Advanced
Medical Isotope Corporation
Condensed
Consolidated Balance Sheets
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|
March
31, 2017
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|
|
December
31, 2016
|
|
|
|
(unaudited)
|
|
|
(audited)
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
23,700
|
|
|
$
|
27,889
|
|
Prepaid
expenses
|
|
|
-
|
|
|
|
11,990
|
|
Total
current assets
|
|
|
23,700
|
|
|
|
39,879
|
|
|
|
|
|
|
|
|
|
|
Fixed assets,
net of accumulated depreciation
|
|
|
733
|
|
|
|
1,473
|
|
|
|
|
|
|
|
|
|
|
Other assets:
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
644
|
|
|
|
644
|
|
Total
other assets
|
|
|
644
|
|
|
|
644
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
25,077
|
|
|
$
|
41,996
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’
EQUITY (DEFICIT)
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|
|
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|
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|
|
|
|
|
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Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
and accrued expenses
|
|
$
|
958,588
|
|
|
$
|
1,137,086
|
|
Related party accounts
payable
|
|
|
190,763
|
|
|
|
109,718
|
|
Accrued interest
payable
|
|
|
91,151
|
|
|
|
114,755
|
|
Payroll liabilities
payable
|
|
|
442,078
|
|
|
|
499,502
|
|
Convertible notes
payable, net
|
|
|
1,071,204
|
|
|
|
544,508
|
|
Derivative liability
|
|
|
89,464
|
|
|
|
324,532
|
|
Related
party promissory note
|
|
|
383,771
|
|
|
|
332,195
|
|
Total
current liabilities
|
|
|
3,227,019
|
|
|
|
3,062,296
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
3,227,019
|
|
|
|
3,062,296
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Mezzanine Equity:
|
|
|
|
|
|
|
|
|
Preferred
stock, $.001 par value, 20,000,000 shares authorized Series A preferred stock, $.001 par value, 5,000,000 shares authorized;
2,964,702 and 3,773,592 shares issued and outstanding, respectively
|
|
|
11,744,233
|
|
|
|
14,144,571
|
|
Total
mezzanine equity
|
|
|
11,744,233
|
|
|
|
14,144,571
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ equity (deficit):
|
|
|
|
|
|
|
|
|
Common stock, $.001
par value; 2,000,000,000 shares authorized; 41,967,897 and 31,743,797 shares issued and outstanding, respectively
|
|
|
41,968
|
|
|
|
31,744
|
|
Paid in capital
|
|
|
43,298,063
|
|
|
|
40,672,825
|
|
Accumulated
deficit
|
|
|
(58,286,206
|
)
|
|
|
(57,869,440
|
)
|
Total
stockholders’ equity (deficit)
|
|
|
(14,946,175
|
)
|
|
|
(17,164,871
|
)
|
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders’ equity (deficit)
|
|
$
|
25,077
|
|
|
$
|
41,996
|
|
The
accompanying notes are an integral part of these condensed consolidated financial statements.
Advanced
Medical Isotope Corporation
Condensed
Consolidated Statements of Operations
(unaudited)
|
|
Three
months ended March 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
4,054
|
|
|
$
|
4,054
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
Sales and marketing
expenses
|
|
|
25,998
|
|
|
|
11,836
|
|
Depreciation and
amortization
|
|
|
740
|
|
|
|
738
|
|
Professional fees
|
|
|
134,604
|
|
|
|
70,969
|
|
Stock options granted
|
|
|
28,240
|
|
|
|
-
|
|
Payroll expenses
|
|
|
104,780
|
|
|
|
165,000
|
|
General and administrative
expenses
|
|
|
74,407
|
|
|
|
438,042
|
|
Total operating
expenses
|
|
|
368,769
|
|
|
|
686,585
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(364,715
|
)
|
|
|
(682,531
|
)
|
|
|
|
|
|
|
|
|
|
Non-operating income (expense)
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(527,951
|
)
|
|
|
(49,209
|
)
|
Net gain on sale
of assets
|
|
|
2,800
|
|
|
|
-
|
|
Net gain (loss)
on settlement of debt
|
|
|
-
|
|
|
|
65,837
|
|
Net gain (loss)
on debt extinguishment
|
|
|
147,710
|
|
|
|
-
|
|
Net gain (loss)
on derivative liability
|
|
|
325,390
|
|
|
|
(5,139,998
|
)
|
Non-operating income
(expense), net
|
|
|
(52,051
|
)
|
|
|
(5,123,370
|
)
|
|
|
|
|
|
|
|
|
|
Income (Loss) before Income Taxes
|
|
|
(416,766
|
)
|
|
|
(5,805,901
|
)
|
|
|
|
|
|
|
|
|
|
Income Tax Provision
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss)
|
|
$
|
(416,766
|
)
|
|
$
|
(5,805,901
|
)
|
|
|
|
|
|
|
|
|
|
Basic and Diluted Income (Loss) per
Common Share
|
|
$
|
(0.0110
|
)
|
|
$
|
(0.0029
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
|
|
38,021,103
|
|
|
|
19,969,341
|
|
The
accompanying notes are an integral part of these condensed consolidated financial statements.
Advanced
Medical Isotope Corporation
Condensed
Consolidated Statements of Cash Flow
(Unaudited)
|
|
Three
months ended March 31,
|
|
|
|
2017
|
|
|
2016
|
|
CASH FLOW FROM OPERATING
ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net Loss
|
|
$
|
(416,766
|
)
|
|
$
|
(5,805,901
|
)
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net loss to
net cash used by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation of
fixed assets
|
|
|
740
|
|
|
|
738
|
|
Amortization of
licenses and intangible assets
|
|
|
-
|
|
|
|
-
|
|
Amortization of
convertible debt discount
|
|
|
462,928
|
|
|
|
299,773
|
|
Gain on sale of
assets
|
|
|
(2,800
|
)
|
|
|
-
|
|
Preferred and common
stock issued for loan fees
|
|
|
|
|
|
|
300,494
|
|
Stock options and
warrants issued for services
|
|
|
28,240
|
|
|
|
-
|
|
Gain (loss) on derivative
liability
|
|
|
(325,390
|
)
|
|
|
5,139,998
|
|
Loss on settlement
of debt
|
|
|
(147,711
|
)
|
|
|
(65,837
|
)
|
Penalties on notes
payable
|
|
|
-
|
|
|
|
(332,274
|
)
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Prepaid expenses
|
|
|
11,990
|
|
|
|
5,411
|
|
Accounts payable
|
|
|
109,110
|
|
|
|
(170,241
|
)
|
Payroll liabilities
|
|
|
(57,424
|
)
|
|
|
73,274
|
|
Accrued
interest
|
|
|
61,425
|
|
|
|
(18,290
|
)
|
Net
cash used by operating activities
|
|
|
(275,658
|
)
|
|
|
(572,855
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING
ACTIVITIES
|
|
|
|
|
|
|
|
|
Sale of fixed
assets
|
|
|
2,800
|
|
|
|
-
|
|
Net cash from
investing activities
|
|
|
2,800
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING
ACTIVITIES:
|
|
|
|
|
|
|
|
|
Proceeds from shareholder advances
|
|
|
137,000
|
|
|
|
-
|
|
Proceeds from
convertible debt
|
|
|
131,669
|
|
|
|
641,760
|
|
Net cash provided
by financing activities
|
|
|
268,669
|
|
|
|
641,760
|
|
|
|
|
|
|
|
|
|
|
Net increase in
cash
|
|
|
(4,189
|
)
|
|
|
68,905
|
|
Cash, beginning
of period
|
|
|
27,889
|
|
|
|
179,032
|
|
|
|
|
|
|
|
|
|
|
CASH, END OF
PERIOD
|
|
$
|
23,700
|
|
|
$
|
247,937
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flow
information:
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
-
|
|
|
$
|
9,920
|
|
Cash paid for income taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
The
accompanying notes are an integral part of these condensed consolidated financial statements.
Advanced
Medical Isotope Corporation
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
NOTE
1: BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
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 months ended March
31, 2017, are not necessarily indicative of the results that may be expected for any future period or the fiscal year ending December
31, 2017 and should be read in conjunction with the Company’s form 10-K for the year ended December 31, 2016.
Use
of Estimates
The
preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities
at the date of financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Fair
Value of Financial Instruments
Fair
Value of Financial Instruments, requires disclosure of the fair value information, whether or not recognized in the balance sheet,
where it is practicable to estimate that value. As of March 31, 2017 and December 31, 2016, the balances reported for cash, prepaid
expenses, accounts receivable, accounts payable, and accrued expenses, approximate the fair value because of their short maturities.
Fair
value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. ASC Topic 820 established a three-tier fair value hierarchy which prioritizes
the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets
for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements).
These tiers include:
Level
1, defined as observable inputs such as quoted prices for identical instruments in active markets;
Level
2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted
prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not
active; and
Level
3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions,
such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are
unobservable.
The
Company measures certain financial instruments at fair value on a recurring basis. Assets and liabilities measured at fair value
on a recurring basis were calculated using the Black-Scholes pricing model and are as follows at March 31, 2017 and December 31,
2016:
March
31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative
Liability
|
|
$
|
89,464
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
89,464
|
|
Total Liabilities
Measured at Fair Value
|
|
$
|
89,464
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
89,464
|
|
December
31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
Level
1
|
|
|
|
Level
2
|
|
|
|
Level
3
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative
Liability
|
|
$
|
324,532
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
324,532
|
|
Total Liabilities
Measured at Fair Value
|
|
$
|
324,532
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
324,532
|
|
Recent
Accounting Pronouncements
There
are no recently issued accounting pronouncements that the Company believes are applicable or would have a material impact on the
financial statements of the Company.
NOTE
2: GOING CONCERN
The
accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and
satisfaction of liabilities in the normal course of business. As shown in the accompanying financial statements, the Company has
suffered recurring losses and used significant cash in support of its operating activities and the Company’s cash position
is not sufficient to support the Company’s operations. Historically, the Company has relied upon outside investor funds
to maintain the Company’s operations and develop the Company’s business. The Company anticipates it will continue
to require funding from investors for working capital as well as business expansion during this fiscal year and it can provide
no assurance that additional investor funds will be available on terms acceptable to us. These factors, among others, may indicate
that the Company will be unable to continue as a going concern for a reasonable time. In addition, the Company’s ability
to continue as a going concern must be considered in light of the problems, expenses and complications frequently encountered
by entrance into established markets and the competitive environment in which it operates.
The
Company anticipates a requirement of $1.5 million in funds over the next twelve months to maintain current operation activities.
The Company may also require up to approximately $1.5 million to retire outstanding debt and past due payables. As of March 31,
2017 the Company has certain convertible promissory notes totaling approximately $45,000 that are currently due and payable (“
Outstanding
Notes
”).
The
Company requires funding of at least $1.5 million per year to maintain current operating activities. Over the next 12-24 months,
the Company believes it will cost approximately $5 million to $10 million to fund: (1) the FDA approval process and initial deployment
of the brachytherapy products and (2) initiate regulatory approval processes outside of the United States. The continued deployment
of the brachytherapy products and a worldwide regulatory approval effort will require additional resources and personnel. The
principal variables in the timing and amount of spending for the brachytherapy products in the next 12-24 months will be the FDA’s
classification of the Company’s brachytherapy products as Class II or Class III devices (or otherwise) and any requirements
for additional studies which may possibly include clinical studies. Thereafter, the principal variables in the amount of the Company’s
spending and its financing requirements would be the timing of any approvals and the nature of the Company’s arrangements
with third parties for manufacturing, sales, distribution and licensing of those products and the products’ success in the
U.S. and elsewhere. The Company intends to fund its activities through strategic transactions such as licensing and partnership
agreements or additional capital raises.
As
of March 31, 2017, the Company has $23,700 cash on hand. There are currently commitments to vendors for products and services
purchased, accrued compensation expenses and the Company’s current lease commitments that in the absence of additional capital
would result in a liquidation of the Company. The current level of cash is not enough to cover the fixed and variable obligations
of the Company.
Assuming
the Company is successful in the Company’s sales/development effort it believes that it will be able to raise additional
funds through strategic agreements or the sale of the Company’s stock to either current or new stockholders. There is no
guarantee that the Company will be able to raise additional funds or to do so at an advantageous price.
The
financial statements do not include any adjustments relating to the recoverability and classification of liabilities that might
be necessary should the Company be unable to continue as a going concern. The Company’s continuation as a going concern
is dependent upon its ability to generate sufficient cash flow to meet its obligations on a timely basis and ultimately to attain
profitability. The Company plans to seek additional funding to maintain its operations through debt and equity financing and to
improve operating performance through a focus on strategic products and increased efficiencies in business processes and improvements
to the cost structure. There is no assurance that the Company will be successful in its efforts to raise additional working capital
or achieve profitable operations. The financial statements do not include any adjustments that might result from the outcome of
this uncertainty.
NOTE
3: FIXED ASSETS
Fixed
assets consist of the following at March 31, 2017 and December 31, 2016:
|
|
March
31, 2017
|
|
|
December
31, 2016
|
|
Production equipment
|
|
$
|
15,182
|
|
|
$
|
1,938,532
|
|
Office equipment
|
|
|
14,593
|
|
|
|
32,769
|
|
|
|
|
29,775
|
|
|
|
1,971,301
|
|
Less accumulated
depreciation
|
|
|
(29,042
|
)
|
|
|
(1,969,828
|
)
|
|
|
$
|
733
|
|
|
$
|
1,473
|
|
Depreciation
expense for the above fixed assets for the three months ended March 31, 2017 and 2016, respectively, was $740 and $738.
NOTE
4: INTANGIBLE ASSETS
Intangible
assets consist of the following at March 31, 2017 and December 31, 2016:
|
|
March
31, 2017
|
|
|
December
31, 2016
|
|
License Fee
|
|
$
|
-
|
|
|
$
|
112,500
|
|
Less accumulated
amortization
|
|
|
-
|
|
|
|
(112,500
|
)
|
|
|
|
|
|
|
|
|
|
Patents and intellectual
property
|
|
|
-
|
|
|
|
-
|
|
Intangible assets
net of accumulated amortization
|
|
$
|
-
|
|
|
$
|
-
|
|
Amortization
expense for the above intangible assets for the three months ended March 31, 2017 and 2016, respectively, was $0 and $0.
NOTE
5: RELATED PARTY TRANSACTIONS
Related
Party Convertible Notes Payable
The
Company, in March 2017, combined the
o
utstanding
n
otes,
along with $51,576 of accrued interest payable, owed to a director and major stockholder into one promissory note. As of March
31, 2017 and December 31, 2016 the balance of this related party promissory note was $383,771 and $332,195, respectively.
Rent
Expenses
The
Company rents office space from a significant shareholder and director of the Company on a month to month basis with a monthly
payment of $1,500.
Rental
expense for the three months ended March 31, 2017 and 2016 consisted of the following and is recorded in general and administrative
expense:
|
|
Three
months ended
March 31, 2017
|
|
|
Three
months ended
March 31, 2016
|
|
Office and warehouse space
|
|
$
|
-
|
|
|
$
|
-
|
|
Corporate
office
|
|
|
4,500
|
|
|
|
4,500
|
|
Total Rental
Expense
|
|
$
|
4,500
|
|
|
$
|
4,500
|
|
NOTE
6: CONVERTIBLE NOTES PAYABLE
As
of March 31, 2017 and December 31, 2016 the Company had the following convertible notes outstanding:
|
|
March
31, 2017
|
|
|
December
31, 2016
|
|
|
|
|
Principal
(net)
|
|
|
|
Accrued
Interest
|
|
|
|
Principal
(net)
|
|
|
|
Accrued
Interest
|
|
July and August 2012 $1,060,000
Notes convertible into common stock at $4.60 per share, 12% interest, due December 2013 and January 2014
|
|
$
|
45,000
|
|
|
$
|
25,161
|
|
|
$
|
95,000
|
|
|
|
50,365
|
|
May through October 2015 $605,000 Notes
convertible into preferred stock at $1 per share, 8-10% interest, due September 30, 2015
|
|
|
-
|
|
|
|
17,341
|
|
|
|
-
|
|
|
|
17,341
|
|
October through December 2015 $613,000
Notes convertible into preferred stock at $1 per share, 8% interest, due June 30, 2016, net of debt discount of $0 and $560,913,
respectively
|
|
|
-
|
|
|
|
5,953
|
|
|
|
-
|
|
|
|
5,953
|
|
January through March 2016 $345,000
Notes convertible into preferred stock at $1 per share, 8% interest, due June 30, 2016
|
|
|
-
|
|
|
|
696
|
|
|
|
-
|
|
|
|
696
|
|
November 2016 $979,162 Notes convertible
into common stock at a variable conversion price, 10% interest, due May 2017, net of debt discounts of $156,788 and $540,720,
respectively
|
|
|
822,374
|
|
|
|
36,547
|
|
|
|
438,442
|
|
|
|
12,397
|
|
January and March 2017 $335,838 Notes
convertible into common stock at a variable conversion price, 10% interest, due May 2017, net of debt discounts of $142,918
and $0, respectively
|
|
|
192,920
|
|
|
|
4,090
|
|
|
|
-
|
|
|
|
-
|
|
Penalties on
notes in default
|
|
|
10,910
|
|
|
|
-
|
|
|
|
11,066
|
|
|
|
-
|
|
Total Convertible
Notes Payable, Net
|
|
$
|
1,071,204
|
|
|
$
|
89,788
|
|
|
$
|
544,508
|
|
|
$
|
86,752
|
|
During
the three months ending March 31, 2017, the Company received proceeds from new convertible notes of $131,669 and obtained advances
from shareholders of $137,000 that were reclassified into convertible notes payable. The Company recorded original issue discounts
on new convertible notes of $67,169, which also increased the debt discounts recorded on the convertible notes. The Company recorded
$50,000 of payments on their convertible notes and a total gain on settlement of $5,831 representing the write-off of convertible
note principal. Each of the Company’s convertible notes have a conversion rate that is variable. The Company therefore has
accounted for such conversion features as derivative instruments (see Note 9). As a result of recording derivative liabilities
at note inception, the Company increased the debt discount recorded on their convertible notes by $90,322 during the three months
ending March 31, 2017. The Company also recorded amortization of $462,928 on their convertible note debt discounts. Lastly, the
Company issued 49,320 shares of the Company’s Series A Convertible Preferred Stock (“
Series A
Preferred
”) as loan fees with their new convertible notes. The Company therefore increased their convertible note
debt discount by $64,424, which represented the portion of the convertible note proceeds that were allocated to preferred stock.
NOTE
7: COMMON STOCK OPTIONS AND WARRANTS
Common
Stock Options
The
Company recognizes in the financial statements compensation related to all stock-based awards, including stock options and warrants,
based on their estimated grant-date fair value. The Company has estimated expected forfeitures and is recognizing compensation
expense only for those awards expected to vest. All compensation is recognized by the time the award vests.
The
following schedule summarizes the changes in the Company’s stock options:
|
|
|
|
|
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, 2016
|
|
|
2,402,500
|
|
|
$
|
0.50-15
|
|
|
|
4.05
years
|
|
|
$
|
-
|
|
|
$
|
0.81
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options granted
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
|
|
|
|
$
|
-
|
|
Options exercised
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
|
|
|
|
$
|
-
|
|
Options
expired
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
|
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2017
|
|
|
2,402,500
|
|
|
$
|
0.50-15
|
|
|
|
3.81
years
|
|
|
$
|
-
|
|
|
$
|
0.81
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at March 31, 2017
|
|
|
2,016,733
|
|
|
$
|
0.50-15
|
|
|
|
3.73
years
|
|
|
$
|
-
|
|
|
$
|
0.86
|
|
During
the three months ended March 31, 2017 the Company recognized $28,240 worth of stock based compensation related to the vesting
of its stock options.
Common
Stock Warrants
The
following schedule summarizes the changes in the Company’s stock warrants:
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
Warrants
Outstanding
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
Number
|
|
|
Exercise
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
Exercise
|
|
|
|
Of
|
|
|
Price
|
|
|
Contractual
|
|
|
Intrinsic
|
|
|
Price
|
|
|
|
Shares
|
|
|
Per
Share
|
|
|
Life
|
|
|
Value
|
|
|
Per
Share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2016
|
|
|
3,579,505
|
|
|
$
|
0.10-10
|
|
|
|
0.52
years
|
|
|
$
|
749
|
|
|
$
|
4.45
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants granted
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
|
|
|
|
$
|
|
|
Warrants exercised
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
|
|
|
|
$
|
|
|
Warrants expired/cancelled
|
|
|
(15,000
|
)
|
|
$
|
-
|
|
|
|
-
|
|
|
|
|
|
|
$
|
2.07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2017
|
|
|
3,564,505
|
|
|
$
|
0.40-10
|
|
|
|
0.28
years
|
|
|
$
|
-
|
|
|
$
|
4.46
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at March 31, 2017
|
|
|
3,564,505
|
|
|
$
|
0.40-10
|
|
|
|
0.28
years
|
|
|
$
|
-
|
|
|
$
|
4.46
|
|
NOTE
8: STOCKHOLDERS’ EQUITY
Common
Stock
During
the three months ending March 31, 2017 the Company issued 762,000 shares of its common stock valued at $99,060 for the settlement
of debt, 280,000 shares of its common stock valued at $43,400 for accounts payable, and 9,182,100 shares of its common stock valued
at $2,464,762 for conversions of 858,210 shares of Series A Preferred.
Preferred
Stock
During
the three months ending March 31, 2017 the Company issued 49,320 shares of Series A Preferred valued at $64,424 as loan
fees on convertible promissory notes.
NOTE
9: SUPPLEMENTAL CASH FLOW INFORMATION
During
the three months ending March 31, 2017 the Company had the following non-cash investing and financing activities:
●
|
Increased
convertible notes payable by $5,675, increased related party notes payable by $51,576, and decreased accrued interest by $57,251
for the reclassification of accrued interest to principal.
|
|
|
●
|
Increased
derivative liabilities for $90,322 to record a debt discount on convertible notes payable.
|
|
|
●
|
Increased
convertible notes payable and decreased loan from shareholder by $137,000 to roll proceeds from shareholder advances to a
formal convertible note payable.
|
|
|
●
|
Issued
49,320 shares of Series A preferred stock for loan fees that increased the convertible note debt discount by $64,424.
|
|
|
●
|
Issued
9,182,100 shares of common stock in exchange for 858,210 shares of Series A Preferred decreasing preferred stock by
$2,464,762, increasing common stock by $9,182, and increasing paid in capital by $2,455,580.
|
|
|
●
|
Issued
280,000 shares of common stock valued at $43,400 for the reduction of $140,000 of accounts payable, recording $96,600 as a
gain on extinguishment of debt.
|
|
|
●
|
Issued
762,000 shares of common stock valued at $99,060 for the reduction of $50,000 of convertible notes payable and $27,778 of
accrued interest, recording $21,282 as a gain on extinguishment of debt.
|
NOTE
10: SUBSEQUENT EVENTS
In
April 2017 the Company received $43,750 in exchange for 10% convertible promissory notes due October 13, 2017. The Company issued
12,600 Series A Preferred as a loan fee on this note.
In
April 2017 the Company settled $86,767 of accounts payable in exchange for 825,000 of common stock.
In
April of 2017, the Company filed a Certificate of Merger with the Delaware Division of Corporations in order to merge the Company’s
wholly-owned subsidiary, IsoPet Solutions Corporation, with and into the Company.
On May 15, 2017 the Company completed
the issuance of $2,194,443 7.5% Senior Secured Convertible Debentures (the "Debentures"), consisting of a principal amount
of $1,755,554 and $438,889 of original issue discounts, and a maturity date of May 15, 2018. These Debentures were issued in
exchange for 10% Convertible promissory notes with an aggregate prepayment amount of $1,755,554 that were maturing on various
dates in May 2017 through October 2017. Of these Debentures $820,419 have a $0.12 conversion rate, $210,313 have a $0.13
conversion rate, and $1,163,711 have a $0.20 conversion rate. In conjunction with the transaction the Company issued 445,861
Series A Preferred as loan fees.
On May 15, 2017 the Company
issued Debentures in the aggregate principal amount of $1,179,581, with $235,916 in original issue discounts,
resulting in gross proceeds of $943,664.39 to the Company. Each of these Debentures has a conversion rate of $0.20.
The Company issued 235,917 of Series A Preferred as loan fees on these Debentures.
In April and May, 2017, the Company issued
1,920,000 shares of common stock for 192,000 shares of Series A Preferred.
Subsequent
to the reporting period, in support of the Company’s efforts to focus resources on the development and commercialization
of its yttrium-90 brachytherapy products, the Company permanently closed its Production Facility located in Kennewick Washington.
The key piece of equipment, the Company’s linear accelerator, is currently being marketed for sale.
The
Company has evaluated subsequent events pursuant to ASC Topic 855 and has determined that, except as disclosed herein,
there are no additional subsequent events to disclose.
Item
2.
|
Management’s Discussion and Analysis of Financial
Condition and Results of Operations.
|
Except
for statements of historical fact, certain information described in this Form 10-Q report contains “forward-looking statements”
that involve substantial risks and uncertainties. You can identify these statements by forward-looking words such as “anticipate,”
“believe,” “could,” “estimate,” “expect,” “intend,” “may,”
“should,” “will,” “would” or similar words. The statements that contain these or similar words
should be read carefully because these statements discuss the Company’s future expectations, including its expectations
of its future results of operations or financial position, or state other “forward-looking” information. Advanced
Medical Isotope Corporation believes that it is important to communicate its future expectations to its investors. However, there
may be events in the future that the Company is not able to accurately predict or to control. Further, the Company urges you to
be cautious of the forward-looking statements which are contained in this Form 10-Q report because they involve risks, uncertainties
and other factors affecting its operations, market growth, service, products and licenses. The risk factors in the section captioned
“Risk Factors” in Item 1A of the Company’s previously filed Form 10-K, as well as other cautionary language
in this Form 10-Q report, describe such risks, uncertainties and events that may cause the Company’s actual results and
achievements, whether expressed or implied, to differ materially from the expectations the Company describes in its forward-looking
statements. The occurrence of any of the events described as risk factors could have a material adverse effect on the Company’s
business, results of operations and financial position.
General
Statement of Business
Advanced
Medical Isotope Corporation (the
“Company,” “AMI”
or
“we”
) was incorporated
under the laws of Delaware on December 23, 1994 as Savage Mountain Sports Corporation (
“SMSC”
). On September
6, 2006, the Company changed its name to Advanced Medical Isotope Corporation. AMI has authorized capital of 2,000,000,000 shares
of Common Stock, $0.001 par value per share and 20,000,000 shares of Preferred Stock, $0.001 par value per share. Our common
stock is quoted on the OTC PINK Marketplace under the symbol,
“ADMD”.
Overview
The
Company is a late stage radiation oncology medical device company engaged in the development of its yttrium-90 based brachytherapy
device, RadioGel™, for the treatment of non-resectable tumors. A prominent team of radiochemists, scientists and engineers,
collaborating with strategic partners, including national laboratories, universities and private corporations, lead the Company’s
development efforts. The Company’s overall vision is to globally empower physicians, medical researchers and patients by
providing them with new isotope technologies that offer safe and effective treatments for cancer.
The
Company’s current focus is on the development of its RadioGel™ device. RadioGel™ is an injectable particle-gel,
for brachytherapy radiation treatment of cancerous tumors in people and animals. RadioGel™ is comprised of a hydrogel, or
a substance that is liquid at room temperature and then gels when reaching body temperature after injection into a tumor. In the
gel are small, one micron, yttrium-90 phosphate particles (“
Y-90
”). Once injected, these inert particles are
locked in place inside the tumor by the gel, delivering a very high local radiation dose. The radiation is beta, consisting of
high-speed electrons. These electrons only travel a short distance so the device can deliver high radiation to the tumor with
minimal dose to the surrounding tissue. Optimally, patients can go home immediately following treatment without the risk of radiation
exposure to family members. Since Y-90 has a half-life of 2.7 days, the radioactively drops to 5% of its original value after
ten days.
The Company’s lead
brachytherapy product, including RadioGel™, incorporates patented technology developed for Battelle Memorial
Institute (“
Battelle
”) at Pacific Northwest National Laboratory, a leading research institute for government
and commercial customers. Battelle has granted the Company an exclusive license to patents covering the manufacturing, processing
and applications of RadioGel™ (the “
Battelle License
”). Other intellectual property protection includes
proprietary production processes and trademark protection in 17 countries. The Company plans to continue efforts to develop new
refinements on the production process, and the product and application hardware, as a basis for future patents.
The
Company is currently focusing on obtaining approval from the Food and Drug Administration (“
FDA
”) to market
and sell RadioGel™ as a Class II medical device. The Company first requested FDA approval of RadioGel™ in June 2013,
at which time the FDA classified RadioGel™ as a medical device. The Company then followed with a 510(k) submission which
the FDA responded, in turn, with a request for a physician letter of substantial equivalence and a reformatted 510(k) summary,
which the Company provided January 2014. In February 2014 the FDA ruled the device as not substantially equivalent due to a lack
of predicate device and it was classified to Class III. The Company is currently developing test plans to address issues raised
by the FDA in connection with the Company’s previous submissions regarding RadioGel™, including developing specific
test plans and specific indication of use. The Company intends to request FDA approval to apply for
de novo
classification
of RadioGel™, which would reclassify the device from a Class III device to a Class II device, further simplifying the path
to FDA approval.
In
previous FDA submittals, the Company proposed applying RadioGel™ for a very broad range of cancer therapies, referred to
as Indication for Use. The FDA has requested that the Company reduce its Indications for Use. To comply with that request, the
Company has expanded its Medical Advisory Board (“
MAB
”) and engaged doctors from respected hospitals who have
evaluated the candidate cancer therapies based on three criteria: (1) potential for FDA approval and successful therapy;
(2) notable advantage over current therapies; and (3) probability of wide spread acceptance by the medical community.
The
MAB selected eighteen applications for RadioGel™, each of which meet the criteria described above. This large number
confirms the wide applicability of the device and defines the path for future business growth. The Company intends to apply
to the FDA for a single Indication for Use, followed by subsequent applications for additional Indications for Use. We
anticipate that this initial application will facilitate each subsequent application, and the testing for many of
the subsequent applications could be conducted in parallel, depending on available resources.
The
MAB selected the treatment of basal cell and squamous cell skin cancers for the first Indication for Use to be submitted to the
FDA. According to the American Cancer Society, one out of every three new cancers diagnosed in the U.S. is a cancerous skin lesion
of this type, representing 5.5 million tumors diagnosed annually. The MAB believes RadioGel™ has the potential to be the
preferred treatment in a reasonable number of cases in a very large market.
The
Company’s IsoPet Solutions division was established in May 2016 to focus on the veterinary oncology market. The Company
has engaged four different university veterinarian hospitals to begin using RadioGel™ for treatment of four different cancer
types in dogs and cats. Washington State University Veterinary Hospital has tested one cat to demonstrate the procedures and the
absence of any significant toxicity effect. The other three centers are expected to begin therapy during the second quarter of
2017 after their internal administrative review process is completed.
These
animal therapies will focus on creating labels that describe the procedures in detail as a guide to future
veterinarians.
The labels will be voluntarily submitted to the FDA for review. They will then be used as data for future FDA applications in
the medical sector and as key intellectual property for licensing to private veterinary clinics. In 2018, Dr. Alice Villalobos,
the Chair of our Veterinarian Advisory Board, will be the first licensee of these therapies in her private clinic to demonstrate
the business model.
The
Company anticipates that future profit will be derived from direct sales of RadioGel™ and related
services,
and from licensing to private medical and veterinary clinics in the U.S. and internationally.
IsoPet
is currently engaged with using university veterinarian hospital to develop the detailed therapy procedures to treat animal tumors.
This intellectual property will be used in the private clinics.
Based
on the Company’s financial history since inception, its auditor has expressed substantial doubt as to the Company’s
ability to continue as a going concern. The Company has limited revenue, nominal cash, and has accumulated deficits since inception.
If the Company cannot obtain sufficient additional capital, the Company will be required to delay the implementation of its business
strategy and not be able to continue operations.
Results
of Operations
Comparison
of the Three Months Ended March 31, 2017 and 2016
The
following table sets forth information from our statements of operations for the three months ended March 31, 2017 and 2016.
|
|
Three
Months Ended
March 31, 2017
|
|
|
Three
Months Ended
March 31, 2016
|
|
Revenues
|
|
$
|
4,054
|
|
|
$
|
4,054
|
|
Operating expenses
|
|
|
(368,769
|
)
|
|
|
(686,585
|
)
|
Operating loss
|
|
|
(364,715
|
)
|
|
|
(682,531
|
)
|
Non-operating income (expense):
|
|
|
|
|
|
|
|
|
Gain on sale of assets
|
|
|
2,800
|
|
|
|
-
|
|
Gain (loss) on debt extinguishment
|
|
|
147,710
|
|
|
|
-
|
|
Gain (loss) on derivative liability
|
|
|
325,390
|
|
|
|
(5,139,998
|
|
Net gain (loss) on settlement of debt
|
|
|
-
|
|
|
|
(65,837
|
)
|
Interest expense
|
|
|
(527,951
|
)
|
|
|
(49,209
|
)
|
Net income (loss)
|
|
$
|
(416,766
|
)
|
|
$
|
(5,805,901
|
|
Revenue
Revenue
was $4,054 for the three months ended March 31, 2017 and March 31, 2016. Revenue consists of consulting revenues, including providing
a company with assistance in strategic targetry services, and research into production of radiophamaceuticals and the
operations of radioisotope production facilities. No proprietary information belonging to our Company is shared during
the process of this consulting.
Operating
Expenses
Operating
expenses for the three months ended March 31, 2017 and 2016 consists of the following:
|
|
Three
months ended
March 31, 2017
|
|
|
Three
months ended
March 31, 2016
|
|
Depreciation and amortization
expense
|
|
$
|
740
|
|
|
$
|
738
|
|
Professional fees
|
|
|
134,604
|
|
|
|
70,969
|
|
Stock options granted
|
|
|
28,240
|
|
|
|
-
|
|
Payroll expenses
|
|
|
104,780
|
|
|
|
165,000
|
|
General and administrative expenses
|
|
|
74,407
|
|
|
|
438,042
|
|
Sales and marketing
expense
|
|
|
25,998
|
|
|
|
11,836
|
|
|
|
$
|
368,769
|
|
|
$
|
686,585
|
|
Operating
expenses for the three months ended March 31, 2017 and 2016 was $368,769 and $686,585, respectively. The decrease in operating
expenses from 2016 to 2017 can be attributed to the decrease in payroll expense ($165,000 for the three months ended March
31, 2016 versus $104,780 for the three months ended March 31, 2017); and the decrease in general and administrative
expense ($438,042 for the three months ended March 31, 2016 versus $74,407 for the three months ended March 31, 2017).
The main contributors to the decrease in general and administrative expense was a decrease in loan
fees ($300,494 for the three months ended March 31, 2016 versus $0 for the three months ended March 31, 2017); and a decrease
in research expense ($95,544 for the three months ended March 31, 2016 versus $32,887 for the three months ended
March 31, 2017). These decreases in operating expenses were partially offset by an increase in stock options granted
($28,500 for the three months ended March 31, 2017 versus $0 for the three months ended March 31, 2016); and an increase in professional fees
expenses ($70,969 for the three months ended March 31, 2016 versus $134,604 for the three months ended March 31, 2017).
Non-Operating
Income (Expense)
Non-operating
income (expense) for the three months ended March 31, 2017 and 2016 consists of the following:
|
|
Three
months
ended
March 31, 2017
|
|
|
Three
months
ended
March 31, 2016
|
|
Interest expense
|
|
$
|
(527,951
|
)
|
|
$
|
(49,209
|
)
|
Net gain on sale of assets
|
|
|
2,800
|
|
|
|
-
|
|
Net gain (loss) on settlement of
debt
|
|
|
-
|
|
|
|
65,837
|
|
Net gain (loss) on debt extinguishment
|
|
|
147,710
|
|
|
|
-
|
|
Gain (loss)
on derivative liability
|
|
|
325,390
|
|
|
|
(5,139,998
|
)
|
|
|
$
|
(52,051
|
)
|
|
$
|
(5,123,370
|
)
|
Non-operating
income (expense) for the three months ended March 31, 2017 varied from the three months ended March 31, 2016 primarily due to
a loss on derivative liability of $5,139,998 for the three months ended March 31, 2016 versus a gain of $325,390 for the three
months ended March 31, 2017; and an increase in gain on debt extinguishment for the three months ended March 31, 2017 of $147,710
versus $0 for the three months ended March 31, 2016. This was partially offset by an increase in interest expense from $49,209
for the three months ended March 31, 2016 to $527,951 for the three months ended March 31, 2017.
Net
Loss
Our
net income (loss) for the three months ended March 31, 2017 and 2016 was $(416,766) and $(5,805,901), respectively.
Liquidity
and Capital Resources
At
March 31, 2017, the Company had negative working capital of $3,203,319, as compared to $3,022,417 at December 31, 2016. During
the three months ended March 31, 2017 the Company experienced negative cash flow from operations of $275,658 and it received $2,800
for investing activities while adding $268,669 of cash flows from financing activities. As of March 31, 2017, the Company had
no commitments for capital expenditures.
Cash
used in operating activities decreased from $572,855 for the three month period ending March 31, 2016 to $275,658 for the three
month period ending March 31, 2017. Cash used in operating activities was primarily a result of the Company’s net loss,
partially offset by non-cash items, such as loss on derivative liability and amortization and depreciation, included in that net
loss and preferred and common stock issued for services and other expenses. The Company received $2,800 and $0 in cash from investing
activities for the three month periods ended March 31, 2017 and 2016, respectively. Cash provided from financing activities decreased
from $641,760 for the three month period ending March 31, 2016 to $268,669 for the three month period ending March 31, 2017. The
decrease in cash provided from financing activities was primarily a result of decrease in proceeds from convertible debt, partially
offset with an increase in proceeds from shareholder advances.
The
Company has generated material operating losses since inception. The Company had a net loss of $416,766 for the three months ended
March 31, 2017, and a net loss of $5,805,901 for the three months ended March 31, 2016. The Company expects to continue to experience
net operating losses. Historically, the Company has relied upon investor funds to maintain its operations and develop the Company’s
business. The Company anticipates raising additional capital within the next twelve months from investors for working capital
as well as business expansion, although the Company can provide no assurance that additional investor funds will be available
on terms acceptable to the Company. If the Company is unable to obtain additional financing to meet its working capital requirements,
it may have to curtail its business.
The
Company anticipates raising additional capital within the next twelve months from investors for working capital as well as business
expansion, although the Company can provide no assurance that additional investor funds will be available on terms acceptable
to the Company. If the Company is unable to obtain additional financing to meet its working capital requirements, it may have
to cease operations.
The
Company requires funding of at least $1.5 million per year to maintain current operating activities. Over the next 12-24 months,
the Company believes it will cost approximately $5 million to $10 million to fund: (1) the FDA approval process and initial deployment
of the brachytherapy products and (2) initiate regulatory approval processes outside of the United States. The continued deployment
of the brachytherapy products and a worldwide regulatory approval effort will require additional resources and personnel. The
principal variables in the timing and amount of spending for the brachytherapy products in the next 12-24 months will be the FDA’s
classification of the Company’s brachytherapy products as Class II or Class III devices (or otherwise) and any requirements
for additional studies which may possibly include clinical studies. Thereafter, the principal variables in the amount of the Company’s
spending and its financing requirements would be the timing of any approvals and the nature of the Company’s arrangements
with third parties for manufacturing, sales, distribution and licensing of those products and the products’ success in the
U.S. and elsewhere. The Company intends to fund its activities through strategic transactions such as licensing and partnership
agreements or additional capital raises.
Although
the Company is seeking the foregoing funding and have engaged in numerous discussions with potential finders, investment bankers
and investors with respect to the initial portion thereof, the Company has not received firm commitments for the required funding.
Based upon its discussions, the Company anticipates that if the Company is able to obtain the funding required to retire outstanding
debt, pay past due payables and maintain its current operating activities that the terms thereof will be materially dilutive to
existing shareholders.
The
recent economic events, including the inherent instability and volatility in global capital markets, as well as the lack of liquidity
in the capital markets, could impact its ability to obtain financing and its ability to execute its business plan. The Company
believes healthcare institutions will continue to purchase the medical solutions that it distributes.
Accounting
Policies and Estimates
The
preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the
United States of America requires management to make estimates and assumptions that affect the amounts reported in the unaudited
condensed consolidated financial statements and accompanying notes. Management bases its estimates on historical experience and
on various other assumptions that are believed to be reasonable under the circumstances. Actual results could differ from these
estimates under different assumptions or conditions. During the period ended March 31, 2017, we believe there have been no significant
changes to the items disclosed as significant accounting policies in management’s notes to the consolidated financial statements
in our annual report on Form 10-K for the year ended December 31, 2016, filed on March 9, 2017.
Off-Balance
Sheet Arrangements
The
Company does not have any off balance sheet arrangements that are reasonably likely to have a current or future effect on the
Company’s financial condition, revenues, results of operations, liquidity or capital expenditures.