##### Table of Contents



U. S. SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2008.
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to.
 Commission File Number: 001-16695
 
 AMDL, INC.
 (Exact name of registrant as specified in its charter)
 
 Delaware
    
    33-0413161(State of Incorporation)
    
    (I.R.S. employer identification no.)2492 Walnut Avenue, Suite 100Tustin, California
    
    92780-7039(Address of principal executive offices)
    
    (Zip Code)
 Registrants telephone number, including area code: (714) 505-4460
 
 þ o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer   o
(Do not check if a smaller reporting company)
    
    Smaller reporting company þ
 o þ




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##### 



AMDL, INC.
INDEX TO FORM 10-Q
 PagePart I Financial InformationItem 1. Financial Statements
    
    
    1Condensed Consolidated Balance Sheets at June 30, 2008 (Unaudited) and December 31, 2007
(Audited)
    
    
    1Unaudited Condensed Consolidated Statements of Operations and Comprehensive Gain (Loss)
for the three and six months ended June 30, 2008 and 2007
    
    
    2Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended June
30, 2008 and 2007
    
    
    3Notes to Unaudited Condensed Consolidated Financial Statements
    
    
    4Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    22Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    37Item 4. Controls and Procedures
    
    
    38Part II Other InformationItem 1 Legal Proceedings
    
    
    39Item 1A. Risk Factors
    
    
    40Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    46Item 3. Defaults upon Senior Securities
    
    
    46Item 4. Submission of Matters to a Vote of Security Holders
    
    
    46Item 5. Other Information
    
    
    46Item 6. Exhibits
    
    
    46Signatures
    
    
    47Exhibit Index
    
    
    48EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2
  i




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##### Table of Contents



PART 1  FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 AMDL, INC.
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 June 30,
    
    
    December 31,2008
    
    
    2007(Unaudited)
    
    
    (Audited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    1,611,821
    
    
    $
    6,157,493Accounts receivable, net
    
    
    6,029,455
    
    
    
    2,954,902Related party receivable
    
    
    644,426
    
    
    
    Inventories
    
    
    959,831
    
    
    
    921,135Prepaid consulting
    
    
    969,935
    
    
    
    872,688Prepaid expenses and other current assets
    
    
    914,921
    
    
    
    1,248,637Total current assets
    
    
    11,130,389
    
    
    
    12,154,855Property and equipment, net
    
    
    12,506,677
    
    
    
    11,672,462Intangible assets, net
    
    
    5,608,222
    
    
    
    5,615,312Other assets
    
    
    4,286,632
    
    
    
    3,424,549Total assets
    
    $
    33,531,920
    
    
    $
    32,867,178LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable and accrued expenses
    
    $
    2,532,687
    
    
    $
    1,676,347Related party payable
    
    
    72,840
    
    
    
    62,621Deferred revenue
    
    
    174,627
    
    
    
    246,758Notes payable
    
    
    3,120,999
    
    
    
    5,159,939Total current liabilities
    
    
    5,901,153
    
    
    
    7,145,665Commitments and contingenciesStockholders equity:Preferred stock, $0.001 par value;
25,000,000 shares authorized; none
issued and outstanding
    
    
    
    
    
    
    Common stock, $0.001 par value;
100,000,000 shares authorized;
15,756,516 and 15,079,528 shares issued
at June 30, 2008 and December 31, 2007,
respectively; 15,656,516 and 14,979,528
shares outstanding at June 30, 2008 and
December 31, 2007, respectively
    
    
    15,657
    
    
    
    14,980Additional paid-in capital
    
    
    64,027,897
    
    
    
    61,525,001Accumulated other comprehensive income
    
    
    2,375,873
    
    
    
    1,068,429Accumulated deficit
    
    
    (38,788,660
    )
    
    
    (36,886,897
    )Total stockholders equity
    
    
    27,630,767
    
    
    
    25,721,513Total liabilities and stockholders equity
    
    $
    33,531,920
    
    
    $
    32,867,178
  1




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##### Table of Contents



AMDL, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 AND COMPREHENSIVE GAIN (LOSS)
 (Unaudited)
 Three Months Ended June 30
    
    
    Six Months Ended June 302008
    
    
    2007
    
    
    2008
    
    
    2007Net revenues
    
    $
    5,780,832
    
    
    $
    2,413,501
    
    
    $
    9,368,578
    
    
    $
    3,837,680Cost of sales
    
    
    2,877,014
    
    
    
    1,262,049
    
    
    
    4,693,743
    
    
    
    1,959,359Gross profit
    
    
    2,903,818
    
    
    
    1,151,452
    
    
    
    4,674,835
    
    
    
    1,878,321Operating expenses:Research and development
    
    
    57,052
    
    
    
    1,351
    
    
    
    65,747
    
    
    
    13,127Selling, general and administrative
    
    
    2,846,344
    
    
    
    3,244,910
    
    
    
    5,714,526
    
    
    
    5,240,5452,903,396
    
    
    
    3,246,261
    
    
    
    5,780,273
    
    
    
    5,253,672Income (loss) from operations
    
    
    422
    
    
    
    (2,094,809
    )
    
    
    (1,105,438
    )
    
    
    (3,375,351
    )Other income (expense):Interest and other income
(expense), net
    
    
    (2,876
    )
    
    
    (549
    )
    
    
    (65,500
    )
    
    
    3,288Interest expense
    
    
    (87,049
    )
    
    
    (98,107
    )
    
    
    (190,106
    )
    
    
    (188,964
    )Total other expense, net
    
    
    (89,925
    )
    
    
    (98,656
    )
    
    
    (255,606
    )
    
    
    (185,676
    )Loss before provision for income
taxes
    
    
    (89,503
    )
    
    
    (2,193,465
    )
    
    
    (1,361,044
    )
    
    
    (3,561,027
    )Provision for income taxes
    
    
    340,064
    
    
    
    70,840
    
    
    
    540,719
    
    
    
    88,684Net loss
    
    
    (429,567
    )
    
    
    (2,264,305
    )
    
    
    (1,901,763
    )
    
    
    (3,649,711
    )Other comprehensive loss:Foreign currency translation gain
    
    
    524,015
    
    
    
    326,733
    
    
    
    1,307,444
    
    
    
    343,336Comprehensive gain (loss)
    
    $
    94,448
    
    
    $
    (1,937,572
    )
    
    $
    (594,319
    )
    
    $
    (3,306,375
    )Basic and diluted loss per common share
    
    $
    (0.03
    )
    
    $
    (0.17
    )
    
    $
    (0.12
    )
    
    $
    (0.31
    )Weighted average common shares
outstanding  basic and diluted
    
    
    15,564,208
    
    
    
    11,415,045
    
    
    
    15,347,277
    
    
    
    10,751,728
  2




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##### Table of Contents



AMDL, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited)
 Six Months Ended June 30,2008
    
    
    2007Cash flows from operating activities:Net loss
    
    $
    (1,901,763
    )
    
    $
    (3,649,711
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization
    
    
    714,078
    
    
    
    633,320Fair market value of options granted to employees and directors for
services
    
    
    422,168
    
    
    
    1,129,600Fair market value of common stock, warrants and options expensed for
services
    
    
    1,116,753
    
    
    
    1,190,488Provision
for bad debts
    
    
    126,754
    
    
    
    913Changes in operating assets and liabilities:Accounts receivable
    
    
    (2,953,059
    )
    
    
    319,914Related party account with Jade Capital
    
    
    (47,375
    )
    
    
    Inventories
    
    
    12,278
    
    
    
    159,518Prepaid consulting, expenses and other assets
    
    
    390,081
    
    
    
    (2,598,739
    )Accounts payable and accrued expenses
    
    
    856,695
    
    
    
    (376,421
    )Deferred revenue
    
    
    (84,851
    )
    
    
    314,762Net cash used in operating activities
    
    
    (1,348,241
    )
    
    
    (2,876,356
    )Cash flows from investing activities:Deposits for acquisition of plant assets
    
    
    (637,421
    )
    
    
    Purchase of property and equipment
    
    
    (574,263
    )
    
    
    (49,088
    )Funds advanced to Kangda (note 12)
    
    
    (644,426
    )
    
    
    Return of advance
    
    
    13,936
    
    
    
    Net cash used in investing activities
    
    
    (1,842,174
    )
    
    
    (49,088
    )Cash flows from financing activities:Payments on notes payable
    
    
    (2,282,145
    )
    
    
    Proceeds from issuance of common stock, net of cash offering costs of
$139,584 in 2008 and $756,674 in 2007
    
    
    860,421
    
    
    
    4,572,837Proceeds from the exercise of options
    
    
    
    
    
    
    31,200Proceeds from the exercise of warrants
    
    
    6,983
    
    
    
    Net cash (used in) provided by financing activities
    
    
    (1,414,741
    )
    
    
    4,604,037Effect of exchange rates on cash and cash equivalents
    
    
    59,484
    
    
    
    (5,051
    )Net change in cash and cash equivalents
    
    
    (4,545,672
    )
    
    
    1,673,542Cash and cash equivalents, beginning of period
    
    
    6,157,493
    
    
    
    1,584,973Cash and cash equivalents, end of period
    
    $
    1,611,821
    
    
    $
    3,258,515Supplemental disclosure of cash flow information:Cash paid during the period for interest
    
    $
    184,960
    
    
    $
    183,765Cash paid during the period for taxes
    
    $
    438,198
    
    
    $
    Supplemental disclosure of non-cash activities:Fair market value of common stock recorded as prepaid consulting
    
    $
    1,011,000
    
    
    $
    1,075,760Increase in debt and fixed assets due to purchase price adjustment
    
    $
    
    
    
    $
    214,617
  3




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##### Table of Contents



AMDL, INC.
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
 For the Six Months Ended June 30, 2008 and 2007
 NOTE 1  MANAGEMENTS REPRESENTATION
  Share-Based Payment
 NOTE 2  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Nature of Business and Basis of Presentation
  ®
   4




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##### Table of Contents



AMDL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 For the Six Months Ended June 30, 2008 and 2007
 ® ® ® ®
 ®
 Going Concern
 ®
 ®
  5




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##### Table of Contents



AMDL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 For the Six Months Ended June 30, 2008 and 2007
  Principles of Consolidation
  Revenue Recognition
   How Taxes Collected from
Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement
(That Is, Gross Versus Net Presentation)
 Wholesale Sales
 Revenue
Recognition in Financial Statements
 Direct Distribution
  6




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##### Table of Contents



AMDL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 For the Six Months Ended June 30, 2008 and 2007
    Accounting for Shipping and Handling Revenue, Fees and Costs
 Accounting for Shipping and Handling Fees and Costs.
 Impairment of Long-Lived Assets
 Accounting for the Impairment or Disposal of Long-Lived Assets
 
    
    significant under performance relative to expected historical or projected future
operating results;
    
    market projections for cancer research technology;
    
    its ability to obtain patents, including continuation patents, on technology;
    
    significant changes in its strategic business objectives and utilization of the assets;
    
    significant negative industry or economic trends, including legal factors;
    
    potential for strategic partnerships for the development of its patented technology;
    
    changing or implementation of rules regarding manufacture or sale of pharmaceuticals in
China; and
    
    ability to maintain Good Manufacturing Process (GMP) certifications.
  7




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##### Table of Contents



AMDL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 For the Six Months Ended June 30, 2008 and 2007
  Risks and Uncertainties
 Manufacturing and Distribution Operations in China
     Regulatory Environment
 ®
 ® ® ®
 8




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##### Table of Contents



AMDL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 For the Six Months Ended June 30, 2008 and 2007
 ® ® ® ® ®
 ® ® ®
 ® ®
 ® ® ®
  Basic and Diluted Loss Per Share
  9




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##### Table of Contents



AMDL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 For the Six Months Ended June 30, 2008 and 2007
  Use of Estimates
  Concentrations of Credit Risk
 Cash
  Customers
    Other
  Recent Accounting Pronouncements
 Fair
Value Measurements Effective Date of FASB Statement No. 157
 10




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##### Table of Contents



AMDL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 For the Six Months Ended June 30, 2008 and 2007
  The Fair Value Option for Financial Assets and
Financial Liabilities
 Business Combinations Business Combinations.
 Noncontrolling Interests in Consolidated Financial
StatementsAn Amendment of ARB No. 51
 The Hierarchy of Generally Accepted Accounting
Principles The Meaning of Present Fairly in Conformity with Generally Accepted
Accounting Principles
 NOTE 3  INVENTORIES
  June 30,
    
    
    December 31,2008
    
    
    2007(Unaudited)
    
    
    (Audited)Raw materials
    
    $
    726,577
    
    
    $
    620,128Work-in-process
    
    
    20,746
    
    
    
    17,331Finished goods
    
    
    212,508
    
    
    
    283,676$
    959,831
    
    
    $
    921,135
 11




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##### Table of Contents



AMDL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 For the Six Months Ended June 30, 2008 and 2007
 NOTE 4  PREPAID EXPENSES, OTHER CURRENT ASSETS, AND OTHER ASSETS
  June 30,
    
    
    December 31,2008
    
    
    2007(Unaudited)
    
    
    (Audited)Material deposits
    
    $
    845,823
    
    
    $
    617,661Receivable from Jiekang
    
    
    
    
    
    
    498,726Due from officers and directors
    
    
    16,619
    
    
    
    9,764Other
    
    
    52,479
    
    
    
    122,486$
    914,921
    
    
    $
    1,248,637
   June 30,
    
    
    December 31,2008
    
    
    2007(Unaudited)
    
    
    (Audited)Deposits, primarily product licenses and acquisition of plant assets
    
    $
    3,651,628
    
    
    $
    2,827,526Advance to Shanghai Jiezheng
    
    
    594,895
    
    
    
    574,123Refundable deposits
    
    
    40,109
    
    
    
    22,900$
    4,286,632
    
    
    $
    3,424,549
  NOTE 5  INTANGIBLE ASSETS
  Effect of
    
    
    
    
    
    
    Amort-Foreign
    
    
    
    
    
    
    izationCurrency
    
    
    
    
    
    
    PeriodGross
    
    
    Accumulated
    
    
    Trans-
    
    
    
    
    
    
    (inValue
    
    
    Amortization
    
    
    lation
    
    
    Net
    
    
    years)Assets subject to amortization:Intellectual property
    
    $
    2,000,000
    
    
    $
    (691,667
    )
    
    $
    
    
    
    $
    1,308,333
    
    
    
    20Production rights
    
    
    1,916,622
    
    
    
    (214,959
    )
    
    
    149,089
    
    
    
    1,850,752
    
    
    
    10Land use rights
    
    
    1,405,829
    
    
    
    (77,808
    )
    
    
    201,220
    
    
    
    1,529,241
    
    
    
    33Non-compete agreements
    
    
    324,415
    
    
    
    (126,391
    )
    
    
    31,922
    
    
    
    229,946
    
    
    
    5Customer relationships
    
    
    214,328
    
    
    
    (60,161
    )
    
    
    26,130
    
    
    
    180,297
    
    
    
    7Trade name and logo
    
    
    530,829
    
    
    
    (97,989
    )
    
    
    76,813
    
    
    
    509,653
    
    
    
    10$
    6,392,023
    
    
    $
    (1,268,975
    )
    
    $
    485,174
    
    
    $
    5,608,222
 12




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##### Table of Contents



AMDL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 For the Six Months Ended June 30, 2008 and 2007
  Effect of
    
    
    
    
    
    
    Amort-Foreign
    
    
    
    
    
    
    izationCurrency
    
    
    
    
    
    
    PeriodGross
    
    
    Accumulated
    
    
    Trans-
    
    
    
    
    
    
    (inValue
    
    
    Amortization
    
    
    lation
    
    
    Net
    
    
    years)Assets subject to amortization:Intellectual property
    
    $
    2,000,000
    
    
    $
    (641,667
    )
    
    $
    
    
    
    $
    1,358,333
    
    
    
    20Production rights
    
    
    1,916,622
    
    
    
    (113,985
    )
    
    
    38,725
    
    
    
    1,841,362
    
    
    
    10Land use rights
    
    
    1,405,829
    
    
    
    (49,304
    )
    
    
    111,644
    
    
    
    1,468,169
    
    
    
    33Non-compete agreements
    
    
    324,415
    
    
    
    (90,269
    )
    
    
    17,488
    
    
    
    251,634
    
    
    
    5Customer relationships
    
    
    214,328
    
    
    
    (42,960
    )
    
    
    15,153
    
    
    
    186,521
    
    
    
    7Trade name and logo
    
    
    530,829
    
    
    
    (67,888
    )
    
    
    46,352
    
    
    
    509,293
    
    
    
    10$
    6,392,023
    
    
    $
    (1,006,073
    )
    
    $
    229,362
    
    
    $
    5,615,312
   NOTE 6  INCOME TAXES
     13




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##### Table of Contents



AMDL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 For the Six Months Ended June 30, 2008 and 2007
 NOTE 7  NOTES PAYABLE
     NOTE 8  COMMITMENTS AND CONTINGENCIES
 Litigation
    14




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##### Table of Contents



AMDL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 For the Six Months Ended June 30, 2008 and 2007
  Suspension of Product Sales
   Licensing Agreements
  ®
  Indemnities and Guarantees
  15




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##### Table of Contents



AMDL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 For the Six Months Ended June 30, 2008 and 2007
 Contingent Share Issuance
 ®
 ®
 NOTE 9  STOCK OPTIONS
   Summary of Assumptions and Activity
  2008
    
    2007Expected volatility
    
    
    248
    %
    
    
    353
    %Expected term
    
    5 years
    
    5 yearsRisk-free interest rate
    
    
    2.48
    %
    
    
    4.92
    %Dividend yield
    
    
    
    %
    
    
    
    %
 16




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##### Table of Contents



AMDL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 For the Six Months Ended June 30, 2008 and 2007
   WeightedWeighted
    
    
    AverageAverage
    
    
    RemainingExercise
    
    
    ContractualOptions
    
    
    Price
    
    
    Life (Years)Outstanding and expect to vest, December 31, 2007
    
    
    2,093,236
    
    
    $
    3.97Granted
    
    
    850,000
    
    
    
    3.45Outstanding and expected to vest, June 30, 2008
    
    
    2,943,236
    
    
    $
    3.82
    
    
    
    2.96Vested and Exercisable at June 30, 2008
    
    
    2,234,906
    
    
    $
    3.93
    
    
    
    2.42
   NOTE 10  STOCKHOLDERS EQUITY
 Cash Financing Activities
   April 2007 Offering
  17




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##### Table of Contents



AMDL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 For the Six Months Ended June 30, 2008 and 2007
   December 2007 Offering
     Non-Cash Financing Activities
   18




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##### Table of Contents



AMDL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 For the Six Months Ended June 30, 2008 and 2007
          19




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##### Table of Contents



AMDL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 For the Six Months Ended June 30, 2008 and 2007
     Accounting for Equity Instruments that are Issued to Other Than Employees for Acquiring, or in
Conjuntion with Selling, Goods or Services
 Warrants
  NOTE 11  SEGMENT REPORTING
 Disclosures about Segments of an Enterprise and Related
Information.
  20




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##### Table of Contents



AMDL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 For the Six Months Ended June 30, 2008 and 2007
  China-Wholesale
    
    China-Direct
    
    Corporate
    
    TotalNet revenue
    
    $
    9,248,064
    
    
    $
    84,852
    
    
    $
    35,662
    
    
    $
    9,368,578Gross profit
    
    $
    4,563,353
    
    
    $
    84,852
    
    
    $
    26,630
    
    
    $
    4,674,835Depreciation
    
    $
    446,235
    
    
    $
    
    
    
    $
    4,938
    
    
    $
    451,173Amortization
    
    $
    212,905
    
    
    $
    
    
    
    $
    50,000
    
    
    $
    262,905Interest expense
    
    $
    184,675
    
    
    $
    
    
    
    $
    5,431
    
    
    $
    190,106Net income (loss)
    
    $
    2,813,271
    
    
    $
    84,852
    
    
    $
    (4,799,886
    )
    
    $
    (1,901,763
    )Identifiable assets
    
    $
    29,797,963
    
    
    $
    594,895
    
    
    $
    3,139,062
    
    
    $
    33,531,920Capital expenditures
    
    $
    437,836
    
    
    $
    
    
    
    $
    136,427
    
    
    $
    574,263
   China-Wholesale
    
    Corporate
    
    TotalNet revenue
    
    $
    3,777,080
    
    
    $
    60,600
    
    
    $
    3,837,680Gross profit
    
    $
    1,825,695
    
    
    $
    52,626
    
    
    $
    1,878,321Depreciation
    
    $
    468,807
    
    
    $
    3,631
    
    
    $
    472,438Amortization
    
    $
    108,582
    
    
    $
    50,000
    
    
    $
    158,582Interest expense
    
    $
    188,964
    
    
    $
    
    
    
    $
    188,964Net income (loss)
    
    $
    506,339
    
    
    $
    (4,156,050
    )
    
    $
    (3,649,711
    )Capital expenditures
    
    $
    36,757
    
    
    $
    12,331
    
    
    $
    49,088
  NOTE 12  RELATED PARTY TRANSACTIONS
     NOTE 13  SUBSEQUENT EVENTS
   21




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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Our management intends for this discussion and analysis to provide the reader with information
that will assist in understanding our financial statements, the changes in certain key items in
those financial statements from period to period, and the primary factors that accounted for those
changes, as well as how certain accounting principles affect our financial statements. The
following discussion and analysis should be read in conjunction with our financial statements and
notes thereto included in this report on Form 10-Q and in our Annual Report on Form 10-K for the
year ended December 31, 2007, as amended on Form 10-K/A . Operating results are not necessarily
indicative of results that may occur in future periods.
 This report includes various forward-looking statements that are subject to risks and
uncertainties, many of which are beyond our control. Our actual results could differ materially
from those anticipated in these forward looking statements as a result of various factors,
including, but not limited to, risks associated with doing business in China and internationally,
demand for our products, governmental regulation and required licensing of our products and
manufacturing operations, dependence on distributors, foreign currency fluctuation, technological
changes, intense competition and dependence on management and those risks set forth below under
Part II  Item 1A Risk Factors and set forth in Part I  Item 1A Risk Factors in our Annual
Report on Form 10-K for the year ended December 31, 2007, as amended on Form 10-K/A .
Forward-looking statements discuss matters that are not historical facts and include, but are not
limited to, discussions regarding our operating strategy, sales and marketing strategy, regulatory
strategy, industry, economic conditions, financial condition, liquidity and capital resources and
results of operations. Such statements include, but are not limited to, statements preceded by,
followed by or that otherwise include the words believes, expects, anticipates, intends,
estimates, projects, can, could, may, will, would, or similar expressions. For those
statements, we claim the protection of the safe harbor for forward-looking statements contained in
the Private Securities Litigation Reform Act of 1995. You should not unduly rely on these
forward-looking statements, which speak only as of the date on which they were made. They give our
expectations regarding the future, but are not guarantees. We undertake no obligation to update
publicly or revise any forward-looking statements, whether because of new information, future
events or otherwise, unless required by law.
 Operations of Jade Pharmaceutical Inc.
      22




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New
Capsule and Cream Formulation of Goodnak Anti-Aging Product
 ®
  Letter of Intent to purchase Sichuan ZhiTong Pharmaceutical, Ltd.
  License Agreement with Mygene
 MGI
 23




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##### Table of Contents



The MyGene HPV Test Kit
  
    
    Pre-Diagnosis of cervical cancer;
    
    Diagnosis of HPV infection and the genotype of HPV infection;
    
    Diagnosis for low copy of HPV infection;
    
    Diagnosis of multiple HPV infections;
    
    Simple and easy sample collecting;
    
    Accurate and prompt results; and
    
    Identifying a total of 24 types of HPV infections.
 Regulatory Approval of the MyGene HPV Test Kit
  24




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##### Table of Contents



Current Economic and Market Environment
   
    
    China is experiencing growth rate of 8  10% per year as measured by the gross
domestic product;
    
    Chinas pharmaceutical market is forecasted to become the worlds fifth largest by
2010 and the largest by 2050 as reported by PriceWaterhouseCoopers ; and
    
    The growing demand in China for over the counter pharmaceutical products.
   
    
    gain access to what we believe to be the fastest growing pharmaceutical and consumer
market in the world, China;
    
    platform to in-license North American drugs for manufacture and sale in China and
through out Asia;
    
    expand DR-70®, combination immunogene therapy (CIT) technologies and HPV test kits
in clinical trials, sales, and marketing into China and Asia; and
    
    create new opportunities for cancer related product development in China.
 Research and Development
   
    
    Additional expenditures for research and development is needed in China for SFDA
approval of DR-70® and the possibility of the need for clinical trials in China for SFDA
approval of DR-70®, and
    
    Research and development for manufacturing the MyGene HPV test kit
 ® ® ® ® ®
 25




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Liquidity and Capital Resources
    ®
       26




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##### Table of Contents



Going Concern
  ®
 ® ®
 27




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® ®
     Critical Accounting Policies
   Allowance for Doubtful Accounts
 Inventories
 28




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##### Table of Contents



Sales Allowances
 Valuation of Intangible Assets
 
    
    significant under performance relative to expected historical or projected future
operating results;
    
    market projections for cancer research technology;
    
    its ability to obtain patents, including continuation patents, on technology;
    
    significant changes in its strategic business objectives and utilization of the assets;
    
    significant negative industry or economic trends, including legal factors;
    
    potential for strategic partnerships for the development of its patented technology;
    
    changing or implementation of rules regarding manufacture or sale of pharmaceuticals in
China; and
    
    ability to maintain Good Manufacturing Process (GMP) certifications.
  Revenue Recognition
  Wholesale Sales
 29




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Direct Distribution
  VAT Taxes.
 Deferred Taxes
 Litigation
 Stock-Based Compensation Expense
  30




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Results of Operations
 Three Months Ended June 30, 2008 Compared to Three Months Ended June 30, 2007
 Net Revenues
 Corporate
 ® .
 ®
 ®
 China-Wholesale
 %
  
    
    Human Placental Histosolution (Goodnak)
    
    Levofloxacin Lactate and Sodium Chloride Injection
 31




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
    
    50% NACL G.S.
    
    Metronidazole Injection
    
    Levofloxacin Hydrochloride Injection
    
    Ondansetron Hydrochloride Injection
    
    Domperidone Tablet
    China-Direct Distribution
  Gross Profit.
 Corporate
 ®
 China-Wholesale
    32




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##### Table of Contents



China-Direct Distribution
  Research and Development.
 Corporate
 ® .
 China-Wholesale and China-Direct Distribution
  ® ® ®
 Selling, General and Administrative Expenses.
  Corporate
  China-Wholesale
  China-Direct Distribution
  33




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##### Table of Contents



Six Months Ended June 30, 2008 Compared to Six Months Ended June 30, 2007
 Net Revenues
 Corporate
 ® .
 ®
 ® ®
 ® ®
 ®
 China-Wholesale
 %
  
    
    Human Placental Histosolution (Goodnak)
    
    Levofloxacin Lactate and Sodium Chloride Injection
    
    50% NACL G.S.
    
    Metronidazole Injection
    
    Levofloxacin Hydrochloride Injection
    
    Ondansetron Hydrochloride Injection
    
    Domperidone Tablets
 34




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##### Table of Contents



YYBs net revenues increased 104% to $1,549,193 for the six months ended June 30, 2008, as
compared to $759,387 for the same period in 2007, due to the increase in demand for medical
products in China as well as expansion into new regions.
   Percent ofTotalChina-WholesaleName
    
    SalesDomperidone Tablets
    
    
    44.61
    %Human Placental Histosolution (Goodnak)
    
    
    12.16
    %Diavitamin, Calcium Hydrogen Phosphate and Lysine Tablets
    
    
    9.92
    %Levofloxacin Lactate and Sodium Chloride Injection
    
    
    7.25
    %Guyanlin Tablets
    
    
    3.83
    %77.77
    %
 China-Direct Distribution
  Gross Profit.
 Corporate
 ®
 China-Wholesale
    35




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China-Direct Distribution
  Research and Development.
 Corporate
 ® .
 China-Wholesale and China-Direct Distribution
  ® ® ®
 Selling, General and Administrative Expenses.
  Corporate
  China-Wholesale
  36




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Geographic Location  ChinaSoutheastern
    
    
    24
    %Eastern
    
    
    15
    %Central
    
    
    40
    %Northeastern
    
    
    20
    %Southwestern
    
    
    1
    %
  China-Direct Distribution
  Other Income and Expense.
 Corporate.
   China-Wholesale
  Loss from Operations and Net Loss.
  
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  37




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ITEM 4. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures.
   
    
    We entered in to a transaction in which our subsidiary advanced funds to a related party without
preparing legal documentation to evidence amounts advanced.
    
    We do not have adequate controls in place to identify and approve non-recurring
transactions such that the validity and proper accounting can be determined on a timely
basis.
    
    A lack of clear policy regarding delegated authority has contributed to a lapse in
oversight regarding such transactions.
    
    We do not have adequate procedures in place to detect related party transactions which
give rise to conflicts of interest.
  
    
    We corrected the lack of proper legal documentation evidencing amounts advanced in the
first quarter of 2008 by obtaining a promissory note from the counterparty.
    
    We will develop written policies and procedures regarding delegation of authority and
ensure that all employees are aware of the policies.
    
    We will develop procedures to allow for scrutiny of related party transactions by
uninterested members of management or the board of directors, as appropriate.
    
    We will develop an internal audit function with direct reporting responsibility to the
board of directors.
    
    We will enhance the capabilities of our financial control function and reporting mechanisms.
   38




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Changes in Internal Control Over Financial Reporting.
  AMDL, INC.
 
 PART II  OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
       39




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ITEM 1A. RISK FACTORS
  Limited product development activities; our product development efforts may not result in
commercial products.
 ® ®
 
    
    the product candidate did not demonstrate acceptable clinical trial results even though
it demonstrated positive preclinical trial results;
    
    the product candidate was not effective in treating a specified condition or illness;
    
    the product candidate had harmful side effects on humans;
    
    the necessary regulatory bodies, such as the SFDA, did not approve our product
candidate for an intended use;
    
    the product candidate was not economical for us to manufacture and commercialize; and
    
    the product candidate is not cost effective in light of existing therapeutics.
  ®
 Our operations in China involve significant risk.
    40




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We may not be able to continue to operate our business if we are unable to attract additional
operating capital.
 ®
  ®
 Our independent registered public accounting firm has included a going concern paragraph in their
report on our financial statements.
  41




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Our current products cannot be sold in certain countries if we do not obtain and maintain
regulatory approval.
  Our future prospects will be negatively impacted if we are unsuccessful in pending litigation over
our CIT technology.
  The value of intangible assets may not be equal to their carrying values.
   42




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If our intellectual property positions are challenged, invalidated or circumvented, or if we fail
to prevail in future intellectual property litigation, our business could be adversely affected.
  We face substantial competition, and others may discover, develop, acquire or commercialize
products before or more successfully than we do.
  We have limited sales of DR-70® and are reliant on our distributors for sales of our products.
 ® ® ® ® ®
 JPI is reliant on its distributors for sales of its products.
  We are subject to risks associated with our foreign distributors.
 ® ®
 We do not intend to pay dividends on our common stock in the foreseeable future.
  43




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If we fail to comply with the rules under the Sarbanes-Oxley Act related to accounting controls and
procedures or if material weaknesses or other deficiencies are discovered in our internal
accounting procedures, our stock price could decline significantly
     Loss of our listing on the American Stock Exchange could adversely affect the marketability and
price of our shares.
  Our stock price is volatile, which could adversely affect your investment.
  
    
    clinical trial results;
    
    product development announcements by us or our competitors;
 44




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##### Table of Contents




    
    regulatory matters;
    
    announcements in the scientific and research community;
    
    intellectual property and legal matters;
    
    broader industry and market trends unrelated to our performance;
    
    economic markets in Asia; and
    
    competition in local Chinese markets where we sell JPIs product.
  We have limited product liability insurance.
  45




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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  Accounting for Equity Instruments that are Issued to Other Than Employees for Acquiring, or in Conjunction
with Selling, Goods or Services
 
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 ITEM 5. OTHER INFORMATION
  
 ITEM 6. EXHIBITS
  46




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AMDL, INC.
 
 SIGNATURES
  AMDL, INC.
(Registrant)Date: August 14, 2008
    By:
    /s/ Gary L. DreherGary L. Dreher, President andChief Executive OfficerDate: August 14, 2008
    By:
    /s/ Akio AriuraAkio Ariura, Chief Financial Officer andSecretary (Principal Financial Officer) 47




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EXHIBIT INDEX
 ExhibitNumber
    
    Description:31.1
    
    Certification of Chief Executive Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002. (Filed herewith.)31.2
    
    Certification of Chief Financial Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002. (Filed herewith.)32.1
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C. §
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002. (Filed herewith.)32.2
    
    Certification of Chief Financial Officer pursuant to 18 U.S.C. §
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002. (Filed herewith.)
 48