FORM 10-Q

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

                QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                         For the quarterly period ended
                               September 30, 2001



                             Commission file number:
                                     0-22923

                           INTERNATIONAL ISOTOPES INC.
             (Exact name of registrant as specified in its charter)


                 Texas                                74-2763837
       (State of incorporation)            (IRS Employer Identification Number)

       4137 Commerce Circle
       Idaho Falls, Idaho                                83401
       (Address of principal executive offices)        (zip code)

                                  208-524-5300
              (Registrant's telephone number, including area code)



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

As of May 21,  2002 the  number  of  shares of  Common  Stock,  $.01 par  value,
outstanding was 95,081,135






INTERNATIONAL ISOTOPES INC.


TABLE OF CONTENTS



                                                                        Page No.
PART I  - FINANCIAL INFORMATION:


 Item 1 - Financial Statements:

    Condensed Consolidated Balance Sheets at September 30, 2001
    (unaudited) and December 31, 2000.                                        3

    Unaudited Condensed Consolidated Statements of Operations for the
    Three Months Ended September 30, 2001 and 2000, and for the Nine Months
    Ended September 30, 2001 and 2000                                         4

    Unaudited Condensed Consolidated Statements of Cash Flows for the
    Nine Months Ended September 30, 2001 and 2000.                            5

    Notes to Unaudited Condensed Consolidated Financial Statements.           7

 Item 2 - Management's Discussion and Analysis of Financial
           Condition and Results of Operations                               13


PART II - OTHER INFORMATION:


 Item 2 - Changes in Securities and Use of Proceeds                          14

 Item 6 - Exhibits and Reports on Form 8-K                                   14




                                       2


Part I.  Financial Statements

  Item 1.  Financial Statements



                  INTERNATIONAL ISOTOPES INC. AND SUBSIDIARIES
                      Condensed Consolidated Balance Sheets
                                                                         September 30,
                                                                             2001           December 31,
                                   Assets                                 (unaudited)           2000
                  --------------------------------------------           ------------       ------------
                                                                                      
Current assets:
    Cash and cash equivalents                                            $    361,406       $    642,554
    Accounts receivable                                                       580,486            373,513
    Assets held for sale                                                    7,894,416         25,085,806
    Inventories                                                             2,433,419          2,587,992
    Prepaids and other current assets                                            (950)           304,636
                                                                         ------------       ------------
       Total current assets                                                11,268,777         28,994,501

Property, plant and equipment, net                                            453,434            455,541

Intangibles and other assets                                                        -            134,777
                                                                         ------------       ------------
       Total assets                                                      $ 11,722,211       $ 29,584,819
                                                                         ============       ============

               Liabilities, Redeemable Convertible Preferred Stock
                           and Stockholders' Deficit
               ---------------------------------------------------
Current liabilities
    Accounts payable                                                     $     87,029       $  4,459,814
    Accrued liabilities                                                       235,606            939,254
    Current portion of lease obligations                                            -          1,531,883
    Current portion of mortgage and notes payable to banks                  9,570,538         16,972,971
                                                                         ------------       ------------
       Total current liabilites                                             9,893,173         23,903,922

Non-current portion of lease obligations                                            -          2,025,763
Mortgage and notes payable to banks, excluding current portion                 51,467             67,989
                                                                         ------------       ------------
       Total liabilities                                                    9,944,640         25,997,674

Redeemable convertible preferred stock, net                                16,985,304         17,337,954
    (liquidation value of $17,467,000)

Stockholders' deficit
    Preferred stock, $0.01 par value; 5,000,000 shares authorized,
       16,717 shares issued and outstanding at September 30, 2001
       and 17,467 shares issued and outstanding at December 31, 2000                -                  -
    Common stock, $0.01 par value; 250,000,000 shares authorized,
       issued and outstanding 20,047,510 shares at September 30, 2001
       and 10,611,411 shares at December 31, 2000                             200,476            106,115
    Additional paid-in capital                                             70,510,497         69,190,246
    Accumulated deficit                                                   (85,918,706)       (83,047,170)
                                                                         ------------       ------------
       Total stockholders' deficit                                        (15,207,733)       (13,750,809)
                                                                         ------------       ------------
       Total liabilities and stockholders' deficit                       $ 11,722,211       $ 29,584,819
                                                                         ============       ============


     See accompanying notes to condensed consolidated financial statements.


                                       3






            INTERNATIONAL ISOTOPES INC. AND SUBSIDIARIES
     Unaudited Condensed Consolidated Statements of Operations


                                                       Three Months ended September 30,       Nine Months ended September 30,
                                                       --------------------------------       -------------------------------
                                                             2001            2000                   2001             2000
                                                         -----------     ------------          ------------     ------------
                                                                                                    
Revenue:
   Sales of product                                      $   803,801          449,847          $  1,846,395     $  1,398,054

Cost of revenue:
   Cost of products                                          489,252          195,402             1,095,261          628,481
                                                         -----------     ------------          ------------     ------------
     Gross profit                                            314,549          254,445               751,134          769,573
                                                         -----------     ------------          ------------     ------------

 Operating costs and expenses:
   Salaries and contract labor                               103,533          612,168               295,540        1,175,120
   General, administrative and consulting                    198,695        1,421,417               524,784        2,922,967
                                                         -----------     ------------          ------------     ------------
     Total operating expenses                                302,228        2,033,585               820,324        4,098,087
                                                         -----------     ------------          ------------     ------------
     Operating profit (loss)                                  12,321       (1,779,140)              (69,190)      (3,328,514)

Other income (expense):
   Interest income                                             1,307                -                 1,307                -
   Interest expense                                             (601)         (36,515)               (2,314)         (83,883)
                                                         -----------     ------------          ------------     ------------
     Profit (loss) from continuing operations                 13,027       (1,815,655)              (70,197)      (3,412,397)

Discontinued operations:
   Loss on disposal of discontinued operations
     including provision of $678,511 for operating
     losses during the phase-out period
     (less applicable taxes of $0)                          (362,847)               -            (1,739,377)               -
   Profit (loss) from operations of discontinued
     segment                                                       -       (2,974,026)                    -      (11,074,340)
                                                         -----------     ------------          ------------     ------------
     Loss from discontinued operations                      (362,847)      (2,974,026)           (1,739,377)     (11,074,340)
                                                         -----------     ------------          ------------     ------------
      Net loss                                              (349,820)      (4,789,681)           (1,809,574)     (14,486,737)

Preferred stock dividend, deemed dividends
   and accretion of discount                                (132,450)      (4,563,761)             (397,350)     (12,960,557)
                                                         -----------     ------------          ------------     ------------

Net loss applicable to common shareholders               $  (482,270)    $ (9,353,442)         $ (2,206,924)    $(27,447,294)
                                                         ===========     ============          ============     ============

Net loss per common share continuing
  operations - basic and diluted                         $     (0.01)    $      (0.66)         $      (0.03)    $      (1.73)
Net loss per common share discontinued
  operations - basic and diluted                               (0.02)           (0.31)                (0.12)           (1.17)
                                                         -----------     ------------          ------------     ------------
Net loss per common share - basic and diluted            $     (0.03)    $      (0.97)         $      (0.15)    $      (2.90)
                                                         ===========     ============          ============     ============

Weighted average common shares outstanding -
   basic and diluted                                      17,325,171        9,686,222            14,256,586        9,480,620
                                                         ===========     ============          ============     ============


     See accompanying notes to condensed consolidated financial statements.




                                       4





                  INTERNATIONAL ISOTOPES INC. AND SUBSIDIARIES
            Unaudited Condensed Consolidated Statements of Cash Flows

                                                                                  Nine Months ended September 30,
                                                                                      2001              2000
                                                                                  ------------      ------------
                                                                                              
Cash flows from operating activities:
     Net loss                                                                     $ (1,809,574)     $(14,486,736)
     Adjustments to reconcile net loss to net cash used in
     operating activities
         Depreciation and amortization                                                  57,886         2,508,022
         Services compensated by stock issuance                                              -           469,783
         Changes in operating assets and liabilities:
                Accounts receivable                                                   (206,973)       (1,168,770)
                Prepaids and other assets                                              440,363           316,709
                Inventories                                                            154,573        (1,318,345)
                Accounts payable                                                    (4,372,785)        1,495,563
                Accrued liabilities                                                   (703,648)          130,143
                                                                                  ------------      ------------
                     Net cash used in operating activities                          (6,440,158)      (12,053,631)
                                                                                  ------------      ------------

Cash flows from investing activities:
     Purchase of property, plant and equipment                                         (68,022)       (2,290,646)
     Proceeds from sale of assets held for sale                                     17,203,633                 -
                                                                                  ------------      ------------
                    Net cash provided by (used in) investing activites              17,135,611        (2,290,646)
                                                                                  ------------      ------------

Cash flows from financing activities:
     Settlement of contingent consideration - MAC Isotopes, Inc.                             -        (1,266,441)
     Proceeds from issuances of redeemable convertible
         preferred stock and warrants                                                        -         9,320,000
     Proceeds from issuance of common stock,
         net of issuance costs                                                               -         5,450,264
     Payments on capital leases                                                     (3,557,646)       (1,152,295)
     Proceeds from issuance of debt                                                          -         4,641,579
     Principal payments on notes payable                                            (7,418,955)       (2,894,352)
     Payments of preferred stock dividends                                                   -          (125,000)
                                                                                  ------------      ------------
                    Net cash provided by (used in) financing activities            (10,976,601)       13,973,755
                                                                                  ------------      ------------

Net increase (decrease) in cash and cash equivalents                                  (281,148)         (370,522)
Cash and cash equivalents at beginning of period                                       642,554         2,990,300
                                                                                  ------------      ------------
Cash and cash equivalents at end of period                                        $    361,406      $  2,619,778
                                                                                  ============      ============


      See accompanying notes to condensed consolidated financial statements


                                   (Continued)


                                       5






                  INTERNATIONAL ISOTOPES INC. AND SUBSIDIARIES
      Unaudited Condensed Consolidated Statements of Cash Flows - continued

                                                                                  Nine Months ended September 30,
                                                                                      2001              2000
                                                                                  ------------      ------------
                                                                                              
Supplemental disclosure of cash flow activities:
     Cash paid for interest, net of amounts capitalized                           $    471,218      $  1,473,722
                                                                                  ============      ============

Supplemental disclosure of noncash transactions:
     Common stock issued for preferred stock dividend                             $    668,755      $    425,000
                                                                                  ============      ============

     Capital expenditures included in accounts payable                            $          -      $    462,849
                                                                                  ============      ============



      See accompanying notes to condensed consolidated financial statements



                                       6




                  INTERNATIONAL ISOTOPES INC. AND SUBSIDIARIES
         Notes to Unaudited Condensed Consolidated Financial Statements


(1) The Company and Basis of Presentation

International  Isotopes Inc (the Company) was  incorporated in Texas in November
1995. The Company acquired the technology,  proprietary designs and intellectual
property for the design and assembly of a proton linear  accelerator  (LINAC) to
produce  radioisotopes  used in nuclear medicine for the detection and treatment
of various forms of cancer and other diseases. The Company also owns 100% of the
outstanding  common shares of Gazelle Realty,  Inc. and  International  Isotopes
Idaho,  Inc.  (I4).  Gazelle  Realty,  Inc.  owned 20 acres of land on which the
facility for the LINAC has been  constructed  and 1.6 acres of land on which the
administration,   manufacturing,  and  research  and  development  building  was
constructed.  During 1997,  all the property owned by Gazelle  Realty,  Inc. was
transferred to the Company.

Prior to initial production in late 1999, the Company had devoted  substantially
all of its efforts, since inception,  to the acquisition and construction of the
LINAC  project  and related  assets,  pharmaceutical  production  and to raising
capital and other organizational activities. The operating revenues to date have
been limited to the sales of accelerator  components purchased from the State of
Texas,  product development  income,  initial sales of I-125 brachytherapy seeds
and sales of reactor produced  products from I4.  Additionally,  the Company has
derived operating capital from the sales of assets. The Company has financed its
operations in part through private  placements of its equity  securities and its
initial public offering (the "Offering") which occurred on August 19, 1997.

Discontinued  Operations - In late 2000, the Company determined that it would be
required to pursue  strategic  alternatives  to sell certain  assets in order to
continue operations. It was determined that it would be necessary to dispose of:
the  Woodrow  Spencer  office  and  warehouse  located  in  Denton,  Texas;  the
Radiopharmaceutical  Manufacturing  Facility in Denton, Texas; the brachytherapy
seed business in Denton,  Texas;  real estate located in Waxahachie,  Texas; and
the  Radioisotope   Production   Facility  in  Denton,   Texas.  Each  of  these
facilities/assets  was evaluated for impairment and all were written down to net
realizable  value and an adjustment of $17,975,043  was recorded at December 31,
2000 and was reported in the December 31, 2000 financial statements.

During January 2001 the sale of the Woodrow Spencer  facility was completed.  In
April  2001  the  Company   completed   the  sale  of  the   Radiopharmaceutical
Manufacturing  Facility and the  Brachytherapy  seed  business.  The sale of the
Radioisotope Production Facility ("LINAC") closed in December 2001. At March 31,
2001 and 2000, the operations  associated  with these  facilities and activities
have  been  reclassified  as  discontinued  operations.  Costs  associated  with
corporate  functions  for each of these years have been  categorized  as part of
general and administrative and are included in continuing  operations.  Interest
expense   associated   directly  with  the  discontinued   operations  has  been
categorized  as  discontinued  operations.   Interest  expense  associated  with
continuing operations is reported separately

Principles of Consolidation - The consolidated  financial statements include the
accounts of the Company and its wholly owned subsidiaries  Gazelle Realty,  Inc.
and International Isotopes Idaho, Inc. All significant intercompany accounts and
transactions have been eliminated in consolidation


                                       7


(2) Current Developments and Liquidity

On January 16,  2001,  the  Company  completed  the sale of the Woodrow  Spencer
office and warehouse facility located in Denton, Texas for proceeds of $950,000,
less closing  costs of $63,811.  Through an impairment  charge of $209,773,  the
facility  had been  written down to a net book value of $886,189 at December 31,
2000.  The Company used the proceeds to reduce its  revolving  line of credit by
$863,890  (including  interest of $23,400) and fund operating  expenses with the
remaining amounts.

On April 20, 2001,  the Company  completed  the sale of the  Radiopharmaceutical
Manufacturing  Facility to NeoRx  Corporation  ("NeoRx")  for  proceeds of $12.0
million,  less settlement  costs of $225,000,  and warrants to purchase  800,000
shares of NeoRx  common  stock.  (The  warrants  were  given no value due to the
exercise  price of the warrants being less than the market value on the date the
agreement was entered  into.) This facility had a net book value of  $11,304,724
at December 31, 2000.  The Company used the proceeds to repay  advances  made by
NeoRx in the amount of $861,060,  reduce its note payable to a commercial lender
by $1,296,469  (including  interest of $36,578),  reduce its  revolving  line of
credit by $2,614,023  (including interest of $45,857),  reduce its capital lease
obligations  by  $3,291,289,  repay a portion  of the note  payable  to  William
Nicholson,  the former Chairman of the Board, in the amount of $348,000 and fund
other  operating  expenses.  The Company  transferred  the NeoRx warrants to the
Series A and B preferred  shareholders  in exchange for certain  concessions  in
their  certificates  of  designation.  See  Note  8  for  a  discussion  of  the
concessions made by the Series A and B preferred shareholders.

On April 27, 2001,  the Company  completed  the sale of its  brachytherapy  seed
assets to Imagyn Medical Technologies,  Inc. ("Imagyn") for net cash proceeds of
$5.0 million,  less settlement  costs of $100,000.  The seed business through an
impairment  charge of  $416,294  had been  written  down to a net book  value of
$5,000,000 at December 31, 2000. The Company used the proceeds to repay advances
and  expenses  incurred by Imagyn in the amount of $108,786  and reduce its note
payable to a commercial  lender by $4,645,582  (including  interest of $25,768),
reduce its  capital  lease  obligations  by  $145,632  and fund other  operating
expenses.

On December 14, 2001, the Company  completed the sale of the Linear  Accelerator
Facility for $8,251,849. In this transaction, the buyers assumed Company debt of
$7,433,000  and paid interest of $318,848 on behalf of the Company.  The Company
incurred additional closing costs of $272,025.  The Linear Accelerator  Facility
through an impairment  charge of $15,889,765 had been written down to a net book
value of  $7,164,160  at December  31,  2000.  Associated  with the sale and the
assumption  of debt by the  purchaser,  the Company will retain an obligation of
$500,000 on that loan for six months or until  purchaser  renews their note with
Texas State Bank. The Company also retains an obligation (also for six months or
until  purchaser  renews  the note)  for  decommissioning  the Shady  Oaks/LINAC
facility  should  AMISI  default  on  payment  or  not  meet  Texas  State  Bank
requirements for note renewal.

Business Condition - Since inception, the Company has suffered recurring losses.
During the periods  ended  September  30, 2001 and 2000,  the Company had losses
before preferred dividends of $1,809,574 and $14,486,737,  respectively.  During
the periods ended  September 30, 2001 and 2000,  the Company's  operations  used
cash in operating  activities of $6,440,158 and $12,053,631,  respectively.  The
net loss before preferred  dividends  includes  discontinued  operations for the
periods  ended  September  30,  2001 and  2000 of  $1,739,377  and  $11,074,340,
respectively.  As of September 30, 2001, the remaining  operating  assets of the
Company  are  those of I4.  These  matters  raise  substantial  doubt  about the
Company's  ability to continue as a going concern.  With the  continuation of I4
operations,  management  expects  to  generate  sufficient  cash  flows  to meet
operational needs during 2002 through financing and operating capital;  however,
there is no  assurance  that  these  cash flows  will  occur.  The  accompanying
financial   statements   do  not  include  any   adjustments   relating  to  the
recoverability  and  classification  of asset carrying amounts or the amount and
classification  of liabilities that might result should the Company be unable to
continue as a going concern.


                                       8


(3) Net Loss Per Common Share - Basic and Diluted

Basic loss per share excludes dilution for potentially  dilutive  securities and
is computed by dividing loss  applicable to common  stockholders by the weighted
average number of common shares outstanding during the period.  Diluted loss per
share,  which is computed on the basis of the weighted  average number of common
shares and all potentially dilutive securities outstanding during the period, is
the same as basic loss per share as all  potentially  dilutive  securities  were
anti-dilutive.  Net loss per common share is calculated for both  continuing and
discontinued operations.

As of September 30, 2001 and 2000 there were 8,312,376 and 8,181,876 options and
warrants outstanding, respectively. As of September 30, 2001 and 2000 there were
a total of 17,467 and  18,217  shares of Series A and B  redeemable  convertible
preferred  stock that were not included in the  computation  of diluted net loss
per  common  share  as their  effect  would  have  been  anti-dilutive,  thereby
decreasing the net loss per common share.


(4) Inventories

Inventories consist of the following at September 30, 2001 and December 31, 2000

                                   September 30, 2001     December 31, 2000
                                   ------------------     -----------------
           Raw materials              $     147,333         $     288,344
           Work in progress               2,260,959             2,215,906
           Finished goods                    25,127                83,742
                                      -------------         -------------
                                      $   2,433,419         $   2,587,992
                                      =============         =============


(5) Stockholders' Equity and Redeemable Convertible Preferred Stock

 Redeemable Convertible Preferred Stock
 --------------------------------------

The Series A Preferred Stock was mandatorily  redeemable on May 20, 2002 in cash
or common stock at the then Average  Price,  at the Company's  option.  In March
2001, the holders of the Series A Preferred  Stock agreed to a  modification  in
terms,  which removed their early redemption  rights and certain  adjustments to
their  conversion  price.  The Series A Preferred Stock was then  convertible to
common stock at a fixed price of $2.00 per share,  subject to  adjustment in the
case of stock splits or stock dividends.  In connection with this  modification,
the exercise price of the Series A Preferred Stock warrants were also reduced to
$2.00 per warrant. Because the underlying stock value of the common stock at the
date of adjustment  was less than the new exercise  price,  the repricing of the
warrants resulted in no additional value to the Series A Preferred Stockholders.

As consideration for those concessions,  the Company  distributed to the holders
of the Series A Preferred  Stock an  aggregate  of 439,150  warrants to purchase
NeoRx common stock that the Company had received in connection  with the sale of
the Radiopharmaceutical Manufacturing Facility to NeoRx. The NeoRx warrants were
valued  using the  intrinsic  method of  accounting  resulting in no value being
assigned to the warrants


                                       9


The Series B Preferred Stock was mandatorily  redeemable on May 31, 2003 in cash
or  common  stock at the then  Average  Price,  at the  Company's  option.  When
originally  issued,  holders of Series B  Preferred  Stock could  require  early
redemption  on December  1, 2000 and June 1, 2001.  Other  mandatory  redemption
events included change in control,  suspension or delisting from NASDAQ, the BSE
or any  subsequent  market  on  which  the  common  stock  is  listed  for  five
consecutive  days, breach by the Company of any  representations,  warranties or
other conditions in the preferred stock purchase agreement, and other events. In
March, 2001, the holders of Series B Preferred Stock agreed to a modification in
terms,  which removed their early redemption  rights and certain  adjustments to
their  conversion  price.  The Series B Preferred Stock was then  convertible to
common stock at a fixed price of $2.00 per share  subject to  adjustment  in the
case of stock splits or stock dividends. As consideration for those concessions,
the Company  distributed to the holders of Series B Preferred Stock an aggregate
of 360,850 warrants to purchase NeoRx common stock that the Company had received
in connection with the sale of the Radiopharmaceutical Manufacturing Facility to
NeoRx.  The NeoRx warrants were valued using the intrinsic  method of accounting
resulting in no value being assigned to the warrants.

During  2001,  with the  exception  of the July 15 and the  October  15 Series A
Preferred dividends which were waived by the preferred shareholders, the Company
for all other  Series A and  Series B  redeemable  convertible  preferred  stock
dividends in 2001,  elected to issue  common stock as payment for the  quarterly
dividends.  The Company  satisfied these dividend payments by issuing a total of
15,594,724  shares of common stock ( of which 1,596,187 were issued in the first
quarter).  The preferred  shareholders have waived all future dividends for both
the Series A and Series B redeemable convertible preferred stock.

During April and June of 2001, certain holders of Series B redeemable  preferred
stock  converted  750 shares of preferred  stock into  375,000  shares of common
stock valued at $750,000 or $2.00 per common share.


 Common Stock
 ------------

On November 2, 2001, at the annual  meeting of  stockholders,  the  stockholders
ratified an amendment authorizing 250,000,000 shares of common stock.


 Stock Option Plan
 -----------------

On April  23,  2001,  the  Company  granted  1,000,000  stock  options  to a key
employee.

The following table summarizes  information  about fixed stock options under the
Plan outstanding at December 31, 2001:




                                           Options Outstanding             Options Exerciseable
                     Options           Weighted          Weighted           Number         Weighted
     Range of     Outstanding at        Average          Average        Exercisable at     Average
     Exercise      December 31,        Remaining         Exercise        December 31,      Exercise
      Price           2001          Contractual Life      Price              2001           Price
     --------     --------------    ----------------     --------        ------------      --------
                                                                         
     $  0.076       1,000,000          9.32 years        $  0.076          500,000         $  0.076



                                       10


The fair value of each option  grant is estimated on the date of grant using the
Black-Scholes  option pricing model with the following  assumptions (all options
from previous year expired prior to being exercised):

                                              2001
                                             ------
     Expected dividend yield                      -
     Risk-free interest rate                   4.4%
     Expected volatility                       153%
     Expected life                          3 years
     Weighted average fair value              $0.03



 Warrants
 --------

At March 31, 2001, the Company had 7,312,376 warrants  outstanding with exercise
prices ranging from $3.38 to $10.00 per warrant.


(6) Commitments and Contingencies


 Employment Contract
 -------------------

The Company has a five-year  employment  contract with the Company's  president.
The employment agreement extends through February 2007.


 Dependence on Third Parties
 ---------------------------

The production of HSA Cobalt is dependent upon the Department of Energy, and its
prime operating contractor,  who controls the reactor and laboratory operations.
The gemstone  production is tied to an exclusive  agreement with Quali Tech Inc.
who in turn has a contract  with The Topaz  Group,  Inc.  Medical  flood  source
manufacturing is conducted under an exclusive contract with RadQual, LLC. who in
turn has agreement in place with several companies for marketing and sales.


 Contingencies
 -------------

In March 2001, I4 terminated its commercial use  subcontract  agreement that was
first  established in 1996 at the Idaho National  Engineering and  Environmental
Laboratory. This contract had permitted access to the Idaho research reactor for
isotope  production but also included an obligation to pay for the operations of
a DOE owned  processing  facility.  The cost of supporting  those operations had
increased considerably in the past several years to the point of no longer being
a profitable operation under those contractual arrangements.  The termination of
this  contract  will not  effect  the  Company's  plans to  continue  HSA cobalt
production  as some material  remains in production in the DOE reactor  facility
and this material can be shipped directly from the reactor site to the customers
facilities' without any processing in the government laboratory.

The Company conducts its operations in Idaho Falls, Idaho.  Although the medical
flood source and gemstone  products appear diverse they share the common link as
being  radioactive  materials.  Therefore,  the  Company is  required to have an
operating license from the Nuclear  Regulatory  Commission ("NRC") and specially
trained  staff to handle  these  materials.  The  Company  has an NRC  operating
license and has, in fact,  continued to amend this license  several times during
2001  to  increase  the  amount  of  material  permitted  within  the  facility.
Additional  processing  capabilities and license amendments could be implemented
that would permit  processing of other  reactor  produced  radioisotopes  by the
Company but at the present  time this  license  does not  restrict the volume of
business operation performed or projected to be performed in the coming year. An
irrevocable, automatic renewable letter of credit against a $132,614 Certificate
of Deposit at Texas State Bank has been used to provide the financial  assurance
required by the Nuclear Regulatory Commission for the Idaho facility license.


                                       11


Associated  with the sale of the Shady Oaks Linac Facility and the assumption of
debt by the  purchaser,  the Company  retains an  obligation of $500,000 on that
loan for six months or until purchaser  renews their note with Texas State Bank.
The Company also retains an obligation  (also for six months or until  purchaser
renews the note) for  decommissioning  the Shady Oaks/LINAC  facility should the
purchaser  default on payment or not meet Texas State Bank requirements for note
renewal.  Because an amount is not probable nor  estimable,  no reserve has been
established for the decommissioning of the Shady Oaks/Linac facility.


(7)      Subsequent Events

In January 2002 certain  persons acting  together as a group acquired all of the
Company's  outstanding  shares of Series A 5% Convertible  Redeemable  Preferred
Stock and certain  common stock from its then  current  owners.  The  securities
acquired  consisted  of all  10,000  shares  of  Series A  Preferred  Stock  and
2,087,837 shares of common stock.  Also in January 2002, the Company  reacquired
2,817  shares (or 37.7%) of the  Company's  Series B 7%  Convertible  Redeemable
Preferred Stock for $86,832.

In February and March 2002 the Company gained  approval from 100% of the holders
of Series A and 80% of the  holders of Series B  Preferred  Stock to amend their
respective Certificates of Designation to eliminate the Series A 5% dividend and
the Series B 7%  dividend,  change  the  mandatory  redemption  date for the all
Preferred Stock to May 2022, and remove certain default and penalty  provisions.
In addition,  the Company's Board of Directors  approved a purchase offer of the
Series A and B Preferred  Stock (5000 common shares for each one share of Series
A or B Preferred  Stock).  The same  percentages  of Series A and B holders have
agreed to sell their preferred shares for common stock.

All of the holders of the Series A Preferred  Stock  agreed to sell their 10,000
preferred  shares  for  50,000,000  shares of common  stock at $0.20 per  share.
Holders of the Series B Preferred  Stock  agreed to sell their  3,700  preferred
shares for 18,500,000 shares of common stock at $0.20 per share.

Effective  March 2002, the Company amended and restated the 2000 Stock Incentive
Plan. The 2002 Long-Term  Incentive Plan (the Plan) authorizes grants of options
to purchase up to 20,000,000  shares of authorized and unissued shares or issued
and outstanding shares of common stock. The maximum number of options granted to
each employee in one year is 10,000,000.

In  February  2002,  the Company  granted an  additional  13,000,000  options to
purchase shares of common stock with an exercise price of $0.02 per share, which
was equal to the closing  market price of the common stock on the date of grant.
These options vest through February 2005.

In March 2002 the Company made a $20,000  payment to the former  chairman of the
board and put a new 10-year note in place for the remaining  balance  owed.  The
new note amount was set at $909,737 with annual income based  payments  fixed at
7%  interest  plus 30% of the  Company's  pretax net  profits to be paid  toward
principal on the note. The former  chairman agreed to declare any previous notes
or agreements as null and void.


                                       12


ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL
        CONDITION AND RESULTS OF OPERATIONS

Except for  historical  information  contained  herein,  the following  contains
forward-looking  information that is subject to certain risks and uncertainties.
The Company's actual results could differ  materially from those  anticipated in
these forward-looking  statements as a result of certain factors including those
set forth in the "Risk  Factors"  section  included in the  Company's  Form 10-K
amended, filed with the Securities Exchange Commission (SEC) on November 8, 2001
("Form  10-K").  The following  discussion  should be read in  conjunction  with
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations" included in the Form 10-K.


 RESULTS OF OPERATIONS
 ---------------------

Effective  December 31, 2000, the Company decided to dispose of all its business
segments with the exception of the I4  operations.  As a result,  all results of
operations for the discontinued  segments have been reclassified as discontinued
operations.

Three and nine month  periods ended  September 30, 2001 and 2000.  The Company's
profit (loss) from  continuing  operations  for the three and nine month periods
ended September 30, 2001 was $13,027 and ($70,197) respectively,  as compared to
($1,815,655) and  ($3,130,682) for the comparable  periods of 2000. Net loss per
common share for the three and nine month periods  ended  September 30, 2001 was
$0.03 and $0.15  respectively,  as  compared  to a net loss per common  share of
$0.97 and $2.90 for the same periods of 2000. The changes were  attributable  to
discontinued  operations  and the increase in revenues from the remaining  Idaho
operations.

Revenues  for the three and nine month  periods  ended  September  30, 2001 were
$803,801 and $1,846,395 respectively, as compared to $449,847 and $1,398,054 for
the same  periods in 2000.  Gross  profit for the three and  nine-month  periods
ended September 30, 2001 was $314,549 and $751,134 respectively,  as compared to
$254,445  and $769,573 for the same  periods in 2000.  Increased  revenues  were
attributable  to  increases  in sales of  medical  flood  sources  and  gemstone
processing.  The  reduction  in  gross  profit  for  the  six-month  period  was
attributable to residual costs associated with discontinued operations.

Operating expenses decreased to $302,228 and $820,324 respectively for the three
and  nine-month  periods ended  September  30, 2001  compared to $2,033,585  and
$4,098,087  for the same periods of 2000.  Salaries and contract  labor expenses
for the three and nine month periods  ended  September 30, 2001 was $103,533 and
$295,540  respectively,  as  compared to $612,168  and  $1,175,120  for the same
periods of 2000,  a decrease of $508,635  and  $879,580  respectively.  General,
administrative   and  consulting   expenses   totaled   $198,6951  and  $524,784
respectively  for the three and nine month periods  ended  September 30, 2001 as
compared to $1,421,417  and  $2,922,967 for the same periods of 2000, a decrease
of  $1,222,722  and  $2,398,183  respectively.  The  decreases  in  all  expense
categories  were  primarily  attributable  to  discontinued  operations  in  the
radiopharmaceutical manufacturing and Linac facilities in Denton, Texas.

Interest  expense for the three and nine month period ended  September  30, 2001
was $601 and  $2,314 as  compared  to $36,515  and  $83,883  for the  comparable
periods in 2000.  The decrease  was  attributable  to a  suspension  of interest
payment requirements from Texas State Bank.


 LIQUIDITY AND CAPITAL RESOURCES
 -------------------------------

On  September  30, 2001 the Company  had cash and cash  equivalents  of $361,406
compared to $642,554 at December 31, 2000.  For the nine months ended  September
30, 2001, net cash used in operating  activities of $6,440,158 and net cash used
in financing  activities of $10,976,601  was provided by net cash from investing
activities and from proceeds from sales of assets, of $17,135,611.


                                       13


The Company has financed its operations since inception primarily by bank loans,
sales of  accelerator  components  and  excess  equipment,  its  initial  public
offering, sales of shares of common and preferred stock in private placements to
investors and loans from stockholders and directors.

The Company's future liquidity and capital funding  requirements  will depend on
numerous factors, including, but not limited to: sale of remaining assets of I3;
contract manufacturing and marketing relationships; and technological and market
developments.

Although  there can be no  assurance,  the Company  expects that  revenues  will
continue to increase,  providing  sufficient  funds for  operations  and capital
expenditures.


PART II. OTHER INFORMATION

Item 2. Changes in Securities and Use of Proceeds

In September of 2001,  the Company  elected to issue common stock in payment for
the quarterly dividend on the Series B redeemable  convertible  preferred stock.
The Company  satisfied the $130,673 dividend payment by issuing 3,266,807 shares
of common  stock at $0.04 per share,  the  average  closing  price of the common
stock for the preceding 5 trading days.

In December of 2001,  the Company  elected to issue  common stock in payment for
the quarterly dividend on the Series B redeemable  convertible  preferred stock.
The Company  satisfied the $130,673 dividend payment by issuing 6,533,625 shares
of common  stock at $0.02 per share,  the  average  closing  price of the common
stock for the preceding 5 trading days.

In January of 2002, the Company  repurchased  2,817 shares of Series B Preferred
Stock for $86,832.


Item 6. Exhibits and Reports on Form 8-K

Exhibits:

          NONE

Reports on Form 8-K:

The  Company  filed an 8-K on  October  16,  2001  with  respect  to a change in
accountants,  on January 16, 2002 with  respect to a change in  ownership of the
Company's  Series A Preferred Stock,  partial  acquisition of Series B Preferred
Stock, and issuance of common stock as required dividend payment and on April 5,
2002 with respect to a change in accountants.


                                       14




                                   SIGNATURES

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


                                International Isotopes Inc.
                                (Registrant)



                                By:   /s/ Steve T. Laflin
                                      -------------------------------------
                                      Steve T. Laflin
                                      President and Chief Executive Officer

Date: May 29, 2002





                                       15