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U.S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549


FORM 10-KSB/A

(Mark One)

|      |  |                                                                                     
|----- |  | ------------------------------------------------------------------------------------
|[ x ] |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
|      |  |                                                                                     
|      |  | FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002                                         

|     |  |                                                                                         
|---- |  | ----------------------------------------------------------------------------------------
|[  ] |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

| |  |                                                  
| |  | -------------------------------------------------
| |  | For the transition period
from        to        .
| |  |                                                  
| |  | Commission File Number 0-27689                   

AMDL, Inc.




(Exact name of small business issuer as specified in its charter)


|                                                               |  |                                  
|-------------------------------------------------------------- |  | ---------------------------------
|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
Common Stock, $.001 par value |  | Name of each exchange on which
registered
AMEX
|                                                                      |  |                                               

Securities to be registered under Section 12(g) of the Act:

Common Stock, $.001 par value




(Title of class)






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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/A or any amendment to
this Form 10-KSB/A. [  ]

The issuers revenue for the fiscal year ended December 31, 2002 was
$179,003.

The market value of the voting stock held by non-affiliates of the issuer
as of March 24, 2003 was approximately $2,873,000.

The number of shares of the common stock outstanding as of March 24, 2003
was 9,223,322.

DOCUMENTS INCORPORATED BY REFERENCE

Inapplicable.

Transitional Small Business Disclosure Format (check one)

Yes   [  ]          No   [X]





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TABLE OF CONTENTS



|               |                                                                                                                         |  |  |  |  |  |  | 
|-------------- | ----------------------------------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|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                                                                                           
|               | Item 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure                           
|Part III      
|               | Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance With Section 16(a) of the Exchange Act
|               | 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.Controls and Procedures                                                                                        
|SIGNATURES    
|CERTIFICATIONS
|Exhibit Index 
|EXHIBIT 99.1  
|EXHIBIT 99.2  



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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 diagnosis and treatment of the same disease. Hospital, clinical,
research and forensic laboratories and doctors offices 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. We have
two primary kits: DR-70® for the detection of at least 13 different types of
cancer, including: lung (small and non-small cell); stomach; breast; rectal;
colon; prostate and liver; and Pylori-Probe for detection of Helicobacter
Pylori (H.pylori), a bacterium that colonizes the mucus lining associated
with gastric and peptic ulcers. We have received approvals to import and
market DR-70® in Canada, the UK and Australia. We market DR-70® primarily in
Europe and Asia through recently developed distribution channels. 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 for approval of our DR-70® kit
as an aid in monitoring patients with colorectal cancer. See Regulation,
below. The DR-70® test is not available in the United States. Pylori-
Probe is cleared for sale in the United States; however, we do not intend
to market the Pylori-Probe  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.

Our executive offices are located at 2492 Walnut Avenue, Suite 100,
Tustin, California 92780, telephone number (714) 505-4460.

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. We no longer meet the standards for a continued listing on AMEX, and AMEX
may take action to delist our common stock. No notice has as yet been received
from AMEX requesting that we demonstrate compliance with the listing
requirements or asserting that we will be delisted. If we are delisted from
AMEX, delisting could have a material adverse impact on the market for our
common stock. 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.

In August 2001, the Company acquired intellectual property rights and an
assignment of a US patent application for combination immunogene therapy
technology that is a possible treatment for those diagnosed with cancer 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 standard approach
in utilizing gene therapy to combat cancer has been to attempt to replace
defective genes in cancer cells, which has proven to be impractical because of
the number of genes involved. The combination gene therapy technology invented
by Dr. Chang uses GM-CSF (a granulocyte macrophage colony stimulating factor)
and B7-2 (a t-cell co-stimulating factor) to both build the bodys immune
system and destroy cancer cells. The treatment involves injecting the patient
with two genes in one virus carrying a combination of B7-2 and GM-CSF. Dr.
Chang completed Phase 1 human clinical trials in Canada before we acquired the
technology. Our technology has been shown effective in eradicating
experimental human skin and brain tumors implanted in mice. 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. See
Patents, below.

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

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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, and its future prospects for licensing the technology will
be significantly impaired.

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, prostate 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, 237 patients with newly diagnosed lung
cancer and 244 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 the volunteers. The control group was composed of smokers
and non-smokers. The results showed sensitivity of the lung cancer test was
66% and specificity was 92%. We believe these results, coupled with data
reported in continued studies at the Cross Cancer Institute, demonstrate the
value of the DR-70® 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 cancer.

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 addition to the proprietary test kits described above, 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 for 2002, ketone strips accounted for $140,578,
or 94.8%, 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 $7,780, or 4.3%, of our total sales in
2002. 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
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

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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.

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 as well as international approvals
and insurance reimbursements for our DR-70® product                                                                           
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Continue to distribute DR-70® kits in current markets of Europe and Asia                                                                                                                   
|
| |  |  | Develop additional DR-70® distribution channels in existing markets                                                                                                                        
|
| |  |  | Develop DR-70® distribution channels in new markets                                                                                                                                        
|
| |  |  | Pursue one or more strategic partners to license and develop
our combination immunogene therapy technology for the treatment of
cancer and potentially a vaccine inhibiting certain cancers

We intend to continue an aggressive product development program.
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 our product candidate for an intended use                          
|
| |  |  | The product candidate was not economical for us to manufacture and commercialize                                                          
|
| |  |  | The product candidate is not cost effective in light of existing therapeutics                                                             

Of course, there may be other factors that prevent us from marketing a
product. We cannot guarantee we will be able to produce commercially
successful products. Further, clinical trial results are frequently
susceptible to varying interpretations by scientists, medical personnel,
regulatory personnel, statisticians and others, which may

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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.

We are currently conducting three major cancer studies for our DR-70® in
Germany at a cost of approximately $25,000. Studies completed at the
University of Frankfurt have shown DR-70® to be a reliable screening test for
cancer of the gastrointestinal tract. Other lung cancer and ovarian cancer
studies in Germany are ongoing. The purpose of the study is to verify
specificity and sensitivity. We are also conducting a study, at a cost of
approximately $68,000, with 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.

Sales and Marketing

In exchange for relinquishing all of its exclusive Canadian and limited
worldwide marketing rights for DR-70®, we made eighteen monthly payments of
$750 to JGT Management Services Ltd. (JGT), an unrelated third party,
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, 2002 we paid $1,798 to JGT. The agreement expires in
August 2008; however, the Company may elect to pay a $25,000 buy-out fee after
October 1, 2003.

On December 20, 2000, the Medical Devices Agency of the United Kingdom
Department of Health issued a letter of no objection to the exportation of
DR-70® from the United States to the United Kingdom, thereby allowing DR-70® to
be sold in the United Kingdom. We have made arrangements with Surescreen
Diagnostics, Ltd., to distribute DR-70® within the United Kingdom. The
arrangements are informal and provide for the Company to supply DR-70® at the
then current distributor price. There are no fixed terms, expiration dates or
minimum purchase requirements.

In December 2001, we terminated our sole exclusive distribution agreement,
with Chinese Universal Technologies Co., Ltd. (Chinese Universal). The
agreement granted Chinese Universal the exclusive right to distribute, market
and sell our DR-70® diagnostic kits in Taiwan, Hong Kong, Korea, the
Philippines, Japan, Singapore, Malaysia, Thailand, Vietnam and Cambodia through
October 31, 2005. Chinese Universal failed to make minimum purchases of
approximately $2.5 million per year (10,000 DR-70® kits) for the first year
as required under the agreement. Under the terms of the agreement, Chinese
Universal paid us $300,000 as a license fee. Of this amount, $5,172 (one
month) was included in revenue in the year ended December 31, 2000 and the
balance was recorded as deferred revenue at December 31, 2000. On termination
of the agreement in December 2001, all unamortized deferred revenue was
recognized.

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.

Currently, our licensing efforts are focused on seeking additional
exclusive and non-exclusive distribution agreements with distributors located
in Europe, Asia, South America, Africa, Australia, and Canada, where we have
obtained, or believe we can obtain, regulatory approval. Health Canada has
issued a Medical Device License to the Company. This license permits the
Company to market DR-70® in Canada and is renewable annually. Accordingly, we
intend to enter into agreements with distributors who will market DR-70®
throughout Canada. In January 2003, the Therapeutic Goods Administration,
Commonwealth Department of Health and Ageing, Australia, issued to AMDL
Australia Pty. Ltd, our identified Australian distributor, a Certificate of
Device Listing. We have not yet finalized the terms of our exclusive
distribution agreement with AMDL Australia Pty. Ltd. At the time we enter into
a distribution agreement, we normally grant a license to use the name DR-70®
and provide narrow territorial restrictions for each distributor.

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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.

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.

DR-70®. 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 DR-70® is approved for sale in the United
States. We have 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.

We have not yet submitted an application to the U.S. FDA to sell DR-70® in
the United States. In September 2002 we submitted our Pre-Investigational
Device Exemption (Pre IDE) packet to the FDA and we are in the final stages
of responding to FDA comments. The Pre-IDE packet is necessary to establish a
dialogue with the FDA regarding the test procedures and how the clinical trials
are to be performed. The Pre-IDE packet describes our proposal to determine
the efficacy of the DR-70® test for monitoring patients with colorectal
cancer. The Pre-IDE packet includes a history and review of relevant
literature and an explanation of how the DR-70® test identifies the named
cancer and the scientific principle that forms the basis of how the test works.
We also describe the study we will undertake to prove the safety and efficacy
of the test. The FDA comments upon the test procedures we have proposed in the
Pre IDE packet and may make further suggestions on the scope and nature of the
proposed study. We have completed the pre-clinical precision study, which
validates the consistency, reproducibility and stability of our DR-70® kit
and is required by the FDA. The next portion of the FDA approval process
consists of procuring the required specimens and conducting clinical trials
comparing our DR-70® antigen to the currently accepted assay, CEA. We expect
to acquire the blood samples in second quarter 2003 and when funds become
available we plan to conduct the clinical trials and submit the results to the
FDA for
review. In addition to that which was originally submitted, our ultimate
submission to the FDA will include any suggested tests or information required
by the FDA. 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

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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 June 1995, we received approval from the Cross Cancer Institute in
Canada to apply for marketing clearance for our DR-70® lung cancer tumor-marker
from the Health Protection Branch in Ottawa, Canada. In August 1995, we
received marketing clearance from the Health Protection Branch in Canada. The
clearance had lapsed due to procedural changes but a new license from the
Health Protection Branch was issued on January 25, 2002 update expiry and
renewal.

In January 2003, the Therapeutic Goods Administration, Commonwealth
Department of Health and Ageing, Australia, issued to AMDL Australia Pty. Ltd,
our identified Australian distributor, a Certificate of Device Listing in
respect of our DR-70® kit, permitting sales in Australia.

PyloriProbe. 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. As another
non-invasive test exists, the Company does not believe that the PyloriProbe
can be competitively marketed. At December 31, 2002, we fully reserved for the
carrying value ($9,385) of the Pylori Probe inventory on our balance sheet.

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 States with respect to our methodology for the DR-70®
tumor-markers as reliable indicators of the presence of cancer.

In August 2001, the Company 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 is pending and it is unclear what claims, if any,
will be granted by the United States Patent and Trademark Office. 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. A description of the
technology is set forth under Description of Business, above.

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

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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, 2002 and 2001, we
spent $400,624 and $174,611, respectively, on research and development. During
the 2003 fiscal year we expect to incur approximately $450,000 for research and
development, including $436,000 for the FDA DR-70® application. This amount
is exclusive of the costs of our principal scientific consultant, Dr. That G.
Ngo, who is compensated on an hourly basis for research work on our technology.

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.

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 obtained
product liability insurance in April 2001.

Employees

As of March 1, 2003, we had four full-time employees and one part-time
employee. 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.

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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.




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. If AcuVector is successful, the Company may be liable for
substantial damages, its rights to the intellectual property will be adversely
affected, and its future prospects for licensing the technology will be
significantly impaired. No significant discovery has as yet been conducted in
the case. See Item 1, Description of Business, above.




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 2002.




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                        
|
| |  |  | 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 bid quotations (for
the three quarters ended September 30, 2001) and the high and low closing sale
price (for the quarter ended December 31, 2001 and the year ended December 31,
2002) for our common stock. We consider our common stock to be thinly traded
and that any reported bid, sale or closing prices may not be a true
market-based valuation of our common stock. The bid

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quotations on the OTC
Bulletin Board or in the pink sheets represent inter-dealer quotations
without retail markups, markdowns or commissions and may not represent actual
transactions.

|                   |  |      |      |     |  |   |      | 
|------------------ |  | ---- | ---- | --- |  | - | ---- | 
|Quarter Ended      |  | High |      | Low
|                   |  |      |      |    
|March 31, 2001     |  | $    | 2.03 |     |  | $ | 1.41 | 
|June 30, 2001      |  | $    | 3.47 |     |  | $ | 1.91 | 
|September 30, 2001 |  | $    | 5.05 |     |  | $ | 3.52 | 
|December 31, 2001  |  | $    | 3.99 |     |  | $ | 2.15 | 

|                   |  |      |      |     |  |   |      | 
|------------------ |  | ---- | ---- | --- |  | - | ---- | 
|Quarter Ended      |  | High |      | Low
|                   |  |      |      |    
|March 31, 2002     |  | $    | 4.38 |     |  | $ | 1.80 | 
|June 30, 2002      |  | $    | 4.00 |     |  | $ | 1.01 | 
|September 30, 2002 |  | $    | 1.15 |     |  | $ | 0.30 | 
|December 31, 2002  |  | $    | 0.85 |     |  | $ | 0.18 | 

As of March 24, 2003, there were approximately 824 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.

|                                                           |  |                      |           |                   |  |                       |      |  |  |                      |         | 
|---------------------------------------------------------- |  | -------------------- | --------- | ----------------- |  | --------------------- | ---- |  |  | -------------------- | ------- | 
|                                                           |  | (a)                  |           | (b)               |  | (c)                  
|                                                           |  |                      |           |                   |  |                       |      |  |  | Number of securities
|                                                           |  |                      |           |                   |  |                       |      |  |  | remaining available 
|                                                           |  |                      |           |                   |  |                       |      |  |  | for future issuances
|                                                           |  | Number of securities |           | Weighed-average   |  | under equity         
|                                                           |  | to be issued upon    |           | exercise price of |  | compensation plans   
|                                                           |  | exercise of          |           | outstanding       |  | (excluding securities
|                                                           |  | outstanding options, |           | options, warrants |  | reflected in         
|Plan Category                                              |  | warrants and rights  |           | and rights        |  | column (a))          
|Equity compensation plans approved by security holders     |  |                      | 2,676,630 |                   |  | $                     | 1.62 |  |  |                      | 245,501 | 
|Equity compensation plans not approved by security holders |  |                      | -0-       |                   |  |                       | -0-  |  |  |                      | -0-     | 
|Total                                                      |  |                      | 2,676,630 |                   |  | $                     | 1.62 |  |  |                      | 245,501 | 

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. At the time of the transactions the shares
represented over 37% of our 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. 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

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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, 2002, we sold unregistered shares of our securities in the
following transactions:

On November 15, 2001, the Company authorized the issuance of 200,000
shares of our common stock to International Consulting Partners, a consultant
for continuing 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 closing price of our common stock on
the date of issue. 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. These shares of common stock were issued
pursuant to Section 4(2) of the Securities Act. There was no underwriter
involved in this issuance.

On January 22, 2002, the Company issued 25,000 shares of common stock to
Investor Communication Corp., for public relations and communication services
rendered in connection with a plan to raise additional capital. These shares
were valued at $57,375, based upon the trading price of our common stock on the
date of issue. The shares were initially charged to equity as cost of funding
and subsequently expensed as aborted offering costs. The shares of common
stock were issued pursuant to Section 4(2) of the Securities Act. There was no
underwriter involved in this issuance.

On May 3, 2002, the Company issued 35,000 shares of common stock to
Investor Communication Corp., for public relations and communication services
rendered in connection with a plan to raise additional 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.
The common stock was issued pursuant to Section 4(2) of the Securities Act.
There was no underwriter involved in this issuance.

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 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. The common stock
was issued pursuant to Section 4(2) of the Securities Act. There was no
underwriter involved in this issuance.

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 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. The common stock was issued pursuant to
Section 4(2) of the Securities Act.

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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 for
services rendered in 2002 were valued at $30,600, and the 33,333 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 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. 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 decreased to $2,434,303 at December 31, 2002 from $5,026,404
at December 31, 2001. The decrease is a result of cash used in operating
activities which was partially offset by receipts from the sale of common stock
and the exercise of warrants.

Our total outstanding indebtedness increased to $243,585 at December 31,
2002 as compared to $242,994 at December 31, 2001. The increase resulted from
increases in operating payables offset, in part, by the forgiveness of certain
indebtedness.

From December 31, 2001 to December 31, 2002, our cash and cash equivalents
decreased by $2,582,081, primarily as a result of cash used in operating
activities. As of March 1, 2002, cash is being depleted at the rate of
approximately $135,000 per month exclusive of clinical trial costs which
will approximate $85,000 for first quarter 2003. In March 2003, we received a
purchase order for ketone strips in the amount of approximately $109,000. We
expect to receive additional cash from other product sales, although no other
definitive orders or commitments have been received in any significant
quantity.

As of March 24, 2003, our cash on hand was approximately $99,000. Without
a significant change in sales, our only source of additional funds to meet
future operating expenses and the costs of the FDA approval process is the sale
of the Companys securities. The amount of cash on hand is only sufficient to
meet our operating expenses through March 31, 2003. In addition, at March 24,
2003, we had negative working capital of approximately $100,000. In addition,
current liabilities have increased from approximately $244,000 at December 31,
2002 to approximately $368,000 at March 24, 2003.

There are significant uncertainties which negatively affect our
operations. These are principally related to (i) the absence of any strong
distribution network for our DR-70® kits, (ii) the early stage of development
of our Combination 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. In addition, the lack of a market for our PyloriProbe
product due to changes in technology and the presence of improved competitive
products has led us to conclude that our investment in this product and any
inventory on hand will have no future realizable value. Accordingly, the
$9,385 carrying value of our PyloriProbe inventory was fully reserved for
at December 31, 2002. Moreover, there is no assurance as to when, if ever, we
will be able to conduct our operations

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on a profitable basis. Our limited
sales to date and the lack of any purchase requirements in the existing
distribution agreements, makes it impossible to identify any trends in our
business prospects.

Additionally, in order to (i) fund the costs of acquisition of the colon
cancer samples and conducting the clinical trials needed for the FDA approval
process, and (ii) pay ongoing general and administrative expenses, we are
currently seeking to raise additional funds through the sale of the Companys
equity securities. The potential impact of either an adverse determination in
the action brought by AcuVector or poor results in ongoing German trials could
materially impact our ability to obtain the additional working capital. There
is no assurance we will be able to generate sufficient revenues or sell equity
any 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 lawsuit may have an effect on our ability to license
the CIT technology.

As reported in our financial statements and in the report of our auditors
for the year ended December 31, 2002, there is substantial doubt as to our
ability to continue as a going concern. The financial statements do not
include any adjustments related to recoverability and classification of assets
and liabilities that might result should we be unable to continue as a going
concern.

Critical Accounting Policies

Our Consolidated 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

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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 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, 2002 Compared to Year Ended December 31, 2001

Net Revenue. During the year ended December 31, 2002, we generated
revenues of $179,003 from product sales compared to revenues from product
sales of $188,472 in the prior year period. This decrease was principally
attributable to the greater volume of orders for DR-70® kits placed by
Chinese Universal in 2001, the initial year of their 5-year license agreement,
offset by an increase in sales of our OEM products. Our product sales are
further broken down as follows:

|             |  |                   |         |                   |  |          |        |         |  |   |        |  |  |   |         | 
|------------ |  | ----------------- | ------- | ----------------- |  | -------- | ------ | ------- |  | - | ------ |  |  | - | ------- | 
|             |  | Year ended        |         | Year ended       
|             |  | December 31, 2002 |         | December 31, 2001
|             |  |                   |         |                  
|             |  | Domestic          |         | Foreign           |  | Domestic |        | Foreign
|             |  |                   |         |                   |  |          |        |        
|DR-70® kits  |  | $                 | 3,794   |                   |  | $        | 26,851 |         |  | $ | 2,729  |  |  | $ | 115,660 | 
|             |  |                   |         |                   |  |          |        |         |  |   |        |  |  |   |         | 
|OEM Products |  |                   | 148,358 |                   |  |          | 0      |         |  |   | 70,083 |  |  |   | 0       | 
|             |  |                   |         |                   |  |          |        |         |  |   |        |  |  |   |         | 
|TOTAL        |  | $                 | 152,152 |                   |  | $        | 26,851 |         |  | $ | 72,812 |  |  | $ | 115,660 | 
|             |  |                   |         |                   |  |          |        |         |  |   |        |  |  |   |         | 

During 2003, we expect sales of OEM products to be at or about the same
level as experienced in 2002. Assuming FDA approval of DR-70® in late 2003,
we expect sales of DR-70® to increase in 2003, but any such increase in sales
is not expected to impact significantly our operating results for 2003. In
2001, we also recorded licensing revenues of $494,828. The licensing revenue
in the year ended December 31, 2001 was attributable to (i) amortization of the
licensing fee received from Chinese Universal for a full 12 month period in the
year ended

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December 31, 2001; (ii) the one-time recognition of the unamortized
balance of deferred income upon the termination of the Chinese Universal
license agreement; and (iii) the one-time recognition of a non-refundable
deposit of $200,000 from Chinese Universal because Chinese Universal did not
complete its obligations under the corresponding agreement with the Company.
No licensing revenue was received in 2002. We also realized interest income of
$22,523 in fiscal year 2002 compared to $130,976 of interest income for the
equivalent period in the prior year. The decrease in interest income was due
to a decrease in available funds for investments during the fiscal year 2002.

Gross Profit. Gross profit decreased by $512,758 or 84.3% to $95,356 for
the year ended December 31, 2002, compared to $608,114 for the period ended
December 31, 2001. The decrease in gross profit was due to a decrease in sales
of $9,469 and a decrease in licensing revenue of $494,828. Gross profit on
product sales was 53.3% in the year ended December 31, 2002 compared to 60.1%
in the prior year. The decrease was due to the relative decrease in sales of
DR-70®, a higher margin product, as a percentage of product sales.

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, 2002. 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, 2002. Although the Company believes it provides
high-quality products, pricing and 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, 2001 were $400,624 as compared to $174,611 for the year
ended December 31, 2001. The increase of $226,013 was primarily a result of an
increase in (a) the amount of services provided by our principal consultant in
the amount of $38,006 due to expanded efforts on (i) refinement of our DR-70®
kit and (ii) development of additional patent applications, and (b) expenses of
$178,415 related to clinical trials.

General and Administrative Expenses. General and administrative expenses
increased by $451,931to $3,362,857 for the year ended December 31, 2001 as
compared to the $2,910,926 reported for the year ended December 31, 2001 due
mainly to increases in: (i) investor and financial consulting services of
approximately
$560,000; (ii) an overall increase of approximately $140,000 paid to the
Companys newly hired full-time Chief Financial Officer compared to a
part-time Chief Financial Officer in the prior year; (iii) approximately
$95,000 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
fees of approximately $80,000. These amounts were partially offset by a
decrease in non-cash (securities) compensation for services of approximately
$665,000, including (a) a decrease of $400,000 relating to the pricing of stock
issued for financial consulting services (339,999 shares issued in the year
ended December 31, 2002 compared to 353,333 shares issued in the prior year)
and (b) $265,000 from the issuance of 300,000 warrants (estimated using the
Black-Scholes option-pricing model) for research services issued in the year
ended December 31, 2001. The significant components of general and
administrative expenses for the year ended December 31, 2002 primarily consist
of payroll, taxes and benefits; consulting expenses, including financial
consulting, investor relations and public relations; professional fees,
including legal, audit and patent expenses; and aborted offering costs.

Net Loss and Loss from Operations.As a result of the factors described
above, in fiscal year 2002, our net loss was $3,602,127 or ($0.42) per share,
compared to a net loss of $2,346,447 or ($0.33) per share, in fiscal year 2001.

Assets and Liabilities

At December 31, 2002, the Company had total assets of $2,434,303 compared
to total assets of $5,026,404 at December 31, 2001. Cash was $347,752 as of
December 31, 2002, a decrease of $2,582,081 (88.1%) from the $2.929,833 cash on
hand as of December 31, 2001. Cash used in operations was $2,897,366, cash
used in investing activities from purchases of fixed assets was $25,664, and
cash provided by financing activities from the sale of common stock and
exercise of warrants and options was $340,949. As of march 24, 2003, our cash
has further declined to approximately $99,000.

14



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##### Table of Contents



Accounts receivable was $91,517 at December 31, 2002, an increase of
$81,230 (689.6%) from the $10,287 at December 31, 2001 due principally to a
single large order for OEM products in 2002 which was shipped just prior to
year end. Inventories increased $3,508 (4.4%), to $82,974, from the $79,466 at
December 31, 2001. The increase in inventories is attributable to increased
work in process and raw materials available for DR-70® kit manufacturing, net
of the reserve for the PyloriProbe inventory.

Net fixed assets totaled $31,570 at December 31, 2002 compared to $15,000
at December 31, 2001, an increase of $16,570 (110.5%). Purchases of fixed
assets in 2002 totaled $25,664, while depreciation and amortization totaled
$9,094, resulting in the net increase in fixed assets.

Total liabilities at December 31, 2002 were $243,585, an increase of $591
from the $242,994 at December 31, 2001. Accounts payable and accrued
liabilities were $144,688 at December 31, 2001, an increase of $18,272 (14.5%)
from the $126,416 at December 31, 2001. The increase is primarily due to (i)
increased trade payables and accruals attributable to December 2002 product
shipments and stock exchange fees offset by the elimination of accrued interest
payable on a debt that was treated as forgiven. Accrued payroll totaled
$86,548 at December 31, 2002, an increase of $770 compared to $85,778 at
December 31, 2001.

A note payable in the amount of $25,000 carried as a liability at December
31, 2001 was treated as forgiven as of December 31, 2002. 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. We also recognized an additional $18,475 of debt
forgiveness, principally related to the accrued interest on the note.

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 lack of significant operating history, demand
for our products, international business operations, dependence on licensees,
governmental regulations, technological changes, intense competition, and
dependence on management. 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-1 | 
|Balance Sheet as of December 31, 2002                                             |  |  | F-2 | 
|Statements of Operations for the years ended December 31, 2002 and 2001           |  |  | F-3 | 
|Statements of Stockholders Equity for the years ended
December 31, 2002 and 2001 |  |  | F-4 | 
|Statements of Cash Flows for the years ended December 31, 2002 and 2001           |  |  | F-6 | 
|Notes to Financial Statements                                                     |  |  | F-7 | 

15



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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, 2002, 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,
2002, 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.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As disclosed in Note 1, the Company
has incurred significant operating losses in the last two years and has an
accumulated deficit of $20,657,994 at December 31, 2002. These factors, among
others, raise substantial doubt about the Companys ability to continue as a
going concern. Managements plans in regard to these matters are described in
Note 1. The financial statements do not include any adjustments that may
result from the outcome of this uncertainty.

|                     
|---------------------
|CORBIN & COMPANY, LLP

Irvine, California
February 23, 2003, except
Note 13 as to which the date is
March 21, 2003

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AMDL, INC.

BALANCE SHEET

|                                     |                                       |                                                                                                       |           |         |              |   | 
|------------------------------------ | ------------------------------------- | ----------------------------------------------------------------------------------------------------- | --------- | ------- | ------------ | - | 
|                                     |                                       |                                                                                                       |           |         | December 31,
|                                     |                                       |                                                                                                       |           |         | 2002        
|                                     |                                       |                                                                                                       |           |         |             
|ASSETS                               |                                       |                                                                                                       |           |        
|Current assets                       |                                       |                                                                                                       |           |        
|                                     | Cash and cash equivalents             |                                                                                                       | $         | 347,752 |             
|                                     | Accounts receivable                   |                                                                                                       |           | 91,517  |             
|                                     | Inventories                           |                                                                                                       |           | 82,974  |             
|                                     | Prepaid expenses                      |                                                                                                       |           | 16,400  |             
|                                     |                                       |                                                                                                       |           |        
|Total current assets                 |                                       |                                                                                                       | 538,643   |        
|Intellectual property, net           |                                       |                                                                                                       | 1,858,333 |        
|Fixed assets, net                    |                                       |                                                                                                       | 31,570    |        
|Other assets                         |                                       |                                                                                                       | 5,757     |        
|                                     |                                       |                                                                                                       |           |        
|                                     |                                       | $                                                                                                     | 2,434,303 |        
|                                     |                                       |                                                                                                       |           |        
|LIABILITIES AND STOCKHOLDERS EQUITY |                                       |                                                                                                       |           |        
|Current liabilities:                 |                                       |                                                                                                       |           |        
|                                     | Accounts payable and accrued expenses |                                                                                                       | $         | 144,687 |             
|                                     | Accrued payroll and related expenses  |                                                                                                       |           | 86,548  |             
|                                     | Customer deposits                     |                                                                                                       |           | 12,350  |             
|                                     |                                       |                                                                                                       |           |        
|Total current liabilities            |                                       |                                                                                                       | 243,585   |        
|Commitments and contingencies        |                                       |                                                                                                       |           |        
|Stockholders 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; 9,106,656 shares issued and outstanding |           |         | 9,107        |  
|                                     |                                       | Additional paid in capital                                                                            |           |         | 22,839,605   |  
|                                     |                                       | Accumulated deficit                                                                                   |           |         | (20,657,994  | )
|                                     |                                       |                                                                                                       |           |        
|Total stockholders equity           |                                       |                                                                                                       | 2,190,718 |        
|                                     |                                       |                                                                                                       |           |        
|                                     |                                       | $                                                                                                     | 2,434,303 |        
|                                     |                                       |                                                                                                       |           |        

See independent auditors report and accompanying notes to financial statements.

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AMDL, INC.

STATEMENTS OF OPERATIONS

|                                                                         |                             |              |            |              |        |              |            |            |         | 
|------------------------------------------------------------------------ | --------------------------- | ------------ | ---------- | ------------ | ------ | ------------ | ---------- | ---------- | ------- | 
|                                                                         |                             |              |            | Years Ended 
|                                                                         |                             |              |            |             
|                                                                         |                             |              |            | December 31, |        | December 31,
|                                                                         |                             |              |            | 2002         |        | 2001        
|                                                                         |                             |              |            |              |        |             
|Revenues:                                                                |                             |              |            |              |        |              |            |           
|                                                                         | Product sales               |              | $          | 179,003      |        |              | $          | 188,472    |        
|                                                                         | Licensing                   |              |            |             |        |              |            | 494,828    |        
|                                                                         |                             |              |            |              |        |              |            |            |        
|                                                                         |                             |              | 179,003    |              |        |              | 683,300    |           
|Cost of sales                                                            |                             |              | 83,647     |              |        |              | 75,186     |           
|                                                                         |                             |              |            |              |        |              |            |            |        
|                                                                         |                             | Gross profit |            |              | 95,356 |              |            |            | 608,114 | 
|                                                                         |                             |              |            |              |        |              |            |            |        
|Operating expenses:                                                      |                             |              |            |              |        |              |            |           
|                                                                         | Research and development    |              |            | 400,624      |        |              |            | 174,611    |        
|                                                                         | General and administrative  |              |            | 3,362,857    |        |              |            | 2,910,926  |        
|                                                                         |                             |              |            |              |        |              |            |            |        
|                                                                         |                             |              | 3,763,481  |              |        |              | 3,085,537  |           
|                                                                         |                             |              |            |              |        |              |            |            |        
|Loss from operations                                                     |                             |              | (3,668,125 | )            |        |              | (2,477,423 | )         
|                                                                         |                             |              |            |              |        |              |            |            |        
|Other income (expense):                                                  |                             |              |            |              |        |              |            |           
|                                                                         | Interest income             |              |            | 22,523       |        |              |            | 130,976    |        
|                                                                         | Forgiveness of indebtedness |              |            | 43,475       |        |              |            |           |        
|                                                                         |                             |              |            |              |        |              |            |            |        
|                                                                         |                             |              | 65,998     |              |        |              | 130,976    |           
|                                                                         |                             |              |            |              |        |              |            |            |        
|                                                                         | Net loss                    |              | $          | (3,602,127   | )      |              | $          | (2,346,447 | )      
|                                                                         |                             |              |            |              |        |              |            |            |        
|Basic and diluted loss available to common
shareholders per common share |                             | $            | (0.42      | )            |        |              | (0.33      | )         
|                                                                         |                             |              |            |              |        |              |            |            |        
|Weighted average common shares outstanding                               |                             |              | 8,561,511  |              |        |              | 7,030,478  |           
|                                                                         |                             |              |            |              |        |              |            |            |        

See independent auditors report and accompanying notes to financial statements.

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AMDL, INC.

STATEMENTS OF STOCKHOLDERS EQUITY

For The Years Ended December 31, 2002 and 2001

|                                                                                                                                          |  |              |           |                 |  |            |       |             |  |         |   |         |  |       |   |  |  |  |            |  |  |  |             |   |  |  |            |  
|----------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | --------- | --------------- |  | ---------- | ----- | ----------- |  | ------- | - | ------- |  | ----- | - |  |  |  | ---------- |  |  |  | ----------- | - |  |  | ---------- | -
|                                                                                                                                          |  | Common Stock |           | Preferred Stock |  | Additional |       |             |  |         |   |         |  |      
|                                                                                                                                          |  |              |           |                 |  | Paid-in    |       | Accumulated |  |         |   |        
|                                                                                                                                          |  | Shares       |           | Amount          |  | Shares     |       | Amount      |  | Capital |   | Deficit |  | Total
|                                                                                                                                          |  |              |           |                 |  |            |       |             |  |         |   |         |  |      
|Balance, January 1, 2001                                                                                                                  |  |              | 5,279,024 |                 |  |            | 5,279 |             |  |         |  |         |  |       |  |  |  |  | 17,393,926 |  |  |  | (14,709,420 | ) |  |  | 2,689,785  |  
|Common stock issued for cash (including
231,800 shares of common stock issued to finders),
net of offering costs of $520,366              |  |              | 2,299,800 |                 |  |            | 2,300 |             |  |         |  |         |  |       |  |  |  |  | 3,096,334  |  |  |  |            |   |  |  | 3,098,634  |  
|Common stock issued for consulting services                                                                                               |  |              | 378,833   |                 |  |            | 379   |             |  |         |  |         |  |       |  |  |  |  | 934,014    |  |  |  |            |   |  |  | 934,393    |  
|Common stock issued for warrants exercised,
(including 10,000 shares of common stock
issued to finders), net of offering costs
of $10,000 |  |              | 119,000   |                 |  |            | 119   |             |  |         |  |         |  |       |  |  |  |  | 96,001     |  |  |  |            |   |  |  | 96,120     |  
|Estimated fair market value of options and
warrants granted to consultants for
services rendered                                          |  |              |          |                 |  |            |      |             |  |         |  |         |  |       |  |  |  |  | 310,925    |  |  |  |            |   |  |  | 310,925    |  
|Net loss                                                                                                                                  |  |              |          |                 |  |            |      |             |  |         |  |         |  |       |  |  |  |  |           |  |  |  | (2,346,447  | ) |  |  | (2,346,447 | )
|                                                                                                                                          |  |              |           |                 |  |            |       |             |  |         |   |         |  |       |   |  |  |  |            |  |  |  |             |   |  |  |            |  
|Balance, December 31, 2001                                                                                                                |  |              | 8,076,657 |                 |  |            | 8,077 |             |  |         |  |         |  |       |  |  |  |  | 21,831,200 |  |  |  | (17,055,867 | ) |  |  | 4,783,410  |  

See independent auditors report and accompanying notes to financial statements.

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AMDL, INC.

STATEMENTS OF STOCKHOLDERS EQUITY (Continued)

For The Years Ended December 31, 2002 and 2001

|                                                                                                 |  |              |           |                 |  |            |       |             |  |         |   |         |  |       |   |  |  |   |            |  |  |   |             |   |  |   |            |  
|------------------------------------------------------------------------------------------------ |  | ------------ | --------- | --------------- |  | ---------- | ----- | ----------- |  | ------- | - | ------- |  | ----- | - |  |  | - | ---------- |  |  | - | ----------- | - |  | - | ---------- | -
|                                                                                                 |  | Common Stock |           | Preferred Stock |  | Additional |       |             |  |         |   |         |  |      
|                                                                                                 |  |              |           |                 |  | Paid-in    |       | Accumulated |  |         |   |        
|                                                                                                 |  | Shares       |           | Amount          |  | Shares     |       | Amount      |  | Capital |   | Deficit |  | Total
|                                                                                                 |  |              |           |                 |  |            |       |             |  |         |   |         |  |      
|Balance, December 31, 2001                                                                       |  |              | 8,076,657 |                 |  |            | 8,077 |             |  |         |  |         |  |       |  |  |  |   | 21,831,200 |  |  |   | (17,055,867 | ) |  |   | 4,783,410  |  
|Common stock issued for cash,
net of offering costs of $13,000                                   |  |              | 250,000   |                 |  |            | 250   |             |  |         |  |         |  |       |  |  |  |   | 86,750     |  |  |   |            |   |  |   | 87,000     |  
|Common stock issued for consulting services                                                      |  |              | 399,999   |                 |  |            | 400   |             |  |         |  |         |  |       |  |  |  |   | 660,686    |  |  |   |            |   |  |   | 661,086    |  
|Common stock issued for warrants and options
exercised, net of offering costs of $4,451          |  |              | 380,000   |                 |  |            | 380   |             |  |         |  |         |  |       |  |  |  |   | 253,569    |  |  |   |            |   |  |   | 253,949    |  
|Estimated fair market value of options and
warrants granted to consultants for
services rendered |  |              |          |                 |  |            |      |             |  |         |  |         |  |       |  |  |  |   | 7,400      |  |  |   |            |   |  |   | 7,400      |  
|Net 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.

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AMDL, INC.

STATEMENTS OF CASH FLOWS

|                                                                     |                                                                                                        |                                              |                                           |            |              |         |              |            |         |          |  
|-------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------ | -------------------------------------------- | ----------------------------------------- | ---------- | ------------ | ------- | ------------ | ---------- | ------- | -------- | -
|                                                                     |                                                                                                        |                                              |                                           |            | Years Ended 
|                                                                     |                                                                                                        |                                              |                                           |            |             
|                                                                     |                                                                                                        |                                              |                                           |            | December 31, |         | December 31,
|                                                                     |                                                                                                        |                                              |                                           |            | 2002         |         | 2001        
|                                                                     |                                                                                                        |                                              |                                           |            |              |         |             
|Cash flows from operating activities                                 |                                                                                                        |                                              |                                           |            |              |         |              |           
|                                                                     | Net loss                                                                                               |                                              | $                                         | (3,602,127 | )            |         | $            | (2,346,447 | )      
|                                                                     | Adjustments to reconcile net loss to net cash
used in operating activities:                            |                                              |                                           |            |              |         |              |            |        
|                                                                     |                                                                                                        | Depreciation and amortization                |                                           |            | 109,094      |         |              |            | 44,357  |         
|                                                                     |                                                                                                        | Common stock issued for services             |                                           |            | 661,086      |         |              |            | 934,393 |         
|                                                                     |                                                                                                        | Warrants and options issued for services     |                                           |            | 7,400        |         |              |            | 310,925 |         
|                                                                     |                                                                                                        | Forgiveness of indebtedness                  |                                           |            | (43,475      | )       |              |            |        |         
|                                                                     |                                                                                                        | Changes in operating assets and liabilities: |                                           |            |              |         |              |            |         |         
|                                                                     |                                                                                                        |                                              | Accounts receivable                       |            |              | (81,230 | )            |            |         | 13,430   |  
|                                                                     |                                                                                                        |                                              | Inventories                               |            |              | (3,508  | )            |            |         | (6,274   | )
|                                                                     |                                                                                                        |                                              | Prepaid expenses and other current assets |            |              | 11,327  |              |            |         | (27,727  | )
|                                                                     |                                                                                                        |                                              | Accounts payable and accrued expenses     |            |              | 30,947  |              |            |         | (143,801 | )
|                                                                     |                                                                                                        |                                              | Accrued payroll and related expenses      |            |              | 770     |              |            |         | 27,381   |  
|                                                                     |                                                                                                        |                                              | Customer deposits                         |            |              | 12,350  |              |            |         |         |  
|                                                                     |                                                                                                        |                                              | Deferred revenue                          |            |              |        |              |            |         | (294,828 | )
|                                                                     |                                                                                                        |                                              |                                           |            |              |         |              |            |        
|                                                                     | Net cash used in operating activities                                                                  |                                              |                                           | (2,897,366 | )            |         |              | (1,488,591 | )      
|                                                                     |                                                                                                        |                                              |                                           |            |              |         |              |            |        
|Cash flows from investing activities                                 |                                                                                                        |                                              |                                           |            |              |         |              |           
|                                                                     | Purchase of fixed assets                                                                               |                                              |                                           | (25,664    | )            |         |              | (17,690    | )      
|                                                                     | Purchase of intellectual property                                                                      |                                              |                                           |           |              |         |              | (2,000,000 | )      
|                                                                     |                                                                                                        |                                              |                                           |            |              |         |              |           
|                                                                     | Net cash used in investing activities                                                                  |                                              |                                           | (25,664    | )            |         |              | (2,017,690 | )      
|                                                                     |                                                                                                        |                                              |                                           |            |              |         |              |           
|Cash flows from financing activities                                 |                                                                                                        |                                              |                                           |            |              |         |              |           
|                                                                     | Proceeds from the sale of common stock,
net of offering costs                                          |                                              |                                           | 87,000     |              |         |              | 5,098,634  |        
|                                                                     | Proceeds from the exercise of warrants and options,
net of offering costs                              |                                              |                                           | 253,949    |              |         |              | 96,120     |        
|                                                                     |                                                                                                        |                                              |                                           |            |              |         |              |           
|                                                                     | Net cash provided by financing activities                                                              |                                              |                                           | 340,949    |              |         |              | 5,194,754  |        
|                                                                     |                                                                                                        |                                              |                                           |            |              |         |              |           
|Net change in cash and cash equivalents                              |                                                                                                        |                                              | (2,582,081                                | )          |              |         | 1,688,473    |           
|Cash and cash equivalents, beginning of year                         |                                                                                                        |                                              | 2,929,833                                 |            |              |         | 1,241,360    |           
|                                                                     |                                                                                                        |                                              |                                           |            |              |         |              |           
|Cash and cash equivalents, end of year                               |                                                                                                        | $                                            | 347,752                                   |            |              | $       | 2,929,833    |           
|                                                                     |                                                                                                        |                                              |                                           |            |              |         |              |           
|Supplemental disclosure of cash flow information                     |                                                                                                        |                                              |                                           |            |              |         |              |           
|                                                                     | Cash paid during the year for interest                                                                 |                                              | $                                         |           |              |         | $            |           |        
|                                                                     |                                                                                                        |                                              |                                           |            |              |         |              |           
|                                                                     | Cash paid during the year for taxes                                                                    |                                              | $                                         | 800        |              |         | $            | 800        |        
|                                                                     |                                                                                                        |                                              |                                           |            |              |         |              |           
|Supplemental schedule of non-cash investing and
financing activities |                                                                                                        |                                              |                                           |            |              |         |              |           
|                                                                     |                                                                                                       
|                                                                     | See related Notes 6, 9 and 10 to financial statements for non-cash investing and financing activities.

See independent auditors report and accompanying notes to financial statements.

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AMDL, INC.

NOTES TO FINANCIAL STATEMENTS - CONTINUED

For The Year Ended December 31, 2002 and 2001

NOTE 1  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Business

AMDL, Inc.s 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.

Going Concern

The accompanying financial statements have been prepared assuming the Company
will continue as a going concern, which contemplates, among other things, the
realization of assets and satisfaction of liabilities in the normal course of
business. The Company has an accumulated deficit of $20,657,994 as of December
31, 2002, continues to generate low levels of sales from its DR-70® product,
and has incurred significant losses from operations through December 31, 2002.
In addition, the Company no longer meets the standards for a continued listing
on AMEX, and AMEX may take action to delist the Companys stock. These items,
among other matters, raise substantial doubt about the Companys ability to
continue as a going concern.

The Companys near and long-term operating strategies focus on exploiting the
technologies currently owned by the Company. In response to the current
financial conditions of the Company and as a part of its ongoing corporate
strategy, the Company is pursuing several equity financing arrangements
intended to increase liquidity and better position the Company for future
growth.

Several ongoing initiatives, which the Company hopes to accomplish, are as
follows:



| |  |  | The Company has begun the process of obtaining FDA approval of its
DR-70® product, which if successful, will allow the Company to sell this
product in the United States. The Company believes that FDA approval
would increase sales of the DR-70® product.                 
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | The Company is making efforts to license its combination immunogene
therapy technology by entering into a strategic relationship with a
larger company. The Company hopes that this relationship would provide
cash up-front to help improve the current financial condition.
|
| |  |  | The Company currently is seeking equity financing through concurrent
private placement offerings. See Note 13.                                                                                                                                                               

The successful outcome of these future activities cannot be determined at this
time. There can be no assurances that any financing will be obtained, or if
obtained, the Company will have sufficient funds to execute its intended
business plan or generate positive operating results.

Additional financing may not be available to us when needed or, if available,
may not be obtained on commercially reasonable terms. In addition, any equity
financing may involve substantial dilution to our shareholders.

Accordingly, the Company believes that its cash position of $347,752 at
December 31, 2002 is sufficient to fund its operations and working capital
requirements only through March 31, 2003.

The financial statements do not include any adjustments related to
recoverability and classification of assets or the amount and classification of
liabilities that might result should the Company be unable to continue as a
going concern.

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AMDL, INC.

NOTES TO FINANCIAL STATEMENTS - CONTINUED

For The Year Ended December 31, 2002 and 2001

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.
Licensing revenue is recognized as earned over the term of each respective
agreement.

Deferred Revenue

As of December 31, 2000, the Company had $294,828 of deferred revenue pursuant
to an exclusive distribution agreement with a related party. The exclusive
distribution agreement was to expire in October 2005 and required the related
party to market and distribute the Companys products and to purchase a minimum
of 10,000 DR-70® kits per year. During the year ended December 31, 2001, the
Company recognized $56,895 of deferred revenue based on straight-line
amortization over the term of the original contract. However, due to
non-performance, the Company terminated the agreement in December 2001 and
recognized the unamortized deferred revenue balance of $237,933 as licensing
income in the accompanying statement of operations for the year ended December
31, 2001.

Advertising

The Company expenses the cost of advertising when incurred as a component of
general and administrative expenses. Advertising expenses were $0 and $2,118
for the years ended December 31, 2002 and 2001, respectively.

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.

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AMDL, INC.

NOTES TO FINANCIAL STATEMENTS - CONTINUED

For The Year Ended December 31, 2002 and 2001

Intangible Assets

The Company has expended funds for patents that are in various stages of the
filing approval process. During 2002 and 2001, the Company expended
approximately $33,152 and $19,764, 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. For the years ended December 31, 2002 and 2001, the
Company recognized amortization expense of $100,000 and $41,667, respectively.

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, 2002. 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
within other foreign markets. There can be no assurance that the Company will
maintain the regulatory approvals required to market its products.

The Company is subject to the risk of failure in maintaining its current
regulatory approvals and in obtaining future regulatory approval, as well as
the timely 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,

F-9



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##### Table of Contents



AMDL, INC.

NOTES TO FINANCIAL STATEMENTS - CONTINUED

For The Year Ended December 31, 2002 and 2001

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 Note 7). 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, 2002, 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 statement 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
income and earnings per share if the Company had applied the fair value
recognition provisions SFAS 123, to stock-based employee compensation.

|                                                                                                                         |  |                         |            |      |  |   |            |  
|------------------------------------------------------------------------------------------------------------------------ |  | ----------------------- | ---------- | ---- |  | - | ---------- | -
|                                                                                                                         |  | Year ended December 31,
|                                                                                                                         |  |                        
|                                                                                                                         |  | 2002                    |            | 2001
|                                                                                                                         |  |                         |            |     
|Net loss as reported                                                                                                     |  | $                       | (3,602,127 | )    |  | $ | (2,346,447 | )
|Deduct: Total stock-based employee
compensation under fair value based method
for all awards, net of related tax effects |  |                         | (806,960   | )    |  |   | (721,500   | )
|                                                                                                                         |  |                         |            |      |  |   |            |  
|Pro forma net loss                                                                                                       |  | $                       | (4,409,087 | )    |  | $ | (3,067,947 | )
|                                                                                                                         |  |                         |            |      |  |   |            |  
|Basic and diluted loss per share  as reported                                                                           |  | $                       | (0.42      | )    |  | $ | (0.33      | )
|                                                                                                                         |  |                         |            |      |  |   |            |  
|Basic and diluted loss per share  pro forma                                                                             |  | $                       | (0.51      | )    |  | $ | (0.43      | )
|                                                                                                                         |  |                         |            |      |  |   |            |  

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.

F-10



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AMDL, INC.

NOTES TO FINANCIAL STATEMENTS - CONTINUED

For The Year Ended December 31, 2002 and 2001

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 1,116,106 and 1,289,659 for the years ended December 31, 2002 and
2001, 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, accounts receivable, accounts
payable and accrued expenses approximates their estimated fair values due to
the short-term maturities of those financial instruments.

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
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. During fiscal year 2001,
approximately 72% of our sales were to customers in foreign countries. Of the
foreign sales, approximately 45% were to customers in Taiwan and 14% 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

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AMDL, INC.

NOTES TO FINANCIAL STATEMENTS - CONTINUED

For The Year Ended December 31, 2002 and 2001

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 99% of accounts receivable as of
December 31, 2002. One customer accounted for 78.5% of sales for the year
ended December 31, 2002 and three customers accounted for 75% of sales for the
year ended December 31, 2001. The loss of any of these customers 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, 2002, the Company
had approximately $345,000 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 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 does not expect FIN 45 to have a material impact
on its financial position or results of operations as it does not act as a
guarantor.

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.

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AMDL, INC.

NOTES TO FINANCIAL STATEMENTS - CONTINUED

For The Year Ended December 31, 2002 and 2001

Adoption of SFAS 146 is required with the beginning of fiscal year
2003. The Company does not anticipate a significant impact on its results of
operations from adopting SFAS 146.

In April 2002, the FASB issued Statement of Financial Accounting Standards No.
145, Rescission Of FASB Statements No. 4, 44, and 64, Amendment Of FASB
Statement No. 13, And Technical Corrections. FASB 145 rescinds Statement 4,
which required all gains and losses from extinguishments of debt to be
aggregated and, if material, classified as an extraordinary item, net of
related income tax effect. Early application of the provisions of FASB 145 may
be as of the beginning of the fiscal year or as of the beginning of the interim
period in which FASB 145 is issued. The Company has elected to adopt FASB 145
as of the beginning of the current fiscal year, and accordingly, reflected all
gains on debt extinguishments (totaling $43,475 in fiscal 2002) as other income
instead of extraordinary in the accompanying statements of operations.

NOTE 2 - INVENTORIES

Inventories consist of the following at December 31, 2002:

|                |  |   |        | 
|--------------- |  | - | ------ | 
|Raw materials   |  | $ | 56,319 | 
|Work-in-process |  |   | 24,749 | 
|Finished goods  |  |   | 1,906  | 
|                |  |   |        | 
|                |  | $ | 82,974 | 
|                |  |   |        | 

NOTE 3  PROPERTY AND EQUIPMENT

Property and equipment at December 31, 2002 consists of the following:

|                              |  |   |         |  
|----------------------------- |  | - | ------- | -
|Office equipment              |  | $ | 37,375  |  
|Lab equipment                 |  |   | 5,979   |  
|                              |  |   |         |  
|                              |  |   | 43,354  |  
|Less accumulated depreciation |  |   | (11,784 | )
|                              |  |   |         |  
|                              |  | $ | 31,570  |  
|                              |  |   |         |  

Depreciation expense totaled $9,094 for the year ended December 31, 2002.

NOTE 4  INTELLECTUAL PROPERTY

Intangible assets consist of the following as of December 31 2002:

|                                    |  |   |           |  
|----------------------------------- |  | - | --------- | -
|Purchased patent pending technology |  | $ | 2,000,000 |  
|Accumulated amortization            |  |   | (141,667  | )
|                                    |  |   |           |  
|                                    |  | $ | 1,858,333 |  
|                                    |  |   |           |  

During the fiscal years ended December 31, 2002 and 2001, amortization expense
totaled $100,000, and $41,667 respectively. The estimated amortization expense
for the next five years is as follows:

|             |  |   |         | 
|------------ |  | - | ------- | 
|Years Ending |  |   |         | 
|             |  |   |         | 
|2003         |  | $ | 100,000 | 
|2004         |  |   | 100,000 | 
|2005         |  |   | 100,000 | 

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AMDL, INC.

NOTES TO FINANCIAL STATEMENTS - CONTINUED

For The Years Ended December 31, 2002 and 2001

|     |  |   |         | 
|---- |  | - | ------- | 
|2006 |  |   | 100,000 | 
|2007 |  |   | 100,000 | 
|     |  |   |         | 
|     |  | $ | 500,000 | 
|     |  |   |         | 

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). Subsequent to year-end a lawsuit was filed challenging the
Companys ownership of this intellectual property. The value of the
intellectual property will be diminished if the lawsuit is successful (see Note
6).

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
paid $30,000 and $13,897 for consulting services in the years ended December
31, 2002 and 2001, respectively. The Company has not paid any royalties to Dr.
Chang to date.

During the year ended December 31, 2001, the Company received a non-refundable
deposit of $200,000 from Chinese Universal Technologies Co., Ltd. (Chinese
Universal) as part of an agreement to secure the rights to purchase the
patents for combination immunogene therapy technology. Due to Chinese
Universal not completing the purchase in accordance with the agreement, the
agreement was terminated and the Company recorded the deposit as licensing
revenue for the year ended December 31, 2001. No additional amounts of
licensing revenues were recorded related to any other terminated agreement with
former distributors during fiscal 2002 and 2001.

NOTE 5  INCOME TAXES

The tax effects of temporary differences that give rise to deferred taxes at
December 31, 2002 are as follows:

|                         |                                                          |  |            |           | 
|------------------------ | -------------------------------------------------------- |  | ---------- | --------- | 
|Deferred tax asset:      |                                                          |  |            |          
|                         | Net operating loss carryforward                          |  | $          | 7,067,000 | 
|                         | Expenses recognized for granting of options and warrants |  |            | 575,000   | 
|                         |                                                          |  |            |          
|                         | Total gross deferred tax asset                           |  |            | 7,642,000 | 
|Less valuation allowance |                                                          |  | (7,642,000 | )        
|                         |                                                          |  |            |          
|                         | Net deferred tax asset                                   |  | $          |          | 
|                         |                                                          |  |            |          

The valuation allowance increased by approximately $1,435,000 and $934,000
during the years ended December 31, 2002 and 2001, respectively. No current
provision for income taxes for the years ended December 31, 2002 and 2001 is
required, except for minimum state taxes, since the Company incurred taxable
losses during such years.

The provision for income taxes for fiscal 2002 and 2001 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:

|                                                |  |      |            |      |  |   |          |  
|----------------------------------------------- |  | ---- | ---------- | ---- |  | - | -------- | -
|                                                |  | 2002 |            | 2001
|                                                |  |      |            |     
|Computed tax benefit at federal statutory rate  |  | $    | (1,225,000 | )    |  | $ | (797,000 | )
|State income tax benefit, net of federal effect |  |      | (210,000   | )    |  |   | (137,000 | )
|Increase in valuation allowance                 |  |      | 1,435,000  |      |  |   | 934,000  |  

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##### Table of Contents



AMDL, INC.

NOTES TO FINANCIAL STATEMENTS - CONTINUED

For The Years Ended December 31, 2002 and 2001

|      |  |      |     |      |  |   |     | 
|----- |  | ---- | --- | ---- |  | - | --- | 
|      |  | 2002 |     | 2001
|      |  |      |     |     
|Other |  |      | 800 |      |  |   | 800 | 
|      |  |      |     |      |  |   |     | 
|      |  | $    | 800 |      |  | $ | 800 | 
|      |  |      |     |      |  |   |     | 

As of December 31, 2002 the Company had net operating loss carry forwards of
approximately $18,900,000 and $8,700,000 for federal and state income tax
reporting purposes, which expire at various dates through 2022 and 2014,
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, 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 Ending |  |   |         | 
|December 31, |  |   |         | 
|             |  |   |         | 
|2003         |  |   | 77,000  | 
|2004         |  |   | 45,000  | 
|             |  |   |         | 
|             |  | $ | 122,000 | 
|             |  |   |         | 

Rent expense was approximately $75,000 and $79,000 for the years ended December
31, 2002 and 2001, 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.

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.

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##### Table of Contents



AMDL, INC.

NOTES TO FINANCIAL STATEMENTS - CONTINUED

For The Years Ended December 31, 2002 and 2001

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.

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 2002
and 2001, the Company paid cash, stock and warrants to third parties under
these agreements. See Note 9.

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, 2002 and 2001,
$213,453 and $170,000 were paid, respectively.

On November 15, 2001, the Company entered into a consulting agreement to issue
200,000 shares of common stock for financial consulting services. 33,333
shares of common stock were issued on each of December 15, 2001 and January 16,
2002 and these shares were valued at $75,083 and $56,383, respectively. On
February 15, 2002, the Company issued the remaining 133,334 shares of common
stock 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. In each of June and July 2002, the Company issued 33,333 shares to the
same consultant for similar services and these shares were valued at $36,833
and $17,000, respectively, and were charged to consulting expense. On November
1, 2002, the Company entered into a further agreement with the same consultant
to issue 99,999 shares of common stock for financial consulting services to be
rendered through January 31, 2003. 33,333 shares of common stock were earned
on the last day of each month of the term of the contract and the shares were
valued at $30,600 through December 31, 2002 and

F-16



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##### Table of Contents



AMDL, INC.

NOTES TO FINANCIAL STATEMENTS - CONTINUED

For The Years Ended December 31, 2002 and 2001

$16,433 for January 2003 and
were charged to consulting expense. See Note 13 for additional issuances after
December 31, 2002.

In December 2001, the Company entered into a consulting agreement with a third
party to provide public relations consulting for a term of twelve months. The
agreement was amended in April 2002 and pursuant to the revised agreement, the
Company paid a monthly retainer of $5,000 per month for these services and
25,000 shares, valued at $57,375, were issued in January 2002 and 35,000
shares, valued at $81,813, were issued in May 2002. The agreement was
terminated, effective June 30, 2002.

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 2002 and 2001 the Company
paid or accrued $1,798 and $2,851, respectively, in connection with this
agreement.

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 75,444 and 85,000 shares of the
Companys common stock under incentive stock option agreements in 2002 and
2001, respectively, and granted options to purchase 165,556 and 500,000 shares
of the Companys common stock under non-qualified stock option agreements in
2002 and 2001, 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 2002 and 2001 was $0 and
$25,300, respectively. Additionally, $20,625 was recognized in 2001 for
options issued in 1999 that vested through 2001.

The number of options available for grant under the 1999 Plan at December 31,
2002 and 2001 was 501 and 241,501, respectively.

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 1999 Plan, on July 24, 2002,
155,000 options were granted under incentive stock option agreements to
employees, and 600,000 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 10 years. In accordance with SFAS 123, the Company
recognized $7,400 of non-cash consulting expense related to the options issued
to the consultant during 2002.

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##### Table of Contents



AMDL, INC.

NOTES TO FINANCIAL STATEMENTS - CONTINUED

For The Years Ended December 31, 2002 and 2001

The following is a status of the stock options outstanding at December 31, 2002
and 2001 and the changes during the years then ended:

|                                               |                   |  |           |         |       |   |          |       |       |  |           |         |          |   |      |        |  
|---------------------------------------------- | ----------------- |  | --------- | ------- | ----- | - | -------- | ----- | ----- |  | --------- | ------- | -------- | - | ---- | ------ | -
|                                               |                   |  | 2002      |         | 2001 
|                                               |                   |  |           |         |      
|                                               |                   |  |           |         |       |   | Weighted |       |       |  |           |         | Weighted
|                                               |                   |  |           |         |       |   | Average  |       |       |  |           |         | Average 
|                                               |                   |  |           |         |       |   | Exercise |       |       |  |           |         | Exercise
|                                               |                   |  | Shares    |         | Price |   | Shares   |       | Price
|                                               |                   |  |           |         |       |   |          |       |      
|Outstanding,
beginning of year                 |                   |  | 1,761,899 |         |       | $ | 2.14     |       |       |  | 1,224,964 |         |          | $ | 2.03 |       
|                                               | Granted           |  |           | 996,000 |       |   |          | 0.92  |       |  |           | 585,000 |          |   |      | 4.00   |  
|                                               | Exercised         |  |           | (21,869 | )     |   |          | (0.68 | )     |  |           |        |          |   |      |       |  
|                                               | Expired/forfeited |  |           | (59,400 | )     |   |          | (5.42 | )     |  |           | (48,065 | )        |   |      | (22.05 | )
|                                               |                   |  |           |         |       |   |          |       |       |  |           |         |          |   |      |       
|Outstanding,
end of year                       |                   |  | 2,676,630 |         |       | $ | 1.62     |       |       |  | 1,761,899 |         |          | $ | 2.14 |       
|                                               |                   |  |           |         |       |   |          |       |       |  |           |         |          |   |      |       
|Exercisable at end
of year                     |                   |  | 2,676,630 |         |       | $ | 1.62     |       |       |  | 1,756,899 |         |          | $ | 2.14 |       
|                                               |                   |  |           |         |       |   |          |       |       |  |           |         |          |   |      |       
|Weighted average fair value
of options granted |                   |  |           |         |       | $ | 0.82     |       |       |  |           |         |          | $ | 2.53 |       
|                                               |                   |  |           |         |       |   |          |       |       |  |           |         |          |   |      |       

The following table summarizes information about stock options outstanding at
December 31, 2002:

|                |  |                     |         |                     |  |          |     |             |  |          |      |          |  |  |         |  |  |  |      | 
|--------------- |  | ------------------- | ------- | ------------------- |  | -------- | --- | ----------- |  | -------- | ---- | -------- |  |  | ------- |  |  |  | ---- | 
|                |  | Options Outstanding |         | Options Exercisable
|                |  |                     |         |                    
|                |  |                     |         |                     |  | Weighted |     |             |  |          |      |          |  |  |         |  |  | 
|                |  | Number of           |         | Average             |  | Weighted |     |             |  |          |      | Weighted
|                |  | Optioned            |         | Remaining           |  | Average  |     | Number of   |  | Average 
|Range of        |  | Shares              |         | Contractual         |  | Exercise |     | Options     |  | Exercise
|Exercise Prices |  | Outstanding         |         | Life (Years)        |  | Price    |     | Exercisable |  | Price   
|                |  |                     |         |                     |  |          |     |             |  |         
|$4.00           |  |                     | 545,000 |                     |  |          | 3.7 |             |  |          | 4.00 |          |  |  | 545,000 |  |  |  | 4.00 | 
|$2.39           |  |                     | 50,000  |                     |  |          | 4.4 |             |  |          | 2.39 |          |  |  | 50,000  |  |  |  | 2.39 | 
|$2.25           |  |                     | 191,000 |                     |  |          | 4.0 |             |  |          | 2.25 |          |  |  | 191,000 |  |  |  | 2.25 | 
|$1.75  2.00    |  |                     | 370,000 |                     |  |          | 2.0 |             |  |          | 1.77 |          |  |  | 370,000 |  |  |  | 1.77 | 
|$1.00           |  |                     | 240,000 |                     |  |          | 2.8 |             |  |          | 1.00 |          |  |  | 240,000 |  |  |  | 1.00 | 
|$0.68           |  |                     | 525,630 |                     |  |          | 1.5 |             |  |          | 0.68 |          |  |  | 525,630 |  |  |  | 0.68 | 
|$0.48           |  |                     | 755,000 |                     |  |          | 4.6 |             |  |          | 0.48 |          |  |  | 755,000 |  |  |  | 0.48 | 

The fair value of each option granted during 2002 and 2001 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 139 percent and 24 percent, respectively, (iii) weighted-average
risk-free interest rate of approximately 4.0 percent and 4.8 percent,
respectively, and (iv) expected life of five years.

NOTE 8  STOCK WARRANTS

From time to time, the Company issues warrants pursuant to various consulting
agreements and other compensatory arrangements.

F-18



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##### Table of Contents



AMDL, INC.

NOTES TO FINANCIAL STATEMENTS - CONTINUED

For The Years Ended December 31, 2002 and 2001

During the year ended December 31, 2001, the Company issued 300,000 warrants
for services for which the Company recognized expense of $265,000. These
warrants are exercisable at prices ranging from $3.25 to $3.75. All these
warrants were immediately exercisable and expire in August 2003.

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.
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 2002 and 2001 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 139 percent and 24 percent, respectively,
(iii) weighted-average risk-free interest rate of approximately 3.8 percent and
4.8 percent, respectively, and (iv) expected life of two years.

The following represents a summary of the warrants outstanding at December 31,
2002 and 2001 and changes during the years then ended:

|                                                |                   |  |           |          |                |   |          |       |       |  |           |          |          |   |          |        |  
|----------------------------------------------- | ----------------- |  | --------- | -------- | -------------- | - | -------- | ----- | ----- |  | --------- | -------- | -------- | - | -------- | ------ | -
|                                                |                   |  | 2002      |          | 2001          
|                                                |                   |  |           |          |               
|                                                |                   |  |           |          |                |   |          |       |       |  |           |          |          |   | Weighted
|                                                |                   |  |           |          |                |   | Weighted |       |       |  |           |          | Average 
|                                                |                   |  |           |          |                |   | Average  |       |       |  |           |          | Exercise
|                                                |                   |  | Shares    |          | Exercise Price |   | Shares   |       | Price
|                                                |                   |  |           |          |                |   |          |       |      
|Outstanding,
beginning of year                  |                   |  | 1,001,937 |          |                | $ | 1.67     |       |       |  | 811,687   |          |          | $ | 0.70     |       
|                                                |                   |  |           |          |                |   |          |       |       |  |           |          |          |   |          |       
|                                                | Granted           |  |           | 25,000   |                |   |          | 0.40  |       |  |           | 300,000  |          |   |          | 3.42   |  
|                                                | Expired/forfeited |  |           |         |                |   |          |      |       |  |           | (750     | )        |   |          | (32.00 | )
|                                                | Exercised         |  |           | (358,131 | )              |   |          | (0.68 | )     |  |           | (109,000 | )        |   |          | (0.97  | )
|                                                |                   |  |           |          |                |   |          |       |       |  |           |          |          |   |          |       
|Outstanding,
end of year                        |                   |  | 668,806   |          |                | $ | 1.99     |       |       |  | 1,001,937 |          |          | $ | 1.67     |       
|                                                |                   |  |           |          |                |   |          |       |       |  |           |          |          |   |          |       
|Weighted average fair value
of warrants granted |                   |  |           |          |                | $ | 0.42     |       |       |  |           |          |          | $ | 0.88     |       
|                                                |                   |  |           |          |                |   |          |       |       |  |           |          |          |   |          |       

The following table summarizes information about warrants outstanding at
December 31, 2002:

|                |  |                      |         |                      |  |          |     |             |  |          |      |          |  |  |         |  |  |   |      | 
|--------------- |  | -------------------- | ------- | -------------------- |  | -------- | --- | ----------- |  | -------- | ---- | -------- |  |  | ------- |  |  | - | ---- | 
|                |  | Warrants Outstanding |         | Warrants Exercisable
|                |  |                      |         |                     
|                |  |                      |         |                      |  | Weighted |     |             |  |          |      |          |  |  |         |  |  |  
|                |  | Number of            |         | Average              |  | Weighted |     |             |  |          |      | Weighted
|                |  | Warranted            |         | Remaining            |  | Average  |     | Number of   |  | Average 
|Range of        |  | Shares               |         | Contractual          |  | Exercise |     | Warrants    |  | Exercise
|Exercise Prices |  | Outstanding          |         | Life (Years)         |  | Price    |     | Exercisable |  | Price   
|                |  |                      |         |                      |  |          |     |             |  |         
|$3.25  3.75    |  |                      | 300,000 |                      |  |          | 0.6 |             |  | $        | 3.42 |          |  |  | 300,000 |  |  | $ | 3.42 | 
|$1.00           |  |                      | 200,000 |                      |  |          | 0.4 |             |  |          | 1.00 |          |  |  | 200,000 |  |  |   | 1.00 | 
|$0.68           |  |                      | 143,806 |                      |  |          | 1.5 |             |  |          | 0.68 |          |  |  | 143,806 |  |  |   | 0.68 | 
|$0.40           |  |                      | 25,000  |                      |  |          | 2.0 |             |  |          | 0.40 |          |  |  | 25,000  |  |  |   | 0.40 | 

The outstanding warrants at December 31, 2002 are held by consultants and other
service providers, stockholders, and current and former noteholders.

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##### Table of Contents



AMDL, INC.

NOTES TO FINANCIAL STATEMENTS - CONTINUED

For The Years Ended December 31, 2002 and 2001

On December 9, 2002, the Company entered into an Investment Banking Agreement
with Delta Asset Holding Corp. (Delta). Under the terms of the agreement, the
Company granted Delta warrants to purchase 950,000 shares of the Companys
common stock for services to be rendered. Under these warrants, the selling
shareholder is entitled, subject to fulfillment of certain exercise conditions,
to purchase (a) up to 200,000 shares of common stock at an exercise price of
$.70 per share not later than January 31, 2003 (which warrant has expired), (b)
up to 250,000 shares of common stock at an exercise price of $.70 per share not
later than February 28, 2003 (which warrant has expired), (c) up to 250,000
shares of common stock at an exercise price of $.85 per share not later than
March 31, 2003, and (d) up to 250,000 shares of common stock at an exercise
price of $1.00 per share not later than April 30, 2003. The exercise
conditions with respect to the unexpired warrants have not been met and the
Company does not expect them to be met. Therefore, none of the warrants are
included in the tables above.

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, 2002, the Company had no shares of preferred stock outstanding.

Common Stock

Cash Financing Activities

In December 2000, the Company sold 2,000,000 shares of common stock at $1.35
per share for cash consideration of $656,113 (net of issuance costs of $43,887)
and a note for $2,000,000 due February 1, 2001. The note was paid in full on
January 30, 2001.

During the year ended December 31, 2001, the Company conducted a Regulation D,
Rule 506 Offering of common stock for $1.75 per share. As part of this
offering, the Company issued 1,582,600 shares of common stock (including
166,600 shares issued to consultants for services rendered) for net cash
consideration of $2,230,200 (net of issuance costs of $247,800). No expense
was recognized on the issuance of the shares to consultants, as the shares were
issued in connection with fund raising efforts.

During the year ended December 31, 2001, the Company conducted a Regulation S
Offering of common stock for $1.75 per share. As part of this offering, the
Company issued 717,200 shares of common stock (including 65,200 shares issued
to consultants for services rendered) for net cash consideration of $1,026,900
(net of issuance costs of $114,100). No expense was recognized on the issuance
of the shares to consultants, as the shares were issued in connection with fund
raising efforts.

Additional costs of funding for the 2001 offerings were $158,466 representing
travel, legal and other fees in connection with the funding activities.

During the year ended December 31, 2001, the Company issued 119,000 shares of
common stock (including 10,000 shares issued to consultants for services
rendered) in connection with the exercise of stock warrants for $96,120 (net of
issuance costs of $10,000). No expense was recognized on the issuance of the
shares to consultants, as the shares were issued in connection with fund
raising efforts.

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##### Table of Contents



AMDL, INC.

NOTES TO FINANCIAL STATEMENTS - CONTINUED

For The Years Ended December 31, 2002 and 2001

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 $.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 $17,400,
net of issuance costs 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 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.

Non-Cash Financing Activities

During the year ended December 31, 2001, the Company issued (i) 353,333 shares
of common stock (including 33,333 shares valued at $75,083 and described in the
following paragraph) to International Consulting Partners for continuing
financial consulting services rendered valued at $860,683 (based on the market
value on the date of issue), (ii) 25,000 shares of common stock to ACC
Communications, an investor relations firm for and in release and settlement of
a contract for services rendered and to be rendered valued at $72,250 (based on
the market value on the date of issue), and (iii) 500 shares of common stock to
Donner Corp. International for services rendered in connection with a written
report on our company valued at $1,460 (based on the market value on the date
of issue).

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 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.

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##### Table of Contents



AMDL, INC.

NOTES TO FINANCIAL STATEMENTS - CONTINUED

For The Years Ended December 31, 2002 and 2001

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.

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 as follows:

|                                                |  |   |        | 
|----------------------------------------------- |  | - | ------ | 
|Note payable released due to lapse in time      |  | $ | 25,000 | 
|Interest accrued on note payable release        |  |   | 12,675 | 
|Deposit forfeited due to expiration of contract |  |   | 5,800  | 
|                                                |  |   |        | 
|Net gain on relief of debt                      |  | $ | 43,475 | 
|                                                |  |   |        | 

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##### Table of Contents



AMDL, INC.

NOTES TO FINANCIAL STATEMENTS - CONTINUED

For The Years Ended December 31, 2002 and 2001

NOTE 11 - EARNINGS PER SHARE

The following is a reconciliation of the numerators and denominators of the
basic and diluted earnings per share computations:

|                                                                                             |  |      |            |      |  |   |            |  
|-------------------------------------------------------------------------------------------- |  | ---- | ---------- | ---- |  | - | ---------- | -
|                                                                                             |  | 2002 |            | 2001
|                                                                                             |  |      |            |     
|Numerator for basic and diluted earnings per share
Net loss available to common stockholders |  | $    | (3,602,127 | )    |  | $ | (2,346,447 | )
|                                                                                             |  |      |            |      |  |   |            |  
|Denominator for basic and diluted earnings per share
Weighted average shares                 |  |      | 8,561,511  |      |  |   | 7,030,478  |  
|                                                                                             |  |      |            |      |  |   |            |  
|Basic and diluted loss per share                                                             |  | $    | (0.42      | )    |  | $ | (0.33      | )
|                                                                                             |  |      |            |      |  |   |            |  

NOTE 12  RELATED PARTY TRANSACTIONS

During the years ended December 31, 2002 and 2001 the Company paid
approximately $7,900 and $15,000, respectively, for consulting services from a
member of the board of directors, exclusive of expense reimbursements.

During the fiscal year ended December 31, 2000 the Company entered into an
exclusive distribution agreement with Chinese Universal, a significant
shareholder. The agreement, which was to expire in October 2005, required
Chinese Universal to pay $300,000 at the inception of the agreement and
provided for Chinese Universal to purchase a minimum of 10,000 DR-70® kits per
year at a negotiated preferential price. The Company recorded the $300,000
payment as deferred revenue at December 31, 2000, and was recording licensing
revenue on a straight line basis over the term of the agreement. However, in
2001 Chinese Universal purchased only 350 kits at a total cost of $85,607, and
due to non-performance, the Company terminated the agreement in December 2001
and recognized the unamortized deferred revenue balance of $237,933 as
licensing revenue in the accompanying statement of operations for the year
ended December 31, 2001 (see Note 1). The total licensing revenue recognized
by the Company under the agreement was $294,828 in 2001.

During the year ended December 31, 2001, the Company recognized $200,000 of
licensing income related to the forfeiture of a deposit received from Chinese
Universal (see Note 4).

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, one of the voting trustees 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.

NOTE 13 - SUBSEQUENT EVENTS

Subsequent to year end, the Company issued an aggregate of 66,666 common
shares, valued at $27,766, to International Consulting Partners for financial
consulting services and 50,000 common shares to one investor for cash. The
Company also issued warrants to purchase 5,000 common shares to its placement
agent, PCNA, SA, in connection with the sale for cash. See Note 9 for
additional details of these issuances.

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AMDL, INC.

NOTES TO FINANCIAL STATEMENTS - CONTINUED

For The Years Ended December 31, 2002 and 2001

On March 21, 2003, the board of directors authorized the sale of units
consisting of securities and warrants to purchase common stock, at or above the
market price of the common stock to accredited investors only. The Company is
seeking to raise $1 million in gross proceeds from this offering.

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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.




Part III




Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance With Section 16(a) of the Exchange Act.

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.

|                                |  |     |    |         |  |            |      |  |  |                                                 
|------------------------------- |  | --- | -- | ------- |  | ---------- | ---- |  |  | ------------------------------------------------
|                                |  |     |    |         |  | Year First |      | 
|Name                            |  | Age |    | Elected |  | Position  
|                                |  |     |    |         |  |           
|William M. Thompson III, Ph.D.  |  |     | 75 |         |  |            | 1989 |  |  | Chairman of the board of directors              
|Gary L. Dreher                  |  |     | 56 |         |  |            | 1999 |  |  | President, Chief Executive Officer, and Director
|Douglas C. MacLellan            |  |     | 47 |         |  |            | 1992 |  |  | Director                                        
|Edward R. Arquilla, M.D., Ph.D. |  |     | 80 |         |  |            | 1997 |  |  | Director                                        
|Marvin E. Rosenthale, Ph.D.     |  |     | 69 |         |  |            | 2002 |  |  | Director Nominee                                

Dr. Thompson has been one of our directors since June 1989. From 1969 to
the present, Dr. Thompson has been a practicing General Surgeon in Orange
County, California. From 1975 to the present, Dr. Thompson has also served as
Vice President for Medical Affairs and as a director of Beech Street in Irvine,
California.

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.

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. 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

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##### Table of Contents



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, 2002, there were seven 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, Dr. Arquilla
and Dr. Rosenthale. 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. Mr. MacLellan serves as the
Chairman of both the compensation and the audit committee.

Our executive officer who is not also a director is as follows:

Arthur S. Rosten, Age 55, 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.

Vivian B. Frazier. Ms. Frazier resigned as our Secretary on March 10,
2003. Her replacement has not been identified.

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 2001 all Section 16(a) filing requirements applicable to
our officers, directors and greater than 10% beneficial owners were complied
with except that each of our officers and directors failed to timely file
annual Form 5s by February 14, 2003. The required Form 5s were filed in
March 2003.




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.

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##### Table of Contents



|                        |  |                     |      |              |  |           |         |                  |  |             |        |                  |  |        |        |                    |  |           |         |  |  |  |     | 
|----------------------- |  | ------------------- | ---- | ------------ |  | --------- | ------- | ---------------- |  | ----------- | ------ | ---------------- |  | ------ | ------ | ------------------ |  | --------- | ------- |  |  |  | --- | 
|                        |  |                     |      |              |  |           |         |                  |  |             |        |                  |  |        |        |                    |  | Long-Term |         |  |  | 
|                        |  | Annual Compensation |      | Compensation |  |           |         |                 
|                        |  |                     |      |              |  |           |         |                 
|                        |  |                     |      |              |  |           |         |                  |  |             |        |                  |  | Other  |        | Common Shares      |  |           |         | 
|                        |  |                     |      |              |  |           |         |                  |  |             |        |                  |  | Awards |        | Underlying Options |  | All Other
|Name and Position       |  | Year                |      | Salary ($)   |  | Bonus ($) |         | Compensation ($) |  | Granted (#) |        | Compensation ($)
|                        |  |                     |      |              |  |           |         |                  |  |             |        |                 
|Gary L. Dreher,         |  |                     | 2002 |              |  | $         | 325,000 | (1)              |  |             | -0-    |                  |  | $      | 28,893 | (2)                |  |           | 450,000 |  |  |  | -0- | 
|President and CEO       |  |                     | 2001 |              |  | $         | 248,000 | (1)              |  | $           | 75,000 |                  |  | $      | 71,000 | (2)                |  |           | 350,000 |  |  |  | -0- | 
|                        |  |                     | 2000 |              |  | $         | 222,000 | (1)              |  |             | -0-    |                  |  | $      | 9,000  | (2)                |  |           | 400,000 |  |  |  | -0- | 
|Arthur S. Rosten,       |  |                     | 2002 |              |  | $         | 162,240 | (3)              |  |             | -0-    |                  |  |        | -0-    |                    |  |           | 79,000  |  |  |  | -0- | 
|Chief Financial Officer |  |                     | 2001 |              |  | $         | 7,291   |                  |  |             | -0-    |                  |  |        | -0-    |                    |  |           | -0-     |  |  |  | -0- | 



---



|(1) |  | Effective January 1, 2000, 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 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.
The amount for 2000 represents a car allowance of $9,000.
|   
|(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.                                                                                                                                                                                                                                                                           

OPTION GRANTS IN LAST FISCAL
YEAR

Individual Grants

|                        |  |                      |         |                     |  |                    |      |            |  |  |      |  |  |  |         | 
|----------------------- |  | -------------------- | ------- | ------------------- |  | ------------------ | ---- | ---------- |  |  | ---- |  |  |  | ------- | 
|                        |  |                      |         |                     |  | % of Total Options |      |            |  |  |      |  |  | 
|                        |  | Number of Securities |         | Granted to          |  |                    |      |            |  |  |      | 
|                        |  | Underlying Options   |         | Employees in Fiscal |  | Exercise or Base   |      | Expiration
|Name                    |  | Granted              |         | Year (5)            |  | Price ($/Sh)       |      | Date      
|                        |  |                      |         |                     |  |                    |      |           
|Gary Dreher,            |  |                      | 100,000 | (1)                 |  |                    | 15.7 | %          |  |  | 2.25 |  |  |  | 1/8/07  | 
|President and CEO       |  |                      | 350,000 | (2)                 |  |                    | 55.0 | %          |  |  | 0.48 |  |  |  | 7/24/07 | 
|Arthur S. Rosten,       |  |                      | 4,000   | (3)                 |  |                    | 0.6  | %          |  |  | 2.25 |  |  |  | 1/8/07  | 
|Chief Financial Officer |  |                      | 75,000  | (4)                 |  |                    | 11.8 | %          |  |  | 0.48 |  |  |  | 7/24/07 | 



---



|(1) |  | Includes 44,444 options granted as incentive stock options and 55,556
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 350,000 options granted as non-qualified stock options under our
2002 stock option plan. All of these options became exercisable on the
date of grant.                                                     
|   
|(3) |  | Includes 4,000 options granted as incentive stock options under our 1999
stock option plan. All of these options became exercisable on the date of
grant.                                                           
|   
|(4) |  | Includes 75,000 options granted as incentive stock options under our 2002
stock option plan. All of these options became exercisable on the date of
grant.                                                          
|   
|(5) |  | Based on an aggregate of 636,000 options granted to employees in fiscal
2002.                                                                                                                                       

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##### Table of Contents



AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES

|                        |  |              |   |              |  |                            |   |                               |  |                              |             |  |  |   |          | 
|----------------------- |  | ------------ | - | ------------ |  | -------------------------- | - | ----------------------------- |  | ---------------------------- | ----------- |  |  | - | -------- | 
|                        |  |              |   |              |  |                            |   |                               |  | Number of Securities         |             |  |  |  
|                        |  | Shares       |   |              |  |                            |   | Underlying Unexercised        |  | Value of Unexercised In-the-
|                        |  | Acquired on  |   | Value        |  | Options at FY-End (#)      |   | Money Options at FY-End ($)  
|Name                    |  | Exercise (#) |   | Realized ($) |  | Exercisable/Unexerciseable |   | Exercisable/Unexercisable
(1)
|                        |  |              |   |              |  |                            |   |                              
|Gary Dreher,            |  |              | 0 |              |  |                            | 0 |                               |  |                              | 1,450,000/0 |  |  | $ | 24,500/0 | 
|President and CEO       |  |              |   |              |  |                            |   |                               |  |                              |             |  |  |   |          | 
|Arthur S. Rosten,       |  |              | 0 |              |  |                            | 0 |                               |  |                              | 79,000/0    |  |  | $ | 5,250/0  | 
|Chief Financial
Officer |  |              |   |              |  |                            |   |                               |  |                              |             |  |  |   |          | 



---



|(1) |  | Based on a price of $0.55 per share, the closing price as reported
on the American Stock Exchange on December 31, 2002.
|--- |  | -----------------------------------------------------------------------------------------------------------------------

Director Compensation

Certain members of our board of directors receive cash compensation for
their services on committees at the rate of $2,000 per month. As Chairman of
our compensation and audit committees, Douglas MacLellan receives an additional
$667 per month.

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.

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

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##### Table of Contents



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 2002, options to purchase an aggregate of 869,000 shares were granted to
executives and directors of the company.

CEO Compensation.Mr. Drehers compensation for fiscal 2002 was $325,000
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.

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.
Marvin E. Rosenthale, Ph.D.
COMPENSATION COMMITTEE

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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 24, 2003 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.

|                                                                                                           |  |                  |           |  |     |       |  |            |      |  
|---------------------------------------------------------------------------------------------------------- |  | ---------------- | --------- |  | --- | ----- |  | ---------- | ---- | -
|                                                                                                           |  |                  |           |  |     |       |  | Percentage
|Name and Address(1)                                                                                        |  | Number of Shares |           |  |     | Owned
|                                                                                                           |  |                  |           |  |     |      
|Gary L. Dreher                                                                                             |  |                  | 3,460,500 |  | (2  | )     |  |            | 27.3 | %
|William M. Thompson III, M.D.
7822 Beach Blvd., Suite 452
Huntington Beach, CA 92647                       |  |                  | 272,126   |  | (3  | )     |  |            | 2.9  | %
|Douglas C. MacLellan
8324 Delgany Avenue
Playa del Rey, CA 90293                                           |  |                  | 166,964   |  | (4  | )     |  |            | 1.8  | %
|Edward R. Arquilla, M.D., Ph.D.
Department of Pathology
University of California  Irvine
Irvine, CA 92697 |  |                  | 198,153   |  | (5  | )     |  |            | 2.1  | %
|Marvin E. Rosenthale, Ph.D.
6808 Queenferry Circle
Boca Raton, FL 33496                                    |  |                  | 85,000    |  | (6  | )     |  |            | (7   | )
|Arthur S. Rosten                                                                                           |  |                  | 79,000    |  | (8  | )     |  |            | (7   | )
|Chinese Universal Technologies Co., Ltd.
7F-3B1, 61 SEC GUN GYI Road
403 Taichuna, Taiwan                  |  |                  | 2,000,000 |  | (9  | )     |  |            | 21.7 | %
|RAB Europe Fund Limited
c/o RAB Capital Limited
1 Adam Street
London WCN6LE England                        |  |                  | 944,200   |  | (10 | )     |  |            | 9.9  | %
|RAB Europe Partners LP
c/o RAB Capital Limited
1 Adam Street
London WCN6LE England                         |  |                  | 944,200   |  | (10 | )     |  |            | 9.9  | %
|HSBC Securities (USA), Inc.
452 Fifth Avenue
New York, NY 10018                                            |  |                  | 600,000   |  |     |       |  |            | 6.5  | %
|All Directors and Officers
as a group (6 persons)                                                          |  |                  | 4,261,743 |  |     |       |  |            | 31.9 | %



---

|(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 and 350,000 shares of common stock issuable upon the
exercise of options at
$0.48 per share. Also includes 2,000,000 shares of common stock for
which Mr. Dreher serves as a voting co-trustee (see footnotes (9) below) of which he disclaims beneficial ownership.

III-6



---



##### 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 and
65,000 shares of common stock issuable upon the exercise of options at
$0.48 per share.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    
|(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 and 65,000 shares
of common stock issuable upon the exercise of options at $0.48 per share.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    
|(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 and 65,000 shares
of common stock issuable upon the exercise of options at $0.48 per share.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    
|(6)  |  | Includes 50,000 shares of common stock issuable upon the exercise of
options at an exercise price of $2.39 per share and 35,000 shares of
common stock issuable upon the exercise of options at $0.48 per share.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    
|(7)  |  | Less than one percent.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    
|(8)  |  | Includes 4,000 shares of common stock issuable upon the exercise of
options at $2.25 per share and 75,000 shares of common stock issuable upon
the exercise of options at $0.48 per share.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    
|(9)  |  | 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 Jeanne Lai 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.                                                                                                                                                                                                                                                                                                                                                                                                       
|    
|(10) |  | According to a Schedule 13G filed by the these entities on February 11,
2003, RAB Europe Fund Limited, RAB Europe Partners 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 Europe Partners LP. These entities and individuals
reported shared voting and dispositive power with respect to 744,200
shares of our common stock, plus warrants to purchase up to 200,000
additional shares, of which warrants to purchase 150,000 shares are held
by RAB Europe Fund Limited and warrants to purchase 50,000 shares are held
by RAB Europe Partners LP. These warrants may not be exercised if, after
giving effect to such exercise, RAB Europe Fund Limited and RAB Europe
Partners 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. Based on 9,223,322 shares of common
stock
outstanding as of March 24, 2003, the RAB entities were contractually
restricted from acquiring more than 921,409 shares of our common stock as
of such date.

III-7



---



##### Table of Contents






Item 12.   Certain Relationships and Related Transactions.

Chinese Universal

On December 19, 2000, we sold to Chinese Universal 2,000,000 shares of our
common stock at a price of $1.35 per share for $700,000 cash and a secured
promissory note in the principal amount of $2,000,000 due February 1, 2001.
The note included imputed interest, computed at 7% per annum. Chinese
Universal paid the note in full on January 30, 2001. The 2,000,000 shares of
common stock currently represent approximately 21.7% of our total issued and
outstanding common stock.

As part of the transactions described above, Chinese Universal acquired a
significant interest in us. However, as a condition to the sale of the shares
of common stock, Chinese Universal was required to cause the shares to be
deposited with Jeanne Lai, President of Chinese Universal, and Gary L. Dreher,
as voting trustees, under a Voting Trust Agreement dated as of December 14,
2000. 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 lest the
voting trustees votes not be counted except for purposes of a quorum for
voting on such proposal. Chinese Universal nominated Fong Lin (David) Huang,
M.D. for director.

Concurrently, with the sale of the shares to Chinese Universal, we, under
an Exclusive Distribution Agreement with Chinese Universal, sold to Chinese
Universal for $300,000 cash, the exclusive distribution rights for five years
to market and distribute our micro-titer plate based DR-70®in vitrodiagnostic
kits in the Asian markets of Taiwan, Hong Kong, Korea, Philippines, Japan,
Singapore, Malaysia, Thailand, Vietnam and Cambodia. Under the Exclusive
Distribution Agreement, Chinese Universal was required to purchase a minimum of
10,000 kits per year. In December 2001, we terminated this agreement due to
Chinese Universal not meeting the required minimum purchase amount.

We received a non-refundable deposit of $200,000 from Chinese Universal as
part of an agreement to secure the rights to purchase the patents for
combination gene therapy. Due to Chinese Universal not completing the
purchase, the company recorded the deposit as licensing revenue in the year
ended December 31, 2001. In addition, in 2001 Chinese Universal purchased
DR-70® kits at a total cost of $85,607.

Guangzhou A-Share Technology Co. Ltd

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, one of the voting trustees 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.




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)       
|            |  |                                               

III-8



---



##### Table of Contents



|            |  |                                                                                                                                                           
|----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  |                                                                                                                                                           
|            |  |                                                                                                                                                           
|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)                                                                  
|            |  |                                                                                                                                                           
|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)                                         
|            |  |                                                                                                                                                           

III-9



---



##### Table of Contents



|            |  |                                                                                                                                                        
|----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  |                                                                                                                                                        
|            |  |                                                                                                                                                        
|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)                                                 
|            |  |                                                                                                                                                        
|10.34       |  | Executive Management Change in Control Severance Plan (13)                                                                                             
|            |  |                                                                                                                                                        
|10.35       |  | The Companys 2002 Stock Option Plan(14)                                                                                                               



---

|(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.   

III-10



---



##### Table of Contents



|(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. 
|    
|(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.



|21.1 |  | Subsidiaries                                                        
|---- |  | --------------------------------------------------------------------
|    
|     |  | Not Applicable.                                                     
|    
|99.1 |  | Certification Pursuant to 18 U.S.C. §1350 of Chief Executive Officer
|    
|99.2 |  | Certification Pursuant to 18 U.S.C. §1350 of Chief Financial Officer




Item 14.   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 a date
(the Evaluation Date) within 90 days before the filing date of this annual
report, that as of the Evaluation 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.

III-11



---



##### Table of Contents






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: June 30, 2003 |  | By  |            | /s/ Gary L Dreher                                   
|                     |  |     |            |                                                     
|                     |  |     |            | Gary L. Dreher
President and Chief Executive Officer
|                     |  |     |            |                                                     
|Dated: June 30, 2003 |  | By: |            | /s/ Arthur S. Rosten                                
|                     |  |     |            |                                                     
|                     |  |     |            | Arthur 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) |  | June 30, 2003  
|                                                       |  |                                                                                  |  |                
|/s/ Arthur S. Rosten

Arthur S. Rosten                 |  | Chief Financial Officer
(principal financial and
accounting officer)             |  | June 30, 2003  
|                                                       |  |                                                                                  |  |                
|/s/ William M. Thompson

William M. Thompson III, M.D. |  | Chairman of the Board                                                            |  | June 30, 2003  
|                                                       |  |                                                                                  |  |                
|Edward R. Arquilla, M.D.                               |  | Director                                                                         |  | June     , 2003
|                                                       |  |                                                                                  |  |                
|Douglas C. MacLellan                                   |  | Director                                                                         |  | June     , 2003
|                                                       |  |                                                                                  |  |                
|/s/ Marvin E. Rosenthale

Marvin E. Rosenthale         |  | Director                                                                         |  | June 30, 2003  

III - 12



---



##### Table of Contents






CERTIFICATIONS

I, Gary L. Dreher, certify that:



|1.     I have reviewed this annual report on Form 10-KSB/A of AMDL, Inc.                                                                                                                                                                                                                                                       
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                               
|2.     Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
|                                                                                                                                                                                                                                                                                                                               
|3.     Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;                   
|                                                                                                                                                                                                                                                                                                                               
|4.     The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:                                                                                                  



| | a)     designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report is
being prepared;
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b)     evaluated the effectiveness of the registrants disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this annual report (the Evaluation Date); and                                                                                                  
|
| | c)     presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        



|5.     The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent functions):
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a)     all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to record,
process, summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b)     any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal
controls; and                                                                                                                                        



|6.     The registrants other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Date: June 30, 2003

|                       
|-----------------------
|/s/ Gary L. Dreher     
|                       
|Gary L. Dreher         
|Chief Executive Officer





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##### Table of Contents



CERTIFICATIONS

I, Arthur S. Rosten, certify that:



|1.     I have reviewed this annual report on Form 10-KSB/A of AMDL, Inc.                                                                                                                                                                                                                                                       
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                               
|2.     Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
|                                                                                                                                                                                                                                                                                                                               
|3.     Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;                   
|                                                                                                                                                                                                                                                                                                                               
|4.     The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:                                                                                                  



| | a)     designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report is
being prepared;
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b)     evaluated the effectiveness of the registrants disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this annual report (the Evaluation Date); and                                                                                                  
|
| | c)     presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        



|5.     The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent functions):
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                                                                                                                                                                                                                                                                                                                                                                              | a)     all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to record,
process, summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                              | b)     any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal
controls; and                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                             
|6.     The registrants other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: June 30, 2003

|                       
|-----------------------
|/s/ Arthur S. Rosten   
|                       
|Arthur S. Rosten       
|Chief Financial Officer





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##### Table of Contents






Exhibit Index

|            |  |                                                                                                                                                           
|----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------
|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)                                                                  
|            |  |                                                                                                                                                           
|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)                                         
|            |  |                                                                                                                                                           







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##### Table of Contents



|            |  |                                                                                                                                                        
|----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  |                                                                                                                                                        
|            |  |                                                                                                                                                        
|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)                                                 
|            |  |                                                                                                                                                        
|10.34       |  | Executive Management Change in Control Severance Plan (13)                                                                                             
|            |  |                                                                                                                                                        
|10.35       |  | The Companys 2002 Stock Option Plan(14)                                                                                                               



---

|(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.   





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##### Table of Contents



|(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. 
|    
|(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.



|21.1 |  | Subsidiaries                                                        
|---- |  | --------------------------------------------------------------------
|    
|     |  | Not Applicable.                                                     
|    
|99.1 |  | Certification Pursuant to 18 U.S.C. §1350 of Chief Executive Officer
|    
|99.2 |  | Certification Pursuant to 18 U.S.C. §1350 of Chief Financial Officer