(iii)          immediate vesting of all   outstanding options, stock grants, shares of restricted stock and any other equity incentive compensation; provided, that the stock options shall be exercisable only until the earlier to occur of (A) two (2) years from the date of the Executive's termination, or (B) the date the option would have otherwise expired if the Executive had not terminated   employment; and
 
(iv)         disability and other welfare plan benefits (other than continued group long-term disability coverage) for Executive and Executive's spouse/family, which are generally available to executives of the Company, for a period of one (1) year from the Date of Termination at the same cost to the Executive as is charged to such executives from time to time for   comparable coverage.
 
(b)       Termination by Executive Other Than for Good Reason or by   the Company for Cause.
 
In the event that the   Executive's employment is terminated by Executive other than for Good Reason, as determined by the Company, or by the Company for Cause, the Executive shall be entitled only to the payments and benefits set forth below:

 
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(i)           as of the Date of Termination, any Base Salary that is accrued but unpaid, any vacation that is accrued but unused and any business expenses that are unreimbursed; and
 
(ii)          any other rights and benefits (if any) provided under plans and programs of the Company (excluding any bonus program), determined in accordance with the applicable terms and provisions of such plans and programs,
 
(c)       Disability.
 
If the Executive's employment is terminated due to Disability, Executive shall be entitled to the following payments and benefits:
 
(i)           payment of all Accrued Obligations in a lump sum in cash as soon as practicable but no later than ninety (90) days following the Date of Termination;
 
(ii)          payment of an amount equal to twelve (12) times the sum of Executive's monthly current Base   Salary plus any portion of the Annual Bonus allocated by the Board of Directors for the period of employment.
 
(iii)         immediate vesting of all outstanding options, stock grants, shares of restricted stock and any other equity incentive compensation; provided, that the stock options shall be exercisable only until the earlier to occur of (A) two (2) years from the date of the Executive's termination, or (B) the date the option would have otherwise expired if the Executive had not terminated employment; and
 
(iv)        disability and other welfare plan benefits (other than continued group long-term disability coverage) for Executive and Executive's family, which are generally available to executives of the Company, for a period of one (1 ) year from the Date of Termination at the same cost to the Executive as is charged to such executives from time to time for comparable coverage.
 
Notwithstanding any other provision hereof, if Executive dies prior to the time that all payments described in this Section 9(c) have been completed, such payments and benefits shall be paid to the Executive's estate.
 
(d)       Death.
 
If the Executive's employment is terminated by death, Executive's estate shall be entitled to the payment of all Accrued Obligations in a lump sum in cash as soon as practicable but no later than ninety (90) days following the Date of Termination.
 
(e)       No Duty   to Mitigate Damages.
 
After any Date of Termination, the Executive shall have no obligation to seek other employment, but shall have the right to be otherwise employed, and any compensation of any type whatsoever received by the Executive in connection with such employment shall not be offset by the Company against any of the obligations of the Company under this Agreement.
 
 
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10.       Restrictive covenant s.
 
The Executive agrees that, during the term of this Agreement, including any extension thereof, and for a period of one (1) year thereafter, he shall not, directly or indirectly in the service of or on behalf of others, engage in or provide services substantially similar to those services he provides for the Company for a Competing Business. For purposes of this Section 1 0(a), the Executive acknowledges that the Business of the Company is conducted in the Area; of production, import for resale, and distribution of radioisotopes for use in the medical industries and as may be authorized by the Board of Directors.
 
11.       Ownership and Protection of Proprietary Information.
 
(a)       Confidentiality.
 
All Confidential information and Trade Secrets and all physical embodiments thereof received or developed by the Executive while employed by the Company are confidential to and are and will remain the sole and exclusive property of the Company. Except to the extent necessary to perform the duties assigned to him by the Company, the Executive will hold such Confidential Information and Trade Secrets in trust and strictest confidence, and will not use, reproduce, distribute, disclose or otherwise disseminate the Confidential Information and Trade Secrets or any physical embodiments thereof and may in no event take any action causing or fail to take the action necessary in order to prevent, any Confidential Information and Trade Secrets disclosed to or developed by the Executive to lose its character or cease to qualify as Confidential Information or Trade Secrets.
 
(b)       Return of Company Property.
 
Upon request by the Company, and in any event upon termination of the employment of the Executive with the Company for any reason, as a prior condition to receiving any final compensation hereunder (including payments under Section 9 hereof), the Executive will promptly deliver to the Company all property belonging to the Company, including, without limitation, all Confidential information and Trade Secrets (and all embodiments thereof) then in the Executive's custody, control or possession.
 
(c)       Survival.
 
The covenants of confidentiality set forth herein will apply on and after the date hereof to any Confidential Information and Trade Secrets disclosed by the Company or developed by the Executive prior to or after the date hereof. The covenants restricting the use of Confidential Information will continue to survive the termination of this Agreement.
 
12.       Non-exclusivity of Rights.
 
Nothing in this Agreement shall prevent or limit the Executive's continuing or future participation in any benefit, bonus, incentive or other plan or program provided by the Company or any of its Affiliated Companies and for which the Executive may qualify, nor shal l anything herein limit or otherwise prejudice such rights as the Executive may have under any other agreements with the Company or any Affiliated Companies, including, but not limited to stock option or restricted stock agreements. Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plan or program of the Company or any Affiliated Companies at or subsequent to the Date of Termination shall be payable in accordance with such plan or program.
 
 

 
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13.       Full Settlement .
 
The Company's obligation to make the payments provided  for   in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any circumstances, including, without limitation, any set-off, counterclaim, recoupment, defense or other right which the Company may have against the Executive or others whether by reason of the subsequent employment of the Executive or otherwise. In no event shall the Executive be obligated to seek other employment by way of mitigation of the amounts payable to the   Executive under any of the provisions of this Agreement. In the event that the Executive shall in good faith give a Notice of Termination for Good Reason and it shall thereafter be determined that Good Reason did not take place, the employment of the Executive shall, unless the Company and the Executive shall otherwise mutually agree, be deemed to have terminated, at the date of giving such purported Notice of Termination, by mutual consent of the Company and the Executive and, except as provided in the last preceding sentence, the Executive shall be entitled to receive only those payments and benefits which he would have been entitled to receive at such date had he terminated his employment voluntarily at such date under this Agreement.
 
14.       Definitions.
 
(a)           “Accrued Obligations” shall mean (i) the Executive's full Base Salary through the Date of Termination, (ii)  any   unpaid but accrued Bonus, (iii) the product of the total Bonus paid to the Executive for the last full fiscal year of the Company and a fraction, the numerator of which is the number of days in the current fiscal year of the Company through the Date of Termination, and the denominator of which is 365, (iv) any compensation previously deferred by the Executive (together with any accrued earnings thereon) and not yet paid by the Company and any accrued vacation pay for the current year not yet paid by the Company, (v) any amounts or benefits owing to the Executive or to the Executive's beneficiaries under the then applicable employee benefit plans or policies of the Company and (vi) any amounts owing to the Executive for reimbursement of expenses properly incurred by the Executive prior to the Date of Termination and which are reimbursable in accordance with the reimbursement policy of the Company described in Section 5(a).
 
(b)           “Affiliated Company” shall mean any company controlling, controlled by or under common control with the Company.
 
(c)           “Area” shall mean the United States.
 
(d)           “Base Salary” shall have the meaning set forth in Section 3.
 
(e)           “ Bonus” shall have the meaning set forth in Section 4.
 
(f)           “Business of the Company” shall mean any business that involves the manufacture, production, sale, marketing, promotion, exploitation, development, licensing or distribution of radioisotope devices used in the treatment of cancer.
 
(g)           “Cause” shall mean either: (i) any act that constitutes, on the part of the Executive, fraud or dishonesty that directly results in material injury to the Company or the conviction of a felony, or (ii) the Executive materially breaches this Agreement, provided, however, that in case of Clause (ii) above, such conduct shall not constitute Cause unless the Board of Directors shall have delivered to the Executive notice setting forth with specificity (A) the conduct deemed to qualify as Cause, (B) reasonable action that would remedy such objection, and (C)  a   reasonable time (not less than thirty (30) days) within which the Executive may take such remedial action, and the Executive shall not have taken such specified remedial action within such specified reasonable time.
 
 
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(h)       A "Change of Control" means: (i) the acquisition after the execution of this agreement, by any individual, entity or group (within the meaning of Section 130)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") (a "Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of voting securities of the corporation where such acquisition causes such person to own thirty- five percent (35%) or more of the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that for purposes of this Subsection (i), the following acquisitions shall not be deemed to result in a Change of Control: (A) any acquisition directly from the Company, (B) any acquisition by the Company, (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company or (D) any acquisition by any corporation pursuant to a transaction that complies with clauses (A). (B) and (C) of Subsection (iii) below; and   provided, further, that if any Person's beneficial ownership of the Outstanding Company Voting Securities reaches or exceeds thirty-five percent (35%) as a result of   a transaction described in clause (A) or (B) above, and such Person subsequently acquires beneficial ownership of additional voting securities of the Company, such subsequent acquisition shall he treated as an acquisition that causes such Person to own thirty-five percent (35%) or more of the Outstanding Company Voting Securities; or (ii) individuals who, as of the date hereof constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; porvided, however, that any individual becoming a director subsequent to the date hereof whose election, or   nomination for election, by the Company's shareholders, was approved by a vote of at least two-thirds of the directors then comprising the incumbent Board shall be considered as though such individual were a member of the incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; (iii) the approval by the shareholders of the Company of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company ("Business Combination") or, if consummation of such Business Combination is subject, at the time of such approval by shareholders, to the consent of any government or governmental agency, the obtaining of such consent (either explicitly or implicitly by consummation); excluding, however, such a Business Combination pursuant to which (A) all or substantially all of the individuals and entities who were the beneficial owners of the Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly. more than sixty percent (60%) of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be of the corporation resulting from such Business Combination including, without limitation, a corporation that as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Voting Securities, (B) no Person (excluding any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, thirty-five percent (35%) or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination and (C) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or (iv) approval by the shareholders of the Company of a complete liquidation or dissolution of the Company.
 
 
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(i)      "Change of Control Date" shall mean the date on which a Change of Control shall be deemed to have occurred.
 
(j)      "Code" shall mean the Internal Revenue Code of 1986, as amended.
 
(k)      "Company Information" means Confidential Information and Trade Secrets,
 
(l)             "Competing Business" means any person, film, corporation, joint venture or other business entity which is engaged in the Business of the Company within the Area.
 
(m)           "Confidential Information" means confidential data and confidential information relating to the business of the Company (which does not rise to the status of a trade secret under applicable law) which is or has been disclosed to Executive or of which Executive became aware as a consequence of or through his employment with the Company and which has value to the Company and is not generally known to its competitors, and which is designated by the Company as confidential. Confidential Information shall riot include any data or information that (i) has been voluntarily disclosed to the general public by the Company; (ii) has been independently developed and disclosed to the general public by others; or (iii) otherwise enters the public domain through lawful means.
 
(n)           "Date of Termination" shall mean (i) if the Executive's employment is terminated by his death, the date of his death; (ii) if the Executive's employment is terminated by the Company as a result of Disability pursuant to Paragraph 8(a)(iii), the date that is thirty (30) days after Notice of Termination is given, provided, the Executive shall not have returned to the performance of his duties on a full-time basis during such thirty (30) day period; (iii) if the Executive terminates his employment for Good Reason pursuant to Paragraph 8(b), the date that is ten (10) days after Notice of Termination is given (provided that the Company does not cure the event which gives the Executive Good Reason during the ten (10) day period); (iv) if the Executive terminates his employment other than for Good Reason, the date that is two (2) weeks after Notice of Termination is given, provided, in the sole discretion of the Company, such date may be any earlier date after Notice of Termination is given; (v) if the Executive's employment is terminated by the Company without Cause pursuant to Section 8(a)(i), the date that is two (2) weeks after Notice of Termination is given; or (vi) if the Executive's employment is terminated by the Company for Cause pursuant to Paragraph 8(a)(ii), the date on which the Notice of Termination is given.
 
(o)           "Disability" shall mean physical or mental illness which would entitle the Executive to receive full long-term disability benefits under the Company's long-term disability plan on terms substantially similar to those of the long-term disability plan as in effect as of the financial breakeven date.
 
(p)             "Good Reason" shall mean the occurrence of one of the following events which occurs without the Executive's consent (provided the Company does not cure such event on a retroactive basis to the extent possible within ten (10) days following its receipt of the Executive's Notice of Termination): (i) the Executive's title, position, authority or responsibilities (including reporting responsibilities and authority) are changed in a materially adverse manner; (ii) the Executive's Base Salary is reduced for any reason other than in connection with the termination of his employment or mutual agreement; (iii) for any reason other than in connection with the termination of the Executive's employment, the Company materially reduces any fringe benefit provided to the Executive under Section 5, below the level of such fringe benefit provided generally to other actively employed similarly situated executives of the Company (notwithstanding the foregoing, if the Company agrees to fully compensate the Executive for any such material reduction for a period ending on the earlier to occur of (A) the date such fringe benefit is no longer provided to other actively employed similarly situated executives of the Company or (B) four (4) years, then such event shall not constitute Good Reason); (iv) the Company otherwise materially breaches, or is unable to perform its obligations under this Agreement; or (v) the occurrence of a Change of Control.
 
 
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Notwithstanding the foregoing, the occurrence of one of the events in Paragraphs (i) through (v) hereof shall not be considered Good Reason for the Executive's termination, unless the Executive delivers a Notice of Termination pursuant to Paragraph 8 hereof, within sixty (60) days after the Executive has actual notice of the occurrence of any of the events listed in Paragraphs (i) through (v) hereof.
 
(q)            "Notice of Termination" shall mean a notice that shall indicate the specific termination provision in this Agreement relied upon, and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated.
 
(r)            "Subsidiary" shall mean any majority owned subsidiary of the Company.
 
(s)            "Trade Secrets" means information of the Company, without regard to   form, including, but not limited to, technical or nontechnical data, formulas, patterns, compilations, programs, devices, methods, techniques, drawings, processes, financial data, financial plans, product or service plans or lists of actual or potential customers or suppliers which is not commonly known by or available to the public and which information (i) derives economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and (ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.
 
15.       Assignment and Survivorship of Benefits.
 
The rights and obligations of the Company under this Agreement shall inure to the benefit of, and shall be binding upon, the successors and assigns of the Company. If the Company shall at any time be merged or consolidated into, or with, any other company, or if substantially all of the assets of the Company are transferred to another company, then the provisions of this Agreement shall be binding upon and inure to the benefit of the company resulting from such merger or consolidation or to which such assets have been transferred, and this provision shall apply in the event of any subsequent merger, consolidation, or transfer.
 
 

 
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16.       Notices.
 
Any notice given to either party to this Agreement shall be in writing, and shall be deemed to have been given when delivered personally or sent by certified mail, postage prepaid, return receipt requested, duly addressed to the party concerned, at the address indicated below or to such changed address as such party may subsequently give notice of.
 
If to the Company:
 
Advanced Medical Isotopes Corporation
6308 Okanogan Street
Kennewick, WA
 
Attn: Mr. James Katzaroff, President and Board of Directors Chairman
 
If to the Executive:
 
William J. Stokes
257 Riverwood Street
Richland WA 99352
 
17.             Indemnification.
 
The Executive shall be indemnified by the Company, to the extent provided in the case of officers under the Company's Certificate of Incorporation or Bylaws.
 
18.             Taxes .
 
Anything in this Agreement to the contrary notwithstanding, all payments required to be made hereunder by the Company to the Executive shall be subject to withholding of such amounts relating to taxes as the Company may reasonably determine that it should withhold pursuant to any applicable law or regulations. In lieu of withholding such amounts, in whole or in part, however, the Company may, in its sole discretion, accept other provision for payment of taxes, provided that it is satisfied that all requirements of the law affecting its responsibilities to withhold such taxes have been satisfied.
 
19.             Enforcement of Rights.
 
All legal and other fees and expenses, including, without limitation, any arbitration expenses, incurred by the Executive in connection with seeking to obtain or enforce any right or benefit provided for in this Agreement, or in otherwise pursuing any right or claim, shall be paid by the Company, to the extent permitted by law, provided that the Executive is successful in whole or in part as to such claims as the result of litigation, arbitration, or settlement. Under a partial finding for the Executive, the Company shall be obligated to pay such legal fees as associated with the upheld claim or prorated to the award vs. the claim.
 
In the event the Company refuses or otherwise fails to make a payment when due and it is ultimately decided that the Executive is entitled to such payment, such payment shall be increased to reflect an interest equivalent for the period of delay, compounded annually, equal to four (4) percentage points over the Prime Interest Rate as posted periodically in the Wall Street Journal in effect as of the date the payment was first due.

 
10

 

20.            G overnin g Law/Captions/Severance.
 
This Agreement shall be construed in accordance with, and pursuant to, the laws of the State of Washington. The captions of this Agreement shall not be part of the provisions hereof; and shall have no force or effect. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. Except as otherwise specifically provided in this paragraph, the failure of either party to insist in any instance on the strict performance of any provision of this Agreement or to exercise any right hereunder shall not constitute a waiver of such provision or right in any other instance.
 
21.            Entire Agree ment/Amendment.
 
This instrument contains the entire agreement of the parties relating to the subject matter hereof, and the parties have made no agreement, representations, or warranties relating to the subject matter of this Agreement that are not set forth herein. This Agreement may be amended at any time   by written agreement of both parties, but it shall not be amended by oral agreement This Agreement terminates any and all prior Agreements relating to the terms   of Executive's employment.
 
IN WITNESSETH WHEREOF ,  the parties have executed this Agreement on the date first above written.
 
  Advanced Medical Isotope Corporation  
       
  By:  James C. Katzaroff,  
       
 
 
/s/ James C. Katzaroff  
    Title: President and Chairman Board of Directors   
       
       
 
  EXECUTIVE:  
       
    William J. Stokes  
       
 
 
/s/ William J. Stokes  
    Title: Chief Executive Officer  
       
       
 
 
11

EXHIBIT 10.4
 

 
 
ACQUISITION OF NEU-HOPE TECHNOLOGIES, INC.
by
ADVANCED MEDICAL ISOTOPES CORPORATION
 
 
AGREEMENT AND PLAN OF ACQUISITION
 
This Agreement and Plan of Acquisition ("Agreement ") is entered into by and   between Neu-Hope Technologies, Inc., a Florida corporation ("NHTI") UTEK CORPORATION, a Delaware corporation ("UTEK"),   and Advanced Medical Isotopes Corporation, a Delaware corporation ("ADMD").
 
WHEREAS, UTEK owns 100% of the issued and outstanding shares of common stock of NHTI ("NHTI Shares");
 
WHEREAS, before the Closing Date, NHTI will acquire the license for the fields of use as described in the License Agreement which is attached hereto as part of Exhibit A and made a part of this Agreement (License Agreement) and the rights to develop and market a patented and proprietary technology for the fields of uses specified in the License Agreement (Technology);
 
WHEREAS, the parties desire to provide for the terms and conditions upon which NHTI will be acquired by ADMD in a stock-for-stock exchange ("Acquisition") in accordance with the respective corporation laws of their state, upon consummation of which all NHTI Shares will be owned by ADMD, and all   issued and outstanding NHTI Shares will be exchanged for Preferred A Series stock of ADMD with terms and conditions as set forth more fully   in this Agreement; and
 
WHEREAS, for federal income tax purposes, it is intended that the Acquisition qualifies   within the meaning of Section 368 (a)(1)(B) of the Internal Revenue Code of 1986, as amended ( "Code").
 
NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt, adequacy and sufficiency of which are   by this Agreement acknowledged, the parties agree as follows:
 
ARTICLE 1
THE STOCK-FOR-STOCK ACQUISITION
 
1.01       The Acquisition
 
(a)       Acquisition   Agreement . Subject to the terms and conditions of this Agreement, at the Effective Date, as defined below, all NHTI Shares shall be acquired from UTEK by ADMD in accordance with the respective corporation laws of their states and the provisions of this Agreement and the separate corporate existence of NHTI, as a wholly-owned subsidiary of ADMD, shall continue after the closing.
 
(b)       Effective Date. The Acquisition shall become effective ("Effective Date") upon the execution of this Agreement and closing of the transaction.


Page 1 of 17

 
1.02       Consideration.
 
(a)      On the date of closing ("the Effective Date") Advanced Medical Isotopes Corporation shall acquire all 1,000 Shares of common stock of Neu-Hope Technologies Inc, which are issued and outstanding at the date of closing, and in exchange, Advanced Medical Isotopes Corporation shall issue 100,000 shares of Series A convertible preferred stock (as described in Exhibit D — Preferred Stock), of which UTEK is receiving 95,000 shares and Aware Capital Consultants, Inc. is receiving 5,000 shares. At any time after Twelve (12) months from the date of closing, UTEK shall have the right to convert its Series A convertible preferred stock to unrestricted common stock ("Conversion Shares") of Advanced Medical Isotopes Corporation to be adjusted to equal the amount of ninety five percent (95%) of $3,350,000, or $3,182,500 based on the previous 10 day average closing price on the day of conversion. For example, on the date of conversion to common, if the 10 day average closing price is $.10, then UTEK shall receive 31,825,000 shares of common stock in Advanced Medical Isotopes Corporation. The common stock that UTEK receives shall be delivered to UTEK within 30 days of the conversion. Within 45 days of conversion of all of the Preferred Shares, the Company will file a Registration Statement Form S -1 or Form SB -2 under the Securities Act of 1933 to register the sale of the Conversion Shares by UTEK. The Company shall use its best efforts within reason to affect the registration, qualification or compliance of the Conversion Shares under the Securities Act and under other applicable federal law and any applicable securities or "blue sky' laws of jurisdictions within the United States, (the "Registrable Securities"). ADMD shall place all such shares and said shares shall remain in reserve with the Transfer Agent until UTEK provides the Transfer Agent instructions (Irrevocable Transfer Agent Instructions attached in Exhibit D) that the shares or any part of them shall be taken out of reserve and shall no longer be subject to the terms of these instructions.
 
(b)      During the 12 month period in which UTEK is holding said preferred stock, interest shall be charged at the annual ratio of five (5%) percent, compounded quarterly, (at 1.25% per quarter) payable in cash or in common shares of ADMD.
 
(c)       Exchange of Stock. At the Effective Date, by virtue of the Acquisition, all of the NHTI Shares that are issued and outstanding at the Effective Date shall be exchanged for 100,000 Series A Convertible Preferred shares of ADMD (ADMD Shares, as described in Exhibit D) as follows:
 
 
To: ADMD Series A Convertible Preferred Shares
     
UTEK Corporation
 95,000
 
Aware Capital Consultants, Inc.  
  5,000
 
 
 100,000
 
 
 
1.03       Effect of Acquisition.
 
(a)       Rights in NHTI Cease. At and after the Effective Date, the holder of each certificate of common stock of NHTI shall cease to have any rights as a shareholder of NHTI.
 
(b)       Closure of NHTI Shares Records. From and after the Effective Date, the stock transfer books of NHTI shall be closed and there shall be no further registration of stock transfers on the records of NHTI.
 
1.04       Closing. Subject to the terms and conditions of this Agreement, the Closing of the Acquisition shall be the date of the last executed signature affixed to this Agreement, but in no event later than September 22 , 2006.

 
Page 2 of 17


ARTICLE 2
REPRESENTATIONS AND WARRANTIES
 
2.01       Representations and Warranties of UTEK and NHTI. UTEK and NHTI jointly and severally represent and warrant to ADMD that the facts set forth below are true and correct:
 
(a)       Organization. NHTI and UTEK are corporations duty organized, validly existing and in good standing under the laws of their respective states of incorporation, and they have the requisite power and authority to conduct their business and consummate the transactions contemplated by this Agreement. True, correct and complete copies of the articles of incorporation, bylaws and all corporate minutes of NHTI have been provided to AD MD and such documents are presently in effect and have not been amended or modified.
 
(b)       Authorization. The execution of this Agreement and the consummation of the Acquisition and the other transactions contemplated by this Agreement have been duly authorized by the board of directors and shareholder of NHTI and the board of directors of UTEK; no other corporate action by the respective parties is necessary in order to execute, deliver, consummate and perform their respective obligations hereunder and NHTI and UTEK have all requisite corporate and other authority to execute and deliver this Agreement and consummate the transactions contemplated by this Agreement
 
(c)       Capitalization . The authorized capital of NHTI consists of 1,000,000 shares of common stock with a par value $ .01 per share. At the date of this Agreement, 1,000 NHTI Shares are issued and outstanding as follows:
 
Shareholder
Number of NHTI Shares 
   
UTEK Corporation
1000
 
 
All issued and outstanding NHTI Shares have been duly and validly issued and are fully paid and non-assessable shares and have not been issued in violation of any preemptive or other rights of any other person or any applicable laws. NHTI   is not authorized to issue any preferred stock. All   dividends on NHTI Shares which have been declared prior to the date of this Agreement have been paid in full. There are no outstanding options, warrants, commitments, calls or other rights or Agreement s requiring NHTI to issue any NHTI Shares or securities convertible, exercisable or exchangeable into NHTI Shares to anyone for any reason whatsoever. None of the NHTI Shares is subject to any charge, claim, condition, interest, lien, pledge, option, security interest or other encumbrance or restriction, including any restriction on use, voting, transfer, receipt of income or exercise of any other attribute of ownership.
 
(d)       Binding Effect. The execution, delivery, performance and consummation of this Agreement, the Acquisition and the transactions contemplated by this Agreement will not violate any obligation to which NHTI or UTEK is a party and will not create a default under any such obligation or under any Agreement to which NHTI or UTEK is a party. This Agreement constitutes a legal, valid and binding obligation of NHTI, enforceable in accordance with its terms, except as the enforcement may be limited by bankruptcy, insolvency, moratorium, or similar laws affecting creditor's rights generally and by the availability of injunctive relief, specific performance or other equitable remedies.
 
(e)       Litigation Relating to this Agreement. There are no suits, actions or proceedings pending or, to the best of NHTI's and UTEK's knowledge, information and belief, threatened, which seek to enjoin the Acquisition or the transactions contemplated by this Agreement or which, if adversely decided, would have a materially adverse effect on the business, results of operations, assets or prospects of NHTI.

 
Page 3 of 17

 
(f)       No Conflicting Agreements. Neither the execution and delivery of this Agreement nor the fulfillment of or compliance by NHTI or UTEK with the terms or provisions of this Agreement nor all other documents or agreements contemplated by this Agreement and the consummation of the transaction contemplated by this Agreement will result in a breach of the terms, conditions or provisions of, or constitute a default under, or result in a violation of, NHTI's or UTEK's articles of incorporation or bylaws, the Technology. the License Agreement, or any agreement, contract, instrument, order, judgment or decree to which NHTI or UTEK is a party or by which NHTI or UTEK or any of their respective assets is bound, or violate any provision of any applicable law, rule or regulation or any order, decree, writ or injunction of any court or government entity which materially affects their respective assets or businesses.
 
(g)       Consents. No consent from or approval of any court, governmental entity or any other person is necessary in connection with execution and delivery of this Agreement by NHTI and UTEK or performance of the obligations of NHTI and UTEK hereunder or under any other agreement to which NHTI or UTEK is a party; and the consummation of the transactions contemplated by this Agreement will not require the approval of any entity or person in order to prevent the termination of the Technology, the License Agreement, or any other material right, privilege, license or agreement relating to NHTI or its assets or business.
 
(h)       Title to Assets. NHTI has or has agreed to enter into the agreement s as listed on Exhibit A attached hereto. These agreement s and the assets shown on the balance sheet of attached Exhibit B are the sole assets of NHTI. Except as set forth on Schedule 2.01(h), NHTI has good and marketable title to its assets, free and clear of all liens, claims, charges, mortgages, options, security agreements and other encumbrances of every kind or nature whatsoever. On the Closing Date, NHTI will have good and marketable title to its assets, free and clear of all liens, claims, charges, mortgages, options, security agreements and other encumbrances of every kind and nature whatsoever.
 
(i)       Intellectual Property
 
(1)      The University of California through the Lawrence Berkeley National Laboratory ("Laboratory ") invented and owns the Technology and has all right, power, authority and ownership and entitlement to file, prosecute and maintain in effect the Patent application with respect to the Inventions listed in Exhibit A hereto.
 
(2)      The License Agreement between Laboratory and NHTI covering the Inventions is legal, valid, binding and will be enforceable in accordance with its terms as contained in Exhibit A.
 
(3)       Except as otherwise set forth in this Agreement, ADMD acknowledges and understands that NHTI and UTEK make no representations and provide no assurances that the rights to the Technology and Intellectual Property contained in the License Agreement do not, and will not in the future, infringe or otherwise violate the rights of third parties; however, NHTI and UTEK have no knowledge of pending or threatened claims by. or any basis for any claims by, any third parties alleging such infringement or other violation, and
 
(4)      Except as otherwise expressly set forth in this Agreement, NHTI and UTEK make no representations and extend no warranties of any kind, either express or implied, including, but not limited to warranties of merchantability, fitness for a particular purpose, non-infringement and validity of the Intellectual Property.
 
(j)       Liabilities of NHTI. NHTI has no assets (except as set forth in Section 2.01 (h)), no liabilities or obligations of any kind, character or description except those listed on the attached schedules and exhibits.
 
(k)       Financial Statements. The unaudited financial statements of NHTI, including a balance sheet, attached as Exhibit B and made a part of this Agreement, are, in all respects, complete and correct and present fairly NHTI's financial position and the results of its operations on the dates and for the periods shown in this Agreement; provided, however, that interim financial statements are subject to customary year-end adjustments and accruals that, in the aggregate, will not have a material adverse effect on the overall financial condition or results of its operations. NHTI has not engaged in any business not reflected in its financial statements. There have been no material adverse changes in the nature of its business, prospects, the value of assets or the financial condition since the date of its financial statements. There are no, and on the Closing Date there will be no, outstanding obligations or liabilities of NHTI except as specifically set forth in the financial statements and the other attached schedules and exhibits. There is no information known to NHTI or UTEK that would prevent the financial statements of NHTI from being audited in accordance with generally accepted accounting principles.
 
 
Page 4 of 17

 
(l)       Taxes.   All returns, reports, statements and other similar filings required to be filed by NHTI with respect to any federal, state, local or foreign taxes, assessments, interests, penalties, deficiencies, fees and other governmental charges or impositions have been timely filed with the appropriate governmental agencies in all jurisdictions in which such tax returns and other related filings are required to be filed: all such tax returns properly reflect all liabilities of NHTI for taxes for the periods, property or events covered by this Agreement; and all taxes, whether or not reflected on those tax returns, and all taxes claimed to be due from NHTI by any taxing authority, have been properly paid, except to the extent reflected on NHTI's financial statements, where NHTI has contested in good faith by appropriate proceedings and reserves have been established on its financial statements to the full extent if the contest is adversely decided against it. NHTI has not received any notice of assessment or proposed assessment in connection with any tax returns, nor is NHTI a party to or to the best of its knowledge, expected to become a party to any pending or threatened action or proceeding, assessment or collection of taxes. NHTI has not extended or waived the application of any statute of limitations of any jurisdiction regarding the assessment or collection of any taxes. There are no tax liens (other than any lien which arises by operation of law for current taxes not yet due and payable) on any of its assets. There is no basis for any additional assessment of taxes, interest or penalties. NHTI has made all deposits required by law to be made with respect to employees' withholding and other employment taxes, including without limitation the portion of such deposits relating to taxes imposed upon NHTI. NHTI is not and has never been a party to any tax-sharing agreements with any other person or entity.
 
(m)       Absence of Certain Changes or Events. From the date of the full execution of the Term Sheet until the Closing Date, NHTI has not, and without the written consent of ADMD, it will not have:
 
(1)      Sold, encumbered, assigned let lapsed or transferred any of its material assets, including without limitation the Intellectual Property, the License Agreement or any other material asset;
 
(2)      Amended or terminated the License Agreement or other material agreement or done any act or omitted to do any act which would cause the breach of the License Agreement or any other material agreement;
 
(3)      Suffered any damage, destruction or loss whether or not in control of NHTI;
 
(4)      Made any commitments or agreements for capital expenditures or otherwise;
 
(5)      Entered into any transaction or made any commitment not disclosed to ADMD;
 
(6)      Incurred any material obligation or liability for borrowed money;
 
(7)      Done or omitted to do any act, or suffered any other event of any character, which is reasonable to expect, would adversely affect the future condition (financial or otherwise) , assets or liabilities or business of NHTI; or
 
(8)      Taken any action, which could reasonably be foreseen to make any of the representations or warranties made by NHTI or UTEK untrue as of the date of this Agreement or as of the Closing Date.

 
Page 5 of 17

 
(n)       Material Agreements.   Exhibit A attached contains a true and complete list of all contemplated and executed agreements between NHTI and a third party. A complete and accurate copies of all material agreements, contracts and commitments of the following types, whether written or oral , to which it is a party or is bound (Contracts), has been provided to ADMD. Such executed Contracts are, and such contemplated Contracts will be at the Closing Date, in full force and effect without modifications or amendment and constitute the legally valid and binding obligations of NHTI in accordance with their respective terms and will continue to be valid and enforceable foil owing the Acquisition. NHTI is not, and will not be at the Closing Date, in default of any of the Contracts. In addition:
 
(1)      There are no outstanding unpaid promissory notes, mortgages, indentures, deed of trust, security agreements and other agreements and instruments relating to the borrowing of money by or any extension of credit to NHTI; and
 
(2)      There are no outstanding operating agreements, lease agreements or similar agreements by which NHTI is bound; and
 
(3)      The complete final draft of the License Agreement has been provided to ADMD; and
 
(4)      Except as set forth in (3) above, there are no outstanding licenses to or from others of any Intellectual Property and trade names; and
 
(5)      There are no outstanding agreements or commitments to sell , lease or otherwise dispose of any of NHTI's property; and
 
(6)      There are no breaches of any agreement to which NHTI is a party.
 
(o)       Compliance with Laws. NHTI is in compliance with all applicable laws, rules, regulations and orders promulgated by any federal, state or local government body or agency relating to its business and operations.

(p)       Litigation. There is no suit, action or any arbitration, administrative, legal or other proceeding of any kind or character, or any governmental investigation pending or to the best knowledge of NHTI or UTEK, threatened against NHTI, the Technology, or License Agreement, affecting its assets or business (financial or otherwise), and neither NHTI nor UTEK is in violation of or in default with respect to any judgment, order, decree or other finding of any court or government authority relating to the assets, business or properties of NHTI or the transactions contemplated hereby. There are no pending or threatened actions or proceedings before any court, arbitrator or administrative agency, which would, if adversely determined, individually or in the aggregate, materially and adversely affect the assets or business of NHTI or the transactions contemplated hereby.
 
(q)       Employees. NHTI has no and never had any employees. NHTI is not a party to or bound by any employment agreement or any collective bargaining agreement with respect to any employees. NHTI is not in violation of any law, rule or regulation relating to employment of employees.
 
(r)             Neither NHTI nor UTEK has any knowledge of any existing or threatened occurrence, action or development that could cause a material adverse effect on NHTI or its business, assets or condition (financial or otherwise) or prospects.

 
Page 6 of 17

 
(s)            Employee Benefit Plans. There are no and have never been any employee benefit plans, and there are no commitments to create any, including without limitation as such term is defined in the Employee Retirement Income Security Act of 1974, as amended, in effect, and there are no outstanding or un-funded liabilities nor will the execution of this Agreement and the actions contemplated in this Agreement result in any obligation or liability to any present or former employee.
 
(t)              Books and Records. The books and records of NHTI are complete and accurate in all material respects, fairly present its business and operations, have been maintained in accordance with good business practices, and applicable legal requirements, and accurately reflect in all material respects its business, financial condition and liabilities.
 
(u)            No Broker's Fees. Neither UTEK nor NHTI has incurred any investment banking, advisory or other similar fees or obligations in connection with this Agreement or the transactions contemplated by this Agreement.
 
(v)             Full Disclosure. All representations or warranties of UTEK and NHTI are true, correct and complete in all material respects to the best of UTEK's and NHTI's knowledge on the date of this Agreement and shall be true, correct and complete in all material respects as of the Closing Date as if they were made on such date. No statement made by them in this Agreement or in the exhibits and schedules to this Agreement or any document delivered by them or on their behalf pursuant to this Agreement contains an untrue statement of material fact or omits to state all material facts necessary to make the statements in this Agreement not misleading in any material respect in light of the circumstances in which they were made.
 
2.02       Representations and Warranties of ADMD. ADMD represents and warrants to UTEK and NHTI that the facts set forth below are true and correct.
 
(a)             Organization. ADMD is a corporation duly organized, validly existing and in good standing under the laws of Delaware, is qualified to do business as a foreign corporation in other jurisdictions in which the conduct of its business or the ownership of its properties require such qualification, and have all requisite power and authority to conduct its business and operate its properties.
 
(b)             Authorization. The execution of this Agreement and the consummation of the Acquisition and the other transactions contemplated by this Agreement have been duly authorized by the board of directors of ADMD; no other corporate action on ADMD's part is necessary in order to execute, deliver, consummate and perform its obligations hereunder; and it has all requisite corporate and other authority to execute and deliver this Agreement and consummate the transactions contemplated by this Agreement.
 
(c)             Binding Effect. The execution, delivery, performance and consummation of the Acquisition and the transactions contemplated by this Agreement will not violate any obligation to which ADMD is a party and will not create a default hereunder, and this Agreement constitutes a legal, valid and binding obligation of ADMD, enforceable in accordance with its terms, except as the enforcement may be limited by bankruptcy, insolvency, moratorium, or similar laws affecting creditors rights generally and by the availability of injunctive relief, specific performance or other equitable remedies.
 
(d)            Litigation Relating to this Agreement. There are no suits, actions or proceedings pending or to its knowledge threatened which seek to enjoin the Acquisition or the transactions contemplated by this Agreement or which, if adversely decided, would have a materially adverse effect on its business, results of operations, assets, prospects or the results of its operations of ADMD.
 
(e)            No Conflicting Agreement s. Neither the execution and delivery of this Agreement nor the fulfillment of or compliance by ADMD with the terms or provisions of this Agreement will result in a breach of the terms, conditions or provisions of, or constitute default under, or result in a violation of, the corporate charter or bylaws, or any agreement , contract, instrument, order, judgment or decree to which it is a party or by which it or any of its assets are bound, or violate any provision of any applicable law, rule or regulation or any order, decree, writ or injunction of any court or governmental entity which materially affects its assets or business.
 
Page 7 of 17

 
(f)               Consents. Assuming the correctness of UTEK 's and NHTI's representations, no consent from or approval of any court, governmental entity or any other person is necessary in connection with its execution and delivery of this Agreement ; and the consummation of the transactions contemplated by this Agreement will not require the approval of any entity or person in order to prevent the termination of any material right privilege, license or agreement relating to ADMD or its assets or business.
 
(g)              Financial Statements. The unaudited financial statements of ADMD attached as Exhibit C present fairly its financial position and the results of its operations on the dates and for the periods shown on such statements; provided,   however, that interim financial statements are subject to customary year-end adjustments and accruals that, in the aggregate, will not have a material adverse effect on the overall financial condition or results of its operations. ADMD has not engaged in any business not reflected in its financial statements. There have been no material adverse changes in the nature of its business, prospects, the value of assets or the financial condition since the d ate of its financial statements. There are no outstanding obligations or liabilities of ADMD except as specifically set forth in the ADMD financial statements.
 
(h)              Full Disclosure. All representations or warranties of ADMD are true, correct and complete in all material respects on the date of this Agreement and shall be true, correct and complete in all material respects as of the Closing Date as if they were made on such date. No statement made by it in this Agreement or in the exhibits to this Agreement or any document delivered by it or on its behalf pursuant to this Agreement contains an untrue statement of material fact or omits to state all material facts necessary to make the statements in this Agreement not misleading in any material respect in light of the circumstances in which they were made.
 
(i)               Compliance with Laws. ADMD is in compliance with all applicable laws, rules, regulations and orders promulgated by any federal, state or local government body or agency relating to its business and operations.
 
(j)               Litigation. There is no suit, action or any arbitration, administrative, legal or other proceeding of any kind or character, or any governmental investigation pending or, to the best knowledge of ADMD, threatened against ADMD materially affecting its assets or business (financial or otherwise), and ADMD is not in violation of or in default with respect to any judgment, order, decree or other finding of any court or government authority. There are no pending or, to the knowledge of ADMD, threatened actions or proceedings before any court, arbitrator or administrative agency, which would, if adversely determined, individually or in the aggregate, materially and adversely affect its assets or business. ADMD has no knowledge of any existing or threatened occurrence, action or development that could cause a material adverse affect on ADMD or its business, assets or condition (financial or otherwise) or prospects.
 
(k)            Development. ADMD agrees and warrants that it has the expertise necessary to and has had the opportunity to independently evaluate the inventions of the Licensed Patents and develop same for the market. ADMD further agrees that it will provide UTEK with copies of progress reports made to the university as required under the subject license agreement on a quarterly basis.
 
(l)             Investment Company . ADMD is not an investment company, either registered or unregistered.
 
 
Page 8 of 17


 
2.03       I nvestment Representations of UTEK. UTEK represents and warrants to ADMD that:

(a)            General. It has such knowledge and experience in financial and business matters as to be capable of evaluating the risks and merits of an investment in ADMD Shares pursuant to the Acquisition. It is able to bear the economic risk of the investment in ADMD Shares, including the risk of a total loss of the investment in ADMD Shares. The acquisition of ADMD Shares is for its own account and is for investment and not with a view to any distribution of such shares. Except a permitted by law, it has no present intention of selling, transferring or otherwise disposing in any way of all or any portion of the shares at the present time. All information that it has supplied to ADMD is true and correct. It has conducted all investigations and due diligence concerning ADMD to evaluate the risks inherent in accepting and holding the shares which it deems appropriate, and it has found all such information obtained fully acceptable. It has had an opportunity to ask questions of the officers and directors of ADMD concerning ADMD Shares and the business and financial condition of and prospects for ADMD, and the officers and directors of ADMD have adequately answered all questions asked and made all relevant information available to them. UTEK is an "accredited investor, " as the term is defined in Regulation D, promulgated under the Securities Act of 1933, amended, and the rules and regulations thereunder.
 
 
 
ARTICLE 3
TRANSACTIONS PRIOR TO CLOSING
 
3.01       Corporate Approvals. Prior to Closing Date, each of the parties shall submit this Agreement to its board of directors and , if necessary, its respective shareholders and obtain approval of this Agreement. Copies of corporate actions taken shall be provided to each party.
 
3.02       Access to Information. Each party agrees to permit, upon reasonable notice, the attorneys, accountants, and other representatives of the other parties reasonable access during normal business hours to its properties and its books and records to make reasonable investigations with respect to its affairs, and to make its officers and employees available to answer questions and provide additional information as reasonably requested.
 
3.03       Expenses. Each party agrees to bear its own expenses in connection with the negotiation and consummation of the Acquisition and the transactions contemplated by this Agreement.
 
3.04       Covenants. Except with the prior written approval of ADMD or of NHTI or UTEK, as the case may be, each party agrees that it will:
 
(a)            Use its good faith efforts to obtain all requisite licenses, permits, consents, approvals and authorizations necessary in order to consummate the Acquisition; and
 
(b)           Notify the other parties upon the occurrence of any event which would have a materially adverse effect upon the Acquisition or the transactions contemplated by this Agreement or upon the business, assets or results of operations; and
 
(c)            Not modify its corporate structure, except, upon prior written notice to the other parties, as necessary or advisable in order to consummate the Acquisition and the transactions contemplated by this Agreement.
 
 
 
ARTICLE 4
CONDITIONS PRECEDENT
 
The obligation of the parties to consummate the Acquisition and the transactions contemplated by this Agreement are subject to the following conditions that may be waived, to the extent permitted by law:
 
 
Page 9 of 17

 
4.01      Each party must obtain the approval of its board of directors and such approval shall not have been rescinded or restricted.
 
4.02      Each party shall obtain all requisite licenses, permits, consents, authorizations and approvals required to complete the Acquisition and the transactions contemplated by this Agreement.
 
4.03      There shall be no claim or litigation instituted or threatened in writing by any person or government authority seeking to restrain or prohibit any of the contemplated transactions contemplated by this Agreement or challenge the right, title and interest of UTEK in the NHTI Shares. NHTI in the License Agreement, or the right of NHTI or UTEK to consummate the Acquisition contemplated hereunder.
 
4.04      The representations and warranties of the parties shall be true and correct in all material respects at the Effective Date.
 
4.05      The Technology and Intellectual Property shall have been prosecuted in good faith with reasonable diligence.
 
4.06      The License Agreement shall have been executed and delivered by all parties thereto and, to the best knowledge of UTEK and NHTI, the License Agreement shall be valid and in full force and effect without any default under such agreement .
 
4.07      ADMD shall have received, at or within 5 days before the Closing Date, each of the following:
 
(a)            the stock certificates representing the NHTI Shares, duly endorsed (or accompanied by duly executed stock powers) by UTEK for cancellation;
 
(b)            all documentation relating to NHTI's business, all in form and substance satisfactory to ADMD;
 
(c)            such agreements, files and other data and documents pertaining to NHTI's business as ADMD may reasonably request;
 
(d)            copies of the general ledgers and books of account of NHTI, and all federal, state and local income, franchise, property and other tax returns filed by NHTI since the inception of NHTI;
 
(e)            certificates of (i) the Secretary of State of the State of Florida as to the legal existence and good standing, as applicable (including tax), of NHTI in Florida;
 
(f)             the original corporate minute books of NHTI, including the articles of incorporation and bylaws of NHTI, and all other documents filed in this Agreement;
 
(g)            all consents, assignments or related documents of conveyance to give ADMD the benefit of the transactions contemplated hereunder;
 
(h)            such documents as may be needed to accomplish the Closing under the corporate laws of the states of incorporation of ADMD and NHTI, and
 
(i)              such other documents, instruments or certificates as ADMD, or its counsel may reasonably request.


 
Page 10 of 17


4.08      ADMD shall have completed its due diligence investigation of NHTI to ADMD's satisfaction in its sole discretion.
 
4.09      ADMD shall receive the resignation s of each director and officer of NHTI effective the Closing Date.
 
 
 
ARTICLE 5
INDEMNIFICATION AND LIABILITY LIMITATION
 
5.01       Survival of Representations and Warranties.
 
(a)           The representations and warranties made by UTEK and NHTI shall survive for a period of 1 year after the Closing Date, and thereafter all such representation and warranties shall be extinguished, except with respect to claims then pending for which specific notice has been given during such 1-year period.
 
(b)           The representations and warranties made by ADMD shall survive for a period of 1 year after the Closing Date, and thereafter all such representations and warranties shall be extinguished, except with respect to claims then pending for which specific notice has been given during such 1 -year period.
 
5.02       Limitations on Liability. ADMD agrees that UTEK shall not be liable under this agreement to ADMD or their respective successor's, assigns or affiliates except where damages result directly from the gross negligence or willful misconduct of UTEK or its employees. In no event shall UTEK's liability exceed the total amount of the fees paid to UTEK under this agreement, nor shall UTEK be liable for incidental or consequential damages of any kind. ADMD shall indemnify UTEK, and hold UTEK harmless against any and all claims by third parties for losses, damages or liabilities, including reasonable attorneys fees and expenses ("Losses"), arising in any manner out of or in connection with the rendering of services by UTEK under this Agreement, unless it is finally judicially determined that such Losses resulted from the gross negligence or willful misconduct of UTEK. The terms of this paragraph shall survive the termination of this agreement and shall apply to any controlling person, director, officer, employee or affiliate of UTEK.
 
5.03       Indemnification. ADMD agrees to indemnify and hold harmless UTEK and its subsidiaries and affiliates and each of its and their officers, directors, principals, shareholders, agents, independent contactors and employees (collectively "Indemnified Persons') from and against any and all claims, liabilities, damages, obligations, costs and expenses (including reasonable attorneys' fees and expenses and costs of investigation) arising out of or relating to matters or arising from this Agreement, except to the extent that any such claim, liability, obligation, damage, cost or expense shall have been determined by final non-appealable order of a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of the Indemnified Person or Persons in respect of whom such liability is asserted.
 
(a)       Limitation of Liability . ADMD agrees that no Indemnified Person shall have any liability as a   result of the execution and delivery of this Agreement, or other matters relating to or arising from this Agreement, other than liabilities that shall have been determined by final non-appealable order of a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of the Indemnified Person or Persons in respect of whom such liability is asserted. Without limiting the generality of the foregoing, in no event shall any Indemnified Person be liable for consequential, indirect or punitive damages, damages for lost profits or opportunities or other like damages or claims of any kind. In no event shall UTEK's liability exceed the total amount of the fees paid to UTEK under this Agreement.
 
 
 
Page 11 of 17

 
ARTICLE 6
REMEDIES

6.01       Specific Performance. Each party's obligations under this Agreement are unique. If any party should default in its obligations under this Agreement, the parties each acknowledge that it would be extremely impracticable to measure the resulting damages. Accordingly, the non-defaulting party, in addition to any other available rights or remedies, may sue in equity for specific performance, and the parties each expressly waive the defense that a remedy in damages will be adequate.
 
6.02       Costs. If any legal action or any arbitration or other proceeding is brought for the enforcement of this Agreement or because of an alleged dispute, breach, default, or misrepresentation in connection with any of the provisions of this Agreement, the successful or prevailing party or parties shall be entitled to recover reasonable attorneys' fees and other costs incurred in that action or proceeding, in addition to any other relief to which it or they may be entitled.
 
 
 
ARTICLE 7
ARBITRATION
 
In the event a dispute arises with respect to the interpretation or effect of this Agreement or concerning the rights or obligations of the parties to this Agreement, the parties agree to negotiate in good faith with reasonable diligence in an effort to resolve the dispute in a mutually acceptable manner. Failing to reach a resolution of this Agreement, either party shall have the right to submit the dispute to be settled by arbitration under the Commercial Rules of Arbitration of the American Arbitration Association. The parties agree that, unless the parties mutually agree to the contrary such arbitration shall be conducted in New York, New York The cost of arbitration shall be borne by the party against whom the award is rendered or, if in the interest of fairness, as allocated in accordance with the judgment of the arbitrators. All awards in arbitration made in good faith and not infected with fraud or other misconduct shall be final and binding. The arbitrators shall be selected as follows: one by ADMD, one by UTEK and a third by the two selected arbitrators. The third arbitrator shall be the chairman of the panel.
 
 
 
ARTICLE 8
MISCELLANEOUS
 
8.01      No party may assign this Agreement or any right or obligation of it hereunder without the prior written consent of the other parties to this Agreement. No permitted assignment shall relieve a party of its obligations under this Agreement without the separate written consent of the other parties.
 
8.02      This Agreement shall be binding upon and inure to the benefit of the parties and their respective permitted successors and assigns.
 
8.03      Each party agrees that it will comply with all applicable laws, rules and regulations in the execution and performance of its obligations under this Agreement.
 
8.04      This Agreement shall be governed by and construct in accordance with the laws of the State of Delaware without regard to principles of conflicts of law.
 
8.05      This document constitutes a complete and entire agreement among the parties with reference to the subject matters set forth in this Agreement. No statement or agreement, oral or written, made prior to or at the execution of this Agreement and no prior course of dealing or practice by either party shall vary or modify the terms set forth in this Agreement without the prior consent of the other parties to this Agreement. This Agreement may be amended only by a writ ten document signed by the parties.
 
8.06      Notices or other communications required to be made in connection with this Agreement shall be sent by U.S. mail, certified, return receipt requested, personally delivered or sent by express delivery service and delivered to the parties at the addresses set forth below or at such other address as may be changed from time to time by giving written notice to the other parties.

 
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8.07      The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or   enforceability of any other provision of this Agreement.
 
8.08      This Agreement may be executed in multiple counterparts, each of which shall constitute one and a single Agreement.
 
8.09      Any facsimile signature of any part to this Agreement or to any other Agreement or document executed in connection of this Agreement should constitute a legal, valid and binding execution by such parties.
 
ADVANCED MEDICAL ISOTOPES CORPORATION   NEU-HOPE TECHNOLOGIES, INC.  
           
           
By:
/s/  William J. Stokes
  By:
/s/  Joel H. Edelson
 
 
William J. Stokes
   
Joel. H. Edelson
 
 
CEO
   
President
 
           
  Address:     Address:  
  7203 Deschutes Avenue     2109 E. Palm Avenue  
  Kennewick, Washington 99336     Tampa, Florida 33605  
           
Date:     Date:       9/22/06   
           
           
           
UTEK CORPORATION     COMPLIANCE OFFICER  
           
           
By: /s/   Clifford M. Gross    By: /s/                                                                 
  Clifford M. Gross, Ph.D.        
  Chief Executive Officer   Date:       9/22/06   
           
           
  Address:         
  2109 E. Palm Avenue        
  Tampa, Florida 33605        
           
Date:        9/22/06         
 
 
Page 13 of 17


EXHIBIT A
 
 
Outstanding Agreements
 
1 .      License Agreement from the Ernest Orlando Lawrence Berkeley National Laboratory (Berkeley Lab)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
Page 14 of 17

 

EXHIBIT B
 
 
NEU-HOPE TECHNOLOGIES, Inc.
 
Financial Statements as of
 
September 22, 2006
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Page 15 of 17


EXHIBIT C
 
 
Advanced Medical Isotopes Corporation
 
FORM 10-QSB or Un-Audited Financials
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 
Including Audited Financial Statements
For the fiscal quarter ended December 31, 2005
 
 
 
 
 
 
 
 
 
 
 
 
 

 
Page 16 of 17

 

EXHIBIT D

 
Advanced Medical Isotopes Corporation
 
 
 
1)
Series A Preferred Stock Purchase Agreement
 
 
2)
Certificate of Designation of the Rights and Preferences of Series A Convertible Preferred Stock
 
 
3)
Board of Director's Meeting
 
 
4)
Irrevocable Transfer Agent Instructions
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Page 17 of 17

EXHIBIT 10.5
 
 
EMPLOYMENT AGREEMENT
 
Employment Agreement, between Advanced Medical Isotopes   Corporation (the "Company" or “Employer”) and Leonard Bruce Jolliff (the "Employee").

1.  For good consideration, the Company employs the Employee on the following terms and conditions.

2.  Term of Employment.   Subject to the provisions for termination set forth below this agreement will begin on May 16, 2007, unless sooner terminated.

3.  Salary. The Company shall pay Employee a salary of $100,000 per year, for the services of the Employee, payable at regular payroll periods.   1,500,000 options to purchase common stock at .50 with a 3 year vesting schedule ( 500,000 per year on the anniversary of the execution date of this document). The options have a five year life from the execution date of this document.

4.  Duties and Position. The Company hires the Employee in the capacity of Chief Financial Officer. The Employee's duties may be reasonably modified at the Company's discretion from time to time.

5.  Employee to Devote Time   to Company. The Employee will devote time, attention, and energies as considered necessary to fulfill his duties and responsibilities to the Company.

6.  Confidentiality of Proprietary Information.  Employee agrees, during or after the term of this   employment, not to reveal confidential information, or trade secrets to any person, firm, corporation, or entity. Should Employee reveal or threaten to reveal   this information, the Company shall be entitled to an injunction restraining the   Employee from disclosing same, or from rendering any services to any entity to whom said information has been or is threatened to be disclosed, the right to secure an injunction is not exclusive, and the Company may pursue any other remedies it has against the Employee for a breach or threatened breach of this condition, including the recovery of damages from the Employee.

7.  Reimbursement of Expenses. The Employee may incur reasonable expenses for furthering the Company's business, including expenses for entertainment, travel, and similar items. The Company shall reimburse Employee for all approved business expenses after the Employee presents an itemized account of expenditures, pursuant to Company policy.

8.  Vacation. The Employee shall   be entitled to a yearly vacation of 3 weeks at full pay.

9.  Termination of Agreement. Without cause, the Company may terminate this agreement at any time upon 30 days' written notice to the Employee. If the Company requests, the Employee will   continue to perform his/her duties and may be paid his/her regular salary up to the date of termination. In addition, the Company will pay the Employee on the date of the termination a severance allowance of two months less taxes and Social Security required to be withheld. Without cause, the Employee may terminate employment upon 14 days' written notice to the Company. Employee may be required to perform his or her duties and will be paid the regular salary to date of termination but shall not receive severance allowance. Notwithstanding anything to the contrary contained in this agreement, the Company may terminate the Employee's employment upon 14 days' notice to the Employee should any of the following events occur:

(a) The sale of substantially all of the Company's assets to a single purchaser or group of associated purchasers; or

(b) The sale, exchange, or other disposition, in one transaction of the majority of the Company's outstanding corporate shares; or

(c) The Company's decision to terminate its business and liquidate its assets;

(d) The merger or consolidation of the Company with another company.

 
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(e) Bankruptcy or chapter 1l reorganization.

10.  Death Benefit.   Should Employee die during the term of employment, the Company shall pay to Employee's estate any compensation due through the end of the month in which death occurred.

11.  Restriction on Post Employment Compensation .   In the event the Employee voluntarily terminates employment with the Company, for a period of one (1) year after the end of employment the Employee shall not control, consult to or be employed by any business similar to that conducted by the company, either by soliciting any of its accounts or by operating within Employer's general trading area.

12.  Assistance in Litigation.   Employee shall   upon reasonable notice, furnish such information and proper assistance to the Company as it may reasonably require in connection with any litigation in which it is, or may become, a party either during or after employment.

13.  Effect of Prior Agreements . This Agreement supersedes any prior agreement between the Company or any predecessor of the Company and the Employee, except that   this agreement shall not affect or operate to reduce any benefit or compensation inuring to the Employee of a kind elsewhere provided and not expressly provided in this agreement.

14.  Settlement by Arbitration.   Any claim or controversy that arises out of or relates to this agreement, or the breach of it, shall be settled by arbitration in accordance with the rules of the American Arbitration Association. Judgment upon the award rendered may be entered in any court with jurisdiction within Benton County, WA.

15.  Limited Effect of Waiver by Company.  Should Company waive breach of any provision of this agreement by the Employee, that waiver will not operate or be construed as a waiver of further breach by the Employee.

16.  Severability.   If, for any reason, any provision of this agreement is held invalid, all other provisions of this agreement shall remain in effect. If this agreement is held invalid or cannot be enforced, then to the full extent permitted by law any prior agreement between the Company or any predecessor thereof) and the Employee shall be deemed reinstated as if this agreement had not been executed.

17.  Assumption or Agreement by Company's Successors and Assignees.   The Company's rights and obligations under this agreement will inure to the benefit and be binding upon the Company's successors and assignees.

18.  Oral Modifications Not Binding.   This instrument is the entire agreement of the Company and the Employee. Oral changes have no effect. It may be altered only by a written agreement signed by the party against whom enforcement of any waiver, change, modification, extension, or discharge is sought.

19.  Each party has reviewed this Agreement with their respective attorneys.

Signed this 10 th day of August 2007.
 
         
/s/  James C. Katzaroff
   
/s/  Leonard Bruce Jolliff
 
Officer's Signature
   
Employee's Signature
 
 
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EXHIBIT 10.6

 
ASSET PURCHASE AGREEMENT
 
THIS ASSET PURCHASE AGREEMENT {the "Agreement") is made and entered into this 13 th day of June 2007, by and among Isonics Corporation, a California corporation (the "Seller"), and Advanced Medical Isotopes Corporation, a Delaware corporation (the "Buyer"). Buyer and Seller are each a "Party" and collectively are the "Parties."
 
Explanatory Statement
 
A.           The Seller has operated a business segment that it has referred to as its life sciences segment. The Seller has described this segment as follows:
 
"Our life sciences division has historically been primarily a distribution business. We acquire isotopes from several manufacturers who are located primarily in republics that were part of the former Soviet Union. We buy these isotopes from the manufacturers and resell them in the form of common chemical compounds. For example, oxygen-18 is sold as water, and zinc-68 is sold as zinc oxide. We sell these isotopes for use in basic scientific research, medical diagnostics/therapy and industrial applications. An isotope is one of two or more species (or nuclides) of the same chemical element that differ from one another only in the number of neutrons in the atom's nucleus. The different number of neutrons can create significantly different nuclear properties. The most well known of these properties is radioactivity. Radioactive isotopes (or radioisotopes) can be found in nature. Most of our radioisotopes, however, are man-made. Stable isotopes, as distinguished from radioisotopes, are not radioactive."
 
The Seller has published further information about its life sciences business segment in its reports filed with the Securities and Exchange Commission (the "SEC") under the Securities Exchange Act of 1934 (the "1934 Act").
 
B.           The Buyer is experienced in the offer and sale of isotopic and other materials similar to the Seller's life sciences segment, and desires to purchase the assets constituting the Seller's life sciences segment, which assets (the "Assets") are more fully described in Exhibit "A" attached hereto and by this reference incorporated herein.
 
NOW, THEREFORE, in consideration of the mutual covenants, promises, agreements, representations and warranties contained in this Agreement, the Parties hereby covenant, promise, agree, represent and warrant as follows:
 
1.              Purchase and Sale of Assets. Seller agrees to sell, assign, transfer and deliver to the Buyer and Buyer agrees to purchase from the Seller all of Seller's right, title and interest in and to the Assets (the "Sale" or "Transaction").
 
2.              Assumed Contract Rights and Liabilities. Except for the contracts specifically described on Exhibit "A", the Buyer does not assume, and shall not be liable for any of the Seller's liabilities or obligations, known or unknown, fixed or contingent, whether existing now or in the future with respect to, any contracts or contractual obligations from the Seller, including the current dispute between the Seller and Central Radiopharmaceutical Services ("CRS") regarding moneys owed to CRS for services previously provided. To the extent that any of the contracts being assumed by the Buyer {the "Assumed Contracts") require the consent of another party to the contract, Buyer's assumption of the contract shall be contingent on such approval. Provided, however, that in the event consent is not obtained, Seller may, at its option, if permitted by the contract and Seller can do so without breach of the contract, cancel the contract or continue the contract and subcontract to Buyer until the expiration of its term and Buyer, as subcontractors, shall reimburse Seller for all payments made under such contracts after the Closing Date. Buyer shall have no obligation to reimburse Seller for any costs or damages incurred as a consequence of Seller's breach of a contract or paid as a requirement of obtaining consent to the assumption or subcontracting.
 
 
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3.              Purchase Price. In consideration of the Sale of the Assets by the Seller to the Buyer, the Buyer shall pay to Seller at the Closing in cash or immediately available funds a total of $850,000 (the "Purchase Price"):
 
4.              Closing. The "Closing" shall be the completion of the Sale contemplated by this Agreement. The date of Closing (the "Closing Date") shall be as mutually agreed upon by the Parties but in no event later than May 31, 2007, unless extended by the mutual agreement of the Parties. The Closing will take place at the offices of Burns, Figa & Will, P.C., Suite 1000, 6400 South Fiddler's Green Circle, Greenwood Village, CO 80111.
 
5.              Conduct of Business Prior to Closing. Except as set forth in Exhibit B, the Seller shall continue to conduct the business of its life sciences segment as such business has historically been conducted over the past year. Each Party will keep the other Party advised of any material developments relevant to this Transaction.
 
6.              Possession of the Assets. The Buyer shall take possession of the Assets at the Closing. The Seller will assist the Buyer as may be reasonably necessary in transferring the Assets to the Buyer's possession, although any freight or other expenses incurred (other than expenses of the Seller's employees) will be paid by Buyer.
 
7.              Condition of Assets; No Warranties. The Seller and Buyer agree that the Buyer will be acquiring the Assets as-is, where-is, and without any warranties of merchantability or fitness for a particular purpose and all such warranties are hereby expressly disclaimed. The only warranties of Seller are those specifically set forth herein, and there will be no implied warranties. The cost of maintaining the Assets prior to the Closing Date shall be the Seller's expense.
 
8.              Employees. The Seller will retain responsibility for any of its employees normally dealing with the Assets or the life sciences business. To the extent that the Buyer desires to use the services of any such employee, the Buyer may, in its discretion and upon prior written notice to the Seller, contract with such employee.
 
9.              The Seller's Warranties and Representations. The Seller represents and warrants to the Buyer as follows:
 
a.       Due Organization; Good Standing; Authority of Seller. The Seller is a corporation duly organized, validly existing and in good standing under the laws of the State of California. The Seller has full right, power and authority to own, lease and operate its properties and assets, and to carry on its business. The Seller is not in breach or violation of, and the execution, delivery and performance of this Agreement will not result in a breach or violation of, any of the provisions of the Seller's articles of incorporation or bylaws to the date of this Agreement.
 
 
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b.             Authorization and Validity of Agreements. The Seller has the full right, power and authority to execute and deliver this Agreement and the other documents contemplated for the Closing (collectively the "Closing Documents") and to perform the transactions contemplated by the applicable Closing Documents. This Agreement has been duly executed and delivered by the Seller.
 
c.             Agreement Not in Conflict with Other Instruments; Required Approvals Obtained. The execution, delivery, and performance of the applicable Closing Documents by the Seller and the completion of the Sale will not conflict with, require any consent, approval, or filing under, result in the breach or termination of, or constitute a default under the Seller's articles of incorporation or bylaws, or any contract, covenant, judgment, order or decree to which the Seller or any of the Assets is bound.
 
d.             Legal Proceedings. There is no action, suit, proceeding, claim or arbitration, or any investigation by any person or entity including, but not limited to, any government or governmental agency, (i) pending, to which the Seller is a party, or threatened against or relating to the Seller which affects or may affect the Seller's ability to complete the transactions contemplated hereby; (ii) challenging the Seller's right to execute, deliver, perform under or complete the transactions contemplated by the Closing Documents, except for the mediation demand filed by the producer of 111 indium, CRS, regarding the amount of money owed to CRS for certain services previously provided to the Seller (which claim and potential liability the Seller is retaining). To the Seller's knowledge, there are no attachments, executions, assignments for the benefit of creditors or voluntary or involuntary proceedings in bankruptcy or under any other debtor relief laws either contemplated or currently undertaken by the Seller, or pending or threatened against the Seller, or any portion of the Assets.
 
e.             Assets. The Seller has, and shall have effective as of the Closing, good and marketable title to each and all of the Assets, free and clear of any and all liens, agreements, restrictions, claims, security interest, pledges, charges, equities and other encumbrances except the security interest granted to Cornell Capital Partners, L.P., which interest Cornell will, prior to the Closing, release in writing and except for a security interest held by General Electric Capital in the PerkinElmer Optima 2000 (the "ICP"), collateralizing a debt which the Seller will repay in full from the proceeds of the Closing and for which the Seller will obtain a release from the creditor.
 
f.             Records. The Records that have been delivered by the Seller to the Buyer or that shall be delivered by the Seller to the Buyer are true, correct and complete.
 
g.            Taxes. The Seller has, prior to the date hereof, paid any and all taxes due and payable in connection with the Assets through the calendar year 2006.
 
 

 
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h.             No Material Omissions or Misrepresentations. This Agreement and the exhibits hereto do not include any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein and herein, in light of the circumstances under which they were made, not misleading. The Seller has no knowledge of any circumstances that might materially adversely impact the value of the Assets prior to the Closing Date.
 
i.             Other Acts. The Seller will execute any other documents reasonably required to carry out the intent of this Agreement, including specific transfer documents to be executed by the Seller with respect to any of the Assets that require separate documents of transfer.
 
10.       Representations and Warranties of the Buyer. The Buyer represents and warrants to the Seller that:
 
a.             Due Organization; Good Standing; Authority of the Buyer. The Buyer is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and duly qualified to transact business in the state of Washington. The Buyer has full right, power and authority to own, lease and operate its properties and assets, and to carry on its business. The Buyer is not in breach or violation of, and the execution, delivery and performance of this Agreement will not result in a breach or violation of, any of the provisions of the Buyer's articles of incorporation or bylaws to the date of this Agreement.
 
b.             Authorization and Validity of Agreements. The Buyer has the full right, power and authority to execute and deliver this Agreement and the other Closing Documents and to perform the transactions contemplated by the applicable Closing Documents. This Agreement has been duly executed and delivered by the Buyer.
 
c.             Agreement Not in Conflict with Other Instruments. The execution, delivery, and performance of the applicable Closing Documents by the Buyer and the completion of the Sale will not conflict with, require any consent, approval, or filing under, result in the breach or termination of, or constitute a default under the Buyer's articles of incorporation or bylaws, or any contract, judgment, order or decree to which the Buyer are bound.
 
d.             Legal Proceedings. To the Buyer's knowledge, there is no action, suit, proceeding, claim or arbitration, or any investigation by any person or entity including, but not limited to, any government or governmental agency, (i) pending, to which the Buyer (or any of them) are a party, or threatened against or relating to the Buyer which affects or may affect the Buyer's ability to complete the transactions contemplated hereby; (ii) challenging the Buyer's right to execute, deliver, perform under or complete the transactions contemplated by the Closing Documents. To the Buyer's knowledge, there are no attachments, executions, assignments for the benefit of creditors or voluntary or involuntary proceedings in bankruptcy or under any other debtor relief laws either contemplated or currently undertaken by the Buyer, or pending or threatened against the Buyer, or any property or assets of the Buyer.

 
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e.             No Material Omissions or Misrepresentations. This Agreement and the exhibits hereto do not include any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading.
 
f.             Financial Condition. The Buyer is not insolvent and the completion by the Buyer of the purchase of the Assets will not result in the Buyer becoming insolvent or unable to pay its debts as they may become due.
 
g.             Other Acts. The Buyer will execute any other documents reasonably required to carry out the intent of this Agreement.
 
11.       Conditions to the Buyer's Obligation to Close. The obligations of the Buyer to complete the Sale under this Agreement are conditioned upon and subject to the satisfaction of the following conditions, each of which may be waived in writing by the Buyer:
 
a.           The representations and warranties of the Seller set forth in this Agreement and all documents delivered pursuant hereto or in connection with the Transaction shall be true and correct in all material respects when made and on the Closing Date.
 
b.           The Seller shall have performed in all material respects the covenants, agreements and obligations required to be performed by Seller under this Agreement prior to and on the Closing Date.
 
c.           This Agreement and the transactions contemplated hereby shall have been approved by the Seller's Board of Directors.
 
d.           The Buyer shall have completed its due diligence review of the life sciences' business, assets, liabilities, legal matters, employment matters, financial condition, customer matters, supplier matters and employee matters and its contact and communication with the suppliers, customers and employees of the life sciences division , and this review and contact shall have confirmed the accuracy and completeness of the information concerning the life sciences division's customers, suppliers and employees previously supplied by the Seller.
 
12.       Conditions to the Seller's Obligation to Close. The obligations of the Seller to complete the Sale under this Agreement are conditioned upon and subject to the satisfaction of the following conditions, each of which may be waived in writing by the Seller:
 
a.           The Buyer shall have delivered to the Seller the Purchase Price.
 
b.           The representations and warranties of the Buyer set forth in this Agreement and all documents delivered pursuant hereto or in connection with the Transaction shall be true and correct in all material respects when made and on the Closing Date.

 
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c.           The Buyer shall have performed in all material respects the covenants, agreements and obligations required to be performed by the Buyer under this Agreement prior to and on the Closing Date.
 
13.       Actions to Be Taken at Closing. At Closing the following actions shall be taken by the following persons:
 
a.           The Buyer shall deliver the Purchase Price to Seller by wire transfer or in immediately available funds as may be directed by Seller.
 
b.           The Seller shall execute and deliver to the Buyer a Bill of Sale, with warranties of title, pursuant to which the Seller shall sell, assign, and transfer to the Buyer the Assets that can be transferred by Bill of Sale.
 
c.           The Seller shall execute and deliver to the Buyer an Asset Assignment pursuant to which the Seller shall sell, assign and transfer to the Buyer any portion of the Assets that cannot be transferred by Bill of Sale.
 
d.           At the Closing, the Seller will retain all inventory of Oxygen-18 in the form of water and, after the Closing, may continue to fulfill its contractual obligations with respect thereto, and offer the remaining inventory for sale. Buyer may sell Oxygen-18 after Seller has disposed of its inventory. Seller and Buyer will work cooperatively after the Closing to transition Seller's contracts and relationships for the Purchaser and sale of Oxygen-18 to the Buyer, who agrees to assume such obligation.
 
14.       Indemnification.
 
a.       The Buyer's Indemnity Obligations. The Buyer, and its legal representatives, guardians, directors, officers, shareholders, successors and assigns, hereby jointly and severally agree to indemnify and hold harmless the Seller, and its officers, directors, shareholders, employees, successors and assigns from and against any and all claims, liabilities, suits, actions, proceedings, demands, damages, losses, costs, and expenses {including reasonable attorneys' fees and experts' fees) arising out of or in connection with:
 
i.              Any misrepresentation or breach by the Buyer of any representation or warranty contained in any Closing Document or exhibit thereto.
 
ii.             Any nonperformance, failure to comply or breach of or default by the Buyer under any covenant, promise or agreement of the Buyer contained in this Agreement or exhibit hereto.
 
b.       The Seller's Indemnity Obligations. The Seller and its legal representatives, guardians, directors, officers, shareholders, successors and assigns, hereby jointly and severally agree to indemnify and hold harmless the Buyer, and its officers, directors, shareholders, employees, successors and assigns from and against any and all claims, liabilities, suits, actions, proceedings, demands, damages, losses, costs, and expenses (including reasonable attorneys' fees and experts' fees) arising out of or in connection with:
 
 
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i.              Any misrepresentations or breach by the Seller of any representation or warranty contained in any Closing Document or exhibit thereto.
 
ii.             Any nonperformance, failure to comply or breach of or default by the Seller under any covenant, promise or agreement of the Seller contained in this Agreement or contained in any Closing Document or exhibit thereto.
 
c.       Notice: Disposition. The indemnified Party shall notify the indemnifying Party in writing of any such claim for indemnification with reasonable promptness. The indemnifying Party or its representatives shall have, at its election, the right to compromise, defend or cure any such claim at the indemnifying Party's sole expense. The indemnifying Party shall keep the indemnified Party reasonably apprised of the matter and shall consider input offered by the indemnified Party in resolving the matter.
 
15.       Expenses of Sale.
 
a.             All sales, transfer and use taxes incurred in connection with the sale, assignment, transfer and delivery of the Assets shall be paid by the Buyer.
 
b.             Each Party shall bear the fees and expenses of its professional advisers incurred in connection with the negotiation of this agreement or the letter of intent between the parties dated March 12, 2007, completion of any due diligence investigation, and the completion of the transactions contemplated hereby.
 
c.             Neither Party has engaged a broker to facilitate the Sale. Any claims for commissions or fees made against any Party in connection with this Transaction shall be handled and paid by the Party whose actions form the basis of such claim.
 
16.       Entire Agreement. This Agreement constitutes the entire, integrated agreement of the Parties with respect to the subject matter hereof, and shall supersede any and all prior or contemporaneous negotiations, correspondence, understandings and agreements between the parties, respecting the subject matter hereof. No provision of this Agreement may be amended, waived, or otherwise modified without the prior written consent of all Parties.
 
17.       Notices. All notices, requests, demands, consents, and other communications which are required or may be given under this Agreement shall be in writing and shall be given as follows: by personal delivery against a receipted copy; overnight courier, or by U.S. registered or certified mail, return receipt requested, postage prepaid:
 
 
If to the Buyer:
Advanced Medical Isotopes Corporation
Attn: James C. Katzaroff, President
 

 
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7203 W. Deschutes Avenue, Suite C
Kennewick, WA 99336
Tel:509-374-4038
Fax: 509-736-7001
www.advancedmedicalisotopes.com
   
If to the Seller:
Isonics Corporation
Attention: John Sakys, President
5906 McIntyre Street
Golden, Colorado 80403
Tel:303-279-7900
Fax: 303-279-7300
www.isonics.com
 
With a copy to:
Burns Figa & Will, P.C.
Herrick K. Lidstone, Jr., Esq.
6400 S. Fiddlers Green Circle
Suite 1000
Greenwood Village, Colorado 80111
 
Any such notice shall be deemed to be received: (a) if delivered personally, on the date of such delivery; (b) if mailed by certified or registered mail, on the third business day following mailing; or (c) if sent by overnight courier, on the date of delivery as reflected in the records of the courier.
 
18.            Survival. Except as otherwise provided herein, all of the representations and warranties of the Parties contained in this Agreement as well as the exhibits to this Agreement and those contained in the documents delivered in connection with the Closing of this Transaction, shall be true on and as of the Closing Date, as though made at Closing. Any claims based upon this Agreement, including breach of representations, warranties and indemnity obligations, shall survive the Closing of this Transaction and remain in full force and effect for a period of one year from the Closing Date, but not thereafter, and shall not be deemed merged in any document or instrument executed or delivered at the Closing.
 
19.            Incorporation of Exhibits. All exhibits attached to this Agreement are hereby incorporated herein by this reference.
 
20.            Binding Effect; Assignment. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, personal and legal representatives, guardians, successors and permitted assigns. This Agreement shall not be assigned by any Party without the prior written consent of the other Parties.
 
21.            Contract Interpretation; Severability. All Parties have participated in the negotiation of this Agreement. This Agreement shall not be construed either for or against either Party by virtue of mere drafting. Capitalized terms shall carry the meaning ascribed to such terms, even if s uch terms appear before the actual definition thereof. If any provision hereof shall be held invalid, illegal or unenforceable in any respect, such provision shall be deemed modified to the extent necessary to make such provision enforceable to the fullest extent permitted by law. In the event modification will not remedy the invalidity, illegality or unenforceability of the provision, such provision shall not affect any other provision hereof, and this Agreement shall be construed as if such provision had never been contained herein.
 
 
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22.             Waiver. No delay or failure to exercise any right or remedy accruing to a party upon any breach by the other party under this Agreement shall impair such right or remedy or be construed as a waiver of any such breach theretofore or thereafter occurring. The waiver of any condition or the breach of any term or condition herein shall not be deemed to be a waiver of any other condition or of any subsequent breach of any term, covenant or condition hereof.
 
23.             Governing Law; Attorneys' Fees. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Colorado. Any legal action related to this Agreement shall be brought exclusively in the County of Jefferson, State of Colorado or in the federal courts that include Jefferson County, Colorado. In any such action, the court shall award to the prevailing Party its costs, expenses, and reasonable attorneys' fees payable by the other Party.
 
24.            Confidentiality.
 
a.
Without the prior written consent of both parties, no disclosure shall be made except as required by law. Any disclosure that one party (the "Disclosing Party") may desire to make, or may believe is required by law, must be provided to the other party in substantially final, or final, form not less than one business day prior to the day that the Disclosing Party intends to make such disclosure. If the other party reasonably objects to the disclosure to be made by the Disclosing Party, the two parties will work together to draft disclosure that is acceptable to both parties.
 
b.
Since both the Seller and the Buyer are subject to the reporting requirements of the 1934 Act, prior to signing this Agreement they will negotiate the language for a press release announcing the signing of this Agreement. Each of the Parties will use language similar to the press release to make any report on Form 8-K required.
 
c.
The Buyer agrees that all information provided by or on behalf of the Seller in connection with the contemplated Sale is confidential and shall not be used or disclosed except to those persons with a specific need to know such information, and then only if such persons agree in writing to protect the confidential nature of the information.

 
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d.
Nothing herein is intended to terminate, amend, or otherwise modify the non­disclosure and confidentiality agreement between the parties dated February 7, 2007.
 
25.             Further Assurances. The Parties shall execute and deliver after the date hereof, without additional consideration, such further assurances, instruments and documents, and to take such further actions, as may be reasonably requested in order to fulfill the intent of this Agreement and the transactions contemplated hereby.
 
26.             Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which together shall be deemed to be one and the same instrument.
 
IN WITNESS WHEREOF, the Parties have executed this Agreement effective as of the date set forth above.
 
SELLER:     BUYER:  
         
ISONICS CORPORATION     ADVANCED MEDICAL ISOTOPES CORPORATION  
         
/s/  John Sakys    
   
/s/   James C. Katzaroff
 
John Sakys, President   
   
James C. Katzaroff, President
 
 
 
 
 
 
 

 
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EXHIBIT A
THE ASSETS
 
Assets Relating to 111 lndium
 
Intellectual Property owned by Isonics and related to the production of Indium-111 is focused on the Chemical Separation of Indium from a Cadmium-112 target. Associated processes in support of this separation method include the plating process used to prepare an enriched Cadmiun -112 target, and the recovery of Cadmim-112. This recovered cadmium is then recycled and used again to plate future targets for irradiation.
 
I.          Target Plating:
 
The UB standard target is fabricated as a solid copper bar or plate. The plating procedure developed is a two step process. The copper bar is first plated with a silver coating. This reduces the amount of copper introduced into the chemical process as well as the radio impurities produced in the copper during irradiation.
 
Enriched cadmium is then plated over the silver surface. The plating procedure developed is based upon a sulfate plating bath. The bath is used until it has been depleted of cadmium.
 
II.          Chemical Separation:
 
Indium-111 is separated from the target cadmium after dissolution of the cadmium from the plated target. Indium is separated utilizing a liquid — liquid extraction method. The indium is further purified using ion exchange chromatography. Chemical purity is verified utilizing ICP­OES Spectroscopy. The extractions are accomplished utilizing developed equipment specific to this process. Equipment is a series of containers remotely manipulated and a series of traps utilized to control any possible emissions to the air handling system.
 
III.          Target recovery:
 
The dissolved cadmium from which Indium is separated is reserved and stored for decay and eventual recycling into the process. After appropriate decay, several targets are combined for recovery. The developed procedures utilize precipitation and ion — exchange chromatography to remove all chemical and radiochemical purities. The developed procedure results in the production of a new plating bath.
 
IV.            Customer List
 
V.             Assets Located at Central Radiopharmaceutical Services, Buffalo, New York Hot cell and remote handling manipulators
 
ICP-OES Spectrometer
 
Four (4) fume hoods
 
Laboratory benches under fume hoods
 
Laboratory benches in support closet

Air compressor in mezzanine area

 
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Hot cell ion chamber and supporting electronics
 
Capintech dose calibrator and supporting electronics
 
Target plating cells and supporting electronics
 
 
Assets relating to 225 Actinium
 
Contract 840/08624243/00265 between Isonics Corporation and Kurchatov Institute dated July 14, 2004.
 
Contract 840/08624390/14-09-03 between Isonics Corporation and Institute for Physics and Power Engineering (IPPE) dated May 19, 2004 and amended on February 3, 2006 with Amendment #1.
 
Customer List
 
 
Assets relating to 18 0xygen
 
Production, Marketing and Sales Agreement among Isonics Corporation, Global Scientific Technologies and Center of Molecular Research dated July 25, 2001.
 
Customer List
 
 
 
 
 

 
 
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EXHIBIT B
Conduct of Business Prior to Closing
 
 
1.
The Seller has not been producing 111 indium since January 2007.
 
2.
The Seller and the producer of 111 indium, Central Radiopharmaceutical Services (CRS), disagree on the amount of money owed to CRS for previous services and may enter into mediation if the dispute cannot be resolved.
 
3.
The Drug Master File (DMF) for 111 indium is not complete and has not been submitted to the FDA.
  4. The second manufacturer of 225 actinium, Kurchatov Institute, has not yet shipped evaluation samples of the material.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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EXHIBIT 10.7

 
EMPLOYMENT AGREEMENT
 
THIS AGREEMENT entered into as of January 15, 2008 and effective as of January 15, 2008 (the "Effective Date") by and between Advanced Medical Isotopes Corporation (AMIC) or its successors and/or assignees, (hereinafter called the "Company") and Dr. Fu-Min Su, an individual residing at 1070 Pleasant View Road #105, Middleton, WI 53562, called the "Executive").
 
WITNESSETH:  

 
WHEREAS, the Company and the Executive desire to enter into an employment agreement to establish the rights and obligations of the Executive and the Company in such employment relationship;
 
WHEREAS, the terms of this Agreement have been approved by the Chief Executive Officer and the President of the Company;
 
NOW, THEREFORE, and in consideration of the mutual covenants herein contained, the Company and the Executive hereby mutually agree as follows:
 
1.       Employment and Duties.
 
The Company hereby employs the Executive and the Executive hereby accepts employment with the Company upon the terms and conditions hereinafter set forth. The Executive shall serve the Company as its Radiochemistry Manager. In such capacity, the Executive shall report directly to the Company's General Manager (Mr. James Madsen) and the Executive shall have all powers, duties, and obligations as are normally associated with such position as described in Exhibit I. The Executive shall further perform such other duties related to the business of the Company as may from time to time be reasonably requested of him by the GM or other senior Corporate Officers. The Executive shall devote all of his/her skills, time and attention solely and exclusively to said position and in furtherance of the business and interests of the Company except for:
 
(a)           time spent in managing his personal, financial and legal affairs and serving on corporate, civic or charitable boards or committees, in each case only if and to the extent not substantially interfering with the performance of his responsibilities to the Company, and:
 
(b)           periods of vacation to which he is entitled.
 
Executive shall promptly notify the Company of his/her election or appointment to any corporate, civic or charitable boards or committees on or after the date of this Agreement.
 
2.       Term of Employment.
 
The term   of employment (the "Term") shall begin on the Effective Date and shall expire on the fifth anniversary of the Effective Date, subject, however, to prior termination, as herein provided.
 
 
 
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3.             Base Salary.
 
The Executive shall receive a monthly salary of $7,500 beginning upon reporting for work. The initial base salary shall be reviewed at the first six month anniversary from the Effective Date and then annually thereafter from the Effective Date. Adjustments shall be made at the discretion of the CEO and upon Board of Directors approval considering the performance of the company and contributions of the Executive.
 
In the event the Company increases the Executive's initial Base Salary, the amount of the initial Base Salary, together with any increase(s), shall be his/her Base Salary. The Base Salary shall be payable in equal installments, in accordance with the Company's regular payroll practices.
 
4.             Bonus.
 
Within forty five (45) days of the close of each half of the Company's fiscal year, during which Executive is employed by the Company, the Executive shall be eligible to receive bonus payments ("Bonus") under the bonus plan established by the CEO and Board of Directors for the Executive. These bonuses are to be paid when cash flow allows or equity is raised in the amount that these Executive bonuses may be paid without hurting the growth of the company. The Bonus structure is described in Exhibit II The actual amount of the Bonus shall be determined based on performance goals established and agreed to by the Executive and by the CEO, within the first ninety (90) days of each fiscal year and the same shall be provided in writing to the Executive promptly thereafter, see Exhibit III.
 
5.             Fringe Benefits.
 
The Company health and medical programs are currently under development and not available at this time. However, the company intends that such programs will be made part of each regular employee's standard employment package. The Executive shall be offered full participation in such company plans when available in accordance with the normal participation rules when the plan is available and developed.
 
6.             Stock Options.
 
Executive shall be eligible for all Executive Stock Option Plans that are available to other Executives. The Board of Directors will be responsible for the general employee Stock Option Plans annually.
 
 
 
 

 
 
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7.       Provision of Directors and Officers Insurance.
 
N/A
 
8.             Termination of Employment.
 
(a)        Termination of Employment by the Company.
 
The Executive's employment hereunder may be terminated by the Company without any breach of this Agreement under the following circumstances:
 
(i)      Without Cause.
 
The Company may terminate the Executive's employment hereunder without Cause.
 
(ii)           Cause.
 
The Company may terminate the Executive's employment hereunder for Cause.
 
(iii)          Death or Disability.
 
The Executive's employment hereunder shall terminate upon his death and may be terminated by the Company in the event of his Disability for a continuous period of at least ninety (90) days. If Executive becomes subject to a Disability which is expected to last for a continuous period of at least ninety (90) days, the Company may appoint an acting Manager, during such ninety (90) day period without any breach of this Agreement; provided, that Executive shall be entitled to continue receiving Base Salary and benefits under this Agreement during such ninety (90) day period.
 
(b)       Termination of Employment by Executive.
 
The Executive may terminate his employment at any time with or without Good Reason. With the exception of personal hardship, the Executive is expected to provide thirty (30) days notice of a voluntary termination of employment.
 
(c)       Notice of Termination.
 
Any termination of the Executive's employment by the Company hereunder, or by the Executive other than termination upon the Executive's death, shall be communicated by written Notice of Termination to the other party. The Company shall provide a two week or fourteen (14) termination notice; except when such notice would be harmful to the Company's financial status or for termination for Cause.
 
 
 

 
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9.       Amounts Payable Upon Termination of Employment.
 
(a)       Termination by the Company Without Cause or by the Executive for Good Reason.
 
In the event Executive's employment is terminated by the Company without Cause or by the Executive for Good Reason. Executive shall be entitled to the following payments and benefits: The determination of "Good Reason" is in the sole discretion of the Company.
 
(i)            payment of all Accrued Obligations in a lump sum in cash as soon as practicable but no later than ninety (90) days following the Date of Termination:
 
(ii)           payment of an amount equal to one (1) times the sum of Executive's monthly current Base Salary plus any portion of the Annual Bonus allocated by the Board of Directors for the period of employment.
 
(iii)          immediate pro-rated vesting of all outstanding options, stock grants, shares of restricted stock and any other equity incentive compensation; provided, that the stock options shall be exercisable only until the earlier to occur of (A) two (2) years from the date of the Executive's termination, or (B) the date the option would have otherwise expired if the Executive had not terminated employment: and
 
(iv)          disability and other welfare plan benefits (other than continued group long-term disability coverage) for Executive and Executive's spouse/family, which are generally available to executives of the Company, for a period of one (1) year from the Date of Termination at the same cost to the Executive as is charged to such executives from time to time for comparable coverage.
 
(b)             Termination by Executive Other Than for Good Reason or by the Company for Cause.
 
In the event that the Executive's employment is terminated by Executive other than for Good Reason, as determined by the Company, or by the Company for Cause, the Executive shall be entitled only to the payments and benefits set forth below:
 
(i)            as of the Date of Termination, any Base Salary that is accrued but unpaid, any vacation that is accrued but unused and any business expenses that are unreimbursed; and
 
(ii)           any other rights and benefits (if any) provided under plans and programs of the Company (excluding any bonus program), determined in accordance with the applicable terms and provisions of such plans and programs.
 
(c)            Disability.
 
If the Executive's employment is terminated due to Disability, Executive shall be entitled to the following payments and benefits:
 
(i)            payment of all Accrued Obligations in a lump sum in cash as soon as practicable but no later than ninety (90) days following the Date of Termination:

 
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(ii)           payment of an amount equal to one (1) times the sum of Executive's monthly current Base Salary plus any portion of the Annual Bonus allocated by the Board of Directors for the period of employment.
 
(iii)           immediate vesting of all outstanding options, stock grants, shares of restricted stock and any other equity incentive compensation; provided, that the stock options shall be exercisable only until the earlier to occur of (A) two (2) years from the date of the Executive's termination, or (B) the date the option would have otherwise expired if the Executive had not terminated employment; and
 
(iv)          disability and other welfare plan benefits (other than continued group long-term disability coverage) for Executive and Executive's family, which are generally available to executives of the Company, for a period of one (1) year from the Date of Termination at the same cost to the Executive as is charged to such executives from time to time for comparable coverage.
 
Notwithstanding any other provision hereof, if Executive dies prior to the time that all payments described in this Section 9(c) have been completed, such payments and benefits shall be paid to the Executive's estate.
 
(d)             Death.
 
If the Executive's employment is terminated by death, Executive's estate shall be entitled to the payment of all Accrued Obligations in a lump sum in cash as soon as practicable but no later than ninety (90) days following the Date of Termination.
 
(e)             No Duty to Mitigate Damages.
 
After any Date of Termination, the Executive shall have no obligation to seek other employment, but shall have the right to be otherwise employed, and any compensation of any type whatsoever received by the Executive in connection with such employment shall not be offset by the Company against any of the obligations of the Company under this Agreement.
 
10.       Restrictive Covenants.
 
The Executive agrees that, during the term of this Agreement, including any extension thereof, and for a period of one (1) year thereafter, he shall not, directly or indirectly:
 
(a)           within the Area, on the Executive's own behalf, or in the service of or on behalf of others, engage in or provide services substantially similar to those services he provides for the Company for a Competing Business. For purposes of this Section 10(a), the Executive acknowledges that the Business of the Company is conducted in the Area; of production, import for resale, and distribution of radioisotopes for use in the medical and/or homeland defense industries and as may be authorized for involvement by the Board of Directors.
 
(b)           on Executive's own behalf or in the service of or on behalf of any other person or entity, solicit or divert, or attempt to solicit or divert, to a Competing Business. any person or entity who was an actual or actively sought prospective client or customer of the Company, with whom the Executive had material contact during the last one (1) year of employment with the Company or about whom the Executive acquired Confidential Information during the Executive's last one (1) year of employment with the Company, or any representative of any such client or customer; and
 
 
 
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(c)           on the Executive's own behalf or in the service of or on behalf of others, solicit, divert or hire or attempt to solicit, divert or hire or assist anyone else in soliciting, diverting or hiring any person who, at any time within the period commencing one year prior to the Date of Termination and ending two (2) years after the Date of Termination, was, is or shall be an employee of the Company (whether or not such employment is full-time or is pursuant to a written contract with the Company).
 
11.       Ownership and Protection of Proprietary Information.
 
(a)              Confidentiality.
 
All Confidential Information and Trade Secrets and all physical embodiments thereof received or developed by the Executive while employed by the Company are confidential to and are and will remain the sole and exclusive property of the Company. Except to the extent necessary to perform the duties assigned to him by the Company, the Executive will hold such Confidential Information and Trade Secrets in trust and strictest confidence, and will not use, reproduce, distribute, disclose or otherwise disseminate the Confidential Information and Trade Secrets or any physical embodiments thereof and may in no event take any action causing or fail to take the action necessary in order to prevent, any Confidential Information and Trade Secrets disclosed to or developed by the Executive to lose its character or cease to qualify as Confidential Information or Trade Secrets.
 
(b)             Return of Company Property.
 
Upon request by the Company, and in any event upon termination of the employment of the Executive with the Company for any reason, as a prior condition to receiving any final compensation hereunder (including payments under Section 9 hereof), the Executive will promptly deliver to the Company all property belonging to the Company, including, without limitation, all Confidential Information and Trade Secrets (and all embodiments thereof) then in the Executive's custody, control or possession.
 
(c)              Survival.
 
The covenants of confidentiality set forth herein will apply on and after the date hereof to any Confidential Information and Trade Secrets disclosed by the Company or developed by the Executive prior to or after the date hereof. The covenants restricting the use of Confidential Information will continue to survive the termination of this Agreement.
 
12.       Non-exclusivity of Rights.
 
Nothing in this Agreement shall prevent or limit the Executive's continuing or future participation in any benefit, bonus, incentive or other plan or program provided by the Company or any of its Affiliated Companies and for which the Executive may qualify, nor shall anything herein limit or otherwise prejudice such rights as the Executive may have under any other agreements with the Company or any Affiliated Companies, including, but not limited to stock option or restricted stock agreements. Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plan or program of the Company or any Affiliated Companies at or subsequent to the Date of Termination shall be payable in accordance with such plan or program.
 
 
 
 
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13.             Full Settlement.
 
The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any circumstances, including, without limitation, any set-off, counterclaim, recoupment, defense or other right which the Company may have against the Executive or others whether by reason of the subsequent employment of the Executive or otherwise. In no event shall the Executive be obligated to seek other employment by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement. In the event that the Executive shall in good faith give a Notice of Termination for Good Reason and it shall thereafter be determined that Good Reason did not take place, the employment of the Executive shall, unless the Company and the Executive shall otherwise mutually agree, be deemed to have terminated, at the date of giving such purported Notice of Termination, by mutual consent of the Company and the Executive and, except as provided in the last preceding sentence, the Executive shall be entitled to receive only those payments and benefits which he would have been entitled to receive at such date had he terminated his employment voluntarily at such date under this Agreement.
 
14.             Definitions.
 
(a)           "Accrued Obligations" shall mean (i) the Executive's full Base Salary through the Date of Termination, (ii) any unpaid but accrued Bonus, (iii) the product of the total Bonus paid to the Executive for the last full fiscal year of the Company and a fraction, the numerator of which is the number of days in the current fiscal year of the Company through the Date of Termination, and the denominator of which is 365, (iv) any compensation previously deferred by the Executive (together with any accrued earnings thereon) and not yet paid by the Company and any accrued vacation pay for the current year not yet paid by the Company, (v) any amounts or benefits owing to the Executive or to the Executive's beneficiaries under the then applicable employee benefit plans or policies of the Company and (vi) any amounts owing to the Executive for reimbursement of expenses properly incurred by the Executive prior to the Date of Termination and which are reimbursable in accordance with the reimbursement policy of the Company described in Section 5(a).
 
(b)           "Affiliated Company" shall mean any company controlling, controlled by   or under common control with the Company.
 
(c)           "Area" shall mean the United States.
 
(d)           "Base Salary" shall have the meaning set forth in Section 3.
 
(e)           "Bonus" shall have the meaning set forth in Section 4
 
(f)           "Business of the Company" shall mean any business that involves the manufacture, production, sale, marketing, promotion, exploitation, development, licensing or distribution of radioisotope devices used in the treatment of cancer.
 
(g)           "Cause" shall mean either: (i) any act that constitutes, on the part of the Executive, fraud or dishonesty that directly results in material injury to the Company or the conviction of a felony; or (ii) the Executive materially breaches this Agreement, provided, however, that in case of Clause (ii) above, such conduct shall not constitute Cause unless the Board of Directors shall have delivered to the Executive notice setting forth with specificity (A) the conduct deemed to qualify as Cause, (B) reasonable action that would remedy such objection, and (C) a reasonable time (not less than thirty (30) days) within which the Executive may take such remedial action, and the Executive shall not have taken such specified remedial action within such specified reasonable time.
 
 
 
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(h)           A "Change of Control" means: (i) the acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of voting securities of the corporation where such acquisition causes such person to own thirty-five percent (35%) or more of the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that for purposes of this Subsection (i), the following acquisitions shall not be deemed to result in a Change of Control: (A) any acquisition directly from the Company, (B) any acquisition by the Company, (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company or (D) any acquisition by any corporation pursuant to a transaction that complies with clauses (A), (B) and (C) of Subsection (iii) below; and provided, further, that if any Person's beneficial ownership of the Outstanding Company Voting Securities reaches or exceeds thirty-five percent (35%) as a 'result of a transaction described in clause (A) or (B) above, and such Person subsequently acquires beneficial ownership of additional voting securities of the Company, such subsequent acquisition shall be treated as an acquisition that causes such Person to own thirty-five percent (35%) or more of the Outstanding Company Voting Securities; or (ii) individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election, by the Company's shareholders, was approved by a vote of at least two-thirds of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, an such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; (iii) the approval by the shareholders of the Company of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company ("Business Combination") or, if consummation of such Business Combination is subject, at the time of such approval by shareholders, to the consent of any government or governmental agency, the obtaining of such consent (either explicitly or implicitly by consummation); excluding, however, such a Business Combination pursuant to which (A) all or substantially all of the individuals and entities who were the beneficial owners of the Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than sixty percent (60%) of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination including, without limitation, a corporation that as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Voting Securities, (B) no Person (excluding any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, thirty-five percent (35%) or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination and (C) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination: or (iv) approval by the shareholders of the Company of a complete liquidation or dissolution of the Company.
 
 
 
8

 
 
(i)            "Change of Control Date" shall mean the date on which a Change of Control shall be deemed to have occurred.
 
(j)            "Code" shall mean the Internal Revenue Code of 1986, as amended.
 
(k)           "Company Information" means Confidential Information and Trade Secrets.
 
(1)           "Competing Business" means any person, firm, corporation, joint venture or other business entity which is engaged in the Business of the Company within the Area.
 
(m)           "Confidential Information" means confidential data and confidential information relating to the business of the Company (which does not rise to the status of a trade secret under applicable law) which is or has been disclosed to Executive or of which Executive became aware as a consequence of or through his employment with the Company and which has value to the Company and is not generally known to its competitors and which is designated by the Company as confidential. Confidential Information shall not include any data or information that (i) has been voluntarily disclosed to the general public by the Company; (ii) has been independently developed and disclosed to the general public by others: or (iii) otherwise enters the public domain through lawful means.
 
(n)           "Date of Termination" shall mean (i) if the Executive's employment is terminated by his death, the date of his death; (ii) if the Executive's employment is terminated by the Company as a result of Disability pursuant to Paragraph 8(a)(iii). the date that is thirty (30) days after Notice of Termination is given, provided, the Executive shall not have returned to the performance of his duties on a full-time basis during such thirty (30) day period; (iii) if the Executive terminates his employment for Good Reason pursuant to Paragraph 8(b), the date that is ten (10) days after Notice of Termination is given (provided that the Company does not cure the event which gives the Executive Good Reason during the ten (10) day period); (iv) if the Executive terminates his employment other than for Good Reason, the date that is two (2) weeks after Notice of Termination is given, provided, in the sole discretion of the Company, such date may be any earlier date after Notice of Termination is given; (v) if the Executive's employment is terminated by the Company without Cause pursuant to Section 8(a)(i), the date that is two (2) weeks after Notice of Termination is given; or (vi) if the Executive's employment is terminated by the Company for Cause pursuant to Paragraph 8(a)(ii), the date on which the Notice of Termination is given.
 
(o)           "Disability" shall mean physical or mental illness which would entitle the Executive to receive full long-term disability benefits under the Company's long-term disability plan on terms substantially similar to those of the long-term disability plan as in effect as of the financial breakeven date.
 
(p)           "Good Reason" shall mean the occurrence of one of the following events which occurs without the Executive's consent (provided the Company does not cure such event on a retroactive basis to the extent possible within ten (10) days following its receipt of the Executive's Notice of Termination): (i) the Executive's title, position, authority or responsibilities (including reporting responsibilities and authority) are changed in a materially adverse manner; (ii) the Executive's Base Salary is reduced for any reason other than in connection with the termination of his employment or mutual agreement; (iii) for any reason other than in connection with the termination of the Executive's employment, the Company materially reduces any fringe benefit provided to the Executive under Section 5, below the level of such fringe benefit provided generally to other actively employed similarly situated executives of the Company (notwithstanding the foregoing, if the Company agrees to fully compensate the Executive for any such material reduction for a period ending on the earlier to occur of (A) the date such fringe benefit is no longer provided to other actively employed similarly situated executives of the Company or (B) four (4) years, then such event shall not constitute Good Reason): (iv) the Company otherwise materially breaches, or is unable to perform its obligations under this Agreement; or (v) the occurrence of a Change of Control.
 
 
 
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Notwithstanding the foregoing, the occurrence of one of the events in Paragraphs (i) through (v) hereof shall not be considered Good Reason for the Executive's termination, unless the Executive delivers a Notice of Termination pursuant to Paragraph 8 hereof, within sixty (60) days after the Executive has actual notice of the occurrence of any of the events listed in Paragraphs (i) through (v) hereof.
 
(q)            "Notice of Termination" shall mean a notice that shall indicate the specific termination provision in this Agreement relied upon, and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated.
 
(r)             "Subsidiary" shall mean any majority owned subsidiary of the Company.
 
(s)            "Trade Secrets" means information of the Company, without regard to Form, including, but not limited to, technical or nontechnical data, formulas, patterns, compilations, programs, devices, methods, techniques, drawings, processes, financial data, financial plans. product or service plans or lists of actual or potential customers or suppliers which is not commonly known by or available to the public and which information (i) derives economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and (ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.
 
15.       Assignment and Survivorship of Benefits.
 
The rights and obligations of the Company under this Agreement shall inure to the benefit of, and shall be binding upon, the successors and assigns of the Company. If the Company shall at any time be merged or consolidated into, or with, any other company, or if substantially all of the assets of the Company arc transferred to another company, then the provisions of this Agreement shall be binding upon and inure to the benefit of the company resulting from such merger or consolidation or to which such assets have been transferred, and this provision shall apply in the event of any subsequent merger, consolidation, or transfer.
 
 
 
 

 
10

 

16.             Notices.
 
Any notice given to either party to this Agreement shall be in writing, and shall be deemed to have been given when delivered personally or sent by certified mail, postage prepaid, return receipt requested, duly addressed to the party concerned, at the address indicated below or to such changed address as such party may subsequently give notice of:
 
If to the Company:
 
Advanced Medical Isotopes Corporation
6308 Okanogan Street
Kennewick, WA
 
Attn: William J. Stokes, Chief Executive Officer
 
If to the Executive:
 
1070 Pleasant View Road #105
Middleton, WI 53562
 
17.             Indemnification.
 
The Executive shall be indemnified by the Company, to the extent provided in the case of officers under the Company's Certificate of Incorporation or Bylaws.
 
18.             Taxes.
 
Anything in this Agreement to the contrary notwithstanding, all payments required to be made hereunder by the Company to the Executive shall be subject to withholding of such amounts relating to taxes as the Company may reasonably determine that it should withhold pursuant to any applicable law or regulations. In lieu of withholding such amounts, in whole or in part, however, the Company may, in its sole discretion, accept other provision for payment of taxes, provided that it is satisfied that all requirements of the law affecting its responsibilities to withhold such taxes have been satisfied.
 
19.             Enforcement of Rights.
 
All legal and other fees and expenses, including, without limitation, any arbitration expenses, incurred by the Executive in connection with seeking to obtain or enforce any right or benefit provided for in this Agreement, or in otherwise pursuing any right or claim, shall be paid by the Company, to the extent permitted by law, provided that the Executive is successful in whole or in part as to such claims as the result of litigation, arbitration, or settlement. Under a partial finding for the Executive, the Company shall be obligated to pay such legal fees as associated with the upheld claim or prorated to the award vs. the claim.
 
In the event the Company refuses or otherwise fails to make a payment when due and it is ultimately decided that the Executive is entitled to such payment, such payment shall be increased to reflect an interest equivalent for the period of delay, compounded annually, equal to four (4) percentage points over the Prime Interest Rate as posted periodically in the Wall Street Journal in effect as of the date the payment was first due.

 
 
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20.             Governing Law/Captions/Severance.
 
This Agreement shall be construed in accordance with, and pursuant to, the laws of the State of Washington. The captions of this Agreement shall not be part of the provisions hereof, and shall have no force or effect. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. Except as otherwise specifically provided in this paragraph, the failure of either party to insist in any instance on the strict performance of any provision of this Agreement or to exercise any right hereunder shall not constitute a waiver of such provision or right in any other instance.
 
21.             Entire Agreement/Amendment.
 
This instrument contains the entire agreement of the parties relating to the subject matter hereof, and the parties have made no agreement, representations, or warranties relating to the subject matter of this Agreement that are not set forth herein. This Agreement may be amended at any time by written agreement of both parties, but it shall not be amended by oral agreement. This Agreement terminates any and all prior Agreements relating to the terms of Executive's employment.
 
IN WITNESSETH WHEREOF, the parties have executed this Agreement on the date first above written.
 
 
    Advanced Medical Isotope Corporation  
       
 
 
By:  William J. Stokes, CEO  
       
    /s/  William J. Stokes, CEO  
    Title: Chief Executive Officer  
 
 
    EXECUTIVE:  
       
 
 
Fu-Min Su, PhD  
       
    /s/  Su, Fu-Min  
    Title: Radiochemistry Manager  
   
1/30/2008
 
 

 
12

 

Exhibit I
 
 
Position Title
 
Radiochemistry Manager
 
Position Description:
 
Dr. Su will be the Company's chief radiochemistry manager. Dr. Su will report directly to the General Manger with full access to corporate Executives, including the Company President, Mr. James Katzaroff and the Company CEO, Mr. William J. Stokes.
 
Eligibility Requirements:
 
Dr. Su's credentials are fully compliant with the position requirements Duties & Responsibilities:
 
In this position, Dr. Su shall be responsible for the operations and product quality of the company's facilities and equipment which produce radiochemical and radiopharmaceutical products.
 
Dr. Su shall be an integral part of the company management team and shall be requested, from time to time, to participate in company planning, selection and management of employees, product development planning, new facility design and equipment selection, and new facility or equipment startup testing.
 
Expectation of the Company:
 
Dr. Su will be expected to represent the Company as a senior company manager both within the corporate environment and professional settings or events, such as conferences or trade shows.
 
Dr. Su will be expected to participate in production efficiency enhancements, new product development, product marketing, business sector expansion opportunities.
 
The company expects that operations under Dr. Su's supervision be conducted in a businesslike, professional, and lawful manner; all products meet or exceed customer expectations for quality, quantity, and delivery schedule; and all activities are conducted in a safe and environmentally responsible manner.
 
Authorities:
 
 
·
Budget and Expenditures: Budgets shall be established at the outset of the fiscal year. Dr. Su shall have the authority over budget expenditures for his areas of responsibility in accordance with corporate accounting practices.
 
·
Personnel Actions: Dr. Su shall have authority over personnel assigned to the radiochemistry and radiopharmaceutical areas in accordance with company practice established in corporate personnel policy manuals.

 
13

 

Exhibit II
 
Position Title
 
Compensation Package
 
Base Salary
 
 
·
Annual Base Salary = $90,000 per year or $7,500 monthly
     
 
·
Salary to be reviewed at first six month interval, annually thereafter
     
 
·
Signup Bonus of 50,000 shares of AMIC Stock upon acceptance of offer
     
 
·
Early Acceptance Incentive - Additional 15,000 shares of AMIC Stock for acceptance of offer by COB (5pm PST) on Tuesday, January 15, 2008
     
 
·
Medical Insurance Program participation when available
 
 
Bonus Eligibility
 
 
·
Full participation in Corporate Sponsored Programs for Management level positions
     
 
·
Participation in future Stock Option and Incentive Programs consistent with Dr. Su's Management level position, as developed
 
 
 
 
 
 
 
 
 
 
14

 

 
Exhibit III
 
Performance Goals
 
 
 
 
 
To be developed as part of Bonus Program management
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
15



EXHIBIT 23.1




 


INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM’S CONSENT


To the Board of Directors and Shareholders of
Advanced Medical Isotope Corporation
Kennewick, Washington

We hereby consent to the use in this Registration Statement of Advanced Medical Isotope Corporation on Form 10, of our report, dated July 15, 2008, which includes an emphasis paragraph relating to an uncertainty as to the Company’s ability to continue as a going concern, for the year ended December 31, 2007, and to all other references to our firm included in this Registration Statement on Form 10.




/s/  HJ & Associates, LLC

HJ & Associates, LLC
Salt Lake City, Utah
November 10, 2008

 
 
 
 
 
 
 


EXHIBIT 23.2
 
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM’S CONSENT


To the Board of Directors and Shareholders of
Advanced Medical Isotope Corporation
Kennewick, Washington



We consent to the use in this Registration Statement of Advanced Medical Isotope Corporation on Form 10, of our report dated February 28, 2008, which includes an emphasis paragraph relating to an uncertainty as to the Company’s ability to continue as a going concern for the year ended December 31, 2006, and to all other references to our firm included in this Registration Statement on Form 10.





/s/ Cordovano and Honeck LLP
Cordovano and Honeck LLP
Englewood, Colorado
November 12, 2008