##### Table of Contents



U.S. SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-KSB/A
 (Mark One)
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2006
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to.
 Commission
File Number 001-16695
 AMDL, Inc.
 
  Delaware
    
    33-0413161(State or other jurisdiction of
    
    (IRS Employer Identification No.)incorporation or organization)
 
  
  Title of each class
    
    Name of each exchange on whichregisteredCommon Stock, $.001 par value
    
    AMEX
  
   þ o
  þ o
 þ
  o þ
     DOCUMENTS INCORPORATED BY REFERENCE
   o þ
 Explanatory
Note:
 Form 10-KSB




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##### 



TABLE OF CONTENTS
 PagePart 1Item 1.
    
    Description of Business
    
    1Item 2.
    
    Description of Properties
    
    16Item 3.
    
    Legal Proceedings
    
    17Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    17Part IIItem 5.
    
    Market for Common Equity and Related Stockholder Matters
    
    17Item 6.
    
    Management's Discussion and Analysis of Financial Condition and Results of Operations
    
    21Item 7.
    
    Financial Statements
    
    30Item 8.
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosures
    
    31Item 8A.
    
    Controls and Procedures
    
    31Part IIIItem 9.
    
    Directors, Executive Officers, Promoters, Control Persons and Corporate Governance; Compliance with Section 16 (a) of the Exchange Act
    
    31Item 10.
    
    Executive Compensation
    
    34Item 11.
    
    Security Ownership of Certain Beneficial Owners and Management
    
    38Item 12.
    
    Certain Relationships and Related Transactions
    
    39Item 13.
    
    Exhibits
    
    40Item 14.
    
    Principal Accountant Fees and Services
    
    42SIGNATURES
    
    43EXHIBIT INDEXEXHIBIT 31.1EXHBIIT 31.2EXHIBIT 32.1EXHIBIT 32.2




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Part 1
 
 Item 1. Description of Business
 ®
 Overview
 AMDL, Inc.
 ® ® ®
 ® ® ® ® ® ® ®
  ®
 1




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® ® German Journal of
Obstetrics and Gynecology ® ® ® ® ® ® ®
     2




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##### Table of Contents



Acquisition of JPI
     3




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® ®
 Business Combinations,
   Our Products
 ® ® ®
 ® ® ® ® ®
 4




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® Journal of Immunoassay. ® ® ®
 ® ® Alimentary Pharmacology & Therapeutics ® ®
     5




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Our Strategy
  ® ® ® ® ®
   
    
    obtain U.S. FDA and Chinese SFDA clearance and international approvals for our DR-70® product;
    
    distribute DR-70® kits in approved markets;
    
    develop DR-70® distribution channels in new markets;
    
    pursue one or more strategic partners to license and develop our combination immunogene
therapy technology;
    
    in-license North American drugs for manufacture and sales in China and Asia;
    
    create new opportunities in cancer related product development in China; and
    
    fully utilize our Chinese GMP manufacturing facilities to foster worldwide sales of
existing and to-be developed products.
 ®
 6




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
    
    the product candidate did not demonstrate acceptable clinical trial results even though
it demonstrated positive preclinical trial results;
    
    the product candidate was not effective in treating a specified condition or illness;
    
    the product candidate had harmful side effects on humans;
    
    the necessary regulatory bodies, such as the U.S. FDA, did not approve the product
candidate for an intended use;
    
    the product candidate was not economical for us to manufacture and commercialize; and
    
    the product candidate is not cost effective in light of existing therapeutics.
 ®
 Sales and Marketing
 ® ® ®
   Manufacturing
 ®
   7




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Regulation
  ® ®
 ® ® ® ® ® ®
  8




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® ®
  ®
 ® ®
 ®
 Patents
 ®
       9




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Research and Development
  ® ® ®
 Competition
 ® ®
 ® ®
  10




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Risk Factors
  Limited product development activities; our product development efforts may not result in
commercial products.
 ® ®
 
    
    the product candidate did not demonstrate acceptable clinical trial results even though
it demonstrated positive preclinical trial results;
    
    the product candidate was not effective in treating a specified condition or illness;
    
    the product candidate had harmful side effects on humans;
    
    the necessary regulatory bodies, such as the FDA, did not approve our product candidate
for an intended use;
    
    the product candidate was not economical for us to manufacture and commercialize; and
    
    the product candidate is not cost effective in light of existing therapeutics.
   Operations in China
    11




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We may not be able to continue to operate our business if we are unable to attract additional
operating capital.
 ® ® ®
  ® ®
  Our current products cannot be sold in certain countries if we do not obtain and maintain
regulatory approval.
  12




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FDA
approval for marketing
DR-70 ® is not assured.
 ® ® ® ® ® ®
 SFDA
approval for marketing
DR-70 ® is not assured.
 ® ®
 ®
 Our future prospects will be negatively impacted if we are unsuccessful in pending litigation over
the combination immunogene therapy technology.
    13




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The value of intangible assets may not be equal to their carrying values.
  If our intellectual property positions are challenged, invalidated or circumvented, or if we fail
to prevail in future intellectual property litigation, our business could be adversely affected.
  We face substantial competition, and others may discover, develop, acquire or commercialize
products before or more successfully than we do.
  We are reliant on a few customers and our distributors for sales of our products.
 ® ® ® ® ®
 14




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®
 We are subject to risks associated with our foreign distributors.
 ® ®
 We do not intend to pay dividends on our common stock in the foreseeable future.
  If we fail to comply with the rules under the Sarbanes-Oxley Act related to accounting controls and
procedures or if material weaknesses or other deficiencies are discovered in our internal
accounting procedures, our stock price could decline significantly.
  Loss of AMEX listing could adversely affect the marketability and price of our shares.
  15




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Our stock price is volatile, which could adversely affect your investment.
  
    
    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; and
    
    economic markets in Asia
  We have limited product liability insurance
  Employees
  
 Item 2. Description of Properties
   16




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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
   
    
    clinical trial results;
    
    product development announcements by us or our competitors;
 17




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
    
    regulatory matters;
    
    announcements in the scientific and research community;
    
    intellectual property and legal matters;
    
    broader industry and market trends unrelated to our performance; and
    
    economic markets in Asia.
   Quarter Ended
    
    High
    
    LowMarch 31, 2005*
    
    $
    4.70
    
    
    $
    3.80June 30, 2005*
    
    $
    4.10
    
    
    $
    1.50September 30, 2005*
    
    $
    2.60
    
    
    $
    1.85December 31, 2005*
    
    $
    2.20
    
    
    $
    1.30
 Quarter Ended
    
    High
    
    LowMarch 31, 2006*
    
    $
    3.90
    
    
    $
    1.35June 30, 2006*
    
    $
    4.45
    
    
    $
    2.25September 30, 2006*
    
    $
    3.15
    
    
    $
    1.90December 31, 2006
    
    $
    5.12
    
    
    $
    2.44
 
 *
    
    Adjusted for a one-for-five reverse split effected September 28, 2006.   Securities Authorized for Issuance Under Equity Compensation Plans.
 (a)
    
    
    (b)
    
    
    (c)Number ofsecuritiesremaining availableNumber of
    
    
    
    
    
    
    for futuresecurities to be
    
    
    
    
    
    
    issuances underissued upon
    
    
    Weighed-average
    
    
    equity compensationexercise of
    
    
    exercise price of
    
    
    plans (excludingoutstanding
    
    
    outstanding
    
    
    securitiesoptions, warrants
    
    
    options, warrants
    
    
    reflected inPlan Category
    
    and rights
    
    
    and rights
    
    
    Column (a))Equity compensation plans approved by security holders
    
    
    2,062,637
    *
    
    $
    4.01
    *
    
    
    366,251Equity compensation plans not approved by security holders
    
    
    2,627,992
    
    
    $
    4.22
    
    
    
    -0-Total
    
    
    4,690,629
    *
    
    $
    4.13
    *
    
    
    366,251
 
 *
    
    Adjusted for one-for-five reverse split effected on September 28, 2006 Voting Trust Agreement ®
 18




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®
 Recent Sales of Securities
       19




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20




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Item 6. Managements Discussion and Analysis or Plan of Operation
 Acquisition of Jade Pharmaceuticals Inc.
       The Current Economic and Market Environment
  
    
    Gain access to the fastest growing pharmaceutical and consumer market in the world, China;
    
    Platform to in-license North American drugs for manufacture and sale in China and Asia;
    
    Expand DR-70® and combined immunogene therapy technologies clinical
trials, sales, and marketing into China and Asia; and
    
    Create new opportunities for cancer related product development in China.
 Research and Development
 ®
 21




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®
  ® ® ®
 Liquidity and Capital Resources
    ®
 ® ®
 22




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Critical Accounting Policies
   Allowance for Doubtful Accounts
 Inventories
 Sales Allowances.
 Valuation of Intangible Assets Accounting for the Impairment or Disposal of Long-Lived Assets
 23




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
    
    significant under performance relative to expected historical or projected future operating results;
    
    market projections for cancer research technology;
    
    its ability to obtain patents, including continuation patents, on technology;
    
    significant changes in its strategic business objectives and utilization of the assets;
    
    significant negative industry or economic trends, including legal factors;
    
    potential for strategic partnerships for the development of its patented technology;
    
    changing or implementation of rules regarding manufacture or sale of pharmaceuticals in China; and
    
    ability to maintain Good Manufacturing Process (GMP) certifications.
  Deferred Taxes
 Litigation Accounting for
Contingencies
 Stock-Based Compensation Expense.
 Accounting for Equity Instruments that are Issued to Other than Employees for Acquiring,
or in Conjunction with Selling Goods or Services, Accounting Recognition
for Certain Transactions Involving Equity Instruments Granted to Other than Employees.
 24




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Share-Based Payment Accounting for Stock Issued to Employees
  Accounting for Stock-Based
Compensation.
   25




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Results of Operations
 Year Ended December 31, 2006 Compared to Year Ended December 31, 2005
  Net Revenues.
 AMDL-U.S
 ®
 ® ® ®
 ® ® .
 JPI-China
  Gross Profit.
 AMDL-U.S.
 ®
 26




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JPI-China
   Research and Development.
 AMDL-U.S.
 ® ®
 JPI-China
  General and Administrative Expenses.
 AMDL-U.S.
   JPI-China
  Interest Income and Expense.
 27




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AMDL-U.S.
   JPI-China
  Loss from Operations and Net Loss.
  Assets and liquidity
      Going Concern
 ®
 28




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®
 ®
       Forward Looking Statements
 ®
 29




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##### Table of Contents



Item 7. Financial Statements
 Report of Independent Registered Public Accounting Firm
    
    
    F-1Consolidated Balance Sheet as of December 31, 2006
    
    
    F-2Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31,
2005 and 2006
    
    
    F-3Consolidated Statements of Stockholders Equity for the years ended December 31, 2005 and 2006
    
    
    F-4Consolidated Statements of Cash Flows for the years ended December 31, 2005 and 2006
    
    
    F-5Notes to Consolidated Financial Statements
    
    
    F-6
 30




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Share-Based Payment
  /s/ KMJ | Corbin & Company LLP 
 F-1




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AMDL, INC.
 
 CONSOLIDATED BALANCE SHEET
 December 31,2006ASSETSCurrent assets:Cash and cash equivalents
    
    $
    1,584,973Accounts receivable, net
    
    
    1,541,877Inventories
    
    
    740,658Prepaid expenses and other current assets
    
    
    709,894Total current assets
    
    
    4,577,402Property and equipment, net
    
    
    9,129,904Intangible assets, net
    
    
    3,881,872Other assets
    
    
    1,651,435Total assets
    
    $
    19,240,613LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable and accrued expenses
    
    $
    1,910,154Current portion of notes payable
    
    
    3,060,662Total current liabilities
    
    
    4,970,816Notes payable, net of current portion
    
    
    1,606,641Total liabilities
    
    
    6,577,457Stockholders equity:Preferred stock, $0.001 par value; 25,000,000 shares
authorized; no shares issued and outstanding
    
    
    Common stock, $0.001 par value; 100,000,000 shares
authorized; 10,195,697 shares issued and 10,095,697
shares outstanding
    
    
    10,096Additional paid-in capital
    
    
    47,209,931Accumulated other comprehensive loss
    
    
    (21,728
    )Accumulated deficit
    
    
    (34,535,143
    )Total stockholders equity
    
    
    12,663,156Total liabilities and stockholders equity
    
    $
    19,240,613
  F-2




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AMDL, INC.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
 Year EndedDecember 31,
    
    
    December 31,2005
    
    
    2006Net revenues
    
    $
    67,565
    
    
    $
    2,103,936Cost of sales
    
    
    12,595
    
    
    
    1,035,443Gross profit
    
    
    54,970
    
    
    
    1,068,493Operating expenses:Research and development
    
    
    272,650
    
    
    
    395,964General and administrative
    
    
    2,326,224
    
    
    
    6,446,3102,598,874
    
    
    
    6,842,274Loss from operations
    
    
    (2,543,904
    )
    
    
    (5,773,781
    )Other income (expense):Interest income
    
    
    38,039
    
    
    
    27,033Interest expense
    
    
    
    
    
    
    (90,433
    )Total other income (expense), net
    
    
    38,039
    
    
    
    (63,400
    )Loss before provision for income taxes
    
    
    (2,505,865
    )
    
    
    (5,837,181
    )Provision for income taxes
    
    
    800
    
    
    
    30,247Net loss
    
    
    (2,506,665
    )
    
    
    (5,867,428
    )Other comprehensive loss:Foreign currency translation loss
    
    
    
    
    
    
    (21,728
    )Comprehensive loss
    
    $
    (2,506,665
    )
    
    $
    (5,889,156
    )Basic and diluted loss per common share
    
    
    (0.50
    )
    
    
    (0.83
    )Weighted average common shares outstanding  basic and diluted
    
    
    5,002,886
    
    
    
    7,117,893
  F-3




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AMDL, INC.
 
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
 For The Years Ended December 31, 2005 and 2006
 AccumulatedAdditional
    
    
    
    
    
    Other
    
    
    
    
    
    TotalCommon Stock
    
    Preferred Stock
    
    Paid-in
    
    Prepaid
    
    Comprehensive
    
    Accumulated
    
    StockholdersShares
    
    Amount
    
    Shares
    
    Amount
    
    Capital
    
    Consulting
    
    Loss
    
    Deficit
    
    EquityBalance, January 1, 2005
    
    
    4,700,178
    
    
    $
    4,700
    
    
    
    
    
    
    $
    
    
    
    $
    30,394,728
    
    
    $
    
    
    
    $
    
    
    
    $
    (26,161,050
    )
    
    $
    4,238,378Common stock issued for cash,
net of issuance costs of
$138,814
    
    
    632,718
    
    
    
    633
    
    
    
    
    
    
    
    
    
    
    
    867,553
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    868,186Common stock issued for
consulting services
    
    
    130,000
    
    
    
    130
    
    
    
    
    
    
    
    
    
    
    
    385,870
    
    
    
    (386,000
    )
    
    
    
    
    
    
    
    
    
    
    Estimated fair market value of
options and warrants issued to
third parties
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,500
    
    
    
    (20,500
    )
    
    
    
    
    
    
    
    
    
    
    Amortization of prepaid
consulting costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    384,611
    
    
    
    
    
    
    
    
    
    
    
    384,611Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,506,665
    )
    
    
    (2,506,665
    )Balance, December 31, 2005
    
    
    5,462,896
    
    
    
    5,463
    
    
    
    
    
    
    
    
    
    
    
    31,668,651
    
    
    
    (21,889
    )
    
    
    
    
    
    
    (28,667,715
    )
    
    
    2,984,510Reclassification of prepaid
consulting upon adoption of
SFAS No. 123(R)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (21,889
    )
    
    
    21,889
    
    
    
    
    
    
    
    
    
    
    
    Common stock issued for cash,
net of issuance costs of
$503,244
    
    
    1,347,351
    
    
    
    1,348
    
    
    
    
    
    
    
    
    
    
    
    2,570,703
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,572,051Common stock issued in
connection with JPI Acquisition
    
    
    2,643,000
    
    
    
    2,643
    
    
    
    
    
    
    
    
    
    
    
    7,926,357
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,929,000Stock options issued in
connection with JPI acquisition
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    595,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    595,000Common stock issued for
consulting services
    
    
    529,000
    
    
    
    529
    
    
    
    
    
    
    
    
    
    
    
    1,639,281
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,639,810Estimated fair market value of
warrants and common stock
issued to third parties for
services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    128,155
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    128,155Stock-based employee and
director compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,397,700
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,397,700Exercise of warrants and options
    
    
    113,450
    
    
    
    113
    
    
    
    
    
    
    
    
    
    
    
    305,973
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    306,086Translation loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (21,728
    )
    
    
    
    
    
    
    (21,728
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,867,428
    )
    
    
    (5,867,428
    )Balance, December 31, 2006
    
    
    10,095,697
    
    
    $
    10,096
    
    
    
    
    
    
    $
    
    
    
    $
    47,209,931
    
    
    $
    
    
    
    $
    (21,728
    )
    
    $
    (34,535,143
    )
    
    $
    12,663,156
  F-4




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##### Table of Contents



AMDL, INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 Year EndedDecember 31,
    
    
    December 31,2005
    
    
    2006Cash flows from operating activities:Net loss
    
    $
    (2,506,665
    )
    
    $
    (5,867,428
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization
    
    
    107,508
    
    
    
    310,372Fair value of options granted to employees and directors for services
    
    
    
    
    
    
    2,397,700Common stock issued for services
    
    
    365,778
    
    
    
    1,054,405Warrants issued for services
    
    
    18,833
    
    
    
    65,933Changes in operating assets and liabilities, net of effects of acquisition:Accounts receivable
    
    
    
    
    
    
    (101,197
    )Inventories
    
    
    (10,636
    )
    
    
    (111,364
    )Prepaid expenses and other current assets
    
    
    (71,470
    )
    
    
    40,844Accounts payable and accrued expenses
    
    
    31,958
    
    
    
    272,450Net cash used in operating activities
    
    
    (2,064,694
    )
    
    
    (1,938,285
    )Cash flows from investing activities:Purchase of property and equipment
    
    
    (10,937
    )
    
    
    (2,797
    )Purchase of product licenses
    
    
    
    
    
    
    (332,587
    )Cash paid for acquisition of JPI, net of cash acquired
    
    
    
    
    
    
    (395,756
    )Net cash used in investing activities
    
    
    (10,937
    )
    
    
    (731,140
    )Cash flows from financing activities:Payments on notes payable
    
    
    
    
    
    
    (103
    )Proceeds from issuance of common stock, net of cash offering costs of $138,814
in 2005 and $503,244 in 2006, respectively
    
    
    868,186
    
    
    
    2,572,051Proceeds from the exercise of warrants and options
    
    
    
    
    
    
    306,086Net cash provided by financing activities
    
    
    868,186
    
    
    
    2,878,034Effect of exchange rates on cash and cash equivalents
    
    
    
    
    
    
    (21,728
    )Net change in cash and cash equivalents
    
    
    (1,207,445
    )
    
    
    186,881Cash and cash equivalents, beginning of year
    
    
    2,605,537
    
    
    
    1,398,092Cash and cash equivalents, end of year
    
    $
    1,398,092
    
    
    $
    1,584,973Supplemental disclosure of cash flow information:Cash paid during the year for interest
    
    $
    
    
    
    $
    27,034Cash paid during the year for taxes
    
    $
    800
    
    
    $
    800
    F-5




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##### Table of Contents



AMDL, INC.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 For The Years Ended December 31, 2005 and 2006
 NOTE 1  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Nature of Business
  ®
  Going Concern
 ® ®
 ®
   F-6




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##### Table of Contents



AMDL, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 For The Years Ended December 31, 2005 and 2006
  Reverse Stock Split
  Principles of Consolidation
  Revenue Recognition
 Revenue Recognition in Financial Statements
 How Taxes Collected from
Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement
(That Is, Gross Versus Net Presentation)
 Accounting for Shipping and Handling Revenue, Fees and Costs
 Accounting for Shipping and Handling Fees and Costs.
 Other Comprehensive Income and Foreign Currency Translation
 Reporting Comprehensive Income
 F-7




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##### Table of Contents



AMDL, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 For The Years Ended December 31, 2005 and 2006
   Research and Development
  Cash Equivalents
  Inventories
  Property and Equipment
  Office equipment
    
    
    3 to 10 yearsBuildings and improvements
    
    
    5 to 30 yearsMachinery and equipment, including lab equipment
    
    
    5 to 15 years
  Intangible Assets
  Intellectual Property
  F-8




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##### Table of Contents



AMDL, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 For The Years Ended December 31, 2005 and 2006
 Land Use Rights
  Non-Compete Agreements
  Customer Relationships
  Trade Name and Logo
  Impairment of Long-Lived Assets
 Accounting for the Impairment or Disposal of Long-Lived Assets
 
    
    significant under performance relative to expected historical or projected future operating results;
    
    market projections for cancer research technology;
    
    its ability to obtain patents, including continuation patents, on technology;
    
    significant changes in its strategic business objectives and utilization of the assets;
    
    significant negative industry or economic trends, including legal factors;
    
    potential for strategic partnerships for the development of its patented technology;
    
    changing or implementation of rules regarding manufacture or sale of pharmaceuticals in China; and
    
    ability to maintain Good Manufacturing Process (GMP) certifications.
  F-9




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##### Table of Contents



AMDL, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 For The Years Ended December 31, 2005 and 2006
 Risks and Uncertainties
  ® ® ® ® ® ® ® ®
 ®
  Operations in China
    F-10




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##### Table of Contents



AMDL, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 For The Years Ended December 31, 2005 and 2006
 Accounting for Stock-Based Compensation
  Accounting for Equity
Instruments that are Issued to Other than Employees for Acquiring, or in Conjunction with Selling
Goods or Services, Accounting Recognition for Certain Transactions
Involving Equity Instruments Granted to Other than Employees.
   Share-Based Payment Accounting for Stock Issued to Employees,
 Accounting for Stock-Based Compensation
 F-11




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##### Table of Contents



AMDL, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 For The Years Ended December 31, 2005 and 2006
    Summary of Assumptions and Activity
  2005
    
    2006Dividend yield
    
    
    
    %
    
    
    
    %Expected volatility
    
    
    83
    %
    
    
    276
    %Risk-free interest rate
    
    
    3.12
    %
    
    
    4.71
    %Expected term
    
    1.0 year
    
    4.16 years
  F-12




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##### Table of Contents



AMDL, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 For The Years Ended December 31, 2005 and 2006
 For The Year EndedDecember 31, 2005Net loss as reported
    
    $
    (2,506,665
    )Deduct: Total stock-based employee compensation
under fair value based method for all awards, net
of related tax effects
    
    
    (72,000
    )Pro forma net loss
    
    $
    (2,578,665
    )Basic and diluted loss per share  as reported
    
    $
    (0.50
    )Basic and diluted loss per share  pro forma
    
    $
    (0.52
    )
  Weighted
    
    
    RemainingAverage
    
    
    Contractual
    
    
    AggregateNumber
    
    
    Exercise
    
    
    Term
    
    
    Intrinsicof Shares
    
    
    Price
    
    
    (Years)
    
    
    ValueOptions outstanding at January 1, 2006
    
    
    816,637
    
    
    $
    7.00Granted
    
    
    848,000
    
    
    $
    3.52Expired/forfeited
    
    
    (95,000
    )
    
    $
    20.00Exercised
    
    
    (7,000
    )
    
    $
    2.40Options outstanding and exercisable at December 31, 2006
    
    
    1,562,637
    
    
    $
    4.35
    
    
    
    3.35
    
    
    $
    1,245,501
   General and administrative expense
    
    $
    2,349,400Research and development
    
    
    48,300$
    2,397,700
    Basic and Diluted Loss Per Share
  F-13




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##### Table of Contents



AMDL, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 For The Years Ended December 31, 2005 and 2006
  Income Taxes
 Accounting for Income Taxes.
  Use of Estimates
  Fair Value of Financial Instruments
  Segments of an Enterprise and Related Information
 Disclosures about Segments of an Enterprise and Related
Information. ® ® ®
  F-14




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##### Table of Contents



AMDL, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 For The Years Ended December 31, 2005 and 2006
 Advertising Costs
  Concentrations of Credit Risk
 Cash
  Customers
    Recent Accounting Pronouncements
 Accounting
Changes and Error Corrections Accounting Changes Reporting Accounting Changes in Interim Financial Statements
 Accounting for Uncertainty in Income
Taxes  an interpretation of FASB Statement No. 109.
 Fair Value Measurements
 F-15




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##### Table of Contents



AMDL, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 For The Years Ended December 31, 2005 and 2006
 Considering the Effects of Prior Year
Misstatements when Quantifying Misstatements in Current Year Financial Statements
 NOTE 2  ACQUISITION OF JADE PHARMACEUTICAL, INC.
      ® ®
 Business Combinations
 F-16




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##### Table of Contents



AMDL, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 For The Years Ended December 31, 2005 and 2006
 Purchase consideration:Transaction costs, primarily legal and accounting
    
    $
    592,896Estimated fair value of common stock issued
    
    
    7,929,000Estimated fair value of options to purchase common stock
    
    
    595,000$
    9,116,896Allocation:Tangible assets acquired:Cash
    
    $
    197,140Accounts receivable
    
    
    1,440,680Inventories
    
    
    550,623Property and equipment
    
    
    9,268,300Land use rights
    
    
    1,200,769Prepayments, primarily product licenses
    
    
    1,292,531Identifiable intangible assets acquired:Non-compete agreements
    
    
    382,389Customer relationships
    
    
    254,926Trade name and logo
    
    
    637,317Total assets acquired
    
    
    15,224,675Liabilities assumed:Current liabilities
    
    
    (1,440,373
    )Current and long-term debt
    
    
    (4,667,406
    )Total liabilities assumed
    
    
    (6,107,779
    )$
    9,116,896
   For the Year
    
    
    For the YearEnded
    
    
    EndedDecember 31, 2005
    
    
    December 31, 2006Net revenues
    
    $
    6,985,504
    
    
    $
    7,186,238Net loss
    
    $
    (905,970
    )
    
    $
    (3,869,371
    )Basic and diluted loss per share
    
    $
    (0.12
    )
    
    $
    (0.43
    )Weighted average common shares outstanding  basic and diluted
    
    
    7,645,886
    
    
    
    9,080,230
 NOTE 3  INVENTORIES
  Raw materials
    
    $
    241,219Work-in-process
    
    
    9,892Finished goods
    
    
    489,547$
    740,658
 F-17




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##### Table of Contents



AMDL, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 For The Years Ended December 31, 2005 and 2006
 NOTE 4  PROPERTY AND EQUIPMENT
  Building and improvements
    
    $
    6,443,711Machinery and equipment
    
    
    2,018,097Office equipment
    
    
    851,998Lab equipment
    
    
    12,3719,326,177Less accumulated depreciation
    
    
    (196,273
    )$
    9,129,904
  NOTE 5  INTANGIBLE ASSETS
  Weighted-AverageGross
    
    
    
    
    
    
    
    
    
    
    AmortizationCarrying
    
    
    Accumulated
    
    
    
    
    
    
    PeriodValue
    
    
    Amortization
    
    
    Net
    
    
    (in years)Assets subject to amortization:Intellectual property
    
    $
    2,000,000
    
    
    $
    (541,667
    )
    
    $
    1,458,333
    
    
    
    20Land use rights
    
    
    1,200,769
    
    
    
    (10,205
    )
    
    
    1,190,564
    
    
    
    33Non-compete agreements
    
    
    382,389
    
    
    
    (19,120
    )
    
    
    363,269
    
    
    
    5Customer relationships
    
    
    254,926
    
    
    
    (9,105
    )
    
    
    245,821
    
    
    
    7Trade name and logo
    
    
    637,317
    
    
    
    (13,432
    )
    
    
    623,885
    
    
    
    10$
    4,475,401
    
    
    $
    (593,529
    )
    
    $
    3,881,872
  Years Ending December 31,2007
    
    $
    307,4502008
    
    
    307,4502009
    
    
    307,4502010
    
    
    307,4502011
    
    
    288,330
   F-18




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##### Table of Contents



AMDL, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 For The Years Ended December 31, 2005 and 2006
 NOTE 6  OTHER ASSETS
  Prepayments, primarily product licenses
    
    $
    1,645,678Refundable deposits
    
    
    5,757$
    1,651,435
   NOTE 7  INCOME TAXES
  2005
    
    
    2006Current:Federal
    
    $
    
    
    
    $
    State
    
    
    800
    
    
    
    800Foreign
    
    
    
    
    
    
    29,447800
    
    
    
    30,247Deferred:Federal
    
    
    
    
    
    
    State
    
    
    
    
    
    
    Foreign
    
    
    
    
    
    
    
    
    
    
    $
    800
    
    
    $
    30,247
 Deferred tax asset:Net operating loss carryforwards
    
    $
    10,174,000Expenses recognized for granting of options and warrants
    
    
    1,756,000Total gross deferred tax asset
    
    
    11,930,000Less valuation allowance
    
    
    (11,930,000
    )$
    
   2005
    
    
    2006Computed tax benefit at federal statutory rate
    
    $
    (852,000
    )
    
    $
    (1,995,000
    )State income tax benefit, net of federal effect
    
    
    1,000
    
    
    
    1,000Expired net operating losses
    
    
    138,000
    
    
    
    355,000Foreign earnings taxed at different rates
    
    
    
    
    
    
    (130,000
    )Stock transactions
    
    
    
    
    
    
    358,000Increase in valuation allowance
    
    
    714,000
    
    
    
    1,441,000Other
    
    
    
    
    
    
    $
    1,000
    
    
    $
    30,000
 F-19




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##### Table of Contents



AMDL, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 For The Years Ended December 31, 2005 and 2006
    Value Added Tax Payable
  NOTE 8  NOTES PAYABLE
   Years Ending December 31,2007
    
    $
    3,060,6622008
    
    
    1,606,6414,667,303Less current portion
    
    
    (3,060,662
    )$
    1,606,641
  F-20




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##### Table of Contents



AMDL, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 For The Years Ended December 31, 2005 and 2006
 NOTE 9  COMMITMENTS AND CONTINGENCIES
 Operating Leases
    Years Ending December 31,2007
    
    $
    127,9342008
    
    
    72,600$
    200,534
 Litigation
     F-21




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##### Table of Contents



AMDL, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 For The Years Ended December 31, 2005 and 2006
 Suspension of Product Sales
   Change in Control Severance Plan
     Consulting Agreements
   F-22




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##### Table of Contents



AMDL, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 For The Years Ended December 31, 2005 and 2006
 
    
    commission of 2% on the amount of goods or services sold to the distributor if total
sales delivered to the distributor exceeds $63,000 in any single month;
    
    additional commission of 1% if total sales delivered to the distributor exceeds
$189,000 in any single month;
    
    Special bonus of 2% on total amount of goods delivered exceeds $251,000 in any single month; and
    
    An additional allowance progressively increased with the number of distributors successfully solicited.
  Employment Agreements
   Licensing Agreements
 ®
 Indemnities and Guarantees
  NOTE 10  STOCK OPTIONS
  F-23




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##### Table of Contents



AMDL, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 For The Years Ended December 31, 2005 and 2006
       F-24




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##### Table of Contents



AMDL, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 For The Years Ended December 31, 2005 and 2006
  2005
    
    
    2006Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    AverageExercise
    
    
    
    
    
    
    ExerciseOptions
    
    
    Price
    
    
    Options
    
    
    PriceOutstanding, beginning of year
    
    
    863,637
    
    
    $
    7.30
    
    
    
    816,637
    
    
    $
    7.00Granted
    
    
    60,000
    
    
    
    4.15
    
    
    
    1,348,000
    
    
    
    3.31Expired/forfeited
    
    
    (107,000
    )
    
    
    7.65
    
    
    
    (95,000
    )
    
    
    20.00Exercised
    
    
    
    
    
    
    
    
    
    
    (7,000
    )
    
    
    2.40Outstanding and exercisable, end of year
    
    
    816,637
    
    
    $
    7.00
    
    
    
    2,062,637
    
    
    $
    4.01
  Options Outstanding
    
    
    Options ExercisableWeightedAverage
    
    
    Weighted
    
    
    
    
    
    
    WeightedNumber
    
    
    Remaining
    
    
    Average
    
    
    Number of
    
    
    AverageRange of
    
    of Shares
    
    
    Contractual
    
    
    Exercise
    
    
    Shares
    
    
    ExerciseExercise Price
    
    Outstanding
    
    
    Life (Years)
    
    
    Price
    
    
    Exercisable
    
    
    Price$2.40-$2.95
    
    
    810,000
    
    
    
    2.70
    
    
    $
    2.84
    
    
    
    810,000
    
    
    $
    2.84$3.70-$4.85
    
    
    825,000
    
    
    
    4.38
    
    
    $
    3.84
    
    
    
    825,000
    
    
    $
    3.84$5.50-$6.15
    
    
    382,237
    
    
    
    2.10
    
    
    $
    5.97
    
    
    
    382,237
    
    
    $
    5.97$11.25-$11.95
    
    
    45,400
    
    
    
    0.10
    
    
    $
    11.40
    
    
    
    45,400
    
    
    $
    11.402,062,637
    
    
    
    
    
    
    $
    4.01
    
    
    
    2,062,637
    
    
    $
    4.01
  NOTE 11  STOCK WARRANTS
     F-25




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##### Table of Contents



AMDL, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 For The Years Ended December 31, 2005 and 2006
          2005
    
    
    2006Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    AverageExercise
    
    
    
    
    
    
    ExerciseWarrants
    
    
    Price
    
    
    Warrants
    
    
    PriceOutstanding, beginning of year
    
    
    963,379
    
    
    $
    5.95
    
    
    
    1,323,010
    
    
    $
    5.00Issued
    
    
    399,631
    
    
    
    2.40
    
    
    
    1,493,652
    
    
    
    3.48Expired/forfeited
    
    
    (40,000
    )
    
    
    1.95
    
    
    
    (82,220
    )
    
    
    4.91Exercised
    
    
    
    
    
    
    
    
    
    
    (106,450
    )
    
    
    2.72Outstanding and exercisable, end of year
    
    
    1,323,010
    
    
    $
    5.00
    
    
    
    2,627,992
    
    
    $
    4.22Weighted average fair value of warrants issued
    
    
    
    
    
    $
    1.05
    
    
    
    
    
    
    $
    2.61
 F-26




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##### Table of Contents



AMDL, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 For The Years Ended December 31, 2005 and 2006
  WeightedAverageNumber of
    
    RemainingWarrant
    
    ContractualExercise Price
    
    Shares
    
    Life (Years)$7.30
    
    
    317,676
    
    
    
    0.50$5.85
    
    
    353,481
    
    
    
    2.00$5.51
    
    
    367,137
    
    
    
    3.00$5.45
    
    
    50,000
    
    
    
    0.62$4.95
    
    
    50,000
    
    
    
    0.62$4.70
    
    
    50,000
    
    
    
    0.62$4.60
    
    
    20,000
    
    
    
    0.63$4.52
    
    
    25,000
    
    
    
    1.87$4.50
    
    
    5,000
    
    
    
    0.16$3.55
    
    
    5,000
    
    
    
    0.41$2.78
    
    
    1,012,490
    
    
    
    2.27$2.45
    
    
    235,626
    
    
    
    1.63$2.20
    
    
    126,582
    
    
    
    1.66$1.95
    
    
    5,000
    
    
    
    0.67$1.75
    
    
    5,000
    
    
    
    0.922,627,992
  NOTE 12  STOCKHOLDERS EQUITY
 Preferred Stock
  Common Stock
  Cash Financing Activities
  F-27




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##### Table of Contents



AMDL, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 For The Years Ended December 31, 2005 and 2006
        F-28




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##### Table of Contents



AMDL, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 For The Years Ended December 31, 2005 and 2006
   Non-Cash Financing Activities
        F-29




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##### Table of Contents



AMDL, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 For The Years Ended December 31, 2005 and 2006
  NOTE 12  SEGMENT REPORTING
  China
    
    U.S.
    
    TotalNet revenue
    
    $
    2,032,881
    
    
    $
    71,055
    
    
    $
    2,103,936Gross profit
    
    $
    1,026,677
    
    
    $
    41,816
    
    
    $
    1,068,493Depreciation
    
    $
    149,910
    
    
    $
    8,600
    
    
    $
    158,510Amortization
    
    $
    51,862
    
    
    $
    100,000
    
    
    $
    151,862Interest expense
    
    $
    90,433
    
    
    $
    
    
    
    $
    90,433Net Loss
    
    $
    435,814
    
    
    $
    (6,303,242
    )
    
    $
    (5,867,428
    )Identifiable assets
    
    $
    15,791,809
    
    
    $
    3,448,804
    
    
    $
    19,240,613Capital expenditures
    
    $
    
    
    
    $
    2,797
    
    
    $
    2,797
 NOTE 13  RELATED PARTY TRANSACTIONS
 ®
  F-30




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##### Table of Contents



Item 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures
  
 Item 8A. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Controls
  
 Part III
 
 Item 9. Directors, Executive Officers, Promoters, Control Persons and Corporate Governance;
Compliance with Section 16 (a) of the Exchange Act.
  Name
    
    Age
    
    Year First Elected
    
    PositionWilliam M. Thompson III, M.D.
    
    
    78
    
    
    
    1989
    
    
    Chairman of the board of directorsGary L. Dreher
    
    
    60
    
    
    
    1999
    
    
    President, Chief Executive
Officer, Secretary and DirectorDouglas C. MacLellan
    
    
    51
    
    
    
    1992
    
    
    DirectorEdward R. Arquilla, M.D., Ph.D.
    
    
    84
    
    
    
    1997
    
    
    DirectorMinghui Jia
    
    
    46
    
    
    
    2006
    
    
    Director
   31




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##### Table of Contents



Board of Directors Meetings and Committees
   32




---



##### Table of Contents



Director Compensation.
  FeesEarned or
    
    
    
    
    
    
    
    
    
    Non-Equity
    
    NonqualifiedPaid in
    
    Stock
    
    Option
    
    Incentive Plan
    
    Deferred
    
    All OtherCash
    
    Awards
    
    Awards
    
    Compensation
    
    Compensation
    
    Compensation
    
    TotalName
    
    ($)
    
    ($)
    
    ($)(1)
    
    ($)
    
    Earnings
    
    ($)
    
    ($)Edward R. Arquilla
    
    $
    39,000
    
    
    
    
    
    
    $
    91,400
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    130,400Douglas C MacLellan
    
    $
    117,500
    
    
    
    
    
    
    $
    435,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    552,500Marvin E. Rosenthale
    
    $
    24,000
    
    
    
    
    
    
    $
    27,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    51,000William M Thompson
III
    
    $
    66,000
    
    
    
    
    
    
    $
    845,500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    911,500Minghui Jia
    
    
    0
    
    
    
    
    
    
    
    0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0
 
 (1)
    
    The value of option awards included in this column represent the
compensation costs recognized by the Company in fiscal year 2006 for option awards
made in 2006 and in prior fiscal years calculated pursuant to SFAS No. 123(R). The
values included within this column have not been, and may never be realized. The
options might never be exercised and the value received by the director, if any,
will depend on the share price on the exercise date. The assumptions used by the
Company with respect to the valuation of the option awards are set forth in Note 1
to our Consolidated Financial Statements, which are included in this Form 10-KSB/A. Section 16(a) Beneficial Ownership Reporting Compliance
   Code of Ethics for Financial Professionals
  33




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##### Table of Contents



Item 10. Executive Compensation.
 Summary Compensation of Executive Officers
  SUMMARY COMPENSATION TABLE
 Non-qualifiedNon-Equity
    
    deferredName &
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stock
    
    Option
    
    Incentive Plan
    
    compensation
    
    All otherPrincipal
    
    
    
    
    
    Salary
    
    Bonus
    
    Awards
    
    Awards
    
    Compensation
    
    earnings
    
    Compensation
    
    TotalPosition
    
    Year
    
    ($)
    
    ($)
    
    ($)
    
    ($)(1)
    
    ($)
    
    ($)
    
    ($)(2)
    
    ($)Gary L Dreher.
President & CEO
    
    
    2006
    
    
    $
    400,000
    
    
    $
    10,000
    
    
    
    -0-
    
    
    $
    725,000
    
    
    
    -0-
    
    
    
    -0-
    
    
    $
    19,119
    
    
    $
    1,170,786Akio Ariura, Chief
Financial
Officer(3)
    
    
    2006
    
    
    $
    59,971
    
    
    
    -0-
    
    
    
    -0-
    
    
    $
    128,800
    
    
    
    -0-
    
    
    
    -0-
    
    
    
    -0-
    
    
    $
    188,771
 
 (1)
    
    The value of option awards included in this column represent the compensation costs
recognized by the Company in fiscal year 2006 for option awards made in 2006 and in prior
fiscal years calculated pursuant to SFAS No. 123(R). The values included within this
column have not been, and may never be realized. The options might never be exercised and
the value received by the executive officer, if any, will depend on the share price on the
exercise date. The assumptions used by the Company with respect to the valuation of the
option awards are set forth in the Notes to our Consolidated Financial Statements, which
are included in this Form 10-KSB/A.(2)
    
    Mr. Drehers perquisites and other personal benefits include certain amounts for life
insurance, car allowance and membership dues.(3)
    
    Mr. Ariura joined the Company as Chief Financial Officer on August 16, 2006. The
amounts above reflect the compensation he earned from August 16, 2006 through December 31,
2006. Outstanding Equity Awards at Fiscal Year-End
  34




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##### Table of Contents



Option Awards
    
    Stock AwardsEquityIncentivePlanEquity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Awards:Incentive
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Number ofPlan
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    UnearnedNumber of
    
    
    
    
    
    Awards:
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Shares,Securities
    
    Number of
    
    Number of
    
    
    
    
    
    
    
    
    
    Number of
    
    Market Value
    
    Units orUnderlying
    
    Securities
    
    Securities
    
    
    
    
    
    
    
    
    
    Shares or
    
    of Shares or
    
    OtherUnexercised
    
    Underlying
    
    Underlying
    
    
    
    
    
    
    
    
    
    Units of
    
    Units of Stock
    
    RightsOptions
    
    Unexercised
    
    Unexercised
    
    Option
    
    Option
    
    Stock That
    
    That Have
    
    That Have(#)
    
    Options (#)
    
    Unearned
    
    Exercise Price
    
    Expiration
    
    Have Not
    
    Not Vested
    
    NotName
    
    Exercisable
    
    Unexercisable
    
    Options (#)
    
    ($)
    
    Date
    
    Vested (#)
    
    ($)
    
    Vested (#)Gary L. Dreher
    
    
    70,000
    
    
    
    
    
    
    
    
    
    
    $
    2.40
    
    
    
    7/24/07
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a60,000
    
    
    
    
    
    
    
    
    
    
    $
    2.85
    
    
    
    2/27/11200,000
    
    
    
    
    
    
    
    
    
    
    $
    3.70
    
    
    
    10/08/1160,000
    
    
    
    
    
    
    
    
    
    
    $
    4.15
    
    
    
    6/30/0950,000
    
    
    
    
    
    
    
    
    
    
    $
    4.65
    
    
    
    10/06/0949,000
    
    
    
    
    
    
    
    
    
    
    $
    5.50
    
    
    
    12/19/08140,000
    
    
    
    
    
    
    
    
    
    
    $
    6.15
    
    
    
    2/23/0920,000
    
    
    
    
    
    
    
    
    
    
    $
    11.25
    
    
    
    1/08/07Akio Ariura
    
    
    40,000
    
    
    
    
    
    
    
    
    
    
    $
    3.70
    
    
    
    10/08/11
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
 Option Exercises in Fiscal 2006
 Value of UnexercisedShares
    
    
    
    
    
    Number of Securities
    
    In-the-MoneyAcquired
    
    
    
    
    
    Underlying Unexercised
    
    Options at FY-End ($)on
    
    Value
    
    Options at FY-End (#)
    
    Exercisable/Unexerci-Name
    
    Exercise (#)
    
    Realized ($)
    
    Exercisable/Unexercisable
    
    sable(1)Gary Dreher, President and CEO
    
    
    0
    
    
    
    0
    
    
    
    649,000/0
    
    
    $
    264,100/0Akio Ariura
    
    
    0
    
    
    
    0
    
    
    
    40,000/0
    
    
    $
    14,800/0
 
 (1)
    
    Based on a price of $4.07 per share, the closing price as reported on the American
Stock Exchange on December 31, 2006.  Other Retirement Benefits
  Other Performance Based Benefits
  35




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##### Table of Contents



Employment Agreements
   Change in Control Severance Pay Plan
     36




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##### Table of Contents



Report of the Compensation Committee on Executive Compensation
 Our Compensation Committee has issued the following report:
 Compensation Philosophy.
 Base Salaries.
 Cash Bonuses.
 Stock Options.
  CEO
Compensation.
 Compensation Limitations.
 
 37




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##### Table of Contents



Item 11. Security Ownership of Certain Beneficial Owners and Management.
  Number
    
    PercentageName and Address(1)
    
    of Shares
    
    OwnedGary L. Dreher
    
    
    1,029,000
    (2)
    
    
    9.5
    %Akio Ariura
    
    
    40,000
    (3)
    
    
    *William M. Thompson III, M.D.
    
    
    352,000
    (4)
    
    
    3.5
    %408 Town Square Lane
Huntington Beach, CA 92648Douglas C. MacLellan
    
    
    208,000
    (5)
    
    
    2.0
    %8324 Delgany Avenue
Playa del Rey, CA 90293Edward R. Arquilla, M.D., Ph.D.
    
    
    92,000
    (6)
    
    
    0.9
    %Department of Pathology
University of California  Irvine
Irvine, CA 92697Minghui Jia
    
    
    2,118,900
    (7)
    
    
    19.6
    %Room 1502
15/F Wing on House
71 Des Voeux Road
Central Hong KongFang Zheng
    
    
    2,118,900
    (8)
    
    
    19.6
    %Room 1502
15/F Wing on House
71 Des Voeux Road
Central Hong KongJade Capital Group
    
    
    1,248,900
    
    
    
    12.2
    %Room 1502
15/F Wing on House
71 Des Voeux Road
Central Hong KongAll Directors and Officers
    
    
    3,361,002
    
    
    
    28.6
    %as a group (8 persons)
 
 (1)
    
    Unless otherwise indicated, address is 2492 Walnut Avenue, Suite 100, Tustin,
California, 92780.*
    
    Less than 0.1%.(2)
    
    Includes 70,000 shares of common stock issuable upon the exercise of options at
$2.40 per share, 60,000 shares of common stock issuable upon the exercise of options at $2.85
per share, 50,000 shares of common stock issuable upon the exercise of options at $4.65 per
share, per share, 49,000 shares of common stock issuable upon the exercise of options at $5.50
per share, 140,000 shares of common stock issuable upon the exercise of options at $6.15 per
share, 60,000 shares of common stock issuable upon the exercise of options at $4.15 per share,
and 200,000 shares of common stock issuable upon the exercise of options at $3.70 per share.
Also includes 400,000 shares of common stock in voting trust for Chinese Universal
Technologies Co. Ltd. of which Mr. Dreher serves as a voting co-trustee. Mr. Dreher disclaims
beneficial ownership of these 400,000 shares.(3)
    
    Includes 40,000 shares of common stock issuable on exercise of options at $3.70 per
share.(4)
    
    Includes, 13,000 shares of common stock issuable upon the exercise of options at
$2.40 per share, 30,000 shares of common stock issuable upon the exercise of options at $2.85
per share, 11,000 shares of common stock 38




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##### Table of Contents



issuable upon the exercise of options at $4.65 per share, 8,000 shares of common stock issuable
upon the exercise of options at $5.50 per share, 40,000 shares of common stock issuable upon the
exercise of options at $6.15 per share and 250,000 shares of common stock issuable upon the
exercise of options at $3.70 per share.(5)
    
    Includes, 13,000 shares of common stock issuable upon the exercise of options at
$2.40 per share, 36,000 shares of common stock issuable upon the exercise of options at $2.85
per share, 11,000 shares of common stock issuable upon the exercise of options at $4.65 per
share, 8,000 shares of common stock issuable upon the exercise of options at $5.50 per share,
20,000 shares of common stock issuable upon the exercise of options at $6.15 per share and
120,000 shares of common stock issuable upon the exercise of options at $3.70 per share.(6)
    
    Includes, 13,000 shares of common stock issuable upon the exercise of options at
$2.40 per share, 20,000 shares of common stock issuable upon the exercise of options at $2.85
per share, 11,000 shares of common stock issuable upon the exercise of options at $4.65 per
share, 8,000 shares of common stock issuable upon the exercise of options at $5.50 per share,
20,000 shares of common stock issuable upon the exercise of options at $6.15 per share and
20,000 shares of common stock issuable upon the exercise of options at $3.70 per share.(7)
    
    Includes 1,298,900 shares held in the name of Jade Capital Group Limited of which
Mr. Jia is a director and principal stockholder and options to purchase 220,000 shares of
common stock exercisable at $2.95 per share.(8)
    
    Includes 1,298,900 shares held in the name of Jade Capital Group Limited of which
Mr. Zheng is a director and principal stockholder and options to purchase 220,000 shares of
common stock exercisable at $2.95 per share. 
 Item 12. Certain Relationships and Related Transactions, and Director Independence.
 ® ®
  39




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##### Table of Contents



Item 13. Exhibits.
  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)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)
 40




---



##### Table of Contents



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)10.36
    
    The Companys 2004 Stock Option Plan (15)10.37
    
    Employment Agreement of Gary L. Dreher dated January 31, 2005 (16)10.38
    
    Letter of Intent with Jade Capital Group Ltd. dated November 21, 2005 (17)10.39
    
    Stock Purchase and Sale Agreement between the Company and Jade Capital Group Limited dated May
12, 2006 and First Amendment to Purchase and Sale Agreement dated June 30, 2006 (18)10.40
    
    2006 Equity Incentive Plan (18)10.41
    
    [Form of] Certificate of Amendment to Certificate of Incorporation filed with the Delaware
Secretary of State on September 8, 2006 (18)10.42
    
    Escrow Agreement between the Company and Jade Capital Group Limited (dated as of the closing on
September 28, 2006 (18)10.43
    
    Opinion of Amaroq Capital, LLC dated May 9, 2006 (18)21.1
    
    Subsidiaries of the small business issuer
Jade Pharmaceutical Inc., a British Virgin Islands corporation.* 31.1
    
    Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer* 31.2
    
    Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer* 32.1
    
    Certification Pursuant to 18 U.S.C. §1350 of Chief Executive Officer* 32.2
    
    Certification Pursuant to 18 U.S.C. §1350 of Chief Financial Officer
 
 *
    
    filed herewith(1)
    
    Incorporated by reference to the Companys Report on Form 10-KSB for the year ended December
31, 1989.(2)
    
    Incorporated by reference to the Companys Report on Form 10-KSB 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-KSB for the year ended December
31, 1990.(7)
    
    Incorporated by reference to the Companys Report on Form 10-KSB for the year ended December
31, 1993.(8)
    
    Incorporated by reference to the Companys Report on Form 10-KSB for the year ended December
31, 1995. 41




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##### Table of Contents



(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.(15)
    
    Incorporated by reference from the Companys Report on Form 10-KSB for the year ended
December 31, 2004.(16)
    
    Incorporated by reference from the Companys Form 8-K filed February 1, 2005.(17)
    
    Incorporated by reference from the Companys Form 8-K filed November 22, 2005(18)
    
    Incorporated by reference from the Companys definitive Proxy Statement dated July 14, 2006 
 Item 14. Principal Accountant Fees and Services
  Audit and Non-Audit Fees
  Services Provided
    
    2006
    
    
    2005Audit Fees
    
    $
    225,000
    
    
    $
    55,300Audit Related Fees
    
    
    35,000
    
    
    
    Tax Fees
    
    
    
    
    
    
    All Other Fees
    
    
    
    
    
    
    Total
    
    $
    260,000
    
    
    $
    55,300
     Audit Committee Pre-Approval Policies and Procedures
  42




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##### Table of Contents



SIGNATURES
  AMDL, INC.Dated: June 20, 2007
    By:
    /s/ Gary L DreherGary L. DreherPresident and Chief Executive OfficerDated: June 20, 2007
    By:
    /s/ Akio AriuraAkio AriuraChief Financial Officer  Signatures
    
    Title
    
    Date/s/ Gary L. Dreher
    
    President and Chief Executive Officer and
    
    June 20, 2007Gary L. Dreher
    
    Director
(principal executive officer)/s/ Akio Ariura
    
    Chief Financial Officer (principal financial and
    
    June 20, 2007Akio Ariura
    
    accounting
officer)/s/ William M. Thompson
    
    Chairman of the Board
    
    June 20, 2007William M. Thompson III, M.D./s/ Edward R. Arquilla
    
    Director
    
    June 20, 2007Edward R. Arquilla, M.D./s/ Douglas C. MacLellan
    
    Director
    
    June 20, 2007Douglas C. MacLellan/s/ Minghui Jia
    
    Director
    
    June 20, 2007Minghui Jia
 43




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##### Table of Contents



Exhibit No.
    
    Description3.1
    
    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)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)




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##### Table of Contents



Exhibit No.
    
    Description10.24
    
    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)10.36
    
    The Companys 2004 Stock Option Plan (15)10.37
    
    Employment Agreement of Gary L. Dreher dated January 31, 2005 (16)10.38
    
    Letter of Intent with Jade Capital Group Ltd. dated November 21, 2005 (17)10.39
    
    Stock Purchase and Sale Agreement between the Company and Jade Capital
Group Limited dated May 12, 2006 and First Amendment to Purchase and Sale
Agreement dated June 30, 2006 (18)10.40
    
    2006 Equity Incentive Plan (18)10.41
    
    [Form of] Certificate of Amendment to Certificate of Incorporation filed
with the Delaware Secretary of State on September 8, 2006 (18)10.42
    
    Escrow Agreement between the Company and Jade Capital Group Limited
(dated as of the closing on September 28, 2006 (18)10.43
    
    Opinion of Amaroq Capital, LLC dated May 9, 2006 (18)21.1
    
    Subsidiaries of the small business issuer Jade Pharmaceutical Inc., a
British Virgin Islands corporation.*31.1
    
    Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer*31.2
    
    Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer*32.1
    
    Certification Pursuant to 18 U.S.C. §1350 of Chief Executive Officer*32.2
    
    Certification Pursuant to 18 U.S.C. §1350 of Chief Financial Officer
 
 *
    
    filed herewith(1)
    
    Incorporated by reference to the Companys Report on Form 10-KSB for the year ended December
31, 1989.(2)
    
    Incorporated by reference to the Companys Report on Form 10-KSB 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-KSB for the year ended December
31, 1990.(7)
    
    Incorporated by reference to the Companys Report on Form 10-KSB for the year ended December
31, 1993.(8)
    
    Incorporated by reference to the Companys Report on Form 10-KSB for the year ended December
31, 1995.(9)
    
    Incorporated by reference to the Companys Report on Form 10-KSB for the year ended December
31, 1997.




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(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.(15)
    
    Incorporated by reference from the Companys Report on Form 10-KSB for the year ended
December 31, 2004.(16)
    
    Incorporated by reference from the Companys Form 8-K filed February 1, 2005.(17)
    
    Incorporated by reference from the Companys Form 8-K filed November 22, 2005(18)
    
    Incorporated by reference from the Companys definitive Proxy Statement dated July 14, 2006