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U.S. SECURITIES AND EXCHANGE COMMISSION  FORM 10-KSB (Mark One)[ X ]
    

ANNUAL REPORT PURSUANT TO SECTION
13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934FOR THE FISCAL YEAR ENDED DECEMBER 31, 2003[   ]
    

TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from
________________ to _____________.Commission File Number 0-27689
 AMDL,
Inc. 
  Delaware
    
    33-0413161(State or other jurisdiction of
incorporation or organization)
    
    (IRS Employer Identification No.)
 2492 Walnut Avenue, Suite 100, Tustin, California 92780(Address
of principal executive offices)
 (714) 505-4460(Issuers telephone number)
 Securities registered under Section 12(b) of the Exchange Act: Title of each class
to be so registered
    
    Name of each exchange on which
registered
 Common Stock, $.001 par value
    
    AMEX
 Securities to be registered under Section 12(g) of the Act: Common Stock, $.001 par value(Title of class)
 Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act of 1934 during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
As been subject to such filing requirements for the past 90 days. Yes
    
    [ X ]
    
    No
    
    [   ]
 Check if there is no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K contained in this form, and will not be contained, to the best
of registrants knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [ ] The issuers revenue for the fiscal year ended December 31, 2003 was $360,107. The market value of the voting stock held by non-affiliates of the issuer as of
March 22, 2004 was approximately $20,500,000. The number of shares of the common stock outstanding as of March 22, 2004 was
21,830,248. DOCUMENTS INCORPORATED BY REFERENCE Inapplicable. Transitional Small Business Disclosure Format (check one) Yes
[    ]                No [X]




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|                                          |                                                                                               |  |  |  |  |  |  | 
|----------------------------------------- | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|Part 1                                   
|                                          | Item 1. Description of Business                                                              
|                                          | Item 2. Description of Properties                                                            
|                                          | Item 3. Legal Proceedings                                                                    
|                                          | Item 4. Submission of Matters to a Vote of Security Holders                                  
|Part II                                  
|                                          | Item 5. Market for Common Equity and Related Stockholder Matters                             
|                                          | Item 6. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                                          | Item 7. Financial Statements                                                                 
|INDEPENDENT AUDITORS REPORT             
|BALANCE SHEET                            
|STATEMENT OF OPERATION                   
|STATEMENTS OF STOCKHOLDERS EQUITY       
|STATEMENTS OF CASH FLOW                  
|NOTES TO FINANCIAL STATEMENTS - CONTINUED
|                                          | Item 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 
|                                          | Item 8A. Controls and Procedures                                                             
|Part III                                 
|                                          | Item 9. Directors and Executive Officers of the Registrant.                                  
|                                          | Item 10. Executive Compensation.                                                             
|                                          | Item 11. Security Ownership of Certain Beneficial Owners and Management.                     
|                                          | Item 12. Certain Relationships and Related Transactions                                      
|                                          | Item 13. Exhibits and Reports on Form 8-K                                                    
|                                          | Item 14. Principal Accountant Fees and Services                                              
|SIGNATURES                               
|EXHIBIT 10.36                            
|EXHIBIT 31.1                             
|EXHIBIT 31.2                             
|EXHIBIT 32.1                             
|EXHIBIT 32.2                             



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Part 1 
 Item 1. Description of Business The Company is a cancer theranostics company, meaning it is involved in
both the detection and treatment of the same disease. Hospital, clinical,
research and forensic laboratories and doctors offices may use our products to
obtain precise and rapid identification of certain types of cancer and other
diseases. We develop, manufacture, market and offer for sale various
immunodiagnostic kits for the detection of cancer and other diseases. Our
DR-70® test kit is used to assist in the detection of at least 13 different
types of cancer, including: lung (small and non-small cell); stomach; breast;
rectal; colon and liver. DR-70® is not cleared for sale and is not available
in the United States. Prior to May 2002, our focus was on obtaining foreign
distributors for our DR-70® kit. In May 2002, we decided to begin the FDA
process under Section 510(k) of the Food, Drug and Cosmetic Act for approval of
our intent to market DR-70® as an aid in monitoring patients with colorectal
cancer. We conducted clinical trials comparing our DR-70® to the currently
accepted assay, CEA, and we submitted the results to the FDA in September 2003.
In January 2004, the FDA responded to our submission. The FDA identified
deficiencies in our application and advised our consultant, Diagnostic Oncology
CRO, Inc. (DOCRO) that based upon the data submitted to date, the FDA
determined that the DR-70® kit was not substantially equivalent to any other
device which has gone through the 510(k) approval process. The FDA further
advised that if we had data which we believe shows that the DR-70® kit has
substantial equivalence, we can submit such additional information for the
FDAs consideration. We intend to submit additional data to the FDA to
demonstrate that the existing test data supports substantial equivalence to
CEA. This submission to the FDA has not been made as of the date of this
annual report. Studies completed at the University of Frankfurt have shown DR-70® to be a
reliable screening test for cancer of the gastrointestinal tract. A study on
ovarian cancer at the University of Mainz has been completed, although not yet
published. The study showed the ability to detect ovarian cancer. A third
study of DR-70® as an aid in monitoring and screening for lung cancer in Berlin
is ongoing. We have received approvals to import and market DR-70® in Canada,
Australia and the UK. The Canadian approval is limited to use for the
detection of lung cancer and monitoring changes in the level of the DR-70®
marker in response to treatment. We have also received certification for EN
ISO 13485, a key global standard to ensure quality within the medical and
diagnostic device industry. We have complied with the regulations allowing us
to affix the CE (Conformite Europeenne) Mark to our DR-70® kit. The CE Mark is
required to be displayed on regulated products placed for sale in the European
Union and allows us to market DR-70® in the European Union, subject to any
additional specific country regulatory requirements or limitations. We
currently sell only limited amounts of DR-70®, primarily in Asia. Our other proprietary product, Pylori- Probe is cleared for sale in the
United States; however, we do not intend to market the Pylori-Probe in the
United States because another non-invasive test has been developed by another
company, and as a result we believe that the Pylori-Probe cannot be
competitively marketed at this time in the United States. In August 2001, we acquired intellectual property rights and an assignment
of a U.S. patent application for a combination immunogene therapy technology
that may be effective in building a cancer patients immune system and could
eventually lead to a vaccine to protect patients known to be at risk because of
a family history for certain types of cancer. The combination therapy is
intended to both build the bodys immune system and destroy cancer cells. This
technology involves injecting the cancer patients tumor with a vector carrying
both a granulocyte-macrophage colony stimulating factor and a t-cell
co-stimulating factor, thereby activating an immune response against the cancer
cells. We are actively seeking a pharmaceutical or biotechnology strategic
partner with whom to form a joint venture or otherwise license our combination
immunogene therapy technology. Preliminary tests in Canada conducted on mice
injected with human skin and brain cancers indicated that the combination
therapy can be effective. Additionally, Phase 1 clinical trials have been
completed in Canada. We funded a study conducted by Dr. Chang at the
University of Florida to target breast cancer with a goal of ultimately
developing a vaccine using the combination immunogene therapy technology.
Accordingly, we believe the technology may have potential for fighting several
types of cancer by enhancing ones immune system and thereby increasing the
number of cells that naturally destroy cancer. We also acquired from Dr. Chang
other technology relating to a humanized mouse model for the evaluation of
anti-human tumor immunity and the identification of immunomodulating genes. 1




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On February 22, 2002, AcuVector Group, Inc. (AcuVector) filed a
Statement of Claim in the Court of Queens Bench of Alberta, Judicial District
of Edmonton relating to the Companys combination immunogene therapy technology
acquired from Dr. Chang in August 2001. The claim alleges damages of $CDN 20
million and seeks injunctive relief against Dr. Chang for, among other things,
breach of contract and breach of fiduciary duty, and against us for
interference with the alleged relationship between Dr. Chang and AcuVector.
The claim for injunctive relief seeks to establish that the AcuVector license
agreement with Dr. Chang is still in effect. The Company has performed
extensive due diligence to determine that AcuVector had no interest in the
technology, when the Company acquired it. The Company is confident that
AcuVectors claims are without merit and that the Company will receive a
favorable judgment. We are also defending a companion case filed in the same court by the
Governors of the University of Alberta filed against us and Dr. Chang. The
University of Alberta claims, among other things, that Dr. Chang failed to
remit the payment of the Universitys portion of the monies paid by us to Dr.
Chang for the combination immunogene technology purchased by us from Dr. Chang
in 2001. In addition to other claims against Dr. Chang relating to other
technologies developed by him while at the University, the University also
claims that we conspired with Dr. Chang and interfered with the Universitys
contractual relations under certain agreements with Dr. Chang, thereby damaging
the University in an amount which is unknown to the University at this time.
The University has not claimed that AMDL is not the owner of the combination
immunogene therapy technology, just that the University has an equitable
interest therein or the revenues therefrom. Accordingly, if either AcuVector or the University is successful in their
claims, we may be liable for substantial damages, our rights to the technology
will be adversely affected, and our future prospects for exploiting or
licensing the combination immunogene therapy technology will be significantly
impaired. However, since the final outcome of either case is not determinable,
no accrual or loss relating to either action is reflected in the accompanying
financial statements. We also offer non-proprietary blood and urine tests and kits which we
purchase from other manufacturers and resell under our label. In September 2001 we registered our common stock under the Securities
Exchange Act of 1934 and listed on the American Stock Exchange under the symbol
ADL. You may review any of our public reports or information on file with the
SEC at the SECs Public Reference Room at 450 Fifth Street, N.W. Washington,
D.C., 20549. You may obtain information on the operation of the Public
Reference Room by calling the SEC at 1-800-SEC-0330 or review our reports at
http://www.sec.gov or review our public reports at
http://www.amdlcorporate.com. Our executive offices are located at 2492 Walnut Avenue, Suite 100,
Tustin, California 92780, telephone number (714) 505-4460. Our Products DR-70® is our proprietary diagnostic test kit which has been shown to
detect at least 13 different common cancers, including, but not limited to,
lung (small and non-small cell), stomach, breast, rectal, colon and liver
cancer. DR-70® is a tumor-marker, which is a biochemical substance indicative
of neoplasia, ideally specific, sensitive, and proportional to tumor load, used
to screen, diagnose, assess prognosis, follow response to treatment, and
monitor for recurrence. As DR-70® is a non-invasive blood test, there are no
side effects to our test. In 1993, the Cross Cancer Institute, located in Edmonton, Alberta, Canada,
approved a clinical trial protocol for DR-70® for lung cancer under the
auspices of the Alberta Cancer Board. The objective of the clinical trial at
the Cross Cancer Institute was to evaluate the sensitivity and specificity of
the DR-70® lung cancer tumor-marker and to determine if the level of the
tumor-marker correlates with the stage of lung cancer development. In the
Cross Cancer Institute clinical trial, 233 patients with newly diagnosed lung
cancer and 238 volunteers with no clinical evidence of disease were selected.
The DR-70® tumor-marker was measured in blood serum samples collected from both
cancer patients and volunteers. The control group was composed of smokers and
non-smokers. The results showed sensitivity of the lung cancer test was 67%
and specificity was 91%. We believe these results, coupled with data reported
in continued studies at the Cross Cancer Institute, demonstrate the value of
the DR-70® 2




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lung cancer tumor-marker as a diagnostic test for detecting lung cancer.
These tests also helped determine the usefulness of DR-70® for monitoring
response to treatment and for predicting the recurrence of lung cancer. The test is currently available and approved for lung cancer detection and monitoring by Health Canada. In 1997, the DR-70® test kit was modified to be more user friendly.
Clinical studies with the modified kit were conducted in Wuhan, China, the
results of which have been published in the peer-reviewed Journal of
Immunoassay. As compared to earlier studies, these studies determined that the
DR-70® immunoassay kit detected a number of different cancers with a higher
degree of specificity and sensitivity. Although, as in all such tests, false
readings as to the existence of cancer are experienced, due to other conditions
affecting the patient, e.g. pregnancy or recent trauma. In these tests, DR-70®
was found to have an overall specificity of 95% and an overall sensitivity of
83.8%. Thirteen different types of cancer were found in the screening process,
indicating that DR-70® has significant usefulness as a cancer-screening tool.
In late 2001, the study was expanded to include more than 700 patients and the
results of this expanded study confirmed the previously published results while
providing a broader statistical base. In May 2003 at a meeting of the American Gastroenterology Society in
Orlando, Florida, clinical studies were presented using DR-70® at the
University of Frankfurt to detect colorectal cancer. Samples were taken from
85 gastrointestinal patients, including 29 patients with hepatocellular cancer,
13 with pancreatic cancer, 30 with colorectal cancer, 10 with stomach cancer
and 3 with esophageal cancer. In these tests, DR-70® was found to have an
overall specificity of 93% and an overall sensitivity of 91%. Our primary OEM product is a ketone strip which is used by diabetics and
those on high protein diets to monitor ketones, which if elevated, can cause
kidney damage in patients. Of total OEM sales of $316,278 in 2003, ketone
strips accounted for $307,398, or 97.2%, of these sales. We also offer a line
of diagnostic test kits for allergy, autoimmune, cancer markers, clinical
chemistry, drugs of abuse, fertility, gastrointestinal disease, serology, serum
proteins, thyroid, urine chemistry and others that accounted for $8,880, or
2.8%, of our total OEM sales in 2003. We provide our OEM products on a limited
basis and do not actively market them. These tests are non-invasive and
non-therapeutic diagnostic blood and urine tests performed by a registered
technician. The technician takes the patients sample and performs the test
according to the tests instructions included in the package to determine
whether or not the specific condition being tested exists. Our OEM product
test kits are similar, if not substantially the same as, those offered by
others. All of our OEM products for commercial use have been registered with
and approved by the FDA, for sale to us and others, by the respective
manufacturers. We purchase these products from the manufacturer and resell
them under our label. We do not have any exclusive or nonexclusive rights to
the technology relating to the OEM products. As these tests are administered
in vitro, there are no side effects associated with our OEM products. The
package insert describes the possibility that there may be false positives or
false negatives associated with the administration of the specific test. The
incidence of false positives or negatives from our OEM test kits is similar to
that experienced with other comparable test kits. In 2002 the FDA inspected our facilities and found no deficiencies. All
of our OEM products are Class I (Good Manufacturing Practices not required) or
Class II (Good Manufacturing Practices required, as defined by the FDA
guidelines) devices and our facilities meet the Good Manufacturing Practices
requirements for each of our OEM products. We are licensed to manufacture our
proprietary products and to repackage our OEM products at our Tustin office
location. Our Strategy We develop, manufacture and offer for sale non-invasive diagnostic kits to
hospitals, doctors, clinics, and laboratories, giving them the ability to
detect certain types of cancer and H. pyloriin their patients. Our kits are
designed to provide accuracy, reproducibility and a high degree of specificity
and sensitivity. We continue to conduct quality assurance and quality control testing on
our DR-70® product as part of our commitment to quality and to meet government
regulations. We are seeking to create alliances with reference laboratories to
make DR-70® testing available to physicians and patients. With just a small
amount of blood serum drawn from a patient, DR-70® uses a common microtiter
format familiar to most laboratories in the diagnostic industry to test for the
presence of tumors. We believe that our DR-70® product is capable of detecting
different types of cancer with a superior degree of specificity and
sensitivity. DR-70® test levels are found to increase with the progression and
stage of the disease. 3




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We are currently conducting a cancer study for our DR-70® in detecting
lung cancer in Berlin, Germany. Studies completed at the University of
Frankfurt and at the University of Mainz have shown DR-70® to be a reliable
screening test for cancer of the gastrointestinal tract and ovarian cancer,
respectively. The purpose of the studies is to verify specificity and
sensitivity. We funded a study being conducted by Dr. Chang at the University
of Florida to target certain breast cancer specific antigens with the goal of
ultimately developing a vaccine using the combination immunogene therapy
technology. No assurances can be given that the study will lead to the
development of any commercial products or vaccines. Our objective is to be a leading provider of cancer-detecting
immunodiagnostic kits. In order to meet our objective, we plan to do the
following:  
    
    obtain U.S. FDA clearance and international approvals for our DR-70® product;  
    
    distribute DR-70® kits in approved markets;  
    
    develop DR-70® distribution channels in new markets; and  
    
    contract with one or more strategic partners to license and
develop our combination immunogene therapy technology. Successful cancer detection and treatment product development is highly
uncertain, and very few research and development projects produce a commercial
product. Product candidates like DR-70® or the combination immunogene therapy
technology that appear promising in the early phases of development, such as in
early animal or human clinical trials, may fail to reach the market for any one
of a number of reasons, such as:  
    
    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 U.S. FDA, did
not approve the 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. There may be other factors that prevent us from marketing a product. Our
products compete with other products or treatments for diseases for which our
product may be intended. We cannot guarantee we will be able to produce
commercially successful products, and to date DR-70® has not been approved for
sale in the United States by the FDA. Further, clinical trial results are
frequently susceptible to varying interpretations by scientists, medical
personnel, regulatory personnel, statisticians and others, which may delay,
limit or prevent further clinical development or regulatory approvals of a
product candidate. Also, the length of time that it takes for us to complete
clinical trials and obtain regulatory approval for product marketing may vary
by product and by the intended use of a product. We cannot predict the length
of time to complete necessary clinical trials and obtain regulatory approval.
Moreover, without additional financing, our activities will likely be limited
to licensing our products to others, although there can be no assurances that
our products can be successfully licensed. Sales and Marketing In exchange for JGT Management Services Ltd. (JGT), an unrelated third
party, relinquishing all of its exclusive Canadian and limited worldwide
marketing rights for DR-70®, we made eighteen monthly payments of $750 to JGT
commencing October 1998. In addition, we are required to pay to JGT a royalty
fee equal to 2.5% of gross sales of DR-70® on a quarterly basis. During the
year ended December 31, 2003 we paid $881 to JGT. The 4




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agreement expires in August 2008; however, the Company may elect to pay a
$25,000 buy-out fee after October 1, 2003, subject to acceptance by JGT. On January 30, 2002, we granted Guangzhou A-Share Technology Co. Ltd., a
Peoples Republic of China corporation (GAST), the exclusive right to sell
DR-70® kits in Taiwan and Hong Kong during the one-year period ending January
31, 2003, when the agreement expired. GAST may not manufacture, sell or
distribute competitive products for a three-year period after the termination
of the agreement. All sales of DR-70® kits made to GAST are on our standard
terms applicable to all distributors. An oral distribution arrangement for
Taiwan and Hong Kong continues with Mercy Bio-Technology, Co., Ltd, a company
related to GAST, based in Taiwan. On November 13, 2002, we granted MyGene Inc., a South Korean corporation,
an unrelated third party, the exclusive right to sell DR-70® kits in South
Korea through December 31, 2004. Prior to commercial introduction, MyGene is
conducting clinical trials required to secure Korean regulatory approval to
market our DR-70® kits in South Korea. Through December 31, 2003, all kits
sold to MyGene have been for use in clinical trials. On June 11, 2003, we granted AMDL Australia Pty. Ltd., an Australian
corporation, an unrelated third party, the exclusive right to sell DR-70® kits
in Australia and New Zealand through December 31, 2007. The agreement
generally provides for certain minimum purchases, but based upon current U.S.
sales, there are no minimum purchase obligations. In January 2003, the
Therapeutic Goods Administration, Commonwealth Department of Health and Ageing,
Australia, issued to AMDL Australia Pty. Ltd, our Australian distributor, a
Certificate of Device Listing. Currently, our licensing efforts are focused on seeking additional
exclusive and non-exclusive distribution agreements with distributors in
countries where we have obtained, or believe we can obtain, regulatory
approval. In January 2004, we received EN ISO 13485 certification
demonstrating safety and efficacy, a further standard of quality now required
for export to Canada. Health Canada has issued a Medical Device License to the
Company. This license permits the Company to market DR-70® for the detection
of lung cancer and monitoring changes in the level of the marker DR-70® in
response to treatment. The Canadian license is renewable annually.
Accordingly, we intend to enter into agreements with distributors who will
market DR-70® throughout Canada. We offer OEM or private label test kits to under-served international
markets through distributor relationships and to domestic markets through
strategic partnerships and relationships with larger diagnostic companies. The Company intends to use the internet, select journals, and industry
trade shows for its marketing activities, subject to the availability of
working capital for such endeavors. Manufacturing We manufacture our DR-70® kits at our licensed manufacturing facility
located at 2492 Walnut Avenue, Suite 100, in Tustin, California. We are an
FDA/GMP approved manufacturing facility. We maintain a current Device
Manufacturing License issued by the State of California, Department of Health
Services, Food and Drug Branch. Regulation Our products, to the extent they may be deemed medical devices or
biologics, are governed by the Federal Food, Drug and Cosmetics Act and by the
regulations promulgated thereunder by the U.S. FDA as well as the regulations
of state agencies and various foreign governmental agencies in the
jurisdictions where our products are distributed. We are subject to specific FDA rules applicable to in vitro diagnostic
(IVD) products. Prior to marketing DR-70® in the United States, we are
required to make a pre-market application as an immunology and microbiology
device under the category Tumor Associated Antigens Immunological Test
System. We are required to prove safety and efficacy and comply with
specified labeling requirements for IVD products for human use. We must abide
by the listing rules of the FDA when and if DR-70® is approved for sale in the
United States. We have 5




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established our Quality System Regulation in accordance with applicable
regulations and were inspected in August 2002 with no deficiencies noted. Our
Quality System Regulation program contains applicable complaint provisions
which meet the FDAs requirements for Medical Device Reporting and we have
experienced no incidents or complaints to date. We also have implemented
procedures for preventive and corrective action and changed our packing and
shipping method once in 2002 to improve protection of our product. In September 2003, we submitted our application for the FDA under Section
510(k) of the Food, Drug and Cosmetic Act for approval of our intent to market
DR-70® as an aid in monitoring patients with colorectal cancer. In January,
2004, the FDA responded to our submission. The FDA identified deficiencies in
our application and advised our consultant, Diagnostic Oncology CRO, Inc.
(DOCRO) that based upon the data submitted to date, the FDA determined that the
DR-70® kit was not substantially equivalent to any other device (e.g. CEA)
which has gone through the 510(k) approval process. The FDA further advised
that if we had data which we believe shows that the DR-70® kit has substantial
equivalence, we can submit such additional information for the FDAs
consideration. We intend to submit additional data to the FDA to demonstrate
that the existing test data supports substantial equivalence to CEA. This
submission to the FDA has not been made as of the date of this annual report.
Since the response of the FDA to our ultimate submission cannot be anticipated,
no assurances can be given that we will ever receive FDA clearance for the
commercial sale of DR-70® in the United States. Furthermore, if FDA approval
is granted, although the approval has no expiration date, if we are found in
violation, the FDA may impose fines, terminate the approval or seize our
products, at its discretion. In addition, each foreign jurisdiction may have separate and different
approval requirements and processes. Our distribution agreements require our
distributors to obtain the requisite approval and clearance in each
jurisdiction in which they sell products. In our past experience, once a
foreign approval is obtained, it is generally renewed on a periodic basis,
annually or otherwise. In certain territories, distributors can sell under
limited circumstances prior to approval and in other territories no formal
approval is required. On December 20, 2000, the Medical Devices Agency of
United Kingdom Department of Health issued a letter of no objection to the
exportation of our DR-70® from the United States to the United Kingdom,
allowing DR-70® to be sold in the United Kingdom. In July 1996, we filed a 510(k) Premarket Notification with the FDA
requesting approval to sell PyloriProbe in the United States. In August 1998,
we received clearance from the FDA to market in the United States the
PyloriProbe diagnostic kit. PyloriProbe is not being sold by us. As another
non-invasive test exists, the Company does not believe that the PyloriProbe
can be competitively marketed. In December 2003, we became CE compliant. Our DR-70® kit conforms to the
essential requirements of the CE Mark, which is required to sell our product in
the European Union (EU). The CE Mark is recognized around the world as an
indication of quality practices and is referred to as the Trade Passport to
Europe for non-EU products. Other Approvals There can be no assurance that we will be able to obtain other necessary
regulatory approvals or clearances for DR-70® in the United States, or for
other products developed in the future, on a timely basis or at all, and delays
or failure to receive such approvals, the loss of previously received
approvals, or failure to comply with existing or future regulatory requirements
would have a material adverse effect on our business, financial condition and
results of operations. Patents Our success depends, in part, on our ability to obtain United States and
foreign patent protection for our products, preserve our trade secrets, and
operate without infringing upon the proprietary rights of third parties. The
United States Patent and Trademark Office has issued to us two patents which
describe methods for measuring ring-shaped particles in extracellular fluid as
a means for detecting cancer. Our patent for a method of detecting the tumors
using ring shaped particles as a tumor marker was issued on October 17, 1995
and expires on December 9, 2012. Our patent for a method for detecting the
presence of ring shaped particles as tumor markers was issued on June 3, 1997
and expires on March 6, 2015. We have four additional patent applications
pending in the United 6




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States with respect to our methodology for the DR-70® tumor-markers as
reliable indicators of the presence of cancer. In August 2001, we acquired intellectual property rights and an assignment
of a US patent application covering a combination immunogene therapy technology
for $2,000,000. The technology was purchased from Dr. Lung-Ji Chang, who
developed it while at the University of Alberta, Edmonton, Canada. The U.S.
patent application Serial No. 09/826025 has been allowed and the issue fee has
been paid. The allowed claims are directed at a gene therapy method for
treating cancer using an expression vector comprising a gene encoding the B7-2
protein in combination with an additional modulating protein. The U.S. patent
is expected to issue sometime in mid-2004. On November 21, 2001, Singapore granted our patent containing claims to
the combination immunogene therapy technology. Singapore is a registration
only jurisdiction, which means that patent applications are not substantively
reviewed prior to grant. However, the patent is enforceable in Singapore, but
the validity of such patents is vetted in their courts. In early 2003, Australia granted us a patent for our humanized mouse model
technology acquired from Dr. Chang. This technology is a research tool
suitable for the evaluation of anti-human tumor immunity and the identification
of immunomodulating genes. There can be no assurance, however, that any additional patents will be
issued to us, or that, if issued, the breadth or degree of protection of these
patents will be adequate to protect our interests. In addition, there can be
no assurance that others will not independently develop substantially
equivalent proprietary information or obtain access to our know-how. Further,
there can be no assurance that others will not be issued patents which may
prevent the sale of our test kits or require licensing and the payment of
significant fees or royalties by us in order for us to be able to carry on our
business. Finally, there can be no guarantee that any patents issued to or
licensed by us will not be infringed by the products of others. Defense and
prosecution of patent claims can be expensive and time consuming, even in those
instances in which the outcome is favorable to us. If the outcome is adverse,
it could subject us to significant liabilities to third parties, require us to
obtain licenses from third parties or require us to cease research and
development activities or sales. Research and Development During the last two fiscal years ended December 31, 2003 and 2002, we
spent $545,599 and $400,624, respectively, on research and development. During
the 2004 fiscal year we expect to incur approximately $300,000 for research and
development, including $200,000 in furtherance of the FDA application for
approval of DR-70®. Competition We have only had limited sales of DR-70® to our distributors. We are
dependent on our distributors financial ability to advertise and market DR-70®
in those countries where we have distributors. A number of domestic and
international companies are in indirect competition with us in all of these
markets. Most of these companies are larger, more firmly established, have
significant marketing and development budgets and have greater capital
resources than us or our distributors. Therefore, there can be no assurance
that we will be able to achieve and maintain a competitive position in the
diagnostic test industry. Many major medical device manufacturers, including Abbott Diagnostics,
Baxter Healthcare Corp., Beckman Diagnostics, Boehringer Mannheim, Centocor,
Diagnostic Products Corporation, Bio-Rad Laboratories, Roche Diagnostic
Systems, Sigma Diagnostics and others, are manufacturers or marketers of other
diagnostic products. We are not aware of any efforts currently being devoted
to development of products such as DR-70®; however, there can be no assurance
that such efforts are not being undertaken without our knowledge. We believe
that most of the diagnostic products currently manufactured by other companies
are complementary to DR-70®. Moreover, such companies could develop products
similar to our products and they may be more successful than us in marketing
and manufacturing their products. In addition, there are a number of new
technologies in various stages of development at the National Institute of
Health, university research centers and at other companies for the detection of
various types of cancers, e.g., identification of proteomic patterns in blood
serum that distinguishes benign from cancerous conditions, which may compete
with our product. 7




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Product Liability Insurance We currently produce products for clinical studies and for investigational
purposes. We are producing our products in commercial sale quantities, which
will increase as we receive various regulatory approvals in the future. There
can be no assurance, however, that users will not claim that effects other than
those intended may result from our products, including, but not limited to
claims alleged to be related to incorrect diagnoses leading to improper or lack
of treatment in reliance on test results. In the event that liability claims
arise out of allegations of defects in the design or manufacture of our
products, one or more claims for damages may require the expenditure of funds
in defense of such claims or one or more substantial awards of damages against
us, and may have a material adverse effect on us by reason of our inability to
defend against or pay such claims. We carry product liability insurance for
any such claims. Employees As of March 2, 2004, we had four full-time employees. From time to time,
we supplement our permanent staff with temporary personnel. Our employees are
neither represented by a union nor subject to a collective bargaining
agreement, and we consider our relations with our employees to be favorable.
We have entered into certain agreements with our employees regarding their
services. We utilize the services of consultants for research, testing,
regulatory and legal compliance, and other services. 
 Item 2. Description of Properties Our offices, research laboratory and manufacturing facilities consist of
4,395 square feet and are located at 2492 Walnut Avenue, Suite 100, Tustin,
California. We rent these facilities at a monthly rate of $6,373 per month,
including property taxes, insurance and maintenance. Our lease expires on July
31, 2004. We expect to renew our lease at current market rates. 
 Item 3. Legal Proceedings On February 22, 2002, AcuVector Group, Inc. (AcuVector) filed a
Statement of Claim in the Court of Queens Bench of Alberta, Judicial District
of Edmonton relating to the Companys combination immunogene therapy technology
acquired from Dr. Chang in August 2001. The claim alleges damages of $CDN 20
million and seeks injunctive relief against Dr. Chang for, among other things,
breach of contract and breach of fiduciary duty, and against us for
interference with the alleged relationship between Dr. Chang and AcuVector.
The claim for injunctive relief seeks to establish that the AcuVector license
agreement with Dr. Chang is still in effect. The Company has performed
extensive due diligence to determine that AcuVector had no interest in the
technology, when the Company acquired it. The Company is confident that
AcuVectors claims are without merit and that the Company will receive a
favorable judgment. As the final outcome is not determinable, no accrual or
loss relating to this action is reflected in the accompanying financial
statements. No significant discovery has as yet been conducted in the case. We are also defending a companion case filed in the same court by the
Governors of the University of Alberta filed against us and Dr. Chang. The
University of Alberta claims, among other things, that Dr. Chang failed to
remit the payment of the Universitys portion of the monies paid by us to Dr.
Chang for the combination immunogene technology purchased by us from Dr. Chang
in 2001. In addition to other claims against Dr. Chang relating to other
technologies developed by him while at the University, the University also
claims that we conspired with Dr. Chang and interfered with the Universitys
contractual relations under certain agreements with Dr. Chang, thereby damaging
the University in an amount which is unknown to the University at this time.
The University has not claimed that AMDL is not the owner of the combination
immunogene therapy technology, just that the University has an equitable
interest therein or the revenues therefrom. As the final outcome is not
determinable, no accrual or loss relating to this action is reflected in the
accompanying financial statements. No significant discovery has as yet been
conducted in the case. Accordingly, if either AcuVector or the University is successful in their
claims, we may be liable for substantial damages, our rights to the technology
will be adversely affected, and our future prospects for exploiting or
licensing the combination immunogene therapy technology will be significantly
impaired. 8




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Item 4. Submission of Matters to a Vote of Security Holders There were no matters submitted to our security holders for a vote during
the fourth quarter of 2003. 
 Part II 
 Item 5. Market for Common Equity and Related Stockholder Matters Our common stock is listed on the American Stock Exchange under the symbol
ADL. From April 2000 to September 2001, our common stock was listed on the
OTC Bulletin Board under the symbol AMDD. From August 1999 until April 2000,
our common stock was listed only on the pink sheets. Our stock price, like that of some other cancer diagnostic and treatment
companies, is highly volatile. Our stock price may be affected by such factors
as:  
    
    clinical trial results;  
    
    product development announcements by us or our competitors;  
    
    regulatory matters;  
    
    announcements in the scientific and research community;  
    
    intellectual property and legal matters; and  
    
    broader industry and market trends unrelated to our performance. In addition, if our revenues or earnings in any period fail to meet the
investment communitys expectations, there could be an immediate adverse impact
on our stock price. Set forth in the following table are the high and low closing prices for
the years ended December 31, 2002 and 2003 for our common stock. At times
during the last two years, our common stock was thinly traded and some of the
reported closing prices may not be a true market-based valuation of our common
stock. Quarter Ended
    
    High
    
    LowMarch 31, 2002
    
    $
    4.38
    
    
    $
    1.80June 30, 2002
    
    $
    4.00
    
    
    $
    1.01September 30, 2002
    
    $
    1.15
    
    
    $
    0.30December 31, 2002
    
    $
    0.85
    
    
    $
    0.18
 Quarter Ended
    
    High
    
    LowMarch 31, 2003
    
    $
    0.70
    
    
    $
    0.20June 30, 2003
    
    $
    1.25
    
    
    $
    0.23September 30, 2003
    
    $
    2.20
    
    
    $
    0.76December 31, 2003
    
    $
    1.65
    
    
    $
    1.01
 As of March 22, 2004, there were approximately 866 record holders of our
common stock. We have not paid any cash dividends since our inception and do not
contemplate paying dividends in the foreseeable future. It is anticipated that
earnings, if any, will be retained for the operation of our business. Securities Authorized for Issuance Under Equity Compensation Plans.The
following provides information concerning compensation plans under which equity
securities of the Company are authorized for issuance. 9




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(a)
    
    (b)
    
    (c)Number ofsecuritiesremaining availableNumber of
    
    
    
    
    
    for futuresecurities to be
    
    
    
    
    
    issuances underissued upon
    
    Weighed-average
    
    equity compensationexercise of
    
    exercise price of
    
    plans (excludingoutstanding
    
    outstanding
    
    securitiesoptions, warrants
    
    options, warrants
    
    reflected inPlan Category
    
    and rights
    
    and rights
    
    column (a))Equity compensation plans
approved by security holders
    
    
    3,000,000
    
    
    $
    1.51
    
    
    
    -0-Equity
compensation plans not approved by security holders
    
    
    -0-
    
    
    
    -0-
    
    
    
    -0-Total
    
    
    3,000,000
    
    
    $
    1.51
    
    
    
    -0-
 In January 2004, 161,185 common shares were issued upon the exercise of
outstanding options under the then existing plans. In February 2004, a new
equity compensation plan was approved by the board of directors, subject to
approval of the security holders at the next annual meeting. The new plan
provides for a total of 2,400,000 options, of which a total of 1,395,000
options were granted to employees and a consultant. Voting Trust Agreement. Chinese Universal acquired 2,000,000 shares of
our common stock in December 2000. Concurrent with the purchase of the shares
and execution of the voting trust, as part of an integrated arms-length
negotiated transaction, Chinese Universal acquired the exclusive right to
distribute DR-70® in ten countries in Asia, subject to minimum purchase
requirements on an annual basis (which were not met) and Chinese Universals
agreement to seek approval from the governments to permit distribution of
DR-70® in those countries. This distribution agreement is no longer in effect.
At the time of the transactions the shares represented over 37% of our then
outstanding shares of common stock, and our board of directors used the voting
trust to place limits on Chinese Universals ability to control the Company, by
allowing it only the right to nominate one candidate for director. Pursuant to
the voting trust agreement dated as of December 14, 2000, the 2,000,000 shares
were deposited with Jeanne Lai, former President of Chinese Universal, and Gary
L. Dreher, as voting trustees. Ms. Lai has died and counsel for Chinese
Universal has advised us that Dr. Fong-Lin Huang was appointed as successor
co-trustee. The voting trust agreement provides that during the ten (10) year
term of the voting trust agreement, (i) the voting trustees shall not be
required to elect to cumulatively vote the shares subject to the voting trust,
(ii) Mr. Dreher or his successor elected by us shall, in any election of
directors, always vote in favor of one nominee of Chinese Universal for
director, and (iii) on all other matters coming before the stockholders, the
voting trustees shall be required to vote unanimously in favor of any such
matters or the voting trustees votes will not be counted except for purposes
of a quorum for voting on such proposal. Recent Sales of Unregistered Securities. During the fiscal year ended
December 31, 2003, we sold unregistered shares of our securities in the
following transactions: On October 23, 2002, the board of directors authorized a Regulation S
offering of up to 1,575,000 shares of common stock (Regulation S Offering) at
a price of 70% of the current market price at the time of sale, subject to a
floor price of no less than $.35 per share, the payment of commissions of 10%
of the sales price in cash, non-accountable expenses of 3% of the sales price,
and warrants equal to 10% of the shares sold in the Regulation S Offering. The
Company also conducted a companion offering in the United States under
Regulation D (Regulation D Offering) under the same terms and conditions as
the Regulation S Offering. The aggregate net cash received from the Regulation
S and the Regulation D offerings was $104,400, net of cash commissions of
$15,600, which amount was recorded as an increase in stockholders equity. On
December 23, 2002, 250,000 shares of common stock were sold to one investor in
the Regulation S Offering at a price of $0.40 per share (generating net
proceeds of $87,000, net of cash commissions of $13,000). On February 24,
2003, 50,000 shares were sold to one investor in the 10




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Regulation D Offering at a price of $0.40 per share (generating net
proceeds of $17,400, net of cash commissions of $2,600). PCNA, SA, a Swiss
corporation, acted as our placement agent in connection with this offering. In
addition to the cash compensation, the placement agent received common stock
purchase warrants for 25,000 shares in 2002 and 5,000 shares in 2003. During
the period ended December 31, 2003, the Company received $12,000 from the
placement agents upon the exercise of the warrants for 30,000 shares of common
stock, on which no commissions were paid. The common stock was issued pursuant
to Section 4(2) of the Securities Act. Also on October 23, 2002, the board of directors authorized the issuance
of 50,000 shares of common stock per month to International Consulting
Partners, a consultant, for further financial consulting services to be
rendered thereafter on a month to month basis. On January 31, 2003, the
Company issued an aggregate of 99,999 shares of common stock (33,333 shares per
month for the three months ended January 31, 2003) for consulting services to
the same consultant pursuant to the prior authorization. The 66,666 shares
issued for services rendered in 2002 were valued at $30,600, and the 33,333
shares issued for services rendered in 2003 were valued at $16,433 based upon
the trading price of the common stock on the dates earned, and these amounts
were charged to consulting expense. This consulting arrangement was extended
for one additional month and 33,333 shares were issued for services rendered in
February 2003 and valued at $11,333 based upon the trading price of the common
stock on the date earned, and this amount were charged to consulting expense.
The common stock was issued pursuant to Section 4(2) of the Securities Act.
There was no underwriter involved in this issuance. On March 21, 2003, the board of directors authorized the sale of units
consisting of unsecured convertible notes and warrants to purchase common
stock, at or above the market price of the common stock to accredited and
non-U.S. investors only in a private placement. The Company raised $1,321,000
in gross proceeds from this offering. Under the terms of the offering,
investors received one unit for each $1,000 invested. Each unit generally
consisted of a $1,000 principal amount 5% convertible promissory note due June
30, 2003, generally convertible into 2,598 shares of the Companys common
stock, plus a warrant to purchase 2,598 shares of the Companys common stock
at an exercise price of $0.385 each, expiring on December 31, 2005. The notes
were generally automatically converted into common shares upon the approval of
the listing of the shares issuable on conversion of the notes by the American
Stock Exchange. On June 18, 2003 approximately $878,000 of the convertible
notes were converted into 2,265,655 shares of our common stock, including
10,424 shares in respect of the interest earned on the convertible notes. On
July 8, 2003, another $340,000 of convertible notes were converted into
881,823 shares of our common stock and on September 29, 2003, the remaining
$103,000 of convertible notes were converted into 268,125 shares of our common
stock. During the period ended December 31, 2003 the Company received
approximately $1,308,000 in gross proceeds from investors upon the exercise of
the warrants included in the units to purchase 3,369,659 shares of common
stock. The Company paid a cash commission of 10% of the proceeds of warrant
exercises to the placement agents. The common stock was issued pursuant to
Section 4(2) of the Securities Act. The Company registered with the Securities and Exchange Commission on
Form S-3 the shares of the Companys common stock issued upon conversion of
the convertible notes and issuable upon exercise of the warrants, which
registration statement became effective on July 31, 2003. The Company was
contractually required to issue 5% additional warrants to each investor
entitling them to purchase an aggregate of 170,234 shares of common stock at
an exercise price of generally $0.385 each, expiring on December 31, 2005,
because the registration statement was not declared effective prior to July 1,
2003. In connection with its fundraising efforts, the Company utilized the
services of two placement agents, PCNA, S.A., a Swiss corporation and
Gestibroker Consulting and Financial Management S.A., a Swiss corporation and
paid a total cash compensation of 13% of funds raised plus issued warrants to
purchase common shares equal to 10% of the aggregate number of shares of
common stock issued or issuable on conversion of the promissory notes,
totaling 340,479 warrants at an exercise price of generally $0.385 per share,
expiring December 31, 2005. During the period ended December 31, 2003 the
Company received approximately $132,000 from the placement agents upon the
exercise of the warrants for 340,479 shares of common stock, on which no
commissions were paid. In addition, the Company issued warrants to purchase
200,000 shares of common stock at an exercise price of $0.385 per share
expiring May 31, 2005 to two investors. The common stock was issued pursuant
to Section 4(2) of the Securities Act. 11




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On March 23, 2003 the board of directors authorized the issuance of up to
500,000 shares of common stock to First London Finance, Ltd, a British Virgin
Islands company, for advisory services in connection with the unit offering.
Under the terms of the investment advisory agreement, the Company was required
to issue 400,000 shares of common stock as a success fee for the unit
offering. On June 18, 2003, the Company issued 400,000 of the shares to First
London Finance and valued 200,000 of the shares at $57,800 on May 21, 2003,
the date the first 200,000 shares were earned, and 200,000 shares at $95,200
on June 17, 2003, the date an additional 200,000 shares were earned. The
Company was required to issue to First London Finance an additional 100,000
shares of common stock if $750,000 in gross proceeds was received from the
exercise of the warrants included in the units within the 90-day period
beginning on August 1, 2003 and ending on October 29, 2003. This condition
was met and the 100,000 shares were issued on October 29, 2003 and valued at
$123,250 based upon the trading price of our stock on October 17, 2003, the
date the shares were earned. The common stock issued to First London Finance
was issued pursuant to Section 4(2) of the Securities Act. On June 11, 2003, the board of directors authorized the issuance of
150,000 shares of common stock to International Consulting Group Ltd., a
consultant for financial advisory services, and the Company issued the shares
on July 2, 2003. The shares were valued at $66,300 based upon the trading
price of the common stock on June 11, 2003, the date the shares were earned,
and were charged to consulting expense in the period as if issued on June 11,
2003. The common stock was issued pursuant to Section 4(2) of the Securities
Act. There was no underwriter involved in this issuance. On July 17, 2003 the board of directors authorized the sale of 1,100,000
units consisting of unsecured convertible notes and warrants to purchase
common stock, in a private placement at a price of $0.70 per unit, or
$770,000. Under the terms of the offering, the notes automatically converted
to common shares on the attainment of certain market share prices, but no
later than August 31, 2004. On August 13, 2003, the Company received gross
proceeds of $105,000 from one investor in respect of the issuance of a
convertible note of equal amount. On August 27, 2003, the convertible note
automatically converted into 150,000 shares of common stock. On September 9,
2003, the Company received an additional subscription representing gross
proceeds of $665,000. The Company and the investor agreed that the terms of
the offering with respect to such investor would be amended so as to treat the
investment as a direct subscription of 950,000 shares of common stock rather
than a convertible note. In connection with its fundraising efforts, the
Company utilized the services of Gestibroker Consulting and Financial
Management S.A., as placement agent, and paid total cash compensation of 13%
of funds raised plus issued 110,000 common shares to Gestibroker. The common
stock was issued pursuant to Section 4(2) of the Securities Act. On August 21, 2003, the stockholders of the Company authorized the
issuance of 3,000,000 shares of common stock at a discount of up to 25% below
the current market price at the time of issuance. Pursuant to stockholder
authorization, on September 24, 2003, the board of directors authorized the
sale of units consisting of up to 3,000,000 shares of common stock at a
discount of up to 25% below the current market price at the time of issuance
and 1,500,000 warrants to purchase common stock. The warrants are exercisable
at $1.58 per share, a price equal to 110% of the average closing price of the
Companys common stock, as reported by the American Stock Exchange, for the
ten (10) consecutive trading days immediately prior to and including October
31, 2003. Each warrant became exercisable ninety (90) days after the
effective date of a registration statement covering the resale of the shares
issuable upon exercise of the warrants, and expires on December 31, 2005. On
October 24, 2003 the Company received $375,000 in gross proceeds from the
initial sale of the units. The Company issued 342,700 common shares and
issued a warrant to purchase 171,350 additional common shares. In connection
with its fundraising efforts, the Company utilized the services of Gestibroker
Consulting and Financial Management S.A., as placement agent, and paid total
cash compensation of 13% of funds raised plus issued warrants to purchase
34,270 common shares to Gestibroker. The common stock was issued pursuant to
Section 4(2) of the Securities Act. The Company registered with the Securities and Exchange Commission on
Form S-3 the shares of the Companys common stock issued in connection with
the shares issued to First London Finance and the shares issues pursuant to
the August 13, 2003 transaction, the September 9, 2003 transaction and the
October 24, 2003 transaction and the shares issuable upon exercise of the
related warrants, which registration statement became effective on December 3,
2003. A total of 1,552,700 shares of common stock and warrants to purchases
205,620 shares of common stock were registered. 12




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On September 15, 2003, the board of directors authorized the issuance of
130,000 shares of common stock to Boston Financial Partners, Inc., a consultant
for financial advisory services, and the Company issued the shares on September
29, 2003. The shares were valued at $182,375 based upon the trading price of
the common stock on September 16, 2003, the date of signing of the agreement.
The services were performed during September and October 2003, and accordingly,
the $182,375 was recorded to general and administrative expense over such
period. The common stock was issued pursuant to Section 4(2) of the Securities
Act. There was no underwriter involved in this issuance. On January 8, 2004, the Company closed an offering to accredited investors
only of an aggregate of 2,657,300 shares of common stock at $0.80 per share and
warrants to purchase 1,328,650 shares of common stock at an exercise price of
$1.46 per share, exercisable on or after April 7, 2004 and expiring December
31, 2006. This offering consisted of the unsold portion of the 3,000,000 share
offering approved by the stockholders on August 21, 2003, which permitted the
Company to sell shares a discount of 25% from the current market price at the
time of issuance. In connection with this offering, the Company utilized the
services of Gestibroker Consulting and Financial Management S.A., a Swiss
corporation and paid total cash compensation of 13% of funds raised plus issued
warrants to purchase 259,730 common shares at an exercise price of $1.46 per
share, expiring December 31, 2006. The common stock was issued pursuant to
Section 4(2) of the Securities Act. The Company registered with the Securities and Exchange Commission on
Form S-3 the shares of the Companys common stock issued in connection with
the shares issued to the investors and the shares issuable upon exercise of
the related warrants, including those issued to the placement agent, which
registration statement became effective on February 11, 2004. On March 15, 2004, the board of directors authorized the issuance of
300,000 shares of common stock to Boston Financial Partners, Inc., a
consultant for financial advisory services to be provided from March 18, 2004
through July 31, 2004 and the Company issued the shares on March 19, 2004.
The shares were valued at $247,350 based upon the trading price of the common
stock on such date, and will be charged to general and administrative expense
in the period the services are provided. The common stock was issued pursuant
to Section 4(2) of the Securities Act. There was no underwriter involved in
this issuance. 
 Item 6. Managements Discussion and Analysis of Financial Condition and
Results of Operations Liquidity and Capital Resources Total assets increased to $3,746,582 at December 31, 2003 from $2,434,303
at December 31, 2002. The increase is a result of cash received from the sale
of common stock and the exercise of warrants, which was partially offset by
funds used in operating activities. Our total outstanding indebtedness increased to $352,538 at December 31,
2003 as compared to $243,585 at December 31, 2002. The increase resulted from
increases in operating payables. From December 31, 2002 to December 31, 2003, our cash and cash equivalents
increased by $1,361,134, primarily as a result of cash received from the sale
of common stock and the exercise of warrants. As of March 22, 2004, cash is
being depleted at the rate of approximately $150,000 per month exclusive of the
additional costs related to the application for approval of DR-70® by the FDA,
estimated at an aggregate of $150,000. In January 2004, we received net
proceeds of approximately $1,800,000 from the sale of shares of common stock
and issuance of warrants to purchase shares of common stock. Also in January
2004 we received approximately $120,000 from the exercise of stock options.
Through March 22, 2004 we have received approximately $153,000 from the
collection of accounts receivable outstanding at December 31, 2003 and $11,000
from the sale of DR-70® kits. We have additional DR-70® kit and ketone orders
for delivery in March and April 2004 and expect to receive additional net cash
from such product sales totaling approximately $75,000. As of March 22, 2004,
our cash on hand was approximately $3,181,000. The amount of cash on hand is
sufficient to meet our operating expenses through late 2005. There are significant uncertainties which negatively affect our
operations. These are principally related to (i) the absence of a distribution
network for our DR-70® kits, (ii) the early stage of development of our
Combination 13




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Immunogene Therapy (CIT) technology and the need to enter a strategic
relationship with a larger company capable of completing the development of any
ultimate product and the subsequent marketing of such product, and (iii) the
absence of any commitments or firm orders from our distributors. Moreover,
there is no assurance as to when, if ever, we will be able to conduct our
operations on a profitable basis. Our limited sales to date for DR-70®, the
lack of any purchase requirements in the existing distribution agreements, and
absence of FDA approval make it impossible to identify any trends in our
business prospects. There is no assurance we will be able to generate
sufficient revenues or sell any equity securities to generate sufficient funds
when needed, or whether such funds, if available, will be obtained on terms
satisfactory to us. In addition, the filing of the AcuVector and University of
Alberta lawsuits may have an effect on our ability to license the CIT
technology. The Company does not expect to incur any material capital expenditures
until sales volume increases substantially. Any required future capital
expenditures for manufacturing equipment will be funded out of future revenues
or additional equity. The Company does not have any long term or contingent
obligations that must be satisfied. Critical Accounting Policies Our Financial Statements have been prepared in accordance with accounting
principles generally accepted in the United States. The preparation of these
financial statements requires us to make estimates and judgments that affect
the reported amounts of assets, liabilities, revenues and expenses, and related
disclosure of contingent assets and liabilities. We base our estimates on
historical experience and on various other assumptions that are believed to be
reasonable under the circumstances, the results of which form the basis of
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions. We believe the following critical accounting policies, among others,
affect our more significant judgments and estimates used in the preparation of
our financial statements: Allowance for Doubtful Accounts. We maintain allowances for doubtful
accounts for estimated losses resulting from the inability of our customers to
make required payments. The allowance for doubtful accounts is based on
specific identification of customer accounts and our best estimate of the
likelihood of potential loss, taking into account such factors as the financial
condition and payment history of major customers. We evaluate the
collectibility of our receivables at least quarterly. If the financial
condition of our customers were to deteriorate, resulting in an impairment of
their ability to make payments, additional allowances may be required. The
differences could be material and could significantly impact cash flows from
operating activities. Inventory. We write down our inventory for estimated obsolescence or
unmarketable inventory equal to the difference between the cost of inventory
and the estimated market value based upon assumptions about future demand,
future pricing and market conditions. If actual future demand, future pricing
or market conditions are less favorable than those projected by management,
additional inventory write-downs may be required and the differences could be
material. Such differences might significantly impact cash flows from
operating activities. Sales Allowances.A portion of our business is to sell products to
distributors who resell the products to the end customers. In certain
instances, these distributors obtain discounts based on the contractual terms
of these arrangements. Sales discounts are usually based upon the volume of
purchases or by reference to a specific price in the related distribution
agreement. We recognize the amount of these discounts at the time the sale is
recognized. Additionally, sales returns allowances are estimated based on
historical return data, and recorded at the time of sale. If the quality or
efficacy of our products deteriorates or market conditions otherwise change,
actual discounts and returns could be significantly higher than estimated,
resulting in potentially material differences in cash flows from operating
activities. Valuation of Intangibles. From time to time, we acquire intangible assets
that are beneficial to our product development processes. We periodically
evaluate the carrying value of intangibles, including the related amortization
periods. In evaluating acquired intangible assets, we determine whether there
has been an impairment by comparing the anticipated undiscounted cash flows
from the operation and eventual disposition of the product line with its
carrying value. If the undiscounted cash flows are less than the carrying
value, the amount of the 14




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impairment, if any, will be determined by comparing the carrying value of
each intangible asset with its fair value. Fair value is generally based on
either a discounted cash flows analysis or market analysis. Future operating
income is based on various assumptions, including regulatory approvals, patents
being granted, and the type and nature of competing products. If regulatory
approvals or patents are not obtained or are substantially delayed, or other
competing technologies are developed and obtain general market acceptance, or
market conditions otherwise change, our intangibles may have a substantially
reduced value, which could be material. As this asset represents the largest
asset on our balance sheet, any substantial deterioration of value would
significantly impact our reported financial position and our reported operating
results. Deferred Taxes. We record a valuation allowance to reduce the deferred
tax assets to the amount that is more likely than not to be realized. We have
considered estimated future taxable income and ongoing tax planning strategies
in assessing the amount needed for the valuation allowance. Based on these
estimates, all of our deferred tax assets have been reserved. If actual
results differ favorably from those estimates used, we may be able to realize
all or part of our net deferred tax assets. Such realization could positively
impact our operating results and cash flows from operating activities. Litigation. We account for litigation losses in accordance with Statement
of Financial Accounting Standards (SFAS) No. 5, Accounting for Contingencies.
Under SFAS No. 5, loss contingency provisions are recorded for probable losses
at managements best estimate of a loss, or when a best estimate cannot be
made, a minimum loss contingency amount is recorded. These estimates are often
initially developed substantially earlier than the ultimate loss is known, and
the estimates are refined each accounting period, as additional information is
known. Accordingly, we are often initially unable to develop a best estimate
of loss; therefore, the minimum amount, which could be zero, is recorded. As
information becomes known, either the minimum loss amount is increased or a
best estimate can be made, resulting in additional loss provisions.
Occasionally, a best estimate amount is changed to a lower amount when events
result in an expectation of a more favorable outcome than previously expected.
Due to the nature of current litigation matters, the factors that could lead to
changes in loss reserves might change quickly and the range of actual losses
could be significant, which could materially impact our results of operations
and cash flows from operating activities. Results of Operations Year Ended December 31, 2003 Compared to Year Ended December 31, 2002 Net Revenue. During the year ended December 31, 2003, the Company
generated $360,107 from product sales compared to revenues from product sales
$179,003 in the prior year period, an increase of $181,104, or 101.2%. The
increase is primarily due to increased orders for Ketone strips, our principal
OEM product. Revenues from sales of OEM products for the year ended December
31, 2003 were $316,279 compared to $148,358 for the prior year period, an
increase of $167,921, or 113.2%. Ketone strips comprised 97.2% of our OEM
sales, and 85.4% of our total sales in the year ended December 31, 2003. All
sales of OEM products were to domestic customers in both the current year and
prior year periods. Revenues from sales of DR-70® for the year ended December
31, 2003 were $43,828 compared to $30,645 for the year ended December 31,
2002, an increase of $13,183, or 43.0%. Domestic customers accounted for
$1,549, or 3.5%, and foreign customers accounted for $42,279, or 96.5%, of the
DR-70® revenues in the year ended December 31, 2003. Domestic customers
accounted for $3,794, or 12.4%, and foreign customers accounted for $26,851,
or 87.6%, of the DR-70® revenues in the year ended December 31, 2002. The continued low level of DR-70® sales is disappointing to management of
the Company. Our current distributors advise that market acceptance of our
DR-70® kits has been slower than originally anticipated, in part due to the
fact that the DR-70® kit has not yet received FDA approval. In addition, the
Company has not concluded any material new distribution agreements this year
as new potential distributors have experienced similar delays and face similar
market acceptance issues because of the lack of FDA approval. During 2004, we expect sales of OEM products to be at or above the same
level as experienced in 2003. Assuming FDA approval of DR-70® in 2004, we
expect sales of DR-70® to increase in 2004, but any such increase in sales is
not expected to impact significantly our operating results for 2004. The
statement concerning future sales is a forward-looking statement that involves
certain risks and uncertainties which could result in a fluctuation of sales 15




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##### Table of Contents



below those achieved for the year ended December 31, 2003. Sales could be
negatively impacted by potential competing products and overall market
acceptance of the Companys products. Gross Profit. Gross profit increased by $97,682 or 102.4% to $193,038 for
the year ended December 31, 2003, compared to $95,356 for the year ended
December 31, 2002. The increase in gross profit was due to an increase in
sales. Gross profit on product sales was 53.6% in the year ended December 31,
2003 compared to 53.3% in the prior year. There was no material change in the
gross profit percentage. Assuming the product sales mix remains the same, management anticipates
future gross profit margins to remain at the levels of the year ended December
31, 2003. The statement concerning future gross profit margins is a
forward-looking statement that involves certain risks and uncertainties which
could result in a fluctuation of gross margins below those achieved for the
year ended December 31, 2003. Gross profit could be negatively impacted by
potential competing products and overall market acceptance of the Companys
products. Research and Development.Research and development expenses for the year
ended December 31, 2003 were $545,599 as compared to $400,624 for the year
ended December 31, 2002. The increase of $144,975 was primarily a result of an
increase in (i) expenses to $439,002 related to clinical trials compared to
$178,415 in the prior period offset by (ii) a decrease in the amount of
services provided by our principal consultant and other costs to $104,519 in
2003 compared to $212,453 for the year ended December 31, 2002. General and Administrative Expenses. General and administrative expenses
decreased by $1,321,071 to $2,041,786 for the year ended December 31, 2003 as
compared to the $3,362,857 reported for the year ended December 31, 2002 due
mainly to decreases in: (i) investor and financial consulting services of
approximately $729,000, including a reduction in non-cash (securities)
compensation for services of approximately $385,000; (ii) an overall decrease
of approximately $89,000 in payroll and other compensation costs due to the
reduction in the number of employees; (iii) approximately $167,000 of legal
expenses related to capital formation, regulatory compliance and patent
prosecution expenses; (iv) aborted offering costs of approximately $300,000,
including non-cash compensation of $139,000; and (v) stock exchange listing
fees of approximately $46,000. The significant components of general and
administrative expenses for the year ended December 31, 2003 primarily consist
of payroll, taxes and benefits; consulting expenses, including financial
consulting, investor relations and public relations; and professional fees,
including legal, audit and patent expenses. Interest Income and Expense.Interest income for the year ended December
31, 2003 was $1,119, as compared to $22,523 for the year ended December 31,
2002. The decrease of $21,404, or 95.0%, is due to the lower average cash
balance maintained by the Company during 2003 and the lower rate of interest
earned thereon. Interest expense for the year ended December 31, 2003,
totaling approximately $480,000, consists of non-cash amortization of debt
discount associated with the warrants issued as part of the units in our June
2003 private placement offering in the amount of approximately $100,000,
non-cash amortization of debt issuance costs in the amount of approximately
$270,000, and a charge for the beneficial conversion of a convertible note into
shares of common stock in the amount of $105,000, interest paid in shares of
common stock in the amount of approximately $4,000 and cash interest paid of
approximately $1,000. There was no interest expense in 2002. Net Loss and Loss from Operations.As a result of the factors described
above, in fiscal year 2003, our net loss was $2,873,695 or ($0.23) per share,
compared to a net loss of $3,602,127 or ($0.42) per share, in fiscal year 2002.
The reduction in the loss per share was materially affected by the 48%
increase in the weighted average number of common shares outstanding. Assets and Liabilities At December 31, 2003, the Company had total assets of $3,746,582 compared
to total assets of $2,434,303 at December 31, 2002. Cash and cash equivalents
was $1,708,886 as of December 31, 2003, an increase of $1,361,134 (588.3%) from
the $347,752 cash on hand as of December 31, 2002. Cash used in operations was
$1,957,227 and cash provided by financing activities from the sale of common
stock and exercise of warrants and options was $3,318,361. As of March 22,
2004, our cash has further increased to approximately $3,181,000. 16




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Accounts receivable was $152,967 at December 31, 2003, an increase of
$64,577 (73.1%) from the $88,390 at December 31, 2002 due principally to a
single large order for OEM products shipped in December 2003. Inventories
decreased $14,149 (17.1%), to $68,825, from the $82,974 at December 31, 2002.
The decrease in inventories is attributable to decreased work in process and
raw materials available for DR-70® kit manufacturing. Net fixed assets totaled $21,582 at December 31, 2003 compared to $31,570
at December 31, 2002, a decrease of $9,988 (31.6%). There were no purchases or
dispositions of fixed assets in 2003, while depreciation and amortization
totaled $109,988, resulting in the net decrease in fixed assets. Total liabilities at December 31, 2003 were $352,538, an increase of
$108,953 from the $243,585 at December 31, 2002. Accounts payable and accrued
liabilities were $260,642 at December 31, 2002, an increase of $115,955 (80.1%)
from the $144,687 at December 31, 2002. The increase is primarily due to (i)
increased trade payables and accruals attributable to December 2003 product
shipments and deferred directors board and committee fees. Accrued payroll
totaled $91,896 at December 31, 2003, an increase of $5,348 compared to $86,548
at December 31, 2001. As of December 31, 2002 a note payable in the amount of $25,000 previously
carried as a liability was treated as forgiven. In 1996, we had tendered
payment of all accrued interest to the noteholder, which tender was never
negotiated. At the same time, we also offered to repay the principal amount
upon return of the original note we issued. Since 1997 we have had no contact
the noteholder and therefore have recognized the amount as a forgiveness of
indebtedness. As of December 31, 2002, we also recognized an additional
$18,475 of debt forgiveness, principally related to the accrued interest on the
note. There was no debt forgiveness in 2003. Forward Looking Statements This Annual Report on Form 10-KSB contains forward-looking statements.
Such forward-looking statements which we make involve known and unknown risks,
uncertainties and other factors which may cause our actual results, performance
or achievements to be materially different from any future results, performance
or achievements expressed or implied by such forward-looking statements.
Factors that could cause actual results to differ materially from the forward
looking statements include, but are not limited to, risks associated with
failure to obtain FDA approval for DR-70®, lack of demand for our products,
dependence on licensees and on management, governmental regulations,
technological changes, and intense competition. Given these uncertainties,
readers are cautioned not to place undue reliance on such forward-looking
statements. Our management disclaims any obligation to forward-looking
statements contained herein to reflect any change in our expectation with
regard thereto or any change in events, conditions, circumstances or
assumptions underlying such statements. 
 Item 7. Financial Statements Independent Auditors Report
    
    
    F-1Balance Sheet as of December 31, 2003
    
    
    F-2Statements of Operations for the years ended December 31, 2003 and 2002
    
    
    F-3Statements of Stockholders Equity for the years ended
December 31, 2003 and 2002
    
    
    F-4Statements of Cash Flows for the years ended December 31, 2003 and 2002
    
    
    F-6Notes to Financial Statements
    
    
    F-7
 17




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INDEPENDENT AUDITORS REPORT Board of Directors and Stockholders of
AMDL, Inc. We have audited the accompanying balance sheet of AMDL, Inc. (the Company) as
of December 31, 2003, and the related statements of operations, stockholders
equity and cash flows for each of the years in the two-year period then ended.
These financial statements are the responsibility of the Companys management.
Our responsibility is to express an opinion on the financial statements based
on our audits. We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of AMDL, Inc. as of December 31,
2003, and the results of its operations and its cash flows for each of the
years in the two-year period then ended in conformity with accounting
principles generally accepted in the United States of America. CORBIN & COMPANY, LLP Irvine, California
February 23, 2004, except for
Note 13, as to which the date is
March 19, 2004 F-1




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##### Table of Contents



AMDL, INC. 
 BALANCE SHEET ASSETS December 31,2003Current assetsCash and cash equivalents
    
    $
    1,708,886Accounts receivable
    
    
    152,967Inventories
    
    
    68,825Prepaid expenses
    
    
    30,232Total current assets
    
    
    1,960,910Intellectual property, net
    
    
    1,758,333Property and equipment, net
    
    
    21,582Other assets
    
    
    5,757$
    3,746,582LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable and accrued expenses
    
    $
    260,642Accrued payroll and related expenses
    
    
    91,896Total current liabilities
    
    
    352,538Commitments and contingenciesStockholders equity:Preferred stock, $0.001 par value; 10,000,000 shares
authorized; no shares issued and outstanding
    
    
    Common stock, $0.001 par value; 50,000,000 shares
authorized; 18,711,763 shares issued and outstanding
    
    
    18,712Additional paid in capital
    
    
    26,907,021Accumulated deficit
    
    
    (23,531,689
    )Total stockholders equity
    
    
    3,394,044$
    3,746,582
 See independent auditors report and accompanying notes to financial statements. F-2




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##### Table of Contents



AMDL, INC. 
 STATEMENT OF OPERATION Years EndedDecember 31,
    
    December 31,2003
    
    2002Net revenues
    
    $
    360,107
    
    
    $
    179,003Cost of sales
    
    
    167,069
    
    
    
    83,647Gross profit
    
    
    193,038
    
    
    
    95,356Operating expenses:Research and development
    
    
    545,599
    
    
    
    400,624General and administrative
    
    
    2,041,786
    
    
    
    3,362,8572,587,385
    
    
    
    3,763,481Loss from operations
    
    
    (2,394,347
    )
    
    
    (3,668,125
    )Other income (expense):Interest income
    
    
    1,119
    
    
    
    22,523Interest expense
    
    
    (480,467
    )
    
    
    Forgiveness of indebtedness
    
    
    
    
    
    
    43,475(479,348
    )
    
    
    65,998Net loss
    
    $
    (2,873,695
    )
    
    $
    (3,602,127
    )Basic and diluted loss available to common
stockholders per common share
    
    $
    (0.23
    )
    
    $
    (0.42
    )Weighted average common shares outstanding,
- basic and diluted
    
    
    12,693,847
    
    
    
    8,561,511
 See independent auditors report and accompanying notes to financial statements. F-3




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##### Table of Contents



AMDL, INC. 
 STATEMENTS OF STOCKHOLDERS EQUITY For The Years Ended December 31, 2003 and 2002 Common Stock
    
    Preferred Stock
    
    AdditionalPaid-in
    
    AccumulatedShares
    
    Amount
    
    Shares
    
    Amount
    
    Capital
    
    Deficit
    
    TotalBalance, December 31, 2001
    
    
    8,076,657
    
    
    $
    8,077
    
    
    
    
    
    
    $
    
    
    
    $
    21,831,200
    
    
    $
    (17,055,867
    )
    
    $
    4,783,410Common stock issued for cash,
net of offering costs of $13,000
    
    
    250,000
    
    
    
    250
    
    
    
    
    
    
    
    
    
    
    
    86,750
    
    
    
    
    
    
    
    87,000Common stock issued for consulting services
    
    
    399,999
    
    
    
    400
    
    
    
    
    
    
    
    
    
    
    
    660,686
    
    
    
    
    
    
    
    661,086Common stock issued for warrants and options
exercised, net of offering costs of $4,451
    
    
    380,000
    
    
    
    380
    
    
    
    
    
    
    
    
    
    
    
    253,569
    
    
    
    
    
    
    
    253,949Estimated fair market value of options and
warrants granted to consultants for
services rendered
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,400
    
    
    
    
    
    
    
    7,400Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,602,127
    )
    
    
    (3,602,127
    )Balance, December 31, 2002
    
    
    9,106,656
    
    
    
    9,107
    
    
    
    
    
    
    
    
    
    
    
    22,839,605
    
    
    
    (20,657,994
    )
    
    
    2,190,718
 See independent auditors report and accompanying notes to financial statements. F-4




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AMDL, INC. STATEMENTS OF STOCKHOLDERS EQUITY (Continued) For The Years Ended December 31, 2003 and 2002 Common Stock
    
    Preferred Stock
    
    AdditionalPaid-in
    
    AccumulatedShares
    
    Amount
    
    Shares
    
    Amount
    
    Capital
    
    Deficit
    
    TotalBalance, December 31, 2002
    
    
    9,106,656
    
    
    $
    9,107
    
    
    
    
    
    
    $
    
    
    
    $
    22,839,605
    
    
    $
    (20,657,994
    )
    
    $
    2,190,718Common stock issued for cash (including
95,000 shares of common stock issued to finders),
net of cash offering costs of $207,627
    
    
    1,437,700
    
    
    
    1,438
    
    
    
    
    
    
    
    
    
    
    
    850,935
    
    
    
    
    
    
    
    852,373Common stock issued on conversion of notes
and accrued interest
    
    
    3,565,603
    
    
    
    3,566
    
    
    
    
    
    
    
    
    
    
    
    1,262,757
    
    
    
    
    
    
    
    1,266,323Common stock issued for consulting services
    
    
    761,666
    
    
    
    761
    
    
    
    
    
    
    
    
    
    
    
    428,630
    
    
    
    
    
    
    
    429,391Common stock issued for warrants and options
exercised (including 100,000 shares of common
stock issued to consultants), net of cash offering
costs of $148,741
    
    
    3,840,138
    
    
    
    3,840
    
    
    
    
    
    
    
    
    
    
    
    1,299,446
    
    
    
    
    
    
    
    1,303,286Estimated fair market value of options and
warrants granted to third parties and
beneficial conversion feature on convertible
note financing
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    225,648
    
    
    
    
    
    
    
    225,648Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,873,695
    )
    
    
    (2,873,695
    )Balance, December 31, 2003
    
    
    18,711,763
    
    
    $
    18,712
    
    
    
    
    
    
    $
    
    
    
    $
    26,907,021
    
    
    $
    (23,531,689
    )
    
    $
    3,394,044
 See independent auditors report and accompanying notes to financial statements. F-5




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##### Table of Contents



AMDL, INC. 
 STATEMENTS OF CASH FLOW Years EndedDecember 31,
    
    December 31,2003
    
    2002Cash flows from operating activitiesNet loss
    
    $
    (2,873,695
    )
    
    $
    (3,602,127
    )Adjustments to reconcile net loss to net cash
used in operating activities:Depreciation and amortization
    
    
    109,988
    
    
    
    109,094Common stock issued for services
    
    
    276,391
    
    
    
    661,086Non-cash interest expense recognized
    
    
    479,318
    
    
    
    Warrants and options issued for services
    
    
    2,950
    
    
    
    7,400Forgiveness of indebtedness
    
    
    
    
    
    
    (43,475
    )Changes in operating assets and liabilities:Accounts receivable
    
    
    (64,577
    )
    
    
    (81,230
    )Inventories
    
    
    14,149
    
    
    
    (3,508
    )Prepaid expenses and other current assets
    
    
    (10,704
    )
    
    
    11,327Accounts payable and accrued expenses
    
    
    115,955
    
    
    
    30,947Accrued payroll and related expenses
    
    
    5,348
    
    
    
    770Customer deposits
    
    
    (12,350
    )
    
    
    12,350Net cash used in operating activities
    
    
    (1,957,227
    )
    
    
    (2,897,366
    )Cash flows from investing activitiesPurchase of property and equipment
    
    
    
    
    
    
    (25,664
    )Cash flows from financing activitiesProceeds from issuance of common stock,
net of cash offering costs of $207,627 in 2003 and $13,000 in 2002
    
    
    852,373
    
    
    
    87,000Proceeds from issuance of convertible notes,
net of cash offering costs of $263,295 in 2003
    
    
    1,162,702
    
    
    
    Proceeds from the exercise of warrants and options,
net of cash offering costs of $148,741 in 2003 and $69,805 in 2002
    
    
    1,303,286
    
    
    
    253,949Net cash provided by financing activities
    
    
    3,318,361
    
    
    
    340,949Net change in cash and cash equivalents
    
    
    1,361,134
    
    
    
    (2,582,081
    )Cash and cash equivalents, beginning of year
    
    
    347,752
    
    
    
    2,929,833Cash and cash equivalents, end of year
    
    $
    1,708,886
    
    
    $
    347,752Supplemental disclosure of cash flow informationCash paid during the year for interest
    
    $
    1,052
    
    
    $
    Cash paid during the year for taxes
    
    $
    800
    
    
    $
    800Supplemental schedule of non-cash investing and financing activities
 See related Notes 6, 8, 9 and 10 to financial statements for non-cash
investing and financing activities. See independent auditors report and accompanying notes to financial statements. F-6




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AMDL, INC. 
 NOTES TO FINANCIAL STATEMENTS - CONTINUED For The Years Ended December 31, 2003 and 2002 NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Business AMDL, Inc.s (the Company) predecessor was incorporated May 13, 1988 and the
Company reorganized as a Delaware corporation on June 7, 1989. Since inception, the Company has primarily been engaged in the commercial
development of and the obtaining of various governmental regulatory approvals
for the marketing of its proprietary diagnostic tumor-marker test kit
(DR-70®) to detect the presence of multiple types of cancer. The Companys
product line also includes a selection of diagnostic test kits for several
types of cancer, infectious diseases, endocrinology, diabetes, nephrology and
allergy. Revenue Recognition In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin (SAB 101), Revenue Recognition, which outlines the
basic criteria that must be met to recognize revenue and provides guidance for
presentation of revenue and for disclosure related to revenue recognition
policies in financial statements filed with the Securities and Exchange
Commission. The Companys adoption of SAB 101 did not have a material effect
on the Companys financial statements. Product sales revenue is recognized upon passage of title to customers,
typically upon shipment of product. Any provision for discounts and estimated
returns are accounted for in the period the related sales are recorded. Advertising The Company expenses the cost of advertising when incurred as a component of
general and administrative expenses. No advertising costs were incurred for
the years ended December 31, 2003 or 2002. Research and Development Internal research and development costs are expensed as incurred. Third party
research and development costs are expensed when the contracted work has been
performed or as milestone results have been achieved. Cash Equivalents The Company considers all highly liquid investments with original maturities of
three months or less when purchased to be cash equivalents. Inventories Inventories, which consist primarily of raw materials and related materials,
are stated at the lower of cost or market with cost determined on a first-in,
first-out (FIFO) basis. The Company regularly monitors inventories for excess
or obsolete items and makes any valuation corrections when such adjustments are
needed. Equipment Equipment is stated at cost. Depreciation is computed using the straight-line
method over useful lives of three to ten years. Betterments, renewals, and extraordinary repairs that extend the lives of the
assets are capitalized; other repairs and maintenance charges are expensed as
incurred. The cost and related accumulated depreciation applicable to assets
retired are removed from the accounts, and the gain or loss on disposition is
recognized in current operations. F-7




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AMDL, INC. NOTES TO FINANCIAL STATEMENTS - CONTINUED For The Years Ended December 31, 2003 and 2002 Intangible Assets The Company has expended funds for patents that are in various stages of the
filing approval process. During 2003 and 2002, the Company expended
approximately $27,732 and $33,152, respectively, on patents. The Company
elected to expense these expenditures immediately due to their uncertain
realizability. In August 2001, the Company acquired intellectual property rights and an
assignment of a US patent application for combination immunogene therapy
technology for $2,000,000 (see Note 4). The technology was purchased from Dr.
Lung-Ji Chang, who developed it while at the University of Alberta, Edmonton,
Canada. The $2,000,000 acquisition price is being amortized over the expected
useful life of the technology, which the Company has currently determined to be
20 years, based upon an estimate of three years to perfect the patent plus 17
years of patent life. The Company recognized amortization expense of $100,000
for each of the years ended December 31, 2003 and 2002. Impairment of Long-Lived Assets The Companys management assesses the recoverability of its long-lived assets
by determining whether the depreciation and amortization of long-lived assets
over their remaining lives can be recovered through projected undiscounted
future cash flows. The amount of long-lived asset impairment is measured based
on fair value and is charged to operations in the period in which long-lived
asset impairment is determined by management. Based on its analysis, the
Company believes that no impairment of the carrying value of its long-lived
assets existed at December 31, 2003. There can be no assurance, however, that
market conditions will allow us to realize the value of our technologies and
prevent future long-lived asset impairment. Common Stock Issued for Services Rendered The Company periodically issues common stock for services rendered. Common
stock issued is valued at the estimated fair market value, as determined by
management and the board of directors of the Company. Management and the board
of directors consider market price quotations; recent stock offering prices and
other factors in determining fair market value for purposes of valuing the
common stock (see Note 9). Risks and Uncertainties The Companys proprietary test kit is deemed a medical device or biologic, and
as such is governed by the Federal Food and Drug and Cosmetics Act and by the
regulations of state agencies and various foreign government agencies.
Currently, the Company is not permitted to sell DR-70® in the United States,
although the Company is in the process of seeking regulatory approval. The
Company has received regulatory approval from various foreign governments to
sell its products and is in the process of obtaining regulatory approval in
other foreign markets. There can be no assurance that the Company will
maintain the regulatory approvals required to market its products or that they
will not be withdrawn. In May 2002, the Company began the FDA process under Section 510(k) of the
Food, Drug and Cosmetic Act for approval of its intent to market DR-70® as
an aid in monitoring patients with colorectal cancer. The Company conducted
clinical trials comparing its DR-70® to the currently accepted assay, CEA,
and submitted the results to the FDA in September 2003. In January, 2004, the
FDA responded to the Companys submission. The FDA identified deficiencies in
the application and advised the Companys consultant, Diagnostic Oncology CRO,
Inc. (DOCRO) that based upon the data submitted to date, the FDA determined
that the DR-70® kit was not substantially equivalent to any other device
which has gone through the 510(k) approval process (e.g. CEA). The FDA
further advised that if
the Company had data which it believes shows that the DR-70® kit has
substantial equivalence, the Company can submit such additional information
for the FDAs consideration. The Company intends to submit additional data to
the FDA to demonstrate that the existing test data supports substantial
equivalence to CEA. This submission to the FDA has not yet been made. At
this time, the Company cannot predict (i) the length of time it will take for
the FDA to review the F-8




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AMDL, INC. NOTES TO FINANCIAL STATEMENTS - CONTINUED For The Years Ended December 31, 2003 and 2002 submission, (ii) whether 510(k) premarket notification
will be available for its DR-70® test kit, or (iii) if available, whether
such approval will be ultimately obtained. The Company is subject to the risk of failure in maintaining its existing
regulatory approvals, in obtaining other regulatory approval, as well as the
delays until receipt of such approval, if obtained. Therefore, the Company is
subject to substantial business risks and uncertainties inherent in such an
entity; including the potential of business failure. Accounting for Stock-Based Compensation The Company accounts for stock-based compensation issued to employees using the
intrinsic value based method as prescribed by APB Opinion No. 25 Accounting
for Stock Issued to Employees (APB 25). Under the intrinsic value based
method, compensation is the excess, if any, of the fair value of the stock at
the grant date or other measurement date over the amount an employee must pay
to acquire the stock. Compensation, if any, is recognized over the applicable
service period, which is usually the vesting period. In October 1995, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 123, Accounting for
Stock-Based Compensation (SFAS 123). This standard, if fully adopted,
changes the method of accounting for employee stock-based compensation plans to
the fair value based method. For stock options and warrants, fair value is
determined using an option pricing model that takes into account the stock
price at the grant date, the exercise price, the expected life of the option or
warrant and the annual rate of quarterly dividends. Compensation expense, if
any, is recognized over the applicable service period, which is usually the
vesting period. In March 2000, the FASB issued FASB Interpretation No. 44 (FIN 44),
Accounting for Certain Transactions Involving Stock Compensation, an
interpretation of APB Opinion 25. FIN 44 clarifies the application of APB 25
for (a) the definition of employee for purposes of applying APB 25, (b) the
criteria for determining whether a plan qualifies as a non-compensatory plan,
(c) the accounting consequence for various modifications to the terms of a
previously fixed stock option or award, and (d) the accounting for an exchange
of stock compensation awards in a business combination. FIN 44 is effective
July 1, 2000, but certain provisions cover specific events that occur after
either December 15, 1998, or January 12, 2000. The adoption of FIN 44 did not
have a material effect on the financial statements. The adoption of the accounting methodology of SFAS 123 is optional and the
Company has elected to continue accounting for stock-based compensation issued
to employees using APB 25, as amended by FIN 44; however, pro forma
disclosures, as if the Company adopted the cost recognition requirements under
SFAS 123, are required to be presented (see below). For stock-based
compensation issued to non-employees, the Company values these grants at fair
value as defined in SFAS 123, FIN 44 and EITF 96-18, Accounting for Equity
Instruments That Are Issued to Other Than Employees for Acquiring, or in
Conjunction with Selling Goods or Services. At December 31, 2003, the Company had two stock-based employee compensation
plans, which are described more fully in Note 7. The Company accounts for
those plans under the recognition and measurement principles of APB 25, and
related interpretations. No stock-based employee compensation cost is
reflected in the statements of operations, as all options granted under those
plans had exercise prices equal to the market value of the underlying common
stock on the date of grant. The following table illustrates the effect on net
loss and loss per share if the Company had applied the fair value recognition
provisions of SFAS 123 to stock-based employee compensation. F-9




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AMDL, INC. NOTES TO FINANCIAL STATEMENTS - CONTINUED For The Years Ended December 31, 2003 and 2002 Year ended December 31,2003
    
    2002Net loss as reported
    
    $
    (2,873,695
    )
    
    $
    (3,602,127
    )Deduct: Total stock-based employee
compensation under fair value based method
for all awards, net of related tax effects
    
    
    (322,948
    )
    
    
    (806,960
    )Pro forma net loss
    
    $
    (3,196,643
    )
    
    $
    (4,409,087
    )Basic and
diluted loss per share  as reported
    
    $
    (0.23
    )
    
    $
    (0.42
    )Basic and
diluted loss per share  pro forma
    
    $
    (0.25
    )
    
    $
    (0.51
    )
 See Note 13 for stock option activity subsequent to December 31, 2003. Basic and Diluted Loss Per Share The Company has adopted Statement of Financial Accounting Standards No. 128,
Earnings Per Share (SFAS 128). SFAS 128 changes the methodology of
calculating earnings per common share. The adoption of SFAS 128 has not
materially impacted the Companys financial position or results of operations. Basic earnings (loss) per common share is computed based on the weighted
average number of shares outstanding for the period. Diluted earnings (loss)
per share is computed by dividing net income (loss) by the weighted average
shares outstanding assuming all dilutive potential common shares were issued.
Basic and diluted loss per share are the same as the effect of stock options
and warrants on loss per share are anti-dilutive and thus not included in the
diluted loss per share calculation. However, the impact under the treasury
stock method of dilutive stock options and warrants would have been incremental
shares of 724,161 and 1,116,106 for the years ended December 31, 2003 and 2002,
respectively. Income Taxes The Company accounts for income taxes under Statement of Financial Accounting
Standards No. 109 (SFAS 109), Accounting for Income Taxes. Under SFAS 109,
deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. A valuation allowance is
provided for significant deferred tax assets when it is more likely than not
that such assets will not be recovered. Use of Estimates The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make certain estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Significant estimates made by management are, among others, provisions for
doubtful accounts,
realizability of long-lived assets, useful lives of intangibles and valuation
of deferred tax assets. Actual results could differ from those estimates. Fair Value of Financial Instruments The carrying amounts of the Companys cash and cash equivalents, accounts
receivable, accounts payable and accrued expenses approximates their estimated
fair values due to the short-term maturities of those financial instruments. F-10




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AMDL, INC. NOTES TO FINANCIAL STATEMENTS - CONTINUED For The Years Ended December 31, 2003 and 2002 Comprehensive Income Statement of Financial Accounting Standards No. 130 (SFAS 130), Reporting
Comprehensive Income, establishes standards for reporting and display of
comprehensive income and its components in a full set of general-purpose
financial statements. SFAS 130 has not impacted the Companys financial
position or results of operations as the Company has no items of comprehensive
income. Segments of an Enterprise and Related Information The Company has adopted Statement of Financial Accounting Standards No. 131
(SFAS 131), Disclosures about Segments of an Enterprise and Related
Information. SFAS 131 changes the way public companies report information
about segments of their business in their annual financial statements and
requires them to report selected segment information in their quarterly reports
issued to shareholders. It also requires entity-wide disclosures about the
products and services an entity provides, the material countries in which it
holds assets and reports revenues and its major customers. During fiscal year
2003, approximately 11.7% of our sales were to customers in foreign countries.
Of the foreign sales, approximately 69.4% were to customers in Korea and 29.2%
were to customers in Taiwan. During fiscal year 2002, approximately 17.2% of
our sales were to customers in foreign countries. Of the foreign sales,
approximately 92.2% were to customers in Taiwan and 5.9% were to customers in
the United Kingdom. All of the Companys assets are held in the United States
and all transactions are denominated in U.S. dollars. The adoption of SFAS 131
has not impacted the Companys financial position or results of operations as
the Company currently operates in one segment. Concentration of Risk One customer accounted for approximately 100% of accounts receivable as of
December 31, 2003 and the same customer accounted for approximately 99% of
accounts receivable as of December 31, 2002. One customer accounted for 84.4%
of sales for the year ended December 31, 2003 and 78.5% of sales for the year
ended December 31, 2002. The loss of this customer in the future could
significantly affect the Companys operating results. From time to time, the Company maintains credit balances at certain
institutions in excess of the FDIC limit. As of December 31, 2003, the Company
had approximately $1,706,000 in excess of this limit. Recent Accounting Pronouncements In January 2003, the FASB issued Interpretation No. 46 (FIN 46),
Consolidation of Variable Interest Entities, an interpretation of Accounting
Research Bulletin 51, Consolidated Financial Statements, to improve financial
reporting of special purpose and other entities. In accordance with the
interpretation, business enterprises that represent the primary beneficiary of
another entity by retaining a controlling financial interest in that entitys
assets, liabilities, and results of operations must consolidate the entity in
their financial statements. Prior to the issuance of FIN 46, consolidation
generally occurred when an enterprise controlled another entity through voting
interests. FIN 46 is effective immediately for all new variable interest
entities created or acquired after January 31, 2003. For variable interest
entities created or acquired prior to February 1, 2003, the provisions of FIN
46 must be applied for the first
interim or annual period beginning after June 15, 2003. The Company does not
expect FIN 46 to have a material impact on its financial statements as it has
no variable interest entities. In December 2002, the FASB issued Statement of Financial Accounting Standards
No. 148 (SFAS 148), Accounting for Stock-Based
Compensation  Transition and
Disclosure  an amendment of FASB Statement No. 123. SFAS 148 amends SFAS 123
to provide alternative methods of transition for a voluntary change to the fair
value based method of accounting for stock-based employee compensation. In
addition, SFAS 148 amends the disclosure requirements of SFAS 123 to require
prominent disclosures in both annual and interim financial statements about the
method of accounting for stock-based employee compensation and the effect of
the method used on reported results. The transition guidance and annual
disclosure provisions of SFAS 148 are effective for financial statements issued
for fiscal years ending after December 15, 2002. The interim disclosure
provisions are effective for financial reports containing F-11




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AMDL, INC. NOTES TO FINANCIAL STATEMENTS - CONTINUED For The Years Ended December 31, 2003 and 2002 financial statements
for interim periods beginning after December 15, 2002. The Company has applied
the disclosure provisions in SFAS 148 in its financial statements and the
accompanying notes. In November 2002, the FASB issued Interpretation No. 45 (FIN 45),
Guarantors Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others. FIN 45 elaborates on the
disclosures to be made by a guarantor in its interim and annual financial
statements about its obligations under certain guarantees that it has issued.
It also clarifies that a guarantor is required to recognize, at the inception
of a guarantee, a liability for the fair value of the obligation undertaken in
issuing the guarantee. The initial recognition and initial measurement
provisions of FIN 45 are applicable on a prospective basis to guarantees issued
or modified after December 31, 2002. The disclosure requirements in FIN 45 are
effective for financial statements of interim or annual periods ending after
December 15, 2002. The Companys adoption of FIN 45 in 2003 did not have a
material impact on its financial position or results of operations (see Note
6). In June 2002, the FASB issued Statement of Financial Accounting Standards No.
146 (SFAS 146), Accounting for Costs Associated with Exit or Disposal
Activities. SFAS 146 requires recording costs associated with exit or disposal
activities at their fair values when a liability has been incurred. Under
previous guidance, certain exit costs were accrued upon managements commitment
to an exit plan, which is generally before an actual liability has been
incurred. Adoption of SFAS 146 is required with the beginning of fiscal year
2003. The Companys adoption of SFAS 146 did not have a significant impact on
its results of operations. In May 2003, the FASB issued Statement of Financial Accounting Standards No.
150 (SFAS 150), Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity. SFAS 150 establishes
standards for the classification and measurement of certain financial
instruments with characteristics of both liabilities and equity. SFAS 150 also
includes required disclosures for financial instruments within its scope. For
the Company, SFAS 150 was effective for instruments entered into or modified
after May 31, 2003 and otherwise will be effective as of January 1, 2004,
except for mandatorily redeemable financial instruments. For certain
mandatorily redeemable financial instruments, SFAS 150 will be effective for
the Company on January 1, 2005. The Company currently does not have any
financial instruments that are within the scope of SFAS 150. Reclassifications Certain reclassifications were made to 2002 balances in order to conform to
the 2003 presentation. F-12




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AMDL, INC. NOTES TO FINANCIAL STATEMENTS - CONTINUED For The Years Ended December 31, 2003 and 2002 NOTE 2 - INVENTORIES Inventories consist of the following at December 31, 2003: Raw materials
    
    $
    53,700Work-in-process
    
    
    14,625Finished goods
    
    
    500$
    68,825
 NOTE 3 - PROPERTY AND EQUIPMENT Property and equipment at December 31, 2003 consists of the following: Office equipment
    
    $
    37,375Lab equipment
    
    
    5,97943,354Less accumulated depreciation
    
    
    (21,772
    )$
    21,582
 Depreciation expense totaled $9,988 for the year ended December 31, 2003. NOTE 4 - INTELLECTUAL PROPERTY Intangible assets consist of the following as of December 31, 2003: Purchased patent pending technology
    
    $
    2,000,000Accumulated amortization
    
    
    (241,667
    )$
    1,758,333
 During each of the fiscal years ended December 31, 2003 and 2002, amortization
expense totaled $100,000. The estimated amortization expense for the next five
years is as follows: Years Ending2004
    
    
    $
    100,0002005
    
    
    
    100,0002006
    
    
    
    100,0002007
    
    
    
    100,0002008
    
    
    
    100,000
 In August 2001, the Company acquired intellectual property rights and an
assignment of a US patent application for combination immunogene therapy
technology for $2,000,000. The technology was purchased from Dr. Lung-Ji
Chang, who developed it while at the University of Alberta, Edmonton, Canada
(see Note 1). During 2003, two lawsuits were filed challenging the Companys
ownership of this intellectual property . The value of the intellectual
property will be diminished if either of the lawsuits is successful (see Note 6). F-13




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AMDL, INC. NOTES TO FINANCIAL STATEMENTS - CONTINUED For The Years Ended December 31, 2003 and 2002 As part of the acquisition of the technology, the Company agreed to pay Dr.
Chang a 5% royalty on net sales of combination gene therapy products. The
Company has entered into a two-year consulting contract with Dr. Chang, calling
for payments of $2,500 per month in consideration for services relating to the
development of intellectual property and scientific consultations. The Company
accrued $20,000 and $30,000 for consulting services in the years ended December
31, 2003 and 2002, respectively. The Company has not paid any royalties to Dr.
Chang to date. NOTE 5 - INCOME TAXES The tax effects of temporary differences that give rise to deferred taxes at
December 31, 2003 are as follows: Deferred tax asset:Net operating loss carryforward
    
    $
    8,125,000Expenses recognized for granting of options and warrants
    
    
    665,000Total gross deferred tax asset
    
    
    8,790,000Less valuation allowance
    
    
    (8,790,000
    )Net deferred tax asset
    
    $
    
 The valuation allowance increased by approximately $1,148,000 and $1,435,000
during the years ended December 31, 2003 and 2002, respectively. No current
provision for income taxes for the years ended December 31, 2003 and 2002 is
required, except for minimum state taxes, since the Company incurred taxable
losses during such years. The provision for income taxes for fiscal 2003 and 2002 was $800 and differs
from the amount computed by applying the U.S. Federal income tax rate of 34% to
loss before income taxes as a result of the following: 2003
    
    2002Computed tax benefit at federal statutory rate
    
    $
    (976,000
    )
    
    $
    (1,225,000
    )State income tax benefit, net of federal effect
    
    
    (172,000
    )
    
    
    (210,000
    )Increase in valuation allowance
    
    
    1,148,000
    
    
    
    1,435,000Other
    
    
    800
    
    
    
    800$
    800
    
    
    $
    800
 As of December 31, 2003 the Company had net operating loss carry forwards of
approximately $20,800,000 and $10,500,000 for federal and state income tax
reporting purposes, which expire at various dates through 2023 and 2013,
respectively. The utilization of the net operating loss carry forwards might be limited due
to restrictions imposed under federal and state laws upon a change in
ownership. The amount of the limitation, if any, has not been determined at
this time. A valuation allowance is provided when it is more likely than not
that some portion or all of the deferred tax assets will not be realized. As a
result of the Companys continued losses and uncertainties surrounding the
realization of the net operating loss carry forwards, the Company has recorded
a valuation allowance equal to the net deferred tax asset amount as of December
31, 2003. F-14




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AMDL, INC. NOTES TO FINANCIAL STATEMENTS - CONTINUED For The Years Ended December 31, 2003 and 2002 NOTE 6 - COMMITMENTS AND CONTINGENCIES Operating Lease The Company leases its laboratory and manufacturing space under a
non-cancelable operating lease agreement that expires on July 31, 2004 and
requires monthly lease payments of $6,373 over the remaining term of the lease.
Future minimum commitments under this lease agreement are as follows: Years EndingDecember 31,2004
    
    
    $
    45,000
 Rent expense was approximately $76,000 and $75,000 for the years ended December
31, 2003 and 2002, respectively. Litigation On February 22, 2002, AcuVector Group, Inc. (AcuVector) filed a Statement of
Claim in the Court of Queens Bench of Alberta, Judicial District of Edmonton
relating to the Companys combination immunogene therapy technology acquired
from Dr. Chang in August 2001. The claim alleges damages of $CDN 20 million
and seeks injunctive relief against Dr. Chang for, among other things, breach
of contract and breach of fiduciary duty, and against us for interference with
the alleged relationship between Dr. Chang and AcuVector. The claim for
injunctive relief seeks to establish that the AcuVector license agreement with
Dr. Chang is still in effect. The Company performed extensive due diligence to
determine that AcuVector had no interest in the technology, when the Company
acquired it. The Company is confident that AcuVectors claims are without
merit and that the Company will receive a favorable judgment. As the final
outcome is not determinable, no accrual or loss relating to this action is
reflected in the accompanying financial statements. If AcuVector is
successful, the Company may be liable for substantial damages, its rights to
the intellectual property will be adversely affected (see Note 4), and its
future prospects for licensing the technology will be significantly impaired. The Company is also defending a companion case filed in the same court by the
Governors of the University of Alberta filed against the Company and Dr. Chang
in August 2003. The University of Alberta claims, among other things, that Dr.
Chang failed to remit the payment of the Universitys portion of the monies
paid by the Company to Dr. Chang for the combination immunogene technology
purchased by us from Dr. Chang in 2001. In addition to other claims against
Dr. Chang relating to other technologies developed by him while at the
University, the University also claims that the Company conspired with Dr.
Chang and interfered with the Universitys contractual relations under certain
agreements with Dr. Chang, thereby damaging the University in an amount which
is unknown to the University at this time. The University has not claimed that
the Company is not the owner of the combination immunogene therapy technology,
just that the University has an equitable interest therein or the revenues
therefrom. If the University is successful in these claims, the Company may be
liable for substantial damages, its rights to the technology will be adversely
affected (see Note 4), and its future prospects for exploiting or licensing the
combination immunogene therapy technology will be significantly impaired. In the ordinary course of business, there are other potential claims and
lawsuits brought by or against the Company. In the opinion of management, the
ultimate outcome of these matters will not materially affect the Companys
operations or financial position or are covered by insurance. Change in Control Severance Plan On November 15, 2001, the board of directors adopted an Executive Management
Change in Control Severance Pay Plan. The director who may become entitled to
benefits under the plan did not participate in the deliberations or vote to
approve the plan. F-15




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AMDL, INC. NOTES TO FINANCIAL STATEMENTS - CONTINUED For The Years Ended December 31, 2003 and 2002 The plan covers the persons who at any time during the 90-day period ending on
the date of a change in control (as defined in the plan), are employed by the
Company as Chief Executive Officer and/or President and are not party to a
separate agreement which makes such person ineligible to participate in the
plan. These persons become eligible for benefits under the plan if (1) (a) the
Company terminates his or her employment for any reason other than his or her
death or cause (as defined in the plan) or (b) the person terminates his or her
employment with the Company for good reason (as defined in the plan) and (2)
the termination occurs within the period beginning on the date of a change in
control and ending on the last day of the twelfth month that begins after the
month in which the change in control occurs. These persons also become
eligible for benefits under the plan if the person terminates employment with
the Company for any reason during the one-month period commencing on the date
six months following a change in control. The plan requires the Company to make a cash payment in an amount equal to
three hundred percent (300%) of the participants average total compensation
over the prior three years preceding the change in control. If the Companys
auditors determine that the total payments made to a person result in an excise
tax imposed by Internal Revenue Code §4999, the Company will make an additional
cash payment to the person equal to an amount such that after payment by the
person of all taxes (including any interest or penalties imposed with respect
to such taxes), including any excise tax, imposed upon the additional payment,
the person would retain an amount of the additional payment equal to the excise
tax imposed upon the total payments. Immediately following a change in control, the Company is required to establish
a trust and fund the trust with the amount of any payments which may become
owing to persons entitled to receive benefits under the plan but only to the
extent that the funding of the trust would not impair the working capital of
the Company. Consulting Agreements The Company has various agreements with consultants whereby the consultants
perform corporate development services of attracting investors. During 2003
and 2002, the Company paid cash, stock and warrants to third parties under
these agreements. See Note 9 for a summary of non-cash consulting agreements. Effective October 1, 1999, the Company entered into a one-year consulting
agreement with its former president to review and analyze new technologies and
supervise continued testing of existing products and such other services
related to diagnostic technology as the Board of Directors may request for a
monthly payment of not to exceed $4,800. The agreement was not renewed at
expiration. The former president is now engaged on a month-to-month basis at
$250 per hour, as needed. For the years ended December 31, 2003 and 2002,
$104,519 and $213,453 were paid, respectively. Licensing Agreements The Company has an agreement to pay royalty fees to JGT, an unrelated third
party, equal to 2.5% of gross sales of DR-70® on a quarterly basis. The
agreement expires in August 2008; however, the Company may elect to pay a
$25,000 buy-out fee after October 1, 2003. During 2003 and 2002 the Company
paid or accrued $881 and $1,798, respectively, in connection with this
agreement. Indemnities and Guarantees The Company has executed certain contractual indemnities and guarantees, under
which it may be required to make payments to a guaranteed or indemnified party.
The Company also has agreed to indemnify its directors, officers, employees
and agents to the maximum extent permitted under the laws of the State of
Delaware. In connection with a certain facility lease, the Company has
indemnified its lessor for certain claims arising from the use of the
facilities. The duration of the guarantees and indemnities varies, and in many
cases is indefinite. These guarantees and indemnities do not provide for any
limitation of the maximum potential future payments the Company could be
obligated to make. Historically, the Company has not been obligated to make
any payments for these obligations and no liabilities have been recorded for
these indemnities and guarantees in the accompanying balance sheet. F-16




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AMDL, INC. NOTES TO FINANCIAL STATEMENTS - CONTINUED For The Years Ended December 31, 2003 and 2002 NOTE 7 - STOCK OPTIONS Effective June 30, 1999, the Company adopted the 1999 Stock Option Plan (the
1999 Plan). The shareholders of the Company approved the 1999 Plan on June
28, 2000. Under the 1999 Plan, incentive stock options and nonqualified
options may be granted to officers, employees and consultants of the Company
for the purchase of up to 2,000,000 shares of the Companys common stock. The
exercise price per share under the incentive stock option plan shall not be
less than 100% of the fair market value per share on the date of grant. The
exercise price per share under the non-qualified stock option plan shall not be
less than 85% of the fair market value per share on the date of grant.
Expiration dates for the grants may not exceed 10 years from the date of grant.
The 1999 Plan terminates on June 30, 2009. Under the terms of the 1999 Plan,
the Company granted options to purchase 113,279 and 75,444 shares of the
Companys common stock under incentive stock option agreements in 2003 and
2002, respectively, and granted options to purchase 159,091 and 165,556 shares
of the Companys common stock under non-qualified stock option agreements in
2003 and 2002, respectively. All options granted have an exercise price equal
to the fair market value at the date of grant, vest upon grant and expire five
years from the date of grant. Pursuant to SFAS 123, total compensation expense
recognized for options issued to consultants during 2003 and 2002 was $2,950
and $0, respectively. The Company had no options available for grant under the
1999 Plan at December 31, 2003. On January 25, 2002, the board of directors adopted the 2002 Stock Option Plan
(the 2002 Plan). The shareholders of the Company approved the 2002 Plan on
May 10, 2002. Under the 2002 Plan, incentive stock options and nonqualified
options may be granted to officers, employees, directors and independent
contractors of the Company for the purchase of up to 1,000,000 shares of the
Companys common stock. The exercise price per share under the incentive
stock option plan shall not be less than 100% of the fair market value per
share on the date of grant. The exercise price per share under the
non-qualified stock option shall be not less than 85% of the fair market value
per share on the date of grant. Expiration dates for the grants may not
exceed 10 years from the date of grant. Under the terms of the 2002 Plan, the
Company granted options to purchase 120,000 and 155,000 shares of the
Companys common stock under incentive stock option agreements in 2003 and
2002, respectively, and granted options to purchase 160,000 and 600,000 shares
of the Companys common stock under non-qualified stock option agreements in
2003 and 2002, respectively. All options granted have an exercise price equal
to the fair market value at the date of grant, vest upon grant and expire five
years from the date of grant. Pursuant to SFAS 123, total compensation
expense recognized for options issued to consultants during 2003 and 2002 was
$0 and $7,400, respectively. The Company had no options available for grant
under the 2002 Plan at December 31, 2003. F-17




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AMDL, INC. NOTES TO FINANCIAL STATEMENTS - CONTINUED For The Years Ended December 31, 2003 and 2002 The following is a status of the stock options outstanding at December 31, 2003
and 2002 and the changes during the years then ended: 2003
    
    2002Weighted
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    AverageExercise
    
    
    
    
    
    ExerciseOptions
    
    Price
    
    Options
    
    PriceOutstanding,
beginning of year
    
    
    2,676,630
    
    
    $
    1.62
    
    
    
    1,761,899
    
    
    $
    2.14Granted
    
    
    552,370
    
    
    
    1.10
    
    
    
    996,000
    
    
    
    0.92Exercised
    
    
    
    
    
    
    
    
    
    
    (21,869
    )
    
    
    (0.68
    )Expired/forfeited
    
    
    (229,000
    )
    
    
    (1.87
    )
    
    
    (59,400
    )
    
    
    (5.42
    )Outstanding and exercisable,
end of year
    
    
    3,000,000
    
    
    $
    1.51
    
    
    
    2,676,630
    
    
    $
    1.62Weighted average fair value
of options granted
    
    
    
    
    
    $
    0.59
    
    
    
    
    
    
    $
    0.82
 The following table summarizes information about stock options outstanding at
December 31, 2003: WeightedAverageNumber of
    
    RemainingOptioned
    
    ContractualExercise Price
    
    Shares
    
    Life (Years)$
    4.00
    
    
    
    475,000
    
    
    
    2.7$
    2.39
    
    
    
    50,000
    
    
    
    3.4$
    2.25
    
    
    
    177,000
    
    
    
    3.0$
    2.00
    
    
    
    25,000
    
    
    
    1.3$
    1.75
    
    
    
    345,000
    
    
    
    1.0$
    1.10
    
    
    
    552,370
    
    
    
    5.0$
    1.00
    
    
    
    165,000
    
    
    
    1.8$
    0.68
    
    
    
    490,630
    
    
    
    0.5$
    0.48
    
    
    
    720,000
    
    
    
    3.6
 The fair value of each option granted during 2003 and 2002 to employees and
directors is estimated using the Black-Scholes option-pricing model on the date
of grant using the following assumptions: (i) no dividend yield, (ii) average
volatility of 159 percent and 139 percent, respectively, (iii) weighted-average
risk-free interest rate of approximately 1.3 percent and 4.0 percent,
respectively, and (iv) expected life of one and five years, respectively. See Note 13 for stock option activity subsequent to December 31, 2003. F-18




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AMDL, INC. NOTES TO FINANCIAL STATEMENTS - CONTINUED For The Years Ended December 31, 2003 and 2002 NOTE 8 - STOCK WARRANTS From time to time, the Company issues warrants pursuant to various consulting
agreements and other compensatory arrangements. During the year ended December 31, 2002, the Company issued warrants to
purchase 25,000 shares of the Companys common stock at an exercise price of
$0.40. The warrants are vested and are exercisable through December 23, 2004.
All of the warrants were exercised on October 15, 2003. As these warrants were
issued in connection with fund raising activities, no consulting expense was
recognized for these warrants in the accompanying statement of operations. During the year ended December 31, 2003, the Company issued warrants to
purchase 5,000 shares of the Companys common stock at an exercise price of
$0.40. The warrants are vested and are exercisable through February 24, 2005.
All of the warrants were exercised on October 15, 2003. As these warrants were
issued in connection with fund raising activities, no consulting expense was
recognized for these warrants in the accompanying statement of operations. During the year ended December 31, 2003, the Company issued warrants to
purchase 4,115,620 shares of the Companys common stock at exercise prices of
$0.385 to $0.561, with an average exercise price of $0.388. Of these warrants,
warrants to purchase 3,575,141 common shares were issued to investors
participating in the unit offering, warrants to purchase 340,479 common shares
were issued to placement agents and warrants to purchase 200,000 shares of
common stock were issued to two investors. Warrants to purchase 200,000 shares
of common stock are exercisable through May 31, 2005 and the remaining warrants
are exercisable through December 31, 2005. During 2003 investor warrants to
purchase 3,369,659 shares of common stock and placement agent warrants to
purchase 340,479 shares of common stock were exercised. These warrants were
issued in connection with the Companys convertible note offering in 2003.
Accordingly, interest expense was recognized for these warrants in the
accompanying statement of operations (see Note 9). During the year ended December 31, 2003, the Company issued warrants to
purchase 205,620 shares of the Companys common stock at exercise prices of
$1.58. Of these warrants, warrants to purchase 171,350 common shares were
issued to investors participating in this offering and warrants to purchase
34,270 common shares were issued to the placement agent. All of the warrants
are vested and are exercisable through December 31, 2005. As these warrants
were issued in connection with fund raising activities, no consulting expense
was recognized for these warrants in the accompanying statement of operations. The fair value of each warrant granted during 2003 and 2002 to consultants and
other service providers is estimated using the Black-Scholes option-pricing
model on the date of grant using the following assumptions: (i) no dividend
yield, (ii) average volatility of 94 percent and 139 percent, respectively,
(iii) weighted-average risk-free interest rate of approximately 1.3 percent and
3.8 percent, respectively, and (iv) expected life of three months and two
years, respectively. F-19




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AMDL, INC. NOTES TO FINANCIAL STATEMENTS - CONTINUED For The Years Ended December 31, 2003 and 2002  The following represents a summary of the warrants outstanding at December 31,
2003 and 2002 and changes during the years then ended: 2003
    
    2002Weighted
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    AverageExercise
    
    
    
    
    
    ExerciseWarrants
    
    Price
    
    Warrants
    
    PriceOutstanding,
beginning of year
    
    
    668,806
    
    
    $
    1.99
    
    
    
    1,001,937
    
    
    $
    1.67Granted
    
    
    4,326,240
    
    
    
    0.45
    
    
    
    25,000
    
    
    
    0.40Expired/forfeited
    
    
    (500,000
    )
    
    
    (2.45
    )
    
    
    
    
    
    
    Exercised
    
    
    (3,740,138
    )
    
    
    (0.39
    )
    
    
    (358,131
    )
    
    
    (0.68
    )Outstanding and exercisable,
end of year
    
    
    754,908
    
    
    $
    0.77
    
    
    
    668,806
    
    
    $
    1.99Weighted average fair value
of warrants granted
    
    
    
    
    
    $
    0.42
    
    
    
    
    
    
    $
    0.42
 The following table summarizes information about warrants outstanding at
December 31, 2003: WeightedAverageNumber of
    
    RemainingWarranted
    
    ContractualExercise Price
    
    Shares
    
    Life (Years)$
    1.58
    
    
    
    205,620
    
    
    
    2.0$
    0.68
    
    
    
    143,806
    
    
    
    0.5$
    0.39
    
    
    
    205,482
    
    
    
    2.0$
    0.39
    
    
    
    200,000
    
    
    
    1.4
 The outstanding warrants at December 31, 2003 are held by consultants and other
service providers, stockholders, and former noteholders. See Note 13 for warrant activity subsequent to December 31, 2003. NOTE 9 - EQUITY Preferred Stock The Companys Certificate of Incorporation authorizes up to 10,000,000 shares
of $0.001 par value preferred stock. Shares of preferred stock may be issued
in one or more classes or series at such time and in such quantities as the
Board of Directors may determine. All shares of any one series shall be equal
in rank and identical in all respects. As of October 22, 1999, the Board of
Directors designated 11,000 shares as Series A 8% convertible Preferred Stock
(Preferred A). Each Preferred A had a liquidation preference of $500 per
share plus accrued dividends and was convertible at any time into such number
of fully paid and non-assessable shares of common stock as is determined by
dividing the $500 plus the amount of any accrued and unpaid dividends by $2,
the initial conversion price. At December 31, 2003, the Company had no shares of preferred stock outstanding. Common Stock F-20




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AMDL, INC. NOTES TO FINANCIAL STATEMENTS - CONTINUED For The Years Ended December 31, 2003 and 2002 Cash Financing Activities On April 25, 2002, the Company issued 380,000 shares of common stock upon
exercise of an aggregate of 380,000 previously outstanding warrants and
options at $0.68 per share. The Company received gross proceeds of $258,400
and paid direct expenses of $4,451. The shares were registered on Form S-3
under the Securities Act of 1933, as amended. On October 23, 2002, the board of directors authorized a proposed Regulation S
offering of up to 1,575,000 shares of common stock (Regulation S Offering)
at a price of 70% of the current market price at the time of sale, subject to
a floor price of no less than $0.35 per share, the payment of commissions of
10% of the sales price in cash, non-accountable expenses of 3% of the sales
price, and warrants equal to 10% of the shares sold in the Regulation S
Offering. The Company also authorized a companion offering in the United
States under Regulation D (Regulation D Offering) under the same terms and
conditions as the Regulation S Offering. On December 23, 2002, 250,000 shares
of common stock were sold to one investor in the Regulation S Offering at a
price of $0.40 per share, generating net proceeds of $87,000, net of issuance
costs of $13,000. In February 2003, 50,000 shares were sold in the Regulation
D Offering at a price of $0.40 per share, generating net proceeds of $17,380,
net of issuance costs of $2,620. PCNA, SA, a Swiss corporation, acted as our
placement agent in connection with this offering. In addition to the cash
compensation, the placement agent received common stock purchase warrants for
25,000 shares in 2002 and 5,000 shares in 2003. During the year ended
December 31, 2003 the Company received approximately $12,000 from the
placement agents upon the exercise of the warrants for 30,000 shares of common
stock, on which no commissions were paid. During 2002, the Company incurred $297,499 (including $139,188 of non-cash
compensation) in connection with aborted fundraising efforts. This amount is
included in general and administrative expenses in the accompanying statement
of operations. On March 21, 2003, the board of directors authorized the sale of units
consisting of unsecured convertible notes and warrants to purchase common
stock, at or above the market price of the common stock to accredited and
non-U.S. investors only, in a private placement (2003 Offering No. 1).
Under the terms of the offering, investors received one unit for each $1,000
invested. Each unit generally consisted of a $1,000 principal amount 5%
convertible promissory note due June 30, 2003, generally convertible into
2,598 shares of the Companys common stock plus a warrant to purchase 2,598
shares of the Companys common stock at an exercise price of $0.385 each,
expiring on December 31, 2005. The notes were generally automatically
converted into common shares upon the approval of the listing of the shares
issuable on conversion of the notes by the American Stock Exchange. The
Company raised $1,321,000 in gross proceeds from the initial sale of the
units. See below for details of associated costs. During the year ended
December 31, 2003 the Company received approximately $1,308,000 in gross
proceeds from investors upon the exercise of the warrants included in the
units to purchase 3,369,659 shares of common stock. The Company paid a cash
commission of 10% of the proceeds of warrant exercises to the placement
agents. In addition, during the year ended December 31, 2003 the Company
received approximately $132,000 from the placement agents upon the exercise of
warrants for 340,479 shares of common stock, on which no commissions were
paid. Included in the actual number of warrants issued to each investor was a
5% bonus of warrants to purchase an aggregate of 170,234 shares, which bonus
warrants the Company was contractually obligated to issue because the
registration statement for the shares issued on conversion of the notes and
issuable upon exercise of the warrants did not become effective prior to July
1, 2003. During 2003, all of the convertible notes were converted into
3,415,603 shares of our common stock, including 10,424 shares in respect of
the approximately $4,000 of interest earned on the notes. In the unit offering, the Company utilized the services of two placement
agents, PCNA, S.A., a Swiss corporation, and Gestibroker Consulting and
Financial Management S.A., a Swiss corporation, and paid a total cash
compensation of 13% of funds raised plus issued warrants to purchase common
shares equal to 10% of the aggregate number of
shares of common stock issued or issuable on conversion of the promissory
notes. In addition, the Company entered into an investment advisory agreement
with First London Finance, Ltd, a British Virgin Islands company. Under the
terms of the investment advisory agreement, the Company issued 400,000 shares
of common stock as a success fee for the F-21




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AMDL, INC. NOTES TO FINANCIAL STATEMENTS - CONTINUED For The Years Ended December 31, 2003 and 2002 offering. The Company was also
required to issue to First London Finance an additional 100,000 shares of
common stock if $750,000 in gross proceeds were received from the exercise of
the warrants included in the units within the 90-day period beginning on
August 1, 2003 and ending on October 29, 2003. The additional 100,000 shares
were earned by First London Finance, Ltd. as of October 17, 2003 and were
issued on October 29, 2003 as a cost of equity raising. The Company incurred approximately $413,000 of issuance costs related to
issuance of the units. Of these costs approximately $244,000 was paid in cash
to placement agents and other service providers, and the remaining $169,000 was
based on (i) the estimated fair market value of the 400,000 shares of common
stock granted to First London Finance, (ii) warrants to purchase 340,479 shares
of common stock at an exercise price generally of $0.385 per share expiring
December 31, 2005 issued to placement agents (valued based on the Black-Scholes
model under SFAS 123), and (iii) warrants to purchase 200,000 shares of common
stock at an exercise price of $0.385 per share expiring May 31, 2005 issued to
two investors. The Company recognized approximately $268,000 of these issuance
costs as interest expense based on the original amortization period of the
notes, and transferred approximately $145,000 to additional paid-in capital,
representing the unamortized debt issuance costs associated with the converted
notes, as certain of the issuances were converted prior to their maturity
dates. During the year ended December 31, 2003, the Company incurred
approximately $140,000 of issuance costs related to the exercise of warrants
consisting of cash paid to placement agents and other service providers which
was charged to additional paid-in capital. The Company charged the full amount
of $140,000 to additional paid-in capital. In connection with the investor warrants, the Company recorded a debt discount
of approximately $142,000 (valued based on the Black-Scholes model under SFAS
123 and allocated on a relative fair value basis under APB 14), which was
amortized from the dates of purchase through the maturity dates of the
convertible notes, generally June 30, 2003, or the date of mandatory
conversion, whichever occurred first. The Company amortized approximately
$101,000 of the debt discount to interest expense and transferred approximately
$41,000 of the debt discount to additional paid-in capital for notes converted
prior to their maturity dates, representing the unamortized debt discount
associated with the converted notes. The Company filed a registration statement with the Securities and Exchange
Commission on Form S-3 to register 8,261,233 shares of the Companys common
stock consisting of (i) the 3,415,603 common shares issued upon conversion of
the notes, (ii) the shares underlying the warrants to purchase 3,575,141 common
shares issued to the investors and (iii) the shares underlying the warrants to
purchase 340,479 common shares issued to the placement agents, (vi) the shares
underlying the warrants to purchase 200,000 shares of common stock issued to
two investors and (v) the 400,000 shares of common stock issued to First London
Finance all in connection with 2003 Offering No. 1; and (vi) the 300,000 shares
purchased by the two investors, and (vii) the shares underlying the warrants to
purchase 30,000 common shares issued to the placement agent, all in connection
with the Regulation S Offering of 2002. The registration statement was
declared effective on July 31, 2003. On July 17, 2003 the board of directors authorized a Regulation S offering of
up to 1,100,000 shares of common stock (Regulation S Offering No. 2) at a
price of $0.70 per share, or $770,000 of 5% convertible notes, convertible into
common shares at $0.70 per share, and the payment of commissions of 10% of the
sales price in cash, non-accountable expenses of 3% of the sales price, plus
shares of common stock equal to 10% of the shares sold in Regulation S Offering
No. 2. Under the terms of the offering, the notes automatically converted to
common shares on the attainment of certain market share prices, but no later
than August 31, 2004. On August 13, 2003, the Company received gross proceeds
of $105,000 from one investor in respect of the issuance of a convertible note
of equal amount. On August 27, 2003, the convertible note automatically
converted into 150,000 shares of common stock. Due to the fact that the
conversion price of the note payable was less than the fair market value of the
underlying common stock on the date of issuance, the company recorded imputed
interest expense of $105,000 which is included in interest
expense in the accompanying statements of operations. On September 9, 2003,
the Company received an additional subscription representing gross proceeds of
$665,000 under Regulation S Offering No. 2. The Company and the investor
agreed that the terms of the offering with respect to such investor would be
amended so as to treat the investment as a direct subscription of 950,000
shares of common stock rather than a convertible note. F-22




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##### Table of Contents



AMDL, INC. NOTES TO FINANCIAL STATEMENTS - CONTINUED For The Years Ended December 31, 2003 and 2002 In connection with Regulation S Offering No. 2, the Company utilized the
services of Gestibroker Consulting and Financial Management S.A., as placement
agent, and paid total cash compensation of 13% of funds raised plus issued
110,000 common shares to Gestibroker. The Company incurred approximately
$43,000 of issuance costs related to issuance of the convertible notes on
August 13, 2003. Of these costs approximately $19,000 was paid in cash to the
placement agent (see above) and other service providers, and the remaining
$24,000 was based on the estimated fair market value of the 15,000 shares of
common stock granted to the placement agent (see above). The Company
recognized approximately $2,000 of these issuance costs as interest expense
based on the original amortization period of the note, and transferred
approximately $41,000 to additional paid-in capital, representing the
unamortized debt issuance costs associated with the converted notes, as the
note was converted prior to their maturity dates. On September 9, 2003, the
Company incurred approximately $120,000 in cash issuance costs related to
issuance of the common shares. The Company charged these issuance costs to
additional paid-in capital, since the investment was treated as a purchase of
shares of common stock. On August 21, 2003, the stockholders of the Company authorized the issuance of
3,000,000 shares of common stock at a discount of up to 25% below the current
market price at the time of issuance. Pursuant to stockholder authorization,
on September 24, 2003, the board of directors authorized a Regulation S
offering for the sale of units consisting of up to 3,000,000 shares of common
stock at a discount of up to 25% below the current market price at the time of
issuance and 1,500,000 warrants to purchase common stock (Regulation S
Offering No. 3), to accredited and non-U.S. investors only, in a private
placement. Under the terms of Regulation S Offering No. 3, investors receive
warrants to purchase a number of shares of common stock equal to one-half (1/2)
of the total number of shares purchased in the offering. The warrants are
exercisable at $1.58 per share, equal to 110% of the average closing price of
the Companys common stock, as reported by the American Stock Exchange, for the
ten (10) consecutive trading days immediately prior to and including October
31, 2003. Each warrant will become exercisable beginning ninety (90) days
after the effective date of a registration statement covering the resale of the
shares issuable upon exercise of the warrants, and will remain exercisable
until December 31, 2005. On October 24, 2003 the Company received $375,000 in
gross proceeds from the initial sale of the units in Regulation S Offering No.
3. The Company issued 342,700 common shares and issued a warrant to purchase
171,350 additional common shares. In connection with Regulation S Offering No. 3, the Company utilized the
services of Gestibroker Consulting and Financial Management S.A. and agreed to
pay a total cash compensation of 13% of funds raised plus issue to Gestibroker
warrants to purchase common shares equal to 10% of the aggregate number of

shares of common stock issued. The Company paid $48,750 in fees to its
placement agent in respect of the proceeds received and issued to the placement
agent a warrant to purchase 34,270 shares of common stock at $1.58. The Company incurred legal costs of approximately $17,500 in the fourth quarter
of 2003 related to an offering which closed in January 2004 (see Note 13). The
Company charged these issuance costs to additional paid-in capital, since the
transaction in January 2004 was a purchase of shares of common stock. The Company filed a registration statement with the Securities and Exchange
Commission on Form S-3 to register 1,858,320 shares of the Companys common
stock consisting of (i) the 150,000 common shares issued upon conversion of
the notes, (ii) the 950,000 common shares issued directly upon subscription
and (iii) the 110,000 common shares issued to the placement agent, all in
connection with Regulation S Offering No. 2 and (iv) the 342,000 shares
purchased by the investor, (v) the shares underlying the warrants to purchase
171,350 common shares issued to the investor and (vi) the shares underlying
the warrants to purchase 34,270 common shares issued to the placement agent,
all in connection with Regulation S Offering No. 3, and (vii) the 100,000
shares of common stock
issued to First London Finance on October 29, 2003. The registration
statement was declared effective on December 3, 2003. Non-Cash Financing Activities On November 15, 2001, the Company authorized the issuance of 200,000 shares of
our common stock to International Consulting Partners, a consultant, for
financial consulting services rendered or to be rendered over a six-month
period. On each of December 15, 2001 and January 15, 2002 we issued 33,333
shares pursuant to this agreement. These shares were valued at $75,083 and
$56,383, respectively, based upon the trading price of our common stock on the
date of F-23




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##### Table of Contents



AMDL, INC. NOTES TO FINANCIAL STATEMENTS - CONTINUED For The Years Ended December 31, 2003 and 2002 issuance. On February 25, 2002, the Company issued the remaining
133,334 shares to the consultant. The value of 33,333 of these shares, or
$92,082, was charged to consulting expense in February 2002, the value of
33,333 shares, or $121,832, was charged to consulting expense in March 2002,
the value of 33,334 shares, or $83,585 was charged to consulting expense in
April 2002 and the value of 33,334 shares, or $58,085 was charged to
consulting expense in May 2002. On January 22, 2002, the Company issued 25,000 shares of common stock to
International Communications Corp., a consultant, for investor relations
services rendered in connection with the raising of capital. These shares
were valued at $57,375, based upon the trading price of our common stock on
the date of issue. The value of the shares was initially charged to equity as
cost of funding and subsequently expensed as aborted offering costs as of June
30, 2002. On May 3, 2002, the Company issued 35,000 shares of common stock to
International Communications Corp. for consulting services rendered in
connection with the raising of capital. These shares were valued at $81,813,
based upon the trading price of our common stock on the date of issue. The
value of the shares was expensed as aborted offering costs. On May 10, 2002, the Company authorized the issuance of 66,666 shares of
common stock to International Consulting Partners, a consultant for continuing
financial consulting services to be rendered over the two-month period ending
July 15, 2002. The Company issued 33,333 shares to the consultant for
services through June 15, 2002. These shares were valued at $36,833, based
upon the trading price of our common stock on that date, and charged to
consulting expense. On July 17, 2002, the Company issued 33,333 shares of
common stock to the consultant for services rendered through July 15, 2002
which were valued at $17,000, based upon the trading price of our common stock
on that date, and charged to consulting expense. On October 23, 2002, the board of directors authorized the issuance of 50,000
shares of common stock per month to International Consulting Partners, a
consultant for financial consulting services to be rendered thereafter on a
month to month basis. On January 31, 2003, the Company issued an aggregate of
99,999 shares of common stock (33,333 shares per month for the three months
ended January 31, 2003) for consulting services to the same consultant
pursuant to the prior authorization. Of these shares, 66,666 shares, valued
at $30,600 based upon the trading price of the common stock on the dates
earned, and charged to consulting expense, are reflected in the accompanying
financial statements as if issued on December 31, 2002. The remaining 33,333
shares were valued at $16,433, based upon the trading price of the common
stock on January 31, 2003, and charged to consulting expense. An additional
33,333 shares were issued to the same consultant for services performed in
February 2003, valued at $11,333, based upon the trading price of the common
stock on February 28, 2003, and charged to consulting expense. On October 24, 2002, the board of directors authorized the issuance of 40,000
shares of common stock to Marcel Ewald, a consultant, for financial and
investor relations consulting services in Europe. The consulting agreement
provides for the shares to be held in escrow for a period of one year with
delivery contingent on the Companys satisfaction with the services. The
40,000 shares were issued and placed in escrow on November 21, 2002. These
shares were valued at $25,500, based upon the trading price of the common
stock on that date, and charged to consulting expense. On March 23, 2003 the board of directors authorized the issuance of up to
500,000 shares of common stock to First London Finance under an advisory
agreement in connection with the unit offering described above. On June 18,
2003, the Company issued 400,000 of the shares to First London Finance and
valued 200,000 of the shares at $57,800 on May 21, 2003, the date the first
200,000 shares were earned, and valued 200,000 of the shares at $95,200 on
June 17, 2003, the date the additional 200,000 shares were earned. The value
of the 400,000 shares was included in debt issuance costs for the year ended
December 31, 2003. On October 29, 2003 the Company issued 100,000 shares of
common stock to First London Finance and valued the shares at $123,250 on
October 17, 2003, the date the shares were earned. The value of the 100,000
shares was included in stock issuance costs for the year ended December 31,
2003. F-24




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##### Table of Contents



AMDL, INC. NOTES TO FINANCIAL STATEMENTS - CONTINUED For The Years Ended December 31, 2003 and 2002 On June 11, 2003, the board of directors authorized the issuance of 150,000
shares of common stock to International Consulting Group Ltd., a consultant
for financial advisory services for a six-month period ending November 2003,
and the Company issued the shares on July 2, 2003. The shares were valued at
$66,300 based upon the trading price of the common stock on June 11, 2003 and
were recorded to general and administrative expense over the term of the
agreement. On September 15, 2003, the board of directors authorized the issuance of
130,000 shares of common stock to Boston Financial Partners, Inc., a
consultant for financial advisory services, and the Company issued the shares
on September 29, 2003. The shares were valued at $182,375 based upon the
trading price of the common stock on September 16, 2003, the date of signing
of the agreement. The services were performed during the two-month period of
September and October 2003, and accordingly, the $182,375 was recorded to
general and administrative expense over such period. See Note 13 for common shares authorized to be issued subsequent to December
31, 2003. NOTE 10 - Gain on Relief of Debt and Other Obligations During the fiscal year ended December 31, 2002, the Company removed certain
liabilities as the legal ability of the third parties to collect on these
liabilities had lapsed. As a result, the Company has recorded gains on the
relief of debt and other obligations during the year ended December 31, 2002.
These gains are included in the accompanying statement of operations as other
income for 2002 as follows: Note payable released due to lapse in time
    
    $
    25,000Interest accrued on note payable release
    
    
    12,675Deposit forfeited due to expiration of contract
    
    
    5,800Net gain on relief of debt
    
    $
    43,475
 There was no gain recorded in 2003 for relief of debt. F-25




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##### Table of Contents



AMDL, INC. NOTES TO FINANCIAL STATEMENTS - CONTINUED For The Years Ended December 31, 2003 and 2002 NOTE 11 - EARNINGS PER SHARE The following is a reconciliation of the numerators and denominators of the
basic and diluted earnings per share computations for the years ended December
31: 2003
    
    2002Numerator for basic and diluted earnings per shareNet loss available to common stockholders
    
    $
    (2,873,695
    )
    
    $
    (3,602,127
    )Denominator for basic and diluted earnings per shareWeighted average shares
    
    
    12,693,847
    
    
    
    8,561,511Basic and diluted loss per share
    
    $
    (0.23
    )
    
    $
    (0.42
    )
 NOTE 12 - RELATED PARTY TRANSACTIONS During the years ended December 31, 2003 and 2002 the Company paid
approximately $0 and $7,900, respectively, for consulting services from a
member of the board of directors, exclusive of expense reimbursements. On January 30, 2002 the Company granted Guangzhou A-Share Technology Co. Ltd.,
a Peoples Republic of China corporation (GAST), the right to sell DR-70®
kits in Taiwan and Hong Kong during the one year period ending January 31,
2003. GAST was formed by Jeanne Lai, a former voting trustee under the voting
trust concerning 2,000,000 shares of our common stock held by Chinese
Universal. Accordingly, GAST is considered a related party for financial
reporting purposes. There are no minimum quantities or fixed payments required
of either party to this agreement. During 2002, GAST purchased kits at a total
cost of $24,750. An oral distribution arrangement for Taiwan and Hong Kong
continues with Mercy Bio-Technology, Co., Ltd, a company related to GAST, based
in Taiwan. During 2003, Mercy Bio-Technology purchased kits at a total cost of
$12,350. NOTE 13 - SUBSEQUENT EVENTS On January 8, 2004, the Company closed an offering to accredited investors only
of an aggregate of 2,657,300 shares of common stock at $0.80 per share and
warrants to purchase 1,328,650 shares of common stock at an exercise price of
$1.46 per share, exercisable on or after April 7, 2004 and expiring December
31, 2006. This offering was part of the 3,000,000 share offering approved by
the stockholders on August 21, 2003, which permitted the Company to sell shares
a discount of 25% from the current market price. In connection with this
offering, the Company utilized the services of Gestibroker Consulting and
Financial Management S.A., a Swiss corporation, and paid total cash
compensation of 13% of funds raised plus issued warrants to purchase 259,730
common shares at an exercise price of $1.46 per share, expiring December 31,
2006. The Company registered with the Securities and Exchange Commission on Form S-3
the shares of the Companys common stock issued in connection with the shares
issued to the investors and the shares issuable upon exercise of the related
warrants, including those issued to the placement agent, which registration
statement became effective on February 11, 2004. In January 2004, current and former employees exercised options to purchase
161,185 shares of common stock. The Company received total consideration of
$119,804. On February 23, 2004, the board of directors adopted the 2004 Stock Option Plan
(the 2004 Plan). The 2004 Plan is subject to approval by the shareholders of
the Company. The Company intends to submit the 2004 Plan for
shareholder approval at the next annual meeting. Under the 2004 Plan,
incentive stock options and nonqualified options may be F-26




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##### Table of Contents



AMDL, INC. NOTES TO FINANCIAL STATEMENTS - CONTINUED For The Years Ended December 31, 2003 and 2002 granted to officers,
employees, directors and independent contractors of the Company for the
purchase of up to 2,400,000 shares of the Companys common stock. The exercise
price per share under the incentive stock option plan shall generally not be
less than 100% of the fair market value per share on the date of grant. The
exercise price per share under the non-qualified stock option shall be not less
than 85% of the fair market value per share on the date of grant. Expiration
dates for the grants may generally not exceed 10 years from the date of grant.
Under the terms of the 2004 Plan, on February 23, 2004, 251,300 options were
granted under incentive stock option agreements to employees, and 1,143,700
options were granted under non-qualified stock option agreements to employees,
directors and a consultant; these options have an exercise price equal to the
fair market value on the date of grant, vested immediately and expire in 5
years. In accordance with SFAS 123, the Company will recognize $27,500 of
non-cash consulting expense related to the options issued to the consultant in
2004. On March 15, 2004, the board of directors authorized the issuance of 300,000
shares of common stock to Boston Financial Partners, Inc., a consultant for
financial advisory services to be provided from March 18, 2004 through July 31,
2004 and the Company issued the shares on March 19, 2004. The shares were
valued at $247,350 based upon the trading price of the common stock on such
date, and will be charged to general and administrative expense in the period
the services are provided. There was no underwriter involved in this issuance. F-27




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##### Table of Contents



Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure The change in our independent accounting firm was reported on Form 8-K dated
January 31, 2003 and is incorporated herein by this reference. 
 Item 8A. Controls and Procedures Evaluation of Disclosure Controls and Procedures The Companys chief executive officer and chief financial officer carried
out an evaluation of the effectiveness and operation of the Companys
disclosure controls and procedures. They have concluded after evaluating the
effectiveness of the Companys disclosure controls and procedures as of
December 31, 2003, that as of such date, the Companys disclosure controls and
procedures were effective and designed to ensure that material information
relating to the Company would be made known to them by others. Changes in Internal Controls There have been no significant changes in the Companys internal controls
or in other factors that could significantly affect those controls subsequent
to the Evaluation Date. 
 Part III 
 Item 9. Directors and Executive Officers of the Registrant. The following table sets forth the name and age of each nominee for
director, the year he was first elected a director and his position(s) with
AMDL. Name
    
    Age
    
    Year First Elected
    
    PositionWilliam M. Thompson III, M.D.
    
    
    76
    
    
    
    1989
    
    
    Chairman of the board of directorsGary L. Dreher
    
    
    57
    
    
    
    1999
    
    
    President, Chief Executive
Officer, Secretary and DirectorDouglas C. MacLellan
    
    
    48
    
    
    
    1992
    
    
    DirectorEdward R. Arquilla, M.D., Ph.D.
    
    
    81
    
    
    
    1997
    
    
    DirectorMarvin E. Rosenthale, Ph.D.
    
    
    70
    
    
    
    2002
    
    
    Director
 Dr. Thompson has been one of our directors since June 1989, Chairman since
1991, and he was CEO during the years 1992-1994. He is currently Medical
Director of PPO Next and a member of the clinical surgical faculty of U. C.
Irvine School of Medicine. Dr. Thompson has practiced medicine for over 40
years, in general practice, general surgery and trauma surgery. Previously he
practiced patent law and worked in the pharmaceutical industry in research, law
and senior management for 13 years. During his medical career, he was founding
Medical Director of Beach Street and August Healthcare Companies during a
25-year association with the managed care (PPO) industry. Dr. Thompson has
also served on the OSCAP Board of SCPIE, the malpractice carrier for 20 years
and chaired its Claims Committee. He has been heavily involved with organized
medicine and hospital staff management over many years and was a principal
architect of the paramedic and emergency systems of Orange County, CA. Mr. Dreher joined AMDL in January 1998 as Vice President of Sales and
Marketing. Mr. Dreher has served as our President and as a member of our board of directors since February
1999. From 1993 to 1997, Mr. Dreher served as President of Medical Market
International of Yorba Linda, California, a marketing and management services
company he co-founded. From 1991 to 1993, Mr. Dreher served as Vice President
of Sales and Marketing for Apotex Scientific of Arlington, Texas, a division of
Canadas largest pharmaceutical company. Mr. Dreher also currently serves on
the board of directors of Optimum Care Corporation. 19




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##### Table of Contents



Mr. MacLellan is a member of the board of directors and chairman of the
audit and compensation committees of the Company. Mr. MacLellan is currently
Chairman and CEO of Broadband Access MarketSpace, Ltd, a China-Centric IT firm
marketing products under the Zinc Networks brands since June 2002. Mr.
MacLellan is also currently President and CEO of the MacLellan Group, Inc. a
privately held business incubator and financial advisory firm since May 1992.
Mr. MacLellan is also currently Vice-Chairman of the Board of Axiom
Pharmaceuticals, Inc. (AMEX:AXJ) and its predecessors, since October 2000.
Axiom is a China based bio-pharmaceutical company. From January 1996 through
August 1996, Mr. MacLellan was also the Vice-Chairman of Asia American
Telecommunications (now Metromedia China Corporation) a majority owned
subsidiary of Metromedia International Group, Inc. From November 1996 until
March 1998, Mr. MacLellan was co-Chairman and Investment Committee member of
the Strategic East European Fund. From November 1995 until March 1998, Mr.
MacLellan was President, Chief Executive Officer and Director of PortaCom
Wireless, Inc., a company engaged as a developer and operator of cellular and
wireless telecommunications ventures in selected developing world markets. Mr.
MacLellan is a former member of the board of directors and co-founder of
FirstCom Corporation, an international telecommunications company that operates
a competitive access fiber and satellite network in Latin America, which became
AT&T Latin America, Inc. in August 2000. From 1993 to 1995, Mr. MacLellan was
a Principal and co-founder of Maroon Bells Capital Partners, Inc., a U.S. based
merchant bank, which specializes in providing corporate finance services to
companies in the international and domestic telecommunications and media
industries. Mr. MacLellan was educated at the University of Southern
California in economics and finance, with advanced training in classical
economic theory. Dr. Arquilla has been one of our directors since February 1997. From 1959
until 1994, Dr. Arquilla was a full time faculty member in the Department of
Pathology at the University of Southern California, the University of
California at Los Angeles and the University of California, Irvine. From 1968
to 1986, Dr. Arquilla also served as Professor and Chair of Pathology at U.C.
Irvine and Chief of Pathology services at the U.C. Irvine Medical Center. Marvin E. Rosenthale, Ph. D., Director, became a member of the Board of
Directors in May 2002. He has served as a Scientific Advisory Board member for
AMDL since February 2002. Dr. Rosenthale was President and CEO of Allergan
Ligand Retinoid Therapeutics and Vice President Drug Discovery Worldwide at the
R.W. Johnson Pharmaceutical Institute of Johnson & Johnson as well as a
director of several privately held entities. Dr. Rosenthale holds a B.Sc. in
Pharmacy from Philadelphia College of Pharmacy and Science, and M.Sc. in
Pharmacology from Philadelphia College of Pharmacy and Science, and a Ph.D. in
Pharmacology from Hahnemann Medical College and Hospital. Board of Directors Meetings and Committees During the fiscal year ended December 31, 2003, there were eight meetings
of the board of directors as well as numerous actions taken with the unanimous
written consent of the directors. The board of directors has established a
compensation committee consisting of Mr. MacLellan, Dr. Thompson and Dr.
Arquilla. The compensation committee reviews and recommends to the board of
directors the compensation and benefits of all of our officers and reviews
general policy matters relating to compensation benefits of our employees. The
board of directors has also established an audit committee consisting of Mr.
MacLellan, Dr. Thompson and Dr. Arquilla. The audit committee reviews the
qualifications of the independent auditors, our annual and interim financial
statements, the independent auditors report, significant reporting or
operating issues and corporate policies and procedures as they relate to
accounting and financial controls. The Board has established a governance
committee consisting of Mr. MacLellan, Dr. Rosenthale, and Dr. Thompson. The
governance committee makes recommendations on board nominees and reviews
managements performance. Mr. MacLellan serves as the Chairman of the
compensation, audit and governance committees. Mr. MacLellan serves as the
financial expert on the Companys audit committee. Our executive officer who is not also a director is as follows: Arthur S. Rosten, Age 56, Chief Financial Officer.Mr. Rosten joined us
as our Chief Financial Officer in December 2001. During the last eight years,
Mr. Rosten served in various senior financial executive positions with American
Purification, Inc., SDI Capital Resources, Inc. and Le Group Equus, all in
Newport Beach, California. Earlier in his career, Mr. Rosten was a principal
shareholder, President and Chief Financial Officer of Asyst Data Group. From
1971 to 1991, Mr. Rosten was practicing as a Certified Public Accountant in the
US and Europe with Spicer & Oppenheim International, Ltd. and as a Chartered
Accountant in Canada. He is a licensed CPA in California and a Chartered
Accountant in Canada. Mr. Rosten received his Degree of Accountancy (Post
Bachelor) in 1971 and a Bachelor of Science (with honors) in 1969 from McGill
University, Montreal, Canada. 20




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##### Table of Contents



Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
our officers and directors and those persons who beneficially own more than 10%
of our outstanding shares of common stock to file reports of securities
ownership and changes in such ownership with the Securities and Exchange
Commission. Officers, directors and greater than 10% beneficial owners are
also required by rules promulgated by the SEC to furnish us with copies of all
Section 16(a) forms they file. Based solely upon a review of the copies of such forms furnished to us, we
believe that during 2003 all Section 16(a) filing requirements applicable to
our officers, directors and greater than 10% beneficial owners were complied
with except one of our officers and directors failed to timely file Schedule
13D, which has now been remedied. Code of Ethics for Financial Professionals The Company has adopted a Code of Ethics for Financial Professionals. The
Code of Ethics has been posted and may be viewed on our website at:
http://www.amdlcorporate.com/shar.htm. 
 Item 10. Executive Compensation. Cash Compensation of Executive Officers. The following table sets forth
the total compensation earned by the Chief Executive Officer and all other
executive officers who earned in excess of $100,000 per annum during any of our
last three fiscal years. Long-TermAnnual Compensation
    
    CompensationOther
    
    Common SharesAwards
    
    Underlying Options
    
    All OtherName and Position
    
    Year
    
    Salary ($)
    
    Bonus ($)
    
    Compensation ($)
    
    Granted (#)
    
    Compensation ($)Gary L. Dreher,
    
    
    2003
    
    
    $
    330,000
    (1)
    
    
    -0-
    
    
    $
    15,678
    (2)
    
    
    245,000
    
    
    
    -0-President and CEO
    
    
    2002
    
    
    $
    325,000
    (1)
    
    
    -0-
    
    
    $
    28,893
    (2)
    
    
    450,000
    
    
    
    -0-2001
    
    
    $
    248,000
    (1)
    
    $
    75,000
    
    
    $
    71,000
    (2)
    
    
    350,000
    
    
    
    -0-Arthur S. Rosten,
    
    
    2003
    
    
    $
    175,000
    (3)
    
    $
    8,000
    
    
    
    -0-
    
    
    
    70,000
    
    
    
    -0-Chief Financial Officer
    
    
    2002
    
    
    $
    162,240
    (3)
    
    
    -0-
    
    
    
    -0-
    
    
    
    79,000
    
    
    
    -0-2001
    
    
    $
    7,291
    
    
    
    -0-
    
    
    
    -0-
    
    
    
    -0-
    
    
    
    -0-
   (1)
    
    Effective January 1, 2001, Mr. Drehers compensation was $222,000 per
annum, effective September 1, 2001, Mr. Drehers compensation was raised
to $300,000 per annum, and effective March 1, 2002, Mr. Drehers
compensation was raised to $330,000 per annum.(2)
    
    The 2003 amount represents $4,500 for golf membership dues, $9,000 for a
car allowance and $2,178 for life insurance. The 2002 amount represents
an additional payment of $8,880 in respect of taxes on the 2001 purchase
of the golf club membership, $8,835 for golf membership dues and other
items, $9,000 for a car allowance and $2,178 for life insurance. The 2001
amount represents payments to Mr. Dreher of $59,650 for the purchase of a
golf club membership, $9,000 for a car allowance, $1,325 for life
insurance and $1,125 for golf membership dues.(3)
    
    On December 1, 2001, Mr. Rosten became our Chief Financial Officer on a
part-time basis at a monthly salary of $7,291. Effective March 1, 2002,
Mr. Rosten began serving on a full-time basis at an annual salary of
$175,000. 21




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##### Table of Contents



OPTION GRANTS IN LAST FISCAL YEAR Individual Grants Number of
    
    % of Total OptionsSecurities
    
    Granted toUnderlying Options
    
    Employees in Fiscal
    
    Exercise or BaseName
    
    Granted
    
    Year (3)
    
    Price ($/Sh)
    
    Expiration DateGary Dreher,
President and CEO
    
    245,000(1)
    
    
    63.3
    %
    
    $
    1.10
    
    
    12/19/08Arthur S. Rosten,
Chief Financial Officer
    
    70,000(2)
    
    
    18.1
    %
    
    $
    1.10
    
    
    12/19/08
    (1)
    
    Includes 90,909 options granted as incentive stock options and 154,091
options granted as non-qualified stock options under our 1999 stock option
plan. All of these options became exercisable on the date of grant.(2)
    
    Includes 22,370 options granted as incentive stock options under our 1999
stock option plan and 47,630 options granted as incentive stock options
under our 2002 stock option plan. All of these options became exercisable
on the date of grant.(3)
    
    Based on an aggregate of 387,370 options granted to employees in fiscal
2003. AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES Number of Securities
    
    Value of UnexercisedUnderlying Unexercised
    
    In-the-Money Options atShares Acquired on
    
    
    
    
    
    Options at FY-End (#)
    
    FY-End ($)Name
    
    Exercise (#)
    
    Value Realized ($)
    
    Exercisable/Unexerciseable
    
    Exercisable/Unexercisable (1)Gary Dreher,
President and CEO
    
    
    0
    
    
    
    0
    
    
    
    1,695,000 / 0
    
    
    $
    298,000/0Arthur S. Rosten,
Chief Financial
Officer
    
    
    0
    
    
    
    0
    
    
    
    149,000 / 0
    
    
    $
    43,500/0
    (1)
    
    Based on a price of $1.06 per share, the closing price as reported
on the American Stock Exchange on December 31, 2003. Director Compensation Certain members of our board of directors receive cash compensation for
their services in 2003 on committees at the rate of $2,000 per month. As
Chairman of our compensation, governance and audit committees, Douglas
MacLellan received an additional $667 per month through June 30, 2003 and an
additional $1,000 per month beginning July 1, 2003. Employment Agreements On November 23, 1999, we entered into an employment agreement with Mr.
Dreher. The agreement, which has a term of five years, provided for an annual
base salary of $222,000 effective January 1, 2000. Effective March 1, 2002,
his annual base salary was increased to $330,000. In consideration of this
increase, Mr. Dreher agreed to cancel the provisions of his employment
agreement providing for annual cash bonuses subject to meeting certain sales
goals. No bonus based upon sales was paid for the year ended December 31,
2001; however, in January 2001 the compensation committee approved a
discretionary bonus of $75,000 to Mr. Dreher. 22




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##### Table of Contents



Change in Control Severance Pay Plan On November 15, 2001, our board of directors adopted an Executive
Management Change in Control Severance Pay Plan. The director who may become
entitled to benefits under the plan did not participate in the deliberations or
the vote to approve the plan. The plan covers the persons who at any time during the 90-day period
ending on the date of a change in control, are employed by the company as Chief
Executive Officer and/or President and are not party to a separate agreement
which makes such person ineligible to participate in the plan. These persons
become eligible for benefits under the plan if (1) (a) the company terminates
his or her employment for any reason other than his or her death or cause (as
defined in the plan) or (b) the person terminates his or her employment with
the company for good reason (as defined in the plan) and (2) the termination
occurs within the period beginning on the date of a change in control and
ending on the last day of the twelfth month that begins after the month in
which the change in control occurs. These persons also become eligible for
benefits under the plan if the person terminates employment with the company
for any reason during a one month period commencing six months following a
change in control as defined in the plan. The plan requires the company to make a cash payment in an amount equal to
three hundred percent (300%) of the participants average total compensation
over the prior three years preceding the change in control. If the companys
auditors determine that the total payments made to a person result in an excise
tax imposed by Internal Revenue Code §4999, the company will make an additional
cash payment to the person equal to an amount such that
after payment by the person of all taxes (including any interest or
penalties imposed with respect to such taxes), including any excise tax,
imposed upon the additional payment, the person would retain an amount of the
additional payment equal to the excise tax imposed upon the total payments. Immediately following a change in control, the company is required to
establish a trust and fund the trust with the amount of any payments which may
become owing to persons entitled to receive benefits under the plan but only to
the extent that the funding of the trust would not impair the working capital
of the company. Report of the Compensation Committee on Executive Compensation Our Compensation Committee has issued the following report: Compensation Philosophy.The Compensation Committee is responsible for
developing and recommending the companys executive compensation policies to
the board of directors. The executive compensation philosophy of the company
is to (i) attract and retain qualified management to run the business
efficiently and guide the companys growth in both existing and new markets,
(ii) establish a link between management compensation and the achievement of
the companys annual and long-term performance goals, and (iii) recognize and
reward individual initiative and achievement. Base Salaries.Base salaries for management employees are based primarily
on the responsibilities of the position and the experience of the individual,
with reference to the competitive marketplace for management talent, measured
in terms of executive compensation offered by comparable companies in related
businesses. Increases in base salaries are based upon the performance of the
executive officers as evaluated by the Compensation Committee. Cash Bonuses.Cash bonuses are awarded, at the discretion of the
Compensation Committee, to executive officers based in part on the overall
financial performance of the company and in part on the performance of the
executive officer. The financial performance of the company is measured by
revenue and operating income growth and actual performance against budgeted
performance. Stock Options.The company grants stock options as part of its strategy
to attract and retain qualified persons as executive officers and to motivate
such persons by providing them with an equity participation in the company.
During 2003, options to purchase an aggregate of 552,370 shares were granted to
executives, directors and consultants of the company. CEO Compensation.Mr. Drehers salary for fiscal 2003 was $330,000 in
accordance with the terms of his Employment Agreement with the company. On
November 1, 2001, the board of directors approved an Executive Management
Change in Control Severance Pay Plan which provides the CEO with a cash
severance payment equal to 300% of his average total compensation over the
prior three years in the event of a change in control. 23




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##### Table of Contents



Compensation Limitations.Under section 162(m) of the Internal Revenue
Code, adopted in August 1993, and regulations adopted thereunder by the
Internal Revenue Service, publicly-held companies may be precluded from
deducting certain compensation paid to an executive officer in excess of $1.0
million in a year. The regulations exclude from this limit performance-base
compensation and stock options provided certain requirements such as
stockholder approval, are satisfied. The company plans to take actions, as
necessary, to insure that its stock option plans and executive compensation
plans qualify for exclusion. Douglas C. MacLellan
William M. Thompson III, M.D.
Edward R. Arquilla, M.D., Ph.D.COMPENSATION COMMITTEE
 24




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##### Table of Contents



Item 11. Security Ownership of Certain Beneficial Owners and Management. The following table shows the beneficial ownership of our shares of common
stock as of March 22, 2004 by (i) each person who is known by us to be the
beneficial owner of more than five percent (5%) of our common stock, (ii) each
of our directors and executive officers and (iii) all directors and executive
officers as a group. Except as otherwise indicated, the beneficial owners
listed in the table have sole voting and investment powers of their shares. PercentageName and Address(1)
    
    Number of Shares
    
    OwnedGary L. Dreher
    
    
    4,405,500
    (2
    )
    
    
    18.2
    %William M. Thompson III, M.D.
408 Town Square Lane
Huntington Beach, CA 92648
    
    
    512,126
    (3
    )
    
    
    2.3
    %Douglas C. MacLellan
8324 Delgany Avenue
Playa del Rey, CA 90293
    
    
    306,964
    (4
    )
    
    
    1.4
    %Edward R. Arquilla, M.D., Ph.D.
Department of Pathology
University of California  Irvine
Irvine, CA 92697
    
    
    338,153
    (5
    )
    
    
    1.5
    %Marvin E. Rosenthale, Ph.D.
6808 Queenferry Circle
Boca Raton, FL 33496
    
    
    225,000
    (6
    )
    
    
    1.0Arthur S. Rosten
    
    
    219,000
    (7
    )
    
    
    1.0Chinese Universal Technologies Co., Ltd.
7F-3B1, 61 SEC GUN GYI Road
403 Taichuna, Taiwan
    
    
    2,000,000
    (8
    )
    
    
    9.2
    %RAB Europe Fund Limited
c/o RAB Capital Limited
1 Adam Street
London WCN6LE England
    
    
    1,633,786
    (9
    )
    
    
    7.4
    %RAB Special Situations LP
c/o RAB Capital Limited
1 Adam Street
London WCN6LE England
    
    
    1,633,786
    (9
    )
    
    
    7.4
    %All Directors and Officers
as a group (6 persons)
    
    
    6,006,743
    
    
    
    
    23.3
    %
   (1)
    
    Unless otherwise indicated, address is 2492 Walnut Avenue, Suite 100,
Tustin, California, 92780.(2)
    
    Includes 250,000 shares of common stock issuable upon the exercise of
options at $0.68 per share, 300,000 shares of common stock issuable upon
the exercise of options at $1.75 per share, 100,000 shares of common stock
issuable upon the exercise of options at $1.00 per share, 350,000 shares
of common stock issuable upon the exercise of options at $4.00 per share,
100,000 shares of common stock issuable upon the exercise of options at
$2.25 per share, 350,000 shares of common stock issuable upon the exercise
of options at $0.48
per share, 245,000 shares of common stock issuable upon the exercise of
options at $1.10 per share, and 700,000 shares of common stock issuable
upon the exercise of options at $1.23 per share under the 2004 Stock
Option Plan which is subject to stockholder approval. Also includes
2,000,000 shares of common stock for which Mr. Dreher serves as a voting
co-trustee (see footnotes (9) and (10) below) of which he disclaims
beneficial ownership. 25




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##### Table of Contents



(3)
    
    Includes 96,935 shares of common stock issuable upon the exercise of
currently outstanding warrants and options at an exercise price of $.68
per share, 15,000 shares of common stock issuable upon the exercise of
options at $1.75 per share, 20,000 shares of common stock issuable upon
the exercise of options at $1.00 per share, 35,000 shares of common stock
issuable upon the exercise of options at $4.00 per share, 20,000 shares of
common stock issuable upon the exercise of options at $2.25 per share,
65,000 shares of common stock issuable upon the exercise of options at
$0.48 per share, 40,000 shares of common stock issuable upon the exercise
of options at $1.10 per share, and 200,000 shares of common stock issuable
upon the exercise of options at $1.23 per share under the 2004 Stock
Option Plan which is subject to stockholder approval.(4)
    
    Includes 11,464 shares of common stock issuable upon the exercise of
currently outstanding options at an exercise price of $.68 per share,
15,000 shares of common stock issuable upon the exercise of options at
$1.75 per share, 20,000 shares of common stock issuable upon the exercise
of options at $1.00 per share, 35,000 shares of common stock issuable upon
the exercise of options at $4.00 per share, 20,000 shares of common stock
issuable upon the exercise of options at $2.25 per share, 65,000 shares of
common stock issuable upon the exercise of options at $0.48 per share,
40,000 shares of common stock issuable upon the exercise of options at
$1.10 per share, and 100,000 shares of common stock issuable upon the
exercise of options at $1.23 per share under the 2004 Stock Option Plan
which is subject to stockholder approval.(5)
    
    Includes 33,333 shares of common stock issuable upon the exercise of
currently outstanding options at an exercise price of $.68 per share,
15,000 shares of common stock issuable upon the exercise of options at
$1.75 per share, 20,000 shares of common stock issuable upon the exercise
of options at $1.00 per share, 35,000 shares of common stock issuable upon
the exercise of options at $4.00 per share, 20,000 shares of common stock
issuable upon the exercise of options at $2.25 per share, 65,000 shares of
common stock issuable upon the exercise of options at $0.48 per share,
40,000 shares of common stock issuable upon the exercise of options at
$1.10 per share, and 100,000 shares of common stock issuable upon the
exercise of options at $1.23 per share under the 2004 Stock Option Plan
which is subject to stockholder approval.(6)
    
    Includes 50,000 shares of common stock issuable upon the exercise of
options at an exercise price of $2.39 per share, 35,000 shares of common
stock issuable upon the exercise of options at $0.48 per share, 40,000
shares of common stock issuable upon the exercise of options at $1.10, per
share and 100,000 shares of common stock issuable upon the exercise of
options at $1.23 per share. under the 2004 Stock Option Plan which is
subject to stockholder approval.(7)
    
    Includes 4,000 shares of common stock issuable upon the exercise of
options at $2.25 per share, 75,000 shares of common stock issuable upon
the exercise of options at $0.48 per share, 70,000 shares of common stock
issuable upon the exercise of options at $1.10 per share, and 70,000
shares of common stock issuable upon the exercise of options at $1.23 per
share under the 2004 Stock Option Plan which is subject to stockholder
approval.(8)
    
    The Company believes that one or more individuals may be deemed to share
beneficial ownership in these shares due to their control of Chinese
Universal Technologies Co., Ltd. The Company is unable to ascertain who
those individuals or entities might be. These same 2,000,000 shares of
common stock are subject to a Voting Trust Agreement dated as of December
14, 2000 pursuant to which Dr. Fong-Lin Huang and Gary L. Dreher serve as
voting co-trustees. The Voting Trust Agreement provides that during its
10 year term, (i) the voting trustees shall not be required to elect to
cumulatively vote the shares subject to the voting trust, (ii) Mr. Dreher
or his successor shall always, in any election of directors, vote in favor
of one nominee of Chinese Universal Technologies Co., Ltd., and (iii) on
all other matters coming before the stockholders, the voting
trustees shall be required to vote unanimously in favor (or opposed or in
abstention) with regard to all such matters, otherwise such vote shall
not be counted as having been voted on a proposal, except that the vote
or proxy of only one trustee shall be required to count the shares as
present for purposes of establishing a quorum.(9)
    
    According to a Schedule 13G filed by the these entities on February 17,
2004, RAB Europe Fund Limited, RAB Special Situations LP, RAB Partners
Limited, RAB Capital Limited, William Philip Richards and Michael
Alen-Buckley have shared voting and shared dispositive power with respect
to these shares. Mr. Richards is Managing Director of RAB Capital
Limited, which is the investment manager for RAB Europe Fund Limited. Mr.
Richards is also a director of RAB Partners Limited, which is the general
partner of RAB Special Situations LP. These entities and individuals
reported shared voting and dispositive power with respect to 1,433,786
shares of our common stock, plus warrants to purchase up to 200,000
additional shares, of which warrants to purchase 150,000 26




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shares are held
by RAB Europe Fund Limited and warrants to purchase 50,000 shares are held
by RAB Special Situations LP. These warrants may not be exercised if,
after giving effect to such exercise, RAB Europe Fund Limited and RAB
Special Situations LP, together with their affiliates, would have
collectively acquired beneficial ownership during the sixty (60) day
period ending on and including the date of exercise, that when added to
the number of shares beneficially owned at the beginning of such sixty
(60) day period, exceeds 9.99% of the number of shares of our common stock
outstanding immediately after such exercise. 
 Item 12. Certain Relationships and Related Transactions. On January 30, 2002 the Company granted Guangzhou A-Share Technology Co.
Ltd., a Peoples Republic of China corporation (GAST), the right to sell
DR-70® kits in Taiwan and Hong Kong during the one year period ending January
31, 2003. GAST was formed by Jeanne Lai, a former voting trustee under the
voting trust concerning 2,000,000 shares of our common stock held by Chinese
Universal. Accordingly, GAST is considered a related party for financial
reporting purposes. There are no minimum quantities or fixed payments required
of either party to this agreement. During 2002, GAST purchased DR-70® kits at
a total cost of $24,750. An oral distribution arrangement for Taiwan and Hong
Kong continues with Mercy Bio-Technology, Co., Ltd, a company related to GAST,
based in Taiwan. During 2003 Mercy Bio-Technology purchased DR-70® kits at a
total cost of $12,350. 
 Item 13. Exhibits and Reports on Form 8-K. (a)
    
    Index to Exhibits
 Exhibit No.3.1
    
    Certificate of Incorporation of the Company(1)3.2
    
    Bylaws of the Company(2)3.3
    
    Certificate of Amendment(3)4.1
    
    Specimen of Common Stock Certificate(4)4.2
    
    Certificate of Designations(4)9.1
    
    Voting Trust Agreement by and between Jeanne Lai and Gary L. Dreher, as
Co-Trustees, and Chinese Universal Technologies Co., Ltd.(5)10.1
    
    Amendments to License Agreement between the Company and AMDL Canada,
Inc., dated September 20, 1989, June 16, 1990 and July 5, 1990(6)10.2
    
    The Companys 1992 Stock Option Plan(2)10.3
    
    Operating Agreement of ICD, L.L.C.(7)10.4
    
    Letter Agreement between the Company and BrianaBio-Tech, Inc. and AMDL
Canada, Inc., dated February 7, 1995(7)10.5
    
    The Companys Stock Bonus Plan(8)10.6
    
    Employment Agreement between the Company and Gary L. Dreher, dated January 15, 1998(9)10.7
    
    Salary Continuation Agreement between the Company and That T. Ngo, Ph.D., dated May 21, 1998(10)10.8
    
    Salary Continuation Agreement between the Company and Thomas V. Tilton, dated May 21, 1998(10)10.9
    
    Salary Continuation Agreement between the Company and Harry Berk, dated May 21, 1998(10)
 27




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##### Table of Contents



Exhibit No.10.10
    
    Salary Continuation Agreement between the Company and Gary L. Dreher, dated May 21, 1998(10)10.11
    
    Agreement between the Company and William M. Thompson, M.D., dated May 21, 1998(10)10.12
    
    Amendment No. 1 to Employment Agreement with That T. Ngo, Ph.D., dated July 1, 1998 (10)10.13
    
    Agreement Relating to Salary deferral between the Company and Thomas V.
Tilton, dated July 1, 1998(10)10.14
    
    Agreement Relating to Salary deferral between the Company and Harry
Berk, dated July 1, 1998(10)10.15
    
    Securities Purchase Agreement between the Company and the Purchasers
listed on the Purchaser Signature Pages attached thereto, dated February
17, 1999(11)10.16
    
    The Companys 1999 Stock Option Plan(11)10.17
    
    Agreement Regarding Cancellation of Indebtedness between the Company and
William M. Thompson, III, M.D., dated July 1, 1999(11)10.18
    
    Agreement Regarding Cancellation of Indebtedness between the Company and
Harry Berk, dated July 1, 1999(11)10.19
    
    Agreement Regarding Cancellation of Indebtedness between the Company and
Edward Arquilla, M.D., dated July 1, 1999(11)10.20
    
    Agreement Regarding Cancellation of Indebtedness between the Company and
Thomas V. Tilton, dated July 1, 1999(11)10.21
    
    Agreement Regarding Cancellation of Indebtedness between the Company and
Donald Rounds, dated July 1, 1999(11)10.22
    
    Agreement Regarding Cancellation of Indebtedness between the Company and
That T. Ngo, Ph.D., dated July 1, 1999(11)10.23
    
    Agreement Regarding Cancellation of Indebtedness between the Company and
Gary L. Dreher, dated July 1, 1999(11)10.24
    
    Agreement Regarding Cancellation of Indebtedness between the Company and
Douglas C. MacLellan, dated July 1, 1999(11)10.25
    
    Employment Agreement of Gary L. Dreher dated November 23, 1999(4)10.26
    
    Consulting Agreement with That T. Ngo dated October 1, 1999(4)10.27
    
    Securities Purchase Agreement between the Company and the Purchasers
listed on the Purchaser Signature Pages attached thereto dated February 9,
2000(4)10.28
    
    Securities Purchase Agreement dated as of December 14, 2000 executed December 19, 2000(5).10.29
    
    Secured Promissory Note dated December 14, 2000, effective December 19, 2000(5)10.30
    
    Security and Pledge Agreement dated as of December 14, 2000, executed December 19, 2000(5)10.31
    
    Voting Trust Agreement dated as of December 14, 2000, executed December 19, 2000(5)10.32
    
    Exclusive Distribution Agreement dated December 14, 2000, effective December 19, 2000(5)10.33
    
    Technology Transfer Agreement effective July 30, 2001 between the
Company and Lung-Ji Chang, Ph.D.(12)
 28




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##### Table of Contents



Exhibit No.10.34
    
    Executive Management Change in Control Severance Plan (13)10.35
    
    The Companys 2002 Stock Option Plan (14)*10.36
    
    The Companys 2004 Stock Option Plan
 (b) Reports on Form 8-K
 Form 8-K filed December 10, 2003 reporting the action filed
by the University of Alberta. See Item 1, above
 21.1
    
    Subsidiaries of the small business issuer
Not Applicable.31.1*
    
    Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer31.2*
    
    Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer32.1*
    
    Certification Pursuant to 18 U.S.C. §1350 of Chief Executive Officer32.2*
    
    Certification Pursuant to 18 U.S.C. §1350 of Chief Financial Officer
    *filed herewith  (1)
    
    Incorporated by reference to the Companys Report on
Form 10-K for the year ended December 31, 1989.(2)
    
    Incorporated by reference to the Companys Report on
Form 10-K for the year ended December 31, 1991.(3)
    
    Incorporated by reference to the Companys Report on
Form 10-QSB for the period ended September 30, 1998.(4)
    
    Incorporated by reference to the Companys Report on
Form 10-KSB for the year ended December 31, 1999.(5)
    
    Incorporated by reference to the Companys Report on
Form 8-K dated December 26, 2000(6)
    
    Incorporated by reference to the Companys Report on
Form 10-K for the year ended December 31, 1990.(7)
    
    Incorporated by reference to the Companys Report on
Form 10-KSB for the year ended December 31, 1993.(8)
    
    Incorporated by reference to the Companys Report on
Form 10-KSB for the year ended December 31, 1995.(9)
    
    Incorporated by reference to the Companys Report on
Form 10-KSB for the year ended December 31, 1997.(10)
    
    Incorporated by reference to the Companys Report on
Form 10-QSB for the period ended June 30, 1998.(11)
    
    Incorporated by reference to the Companys Registration
Statement on Form 10-SB dated October 15, 1999. 29




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##### Table of Contents



(12)
    
    Incorporated by reference from the Companys Report on
Form 8-K dated August 31, 2001(13)
    
    Incorporated by reference from the Companys Report on
Form 10-KSB for the year ended December 31, 2001(14)
    
    Incorporated by reference from the Companys Report on
Form 10-KSB for the year ended December 31, 2002. 
 Item 14. Principal Accountant Fees and Services The Audit Committee, which is composed entirely of independent directors,
has selected Corbin & Company LLP as independent accountants to audit our
books, records and accounts for the year 2004. Corbin & Company LLP previously
audited our financial statements during the two fiscal years ended December 31,
2003 and 2002. Audit and Non-Audit Fees Aggregate fees for professional services rendered to the Company by Corbin
& Company LLP and its predecessor firm Corbin & Wertz for the years ended
December 31, 2003 and 2002 were as follows: Services Provided
    
    2003
    
    2002Audit Fees
    
    $
    43,000
    
    
    $
    33,800Audit Related Fees
    
    $
    
    
    
    $
    Tax Fees
    
    $
    
    
    
    $
    All Other Fees
    
    $
    50,605
    
    
    $
    15,110Total
    
    $
    93,605
    
    
    $
    48,910
 Audit Fees. The aggregate fees billed for the years ended December 31,
2003 and 2002 were for the audits of our financial statements and reviews of
our interim financial statements included in our annual and quarterly reports. Audit Related Fees. There were no fees billed for the years ended
December 31, 2003 and 2002 for the audit or review of our financial statement
that are not reported under Audit Fees. Tax Fees. There were no fees billed for the years ended December 31,
2003 and 2002 for professional services related to tax compliance, tax advice
and tax planning. All Other Fees. The aggregate fees billed for the years ended December
31, 2003 and 2002 were for services other than the services described above.
These services include attendance and preparation for shareholder and audit
committee meetings, consultation on accounting, on internal control matters and
review of and consultation on our registration statements and issuance of
related consents (Forms S-3 and S-8). Audit Committee Pre-Approval Policies and Procedures The Audit Committee has implemented pre-approval policies and procedures
related to the provision of audit and non-audit services. Under these
procedures, the Audit Committee pre-approves both the type of services to be
provided by Corbin & Company LLP and the estimated fees related to these
services. 30




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SIGNATURES In accordance with Section 13(a) or 15(d) of the Exchange Act, the
registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized. AMDL, INC.Dated: March 29, 2004
    By:
    /s/ Gary L. DreherGary L. DreherPresident and Chief Executive Officer Dated: March 29, 2004
    By:
    /s/ Arthur S. RostenArthur S. Rosten,Chief Financial Officer In accordance with the Exchange Act, this report has been signed by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated. Signatures
    
    Title
    
    Date/s/ Gary L. Dreher

Gary L. Dreher
    
    President and Chief
Executive Officer and
Director (principal
executive officer)
    
    March 29, 2004/s/ Arthur S. Rosten

Arthur S. Rosten
    
    Chief Financial Officer
(principal financial and
accounting officer)
    
    March 29, 2004/s/ William M. Thompson

William M. Thompson III, M.D.
    
    Chairman of the Board
    
    March 29, 2004/s/ Edward R. Arquilla

Edward R. Arquilla, M.D.
    
    Director
    
    March 29, 2004/s/ Douglas C. MacLellan

Douglas C. MacLellan
    
    Director
    
    March 29, 2004/s/ Marvin E. Rosenthale

Marvin E. Rosenthale
    
    Director
    
    March 29, 2004
 31