##### Table of Contents



U.S. SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-QSB
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 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 0-27689
 AMDL, Inc.
 (Exact name of small business issuer as specified in its charter)
 Delaware
    
    33-0413161(State or other jurisdiction
    
    (IRS Employerof incorporation or organization)
    
    Identification No.)
  
   (Issuers telephone number)
  
   o þ
  þ o




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##### 



PAGEPART I  FINANCIAL INFORMATION
    
    
    2Item 1. Financial Statements
    
    
    2Unaudited Consolidated Balance Sheet at September 30, 2006
    
    
    2Unaudited Consolidated Statements of Operations for the three
and nine months ended September 30, 2006 and 2005
    
    
    3Unaudited Consolidated Statements of Cash Flows for the
nine months ended September 30, 2006 and 2005
    
    
    4Notes to Consolidated Financial Statements (unaudited)
    
    
    5Item 2. Managements Discussion and Analysis or Plan of Operation
    
    
    20Item 3. Controls and Procedures
    
    
    26PART II  OTHER INFORMATION
    
    
    27EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2
  1




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 AMDL, INC.
 
 CONSOLIDATED BALANCE SHEET
 September 30,2006(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    1,005,048Accounts receivable, net
    
    
    1,412,151Inventories
    
    
    624,310Prepaid consulting
    
    
    211,419Due from
directors
    
    
    9,306Other prepaid expenses and current assets
    
    
    80,373Total current assets
    
    
    3,342,607Intellectual property, net
    
    
    1,483,333Property and equipment, net
    
    
    9,281,951Non-compete
agreements
    
    
    116,997Product licenses
    
    
    74,453Land use rights, net
    
    
    2,561,299Other assets
    
    
    1,316,639$
    18,177,279LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable and accrued expenses
    
    $
    1,682,443Accrued payroll and related expenses
    
    
    175,890Current portion of notes payable
    
    
    1,808,691Total current liabilities
    
    
    3,667,024Notes payable, net of current portion
    
    
    2,858,715Total liabilities
    
    
    6,525,739Stockholders 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; 9,440,699 shares issued and outstanding
    
    
    9,441Additional paid-in capital
    
    
    42,877,138Accumulated deficit
    
    
    (31,235,039
    )Total stockholders equity
    
    
    11,651,540$
    18,177,279
  2




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##### Table of Contents



AMDL, INC.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (Unaudited)
 Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2006
    
    2005
    
    2006
    
    2005Net revenues(1)
    
    $
    21,005
    
    
    $
    10,250
    
    
    $
    54,105
    
    
    $
    49,675Cost of sales
    
    
    8,972
    
    
    
    2,828
    
    
    
    21,460
    
    
    
    10,245Gross profit
    
    
    12,033
    
    
    
    7,422
    
    
    
    32,645
    
    
    
    39,430Operating expenses:Research and development
    
    
    162,894
    
    
    
    73,877
    
    
    
    282,139
    
    
    
    232,495General and administrative
    
    
    819,265
    
    
    
    609,471
    
    
    
    2,340,319
    
    
    
    1,662,241Total operating expenses
    
    
    982,159
    
    
    
    683,348
    
    
    
    2,622,458
    
    
    
    1,894,736Loss from operations
    
    
    (970,126
    )
    
    
    (675,926
    )
    
    
    (2,589,813
    )
    
    
    (1,855,306
    )Interest income
    
    
    7,789
    
    
    
    9,100
    
    
    
    22,489
    
    
    
    26,926Net loss
    
    $
    (962,337
    )
    
    $
    (666,826
    )
    
    $
    (2,567,324
    )
    
    $
    (1,828,380
    )Basic and diluted loss per share
    
    $
    (0.13
    )
    
    $
    (0.13
    )
    
    $
    (0.38
    )
    
    $
    (0.38
    )Weighted average common shares outstanding, basic and diluted
    
    
    7,372,750
    
    
    
    5,087,080
    (2)
    
    
    6,689,326
    
    
    
    4,847,959
    (2)
 
 (1)
    
    Represents only the revenues of AMDL, Inc. during the periods covered(2)
    
    Adjusted for the one-for-five reverse split on September 28, 2006  3




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##### Table of Contents



AMDL, INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited)
 Nine Months EndedSeptember 30,2006
    
    
    2005Cash flows from operating activities:Net loss
    
    $
    (2,567,324
    )
    
    $
    (1,828,380
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization
    
    
    81,463
    
    
    
    80,465Fair market value of options granted to employees for services
    
    
    240,300
    
    
    
    Fair market value of common stock, warrants and options issued for services
    
    
    481,525
    
    
    
    259,345Changes in
operating assets and liabilities, net of effects of acquisition:Inventories
    
    
    4,983
    
    
    
    (12,099
    )Prepaid expenses and other current assets
    
    
    21,115
    
    
    
    (21,221
    )Accounts payable and accrued expenses
    
    
    197,215
    
    
    
    (36,486
    )Accrued payroll and related expenses
    
    
    23,415
    
    
    
    24,632Net cash used in operating activities
    
    
    (1,517,308
    )
    
    
    (1,533,744
    )Cash flows from investing activities:Purchase of equipment
    
    
    (2,797
    )
    
    
    (9,179
    )Cash paid
for JPI acquisition, net of cash acquired
    
    
    (373,104
    )
    
    
    Net cash provided by (used in) investing activities
    
    
    (375,901
    )
    
    
    (9,179
    )Cash flows from financing activities:Proceeds from issuance of common stock, net of offering costs of $354,571 and $138,814 in 2006 and 2005, respectively
    
    
    1,457,924
    
    
    
    868,186Proceeds from exercise of warrants
    
    
    42,241
    
    
    
    Net cash provided by financing activities
    
    
    1,500,165
    
    
    
    868,186Net change in cash and cash equivalents
    
    
    (393,044
    )
    
    
    (674,737
    )Cash and cash equivalents at beginning of period
    
    
    1,398,092
    
    
    
    2,605,537Cash and cash equivalents at end of period
    
    $
    1,005,048
    
    
    $
    1,930,800Supplemental disclosure of cash flow information:Cash paid during the period for:Interest
    
    $
    
    
    
    $
    Income taxes
    
    $
    2,881
    
    
    $
    
    4




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##### Table of Contents



AMDL,
INC.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
 For the Three and Nine Months Ended September 30, 2006 and 2005
 NOTE 1  MANAGEMENTS REPRESENTATION
   NOTE 2  NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 AMDL, Inc.
    Acquisition of JPI
    5




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AMDL,
INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 For the Three and Nine Months Ended September 30, 2006 and 2005
  Business
Combinations, Goodwill and Other Intangible Assets,
 Fair ValuePurchase consideration:Capitalized
expenses related to JPI acquisition, primarily legal and accounting
    
    $
    570,244Common stock
issued
    
    
    8,229,000Options to purchase common shares
    
    
    595,000$
    9,394,244
 AmortizationFair Value
    
    
    PeriodAllocation:Cash
    
    $
    197,140Accounts receivable
    
    
    1,440,680Inventories
    
    
    550,623Property and equipment
    
    
    9,268,300Land use rights
    
    
    2,561,299
    
    
    20-50 yearsPrepayments,
primarily product licenses
    
    
    1,292,531Non-compete agreements
    
    
    116,997
    
    
    5 yearsProduct licenses
    
    
    74,453
    
    
    5 yearsCurrent liabilities
    
    
    (1,440,373
    )Current and long term debt
    
    
    (4,667,406
    )$
    9,394,244
   6




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##### Table of Contents



AMDL,
INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 For the Three and Nine Months Ended September 30, 2006 and 2005
 For the Three Months September 30, 2005
    
    For the Nine Months Ended September 30, 2005AMDL
    
    JPI
    
    Combined
    
    AMDL
    
    JPI
    
    CombinedNet revenues
    
    $
    10,250
    
    
    $
    2,404,041
    
    
    $
    2,414,291
    
    
    $
    49,675
    
    
    $
    4,594,377
    
    
    $
    4,644,052Net income (loss)
    
    $
    (666,826
    )
    
    $
    718,805
    
    
    $
    51,979
    
    
    $
    (1,828,380
    )
    
    $
    1,218,158
    
    
    $
    (610,222
    )Earnings (loss) per share
    
    
    
    
    
    
    
    
    
    $
    0.01
    
    
    
    
    
    
    
    
    
    
    $
    (0.13
    )
 For the Three Months September 30, 2006
    
    For the Nine Months Ended September 30, 2006AMDL
    
    JPI
    
    Combined
    
    AMDL
    
    JPI
    
    CombinedNet revenues
    
    $
    21,005
    
    
    $
    1,975,603
    
    
    $
    1,996,608
    
    
    $
    54,105
    
    
    $
    5,071,106
    
    
    $
    5,125,211Net income (loss)
    
    $
    (962,337
    )
    
    $
    791,929
    
    
    $
    (170,408
    )
    
    $
    (2,567,324
    )
    
    $
    1,621,273
    
    
    $
    (946,051
    )Earnings (loss) per share
    
    
    
    
    
    
    
    
    
    $
    (0.03
    )
    
    
    
    
    
    
    
    
    
    $
    (0.14
    )
 Going Concern
 ® ®
 ®
   7




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##### Table of Contents



AMDL,
INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 For the Three and Nine Months Ended September 30, 2006 and 2005
   Principles of Consolidation
  Revenue
Recognition
 Revenue Recognition in Financial Statements
 Sales Allowances
   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
  8




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##### Table of Contents



AMDL,
INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 For the Three and Nine Months Ended September 30, 2006 and 2005
  Advertising
  Research and Development
  Cash Equivalents
  Inventories
   Inventory Costs, an amendment of ARB No. 43,
Chapter 4.,
 Property and Equipment
  Office equipment
    
    
    3 to 10 yearsBuildings and improvements
    
    
    5 to 40 yearsMachinery and equipment
    
    
    5 to 15 years
  Intangible Assets
 Intellectual
Property
  9




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##### Table of Contents



AMDL,
INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 For the Three and Nine Months Ended September 30, 2006 and 2005
   Land Use Rights
  Non-Compete
Agreements
  Product licenses
  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;
 10




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##### Table of Contents



AMDL,
INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 For the Three and Nine Months Ended September 30, 2006 and 2005
 
    
    Changing or implementation of rules regarding manufacture or
sale of pharmaceuticals in China; and
    
    Ability to maintain Good Manufacturing Process (GMP) certifications
  Issuance of Stock for Non-Cash Consideration
  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.
  Accounting for Stock Issued to Employees Accounting for Stock Based Compensation, , Accounting for Stock-Based Compensation  Transaction and Disclosure 
 Share Based Payment
  11




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##### Table of Contents



AMDL,
INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 For the Three and Nine Months Ended September 30, 2006 and 2005
     2006
    
    2005Dividend yield
    
    
    
    %
    
    
    
    %Expected volatility
    
    
    105
    %
    
    
    83
    %Risk-free interest rate
    
    
    4.9
    %
    
    
    3.12
    %Expected term
    
    1.0 year
    
    1.0 year
     12




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##### Table of Contents



AMDL,
INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 For the Three and Nine Months Ended September 30, 2006 and 2005
   For the ThreeMonths
    
    For the NineEnded
    
    Months EndedSeptember
    
    September30, 2005
    
    30, 2005Net loss as reported
    
    $
    (666,826
    )
    
    $
    (1,828,380
    )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
    
    $
    (666,826
    )
    
    $
    (1,900,380
    )Basic and diluted loss per share  as reported
    
    $
    (0.13
    )
    
    $
    (0.38
    )Basic and diluted loss per share  pro forma
    
    $
    (0.13
    )
    
    $
    (0.39
    )
  WeightedAverageExercise PriceNumber
    
    Price Per
    
    PerOf Shares
    
    Share
    
    ShareOptions outstanding at January 1, 2006
    
    
    816,639
    
    
    
    
    
    
    $
    7.00Granted
    
    
    678,001
    
    
    $
    2.85-2.95
    
    
    $
    2.85-2.95Expired
    
    
    (95,000
    )Options outstanding at September 30, 2006
    
    
    1,399,640
    
    
    
    
    
    
    $
    4.15
  13




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##### Table of Contents



AMDL,
INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 For the Three and Nine Months Ended September 30, 2006 and 2005
  For the Three and Nine Months Ended September 30, 2006 and 2005
 Options Outstanding
    
    Options ExercisableWeightedAverage
    
    Weighted-
    
    
    
    
    
    
    
    WeightedRange of
    
    
    
    
    
    Number
    
    Remaining
    
    Average
    
    Aggregate
    
    Number of
    
    Average
    
    AggregateExercise Prices (Split
    
    
    
    
    
    of Shares
    
    Contractual
    
    Exercise
    
    Intrinsic
    
    Shares
    
    Exercise
    
    Intrinsicadjusted)
    
    
    
    Outstanding
    
    Life (years)
    
    Price
    
    Value
    
    Exercisable
    
    Price
    
    Value$2.40
    
    $
    2.95
    
    
    
    817,001
    
    
    
    2.93
    
    
    $
    2.83
    
    
    $
    41,700
    
    
    
    817,001
    
    
    $
    2.83
    
    
    $
    41,700$4.15
    
    $
    4.85
    
    
    
    155,000
    
    
    
    2.91
    
    
    $
    4.46
    
    
    
    
    
    
    
    155,000
    
    
    $
    4.46
    
    
    
    $5.50
    
    $
    6.15
    
    
    
    382,238
    
    
    
    2.35
    
    
    $
    5.97
    
    
    
    
    
    
    
    382,238
    
    
    $
    5.97
    
    
    
    $11.25
    
    $
    11.95
    
    
    
    45,401
    
    
    
    0.35
    
    
$
11.40
    
    
    
    
    
    
    
45,401
    
    
$
11.40
    
    
    
1,399,640
    
    
    
    
    
    
    $
    4.15
    
    
$
    41,700
    
    
    
1,399,640
    
    
    $
    4.15
    
    
    $
41,700
   Basic and Diluted Loss Per Share
  Income Taxes
 Accounting for Income Taxes
 Value Added Tax Payable
  14




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AMDL,
INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 For the Three and Nine Months Ended September 30, 2006 and 2005
 Use of Estimates
  Risks and Uncertainties
 ®
 ® ® ® ® ® ® ® ®
   Operations in China
   15




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##### Table of Contents



AMDL,
INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 For the Three and Nine Months Ended September 30, 2006 and 2005
  Concentration of Risk
  Customers
  Fair Value of Financial Instruments
  Recent Accounting Pronouncements
 Practical Accommodation to
the Application of Grant Date as Defined in FAS 123(R)
(FSP 123(R)-2).
 NOTE 3  SEGMENT REPORTING
   NOTE 4
 DUE FROM DIRECTORS
  16




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##### Table of Contents



AMDL,
INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 For the Three and Nine Months Ended September 30, 2006 and 2005
 NOTE 5  OTHER ASSETS
  Prepayments,
primarily product licenses
    
    $
    1,292,531Other
    
    
    24,108$
    1,316,639
  NOTE 6  FINANCING ACTIVITIES
      17




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##### Table of Contents



AMDL, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 For the Three and Nine Months Ended September 30, 2006 and 2005
     NOTES 7  NOTES PAYABLE
   For the Twelve-Month Period EndingSeptember 30,
    
    Amount2007
    
    $
    1,808,6912008
    
    
    2,030,7972009
    
    
    827,918$
    4,667,406
  NOTE 8  COMMITMENTS AND CONTINGENCIES
 Litigation
   18




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##### Table of Contents



AMDL,
INC,
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 For the Three and Nine Months Ended September 30, 2006 and 2005
    Product
Licenses
  Suspension of Product Sales
   Indemnities and Guarantees
  Note 9.
Subsequent Events
  19




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##### Table of Contents



Item 2.
Managements Discussion and Analysis or Plan of Operation.
 Forward Looking Statements
  Overview
    Acquisition of Jade Pharmaceuticals Inc.
         20




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##### Table of Contents



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 CIT clinical trials, sales, and marketing into China and Asia;
    
    Create new opportunities in cancer related product development in China.
 Research and Development
 ® ®
  ®
 Liquidity and Capital Resources
   ® ® ®
 ®
 21




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##### Table of Contents



®
 ®
      Critical Accounting Policies
   Allowance for Doubtful Accounts
 22




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##### Table of Contents



Inventories
 Revenue
Recognition Revenue Recognition in Financial Statements
 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;
 Sales Allowances.
  Deferred Taxes
 Litigation Accounting for
Contingencies
 23




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##### Table of Contents



Stock-Based Compensation. Share-Based Payment,
 Accounting for Stock-Based Compensation
   Results of Operations
 Three Months Ended September 30, 2006 Compared to Three Months Ended September 30, 2005
 Net Revenues ® ®
 ® ® ®
 ® ®
  24




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##### Table of Contents



Research and Development. ® ®
 General and Administrative Expenses
 Net Loss.
 Results of Operations
 Nine Months Ended September 30, 2006 Compared to Nine Months Ended September 30, 2005
 Net Revenues ® ®
 ® ® ®
 ® ®
   Research and Development. ® ®
 General and Administrative Expenses
 Net Loss.
 25




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##### Table of Contents



Item 3. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Controls
  26




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##### Table of Contents



PART II  OTHER INFORMATION
 Item 1. Legal Proceedings
  Item 2. Unregistered Sales of Equity Securities Use of Proceeds
    th
  27




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##### Table of Contents



Item 3. Defaults Upon Senior Securities
  Item 4. Submission of Matters to a Vote of Security Holders
    Shares WithheldNominee/Director
    
    Shares for
    
    from VotingWilliam M. Thompson
    
    
    29,228,285
    
    
    
    260,051Gary L. Dreher
    
    
    29,169,570
    
    
    
    318,866Edward R. Arquilla
    
    
    29,227,685
    
    
    
    260,651Douglas C. MacLellan
    
    
    29,227,690
    
    
    
    260,646
 28




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##### Table of Contents



Item 5. Other Information
  Item 6. Exhibits
 (a)
    
    Exhibits31.1
    
    Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer31.2
    
    Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer32.1
    
    Certification Pursuant to 18 U.S.C. §1350 of Chief Executive Officer32.2
    
    Certification Pursuant to 18 U.S.C. §1350 of Chief Financial Officer
 29




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##### Table of Contents



SIGNATURES
  AMDL, Inc.Dated:  November 13, 2006
    By:
    /s/  Gary L. DreherGARY L. DREHER, Chief Executive Officer 30




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EXHIBIT INDEX
 Exhibit No.
    
    Description31.1
    
    Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer31.2
    
    Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer32.1
    
    Certification Pursuant to 18 U.S.C. §1350 of Chief Executive Officer32.2
    
    Certification Pursuant to 18 U.S.C. §1350 of Chief Financial Officer
 31