##### Table of Contents



U. S. SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2009.
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from ______ to ______.
 Commission File Number: 001-16695
 
 AMDL, INC.
 (Exact name of registrant as specified in its charter)
 
 Delaware
    
    33-0413161(State of Incorporation)
    
    (I.R.S. employer identification no.)2492 Walnut Avenue, Suite 100Tustin, California
    
    92780-7039(Address of principal executive offices)
    
    (Zip Code)
 
 Registrants telephone number, including area code: (714) 505-4460
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ(Do not check if a smaller reporting company)
 o þ




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##### 



AMDL, INC.
INDEX TO FORM 10-Q
 PagePart I Financial InformationItem 1. Financial Statements
    
    
    3Condensed Consolidated Balance Sheets at June 30, 2009 (Unaudited) and December 31, 2008 (Audited)
    
    
    3Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and six
months ended June 30, 2009 and 2008
    
    
    4Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2009 and 2008
    
    
    5Notes to Unaudited Condensed Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    25Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    41Item 4. Controls and Procedures
    
    
    41Part II Other InformationItem 1 Legal Proceedings
    
    
    44Item 1A. Risk Factors
    
    
    44Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    51Item 3. Defaults upon Senior Securities
    
    
    51Item 4. Submission of Matters to a Vote of Security Holders
    
    
    51Item 5. Other Information
    
    
    51Item 6. Exhibits
    
    
    51Signatures
    
    
    52Exhibit Index:
    
    
    53EX-10.50EX-10.51EX-31.1EX-31.2EX-32.1EX-32.2
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##### Table of Contents



PART 1  FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 AMDL, INC.
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 June 30,
    
    
    December 31,2009
    
    
    2008(Unaudited)
    
    
    (Audited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    2,072,904
    
    
    $
    2,287,283Accounts receivable, net
    
    
    6,550,721
    
    
    
    13,575,534Inventories
    
    
    1,290,934
    
    
    
    1,563,991Prepaid expenses and other current assets
    
    
    6,242,691
    
    
    
    1,006,960Current assets of discontinued operations
    
    
    
    
    
    
    1,435,021Total current assets
    
    
    16,157,250
    
    
    
    19,868,789Property and equipment, net
    
    
    9,807,757
    
    
    
    11,709,508Intangible assets, net
    
    
    4,550,310
    
    
    
    5,311,568Other assets
    
    
    4,725,385
    
    
    
    4,072,432Non-current assets of discontinued operations
    
    
    
    
    
    
    1,789,934Total assets
    
    $
    35,240,702
    
    
    $
    42,752,231LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable and accrued expenses
    
    $
    1,891,582
    
    
    $
    1,675,539Accrued salaries and wages
    
    
    1,179,190
    
    
    
    822,201Income taxes payable
    
    
    61,768
    
    
    
    472,860Deferred revenue
    
    
    
    
    
    
    87,538Current portion of notes payable
    
    
    2,666,670
    
    
    
    2,662,610Current liabilities of discontinued operations
    
    
    
    
    
    
    1,151,515Total current liabilities
    
    
    5,799,209
    
    
    
    6,872,263Other long-term liabilities
    
    
    373,745
    
    
    
    353,811Notes payable, net of current portion and debt discount
    
    
    1,554,788
    
    
    
    581,305Total liabilities
    
    
    7,727,742
    
    
    
    7,807,379Commitments and contingenciesStockholders equity:Preferred stock, $0.001 par value; 25,000,000 shares authorized; none issued and outstanding
    
    
    
    
    
    
    Common stock, $0.001 par value; 100,000,000 shares authorized; 17,150,174 and 16,006,074
shares issued at June 30, 2009 and December 31, 2008,
respectively; 16,001,904 and
15,826,074 shares outstanding at June 30, 2009 and December 31, 2008, respectively
    
    
    16,002
    
    
    
    15,826Additional paid-in capital
    
    
    70,474,045
    
    
    
    68,192,411Accumulated other comprehensive income
    
    
    2,369,778
    
    
    
    2,443,452Accumulated deficit
    
    
    (45,346,867
    )
    
    
    (35,706,837
    )Total stockholders equity
    
    
    27,512,958
    
    
    
    34,944,852Total liabilities and stockholders equity
    
    $
    35,240,702
    
    
    $
    42,752,231
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AMDL, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
 (Unaudited)
 Three Months Ended June 30,
    
    

Six Months Ended June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Net revenues
    
    $
    3,181,043
    
    
    $
    4,878,192
    
    
    $
    5,892,780
    
    
    $
    7,819,385Cost of sales
    
    
    2,150,405
    
    
    
    2,459,322
    
    
    
    3,735,978
    
    
    
    3,976,862Gross profit
    
    
    1,030,639
    
    
    
    2,418,870
    
    
    
    2,156,802
    
    
    
    3,842,523Operating expenses:Research and development
    
    
    332,779
    
    
    
    57,052
    
    
    
    425,463
    
    
    
    65,747Selling, general and administrative
    
    
    3,784,801
    
    
    
    2,714,487
    
    
    
    6,375,570
    
    
    
    5,512,4364,114,580
    
    
    
    2,771,539
    
    
    
    6,801,033
    
    
    
    5,578,183Income (loss) from operations
    
    
    (3,086,941
    )
    
    
    (352,669
    )
    
    
    (4,644,231
    )
    
    
    (1,735,660
    )Other income (expense):Interest and other income (expense), net
    
    
    (36,721
    )
    
    
    4,112
    
    
    
    (72,830
    )
    
    
    (80,408
    )Interest expense
    
    
    (332,034
    )
    
    
    (199,814
    )
    
    
    (566,251
    )
    
    
    (261,779
    )Total other expense, net
    
    
    (368,755
    )
    
    
    (195,702
    )
    
    
    (639,080
    )
    
    
    (342,187
    )Loss before provision for income taxes
    
    
    (3,455,696
    )
    
    
    (548,868
    )
    
    
    (5,283,311
    )
    
    
    (2,077,847
    )Provision for income taxes
    
    
    417,165
    
    
    
    257,572
    
    
    
    527,667
    
    
    
    406,633Loss before discontinued operation
    
    
    (3,872,861
    )
    
    
    (805,943
    )
    
    
    (5,810,978
    )
    
    
    (2,484,480
    )Income (loss) from discontinued operations, net
    
    
    (4,222,696
    )
    
    
    376,376
    
    
    
    (3,975,670
    )
    
    
    582,717Net loss
    
    
    (8,095,755
    )
    
    
    (429,567
    )
    
    
    (9,786,648
    )
    
    
    (1,901,763
    )Other comprehensive loss:Foreign
currency translation gain (loss)
    
    
    (54
    )
    
    
    524,015
    
    
    
    (42,485
    )
    
    
    1,307,444Comprehensive gain (loss)
    
    $
    (8,095,502
    )
    
    $
    ,94,448
    
    
    $
    (9,744,162
    )
    
    $
    (594,319
    )Basic and diluted loss per common share:Loss before discontinued operations
    
    $
    (0.24
    )
    
    $
    (0.05
    )
    
    $
    (0.37
    )
    
    $
    (0.16
    )Income (loss) from discontinued operations
    
    $
    (0.27
    )
    
    $
    0.02
    
    
    $
    (0.25
    )
    
    $
    0.04Net loss
    
    $
    (0.51
    )
    
    $
    (0.03
    )
    
    $
    (0.62
    )
    
    $
    (0.12
    )Weighted average common shares outstanding 
basic and diluted
    
    
    15,851,815
    
    
    
    15,564,208
    
    
    
    15,916,133
    
    
    
    15,347,277
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AMDL, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited)
 Six Months Ended June 30,2009
    
    
    2008Cash flows from operating activities:Net loss
    
    $
    (9,786,648
    )
    
    $
    (1,901,763
    )Less: income from discontinued operations
    
    
    (3,975,670
    )
    
    
    582,717(5,810,978
    )
    
    
    (2,484,480
    )Adjustments to reconcile net loss before discontinued operations to net cash
provided by (used in) operating activities:Depreciation and amortization
    
    
    1,300,413
    
    
    
    637,931Accretion of debt discount and amortization of debt issuance costs
    
    
    194,291
    
    
    
    Fair market value of options granted to employees and directors for services
    
    
    154,056
    
    
    
    422,168Fair market value of common stock, warrants and options expensed for services
    
    
    314,310
    
    
    
    1,116,753Fair value adjustment to warrants accounted for as liabilities
    
    
    35,557
    
    
    
    Provision for bad debts
    
    
    1,932,384
    
    
    
    148,379Changes in operating assets and liabilities:Accounts receivable
    
    
    5,116,069
    
    
    
    (2,743,228
    )Related party account with Jade Capital
    
    
    
    
    
    
    (47,375
    )Inventories
    
    
    275,284
    
    
    
    82.816Prepaid expenses and other assets
    
    
    (5,674,930
    )
    
    
    399,979Accounts payable, accrued expenses and accrued salaries and wages
    
    
    539,155
    
    
    
    733,327Income taxes payable
    
    
    (412,035
    )
    
    
    (20,930
    )Deferred revenue
    
    
    (87,720
    )
    
    
    (84,851
    )Net cash provided by (used in) operating activities of continuing operations
    
    
    (2,124,145
    )
    
    
    (1,839,511
    )Net cash provided by operating activities of discontinued operations
    
    
    1,853,502
    
    
    
    491,270Net cash provided by (used in) operating activities
    
    
    (270,643
    )
    
    
    (1,348,241
    )Cash flows from investing activities:Purchase of property and equipment
    
    
    (2,034,324
    )
    
    
    (1,196,775
    )Funds advanced to Kangda
    
    
    
    
    
    
    (644,426
    )Return of amounts advanced on note receivable
    
    
    
    
    
    
    13,936Net cash used in investing activities of continuing operations
    
    
    (2,034,324
    )
    
    
    (1,827,265
    )Net cash used in investing activities of discontinued operations
    
    
    
    
    
    
    (14,909
    )Net cash used in investing activities
    
    
    (2,034,324
    )
    
    
    (1,842,174
    )Cash flows from financing activities:Proceeds
from issuance of Senior Notes, net of cash issuance costs of $656,426
    
    
    2,088,593
    
    
    
    Payments on notes payable
    
    
    
    
    
    
    (2,197,969
    )Proceeds from issuance of common stock, net of cash offering costs of $123,875
    
    
    
    
    
    
    860,421Proceeds from the exercise of warrants
    
    
    
    
    
    
    6,983Net cash provided by (used in) financing activities of continuing operations
    
    
    2,088,593
    
    
    
    (1,414,741
    )Net cash provided by (used in) financing activities of discontinued operations
    
    
    
    
    
    
    (84,176
    )Net cash provided by (used in) financing activities of continuing operations
    
    
    2,088,593
    
    
    
    (1,414,741
    )Effect of exchange rates on cash and cash equivalents
    
    
    1,996
    
    
    
    59,484Net change in cash and cash equivalents
    
    
    (214,379
    )
    
    
    (4,545,672
    )Cash and cash equivalents, beginning of period
    
    
    2,287,283
    
    
    
    6,157,493Cash and cash equivalents, end of period
    
    $
    2,072,904
    
    
    $
    1,611,821
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AMDL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 For the Six Months Ended June 30, 2009 and 2008
 NOTE 1  MANAGEMENTS REPRESENTATION
   NOTE 2  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Nature of Business
    Discontinued Operations and Dispositions
 Accounting for the Impairment or Disposal of
Long-lived Assets
  Six months ended June 30,2009
    
    2008Revenue
    
    $
    594,839
    
    
    $
    1,549,193Income before income taxes
    
    $
    277,743
    
    
    $
    754,359
 6




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December 31,2008Current assets:Accounts receivable, net
    
    $
    930,769Inventories
    
    
    423,842Other current assets
    
    
    80,410$
    1,435,021Long-lived assets:Property and equipment
    
    $
    1,742,739Other
    
    
    47,195$
    1,789,934Current liabilities:Accounts payable and accrued liabilities
    
    $
    685,360Debt
    
    
    466,155$
    1,151,515
 Going Concern
 
    7




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Principles of Consolidation
  Use of Estimates
  Revenue Recognition
 Revenue Recognition in Financial Statements
 Accounting for Consideration Given by a Vendor to a Customer
(Including a Reseller of the Vendors Products)
  8




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##### Table of Contents



How Taxes Collected from Customers and Remitted to
Governmental Authorities Should Be Presented in the Income Statement (That Is, Gross Versus Net
Presentation)
 Deferred Revenue
   Accounting for Shipping and Handling Revenue, Fees and Costs
 Accounting for Shipping and Handling Fees and Costs.
 Impairment 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 GMP certifications.
 9




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##### Table of Contents



Derivative Financial Instruments
 Accounting for Derivative Instruments and
Hedging Activities
 Risks and Uncertainties
 Manufacturing and Distribution Operations in China
    Regulatory Environment
   10




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
    
    Compile technical file and prepare clinical protocol;
    
    Clinical trial preparation and design;
    
    Clinical trial supervision and monitoring;
    
    When appropriate, apply for SFDA approval.
  Concentrations of Credit Risk
 Cash
  Customers
   11




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Basic and Diluted Income (Loss) Per Share
 Earnings Per Share
   Supplemental Cash Flow Information
 Six months ended June 30,2009
    
    
    2008Supplemental disclosure of cash flow information:Cash paid during the period for interest
    
    $
    207,356
    
    
    $
    184,960Cash paid during the period for taxes
    
    $
    736,506
    
    
    $
    438,198Supplemental disclosure of non-cash activities:Warrants issued in connection with Senior Notes, included in debt
issuance costs and debt discount
    
    $
    1,853,120
    
    
    $
    Reclassification of amounts recorded to additional paid-in capital to
warrant liability, including $110,858 recorded to retained earnings
upon implementation of EITF 07-5, representing the change in value of
the warrants from date of issuance to January 1, 2009
    
    $
    209,166
    
    
    $
    Reclassification of warrant liability to additional paid-in capital
upon expiration of share adjustment terms
    
    $
    133,866
    
    
    $
    Fair market value of common stock recorded as prepaid consulting
    
    
    
    
    
    $
    1,011,000Fair value of warrants issued for services, included in prepaid expense
    
    $
    35,625
    
    
    $
    
 Recent Accounting Pronouncements
 Inventories
  12




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Accounting for Collaborative
Arrangements,
 Noncontrolling Interests in Consolidated Financial
Statements  An Amendment of ARB No. 51
 Business Combinations Business Combinations.
 Determination of the Useful Life of
Intangible Assets Goodwill and Other Intangible Assets
  Determining Whether an Instrument (or an
Embedded Feature) Is Indexed to an Entitys Own Stock
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Interim Disclosures about
Fair Value of Financial Instruments
 NOTE 3  INVENTORIES
  June 30,
    
    
    December 31,2009
    
    
    2008(Unaudited)
    
    
    (Audited)Raw materials
    
    $
    1,024,644
    
    
    $
    719,389Work-in-process
    
    
    5,332
    
    
    
    11,808Finished goods
    
    
    260,959
    
    
    
    832,794$
    1,290,934
    
    
    $
    1,563,991
 NOTE 4  PREPAID EXPENSES, OTHER CURRENT ASSETS, AND OTHER ASSETS
  June 30,
    
    
    December 31,2009
    
    
    2008(Unaudited)
    
    
    (Audited)Material deposits
    
    $
    1,182,463
    
    
    $
    627,390Due from officers and directors
    
    
    12,770
    
    
    
    9,693Current deferred tax asset
    
    
    
    
    
    
    92,798Receivable from sale of YYB
    
    
    2,337,541
    
    
    
    Advertising and sales
    
    
    2,191,445
    
    
    
    Other
    
    
    518,472
    
    
    
    277,079$
    6,242,691
    
    
    $
    1,006,960
  June 30,
    
    
    December 31,2009
    
    
    2008(Unaudited)
    
    
    (Audited)Deposits, primarily product licenses
    
    $
    3,013,055
    
    
    $
    3,000,354Debt issuance costs (Note 7)
    
    
    1,550,665
    
    
    
    906,408Convertible Debt derivative
    
    
    125,000
    
    
    
    125,000Refundable deposits
    
    
    36,665
    
    
    
    40,670$
    4,725,385
    
    
    $
    4,072,432
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NOTE 5  INTANGIBLE ASSETS
  Effect ofGross
    
    
    
    
    
    
    ForeignCarrying
    
    
    Accumulated
    
    
    CurrencyValue
    
    
    Amortization
    
    
    Translation
    
    
    NetAssets subject to amortization:Intellectual property
    
    $
    2,000,000
    
    
    $
    (791,667
    )
    
    $
    
    
    
    $
    1,208,333Production rights
    
    
    1,916,622
    
    
    
    (436,783
    )
    
    
    169,389
    
    
    
    1,649,638Land use rights
    
    
    1,354,765
    
    
    
    (92,854
    )
    
    
    (260,299
    )
    
    
    1,001,613Non-compete agreements
    
    
    324,415
    
    
    
    (216,925
    )
    
    
    48,789
    
    
    
    156,159Customer relationships
    
    
    214,328
    
    
    
    (103,299
    )
    
    
    34,421
    
    
    
    145,451Trade name and logo
    
    
    530,829
    
    
    
    (172,462
    )
    
    
    91,047
    
    
    
    449,413$
    6,340,959
    
    
    $
    (1,813,990
    )
    
    $
    83,268
    
    
    $
    4,610,238
  Effect ofGross
    
    
    
    
    
    
    ForeignCarrying
    
    
    Accumulated
    
    
    CurrencyValue
    
    
    Amortization
    
    
    Translation
    
    
    NetAssets subject to amortization:Intellectual property
    
    $
    2,000,000
    
    
    $
    (741,667
    )
    
    $
    
    
    
    $
    1,258,333Production rights
    
    
    1,916,622
    
    
    
    (318,986
    )
    
    
    154,007
    
    
    
    1,751,643Land use rights
    
    
    1,354,765
    
    
    
    (99,094
    )
    
    
    209,839
    
    
    
    1,465,510Non-compete agreements
    
    
    324,415
    
    
    
    (163,652
    )
    
    
    32,483
    
    
    
    193,246Customer relationships
    
    
    214,328
    
    
    
    (77,904
    )
    
    
    26,569
    
    
    
    162,993Trade name and logo
    
    
    530,829
    
    
    
    (129,041
    )
    
    
    78,055
    
    
    
    479,843$
    6,340,959
    
    
    $
    (1,530,344
    )
    
    $
    500,953
    
    
    $
    5,311,568
   NOTE 6  INCOME TAXES
  Accounting for Income Taxes
  15




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NOTE 7  NOTES PAYABLE
  June 30,
    
    
    December 31,2009
    
    
    2008(Unaudited)
    
    
    (Audited)Convertible Debt, net of unamortized discount, inclusive
of bonus interest, of $3,761,588 and $3,762,000 at June 30,
2009 and December 31, 2008, respectively
    
    $
    412
    
    
    $
    Senior Notes payable, net of unamortized discount of
$1,946,406 and $496,195 at June 30, 2009 and December 31,
2008, respectively
    
    
    1,554,788
    
    
    
    581,305Bank debt
    
    
    2,666,258
    
    
    
    3,128,7654,221,458
    
    
    
    3,710,070Less: Bank debt associated with discontinued operations of YYB
    
    
    
    
    
    
    466,155Less: Current portion of long-term debt
    
    
    2,666,670
    
    
    
    2,662,610$
    1,554,788
    
    
    $
    581,305
 Convertible Debt
  Senior Notes Payable
     16




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Accounting for Registration Payment Arrangements.
     Bank Debt
   17




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##### Table of Contents



Debt Repayment Obligations
  2009
    
    $
    2,665,9462010
    
    
    4,998,6682011
    
    
    888,2242012
    
    
    1,431,358$
    9,984,196
 NOTE 8  EMPLOYMENT CONTRACT TERMINATION LIABILITY
 Accounting for Costs Associated
with Exit or Disposal Activities
 NOTE 9  COMMITMENTS AND CONTINGENCIES
 Litigation
   18




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##### Table of Contents



Production License Acquisition Agreements
  Licensing Agreements
  Contingent Issuance of Shares  Acquisition of JPI
   Indemnities and Guarantees
  19




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##### Table of Contents



Tax Matters
  Change in Control Severance Plan
  NOTE 10  SHARE-BASED COMPENSATION
     Summary of Assumptions and Activity
  20




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##### Table of Contents



Expected volatility
    
    
    111
    %Expected term
    
    5 yearsRisk-free interest rate
    
    
    2.48
    %Dividend yield
    
    
    
    %
   WeightedWeighted
    
    
    AverageAverage
    
    
    RemainingExercise
    
    
    ContractualOptions
    
    
    Price
    
    
    Life (Years)Outstanding, December 31, 2008
    
    
    2,757,001
    
    
    $
    3.75Expired
    
    
    (305,000
    )
    
    
    5.76Outstanding
and expected to vest, June 30, 2009
    
    
    2,452,001
    
    
    $
    3.50
    
    
    
    2.33Vested and Exercisable at June 30, 2009
    
    
    2,348,668
    
    
    $
    3.50
    
    
    
    2.27
   NOTE 11  FINANCING ACTIVITIES
 Cash Financing Activities
 December 2007 Offering
   21




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##### Table of Contents



Convertible Debt
  Senior Notes  Warrants
  Non-Cash Financing Activities
    Accounting for Equity Instruments that are Issued to Other
Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services
  22




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##### Table of Contents



Warrants
  WeightedAverageExerciseWarrants
    
    
    PriceOutstanding, December 31, 2008
    
    
    5,252,699
    
    
    $
    3.38Issued
    
    
    3,758,920
    
    
    
    1.03Outstanding, June 30, 2009
    
    
    7,999,124
    
    
    $
    2.35
 NOTE 12  SEGMENT REPORTING
  23




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##### Table of Contents



China
    
    Corporate
    
    TotalNet revenue
    
    $
    3,152,693
    
    
    $
    28,350
    
    
    $
    3,181,043Gross profit
    
    $
    1,013,903
    
    
    $
    16,737
    
    
    $
    1,030,640Depreciation
    
    $
    263,512
    
    
    $
    31,777
    
    
    $
    295,289Amortization
    
    $
    602,684
    
    
    $
    50,000
    
    
    $
    652,684Interest expense
    
    $
    55,756
    
    
    $
    276,278
    
    
    $
    332,034Income (loss) before discontinued operations
    
    $
    (1,532,428
    )
    
    $
    (2,340,433
    )
    
    $
    (3,872,861
    )Identifiable assets of continuing operations
    
    $
    29,411,505
    
    
    $
    3,551,994
    
    
    $
    32,963,499Capital expenditures
    
    $
    849,660
    
    
    $
    646
    
    
    $
    850,306
  China
    
    Corporate
    
    TotalNet revenue
    
    $
    5,841,360
    
    
    $
    51,420
    
    
    $
    5,892,780Gross profit
    
    $
    2,125,072
    
    
    $
    31,732
    
    
    $
    2,156,804Depreciation
    
    $
    469,899
    
    
    $
    45,678
    
    
    $
    515,577Amortization
    
    $
    709,837
    
    
    $
    75,000
    
    
    $
    784,837Interest expense
    
    $
    111,458
    
    
    $
    454,793
    
    
    $
    566,251Income (loss) before discontinued operations
    
    $
    (1,133,864
    )
    
    $
    (4,677,114
    )
    
    $
    (5,810,978
    )Capital expenditures
    
    $
    1,661,401
    
    
    $
    107,083
    
    
    $
    1,768,484
   NOTE 13  RELATED PARTY TRANSACTIONS
  NOTE 14  SUBSEQUENT EVENTS
  24




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##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Our management intends for this discussion and analysis to provide the reader with information
that will assist in understanding our financial statements, the changes in certain key items in
those financial statements from period to period, and the primary factors that accounted for those
changes, as well as how certain accounting principles affect our financial statements. The
following discussion and analysis should be read in conjunction with our financial statements and
notes thereto included in this report on Form 10-Q and in our Annual Report on Form 10-K for the
year ended December 31, 2008. Operating results are not necessarily indicative of results that may
occur in future periods.
 This report includes various forward-looking statements that are subject to risks and
uncertainties, many of which are beyond our control. Our actual results could differ materially
from those anticipated in these forward looking statements as a result of various factors,
including, but not limited to, risks associated with doing business in China and internationally,
demand for our products, governmental regulation and required licensing of our products and
manufacturing operations, dependence on distributors, foreign currency fluctuation, technological
changes, intense competition and dependence on management and those risks set forth below under
Part II  Item 1A Risk Factors and set forth in Part I  Item 1A Risk Factors in our Annual
Report on Form 10-K for the year ended December 31, 2008. Forward-looking statements discuss
matters that are not historical facts and include, but are not limited to, discussions regarding
our operating strategy, sales and marketing strategy, regulatory strategy, industry, economic
conditions, financial condition, liquidity and capital resources and results of operations. Such
statements include, but are not limited to, statements preceded by, followed by or that otherwise
include the words believes, expects, anticipates, intends, estimates, projects, can,
could, may, will, would, or similar expressions. For those statements, we claim the
protection of the safe harbor for forward-looking statements contained in the Private Securities
Litigation Reform Act of 1995. You should not unduly rely on these forward-looking statements,
which speak only as of the date on which they were made. They give our expectations regarding the
future, but are not guarantees. We undertake no obligation to update publicly or revise any
forward-looking statements, whether because of new information, future events or otherwise, unless
required by law.
 Overview
 The Company
  U. S. Operations
 AMDL IVD Cancer Diagnostics
 DR-70 Test Kit
 ® ®
 Elleuxe Brand of Premium Anti-Aging Skin Care Products
  25




---



##### Table of Contents




    
    Hydrating Firming Cream (Dry-Mix skin)
    
    Hydrating Firming Cream (Oily skin)
    
    Renergie Hydrating Cleanser
    
    Intense Hydrating Cleanser
    
    Visable Renewing Hydrating Softener
    
    Smoothing Renewing Eye Moisturizer
 New Corporate and Product Brand Launch
  IVD Cancer Research and Development
    License Agreement with MyGene International, Inc.
  26




---



##### Table of Contents



China-based Integrated Pharmaceuticals Operations
    AMDL Planned Spin-Off of JPI/JJB
   Post Deconsolidation Business Model
  27




---



##### Table of Contents



Discontinued
Operations and Dispositions
   
    
    The forgiveness of amounts owed to YYB from JJB; and
    
    The buyer of  YYB has contractually agreed to pay off the
balance of the 16 million RMB obligation secured by a mortgage on
certain land owned by JJB.
  Operations of JJB
  Facilities
   28




---



##### Table of Contents



Marketing and Distribution
    New Beauty Formulations of the HPE-Based Anti-Aging Product
  Distribution Channels for Beauty Product Lines
     29




---



##### Table of Contents



The Current Chinese Economic and Market Environment
  Research and Development
   Cancer Therapeutics
  Critical Accounting Policies and Estimates
   Allowance for Doubtful Accounts.
 Inventories.
 30




---



##### Table of Contents



Sales Allowances.
 Valuation of Intangible Assets.
 
    
    significant under performance relative to expected historical or projected future
operating results;
    
    market projections for cancer research technology;
    
    its ability to obtain patents, including continuation patents, on technology;
    
    significant changes in its strategic business objectives and utilization of the assets;
    
    significant negative industry or economic trends, including legal factors;
    
    potential for strategic partnerships for the development of its patented technology;
    
    changing or implementation of rules regarding manufacture or sale of pharmaceuticals in
China; and
    
    ability to maintain GMP certifications.
  Revenue Recognition. Revenue Recognition in Financial Statements
 Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendors
Products)
 How Taxes
Collected from Customers and Remitted to
 31




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##### Table of Contents



Governmental Authorities Should Be Presented in the Income Statement (That Is, Gross Versus
Net Presentation)
 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.
 Share-Based Payment
 Derivative Financial Instruments. Accounting for
Derivative Instruments and Hedging Activities
 Results of Operations
 Quarter Ended June 30, 2009 Compared to Quarter Ended June 30, 2008
 Net Revenues.
 Corporate
  32




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##### Table of Contents



China
  
    
    Management conflicts between JPI and the operating entity JJB;
    
    The Sale of YYB; and
    
    The lack of sales of HPE solutions due to the mandatory 5-year cGMP recertification
by the SFDA of JJBs small injectible line and the expiration of contracts with beauty
distributors that sell topical HPE solution.
 
  Gross Profit.
 Corporate
  China
  33




---



##### Table of Contents



Research and Development.
    
    
    The need for research and development for an updated version of the DR-70 test kit in the
US, clinical trials for such tests and funds for ultimate USFDA approval; and
    
    Research and development for the HPE-based cosmetic product.
 Selling, General and Administrative Expenses. ,
  Corporate
   Three months ended June 30,2009
    
    2008Investor relations (including value of warrants/options)
    
    $
    244,932
    
    
    $
    526,577Salary and wages (including value of options)
    
    $
    734,646
    
    
    $
    756,650Directors fees (including value of options)
    
    $
    73,720
    
    
    $
    170,575Consulting fees
    
    $
    55,572
    
    
    $
    65,608Accounting and other professional fees
    
    $
    166,478
    
    
    $
    251,847Legal
    
    $
    149,889
    
    
    $
    158,480
 34




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##### Table of Contents



China
  Interest Expense.
 Corporate
  China
  Loss before discontinued operations.
 Results of Discontinued Operations
  2009
    
    2008Revenue
    
    $
    594,839
    
    
    $
    646,553Income before income taxes
    
    $
    277,743
    
    
    $
    257,935
   Six Months Ended June 30, 2009 Compared to Six Months Ended June 30, 2008
 Net Revenues.
 Corporate
    35




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##### Table of Contents



China
   Six Months ended June 30,2009
    
    2008Domperidone Tablet
    
    
    59.72
    %
    
    
    44.61
    %Compound Benzoic Acid and Camphor Solution
    
    
    8.99
    %
    
    
    0.00
    %5% GS
    
    
    4.65
    %
    
    
    0.00
    %GNS
    
    
    3.58
    %
    
    
    0.00
    %NaCL
    
    
    3.03
    %
    
    
    0.00
    %Other
    
    
    2.16
    %
    
    
    0.00
    %Levofloxacin Lactate Injuection
    
    
    17.86
    %
    
    
    7.25
    %Guyanlin Tablets
    
    
    0.00
    %
    
    
    3.83
    %HPE Based Products
    
    
    0.00
    %
    
    
    12.16
    %Diavitamin, Calcium Hydrogen Phosphate and Lysine Tablets
    
    
    0.00
    %
    
    
    9.92
    %99.99
    %
    
    
    77.77
    %
  Gross Profit.
 Corporate
  China
  36




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##### Table of Contents



Research and Development.
    
    
    The need for research and development for an updated version of the DR-70 test kit in the
US, clinical trials for such tests and funds for ultimate USFDA approval;
    
    Additional research and development costs incurred in response to questions and requests
by new distribution partners; and
    
    Research and development for the HPE-based cosmetic product.
 Selling, General and Administrative Expenses. ,
 Corporate
   Six months ended June 30,2009
    
    2008Investor relations (including value of warrants/options)
    
    $
    547,797
    
    
    $
    1,054,001Salary and wages (including value of options)
    
    $
    1,446,979
    
    
    $
    1,690,733Directors fees (including value of options)
    
    $
    170,096
    
    
    $
    376,600Consulting fees
    
    $
    130,296
    
    
    $
    116,059Accounting and other professional fees
    
    $
    492,910
    
    
    $
    525,465Legal
    
    $
    356,113
    
    
    $
    332,529
 37




---



##### Table of Contents



China
  Interest Expense.
 Corporate
  China
  Loss before discontinued operations.
 Results of Discontinued Operations
  2009
    
    2008Revenue
    
    $
    594,839
    
    
    $
    646,553Income before income taxes
    
    $
    277,743
    
    
    $
    257,935
  Liquidity and Capital Resources
  Operating activities
 38




---



##### Table of Contents



Investing activities.
 Financing activities.
 Future Capital Needs
   China Credit Facilities
  39




---



##### Table of Contents



Going Concern
       40




---



##### Table of Contents



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Foreign Currency Exchange Rate Risk
   Interest Rate Risk
  Inflation
  Currency Exchange Fluctuations
  Concentration of Credit Risk
  
 
 
 Seasonality and Quarterly Fluctuations
  
 ITEM 4. CONTROLS AND PROCEDURES
 Disclosure of Controls and Procedures
   Material Weaknesses
  41




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Remediation Plan for Material Weaknesses
       42




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##### Table of Contents




    
    We have passed board of directors resolutions to change the signatures on
certain bank accounts and implement new policies and procedures to ensure that in the
future there are more regular communications, access to relevant documentation, and more
frequent collaboration protocols among our management in China and our accounting
department personnel and Chief Financial Officer.
    
    We strengthened the period-end closing procedures of our China based operating
subsidiaries by: (i) requiring all significant estimate transactions to be reviewed by
corporate in the US, (ii) ensuring that account reconciliations and analyses for
significant financial statement accounts are reviewed for completeness and accuracy by
qualified accounting personnel in the US, and (iii) continued developing better monitoring
controls for our China based subsidiaries.
  Changes in Internal Control Over Financial Reporting.
  43




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##### Table of Contents



AMDL, INC.
 
 PART II  OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
     
 ITEM 1A. RISK FACTORS
  Limited product development activities; our product development efforts may not result in
commercial products.
  
    
    the product candidate did not demonstrate acceptable clinical trial results even though
it demonstrated positive preclinical trial results;
    
    the product candidate was not effective in treating a specified condition or illness;
 44




---



##### Table of Contents




    
    the product candidate had harmful side effects on humans;
    
    the necessary regulatory bodies, such as the SFDA, did not approve our product candidate
for an intended use;
    
    the product candidate was not economical for us to manufacture and commercialize; and
    
    the product candidate is not cost effective in light of existing therapeutics.
   Our operations in China involve significant risk.
     We may not be able to continue to operate our business if we are unable to attract additional
operating capital.
  45




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##### Table of Contents



We have a significant amout of relatively short term indebtedness and may be unable to satisfy our
obligations to pay interest and principal thereon when due.
  (i)
    
    $3.1 million in a secured loan with Chinese Industrial Bank of
Commerce bearing interest at 5.3%-9.5% per annum
which is due on or before December 31, 2009. which indebtedness is secured by a mortgage on
one of the JJB factories in Shangro, China;(ii)
    
    $2.56 million in unsecured convertible notes bearing interest at 10% per annum due
September 15, 2010; and(iii)
    
    $3.3 million senior unsecured promissory notes bearing interest at 12% interest
payable quarterly in cash, portions of which principal are due in December 2010 and
the balance of the principal is due at varying dates in early 2011.
  Disputes between the management of our China operating subsidiaries could lead to a decrease
in our ability to direct our China based operations.
  Our independent registered public accounting firm has included a going concern paragraph in their
report on our consolidated financial statements.
  46




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##### Table of Contents



Adverse conditions in the global economy and disruption in financial markets could impair our
revenues and results of operations.
  Our current products cannot be sold in certain countries if we do not obtain and maintain
regulatory approval.
  Our future prospects will be negatively impacted if we are unsuccessful in pending litigation over
the CIT technology.
  The value of intangible assets may not be equal to their carrying values.
   47




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##### Table of Contents



If our intellectual property positions are challenged, invalidated or circumvented, or if we fail
to prevail in future intellectual property litigation, our business could be adversely affected.
  We face substantial competition, and others may discover, develop, acquire or commercialize
products before or more successfully than we do.
  We have limited sales of the DR-70 test kit and are reliant on our distributors for sales of our
products.
  JPI is reliant on its distributors for sales of its products.
  We are subject to risks associated with our foreign distributors.
  48




---



##### Table of Contents



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 the material weaknesses or other deficiencies in our internal accounting
procedures are not remediated, our stock price could decline significantly.
    49




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##### Table of Contents



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;
    
    economic markets in Asia; and
    
    competition in local Chinese markets where we sell JPIs product.
  Our stock price and financing may be adversely affected by outstanding warrants and convertible
securities.
  We have limited product liability insurance.
  50




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##### Table of Contents



ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
     
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES
   
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 ITEM 5. OTHER INFORMATION
   
 ITEM 6. EXHIBITS
  51




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##### Table of Contents



AMDL, INC.
 
 SIGNATURES
  AMDL, INC.
(Registrant)Date: August 19, 2009
    By:
    /s/ Douglas C. MacLellanDouglas C. MacLellan, President andChief Executive Officer (Principal
Executive Officer)Date: August 19, 2009
    By:
    /s/ Akio AriuraAkio Ariura, Chief OperatingOfficer, Chief Financial Officer
and Secretary (Principal Financial
Officer and Principal Accounting
Officer) 52




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNumber
    
    Description:10.50
    
    YYB Share Transfer Agreement10.51
    
    JJB Real Estate Transfer Repayment Agreement31.1
    
    Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (Filed herewith.)31.2
    
    Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (Filed herewith.)32.1
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002. (Filed herewith.)32.2
    
    Certification of Chief Financial Officer pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002. (Filed herewith.)
 53